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Bombay High Court
MRIDUL
Bhurmal Kapurchaud and Co., Judgment Creditors - Appellant
Versus
Premier Machine Tools - Respondent
Decided On : 09/30/1976
INSOLVENCY - ISSUANCE OF INSOLVENCY NOTICE - REQUIREMENT OF LEAVE UNDER O.21, R.22 OF THE CODE OF CIVIL PROCEDURE - PRACTICE OF THE INSOLVENCY REGISTRAR - INTERPRETATION OF S.9(I) AND S.9-A OF THE PRESIDENCY TOWNS INSOLVENCY ACT - DISTINCTION BETWEEN EXECUTION OF A DECREE AND INSOLVENCY PROCEEDINGS - EFFECT OF NON-COMPLIANCE WITH O.21, R.22 - RATIO OF DECISIONS IN PARSHRAM HANMANTA PATIL V. BALIRMKUND LACHIRAM AND RAGHUNATH DAS V. SUNDAR DAS KHETRI - PRINCIPLE LAID DOWN IN J.P. TIWARI V. BHIMRAJ HARLALKA AND ALI D. GANDHI V. S.L. THAKURDAS - PRACTICE OF THE INSOLVENCY REGISTRAR UPHELD.
Fact of the Case:
The judgment-creditors applied to the Insolvency Registrar for issuing an insolvency notice contemplated by S.9-A of the Presidency Towns Insolvency Act (hereinafter referred to as "the Act") in respect of a decree passed in their favour on 1st August 1974. The Insolvency Registrar insisted that before an insolvency notice could be issued, proceedings in that behalf must be adopted and the said notice made absolute by the competent court, as per the provisions of O.21, R.22 of the Code of Civil Procedure. The judgment-creditors challenged this practice, contending that it was contrary to the provisions of law and unreasonable.
Finding of the Court:
The court held that the practice of the Insolvency Registrar was not contrary to the provisions of law and was reasonable. The court interpreted S.9(i) and S.9-A of the Act and held that the only fetters with regard to acts of insolvency based upon an insolvency notice were: (i) 'execution of a decree not having been stayed' (ii) 'the debtor having a counter-claim which equals or is in excess of the judgment-debt' and (iii) the quantum of the debt being disputed. The court further held that the issuance of an insolvency notice was not an execution of a decree because an insolvency proceeding founded on a decree was not a mode of execution postulated by the provisions of the Code of Civil Procedure. The court also held that the absence of leave under O.21 R.22 of the Code of Civil Procedure did not impinge upon or otherwise control the provisions of the Act and rules relevant to the insolvency notices issued under provisions thereof or the proceedings subsequent thereto.
Issues: 1. Whether the practice of the Insolvency Registrar to insist upon order of the competent court under O.21, R.23 of the Code of Civil Procedure, in cases where decrees come under the coverage of the O.21 R.22 of the Code of Civil Procedure, was contrary to the provisions of law and unreasonable? 2. Whether the issuance of an insolvency notice was an execution of a decree? 3. Whether the absence of leave under O.21 R.22 of the Code of Civil Procedure impinged upon or otherwise controlled the provisions of the Act and rules relevant to the insolvency notices issued under provisions thereof or the proceedings subsequent thereto?
Ratio Decidendi: 1. The court held that the practice of the Insolvency Registrar was not contrary to the provisions of law and was reasonable because: (i) S.9(i) and S.9-A of the Act only imposed certain fetters on acts of insolvency based on an insolvency notice, and absence of leave under O.21 R.22 was not one of those fetters; (ii) the issuance of an insolvency notice was not an execution of a decree because an insolvency proceeding founded on a decree was not a mode of execution postulated by the provisions of the Code of Civil Procedure; and (iii) the absence of leave under O.21 R.22 did not impinge upon or otherwise control the provisions of the Act and rules relevant to the insolvency notices issued under provisions thereof or the proceedings subsequent thereto. 2. The court held that the issuance of an insolvency notice was not an execution of a decree because an insolvency proceeding founded on a decree was not a mode of execution postulated by the provisions of the Code of Civil Procedure.
Final Decision: The court upheld the practice of the Insolvency Registrar to insist upon order of the competent court under O.21, R.23 of the Code of Civil Procedure, in cases where decrees come under the coverage of the O.21 R.22 of the Code of Civil Procedure.
2. On 1st August 1974 a decree was passed in favour of the judgment-creditors by the City Civil Court, Bombay, in Summary Suit No.3778 of 1974 against M/s. Premier Machine Tools Co., the Judgment-debtors. On 26th April 1976 the judgment-creditors made an application to the Insolvency Registrar for issuing an insolvency notice contemplated by S.9-A of the Presidency Towns Insolvency Act (hereinafter referred to as "the Act"). The said application was processed by the office of the Insolvency Registrar. The draft of the notice which was submitted by the attorneys of the judgment-creditors was approved by the office of the insolvency Registrar and sent back to the attorney. The said insolvency notice was then duly engrossed and submitted again to the office of the Insolvency Registrar for being sealed. The time which was taken in this process rendered the decree passed on 1st August 1974 more than 2 years old and thus required leave of the court for execution under O.21 R.22 of the Code of Civil Procedure. Upon the said query being raised or the requisition being made in that behalf by the office of the Insolvency Registrar, the attorneys for the Judgment-creditors by their precipe dated 16th August 1976 raised objections that the said query or the requisition was unjustified. By the said precipe the attorneys required the Insolvency Registrar to place the matter before me for directions. The said precipe along with a comprehensive and a well-considered note prepared by the Insolvency Registrar, was submitted to me. I directed that the matter be placed on Board for determination of the issues involved therein.
3. In the precipe of the attorneys of the judgment-creditors it is contended that the Insolvency proceedings are not execution proceedings; that the only requirements which have to be fulfilled before an insolvency notice could be issued are those postulated by the relevant provisions of the Presidency Towns Insolvency Act (hereinafter referred as "the Act'") and the rules of this court relating thereto, viz., debt not being barred and the execution of the decree not being stayed; that the purpose of O.21, R.22 of the Code of Civil Procedure was merely to prevent a surprise being sprung upon a judgment-debtor and further the judgment-debtor has an opportunity to show cause against an insolvency notice and to have it set aside on the ground available to him under the provisions of the said Act and the said Rules. In light of these assertions the contention of the judgment-creditors in the said precipe is that the practice adopted by the Insolvery Registrar is not only without sanction of law but is contrary thereto.
4. Shri Makhija appears for the judgment-creditors. The Insolvency Registrar though present in court, is not represented by any counsel. I must observe that the matter being ex parte as if it were, the learned counsel in the best traditions of the bar approached the problem in a very fair and reasonable manner and rendered even handed assistance to this court. According to the learned counsel there are several reasons, for holding that the position adopted by the Insolvency Registrar or the long standing practice of this court advert
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