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2002 Supreme(Bom) 347
Bombay High Court
J.A.PATIL
In Re : Siddharth Srivastava - Appellant
Versus
. - Respondent
Decided On : 04/04/2002
Milind Vasudeo with Ms. Swapnila D. Rane i/by Ashwin Ankhad, for Petitioning Creditor; K. R. Bulchandani with Subhash Jha, J. P. Shah and Ms. L. K. Bulchandani, for Debtor.
The main legal point established in the judgment is that the Award/Decree obtained by the petitioning creditor was not considered a decree for the purpose of S. 9(2) of the Act, and the order passed in contempt proceedings did not amount to a decree or order within the meaning of S. 9 of the Act.
Headnote:
S. 9 - Presidency Towns Insolvency Act - 13(2) - The court discussed the relevant sections of the Presidency Towns Insolvency Act, 1909, and the Arbitration and Conciliation Act, 1997. The court analyzed the nature of the Award/Decree and its enforceability, as well as the interpretation of the term 'order' in the context of contempt proceedings. The court concluded that the judgment debtor did not commit an act of insolvency under the relevant sections of the Act.
Fact of the Case:
The petitioning creditor filed a petition under S. 9 of the Presidency Towns Insolvency Act, 1909, seeking to adjudicate the judgment debtor as insolvent due to non-payment of a sum of Rs. 6.60 crores as per a consent award. The judgment debtor denied committing any act of insolvency and contested the petition.
Finding of the Court:
The court found that the judgment debtor did not commit an act of insolvency as the Award/Decree obtained by the petitioning creditor was not considered a decree for the purpose of S. 9(2) of the Act. The court also found that the order passed in contempt proceedings did not amount to a decree or order within the meaning of S. 9 of the Act, and therefore, the judgment debtor could not be adjudicated as an insolvent.
Issues: The issues revolved around the nature of the Award/Decree, the enforceability of the consent terms, and the interpretation of the term 'order' in the context of contempt proceedings.
Ratio Decidendi: The court held that the Award/Decree obtained by the petitioning creditor was not considered a decree for the purpose of S. 9(2) of the Act, and the order passed in contempt proceedings did not amount to a decree or order within the meaning of S. 9 of the Act.
Final Decision: The petition was dismissed, and the judgment debtor was not adjudicated as an insolvent.
What is the status of an Award/Decree under S. 9 of the Presidency Towns Insolvency Act when it is not considered a decree under S. 2(2) CPC?
What is the nature of an order in contempt proceedings for purposes of S. 9(1)(i) and S. 9(2) PTI Act, and can such an order be treated as an act of insolvency?
What is the correct interpretation of the term "order" under S. 2(14) CPC in the context of contempt and its executability under Order 21 and S. 36 CPC?
2. The petitioning creditor had invested a sum of Rs. 5 crores by way of equity investment with the Asia Television Network Ltd. (for short ‘ATN') under a memorandum of agreement dated 21-3-1996. The judgment debtor was at all material times and is the Chairman and Managing Director of the said ATN. It appears that certain disputes arose between the parties in connection with the memorandum of agreement and therefore, the petitioning creditor filed an arbitration petition No. 14/1997 under S. 9 of the Arbitration and Conciliation Act, 1997 (for short the Act, 1997'). In that proceeding, the parties arrived at a settlement and filed consent terms dated 7-8-1997. Accordingly, the award in terms of the said consent terms came to be passed on 5-9-1997. According to the petitioners under the provisions of the Act, 1996, the Award has the force of the decree and hence a decree in terms of the said award came into existence. It may be pointed out that under the consent terms, the judgment debtor acknowledged his liability to pay to the petitioning creditor a sum of Rs. 6.60 crores in instalments beginning from 15-9-1997. It is stated that accordingly, the ‘ATN' initially paid a sum of Rs. 45 lakhs towards the instalment as agreed upon in the consent terms but thereafter there were no payments forthcoming from the judgment debtor. According to the petitioning creditor under the said Award/Decree, the judgment debtor was jointly and severally liable alone with the ‘ATN' to pay the dues. Since the judgment debtor made defaults in payment of the instalments, the petitioning creditor filed contempt petition No. 9/98 which came to be admitted on 26-2-1998. During the pendency of the said contempt petition, the petitioning creditor also filed execution application No. 58/1998 and by warrant of attachment got attached the movable properties of the judgment debtor along with the properties of the ATN. In the said contempt petition, the parties arrived at settlement and filed their consent terms dated 9-12-1998. In view of the consent terms, the contempt petition came to be disposed of in terms of the said consent terms. By the consent terms the petitioning creditor agreed to accept a reduced amount than what was stated in the earlier consent terms, provided the judgment debtor adhered to the payment schedule set out thereunder. The consent terms further provided that in case of any default by the judgment debtor, the petitioning creditor would be entitled to recover the full amount as stipulated in the consent terms.
3. The petitioning creditor has alleged that in the meantime, the judgment debtor started a new channel i.e. ATN, which was in contravention of the order passed by this court. The petitioning creditor, therefore, filed a second contempt petition bearing No. 119/1998 against the judgment debtor. The said petition was admitted on 24-2-1999. The petitioning creditor has further alleged that the judgment debtor once again committed breach of the consent terms dated 9-12-1998 as he failed to make payment as per schedule. The petitioning creditor, therefore, took out notice of motion No. 1798/1999 and applied for appointment of a Court receiver in respect of the properties of the judgment debtor as well as the ATN. The said notice of motion was made absolute in terms of the prayer clauses (a) and (b) therein on 8-6-1999 and the Court Receiver, High Court, came to be appointed as the Receiver. It appears that the judgment debtor preferred an appeal against the said order. However, the division bench, dismissed the same on 14-9-1999 but substituted the official liquidator in place of the Court receiver.
