TaxTMI 
TaxTMI 
2006 (10) TMI 419
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....pondents to recover amounts alleged to be due and payable from one Patheja Forgings and Auto Parts Manufactures Ltd. (hereinafter referred to as the 'company'). The appellant was sought to be sued in his purported capacity as guarantor of the dues of the said company. On 09.03.2000, a letter was sent informing the Arbitrators that the company has been registered under section 15 of the Sick Industrial Companies (Special provisions) Act, 1995. An Award was rendered therein on 26th June 2000 by the Arbitrator awarding Rs.3,81,58,821.47. However, according to the appellant, no copy of the Award was served on the appellant. On 16.01.2002, Insolvency notice was issued under section 9(2) of the Presidency Town Insolvency Act, 1909 (PTIA) on the basis of the Arbitration Award. Section 9(2) provides that a debtor commits an act of insolvency if a creditor who has obtained a "decree or order" against him for the payment of money issues him a notice in the prescribed form to pay the amount and the debtor fails to do so within the time specified in the notice. The appellant filed a Notice of Motion in the High Court challenging the said notice, inter alia, on the ground that ....
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....e adjudged an insolvent. The Act has to be construed strictly; it is impermissible to enlarge or restrict the language having regard to supposed notions of convenience, equity or justice. b) The insolvency law for Presidency-Towns was enacted in 1909 when the Civil Procedure Code, 1908 had recently been put on the statute book. At that time, the Arbitration Act, 1899 was in force. It was clearly known to the law makers what is a 'decree', what is an 'order' and what is an 'award'. It was equally known that there is a fundamental difference between 'Courts' and 'arbitrators' that Courts constitute the judiciary and exercise the judicial power of the State whereas arbitrators are persons chosen by parties to a contract to resolve their disputes. c) The Indian Arbitration Act, 1899 clearly draws the distinction between Courts and Arbitrators. The preamble of the Act shows that it is an Act for dealing with 'arbitration by agreement without the intervention of a Court of Justice'. Section 4(a) defines 'Court' and various sections deal with the powers of the Court. Section 11 provides for the making of an 'award'....
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.... the award or any of the matters referred to arbitration for reconsideration in manner aforesaid, and if no application shall have been made to set aside the award, or if the Court shall have refused such application, the Court shall, proceed to pass judgment according to the award or according to its own opinion on the special case, if the award shall have been submitted to it in the form of a special case; and upon the judgment which shall be so given decree shall follow and shall be carried into execution in the same manner as other decrees of the Court. In every case in which judgment shall be given according to the award, the judgment shall be final." "522. If the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration in manner aforesaid, and if no application has been made to set aside the award, or if the Court has refused such application, the Court shall, after the time for making such application has expired, proceed to give judgment according to the award, or if the award has been submitted to it in the form of a special case, according to its own opinion on such case. Upon the judgment so given a decree shall follo....
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....in speaks of a 'decree' and introduces the word 'order'. After so many years of the CPC being in force the Bombay Legislature knew the meaning of 'decree' and 'order' and used those terms as understood under the CPC. The words 'the execution of which is not stayed' point clearly to the fact that decree or order mean those passed by a Court for it is only under CPC that an appellate Court or executing Court can stay the execution of a decree or order. These words are inappropriate for and inapplicable to awards under the Indian Arbitration Act of 1899 or the Arbitration and Conciliation Act, 1996, under which the Awards were straightaway enforceable as if they were decrees of Court. Moreover, so far the Arbitration Act of 1940 is concerned, the award itself acquires force only after the Court pronounces judgment and passes a decree under Section 17. k) The words 'suit or other proceeding in which the decree or order was made' mean a suit in which a decree is made or a proceeding under the CPC which results in an order by a Civil Court which is not a decree. The word 'proceeding' does not refer to arbitrations because they do....
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....re, abundantly clear that the legislative intendment was that only if a debt found due by the Courts in an action contested according to the rules and principles that govern Courts, was not paid in spite of notice; it would amount to an act of insolvency. The Legislatures never contemplated that a mere award given by persons chosen by parties to resolve their disputes i.e. persons, who are outside the ordinary hierarchy of courts of civil judicature, should lead to an act of insolvency. q) It is noteworthy that Section 112 of the Bombay Insolvency Rules, 1910, empowers the three Presidency-Town High Courts to frame Rules. In the exercise of this power Rules were framed by the Bombay High Court in 1910. After the Bombay Amendment to the act w.e.f. 1939 by introduction of clause (i) in Section 9, Rule 52A and Form 1-B were added by the Bombay High Court. r) Rule 52 A(1) uses the words 'certified copy of the decree or order'. It is plain that certified copies are given only by Courts or statutory authorities. Arbitrators only submit their award and are not empowered under any law to furnish certified copies of the award. Sub-rule (2) mandates that the Insolvency Notic....
