Whether the court can restore insolvency petition dismissed in default on the application of one of the creditors?

 The learned Assistant Judge considered that the petitioning creditor sues on behalf of the general body of creditors and, therefore, in a sense every creditor is a party to the proceedings and that under Order IX, Rule 9, any party to the proceeding can ask for a petition dismissed for default being restored to file. But Order IX, Rule 9, refers specifically to the plaintiff who has to satisfy the Court that he has sufficient cause for non-appearance, and it is doubtful whether it was competent to the shop of Laxminarayan Sitaram to apply under Order IX, Rule 9, for a revival of the petition.

7. But the question still remains whether the Court did not have inherent jurisdiction to restore the application to file at the instance of one of the creditors. Under Section 151 of the Civil Procedure Code the Court has inherent powers to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the Court. In my opinion the ends of justice do require in the peculiar circumstances of this case that the application should be restored to file, and that, therefore, the two lower Courts were right in passing the order that they did.

IN THE HIGH COURT OF BOMBAY

Civil Revision Application No. 87 of 1944

Decided On: 17.11.1944

 Keshav Appa Bhagat  Vs.  Sitaram Hanumandas

Hon'ble Judges/Coram:

G.S. Rajadhyaksha, J.

Citation:1944 SCCONLINE 79: AIR 1946 Bom 20:MANU/MH/0133/1944

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Whether insolvency petition is maintainable if debt is denied by debtor?

This contention of Mr. Bhandari that if the debt is denied by the debtor then no petition would be maintainable under Section 9 of the Act, cannot be accepted, because if the expression "debt is a liquidated sum" is interpreted in the manner in which Mr. Bhandari wants this Court to interpret it, then it would provide an easy handle to every debtor to escape the consequences under the provisions of the Act by simply raising a plea of dental about the existence of the debt. In order to debar a creditor from presenting an insolvency petition against a debtor under Section 9 it is necessary for the debtor to show that the debt is of such a nature which is not capable of being easily ascertained within the mischief of Section 9 of the Act. In P.N.V. Ratnasami Naidu v. K.S.P.A. Subba Reddiar, MANU/TN/0146/1943 : AIR 1943 Mad 766 the learned Judge while defining the expression "debt is a liquidated sum" observed as follows:--

"It is not always easy in a claim on an account to say definitely whether it is for a liquidated sum or for an unliquidated sum. It does not cease to be a, liquidated sum, because it can be arrived at only after making some simple calculation; but if it is not readily ascertainable without enquiry, then it is an unliquidated claim."

13. In Madhya Bharat case Ramchandra Narayanji v. Rameshwar Bhagwandas AIR 1951 MP 115 there was a claim for damages for breach of contract of sale and it was in that context that the learned Judge observed that,--

"An essential condition for the foundation of a creditor's petition is that the debt must 'be a liquidated sum. There must, therefore, be a certain sum admittedly due and payable to the person who presents the petition. A claim for damages for non-performance of a contract of a sale cannot ordinarily be within the meaning of a liquidated sum, especially where the alleged contract and its validity or the need of its performance are in question."

This authority, in my opinion, cannot be of any avail to the appellant, because the facts of that case showed that the claim for damages for the non-performance of the contract of a sale could not be accepted as a "debt" of the creditor, unless such a claim was determined by a competent authority. In my opinion this ruling cannot help the court to find out the correct interpretation of the expression "the debt is a liquidated sum", as used by the Legislature in Clause (b) of Sub-section (1) of Section 9 of the Act.

14. In Allahabad case Balak Ram v. Kaley 1966 All LJ 476, the learned Judge held that a claim for damages before passing of the decree could not be termed as a liquidated sum. but in his opinion once a decree is passed, it becomes a liquidated sum payable immediately. This authority is distinguishable on : the point that in that suit the debt claimed depended upon " the adjudication about the quantum of damages and unless it was done that debt could not be said to be of a liquidated sum. In my opinion this authority of Allahabad High Court hardly throws any light on the question that has been posed for this court to answer.

15. In Subramonia Iyer Saradam-bal v. K. R. Ramchandra Iyer AIR 1956 TC 88, the learned Judges, while examining the scope of Section 9 of the Act, observed that.-

"A debt on which the insolvency petition can be based must be one provable in insolvency or in other words it must be a subsisting debt due from the debtor on the date of the presentation of the petition. It must also be a liquidated sum payable either immediately or at some future time."

According to these observations of the learned Judges, if the debt, even though denied by the party, can be proved easily in the insolvency court, then it can act as a base or foundation for submitting a petition under the provisions of the Act.

 Citation : AIR 1976 Raj 4

IN THE HIGH COURT OF RAJASTHAN

Civil Misc. First Appeal No. 60 of 1973

Decided On: 09.10.1975

Mohanlal
Vs.
Rameshwar Dayal and Ors.

Hon'ble Judges/Coram:
V.P. Tyagi, J.

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Whether insolvency petition can be filed if decree is not for payment of money?

