Bombay High Court
T.A. Darbar And Company And Ors. vs Union Bank Of India on 20 June, 1992
Equivalent citations: 1992(3)BOMCR702
JUDGMENT D.R. Dhanuka, J.
1. This notice of motion raises an interesting question of law as to whether the remedy of decree-holder Union Bank of India to execute the decree dated 17th January, 1977 passed in Suit No. 1747 of 1976 was extinguished on the 'relevant date' and whether the Insolvency Notice dated 27th June, 1989 based on the said decree is liable to be set aside as a consequence thereof. The question which arises for consideration of the Court is as to whether the decree forming the basis for issue of insolvency notice was alive on the date when the insolvency notice was issued or on the date when the notice of motion was taken out to set aside the insolvency notice herein.
2. The material facts required to be stated for the purpose of disposal of this notice of motion are as under :
(a) On 17th January, 1977, Desai J., passed a consent decree in favour of Union of India and against M/s. T.A. Darbar & Company, Turabali Abdulhusain Darbar and Mohammadhusain Abdulhusain Darbar in Suit No. 1746 of 1976. By the said consent decree passed in the said suit, the defendants were directed to pay to the plaintiff Union Bank of India a sum of Rs. 46,520.31 for the principal sum, Rs. 525.74 for interest and the cost of the suit as specified therein aggregating to sum of Rs. 48,494.05 along with simple interest on the principal sum of Rs. 46,520.31 at the rate of 6% per annum from the date of the decree till payment. The said decree was an instalment decree. By the said decree, the defendants were directed to pay the decretal amount by monthly instalments of Rs. 1,200/-, first of such instalment to be paid on or before 10th February, 1977 and subsequent monthly instalments to be paid on or before 10th day of each and every succeeding month till the entire decretal amount was paid in full. By the said decree it was further directed that in the event of the defendants committing default of any three monthly instalments on their respective dates as set out in the decree, the plaintiff shall be entitled to recover the entire decretal amount or balance then remaining due, as the case may be, forthwith. It is not necessary to refer to other portions of the said decree.
(b) The judgment-debtors, being the defendants in the said Suit No. 1746 of 1976, did not pay the first instalment, second instalment and third instalment on the due dates specified. The judgment-debtors committed all the three defaults by 10th April, 1977. The judgment-debtors paid a sum of Rs. 1200/- to the creditor on 11th April, 1977 for the first time after the right had accrued to the creditor to execute the decree for entire amount forthwith. By a letter dated 14th April, 1977 addressed to the debtors, the decree-holder Bank recorded that the Bank had accepted the said sum of Rs. 1200/- on 11th April, 1977 without prejudice to their rights and contentions towards the entire decretal amount which had become payable at once. By the said letter, the decree-holder Bank exercised their option to recover the entire decretal amount forthwith in view of three defaults already committed by the judgment-debtors by 10th April, 1977 as aforesaid. By the said letter dated 14th April, 1977, the Bank called upon the judgment-debtors to pay the entire balance of the decretal amount with interest immediately. By the said letter the Bank threatened to execute the decree for the entire amount if the amount was not paid. The judgment-debtors as well as the creditor rely on the said letter.
(c) Thus the said decree ceased to be an instalment decree with effect from 14th of April, 1977. Subsequently the judgment debtors made some part payments to the creditor as endorsed on the decree. Amount specified in the insolvency notice is outstanding.
(d) On 27th June, 1977, the said decree was sealed.
(e) No application for execution could be filed under the rules of our High Court on the Original Side at the relevant time unless the application for execution was necessarily accompanied by certified copy of the decree.
(f) There was a factual dispute between the parties regarding calculation of outstanding amounts payable under the said decree. At one stage, the debtors had contended that there was a mistake of Rs. 1000/- in the computation of amount as demanded by the insolvency notice. The said contention is not pressed by Mrs. Nanavati. Since the decree had already ceased to be an instalment decree by 14th April, 1977, the decree-holder could not convert the said decree once again into an instalment decree merely by accepting the payments which were made by the judgment-debtors intermittanly. Mrs. S.D. Nanavati, the learned Counsel for the judgment-debtors, submitted that the creditor had no right to execute the said decree on the date when insolvency notice was issued or when this notice of motion was taken out as period of 12 years from the date of enforceability of decree had expired prior thereto. This contention of Mrs. Nanavati shall have to be closely scrutinised.
