TaxTMI 
TaxTMI 
2021 (3) TMI 1494
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....mber, 2014 primarily on the ground that the Appellant deliberately concealed from the Court, the fact that the Respondent Bank herein was one of the creditors, having a recovery certificate from the Debts Recovery Tribunal ("DRT") and therefore, without considering the Respondent's claim, the Order of annulment ought not to have been passed. 4. By an Order dated 18th September, 2018, the learned Single Judge allowed Notice of Motion No. 22 of 2018 filed by the Bank i.e. the Order of annulment dated 3rd December, 2014 was recalled. 5. By the present Appeal, the Appellant / Insolvent has impugned the Order dated 18th September, 2018 passed by the learned Single Judge in Notice of Motion No. 22 of 2018 recalling the Order of annulment dated 3rd December, 2014. The Order dated 18th September, 2018 shall thereafter be referred to as 'the impugned Order'. 6. Before going into merits of this Appeal, it is necessary to record certain facts which have transpired after filing of the present Appeal. 7.1 By an Order dated 25th February, 2020, this Court (Appeal Court) stayed the impugned Order and admitted the above Appeal. 7.2 Being aggrieved by the aforesaid stay ord....
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....40]. In his Written Submissions, the Appellant also contended that the NOM filed by the Respondent Bank was at a belated stage and only to pressurize the Appellant. That the Respondent Bank's conduct is vindictive in nature and insolvency proceedings cannot be permitted to be initiated with ulterior motives. 10. As opposed to the aforesaid submission, Mr. Gupta, appearing for the Respondent Bank, has drawn our attention to the impugned Order and submitted that no interference is required in respect thereof. The issue in the matter of Kishore Mehta is completely different from the issue in hand. In view of the law laid down in Kishore Mehta's case, the Respondent Bank is not entitled to initiate proceedings for Insolvency if they have a recovery certificate from DRT as the same is not considered as a "decree" as contemplated under the Insolvency Act. However, the Respondent Bank will still remain a creditor for the purpose of the Insolvency Act and no Order of annulment can be passed without taking into consideration the claim of the Respondent Bank. Mr. Gupta further submitted that Kishore Mehta's case dealt with the scope of Section 9(2) of the Insolvency Act, where this Court ....
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.... On 18th May 2011, Insolvent filed further affidavit informing that he has been declared insolvent by an order dated 22nd April 2010. On 8th December 2011, Applicant filed an Application before DRT seeking to bring Official Assignee on record. On 24th February 2012, Official Assignee, High Court, Bombay was brought on record in place of Insolvent in the said RP. On 12th October 2012, Applicant issued letter dated 12th October 2012 and served the copies of the application filed before DRT and Order dated 24th February 2012 to the Official Assignee. On 6th November 2012, Official Assignee's letter issued to DRT seeking time to take direction from this Court to appoint an advocate. In 2014, Applicant approached DRAT to transfer the said RP to DRT, Mumbai. On 1st October 2014, Notice of Motion No. 52 of 2014 filed for annulment. On 3rd December 2014, the Order of adjudication dated 22.04.2010 declaring Mr. Akshay Thakkar as Insolvent, was annulled. Dues of the Original Petitioning Creditor were paid by a well-wisher of Insolvent who had also given an undertaking to this Hon'ble Court to pay all other creditors, if re....
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....Proceedings before the DRT and the Official Assignee was well aware about the fact of the Judgment and Order being passed by the DRT and Respondent Bank being one of the creditors of the Insolvent. (v) Despite the aforesaid facts being to the knowledge of the Appellant, these facts were not brought to the notice of the Court at the time of passing of the Order dated 03rd December 2014. (vi) In fact, paragraph 3 of the impugned Order takes note of the Affidavit filed by the Appellant at the time of applying for Annulment which reads as under : "3. ...............I say that other than the above Creditor I do not have any creditor payable either jointly or personally. (emphasis supplied)" 13. The learned Single Judge in paragraphs 4 and 5 of the impugned Order also took note of the Order passed on 03rd December 2014, which reads as follow : "4. In view of this statement made by the insolvent, this Court believed the averments made by the insolvent and recorded in the order dated 3rd December 2014 in paragraphs 2 and 3 which read as under : "2. The learned Advocate for the Insolvent states that the Insolvent has set out the name of his....
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....e Appellant is an afterthought and therefore merits rejection on this count alone. 15. In any event, even on merits, we do not subscribe to the Appellant's submissions. Prior to arriving at our reasoning, the following provisions of Insolvency Act are relevant Section 2(a): "Creditor" includes a decree-holder. Section 2(b):"Debt" includes a judgment- debt, and "debtor" includes a judgment-debtor. Section 9 (2): Without prejudice to the provisions of sub- section (1), a debtor commits an act of insolvency if a creditor, who has obtained a decree or order against him for the payment of money (being a decree or order which has become final and the execution whereof has not been stayed), has served on him a notice (hereafter in this section referred to as the insolvency notice) as provided in sub- section (3) and the debtor does not comply with that notice within the period specified therein: Provided that where a debtor makes an application under sub- section (5) for setting aside an insolvency notice: (a) in a case where such application is allowed by the Court, he shall not be deemed to have committed an act of insolvency under this su....