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....sonment for debt was more frequent. But it is equally important in the interests of commerce that creditors should not be defrauded and that dishonest debtors should not be able to make use of insolvency proceedings merely to free themselves from their liabilities while preserving their assets more or less intact." The objects thus sought to be achieved is to widen the scope for adopting Insolvency proceedings. The provisions of Section 9(2) to 9(5) which are brought in by the amending Act of 1978 have to be viewed in the light of the statement of objects and reasons. Therefore, it is evident that what was contemplated was to permit Insolvency Notice being issued even on the basis of the Arbitral Tribunal provided the same has become final, binding and enforceable. The amendment added a new act of Insolvency and in effect provided that a Debtor commits an act of Insolvency if he fails to comply with the requisitions of an Insolvency Notice served upon him by a creditor demanding from him (the Debtor) the amounts due under the Decree or Order for payment of money, which Decree or Order has attained finality and the execution whereof has not been stayed. An Insolvency Notice by....
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....hin the meaning of Section 9(2) of the PTIA, which can sustain an Insolvency Notice. (ii) It is clear from the statement of Objects and Reasons behind the PTIA and the Central Amendments thereto as also from the decisions reported in AIR 1977 Bombay 305, 1994(3) B.C.R. 223 that the provisions relating to issuance of Insolvency Notice (Sections 9(2) to (5) of the PTIA) are an equitable mode of execution of a Decree or Order to enable a creditor to recover from a Debtor the dues under a Decree or Order and upon failure of the Debtor to make payment of the amount demanded by the Insolvency Notice within the prescribed period, to present an Insolvency Notice within the prescribed period, to present an Insolvency Petition against the Debtor for having him adjudicated Insolvent. Mr. L.N. Rao invited our attention to the provisions of P.T.I. Act, Rules, C.P.C., Arbitration Act of 1899 and 1996 and also relied on the following judgments reported in AIR 1956 SC 35 [The Member, Board of Revenue vs. Arthur Paul Benthall] followed in T.B. Guddalli vs. Registrar or Co-op. Societies, AIR 1994 Kar. 66 (FB), Oriental Insurance Co. Ltd. vs. Hansrajbhai V. Kodala, AIR 2001 SC 1832, Commissione....
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.... two provisions is for a purpose. If the field of two provisions are to be the same, the same words would have been used. When the two provisions use different words, the different words used could only be to convey different meaning. Mr. L.N. Rao further submitted that in view of the same, the conclusion must follow that the expression "decree or order for payment of money" found in Section 9(1)(i) (Bombay Amendment of 1948) and also in Section 9(2) (1978 Central Amendment) of the said Act is not restricted to a Decree or Order "of any Court" as found in Section 9(1)(e). Ordinarily, the rule of construction is that the same expression where it appears more than once in the same statute, more so in the same provisions, must receive the same meaning. It lays down that when two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sequence and the conclusion must follow that the expression "decree or order for payment of money" found in Section 9(1)(i) and also in Section 9(2) of the said Act, is not restricted to a decree or order "of any Court" as found in Section 9(1)(e). In view thereo....
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....ination is a decree or order, it must necessarily fall in the language of the definition. Section 2(2) of the CPC defines 'decree' to mean "the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within Section 144, but shall not include- (a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default. Explanation : A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit. It may be partly preliminary and partly final." The words 'Court', 'adjudication' and 'suit' conclusively show that only a Court can pass a decree and that too only in suit commenced by a plaint and after adjudication of a dispute by a judgment pronounced by the Court. It is obvious that an arbitrator is not a Court, an ar....
