Hemant M. Nabar And Ors. vs M/S. Farohar And Co. And Ors.
2001 Latest Caselaw 291 Bom

ORDER

D.K. Deshmukh, J.

1. This Notice of Motion is taken out by the Judgment Debtors for setting aside the insolvency Notice dated 30th August. 1999, taken out by the Decree Holder. The facts that are material and relevant for deciding this Notice of Motion are that in Appeal No. 636 of 1991 the Division Bench of this Court by order dated 26th June. 1992 passed a consent decree, which according to the Decree Holder is a decree for payment of money. The Decree Holder took out an Insolvency Notice dated 30th August, 1999 and served it on the judgment Debtor on 20th September, 1999. The Notice was taken out under the provisions of the Presidency Towns Insolvency Act, 1909. On being served with that notice the Judgment Debtor has taken out this Notice of Motion for, setting aside that Insolvency Notice on various grounds including the ground that the decree pursuant to which this Insolvency Notice has been taken out is not enforceable, as the decree holder has not obtained a leave of the Court required under the provisions of Order 21 Rule 22 of the Civil Procedure Code for execution of the said decree.

2. The Notice of Motion is opposed by the Decree holder. According to the Decree holder, the Insolvency Notice cannot be set aside by this Court on the ground that the Decree is not enforceable, and because of the absence of leave of the Court under Order 21 Rule 22 of the Civil Procedure Code.

3. It may be pointed out here that under the provisions of Order 21 Rule 22 of the Civil Procedure Code, when an application for execution is made more than two years after the date of the decree, the Court executing the decree has to issue a notice to the person against whom execution is applied for, requiring him to show cause, on the date to be fixed, why the decree should not be executed against him. It is admitted position before me that the notice as contemplated by the provisions of Order 21 Rule 22 had not been issued to the Judgment Debtor before the Decree Holder took out the insolvency notice. Apart from the contentions that the Court cannot set aside the insolvency notice on the ground that a decree is not executable, one more contention that is raised on behalf of the Decree Holder is that the notice contemplated by the provisions of Order 21 Rule 22 was not necessary in this case, because an application was made before the Division Bench of this Court, which passed the decree in the year 1995 in Notice of Motion No. 375 of 1995 and that Notice of Motion was dismissed by an order 31st March, 1995. Therefore, relying on the proviso to the Rule 22 Order 21 of the C.P.C., which provides that no such notice shall be necessary in case an application for execution is made within two years from the date of the last order against the party against whom the execution is applied for is made on any previous application for execution. Now, so far as this objection is concerned, in my opinion, this objection has no substance, mainly because the order that is contemplated by proviso to Rule 22 of Order 21 is an order made by the Executing Court on any previous application for execution. The order on which reliance is placed in support of this submission is passed on a Notice of Motion, which was taken out in the appeal, in which decree was passed. It is common ground that, that Notice of Motion was not taken out in any execution proceedings.

4. Now, in so far as main contention raised on behalf of the decree holder that insolvency notice cannot be set aside by the Court on the ground that

the decree in relation to which the insolvency notice has been taken out is not executable is concerned, firstly, there is no debate before me that in the present case an execution application was made more than two years after passing of the decree, that before the date on which the insolvency notice was taken out and it was served on the judgment debtor, no notice as contemplated by the provisions of Order 21 Rule 22 was issued to the judgment debtor and therefore, on the date on which the insolvency notice was taken out and it was served, the decree was not executable/enforceable. Therefore, it is clear that the decree in relation to which the insolvency notice was taken out, was unexecutable decree on the date when the notice was taken out and as also the date on which that notice was served as also till today it is an unexecutable decree. Therefore, the only question to be considered is, can this Court set aside the insolvency notice on the ground that the decree in relation to which that notice is taken out is an unexecutable decree. According to the provisions of Section 12 of the Presidency Towns Insolvency Act, a creditor is entitled to present an insolvency petition against the debtor, if the debtor has committed an act of insolvency three months before the presentation of the petition. Section 9 of the Act defines the act, which amounts to an act of insolvency. By Bombay Act No. 51 of 1948, clause (i) was inserted in Section 9 of the Act, after the existing clause (h), Clause (i) reads as under :-

"(i) if, after a credit or has served an insolvency notice on him under this Act, in respect of a decree or an order for the payment of any amount due to such creditor, the execution of which is not stayed, he does not, within the period specified in the notice which shall not be less than one month, either comply with the requirements of the notice or satisfy the Court that he has a counterclaim or set-off which equals or exceeds the decretal amount or the amount ordered to be paid by him and which he could not lawfully set up in the suit or proceeding in which the decree or order was made against him."

