Re : Suresh Manharlal Mehta, of Mumbai, as a Director of Star Precision Electronics (I) Ltd. vs ICDS Limited, A Company at Manipal and a branch office in Mumbai

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2009 Supreme(Bom) 459

High Court of Judicature at Bombay
THE HONOURABLE MR. JUSTICE S.J. VAZIFDAR
Re : Suresh Manharlal Mehta, of Mumbai, as a Director of Star Precision Electronics (I) Ltd.
Versus
ICDS Limited, A Company at Manipal and a branch office in Mumbai
Notice Of Motion No.46 Of 2008 In Insolvency Petition No.6 Of 2001
Decided on : 02-04-2009

Advocates appeared:
For the Debtor: K.G. Raghwan, Senior Counsel, J.H. Samuel i/b Thakordas Madgaonkar for the Insolvent. For the Creditor: G.S. Hegde, Shetty for Syndicate Bank, Shakuntala Joshi for I.D.B.I, A.P. Kothari, Deputy Official Assignee present.

Headnote:Presidency Towns Insolvency Act, 1909 - Section 21 - Annulment of insolvency - Submission that order of insolvency as void - Division Bench found order in confirmity with law - Person against whom order of insolvency passed, not entitled to maintain application vide Section 21 - Preliminary objection rejected - Submission of insolvency not acceptable - Term "opinion" in Section 21 cannot include personal opinion or view of Judge - Order of annulment contrary to and constitute interference with order of appellate Court - Provisions of Sections 8 and 21 of Insolvency Act with Doctrine of binding precedent reconciled - A contrary view would bring confrontation between Section 21 and doctrine of binding precedent - Accordingly notice of motion is dismissed. - In the exercise of this judicial function however a Judge is bound by the doctrine of precedent. While exercising powers under Section 21 a Judge obviously discharges his judicial function. This he is not entitled to do on the basis of his personal opinion or view. The terms "opinion" in Section 21 thus cannot and does not include within its scope the personal opinion or view of the Judge. A Judges personal view contrary to a binding judgment is not capable of being translated into an order of the Court as Judge is not entitled to ignore a binding precedent and follow his person opinion. The opinion under Section 21 must be based on judicial principles including the doctrine of precedent the application is not maintainable as the petition for adjudication, which was contested by the parties including the insolvent who has taken out the present notice of motion, was decided by the insolvency Court and the decision was affirmed by the Appeal Court. Thus the decision of the Single Judge stood merged in the decision of the Appeal Court. An order of annulment in the present notice of motion would be contrary to and constitute an interference with the order and judgment of the Appeal Court which is not permissible. In this manner the provisions of Sections 8 and 21 of the Presidency Towns Insolvency Act and the doctrine of binding precedent are reconciled. A view to the contrary would bring about constant confrontation especially between the provisions of Section 21 and the doctrine of binding precedent. The Notice of Motion is dismissed.

Judgment

1. The insolvent who has taken out this Notice of Motion for various reliefs restricted his case to prayer (I) wherein he has sought an order of annulment of the insolvency under section 21 of the Presidency Towns Insolvency Act, 1909.

2. This Notice of Motion raises the following questions of law :-

(A). Does a debtor who is adjudged an insolvent fall within the meaning of the expression "any person interested" used in section 21 of the Presidency – Towns Insolvency Act, 1909 ?

(B). Is a person interested entitled to maintain an application for annulment under section 21 of the Presidency – Towns Insolvency Act, 1909 on the ground that he ought not to have been adjudged insolvent in cases where the order of adjudication is passed by or confirmed by the Appeal Court or the Supreme Court of India ?

3. Mr.Raghwan submitted that the insolvent is entitled to an order annulling the insolvency, as the entire proceedings were based on an award made and published under the Arbitration and Conciliation Act, 1996. Relying upon the judgment of the Supreme Court in Paramjeet Singh Patheja v. ICDS Ltd., 2006 AIR SCW 5718, he submitted that the order of adjudication in respect of the insolvent is void.

4(a). The arbitration award, made and published on 24.2.1999 directed the insolvent to pay the Petitioning Creditor a sum of Rs.38,54,087=32 along with interest at the rate of 18% on Rs.24,41,675/- from 29.8.2000 till payment.

(b). Based on the award, Insolvency Notice bearing No.82 of 2000 was issued by this Court on 26.9.2000. The notice was served on the insolvent on 3.10.2000.

(c). On 21.11.2000 the insolvent belatedly took out Notice of Motion No.1127 of 2000 for setting aside the notice.

(d). On 29.1.2001, the petition was filed for an order of adjudication of insolvency against the debtor/insolvent. The Petition was filed before Notice of Motion No.1127 of 2000 was disposed of probably because the Notice of Motion was taken out belatedly.

(e). On 24.4.2001, the Petitioner filed an Arbitration Petition challenging the award. By an order and judgment dated 25.8.2001, the Arbitration Petition was dismissed.

(f). On 4.9.2001, Notice of Motion No.1127 of 2000 for setting aside the Insolvency Notice was withdrawn unconditionally.

(g). On 6.11.2001, D.K. Deshmukh, J. disposed of the Insolvency Petition by the following order :-

"P.C. :

This petition is filed by the Petitioning Creditors for adjudication of the Debtor as Insolvent. The Insolvency Notice is based on an Award made by the Arbitrator. The Notice of Motion challenging the Insolvency Notice has been withdrawn. Even the challenge raised to the Award on which the Insolvency notice was based has failed. There is also no affidavit in reply filed. Hence this petition is granted in terms of prayers

(a) and (b). Petition is disposed of."

Prayer (a) was for an order of adjudication of insolvency and prayer (b) was for costs.

5. The insolvent challenged the order by filing an Appeal being Appeal No.1231 of 2001. The Appeal was dismissed by an order and judgment dated 27.3.2002.

The Division Bench held that the prayers in the Petition were required to be granted in view of the above facts. Various contentions raised on behalf of the insolvent were rejected. The Division Bench held that the order dated 6.11.2001 was in conformity with law and required no interference.

6. Mr.Raghwan submitted that in view of Section 21 and the judgment of the Supreme Court in Patheja’s case (supra), the insolvent is entitled to an order annulling the insolvency. Section 21 of the Act reads as under :-

21. Power for Court to annul adjudication in certain cases.- (1) Where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent, or where it is proved to the satisfaction of the Court that the debts of the insolvent are paid in full, (the Court shall, on the application of any person interested,) by order annul the adjudication and the Court may, of its own motion or on application

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