 Civil - Validity of sale - Whether sale of property in execution of decree would fall within meaning of Section 6(e) of Provincial Insolvency Act (the Act) - Held, in present case, decree for sale was not decree for payment of money within meaning of Section 6(e) of the Act and that sale in execution would not be an act of insolvency on which an application for adjudication could be founded - Civil Revision Petition allowed.

Citation : AIR 1937 Mad 433

IN THE HIGH COURT OF MADRAS

Decided On: 14.12.1936

 Vakkalagadda Venkata Rama Lakshmayya
Vs.
 Parepalli Subba Rao and Ors.

Hon'ble Judges/Coram:
Venkataramana Rao, J.

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Whether insolvency petition abate on death of debtor?

The scheme of the Act shows that the proceedings in the insolvency are really in rem and ensure for the benefit of all the creditors of the insolvent. The petition cannot be withdrawn without the leave of the court, nor does it abate on the death of the debtor and provision has been made for consolidation of two or more petitions of various creditors and also for substitution of the petitioner .

Delhi High Court

Shadi Ram Ram Sarap Dass And Ors. vs Ravi Chander Xazigla And Ors. on 26 November, 1976

Equivalent citations: AIR 1977 Delhi 187

Bench: B Misba

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Whether creditor can make single insolvency petition for adjudicating two or more person as insolvents?

After giving the matter my careful consideration I am of opinion that there is no legal bar to a single application being made by a creditor for adjudicating two or more persons as insolvents if they are jointly liable on a debt or have committed a joint act of insolvency.

 Citation : AIR 1930 Lah 592

IN THE HIGH COURT OF LAHORE

Decided On: 07.03.1930

 Kalu Ram
Vs.
Gitwar Singh and Ors.

Coram:

Tek Chand, J.

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Whether legal heirs of deceased creditor can start execution proceeding without obtaining succession certificate?

Hence, the heirs of the deceased creditor cannot start execution proceedings in respect of a decree obtained by the deceased creditor without obtaining representation to his estate. The petitioning creditors are not, therefore, in a position to execute the decree immediately in view of the provisions of Section 214 of the Indian Succession Act. Mr. Daruwala who appears for the petitioning creditors has urged that an order has been obtained under Order 21, Rule 22, of the Civil P. C. Hence the decree was executable on the date when the insolvency notice was issued. He, therefore, submits that the insolvency notice is valid in law and an act of insolvency can be based on the insolvency notice. This argument proceeds on the assumption that if an order has been obtained under Order 21, Rule 22, then the decree is executable. When, however, execution is sought not by the original decree-holder but by his heirs, they are required to comply with the provisions of Section 214 of the Indian Succession Act also before they can proceed to execute the decree. The heirs of the judgment-creditor cannot, therefore, be heard to say that they were entitled to execute the decree at the time when the insolvency notice was issued. Without obtaining representation to the estate of the deceased decree-holder, they were not in a position to execute the decree at the date of the insolvency notice. Non-compliance with an insolvency notice constitutes an act of insolvency only in cases where the notice is issued in respect of a debt under a decree which can be executed in praesenti. The present insolvency notice does not satisfy this legal requirement. Hence no act of insolvency can be based on such an insolvency notice.

Citation : AIR 1980 Bom 76

IN THE HIGH COURT OF BOMBAY

Petition No. 29 of 1978

Decided On: 17.07.1979

Vijay Jethalal Shah
Vs.
Laja Nandlal Raheja and Anr.

Hon'ble Judges/Coram:
S.V. Manohar, J.

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Whether debtor can initiate insolvency petition against creditor bank?

The question is whether the bank can claim exemption from insolvency proceedings under Section 8 of the Act. Any company registered under any enactment is exempted from the insolvency proceedings. The bank was registered as a banking company as defined under Section 5(c) of the Banking Regulation Act, 1949 (Act No. 10 of 1949), which reads as under:

"5(c) 'banking company' means any company which transacts the business of banking in India;" Clause (d) of Section 5 of the Act No. 10 of 1949 defines 'company' to mean any company as defined in Section 3 of the Companies Act, 1956; and includes a foreign company within the meaning of Section 591 of that Act. Section 2 of Act No. 10 of 1949 provides that the provisions of Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the Companies Act, and any other law for the time being in force.

After the enforcement of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970), all the banking companies including the foreign companies registered under the Companies Act, 1959, were nationalised and more than 51 per cent shares were taken over by the Government of India and the banking companies became the body corporate under Section 2(d) of Act No. 5 of 1970. Clause (d) defines 'corresponding new bank in relation to existing bank' to mean a body corporate specified against such bank in column 2 of Schedule 1. In the First Schedule 'Punjab National Bank Ltd.' is in the first column and in the second column it has been referred to as 'Punjab National Bank'. Section 4 of 1970 Act provides that on commencement of the Act undertaking of every existing bank shall be transferred to and shall vest in the corresponding new bank.

 In view of the aforesaid provision of law, Punjab National Bank is a Government company under Section 617 of the Companies Act. The view taken by the courts below that the bank is registered company and, therefore, it is exempted from insolvency proceedings--does not suffer from any illegality.