5. The net result of incorporation of the above said provisions by Act No. 51 of 1948, which came into force from 19.6.1939 was that after a creditor served an insolvency notice for payment of money pursuant to a decree, the execution of which is not stayed and the judgment debtor does not within a period of one month from service of such notice satisfy the Court that he has counter-claim or set-off against the decree holder, then it amounts to an act of insolvency. By Bombay Act No. 15 of 1939, Section 9-A was inserted. Section 9A reads as under :-

"9-A. Insolvency notice - (1) An insolvency notice under this Act shall be in the prescribed form and shall be served in the prescribed manner. It shall require the debtor to pay the amount due under the decree or order, or to furnish security for the payment of such amount to the satisfaction of the creditor or his agent, or to satisfy the Court that he has a counter-claim or set off which equals or exceeds the decretal amount or the amount ordered to be paid by him and which he could not lawfully set up in the suit or proceeding in which the decree or order was made against him and shall state the consequence of non-compliance with the notice.

(2) Such notice shall not be invalidated by reason only that the sum specified in the notice is the amount due exceeds the amount actually due, unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such misstatements;

but if the debtor does not give such notice, he shall be deemed to have complied with the insolvency notice if within the time allowed he takes such steps as would have constituted a compliance with the notice had the actual amount due been correctly specified therein."

6. Section 9-A thus contemplates that the insolvency notice shall be served in the prescribed form on the judgment debtor requiring him to pay the amount due under the decree or to furnish security or to satisfy the Court that he has counter-claim or set-off against the decree holder. Pursuant to the provisions of clause (i) of Section 9 and Section 9-A in the rules framed under the Act by the High Court namely the Bombay Insolvency Rules, 1910, Rule 52A, 52B were introduced. They read as under :-

52A. (1) A creditor, desirous that an insolvency notice may be issued, shall produce to the Insolvency Registrar a certified copy of the decree or order on which the notice is founded and file the notice, together with a request for issue. The creditors shall at the same time lodge with the Insolvency Registrar two copies of the insolvency notice to be sealed and issued for service.

(2) An insolvency notice shall be Form No. 1-B with such variations as circumstances may require.

52B. (1) Every Insolvency notice shall be endorsed with the name and place of business of the attorney actually suing out the same, or if no attorney be employed, with a memorandum that it is sued out by the creditor in person.

(2) The Notice shall require the debtor to pay the amount claimed, or to furnish security for the payment of the amount to the satisfaction of the creditor or his agent.

(3) There shall also be indorsed on every notice an intimation to the debtor that if he has a counter-claim, or set off, which equals or exceeds the decretal amount or the amount ordered to be paid by him and which he could not lawfully set up in the suit or proceeding in which the decree or order was made against him, he must within the time specified in the notice apply to the Court to set aside the notice.

(4) Non-compliance by the debtor with the requirement of the notice within the specified period will be treated as an act of insolvency on the debtor's part.

(5) Any person served with an Insolvency notice may within the time allowed for compliance with that notice apply to the Court to set aside the insolvency notice :-

(a) On the ground that he has paid the amount claimed or furnished security for the payment of the amount to the satisfaction of the creditor or his agent;

(b) On the ground that he has a counter-claim or set-off which equals or exceeds the decretal amount or the amount ordered to be paid by him and which he could not lawfully set up in the suit or proceeding in which the decree or order was made; or

(c) On any other ground which would in law entitle him to have the notice set aside."

It is clear from the provisions of Rule 52(B)(5)(c) that a person on whom an insolvency notice has been served, can apply to the Court to set aside the insolvency notice, amongst other grounds on the ground, that he is entitled to have the notice set aside in accordance with law. A Division Bench of this Court, after considering the provisions Section 9, 9-A and Rules 52-B and 52-C by its judgment in the case of Ali D. Gandhi v. S. L.

Thakurdas, has held that a debtor on whom a insolvency notice is served, can challenge the insolvency notice on the ground that the insolvency notice could not have been issued to him at all. The Division Bench in Gandhi's case referred to above has quoted with approval the observations in the previous judgment of the Division Bench of this Court, which reads as under :-

"... We fail to understand on what principle should the debtor be debarred from challenging the insolvency notice when he urges that the decree is satisfied not by payment but on any other ground. Why should the rules limit the right of the debtor to prove that the decree is satisfied under sub-rule (5)(c) it is not open to the debtor to take up this particular contention. In our opinion, sub-rule (5)|c) is wide enough to cover this particular ground. It is necessary to consider what other grounds sub-rule (5)(c) might or might not cover, but if the debtor is challenging the very basis of the insolvency notice, surely there could not be a clearer case of falling within the ambit of sub-rule 5[c] than this particular one."

7. By amending Act No. 28 of 1978, the Parliament amended Section 9 by incorporating sub-sections 2, 3, 4 & 5. They read as under :-

9(2). Without prejudice to the provisions of sub-section (2), a debtor commits an act of insolvency if a creditor, who had 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 subsection (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 sub-section; and

(b) in a case where such application is rejected by the Court, he shall be deemed to have committed an act of insolvency under this sub-section on the date of rejection of the application or the expiry of the period specified in the insolvency notice for its compliance, whichever is later :

Provided further that no insolvency notice shall be served on a debtor residing, whether permanently or temporarily, outside India, unless the creditor obtains the leave of the Court therefor.

