Delhi District Court
Urmil Suri vs Allahabad Bank on 26 November, 2011
IN THE COURT OF SH. GAUTAM MANAN,
INSOLVENCY JUDGE (Central): DELHI.
INSOLVENCY CASE NO.19/2000
IN THE MATTER OF :
URMIL SURI,
W/O LATE SH. S.N. SURI,
R/O 35B, POCKET FG1, BLOCKF,
VIKAS PURI, DELHI. .........PETITIONER/DEBTOR
V E R S U S
1 ALLAHABAD BANK
2, NETAJI SUBHASH ROAD,
CALCUTTA 700 001
2 CANARA BANK
112, J.C.ROAD,
BANGALORE560 002 (KARNATAKA)
3 INDUSTRIAL DEVELOPMENT BANK OF INDIA
IDBI TOWER, CUFFE PARADE,
MUMBAI 400 006
4 BANK OF MADURA LTD.
758, ANNA SALAI, CHENNAI 600 002
5 INDUSTRIAL FINANCE CORPORATION OF INDIA LTD.
IFCI TOWER, 61, NEHRU PLACE, NEW DELHI - 110 119
6 UTI BANK LTD.
MAKER TOWER "F", 13TH FLOOR,
CUFFE PARADE, COLABA, MUMBAI 400 005
7 STATE BANK OF INDORE,
YASWANT NIWAS ROAD, INDORE - 452 003
IP no.19/2000 Page 1/12
8 STATE BANK OF TRAVANCORE
NEW ADMINISTRATIVE COMPLEX,
PUZHAPURA, TRIVANDRUM - 695 012
9. INDIAN BANK,
31,RAJAJISALAI,CHENNAI 600001(TAMILNADU)
10 ORIENTAL BANK OF COMMERCE
HARSHA BHAWAN, 'E' BLOCK,
CONNAUGHT CIRCUS, NEW DELHI 110 001
PETITION UNDER SECTION 7 AND 10,11, AND 29 OF THE
PROVINCIAL INSOLVENCY ACT, 1920 FOR ADJUDICATING
THE PETITIONER AS INSOLVENT.
INSTITUTION OF PETITION : 22.11.2000
ORDER RESERVED ON : 03.11.2011
JUDGMENT PRONOUNCED ON : 26.11.2011
J U D G M E N T
1. The petitioner has filed the present petition under section 7/10/11/29 of the Provincial Insolvency Act, 1920 for adjudicating her as Insolvent. It is stated that the petitioner was the nominee of certain companies where she stood as guarantor to the credit facilities sanctioned to the companies. It has been stated that petitioner pledged 9,83,000 shares belonging to her of M/s M.S. Shoes East Ltd. to IDBI for loan granted to M/s M.S. Shoes East Ltd. and she was forced guarantor by the bank being the Director of the said company. IP no.19/2000 Page 2/12
2. The petitioner/debtor was also the nominee/director of M/s Universal Exports Ltd. and Pearls Intercontinental Ltd. till May, 1995 where she stood guarantor being Director to the credit facilities taken by these companies. As the Director, she stood as guarantor to the credit facilities taken by M/s. Universal Exports Ltd. from the respondent no.7, stood guarantor for Pearls Intercontinental Ltd. with respondent no.9 bank and stood guarantor for Euro Exports with respondent no.10 bank. It is stated that the recovery proceedings have already been initiated by the respondents against the said companies and against the petitioner, she being the guarantor for the credit facilities taken by the companies.
3. The petitioner has stated that she has three properties in her name as per para 8 of her petition but the said properties are under litigation. The Canara Bank has wrongfully set off some amount lying in saving bank account against the liabilities of MS Shoes East Ltd. and now the petitioner has no cash balance or no bank account and is unable to pay the huge outstanding amount due to the bank.
4. It has been stated that the respondents have threatened the petitioner that the recovery will be made against the petitioner and since the debts are more than Rs.500/ and petitioner has no money to IP no.19/2000 Page 3/12 pay, as such it has been prayed that the petitioner be declared as Insolvent.
5. Respondents no.2, 3, 4, 5, 7, 9 & 10 filed their written statement and it has been stated on behalf of respondents that petitioner is a solvent person but she does not want to pay the amount of debts, therefore, she has filed the present petition to avoid the execution of the decree which has been passed against her by different courts.
6. It has also been stated that the petitioner has been making payment to some of her other creditors and is avoiding payment to the respondents and hence, she is not entitled to be declared as Insolvent. It has been stated that the petition filed by the petitioner is nothing but an abuse of process of law and has been filed with an ulterior motive to delay the recovery of public money and get rid of her liabilities.
7. The respondents admitted in their written statements that the petitioner stood as guarantor for the companies mentioned by her in the plaint and also admitted that the petitioner is not liable to pay the huge arrears of amount due against those companies. IP no.19/2000 Page 4/12
8. Vide order dated 01.03.2001 the present petition was admitted and Sh. T.M. Rajdan was appointed as an Official Receiver. During proceedings of the case, the respondent no.6 was deleted from the array of the respondents.