(g) On 5th July, 1988, the decree-holder Bank filed an application for execution of the decree in this Court. The said application is dated 14th July, 1988. The said application was filed under Order XXI, Rule 11(2) of the Code of Civil Procedure, 1908. In Column (j) of the said application, relief sought was described by the applicant decree-holder as under :
"By issuing notice to the defendants under Order XXI, Rule 22 and if no cause is shown , by allowing execution to issue".
(h) The said application was filed by the judgment creditor in the form prescribed under Order XXI, Rule 11 of the Code of Civil Procedure and was and is described by the judgment-creditor as an application for execution. The office of the Prothonotary and Senior Master did not require the judgment-creditor to remove any office objection or remedy any defect in the said application within a particular, time or otherwise. The Execution Department of the Prothonotary and Senior Master issued notice under Order XXI, Rule 22 of the Code of Civil Procedure on the footing that the said application was not a defective application. Notice issued under Order XXI, Rule 22 of the Code by the Court was made absolute by an order dated 21st October, 1988 after the judgment debtors were duly served with the notice by substituted service. The Court thus passed a judicial order on 21st October, 1988 granting leave to the decree-holder to proceed further with the execution of the decree and apply for issue of process in execution. It is not open to the Insolvency Court to go behind the order passed by the executing Court on 21st October, 1988. It is, now discovered by this Court that the said application was defective inasmuch as it did not specify the mode in which the assistance of the Court was required to execute the decree, like issue of warrant of attachment or attachment of movables or immovables or for arrest and detention of the judgment-debtors as illustrated by Order XXI, Rule 11(2) of the Code. The said application did not exhaust itself merely on issue of notice under Order XXI, Rule 22 of the Code or on passing of the order dated 21st October, 1988. The said application shall have to be treated as a pending application made within the period of 12 years from the date when the decree became enforceable until the said application is exhausted by issue of process in execution and completion thereof or by rejection thereof as the case may be. The applicant has not diligently prosecuted the said application dated 5th July, 1988 but was resorted to invoking section 9(2) of the Presidency Town Insolvency Act keeping the said application pending. The Prothonotary and Senior Master could have placed the said application on the board of the learned Chamber Judge for rejection of the application for want of prosecution. It has not been so done so far. The said application for execution shall have to be therefore treated as a pending application till today.
(i) On 23rd June, 1989, the decree-holder Bank made an application for issue of the present insolvency notice. On 27th June, 1989, the insolvency notice was issued. On 21st August, 1989, the present motion was taken out by the judgment-debtors for setting aside the said insolvency notice. On 21st August, 1989, the Insolvency Registrar passed an order under Rule 52-C of the Bombay Insolvency Rules, 1910.
3. It appears to me that the above narration of facts is sufficient for consideration of the submissions made by the learned Counsel at the bar.
4. In Hanumant v. Gurulal & another, A.I.R. 1943 Bombay 36, our High Court held that the judgment-creditor was bound by the election made to execute the entire decree. The question before the Court was as to whether the decree could be treated by the decree-holder as an instalment decree if the decree-holder had already made an election to execute the entire decree and exercised the option conferred on him under the default clause provided in the decree. In the said case, Divatia and Macklin. JJ., had differed on the principal question before the Court. The difference of opinion between the two learned Judges of the High Court on the question aforesaid was referred to Beaumont, C.J. The learned Chief Justice agreed with the view taken by Divatia, J., and held that the decree holder was bound by the election once made to execute the entire decree and the decree holder could not subsequently enforce the decree as an instalment decree. In another case reported in the same Volume i.e. Laxman v. Parvatibai, A.I.R. 1943 Bombay 63, Broomfield, J., held that a decree which has ceased to be an instalment decree could not be converted again into an instalment decree. It is thus not open to the decree holder to contend that the decree-holder could waive the operation of default clause by accepting the subsequent instalments in view of the clear language of letter dated 14th April, 1977. The decree for the entire balance of the amount became enforceable on 14th April, 1977. The decree became executable for the first time immediately after the decree was sealed i.e. on 27th June, 1977. Thus the decree holder shall have no remedy to file a fresh application for execution of decree after 26th June, 1989. The decree holder is entitled to pursue the pending application for execution already filed before expiry of 12 years with or without an amendment. The remedy of the decree holder to execute the said decree is now restricted to pursuing the aforesaid application dated 5th July, 1988. An application for execution of decree filed within 12 years from the decree becoming enforceable can be executed with or without amendment even after expiry of 12 years. During pendency of such an application, the remedy of execution is not extinguished. Such a decree can form the basis of application for issue of insolvency notice. So long as the last application for the execution of decree remains pending.