(3) An insolvency notice under sub-section (2) shall -

(a) be in the prescribed form;

(b) be served in the prescribed manner.

(c) specify the amount due under the decree or order and require the debtor to pay the same or to furnish security for the payment of such amount to the satisfaction of the creditor or his agent;

(d) specify for its compliance a period of not less than one month after its service on the debtor or, if it is to be served on a debtor residing, whether permanently or temporarily, outside India, such period (being not less than one month) as may be specified by the order of the Court granting leave for the service of such notice;

(e) state the consequences of non-compliance with the notice.

(4) No insolvency notice shall be deemed to be invalid by reason only that the sum specified therein as the amount due under the decree or order exceeds the amount actually due, unless the debtor, within the period specified in the insolvency notice for its compliance, gives notice to the creditor that the sum specified in the insolvency notice does not correctly represent the amount due under the decree or order :

Provided that if the debtor does not give any such notice as aforesaid, he shall be deemed to have complied with the insolvency notice if, within the period specified therein for it compliance, he takes such steps as would have constituted a compliance with the insolvency notice had the actual amount due been correctly specified therein.

(5) Any person served with an insolvency notice may, within the period specified therein for its compliance, apply to the Court to set aside the insolvency notice on any of the following grounds, namely :-

(a) that he has a counter-claim or set-off against the creditor which is equal to or is in excess of the amount due under the decree or order and which he could not, under any law for the time being in force, prefer in the suit or proceeding in which the decree or order was passed:

(b) that he is entitled to have the decree or order set aside under any law providing for the relief of indebtedness and that -

(i) he has made an application before the Competent Authority under such law for the setting aside of the decree or order, or

(ii) the time allowed for the making of such application has not expired:

(c) that the decree or order is not executable under the provisions of any law referred to in clause (b) on the date of the application."

8. Sub-section (2) of Section 9, which was added by 1978 amendment provides that a creditor who holds a decree for payment of money, which has become final and execution whereof has not been stayed can serve a notice in the prescribed form on the debtor and the debtor can either comply with the notice or apply to the Court for setting aside that notice. The grounds, on which he can claim that notice should be set aside, are to be found in sub-section (5) of Section 9. The ground that the decree itself is not executable or it is a null and void decree is not one of the grounds on which a decree can be set aside under sub-section (5) of Section 9.

9. It may be pointed out here that this Court by its judgment in the case of M/s. Bhurmal Kapurchand and Co. v. M/s. Premier Machine Tools Co., has already held that the decree, on which the insolvency is based is not an executable decree in the absence of notice under the provisions of Order 21 Rule 22 of the C.P.C., can be a ground for setting aside an insolvency notice under the provisions of Rule 52-(B) and 52(C) of the Rules. Following observations from the Judgment in M/s. Bhurmal's case are pertinent :

6. The first question turns on the interpretation of the provisions of Section 9(1) read with Section 9-A of the Act- The said provisions are well known and need not be reproduced here. Suffice it to notice that Section 9(i) by its material provision inter alia provides that if a creditor has served an insolvency notice upon a debtor in respect of a decree or an order for the payment of any amount due to such creditor, execution of which is not stayed and default is made by

the judgment-debtor in complying therewith, such a default constitutes an act of insolvency. Sub-section (f) of Section 9 read with the proviso thereto contemplates two limitations : (a) decree the operation whereof is stayed cannot sustain an insolvency notice and (b) a debtor is immunised from non-compliance if the debtor has a counter-claim or set-off which equals or exceeds the decretal amount and which counter-claim or set-off the debtor could not lawfully set up in the suit or proceedings in which a decree or order was made against him. Section 9-A envisages a third limitation. It inter alia provides by sub-section (2) thereof that an insolvency notice can be invalidated on ground that the debtor had given a notice to the creditor within the period prescribed by the insolvency notice to the effect that he disputed the validity of the notice on the ground of misstatement as to the actual amount due, there is no doubt that the aforesaid are the only fetters postulated by the Act in regard to act of insolvency or to the process leading to a finding that a debtor has committed an act of insolvency so as to give jurisdiction to the Court to make an order upon the basis thereof. These limitations or fetters in my opinion, however do not detract from the two basic concepts that are to be found in the provisions of Section 9(i) of the Act. The term "creditor" is defined by Section 2(a) of the Act as including a decree holder. Conceptually, a decree holder is a person who not only has a decree in his favour but is in a position to enforce such a decree. A decree holder must of necessity be a person who is able to enforce a decree or an order. Absence of any such right in the decree holder merely gives him a husk without a kernel. Law abhors such empty rights. There cannot be a decree without its enforceability. If there is a valid decree it must have the attribute of enforceability. It therefore follows that a judgment debt to sustain an insolvency notice must arise out of an enforceable decree and not out of decree which otherwise is unenforceable. A decree which is more than two years old, is by its own force (prorio vigors) unexecutable. The judgment debt arising out of such a decree is equally unenforceable unless leave as required by Order 21 Rule 22 is first obtained in that behalf.

