Suresh Manherlal Mehta vs Icds Limited
2002 Latest Caselaw 345 Bom

JUDGMENT

C.K. Thakker, C.J.

1. This appeal is filed against an order passed by the learned Single Judge on 6 November, 2001, in Insolvency Petition No. 6 of 2001. By the said order, the petition filed by the petitioning creditor for adjudicating the appellant-debtor as an insolvent was allowed, and the prayers made by the petition were granted.

2. The petitioning creditor approached this court by filing Insolvency Petition No. 6 of 2001 for an order of adjudication against the appellant-debtor, inter alia, stating therein that he was indebted to the petitioning creditor in the sum of Rs. 38,54,087.32 along with interest of Rs. 24,41,675 at the rate of 18% per annum for 29 August, 2000, until payment under insolvency notice No. N/82 of 2000 dates 26 September, 2000. An award was obtained by the petitioning-creditor on 24 February, 1999, in arbitration proceedings No. A.P. 120 of 1998 in accordance with the Arbitration and Conciliation Act, 1996, between ICDS Limited and Star Precision Electronics (I) Ltd. and another. Insolvency Notice No. N/82 of 2000 was issued by this court on 26 September, 2000, calling upon the debtor to pay the amount of award, which was served upon the debtor on 5 October, 2000. As per the said notice, the debtor was required to pay to the petitioning creditor the amount claimed in the notice or to take proceedings for setting aside the notice within a period of 35 days from the date of service of the notice. The debtor, however, failed either to pay the amount or to take any proceeding, and thereby committed an act of insolvency.

3. At a belated stage, however, the debtor took out notice of motion No. 117 of 2000 on 21 November, 2000, for setting aside that notice, The petitioning creditor filed insolvency petition on 29 January, 2001, for the following reliefs :

  "(a)    an order of adjudication of insolvency may be made by this Hon'ble Court against the debtor above-named ;  
 

 (b)   for costs ; and  
 

 (c)   for such other and further reliefs as the nature and circumstances of the case may require. "   
 

4. A copy of the petition was served upon the debtor on 11 April, 2001, challenging the legality and validity of the award and for setting it aside. On 25 August, 2001, the arbitration petition was dismissed on the ground of limitation. Similarly, on 4 September, 2001, the notice of motion taken out by the debtor was also withdrawn unconditionally.

5. In view of the withdrawal of the notice of motion challenging the insolvency notice, and failure of challenge to the award, on which the insolvency notice was based, the prayers made by the petitioning creditor in the insolvency petition were require to be granted. The debtor also failed to file reply-affidavit. In the circumstances, the learned Single Judge, by the order impugned in the present appeal, granted the prayer made by the present appeal.

6. The learned counsel for the appellant contended that his advocate applied for an adjournment before the learned Single Judge, which was not granted. The order passed by the learned Single Judge, therefore, deserves to be quashed and set aside. It was also contended that the appellant was not aware of the proceedings before the learned Single Judge, and he came to know only on information being supplied by his brother. It, therefore, cannot be said that there was default on the part of the appellant in not filing a counter, and he made himself liable for default of appearance and failure to file affidavit-in-reply. It was also urged that the award, which was made against the appellant, was an ex parte award, and no such award could have been made without affording opportunity of hearing to him.

7. The counsel stated that due to circumstances beyond the control of the appellant and threat to his life and property, he could not remain present during the proceedings. For that, the attention of, the court was invited to various letters and communications by the appellant to the police authorities, wherein it was stated that threats were administered to him and he had sought police protection. On merits, it was submitted that the petitioning creditor was seeking to recover the dues twice. From the record, it was clearly established that the amount, for which a demand was made, had already been paid to the petitioning-creditor, and, hence, it was not open to the petitioning-creditor to make a demand twice. On all these grounds, the order passed by the learned Single Judge deserves to be quashed and set aside.

8. The learned counsel for the respondent, however, supported the order. He submitted that all the reasons recorded by the learned Single Judge were legal, proper and germane. It is not in dispute, submitted the learned counsel, that the award was made against the appellant; insolvency notice was issued ; and challenge against the award, as well as insolvency petition, had failed. No affidavit-in-reply was filed to the petition, if that is so, the action, which was consequential in nature, could not be objected by the appellant. The order passed by the learned Single Judge was in conformity with law, and requires no interference. It was also submitted that the allegation of threat and police protection was an after-thought, and does not affect the legality of the order.

9. Having considered the rival contentions of the parties, in our opinion, the learned Single Judge has not committed any illegality in passing the order. From the materials on record, certain facts are either admitted or proved. It is established that an award was passed by the arbitrator on 24 February, 1999, and the intimation of award was sent to the appellant-debtor on 12 February, 1999. During the period of limitation, however, to challenge the legality and validity of the order, nothing was done by the appellant. On 26 September, 2000, insolvency notice was issued, which was served upon the appellant on 5 October, 2000. A notice of motion, No. 117 of 2000, taken out for setting aside insolvency notice, was withdrawn by the appellant. Arbitration petition filed by the appellant challenging the award also did not succeed. Insolvency petition was served upon the appellant on 11 April, 2001, and yet no reply-affidavit was filed. An order of adjudication was passed on 6 November, 2001, and almost at that time, with a view to avoid the consequences likely to be ensued

that the appellant tried to put forward a case of threat and police protection. There is noting on record to show as to why the appellant had withdrawn the notice of motion challenging the insolvency notice. Even the challenge against the award, on which the insolvency notice was based, failed.

10. In the light of all the circumstances, it cannot be said that the learned Single Judge had committed any error in granting the relief in favour of the petitioning creditor. The so-called threat and seeking of police protection was subsequent to the action taken by the petitioning creditor, and, in our opinion, the contention raised by the learned counsel for the petitioning-creditor is well-founded that with a view to avord the consequences of passing an award and issuance of insolvency notice, the case appears to have been put forward by the appellant.

11. In our opinion, the learned Single Judge has neither committed an error of law, nor of jurisdiction, in granting the prayer of the respondent/petitioning creditor, and in adjudicating the debtor as insolvent. We see no substance in any of the objections raised by the appellant-debtor, and the appeal deserves to be dismissed.

12. Appeal is, accordingly, dismissed. In the facts and circumstances, however, there shall be no order as to costs.