9. Vide order dated 07.11.2002 the following issues were framed : I S S U E S
1. Whether the petition is liable to be dismissed as malafide?OPR.
2. Whether the petitioner is liable to be adjudged as Insolvent?OPP
3. Relief.
10. In order to prove her case, the petitioner examined her attorney Sh. Pawan Sachdeva as PW1. This witness deposed on the the lines of the petition and proved the copy of GPA in his favour as Ex.PW1/1, the certified copy of order passed by Debts Recovery Tribunal as Ex.PW1/2 to Ex.PW1/7. This witness deposed that the petitioner is her motherinlaw and testified on her behalf. IP no.19/2000 Page 5/12
11. In defense, the respondent no.3 has examined Sh. S. Balasubarmanium, Deputy General Manager, IDBI Bank as R3W1. In evidence this witness has tendered the copy of loan agreement, the agreement of pledge of shares and letter and the original application filed before the Debts Recovery Tribunal and order passed by Debts Recovery Tribunal.
12. Respondent no.4 examined Sh. G.C. Jagadeesan as R4W1. This witness tendered his examination in chief by way of affidavit and deposed that the petitioner stood as guarantor for loan of Rs. Five Crores disbursed by the petitioner to M.S. Shoes East Ltd. and the said company has defaulted for repayment of loan and as such the bank has instituted the proceedings before Debts Recovery Tribunal against the petitioner.
13. Respondent no.5 has examined Sh. D.D. Lahiri as R5W1, who has deposed that the company M.S. Shoes East Ltd. was sanctioned a short term loan of Rs. Five Crores and the petitioner in her personal capacity executed unconditional deed of personal guarantee on 16.02.1995. It has been stated on behalf of bank that the petitioner has failed to make the payment of the dues and as such the IP no.19/2000 Page 6/12 respondent company has filed original application for recovery of loan amount.
14. Respondent no.9 has examined Sh. Y.P. Kohli, Chief Manager, Assets Recovery of the bank and this witness has deposed that the petitioner stood as guarantor for the repayment of the loan facilities granted by the Indian Bank to Pearl Intercontinental Ltd. to the extent of amount of Rs. 11Crores and the petitioner stood guarantor in her personal capacity in the loan amount. It has also been deposed that the Indian Bank has already instituted a suit against the company since the petitioner is jointly or severely liable to pay outstanding amount.
15. Respondent no.10 has examined Sh. Chacko Epan as R10W1 and it has been deposed on behalf of bank that the petitioner executed an agreement of guarantee dated 11.03.1995 in consideration of the loan facilities granted to M/s Euro Exports and the liability of petitioner is coextensive and continuing with that of M/s Euro Exports as the said company has failed to repay the loan amount.
16. The respondent no.6 stood deleted from the array of the respondents on 07.12.2002 & defense of the respondent no.1 stood struck off on 07.11.2002.
IP no.19/2000 Page 7/12
17. I have heard counsel for parties and carefully gone through the record.
18. The issuewise findings are as under : Issue no.1 :Whether petitioner has not come to the court with clean hands? O.P.R. The onus to prove this issue is on the respondents but there no documents have been filed on behalf of the respondents in order to prove this issue. There is nothing on record to suggest that the petitioner has approached the Court with un clean hands. Accordingly, the issue stands decided against the respondents.
19. Issue no.2: Whether the petitioner is entitled to be adjudged as insolvent? For petitionerdebtor to succeed to her petition, she has to satisfy the conditions laid down in Section 10 of the Provincial insolvency Act which are as under: (1) She is unable to pay his debts; and (2) Her debts amount to Rs. 500/ or more or (3) She is under arrest or imprisonment in (4) If an order of abatement in execution of such a decree has made and is subsisting against his property.
IP no.19/2000 Page 8/12
20. The scope of Section 10 was considered in "K.R.K.K. Krishnappa Chettiar Vs. V.V.R. Kasivishwanathan Chettiar & Ors." AIR 1966 Madras 331 wherein it was held that for adjudicating a debtor as insolvent, the court must see whether there is compliance of provisions of Section 10 of the Provincial Insolvency Act. 1920. When all the conditions specified in Section 10 are satisfied, the debtor is entitled to an order of adjudication. The matter does not depend on the discretion of the Court, but it is a statutory right of which he cannot be deprived by the court on the ground of abuse of process. At the time of the initiation of the proceedings, the court has only to be satisfied that the essential conditions for adjudication as provided under the Act are present. There is a stage at which the court can visit on the petitioner its due consequences of misconduct, i.e. When the application for discharge comes before the Court. The same view has been taken in "A.K. Kaimal Vs. Sudersen Trading Co. Ltd. Mysore & Anr." AIR 1976 Knt 203.