11. On legal parameters noticed above can it be predicated for the judgment creditor before me that they have a right to immediate execution of the decree dated 1st August, 1974. Upon the plain language of Order 21 Rule 22, the question, must be answered against the judgment creditors. The said rule enjoins upon a Court to issue a notice where an application for execution is made in respect of a decree which is more than 2 years old (period of 2 years in so far as Bombay is concerned). It is only when the Court has issued such a notice and has heard the objection of the judgment debtor and has made a finding, express or implied, that no cause had been shown for an execution of a decree that the Court can pass an order directing the execution of the decree. In absence of such leave it is not controverted before me that no execution of a decree or order under Order 21 Rule 22 of the Code of Civil Procedure is permissible to a judgment-creditor.

14. As to the effect of non-compliance with the provisions of Order 21 Rule 22 the ratio of the decision of this Court in Parshram Hanmanta Patil v. Balmukund Lachiram, is apposite. In that case, a Division Bench of this Court while dealing with the corresponding provisions of the Code of Civil Procedure,

1882 invalidated the sale on the ground that the notice was not issued to the judgment debtor. Implicit in the said decision of this Court is a legal principle that absence of notice vitiates all subsequent proceedings.

15. The Privy Council in Raghunath Das v. Sundar Das Khetri, characterised the execution proceedings without compliance with the corresponding provisions of Civil Procedure Code, 1908 as lacking in jurisdiction. At page 257 after referring to an earlier decision of the same Court in Gopal Chunder Chatterjee v. Gunamoni Dasi, the Privy Council observed at p. 257 as follows:-

"A notice under section 248 of the Code is necessary in order that the Court should obtain jurisdiction to sell property by way of execution as against the legal representative of a deceased judgment debtor. In the case of 27 Indian Appeals, such a notice had been served, and the Court had determined, as it had power to do for the purpose of the execution proceedings, that the party served with the notice was in fact the legal representative. It had therefore jurisdiction to sell, though the decision as to who was the legal representative was erroneous. There being jurisdiction to sell and the purchasers having no notice of any irregularity, the sale held good unless or until it was set aside by appropriate proceedings for the purpose. The present case is of a wholly different character. No proper notice was served under the Section, and the respondents had full notice of, and indeed were responsible for, the irregularities of the procedure adopted."

16. In the light of the principle laid down by the Privy Council, the Privy Council upheld the contention of the judgment debtor as to the invalidity of the sale for want of leave of the Court for execution against legal representative. The same principle must also apply to a case where the leave of the Court is necessary in regard to a decree which is more than two years old because in principle there can be no distinction between the two situations in so far as the requirement of the leave of the Court is concerned. I, therefore, must hold that in absence of leave under Order 21 Rules 22 and 23 of the Code of Civil Procedure, it is not open to the judgment creditors herein to execute the said decree. The execution of the said decree is not permissible under the provisions of the Code of Civil Procedure. It must also be held that the judgment creditors herein are not entitled to resort to any equitable mode of execution thereof. This is further buttressed by the principle that if it is not permissible for the judgment creditors to execute the decree under the provisions of the Code of Civil Procedure directly, this Court in exercise of its discretion will not allow the judgment creditors to execute the said decree indirectly by circuitous method of insolvency proceedings.

18. That apart, it is in so far as this Court is concerned, a settled law that in order to sustain an insolvency proceeding it must be shown by the judgment creditor that he is in a position to enforce the decree or order given in his favour. This is what the Division Bench of this Court in J. P. Tiwari v. Bhimraj Harlalka, firmly laid down. It was a case where in regard to the grounds available for challenging an insolvency notice, it was held by the Division Bench of this Court at p. 969 as follows:-

"It is well settled that if there is any impediment in the way of a judgment creditor executing the decree or if the decree is not presently executable, no insolvency notice can be founded on such a decree. It is not necessary that execution of the decree should be stayed formally by the Executing Court. Even without any such formal order of stay, if the judgment creditor is not in a position to satisfy the Insolvency Court that he has a right to execute the decree in praesenti the insolvency notice taken out by the judgment creditor must fail".

