Bombay High Court
M.S.RANE
In Re : Ismail Akbarali Chitalwalla - Appellant
Versus
. - Respondent
Decided On : 03/08/1995
INSOLVENCY - SERVICE OF PROCESS - IRREGULARITIES - SETTING ASIDE OF ADJUDICATION ORDER - PRESIDENCY TOWNS INSOLVENCY ACT, 1909 - SECTIONS 9, 9A, 112 - RULES 10, 11, 34, 40, 44, 46, 52A, 52B, 52D, 52E, 61, 62.
Fact of the Case:
The Debtor sought to set aside an order of adjudication passed against him in insolvency proceedings, alleging non-service of the insolvency petition and notice upon him. The Petitioning Creditor, a Co-operative Credit Society, claimed that service was effected through an employee and a bailiff, who identified the Debtor at his business premises.
Finding of the Court:
The Court found that there were irregularities in the service of process upon the Debtor. The address of the Debtor was incorrectly stated in the insolvency notice and the adjudication petition. The Debtor denied being present at the business premises when service was allegedly effected and provided evidence of his brother's death and the closure of his shop on that day. The Court also noted that the Petitioning Creditor's employee, who was alleged to have identified the Debtor, did not file an affidavit in response to the Debtor's allegations of fraud.
Issues: 1. Whether there was proper service of the process of the petition upon the Debtor? 2. Whether the order of adjudication should be set aside due to irregularities in the service of process?
Ratio Decidendi: 1. The Court held that the service of process upon the Debtor was not duly and properly effected. It emphasized the importance of providing reasonable and proper opportunity to a person sought to be condemned as insolvent, considering the serious consequences of an order of adjudication. 2. The Court relied on the provisions of the Presidency Towns Insolvency Act, 1909, and the Rules framed thereunder, which provide specific guidelines for the service of process in insolvency proceedings. It noted that the Petitioning Creditor had conceded to a "confusion" in the description of the Debtor and his address, and that the employee alleged to have identified the Debtor did not file an affidavit in response to the Debtor's allegations of fraud.
Final Decision: The Court allowed the Debtor's application and set aside the order of adjudication passed against him. It directed the Petitioning Creditor to pay costs to the Debtor and expedited the issuance of a certified copy of the order.
2. The Debtor has also claimed various other reliefs such as ordering inquiry and initiation of criminal proceedings against one Jitendra D. Kanse, the employee of the Petitioning Creditor for making false affidavit of service of process in the petition upon the Debtor. At the outset, it may be stated that the principal ground urged by the Debtor in support of this application is of non-service of the Insolvency Petition herein as also the Insolvency Notice issued therein upon him. Inasmuch as the Debtor has alleged fraud by the Petitioning Creditor in the matter of service of process of the Petition and the Insolvency Notice.
3. It is noticed that the Petitioning Creditor is the Award holder passed by the Cooperative Court against the Debtor and two others who are not before the Court. It is further noticed that the Petitioning Creditor is the Co-operative Credit Society registered under the Maharashtra Co-operative Societies Act and they filed a Dispute before the Co-operative Court for the recovery of certain amount advanced to the principal borrowers (not parties to this Petition) and the Debtor herein who was a guarantor in which Award has been made by the Cooperative Court, including the Debtor herein.
4. As the said Award remained un-complied with the Petitioning Creditor took recourse to the Insolvency proceedings under the provisions of Presidency Towns Insolvency Act. They issued notice being Notice No.N/164 of 1993 dated 11th November, 1993 which according to the Petitioning Creditor was served upon the Debtor. A joint affidavit of service made by Shri Jitendra D. Kanse employee of the Creditor and the Bailiff of the Sheriff of Bombay has been filed being dated 7th March, 1994 which shows that the Debtor refused to accept the notice and therefore a duplicate copy thereof was affixed on the place of his business mentioned in the title. As however, the Debtor did not respond, the said notice was decided ex parte.
5. Then the Petitioning Creditor presented Petition before this Court on 23rd March, 1994 seeking order of adjudication against the Debtor and according to the Petitioning Creditor the service of process was effected and joint affidavit of service made by said Jitendra D. Kanse and Bailiff of the Sheriff of Bombay was filed being dated 7th June, 1994 which mentions that the Debtor refused to accept the service which refusal was accepted and treated as a proper service.
6. Then on 4th October, 1994, the Court proceeded to grant the petition of the Petitioning Creditor and passing an Order of Adjudication against the Debtor in his absence. It is the said Order which is sought to be set aside in this application.
7. As stated the Debtor has sought to set aside the Order of Adjudication on the ground of non-service of the process in the Petition and there being a fraud perpetuated with regard to the service of the process in the Petition.
8. The matter was argued at great length. The Petitioning Creditor has filed the affidavit-in-reply which is tendered in the Court today itself. The Notice of Motion has also been directed against Jitendra D. Kanse, an employee of the Petitioning Creditor, who is co-deponent along with the bailiff of the Sheriff of Bombay, who accompanied the bailiff for effecting service of the process in the Insolvency Notice as also in the Petition and alleged to have identified the Debtor. However, the said Kanse who remained present in the Court and who has been duly served with the process in this application has not chosen to file his affidavit in reply. More comments later on.
9. A short point to be considered is whether there is a proper service of the process of the Petition upon the Debtor?
10. The joint affidavit of service dat
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