IN THE HIGH COURT OF ALLAHABAD

Civil Misc. Writ Petition No. 17526 of 2001

Decided On: 24.05.2001

Appellants: Nagendra Kumar Jain
Vs.
Respondent: District Judge, Moradabad

Hon'ble Judges/Coram:
S.N. Agarwal, J.

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Whether Insolvency Court can investigate question of title?

On the question as to whether the Insolvency Court could investigate the question of title, Mr. Doctor has placed reliance on the decision of the learned Single Judge of the Madras High Court in the matter of A Narayan Nair, an Insolvent, The Official Assignee, Madras v. Kochamma Amma & others reported in 1980 Madras Law Journal Reports page 455. Reliance was placed on the observations in paragraph 11 of the judgment which appear on page 462 of the Report, to contend that the Insolvency Court cannot decide the validity of the transfers which had taken place more than two years before the date of adjudication on the ground that it has been made with a view to defeat or delay the creditors having regard to the provisions of section 53 of the Provincial Insolvency Act or section 55 of the Presidency Town Insolvency Act. As we have indicated earlier, the Full Bench of this Court in Padamsi Premchand's case reported in A.I.R. (36) 1949 Bom. 129 (supra) has laid down that nominal and fictitious transfers do not fall undersection 53 of the Provincial Insolvency Act corresponding to section 55 of the Presidency Act. Where, therefore, the Official Assignee alleges that certain transfers were made by the insolvent, though beyond two years prior to the relevant date, but the same were nominal and fictitious transfers, the Insolvency Court would have jurisdiction under section 4 of the Provincial Insolvency Act and section 7 of the Presidency Act to decide the validity of the said transactions as was done by the Full Bench where the adjudication of insolvency was of 24th August, 1940 and the transactions questioned were of 25th January, 1935, 30th January, 1935 and 30th March, 1932. We are bound by the Full Bench decision of this Court. We are also in respectful agreement with the view expressed by Mrs. Justice Sujata Manohor (as the learned Judge then was) in Babubhai's case (supra). The view expressed in Babubhai's case makes it clear that the powers under section 7 of the Presidency Act are wide enough to decide all questions of priorities and all other questions whatsoever whether of law or fact, which may arise in the case of Insolvency coming within the cognizance of the Court or which the Court may think it expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property in an Insolvency matter. We have indicated earlier that the claims of the creditors, on the date of the order of adjudication, were over Rs. 3 Crores. The transfers, made by the husband in the name of his wife, in our view, were nominal transfers; were sham and bogus and were made clearly with a view to defeating the claims of the genuine creditors. The said transfers being fraudulent, the validity of the same could be investigated by the Insolvency Court by virtue of the powers under section 7 of the Presidency Act. The bar contained in section 55 of the Presidency Act would, therefore, not come in the way.

Bombay High Court

Smt. Yogini Chandrakant Mehta vs The Official Assignee, High ... on 24 February, 1999

Equivalent citations: 1999 (2) BomCR 719, (1999) 2 BOMLR 428, 1999 (2) MhLj 263

Bench: A Agarwal, A Savant

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Procedure to be followed by court when insolvency petition is filed

(i) It is not obligatory for the Insolvency Court, to hear a debtor while admitting the insolvency petition filed by creditor and directing notices under Section 19 to be issued;

(ii) The Insolvency Court may in its discretion issue a notice to the debtor and postpone the issuance of public notice and / or personal notice to other creditors, in a petition filed by creditor, if the insolvency Court in its discretion feels the necessity of doing so or where the debtor has entered a Caveat under Section 148A, C.P.C.;

(iii) At the stage of admitting the insolvency petition and directing notices to be issued underSection 19(2) no inquiry, summary or detailed, by recording evidence, is contemplated; all that is contemplated is forming of a prima facie opinion by the Insolvency Court on preliminary questions such as whether the petition has been properly drawn up, signed and verified, whether it is within limitation, whether the Court has jurisdiction, whether the petition discloses entitlement of the petitioner to file a petition & C;

(iv) Section 19(2) of the Act applies both to the petition by debtor and by creditor.

Madhya Pradesh High Court

Radheshyam Agrawal vs Hariom Trading Co. And Ors. on 12 August, 1991

Bench: R Lahoti

Citation:AIR 1992 MP168

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Whether accused can avoid prosecution for dishonour of cheque by filing insolvency petition?

 In these circumstances, the drawer cannot escape from the criminal liability merely by filing an insolvency petition by putting forward the case that he is not bound to discharge the liability mentioned in the complaint filed before the criminal Court, as there is no existing liability or he cannot face the criminal proceeding as he is already sought to be declared as an insolvent, especially when there is a Section permitting the Court to presume that there is an existing liability and the issuance of cheque by the accused was made towards the discharge of the said liability, which is legally enforceable.

30. In these circumstances, I am of the view that mere presentation of the insolvency petition or pendency of the insolvency petition, while the complaint was filed, would not disentitle the complainant to seek for the speedy remedy by way of penal action before the criminal Court over the offence stated to have been already committed by the accused.

Madras High Court

C.T. Thangaraj vs Murugesan on 15 April, 1999

Equivalent citations: 1999 CriLJ 3436

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