20. It may also be observed that the principle enunciated by Chagla, C.J. in J. P. Tiwari's case (1958) 60 Bom.L.R. 923 was followed by another Division Bench of this Court to which Mukhi, J. was also a party. In Ali D. Gandhi v. S. L. Thakurdas, the Division Bench of this Court took the view that an insolvency notice can be invalidated upon the grounds inter alia that the subsequent events had rendered the enforceability of the decree at the hands of a judgment creditor, untenable. The Division Bench in the said case laid down that if the supervening circumstances "rendered the decree unexecutable (Page 127) it was open to a judgment debtor to successfully impugne the insolvency notice upon the said ground. Having regard to the ratio of the judgment of the Division Bench in Ali D. Gandhi's case (supra) to which Mukhi, J. himself was a party, it must be held that the exposition of law in Daljlt Kishan's case is impliedly overruled by the said Division Bench."

10. I find that a learned Single Judge of this Court in the case of Sharad R. Khanna & Ors. v. Industrial Credit & Investment Corporation of India Ltd. and Ors., has held that an insolvency notice, now as a result of 1978 Amendment, can be set aside only on the grounds which are mentioned in sub-section (5) of Section 9 and that the grounds mentioned in Rule 52(B) and 52(C) of the Rules have lost their legal effect. The relevant observations are to be found in paragraph 7 of the judgment, which read as under :-

"The Insolvency Court can also set aside the insolvency notice if the debtor has complied with the insolvency notice. In my opinion, Rule 52-B(5) of the said rules has no legal efficacy to the extent of inconsistency with the provisions ' inserted in the Presidency Towns Insolvency Act, 1909 by Act No. 28 of 1978. The debtors herein have not complied with the insolvency notice. None of the grounds urged on behalf of the debtors in support of their application for setting aside of insolvency notice fall within Section 9(5) of the Act. I have no hesitation in concluding that after coming into force of Act 28 of 1978 (Note : Act 28 of 1978 is a Central Act), Section 9(2) to 9(5) of the Act constitute self contained Code on the subject as an All India legislation and it is not permissible to the Courts to evolve additional grounds of challenge to the insolvency notice with reference to old English cases or by analogy. In the instant case, the debtors have not set up any counter-claim or set-off within the contemplation of section 9(5)(c) of the Act. In the instant case, the debtors are not relying on any law providing for the relief of indebtness. The above referred provisions were incorporated in insolvency laws by Parliamentary statute in view of difficulties faced by the decree holder concerning execution of the decree as recognised by the Privy Council as more particularly set-out in the statement of objects and reasons concerning the above referred Amending Act."

11. I further find that same view has been taken by another learned Single Judge of this Court in the case of Bijaysingh Mansingh Baid & Ors.

v. Mansingh H. Baid, it is held that in view of the amendment in 1978, the judgment if Bhurmal's case is no longer good law.

12. I also find that similar view has been taken by another learned Single Judge of this Court by order T.R. Rqjasekhar & Ors. v. The Bharat Co-operative Bank Ltd. and other connected matters.

13. Thus, by judgments referred to above, a clear view has been taken that though it is true that if a decree is unexecutable in the absence of leave under Order 21 Rule 22 of the C.P.C., a debtor cannot seek an order from the Court for setting aside an insolvency notice, which is based on such unexecutable decree under sub-section 5 of Section 9 of the Act, and that the provisions of Rule 52(B) (5) are no more in effect. Though, it goes without saying that incase the provisions of Rule 52(B)(5)(c) are taken to be in force, then an insolvency notice can be set aside by the Court on the ground that the decree on which the notice is based is unexecutable.

14. Now, so far as the provisions of sub-section 2 of Section 9 as also the provisions of section 9(i) and 9-A are concerned, one of the essential requirement is that the decree has become final and there is no stay of its execution, it is, therefore, clear that in order that a decree can be made basis of an insolvency notice, decree must have been put to execution. When execution of a decree cannot be said to have been started without the Executing Court giving the notice to the judgment debtor, it cannot be said that the decree is executable. This Court has considered this aspect of the matter in detail in its judgment in the case of M/s. Bhurmal Kapurchand & Co. v. M/s. Premier Machine Tools Co. I am in respectful agreement with observations in that judgment.

15. Thus, it is clear that an insolvency notice can be based only on an executable decree. Therefore, the only question that is to be considered is, can it be said by enactment of sub-sections (2) to (5) to Section 9 in the year 1978, the provisions of Section 9(1) and 9-A and Rules 5A to 5C of the Rules have become ineffective or they have been repealed.

16. It is clear that the Presidency Towns Insolvency Act, was enacted in the year 1909 by the Central Legislature and it came into force on 1.1.1910. In the year 1939, amendments were effected by the Provincial Legislature in the said Act by incorporating section 9(1) and Section 9-A, which were modified in the year 1948. Thus, when the Constitution of India came into force, it was an existing law. Therefore to consider the amendments effected in 1978 by the Parliament in Section 9, provisions of Article 372 of the Constitution become relevant. Sub-Article (1) of Article 372 of the Constitution reads as under :-

"372(1). Notwithstanding the repeal by this Constitution of the enactments referred to in Article 395 but subject to the other provisions of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a Competent Legislature or other Competent Authority."

