Bombay High Court
Sharad R. Khanna vs Karimjee Limited on 17 March, 1994
Equivalent citations: 1994(3)BOMCR223, [1995]84COMPCAS611(BOM), 1994(2)MHLJ1366
Author: Sujata V. Manohar
Bench: Sujata V. Manohar
JUDGMENT
Mrs. Sujata Manohar C.J.
1. Leave to amend in terms of the draft. The amendment to be carried out within one week.
2. This is an appeal from an order of the learned single judge in Notice of Motion No. 52 of 1993, in respect of Insolvency Notice No. N/51 of 1992. The notice of motion was taken out by the judgment-debtor for setting aside the insolvency notice issued and served upon him by the judgment-creditor. The insolvency notice is in respect of a decree dated March 12, 1991, for a sum of Rs. 20,79,184 passed by this court against the judgment-debtor in favour of the judgment-creditor in Summary Suit No. 3760 of 1989. A special leave petition filed from this judgment and decree was rejected by the Supreme Court in April, 1991.
3. On July 13, 1992, the judgment-creditor moved the Insolvency Court for issuance of an insolvency notice. This was because the decree which was then about a year old, had remained unsatisfied and there was no stay against the execution of the decree. The insolvency notice was issued on July 13, 1992. The record shows that a number of attempts were required to be made for the service of the insolvency notice on the judgment-debtor because the judgment-debtor could not be found. According to the judgment-creditor, the judgment-debtor deliberately evaded or avoided the service of the notice. The time for effecting service was extended, therefore, from time to time by the Insolvency Registrar. Within the extended time the insolvency notice was served on the judgment-debtor on April 12, 1993.
4. It is the contention of the appellant who is the judgment-debtor that the insolvency notice is bad in law because service of the insolvency notice was effected on the judgment-debtor more than two years after the passing of the decree against the judgment-debtor. Reliance was placed in support of this contention upon the judgment of this court in the case of Bhurmal Kapurchand and Co. v. P. M. Tools Co., AIR 1977 Bom 305. In that case, on the date when the judgment-creditor applied for the issuance of an insolvency notice the decree was more than two years old. The learned single judge observed that in order to sustain an insolvency notice the judgment-debt must be an enforceable decree. Since the decree was more than two years old when the insolvency notice was applied for, the judgment-creditor ought to have obtained leave under Order 21, rule 22, in order to make the decree executable before he could apply for issuance of an insolvency notice. The learned single judge has also observed that the issuance of an insolvency notice is an equitable mode of execution of a decree or order. The ratio of this judgment has no application to the facts of the present case because clearly on the date of issuance of the insolvency notice the decree was executable and no leave was necessary under Order 21, rule 22.
5. Assuming that an insolvency notice is a mode of equitable execution of the decree, the argument which is advanced before us seems to proceed on the assumption that during the pendency of the execution proceedings also, every two years, the judgment-creditor must keep on applying for leave under Order 21, rule 22. There is no such provision in the Code of Civil Procedure. What is required to be considered is whether there is an enforceable decree on the date when the insolvency notice is issued. In the present case, there was an enforceable decree on the date when the insolvency notice was issued. The insolvency notice has been served on the judgment-debtor within the time provided under the order of the Insolvency Registrar. The case of Bhurmal Kapurchand and Co. v. P. M. Tools Co., AIR 1977 Bom 305, has no application to the present case.
6. The appellant also relied upon a decision in the case of A. D. Gandhi v. S. L. Thakurdas [1975] 77 Bom LR 119 in support of his contention that the Insolvency Court has power to consider the effect of a subsequent event on the validity of the insolvency notice even if at the point of time when the insolvency notice was issued it was a perfectly valid notice. There can be no quarrel with this proposition. But we do not see how an insolvency notice which was admittedly issued in respect of an enforceable decree, becomes invalid because the insolvency notice could be served only during the extended period of service on account of the judgment-debtor evading service. The ratio of this judgment, therefore, has also no application to the facts of the present case. Reliance was also placed upon a decision of the Supreme Court in the case of H. S. Mills Co. v. Court Receiver, High Court, Bombay, , and the observations made therein to the effect that a winding-up petition is a mode of equitable execution. We do not see how these observations help the appellant in the facts of the present case. Even if we assume that the provisions of Order 21, rule 22 apply to a mode of equitable execution, these provisions were not attracted in the present case because the insolvency notice was issued within less than two years of the passing of the decree.
7. We may also point out in this connection the provisions of Order 21, rule 22, sub-rule (2). We need not, however, invoke them in the present case when Order 21, rule 22, is itself not attracted.
8. It is next submitted that section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, has been amended by the Amending Act of 1993, as a result of which certain protection is given to a guarantor. In the present case, the decree against the appellant is in his capacity as a guarantor of certain debts incurred by a company which is at present before the Board for Industrial and Financial Reconstruction. The application of the company has been rejected by the Board but an appeal under section 25 is still pending. Under the amended section 22, inter alia, no suit for the enforcement of any guarantee in respect of any loans or advance granted to the industrial company "shall lie or be proceeded with further" except with the consent of the Board or, as the case may be, the Appellate Authority. This amendment came into effect from February, 1994. The question is whether the issuance of an insolvency notice and its service can be considered as the original suit for the enforcement of guarantee being further proceeded with. It is difficult to consider the issuance of an insolvency notice as proceeding further with the original suit. It is an independent proceeding with its own consequences although it may be considered as a mode of equitable execution. In any case this amendment came into force only with effect from February 1, 1994. It cannot affect retrospectively an insolvency notice issued and served long prior to the coming into effect of the Amending Act. The Amending Act is prospective and will apply to all the suits filed or proceeded with after the amendment came into effect. Section 22, therefore, as amended, cannot affect the order in the present case which is in a notice of motion to set aside the insolvency notice. This point was also not urged before the learned single judge. However, since it is a point of law we have allowed the appellant to urge it.
9. The appeal is, therefore, dismissed.
10. The appellant applies for a continuation of the stay. Learned counsel for the respondent states that he will not proceed with the insolvency petition for a period of three weeks from today.
11. Certified copy expedited.