21. Similarly, in "Karnakam V Jayaseelam Chettiar & Ors."AIR 1977 Madras 250, it was held that when the petition for being adjudged an insolvent is made by a debtor, the Court has under
Proviso to Section 24(1) (a) of the Provincial insolvency Act. 1920 to be satisfied, prima facie, that the petitioner is unable to pay his debts IP no.19/2000 Page 9/12 and on being so satisfied, it is not bound to hear any further evidence on the opulence or the ability of the petitioner to pay his debts. It was further observed that the provisions of provincial Insolvency Act 1920 do not enable the Court to dismiss the petition for insolvency on superficial enquiry to come to a conclusion that the petition is not a bona fide one and if any such situation arises, the stage at which the court can visit the petitioner for any alleged consequences of any misconduct of the debtor of which the debtor applies for discharge and not at the initial stage when an application under the Act. is made by a debtor himself to be adjudged an insolvent. If such an enquiry was contemplated, the Act. should have specifically provided for it. The reasons for this appear to be obvious as the Official Receiver who comes into picture after adjudication and who represents the body of creditors, would necessarily investigate into the question for the benefit of the creditors and if any assets have been screened by the debtors, he would bring the same into the pool for purpose of division of the same amongst the body of creditors. The verdict of Hon'ble High Court of Madras in "K.Krishnan Vs. Ayyathurai & Ors." AIR 1979 Madras 82 is also to the effect that the debtor must satisfy the Court, prima facie, about his inability to pay his debts and it is not necessary for the Court to go into further details as to he bonafides of the claims of the petitioner. Similar are the observations made in "Pathuri Dharma Rao Vs. Vatluru Cooperative Bank & Ors." AIR 1978 AP 4197. IP no.19/2000 Page 10/12
22. From the testimony of the petitioner and also of the respondents, it is clearly established that there exists debts of more than Rs. 500/ against the petitioner and she does not have assets to meet her liability. As per Section 6 Clause (1) SubClause (f) of the provincial Insolvency Act, a debtor commits an act of insolvency if she petitions to be adjudged an insolvent. Thus, the petitioner has proved all the requirements U/S 10 of the Provincial Insolvency Act to be adjudged as insolvent. The issue is decided in favour of the petitioner.
23. R E L I E F : In view of the findings on issue No. 2, the petitioner is declared insolvent in terms of Section 27 Clause (1) of Provincial Insolvency Act. 1920 and she is directed to apply for discharge within a period of two years from the date of this Order. In terms of Section 28 Clause (2) of Provincial Insolvency act, the whole of the properties of the insolvent shall now vest in the Official Receiver Sh. Rajender Arya, attached to this court and shall be divided amongst the Creditors in terms of the provisions of the Provincial Insolvency Act. The Official Receiver shall take necessary steps as per the provisions of Insolvency Act and the rules framed thereunder and shall submit his report by 8th March 2012. The petitioner shall appear IP no.19/2000 Page 11/12 before the official receiver on 19/01/2012. In terms of Section 30 of the Provincial Insolvency Act. Notice of the Order of adjudication stating the name, address and description of insolvent, the date of adjudication, the period within which the debtors shall apply for discharge and the Court by which adjudication is made shall be published in Official Gazette Notification, and in the "Mahamedha" and "Virat Vaibhav" daily newspaper at the expenses of the petitioner.
The file be now put up on 08/03/2012.
The copy of this order be also sent to the Official Receiver for compliance.
Announced in open Court
on 26th November, 2011 (GAUTAM MANAN)
INSOLVENCY JUDGE
(CENTRAL)DELHI
IP no.19/2000 Page 12/12
Insolvency No.19/2000
Urmil Suri V/s Allahabad Bank
26/11/2011
Present: None
Vide separate judgment,the petitioner is declared insolvent in terms of Section 27 Clause (1) of Provincial Insolvency Act. 1920 and she is directed to apply for discharge within a period of two years from the date of this Order. In terms of Section 28 Clause (2) of Provincial Insolvency act, the whole of the properties of the insolvent shall now vest in the Official Receiver Sh. Rajender Arya, attached to this court and shall be divided amongst the Creditors in terms of the provisions of the Provincial Insolvency Act. The Official Receiver shall take necessary steps as per the provisions of Insolvency Act and the rules framed thereunder and shall submit his report by 8 th March 2012. The petitioner shall appear before the official receiver on 19/01/2012. In terms of Section 30 of the Provincial Insolvency Act. Notice of the Order of adjudication stating the name, address and IP no.19/2000 Page 13/12 description of insolvent, the date of adjudication, the period within which the debtors shall apply for discharge and the Court by which adjudication is made shall be published in Official Gazette Notification, and in the "Mahamedha" and "Virat Vaibhav" daily newspaper at the expenses of the petitioner.
The file be now put up on 08/03/2012.
The copy of this order be also sent to the Official Receiver for compliance.
(Gautam Manan) ASCJ (Central)/Delhi 29.11.2011 IP no.19/2000 Page 14/12