17. It is clear from the provisions quoted above that all the laws, in force in territory of India immediately before the commencement of this Consti-

tution, continue in force until they are altered or amended by Competent Legislature. Thus, it appears that in terms of these provisions, unless an existing law is consciously altered or repealed or amended by a competent Legislation, the law continues to be in force. Perusal of the object clause of the amended Act No. 28 of the 1978 shows that the Parliament was conscious and alive to the existence of the amendment brought out by the Bombay Act in the insolvency Act. Relevant sentence reads as under :-

"... to enable the Court to adjudicate him an insolvent if he does not pay the decretal amount after notice by the decree holder, by specifying a period within which it should be paid, on the lines of the amendment made to the Presidency Towns Insolvency Act. 1909 in Bombay."

17.A. The provincial legislature enacted the Bombay Act No. 15 of 1939 and 51 of 1948 in exercise of its legislative powers conferred by the Government of India Act, 1935, therefore for the purpose of Article 372 of the Constitution it will be law in force. Similarly the Rules that were framed by the High Court in exercise of its Rule making however conferred by the Act i.e., Rule 52-A, 52-B etc. would also be the law in force for the purpose of Article 372 of the Constitution. The Supreme Court in its judgment in the case of Edward Mills Co. v. State of Ajmer, has observed thus :

"14. The first point does not impress us much and we do not think that there is any material difference between "an existing law" and "a law in force". Quite apart from Article 366(10) of the Constitution, the expression 'Indian law" has itself been defined in Section 3(29) of the General Clauses Act as meaning any Act, ordinance, regulation, rule, order, or bye-law which before the commencement of the Constitution had the force of law in any province of India or part thereof. In our opinion, the words "law in force" as used in Article 372 are wide enough to include not merely a legislative enactment but also any regulation or order which has the force of law."

A law, in force at the commencement of the Constitution, made by the Legislature, which was competent to frame that law at the time when the law was framed, would continue to be in force after the commencement of the Constitution. It is nobody's case that the provisions of the Bombay Act or Rule contravene any of the provisions of the Constitution. Even under the Constitution, the Legislature of the State continues to have legislative competence as the subject insolvency is in the concurrent list. The Federal' Court while considering the pari materia provisions in the Government of India Act. 1935 has observed in its judgment in the case of United Provinces v. Mt. Atiqa Begum and Ors., as follows :

"One must not, however, overlook the important provision that the previously existing law must in any case continue in force, until altered, repealed or amended. Unless, therefore, there is an Act which actually alters, repeals, or amends it, that law must, in view of the provisions of Section 22, continue in force and cannot be considered as non-existent. Those provisions not merely preserve such laws but keep them in force until actually altered, repealed or amended.

But it is not absolutely necessary that a statute must be repealed by express language, e.g. shown as repealed in an attached schedule. Repeal, and certainly

alteration or amendment, can be effected by necessary implication also. When two Acts are clearly inconsistent with or repugnant to each other, the former will be deemed to have been impliedly repealed or amended, as the last expression of the will of the Legislature must always prevail. But they must really be irreconcilable with each other. Two negative enactments need not, however, be contradictory. An earlier statute expressed in negative language may be included in or absorbed by a later statute expressed in a similar negative language, but with a wider scope. The former in such a case would not be repealed, nor even necessarily altered by the latter as they both can stand together, but it can be said to have been amended."

The law in force at the commencement of the Constitution by virtue of the provisions of Article 372 of the Constitution does not become void by reason only of the provision being different than the provision in the Central Act made under the Constitution. The Supreme Court in its judgment in the case of B. V. Patankar v. C. G. Sastry, has observed that such law continues in force until it is repealed. In paragraph 7, it is observed thus :

7. It was argued on behalf of the appellants before the High Court and that argument was repeated before us that the Mysore House Rent Control Order of 1948 was repugnant to the provisions of the Transfer of Property Act (Act IV of 1882) which was brought into force in the State of Mysore by Part B States (Laws) Act, 1951 (Act III of 1951). This Act was enacted on February, 22, 1951, which was termed the appointed day. It was contended therefore that the House Rent Control Order could not operate on the rights of the parties on the day when the Executing Court made the order for delivery of possession to the appellants, i-e. July 9, 1951, or when the delivery was actually given, i.e. on July 22, 1951. To test the force of this argument it is necessary to examine the provisions of Part B States (Laws) Act and how and when as a consequence of it the Transfer of Property Act became effective and operative in the State of Mysore. Section 3 of that Act deals with the extension and amendment of certain Acts and Ordinances. The Acts and the Ordinances specified in the Schedule were amended and became applicable as specified and as a consequence the fourth paragraph of Section 1 for the words "Bombay, Punjab or Delhi", the words "that the said State" were substituted. Therefore, the effect of the Part B State (Laws) Act merely was that qua the Transfer of Property Act, the State of Mysore was placed on the same footing as the States of Bombay, Punjab or Delhi. It was by virtue of a Notification No. 2676-Cts. 46-51-5 dated September, 12, 1951, that the Transfer of Property Act was extended to the State of Mysore as from October 1, 1951. Consequently, the laws of the State applying to leases which would include the Mysore House Rent Control Order of 1948 continued to be in force and applicable to cases that were pending till it was repealed by the Mysore Rent Control Act of 1951 which received the President's assent on August 16, 1951. The argument, therefore that as from April 1, 1951, as a result of repugnancy the House Rent Control Order unsound and cannot be sustained, because it was an existing law which was saved by Article 372 of the Constitution and remained unaffected by Article 254. The Punjab High Court in Tilakram Rambaksh