5. In the case of J.P. Tiwari v. Bhimraj Harlalka, LX Bom.L.R. 963, the Division Bench of our High Court presided by Chagla, C.J., held that the decree-holder must have a right to execute the decree in presenti if the decree was to form the foundation for issue of an insolvency notice. Mridul, J., took the same view in the case of M/s. Bhurmal Kapurchand & Co. v. M/s. Premier Machine Tools Co., A.I.R. 1977 Bombay 305. The learned Single Judge observed that the Insolvency Registrar could direct the decree-holder to obtain an order of competent Court under Order XXI, Rule 23 of the Code in case the decree was more than two years old. In other words, the Insolvency Registrar could not issue an insolvency notice on the basis of a decree which was more than two years old unless the decree holder obtained an order from the executing Court making notice under Order XXI, Rule 22 of the Code absolute or an order dispensing with the notice. The Insolvency Court cannot go behind the order of executing Court making notice under Order XXI, Rule 22 of the Code absolute. The Insolvency Court must assume that the decree is executable as held by the executing Court while making the notice absolute and the decree holder is entitled to seek further assistance of the Court for execution of decree. No notice can be issued under Order XXI, Rule 22 of the Code unless an application for execution is filed. An application for execution of the decree can never be treated as exhausted merely on issue of notice under Order XXI, Rule 22 of the Code or on such notice being made absolute.
6. Mrs. Nanavati, the learned Counsel for the judgment-debtors, has submitted that the remedy of the decree-holder to execute the decree was extinguished on expiry of 12 years from 27th June, 1977 and such a decree could not therefore form the basis for issue of an insolvency notice. The learned Counsel also submitted that the decree in question must be shown to be executable not merely on the date when application for issue of insolvency notice was made, but must be executable throughout the period of the insolvency notice i.e. the period of 35 days from the date of service of insolvency notice. The learned Counsel submitted that the application dated 5th July, 1988 made by the judgment creditor could not be treated as an application for execution of the decree as such. The learned Counsel submitted that the said application dated 5th July, 1988 was an application only for issue of notice under Order XXI, Rule 22 of the Code and the said application was exhausted on the said notice being made absolute on 21st October, 1988. The learned Counsel submitted that the applicant Bank has in fact not pursued the said application dated 5th July, 1988 by moving the executing Court to issue any warrant of attachment etc., and the said application cannot be considered as a pending application for purpose of consideration of the question as to whether the decree had ceased to be an executable decree on the date when the insolvency notice was issued or on the date when the notice of motion was taken out for setting aside of the insolvency notice.
7. Shri S.D. Parekh, the learned Counsel for one of the judgment-debtors in a companion matter, was invited by the Court to make his submission on the question of law arising for consideration in this case. The learned Counsel invited the attention of the Court to the provisions contained in section 9(2) of the Presidency Town Insolvency Act, 1909. The said section permits the creditor to approach the Insolvency Court for issue of an insolvency notice if the creditor had obtained a decree or order for payment of money, the execution whereof had not been stayed. The learned Counsel prefaced his submission with a statement of law which is not disputable i.e. that no fresh application for execution of the decree could be filed by the creditor once the period of 12 years from the date when the decree became enforceable expired. The learned Counsel submitted that even if the judgment-debtor had a right to proceed with the pending application for execution of the decree and carry it to its logical conclusion, the judgment-creditor could not move the Insolvency Registrar for issue of an insolvency notice during the pendency of last application for execution in view of the fact that no fresh application for execution of the decree could now be filed by the judgment-creditor and his remedy to execute the decree was restricted to pursuing the pending application for execution only. The learned Counsel submitted that right and/or remedy of the judgment creditor to execute the decree within the frame-work of pending application for execution of the decree with or without amendment was not enough to entitle the decree-holder to move the Insolvency Registrar to issue an insolvency notice to the debtor.