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....vency. (4) An estimate shall be made by the official assignee of the value of any debt or liability provable as aforesaid which by reason of its being subject to any contingency or contingencies, or for any other reason, does not bear a certain value: Provided that if in his opinion the value of the debt or liability is incapable of being fairly estimated, he shall issue a certificate to that effect, and thereupon the debt or liability shall be deemed to be a debt not provable in insolvency. Explanation: For the purposes of this section "liability" includes any compensation for work or labour done, any obligation or possibility of an obligation to pay money or money's worth on the breach of any express or implied covenant, contract, agreement or undertaking, whether the breach does or does not occur, or is or is not likely to occur or capable of occurring, before the discharge of the debtor, and generally it includes any express or implied engagement, agreement or undertaking to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is, as respects amount, fixed or unliquidated; as respects time, present or fut....
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....e an insolvency notice under Section 9(2) does not reflect upon such creditor's right to even present an insolvency petition. Section 10 of the Insolvency Act entitles an insolvency petition to be presented, inter-alia, by a creditor in the event of a debtor committing an act of insolvency. Section 10 is not restricted only to the creditors contemplated under Section 9(2). To be entitled to present an insolvency petition, a creditor must fall within the ambit of the expression "creditor" under Section 2(a) of the Insolvency Act. The Apex Court in Yenumula Maluoora Vs. Peruri Seetharathnam & Ors. [AIR 1969 SC 918] has held that an act of insolvency is available to all the creditors of the debtor. Paragraph 6 of the said judgment reads as under : "6 An act of insolvency once, committed cannot be explained or purged by subsequent events. The insolvent cannot claim to wipe it off by paying some of his creditors. This is because the same act of insolvency is available to all his creditors. By satisfying one of the creditors the act of insolvency is not erased unless all creditors are satisfied because till all creditors are paid the debtor must prove his ability to meet his....
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.... in cases where the original petitioning creditor and judgment debtor settle their dispute, the claims of all creditors except of those entitled to serve notice under Section 9(2) would be barred. I find support for this view in the judgment of a Single Judge of this Court in Jayantilal Khandwala & Sons & Ors. - Debtors, Ex-parte Neebha Kapoor & Anr.4 [Insolvency Petition No. 10 of 2007 dt. 03.09.2016] 13. A similar view was taken in Mandvi Co-operative Bank Ltd. & Anr. Vs. Anant V. Hegade [AIR 2007 Bom. 50], where it was contended that under Section 9A of the Insolvency Act, the claim of a creditor prosecuting an insolvency proceeding should be based on a decree or order of a competent court and that, therefore, a claim under a hire-purchase agreement did not amount to a valid claim. Rejecting the contention, the learned Judge held as follows : "2. An affidavit in reply has been filed on behalf of the Debtor to the Insolvency Petition. The first line of defence is that under Section 9A of the Presidency Towns Insolvency Act, 1909, the claim of a creditor who is prosecuting an insolvency proceeding should be based on a decree and order of the Competent Court.....
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....ct. Apart from being bound by, I am in respectful agreement with the judgment in Mandvi Co-operative Bank Limited vs. Anant Hegade. I would only add a few words in support of this view." (emphasis supplied) Therefore, the substituted petitioning creditor (it would have been the applicant in our case) was entitled in law to pursue the proceedings on the basis of the act of insolvency as originally committed by the Debtor since the consequence thereof would enure to the benefit of the general body of creditors. The substituted petitioning creditor is only required to meet the definition of the expression "Creditor" in the Insolvency Act and Section 2(a) defines the expression "Creditor" to include a decree holder. 15. Further, under Section 46 of the Insolvency Act, sub-section 3 which provides "...................all debts and liabilities, present or future, certain or contingent to which the debtor is subject to when he has adjudged as an insolvent......................shall be deemed to be its debts provable in insolvency". The definition of the word 'debt' in Section 2(b) read with Section 46(3) makes it clear that any debt which is present or future,....
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.... and facts arise in both these appeals, they were heard together and are being disposed of by this common judgment. The short but very important point which arises for consideration in both these appeals is whether an insolvency notice can be issued under section 9(2) of the Presidency-Towns Insolvency Act, 1909, hereinafter called as "the Insolvency Act", on the basis of a recovery certificate issued under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1994, hereinafter called as "the RD Act". (emphasis supplied) 24. The issue as recorded was whether a notice under Section 9(2) of the Insolvency Act can be issued based on a recovery certificate. On this count alone, the said decision in Kishore Mehta is wholly distinguishable and inapplicable to the facts of this case. In any event, the law as laid down is that an Insolvency Notice (as contemplated under Section 9 of the Insolvency Act) cannot be issued on the basis of a recovery certificate issued under The Recovery of Debts Due to Banks and Financial Institutions Act, 1993. This is not the question of law that has arisen for determination before us. We are concerned with Section ....
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....the properties in favour of Canara Bank. 5. The present Notice of Motion has been taken out under section 21 of the Presidency Town Insolvency Act, 1909. I will for the purpose of this judgment, proceed on the basis that the Notice of Motion under section 21 is maintainable at the instance of the judgment debtors. 6. Mr. Bulchandani submitted that Canara Bank could not have taken out a notice under section 9(2) of the said Act on the basis of the recovery certificate issued by the D.R.T. in view of the judgment of the Supreme Court in the case of Paramjeet Singh Patheja v. ICDS Ltd., JT 2006(10) SC 41 : (2006) 13 SCC 322 and in view of an unreported judgment of a learned Single Judge of this Court in the case of Re: Kishore K. Mehta dated 4-9-2007 in a group of Notices of Motion, the first of which is Notice of Motion No. 40 of 2007 in Notice No. N/224 of 2006. He submitted that Canara Bank therefore cannot intervene in the proceedings or oppose this Notice of Motion. It was thereafter contended that the judgment debtors are entitled to the reliefs claimed in the Notice of Motion despite the claim of Canara Bank not having been satisfied on the ground ....