v. Bank of Patiala, discussing the effect of Part Estates (Laws) Act on the application of the Transfer of Property Act to Pepsu said :

"All that Central Act III of 1951 has done is to make it possible for Part B States to extend the Act to any part of territory by notification. Actually, however, this was never done by Pepsu or Punjab and the Transfer of Property Act is not as such in force there. It is unnecessary in the circumstances to examine the argument further".

Although the question of repugnancy was raised in the High Court at the time of the hearing of the appeal, the true effect of Section 3 of the Part B States (Laws) Act was not brought to the notice of the learned Judges nor was the Notification placed before them, but it was discussed by the High Court in its order refusing certificate under Article 33(1) of the Constitution. The argument of repugnancy, therefore, is wholly inefficacious in this appeal."

It is nobody's case that the Parliament while enacting Act No. 28 of 1978 repealed the Bombay Act or the Rules framed thereunder.

18. One of the purpose behind enacting 1978 amendment was to make provisions similar to those which are in force in Bombay Presidency for other Presidency Towns. The intention clearly was not to alter, amend or repeal the provisions as were in force in Bombay Presidency. Now, the learned Single Judge in his Judgment in Sharad Khanna's case has held that Rule 52-B(5) has no legal efficacy to the extent of inconsistency with the provisions inserted in the Presidency Towns Insolvency Act, 1909, by Act No. 28 of 1978. Therefore, the question to be examined is, is there any inconsistency between the provisions of sub-section 5 of Section 9 and provisions of Rule 52-B(5) of the Rules? In so far as the present case is concerned, the learned Counsel appearing for the decree holder also stated before me that there does not appear to be any inconsistency between the provisions and it can be said that Rule 52-B(5) makes additional ground of challenge available to the judgment-debtor to have insolvency notice set aside. Sub-section (5) of Section 9 makes certain grounds available to a debtor to have an insolvency notice set aside. Rule 52(B)(5) makes some more grounds available to a debtor to have an insolvency notice set aside. Insolvency is the subject to be found in the Concurrent list of the Constitution. Therefore, both the Legislatures namely Parliament as also the State Legislature, has competence to legislates on the subject. So long as. subsection 5 of Section 9 of the Act is concerned, it does not say that insolvency notice can be set aside only on these grounds and on no other grounds. There is no question of there being any inconsistency in the provisions of Section 9(5) of the Act and Rule 52-B(5) of the Rules. In order that inconsistency results in implied repeal, the inconsistency must be such that one cannot obey without disobeying the other, the repugnancy or inconsistency must appear on the face of the legislation and when two Acts are wholly incompatible with each other or the two together would lead to absurd result. The Supreme Court in its judgment in the case of M/s. Ram Chandra Mawa Lal v. State of Uttar Pradesh, has observed thus :-

"51. There are degrees of inconsistency in the context of conflict of law. There can be apparent or surface inconsistency which may be considered as a non-hostile, tolerable, benign one, subject to the unquestioned power of the Centre to override the State if so minded. On principle, every apparent inconsistency cannot be presumed to be hostile or intolerable. More so when the Centre does not even raise a whisper of discord. One of the tests of ascertaining whether the inconsistency is an irreconcilable or intolerable one, is to pose this question : Can the State law be obeyed or respected without flouting or violating the Central law in letter and spirit? If the answer is in the affirmative, the State law cannot be invalidated.

52. In Australian Boot Trade Employee Federation v. Whybrow Co., the High Court of Australia in a somewhat similar situation held that there was no inconsistency between a State law fixing a minimum wage for workers in the boot trade of 1$ per hour and a Federal law fixing a minimum wage for the same workers of 1-1/2$ per hour. Speaking through Barton, J. the Court observed:-

"The determinations of the wage boards (in effect the State law) and the proposed award (in effect, the Commonwealth law) are couched in the affirmative in respect of the material part of each, the provision as to the minimum wage. None of them prescribed an inflexible rate. The (State) determinations prescribe a minimum and it is in each case lower than the minimum named by the proposed (Commonwealth) award. By paying the latter minimum an employer will be obeying both laws. The affirmative words of the (Commonwealth) award, therefore, do not "impart a contra diction" between it and the [State) determinations. It is impossible to say that the employer cannot obey the one without disobeying the other. Therefore, the former and the latter may stand together. Therefore, according to the proper test, they are not inconsistent."