8. Before I discuss further submissions made by the learned Counsel for the judgment-debtors, it appears to be necessary to refer to some of the relevant provisions contained in the Code of Civil Procedure and the High Court of Judicature at Bombay (Original Side) Rules, concerning execution proceedings.
(a) Order 21, Rule 11(2) of the Code of Civil Procedure prescribes that every application for the execution of a decree save as otherwise provided by sub-rule (1) shall be in writing and shall contain in a tabular form the particulars specified in sub-rule (2). Clause (j) of the said Rule requires the applicant to specify the mode in which the assistance of the Court is required, whether.
(i) by the delivery of any property specifically decreed;
(ii) by the attachment, or by the attachment and sale, or by the sale without attachment, of any property;
(iii) by the arrest and detention in prison of any person;
(iv) by the appointment of a receiver;
(v) otherwise, as the nature of the relief granted may require;
(b) Sub-rule (1), (1A) and (2) of Rule 17 under Order 21 of the Code, after its amendment in the year 1976, read as under :
"O. 21, R. 17(1). On receiving an application for the execution of a decree as provided by Rule 11, sub-rule (2), the Court shall ascertain whether such of the requirements of Rules 11 to 14 as may be applicable to the case have been complied with; and, if they have not been complied with, the Court shall allow the defect to be remedied then and there or within a time to be fixed by it.
(1A) If the defect is not so remedied, the Court shall reject the application : Provided that where in the opinion of the Court, there is some inaccuracy as to the amount referred to in Clauses (g) and (h) of sub-rule (2) of Rule 11, the Court shall, instead of rejecting the application, decide provisionally (without prejudice to the right of the parties to have the amount finally decided in the course of the proceedings) the amount and make an order for the execution of the decree for the amount so provisionally decided.
(2) When an application is amended under the provisions of sub-rule (1), it shall be deemed to have been an application in accordance with law and presented on the date when it was first presented."
The said rules thus obligate the Court to give an opportunity to the applicant to remedy the defect in the application in respect of non-compliance of the provisions contained in Order 21, Rules 11 to 14 of the Code and enables the Court to reject the application only if the defect is not remedied by the applicant on being called upon to do so then and there or within the time fixed by the Court. Substitution of the word "shall" in place of the word "may" in Order 21, Rule 17(1) of the Code by the Amending Act of 1976 is of considerable significance. Sub-rule (3) of the said rule provides that the amendment made to the defective application for execution shall relate back to the date when it was first presented. An application for execution of the decree is liable to be treated as a pending application even if it is defective. Such an application cannot be rejected by the Court unless the defect is pointed out to the applicant and the same is not remedied by the applicant on being called upon by the Court so to do.
(c) Order 21, Rule 22 of the Code can be invoked only after an application for execution of the decree under Order 21, Rule 11 of the Code is filed. The opening words of the said Rule are :
Where an application for execution is made---
(a) more than two years after the date of the decree, or
(b) ...
(c) ...
the Court executing the decree shall issue a notice to the person against whom execution is applied for requiring him to show cause, on a date to be fixed, why the decree should not be executed against him."
(The underlineing is done to supply emphasis) In certain situations, the Court may issue process in execution of the decree without first issuing show cause notice against execution as contemplated under Order 21, Rule 22(1) of the Code.
Order 21, Rule 23 of the Code provides that the Court shall consider an objection raised by the judgment-debtor to the execution of decree, if any, and shall make an order to the effect that the decree be executed or make such other order as it thinks fit. Order 21, Rule 24 of the Code onwards provides for issue of process for execution after the preliminary measures (if any) required by the foregoing rules have been taken.
