The court emphasized the need to protect the interests of the creditors and stop unhealthy trends in insolvency cases, justifying a six-month commitment to civil prison for the insolvent's actions.

Dr. D.Y. Chandrachud, J.

1. The learned Single Judge in exercise of the jurisdiction conferred by Section 34 of the Presidency Towns Insolvency Act, 1909, has directed that the Appellant be committed to civil prison for a period of six months on the ground that he had removed the properties in his possession without the leave of the Official Assignee.

2. The Respondent, Marine Container Services Private Limited has a decree in its favour which was passed in a summary suit on 31 March 2000 for an amount of Rs.17.75 Lakhs together with interest on the principal sum. The decree has not been satisfied. The Appellant was adjudged as an Insolvent on 5 August 2003. Since the Appellant was not cooperating with the Official Assignee, Rule Nisi was taken out, which was made absolute on 4 December 2006. A warrant of arrest was issued on 2 December 2009. Inspite of the warrant, the office of the Sheriff and the Cuffe Parade Police Station were unable to arrest the Insolvent. On 6 May 2010 the Court was informed by the Deputy Sheriff and by the PSI attached to Cuffe Parade Police Station that the orders of the Court would be complied with within two weeks by the arrest of the Insolvent. The Insolvent appeared before the Court and the order of arrest was stayed on his assurance that he would attend the office of the Official Assignee twice in a week and would cooperate with the Official Assignee.

3. The Official Assignee had taken possession of an industrial gala at Sewree, belonging to the Insolvent. A Motion was taken out in the insolvency proceeding by third parties alleging that the Insolvent had sold the gala to them under an agreement dated 7 September 2007. The third parties, thereafter instituted a suit before this Court, seeking reliefs in respect of the gala. An affidavit was filed by them annexing a Memorandum of Understanding dated 20 September 2006 with the Insolvent, showing a consideration of Rs.22.50 Lakhs. The final agreement of sale, however, reflected a consideration of Rs.11.50 Lakhs. The third parties stated before the Court that after the gala had been sealed by the Official Assignee, the Insolvent issued a cheque in favour of an unnamed payee on 31 May 2010 for a sum of Rs.22.51 Lakhs.

4. The second allegation against the Insolvent pertains to a residential flat at Cuffe Parade ad-measuring 3000 square feet, being flat No.151/B, Makers Towers. During the course of his examination on 7 January 2004 the Insolvent informed the Official Assignee that he was residing in the flat which stood in the name of an HUF. The Insolvent avoided handing over the share certificate of the residential flat and eventually when it was produced on 11 October 2010, it transpired that the flat stands in the names of three persons viz. (i) Hakimchand B. Vora; (ii) the Insolvent ; and (iii) Shalin M.Vora. An MOU had been entered into on 23 November 2006 for the sale of the flat to Spire Builders Private Limited for a consideration of Rs.19.50 Crores, of which an amount of Rs.2.51 Crores was paid as earnest money. The amount of Rs.2.51 Crores was deposited in a new bank account opened in Karur Vysya Bank in the names of the Insolvent and his parents. Though, the advocate for the Insolvent had informed the Court that at least an amount of Rs.30 Lakhs would be deposited in Court, nothing had been deposited.

5. On these facts, a motion was taken out by the Petitioning Creditor under Section 34 of the Presidency Towns Insolvency Act, 1909 for committing the Insolvent to civil prison, on the ground that he had violated the provisions of Clause b and c of subsection 1. The learned Single Judge has, while allowing the motion, held that the Insolvent had dealt with both the residential flat at Cuffe Parade and the industrial gala at Sewree, thus removing valuable properties from his possession without the leave of the Official Assignee or of the Court. The learned Single Judge held that by an agreement for sale dated 7 September 2007, the In