If the provisions made in the two Legislations, one made by the Parliament and other by the State Legislation, on the subject in the Concurrent List are capable of existing simultaneously, then there is no question of the provisions of Rule 52(B)(5) loosing its efficacy.

19. It goes without saying that the Court while considering the question whether there is inconsistency or repugnancy in the two legislations enacted by two competent legislative is under a duty to make every effort to reconcile the two enactments and to construe them so as to avoid any inconsistency between them, specially when the effect of holding them not be inconsistent is that an additional ground becomes available to a litigant to challenge the insolvency notice and one more ground of defence. It is settled law that the provisions of the insolvency law have to be strictly construed and if possible in favour of the debtor inasmuch as the status of the debtor is sought to be affected thereby.

20. Now, even if it is assumed, as held by the learned Single Judge in Sharad Khanna's case, that Rule 52B (5)(c) have lost their efficacy, in my opinion, the Court under the Act cannot be said to be powerless to set aside an insolvency notice which is basically infirm. The Division Bench of this Court in its judgment in the case of J. P. Tiwari v. Bhimraj, has held that if the decree is not presently executable no insolvency notice can be founded on such a decree. So far as the requirements of a valid, insolvency notice

is concerned the provisions of Section 9(i) and 9A and Section 9(2) are identical. As the Court cannot set aside an insolvency notice under Section 9(5), though it may find that the notice is invalid because it is based on a decree which is presently unenforceable, the question arises, are there any other provisions in the Act which empower the Court to set aside such an insolvency notice? Section 3 of the Act lays down that the Courts having jurisdiction in insolvency under the Act shall be the High Courts of the Presidency Towns including this Court. Article 215 of the Constitution lays down that the High Court shall be a Court of record and shall have all the powers of such a Court, A High Court as a Court of record has inherent and plenary powers. It has the power to determine its own powers. The observations of the Supreme Court in its judgment in the case of M. V. Elisabeth v. Harwan Investment & Trading, in paragraph 66 are relevant, which read as under :

66. The High Courts in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, and subject to the appellate or discretionary jurisdiction of this Court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers (See Naresh Shridhar Mirajkar v. State of Maharashtra,). As stated in Halsbury's Laws of England, 4th Edn. Vol. 10, para 713 :

"Prima facie, no matter is deemed to be beyond the jurisdiction of a superior Court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior Court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular Court."

Thus this Court by virtue of the provisions of Section 90, while exercising its jurisdiction under the Act has all the powers of a Court of original civil jurisdiction. In terms of the provisions of Section 151 of the C.P.C. a Court of original civil jurisdiction has inherent powers to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. In terms of the provision of Section 9(2) of the Act, in case an application taken out by the debtor to have an insolvency notice set aside is rejected, the debtor is deemed to have committed an act of insolvency. Now, in such a situation, when the Court finds that the insolvency notice lacks one of the basic requirement of a valid insolvency notice and allowing such a notice to stand would result in adversely affecting the status of the debtor, the Court would be duly-bound to intervene in exercise of its inherent powers in favour of the debtor in order to prevent abuse of the process of the Court and set aside the insolvency notice. An enforceable decree is the foundation of a valid insolvency notice. Therefore, when the Court finds that the decree on which the insolvency notice is based was not enforceable on the date on which the notice was issued as also on the date it was received by the debtor and also when the matter is before the Court; the foundation itself goes and when the foundation goes, the superstructure cannot survive. I find, the learned Single Judges of this Court, in their judgments in Sharad Khanna's case, in Bijaysingh Mansingh Baid's case and T. R. Rajshekhar's case, have not considered the provisions of Article 372 of the Constitution. I also do not find any discussion as to why the provisions of Section 9(2) to Section 9(5) of the Act and Rule 52-B are found to be inconsistent. Similarly, the provisions of Article 215 of the Constitution and Section 90 of the Act have also not been considered. In my opinion, these provisions of the Constitution, the Act and the C.P.C. are relevant for deciding the question which have been decided by those decisions. I find myself in respectful disagreement with the view of the learned Judges, for the reasons that I have detailed above. In my opinion, therefore, the insolvency notice has to be set aside. However, I do not propose to pass final order on the notice of motion. In my opinion, the proper course would be for a Larger Bench to consider the above issue, then to pass final order on the motion, in the light of the view that is taken by the Larger Bench.

21. In this view of the matter, therefore, in my opinion, it would be appropriate to have the controversy considered by the Larger Bench. Hence, the Prothonotary & Senior Master of the Court is directed to place before the Hon'ble the Chief Justice for suitable orders.