(e) Rule 986 of the High Court of Judicature at Bombay (Original Side) Rules provides for rejection of an application for execution for non-compliance with the office objections by the applicant within the time specified. The said rule contemplates formulation of office objections to the application for execution like non-specification of mode of execution in column (j) of the application in tabular form etc. before the same can be placed on the board of the Prothonotary & Senior Master for rejection of the application on the ground of non-removal of office objections.
(f) Rule 329 of the High Court of Judicature at Bombay (Original Side) Rules provides for dismissal of the application for execution by the Chamber Judge for want of prosecution where a party does not proceed with the application for execution for a period of twelve months from the date of filing of the application.
9. I shall now proceed to deal with the submissions made by the learned Counsel Mrs. Nanavati and Mr. S.D. Parekh.
10. It is not possible to accept the submission of Mrs. Nanavati, the learned Counsel for the judgment-debtors, to the effect that the application dated 5th July, 1988 made by the judgment-creditor in this case was merely for issue of notice under Order 21, Rule 22 of the Code of Civil Procedure and the said application exhausted itself fully on notice under Order 21, Rule 22 of the Code being made absolute. No notice could be issued by the Court under Order 21, Rule 22 of the Code unless an application for execution was first filed. An application for execution of the decree as contemplated under Order 21, Rule 22 of the Code was in fact filed and the prayer in the said application is also for actual issue of execution after the notice under Order 21, Rule 22 of the Code was disposed of. Issue of notice under Order 21, Rule 22 is merely a preliminary step and not a process in execution. The effect of an order passed under Order 21, Rule 22 of the Code making the notice absolute is that the decree-holder is now entitled to proceed with the execution of the decree by obtaining process in execution of the decree. Such process in execution of the decree can be issued in pursuance of an application filed in time even after expiry of 12 years from the date of enforceability of the decree, provided the application for execution was filed in time. It is of considerable significance to understand the implications and ratio of the judgment of Kania, J., in the case of Vallabhdas Narandas v. Kantilal G. Parekh . In that case, in Column (j) of the application for execution in tabular form, the applicant had described the mode in which the assistance of the Court was required merely to the following effect :
"By the issue of a notice under Order 21, Rule 22 against the judgment-debtor."
The Prothonotary and Senior Master had issued a notice under Order 21, Rule 22 of the Code. When the said notice reached hearing before Kania, J., the learned Counsel for the debtor submitted before the Court that the said notice was liable to be discharged as there was no proper application for execution of the decree before the Court and it was the mandate of the rule that notice under Order 21, Rule 22 of the Code can be issued only in pursuance of a proper application for execution of the decree under Order 21, Rule 11 of the Code, Kania, J., held that the application for execution of the decree made under Order 21, Rule 11 was defective inasmuch as issue of notice under Order 21, Rule 22 could not be considered as a mode of execution required to be specified in Column (j) of the said application. The learned Judge, however, allowed the decree-holder to amend Column (j) of the application by inserting in the said column the words "by the arrest and detention in prison of the judgment-debtor" and made the notice absolute. At that time, Order 21, Rule 17 of the Code merely conferred discretion on the Court to permit amendment of application for execution after the period of limitation had expired. In paragraph 7 of him judgment, Kania, J., held that the amendment of application for execution permitted by him would relate back and such amendment could be allowed even after the period of limitation for execution of the decree had expired. It was then argued on behalf of the debtor that a fresh notice ought to be issued under Order 21, Rule 22 of the Code since the application for execution was amended. The learned Judge rejected the said submission. The underlying principle of this case is that an application for execution of the decree filed in a tabular form without specifying the mode by which the decree was required to be executed could be amended and the amendment when made would relate back to the date when the application was first presented. After the amendment of the provisions contained in Order 21, Rule 17 of the Code by the Amending Act of 1976, the Court is bound to allow the applicant to remedy the defect and supply the omission within the time fixed by the Court and the Court in not entitle to pass an order for rejection of application for execution unless the applicant fails to remedy the defect or supply the omission within the time fixed by it. There is no scope under the Code of Civil Procedure or under our High Court Rules to infer by implication that an application for execution once filed is deemed to have been rejected for non-removal of office objection or for non-prosecution. In this case, no office objections have yet been raised and no order has yet been passed either by the learned Chamber Judge or by the learned Prothonotary and Senior Master for non-prosecution of the application for execution or for non-removal of office objections. The application dated 5th July, 1988 is pending till today. The decree is still alive. The remedy of execution of the decree is restricted to the last application for execution, being application dated 5th July, 1988, but is not extinguished. Since the remedy of execution of the decree is still not extinguished, it shall have to be held that the insolvency notice was issued on the basis of a decree execution of which is not stayed and remedy for execution of which is still not extinguished. On the same principle, it shall have to be held that the decree was still alive on the date when the notice of motion was taken out by the debtor for setting aside of insolvency notice. Application dated 5th July, 1988 contains the prayer for issue of execution after the notice under Order 21, Rule 22 of the Code is disposed of, although the mode of execution is not specified therein. Such mode can be specified even now within the time to be fixed by the Court when an office objection is taken by the Prothonotary and Senior Master in respect of the said application.
