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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. Shriram, J.
Manipal Finance Corporation Ltd - Appellant
Versus
Kotak Mahindra Bank Ltd - Respondent
Notice Of Motion No. 22 of 2018; Insolvency Petition No. 5 of 2010
Decided On : 18-09-2018
Insolvency - Recall of Order - Presidency Town Insolvency Act, 1909 (Insolvency Act) - Section 21(1)
Fact of the Case:
The applicant, Kotak Mahindra Bank Limited, sought to recall an order annulling the order of adjudication against the insolvent, Akshay D. Thakkar, under Section 21(1) of the Insolvency Act. The applicant claimed that the insolvent had made deliberate false statements regarding the settlement of debts, and the recovery proceedings initiated against the insolvent.
Finding of the Court:
The Court found that the insolvent had made deliberate false statements and had failed to disclose the existence of the applicant as a creditor and the orders passed by the Debt Recovery Tribunal (DRT) against the insolvent. The Court recalled the order of annulment and directed the insolvent to show cause for contempt of court and perjury proceedings.
Issues: The issues revolved around the deliberate false statements made by the insolvent regarding the settlement of debts and the failure to disclose the existence of the applicant as a creditor and the orders passed by the DRT against the insolvent.
Ratio Decidendi: The Court held that the deliberate false statements made by the insolvent and the failure to disclose the existence of the applicant as a creditor and the orders passed by the DRT constituted grounds for recalling the order of annulment.
Final Decision: The Court recalled the order of annulment, directed the insolvent to show cause for contempt of court and perjury proceedings, and substituted the applicant as the petitioning creditor in place of Manipal Finance Corporation Ltd. The Court refused to grant a stay due to the deliberate false statements made by the insolvent.
Key Points: - The court recalled the order of annulment under Section 21(1) due to deliberate false statements and non-disclosure of creditor (Kotak Mahindra Bank) and DRT orders (!) (!) (!) (!) . - Deliberate false statements and failure to disclose a creditor and DRT orders constitute grounds for recalling the annulment order (!) (!) . - The insolvent was required to show cause for contempt of court and perjury proceedings following recall (!) (!) . - The substituted petitioning creditor is entitled to pursue proceedings and must meet the definition of "creditor" under Section 2(a) of the Insolvency Act; they may substitute for the original petitioning creditor when appropriate (!) (!) (!) (!) . - Debts provable in insolvency include all debts and liabilities present or future, as per Section 46(3), extending beyond those based on Section 9(2) notice (!) (!) (!) . - All creditors have a right to prove their claims in insolvency; no single creditor’s claim can purge the act of insolvency for others (!) . - The Official Assignee’s failure to disclose the DRT order and attachment impacted the annulment decision; the order dated 3 December 2014 stands recalled (!) (!) (!) . - The registrar was directed to issue notices and the insolvent to appear; stay was refused due to deliberate falsehoods (!) (!) . - The substituted creditor could file and maintain the insolvency petition upon substitution, ensuring the general body of creditors benefits (!) (!) . - The final order restored insolvency petition and substituted Kotak Mahindra Bank as petitioning creditor in place of Manipal Finance Corporation Ltd (!) (!) (!) .
JUDGMENT
K.R. Shriram, J. - This application is taken out by Kotak Mahindra Bank Limited as assignee of State Bank of India to recall the order dated 3rd December 2014 in Notice of Motion No. 52 of 2014 by which the Hon''ble Court was pleased to annul under Section 21(1) of the Presidency Town Insolvency At, 1909 (Insolvency Act), the order of adjudication dated 22nd April 2010 passed against Akshay D. Thakkar (Insolvent).
2. The reason why applicant wants this order to be recalled is because on 3rd December 2014 when the order of annulment was passed, to the knowledge of the insolvent and to the knowledge of the official assignee, there was an order and judgment passed by the Debt Recovery Tribunal on 20th May 2009 against the insolvent to pay to applicant a sum of Rs. 9,60,97,800.69 with simple interest @ 8% per annum from the date of filing till realization along with costs and charges. Applicant to the application and both insolvent and official assignee were also aware that recovery proceedings have been initiated against the insolvent and even two properties belonging to the insolvent had been attached. Applicant also states that the insolvent has also filed an application to set aside/vacate the attachment order before the Debt Recovery Tribunal (DRT) of which nobody is aware what the status is. Shri Bhure states that the attachment order still continues.
3. The insolvent was adjudicated insolvent on a petition filed by one Manipal Finance Corporation Limited. The claim, according to the insolvent, of Manipal Finance Corporation Limited was settled by a wellwisher of the insolvent based on which insolvent took out a Notice of Motion No. 52 of 2014 for annulling the order of adjudication on the grounds that the petitioning creditor''s claim has been settled and there are no other creditors. The affidavit in support filed by the insolvent in the notice of motion affirmed on 30th August 2014, paragraph no.3 reads as under :
"3. ...............I say that other than the above Creditor I do not have any creditor payable either jointly or personally."
4. In view of this statement made by the insolvent, this Court believed the averments made by the insolvent and recorded in the order dated 3rd December 2014 in paragraphs 2 and 3 which read as under :
"2. The learned Advocate for the Insolvent states that the Insolvent has set out the name of his Creditor in the AffidavitinSupport of the above Notice of Motion and the Petitioning Creditor M/s. Manipal Finance Corporation Ltd., is the only creditor of the Insolvent. It is further stated that the claim of the Petitioning Creditor has been duly settled by the wellwisher of Insolvent. Mr. Varma also states that the Insolvent has also complied with the requisitions raised in the above Rule Nisi.
3. Mr. Ramesh Jain, Advocate for the Petitioning Creditor states that the claim of his client has been duly settled by the wellwisher of the Insolvent. 1St Assistant to the Official Assignee states that the claim of the Petitioning Creditor whose name is disclosed by the Insolvent in the Schedule of Assets and Liabilities has been settled and there are no claims pending with the Office of the Official Assignee. However, she has stated that the original receipt is not lodged with the Office of the Official Assignee."
5. Therefore, the counsel for the insolvent and the 1st Assistant to the official assignee had made a statement to the Court that apart from Manipal Finance Corporation Limited, there are no other creditors. Of course the Official Assignee has qualified by saying ".....disclosed by the insolvent in the Schedule of Assets and liabilities.............". Therefore, if not disclosed the Official Assignee also would not know. One Madan K. Salve the alleged wellwisher of the insolvent has also filed undertakingcumindemnity bond with the official assignee that he has paid off the creditors in full and final settlement and also given an undertaking to pay/deposit all additional amount if s
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