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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ABHAY AHUJA, J.
Raj Kantilal Shah – Appellant
Versus
M/s Sanskar Gem Pvt. Ltd. – Respondent
Insolvency Petition No. 9 of 2020
Decided On : 05-12-2023
Insolvency - Adjudication of Insolvency - Presidency Towns Insolvency Act, 1909 (Section 9) - Summary
Fact of the Case:
The Petition seeks an order of adjudication of insolvency against the Debtor Raj Kantilal Shah of Mumbai. The Judgment Debtor owed the Petitioner Rs. 21,37,78,446.52. The Insolvency notice was served upon the Judgment Debtor on 8th December, 2018, and an act of Insolvency was committed by the Judgment Debtor on 13th January, 2019. The Notice of Motion seeking to set aside the Insolvency notice was dismissed on 5th November, 2019.
Finding of the Court:
The Court found that the Judgment Debtor committed an act of insolvency under Section 9(2) of the Insolvency Act. The Petition was not premature, and the Judgment Debtor failed to comply with the Insolvency Notice and the subsequent Notice of Motion.
Issues: The main issue was whether the act of insolvency was committed upon the dismissal of the Notice of Motion on 5th November, 2019, and whether the Petition filed on 23rd January, 2019, was premature.
Ratio Decidendi: The Court held that the Judgment Debtor committed an act of insolvency under Section 9(2) of the Insolvency Act. The Petition was not premature, and the Judgment Debtor failed to comply with the Insolvency Notice and the subsequent Notice of Motion.
Final Decision: The Petition was allowed, and the Judgment Debtor was adjudicated as insolvent in terms of the Insolvency Act.
JUDGMENT :
ABHAY AHUJA, J.
1. This petition seeks an order of adjudication of insolvency by this Court against the Debtor Raj Kantilal Shah of Mumbai.
2. It is not in dispute that the Judgment Debtor owes to the Petitioner Rs. 21,37,78,446.52. Earlier, on 31st March, 2016, the Petitioning Creditor sent demand notice to Judgment Debtor. On 3rd May, 2016 interim reply was sent by advocate for Judgment Debtor to the Petitioning Creditor. On 9th February, 2017, decree on admission was passed in terms of the consent terms dated 9th February, 2017 in Summary Suit No. 657 of 2016. As the Judgment Debtor failed to make payment in terms of the said decree, Insolvency notice dated 16th October, 2018 was issued which was sealed on 4th December, 2018. The Insolvency notice was served upon the Judgment Debtor on 8th December, 2018 and an affidavit of service was filed in this regard. In accordance with the said insolvency notice the Judgment Debtor had 35 days to make payment of the decretal amount. It is not in dispute that, on 13th January, 2019, an act of Insolvency was committed by the Judgment Debtor as he had failed to make payment within 35 days. On 14th January, 2019, Notice of Motion No. 11 of 2019 was presented by the Judgment Debtor for setting aside the Insolvency notice. Thereafter, within a period of 3 months from 14th January, 2019, on 23rd January 2019, this Petition on Lodging No. 1 of 2019, was filed by the Petitioning Creditor for an order of adjudication of insolvency of the Judgment Debtor. On 7th March, 2019 praecipe was filed by the Petitioning Creditor in the Insolvency Registrar’s office for numbering the Petition. The Notice of Motion filed by the Judgment Debtor came to be served upon the Petitioning Creditor on 9th April, 2019. The Insolvency Petition was served upon the advocates for the Judgment Debtor on 11th April, 2019. After hearing the parties, the Notice of Motion seeking to set aside the Insolvency notice was dismissed on 5th November, 2019 by passing the following order:
2. The Petitioning Creditor has taken out the above Insolvency Notice pursuant to a consent decree dated 9th February, 2017 passed by this Court in Summary Suit No. 657 of 2016.
3. From the perusal of the Affidavit in support of the Insolvency Notice, it appears that the Applicant is not disputing the consent decree dated 9th February, 2017 passed by this Court. However, due to financial problems, he is not in a position to pay the decretal amount to the Petitioning Creditor. He submits that he owns properties at Surat which have a market value of Rs. 10 to 12 Crores. He further submits that he is in the process of selling/disposing off his properties and the sale proceeds thereof, would be utilized towards full and final satisfaction of the decretal amount of the Petitioning Creditor. He submits that if the Applicant is declared as Insolvent, no purpose would be served.
4. On the last date of hearing, the learned Advocate for the Applicant/Debtor had stated that the matter between the parties would be settled. The decree in the Summary Suit is of the year 2017. The Judgment Debtor is not even in a position to pay decretal amount. I am not satisfied that the Judgment Debtor has assets which have a market value of Rs. 10 to 12 Crores. I any event, the Judgment Debtor himself states that it is not possible to find a purchaser to buy the said property. In view thereof, I am not inclined to entertain the above Notice of Motion. However, it is open to the Judgment Debtor to deposit the decretal amount with the Prothonotary and Senior Master, High Court, Bombay and take such steps thereafter, for discharge of this Notice. The Notice of Motion is therefore, dismissed. ”
3. On 18 February, 2020
The Judgment Debtor's failure to comply with the Insolvency Notice and subsequent Notice of Motion led to the adjudication of insolvency under Section 9(2) of the Insolvency Act.
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