11. It is not possible to accept the submission of Shri Parekh, the learned Counsel for one of the judgment-debtors in a companion matter, in respect of interpretation of the provisions contained in section 9(2) of the Presidency Town Insolvency Act, 1909. In my judgment, the said section requires that the remedy of execution must not have been extinguished on the date when application for issue of insolvency notice is issued and on the date when the insolvency notice itself is issued and perhaps within the period of 35 days during which the notice is required to be complied with. It does not matter to the applicability of section 9(2) of the said Act that the remedy of the judgment-creditor to execute the decree was restricted to pending application for execution of the decree and issue of process in execution in pursuance thereof with or without amendment. Section 9(2) of the said Act does not require for its applicability that the decree-holder must have right to file any number of applications for execution of the decree on the day when application is made for issue of insolvency notice.
12. In the result, I hold that the insolvency notice was rightly issued on the basis of a decree which was executable and the remedy of execution in respect of the said decree, was very much alive even on the day when the notice of motion was taken out by the judgment-debtors for setting aside the said insolvency notice. The said remedy for execution of the decree is still alive. The notice of motion accordingly fails and is dismissed within no order as to costs.
13. On the request of Mrs. Nanavati, the learned Counsel for the judgment-debtors, operation of this order is stayed for a period of four weeks from today.
14. Before I close discussion in this case, I consider it necessary to formulate certain guidelines which must be followed by the office of the Prothonotary and Senior Master in matters of this nature having regard to my conclusions on interpretation of the relevant provisions. The said guidelines are as under:
(1) The office of Prothonotary and Senior Master must scrutinise every application for execution of decree and ascertain whether the application is complete and whether the application complies with each of the requirements contemplated under Order 21, Rule 11 of the Code to Order 21, Rule 14 of the Code of Civil Procedure. If the application is incomplete, office objections shall have to be formulated and communicated to the applicant or advocate for the applicant.
(2) If the applicant does not remove the office objections and does not supply the omission or remove the defect within a period of 30 days from the date of communication of the office objection, the application for execution shall be placed on board of the Prothonotary and Senior Master for rejection on the ground of non-removal of office objection.
(3) A notice under Order 21, Rule 22 of the Code of Civil Procedure should not be issued unless the office objections are complied with.
(4) After the notice under Order 21, Rule 22 of the Code of Civil Procedure is made absolute, the applicant should be required to proceed diligently with further follow-up action for issue of process in execution. If the applicant does not prosecute the application for execution diligently and within a period of one year from the date of filing of the application, such application must be placed by the Prothonotary and Senior Master before the learned Chamber Judge for dismissal of the application. In case of defective applications or in case of applications not prosecuted by the applicant, passing of an express order by the Court or by the Prothonotary and Senior Master, as the case may be, dismissing or rejecting the application for execution, is necessary to avoid complications. Till such an express order is passed, the application for execution shall have to be treated as a pending application. If an application is unnecessarily treated as a pending application, the judgment-debtor would suffer prejudice. Hence the abovereferred procedure must be completed as expeditiously as possible.
15. Issue of certified copy is expedited.