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.... Law of Insolvency at P. 94. In para 123 Sir D. Mulla states: "An award for the payment of money filed in Court under S.11 of I.A.A. 1890 is not a 'decree' within the meaning of the present clause although it is enforceable under that Act as if it were a decree. No Insolvency petition can therefore be founded on an attachment or sale in execution of an award." In support of this proposition Sir D. Mulla cites the case of Ramasahai v. Joylall (supra). The commentator proceeds: It is therefore for consideration whether Cl.(e) should not be amended by adding the words 'or in execution of an award for the payment of money.' Now, it cannot be disputed that Sir D. Mulla as a commentator on the Law of Insolvency is universally regarded as an authority, and in the course of his Commentary on the Law of Insolvency Sir D. Mulla has not hesitated in several places to record his respectful dissent when he has considered that the judgment of any High Court in India is doubtful or incorrect. It is significant that in referring to the case in AIR 1928 Cal. 840, the learned commentator has not recorded any dissent, but on the contrary states that it is for consideration....
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.... of the Arbitration & Conciliation Act, 1996 which is in pari materia with Section 15 of the 1899 Act, is set out herein below: "36. Enforcement Where the time for making an application to set aside the arbitral award under Section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court." In fact, Section 36 goes further than Section 15 of the 1899 Act and makes it clear beyond doubt that enforceability is only to be under the CPC. It rules out any argument that enforceability as a decree can be sought under any other law or that initiating insolvency proceeding is a manner of enforcing a decree under the CPC. Therefore the contention of the respondents that, an Award rendered under the Arbitration and Conciliation Act, 1996 if not challenged within the requisite period, the same becomes final and binding as provided under Section 35 and the same can be enforced as a Decree as it is as binding and conclusive as provided under Section 36 and that there is no distinction between an Award and a Decree does not hold water. The PTIA, 1....
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....esidency-Towns Insolvency Act, 1909 in Bombay. This recommendation was reiterated by the Law Commission in its Twenty Sixth Report on Insolvency Laws. 2. The Expert Committee on Legal Aid was also of the view that the above recommendation of the Law Commission should be implemented immediately without waiting for the enactment of a comprehensive law of insolvency. 3. It is, therefore, proposed to amend the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920 to add a new act of insolvency, namely, that a debtor has not complied with the insolvency notice served on him by a creditor, who has obtained a decree or order against him for the payment of money, within the period specified in the notice. If the amount shown in the insolvency notice is not correct, it would be invalidated if the debtor gives notice to the creditor, disputing the amount. The debtor can, however, apply to the Court to have the insolvency notice set aside on the ground, among others, that he is entitled to have the decree re-opened under any law relating to relief of debtedness or that the decree is not executable under any such law." The words 'litigant', '....
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....rly distinct and separate in character from judicial decisions pronounced by Courts. Tribunals occupy a special position of their own under the scheme of our Constitution. Special matters are entrusted to them and in that sense they share with the Courts one common characteristic; both the Courts and the tribunals are 'constituted by the State and are invested with judicial as distinguished from purely administrative or executive functions'. The basic and fundamental feature which is common to both the Courts and tribunals is that they discharge judicial functions and exercise judicial powers which inherently vest in a sovereign State." "By 'courts' is meant courts of civil judicature and by 'tribunals' those bodies of men who are appointed to decide controversies arising under certain special laws. Among the power of the State is the power to decide such controversies. This is undoubtedly one of the attributes of the State, and is aptly called the judicial power of the State." "All tribunals are not courts, though all courts are tribunals. The word 'courts' is used to designate those tribunals which are set up in an organized State for the administr....
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....wards. The Insolvency Act of 1909 was passed, and amended by the Bombay Amendment of 1939 and also by Parliament in 1978 when two laws were on the statute book: the Arbitration Act, 1899 and the Civil Procedure Code, 1908. Parliament and the Bombay Legislature were well aware of the difference between awards on the one hand and decrees and orders on the other and they chose to eschew the use of the word 'award' for the purposes of the Insolvency Act. Section 15 of the Arbitration Act, 1899 provides for 'enforcing' the award as if it were a decree. Thus a final award, without actually being followed by a decree (as was later provided by Section 17 of the Arbitration Act of 1940), could be enforced, i.e. executed in the same manner as a decree. For this limited purpose of enforcement, the provisions of CPC were made available for realizing the money awarded. However, the award remained an award and did not become a decree either as defined in the CPC and much less so far the purposes of an entirely different statute such as the Insolvency Act. Section 36 of the Arbitration and Conciliation Act of 1996 brings back the same situation as it existed from 1899 to ....