Bombay High Court

Respondent No.3 vs Unknown on 29 October, 2012

Bench: Anoop V.Mohta

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dgm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY

IN INSOLVENCY

INSOLVENCY PETITION NO. 10 OF 2010

Dr. Krishna Ganpat Karekar ... Debtor

Apna Sahakari Bank Ltd.
a Society deemed to be registered
under The Maharashtra Co-operative

Societies Act, 1960, having its
registered office at Apna Bazar, 106, A Govindji

Keni Road, Naigaon, Mumbai 400014 and The
Administrative Office at Apna Bank Bhavan,
Dr.S.S. Rao Road, Parel, Mumbai 400012 .... Petitioning Creditors

Shri Pradip Janardan Mangaonkar of

Mumbai, Adult, Indian Inhabitant, residing
at Flat No.19/A/202, Shivaliya Cooperative

Housing Society Ltd., Shivdham Complex, Filmcity
Road, Malad (East), Mumbai 400097
and Working for Gain, at The Office No.4/1/G,
Navjivan Cooperative Housing Society Ltd.,

Lamington Road,m Mumbai 400009 .... Respondent

Mr. R.V. Vengurlekar for the petitioning creditor.

Mr. Karl Shroff i/by Tanvir Shaikh for the respondent.

Mr. G. M. Joshi for the Debtor.

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CORAM: ANOOP V. MOHTA, J.

RESERVED ON : October 16, 2012

PRONOUNCED ON : 29 October, 2012.

JUDGMENT:

The Petitioning creditor has invoked the provisions of The

Presidency Towns Insolvency Act, 1909 (for short, the Insolvency Act).

The basic facts are as under :

On 31 March, 2003, The Care Cooperative Bank Ltd. (Care

Bank) granted loan to The Debtor, being The Director of the Care

Bank, of Rs.8-00 LAC @ 18% against The Equitable Mortgage, by

depositing The Title Deeds in respect of the Shop No. B-7, situated at

Neel Ratna Chs Ltd., 107, Mapkhan Nagar, Marol Naka, Andhri (East),

Mumbai 400 005, with Sixty Monthly installments of Rs. 13,333-00,

with last Installment due on 11 April, 2008. The Debtor was also

Guarantor for M/s. Swami Samarth Textile, Prop. Shri Sunil Kumar

Kanodia. The Debtor created The Equitable Mortgage of the shop,

in favour of Care Bank. The Title Deeds of the Shop are still in

possession of the Petitioning Creditors.

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    3      On 12 June, 2003, the Respondent (Pradip) has purchased the

property/shop by a registered agreement for sale and the possession

of the same was taken forcibly on 17 April 2009 by the SRO (Special

Recovery Officer) of the Petitioning Creditor in pursuance to the

Recovery Certificate dated 10 April 2009. The SRO has knowledge of

the transaction of the year 2003.

On 8 September, 2006, the Petitioning Creditors obtained the

Recovery Certificate No. 2192 of 2006, against the Debtor, for Rs.

6,83,055.00, with interest thereon @ 17.5% from 1 st April, 2006 till

payment. The copy of the said Recovery Certificate was served upon

the Debtor, not upon the respondent who is not the original debtor.

5 On 10 April, 2007, the Petitioning creditors also obtained

Recovery Certificate against M/s. Swami Samarth Textile &

Guarantors (including The Debtor herein, being the Guarantors)

bearing Recovery Certificate No.2113 of 2006 for Rs. 14,88,267.00,

with interest thereon @ 17.5% from 1 April, 2006 till payment. The

copy of the Recovery Certificate was also served upon the Debtor.



    6      On 10 June, 2008, Care Bank was merged with the Petitioning 




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creditors, as per the Order passed by the Registrar and Commissioner

of the Cooperative societies, Pune, MS.

7 On 6 October, 2008, the Special Sales and Recovery Officer

(SRO) of The Petitioning Creditors, sent Demand Notices, to pay the

amount due under the Recovery Certificates, as none of the parties

therein had filed the Appeal against the Recovery Certificates. On 5

November, 2008 the SRO of the Petitioning Creditors sent Notice

before attachment dated 5 November, 2008, to the Debtor, under the

Recovery Certificate No.2112/06.

8 On 17 April 2009, the SRO of the Petitioning Creditors, went to

take the physical possession of the Shop and the debtor, voluntarily

and willingly, handed over the symbolic possession of the Shop to the

SRO who drew the punchnama dated 17 April, 2009 to that effect,

bearing the signature of the Debtor and the Debtor informed the sale

of the shop to the Respondent, by furnishing Xerox copy of the

Agreement, thereof.

9 On 21 April, 2009, the SRO of the Petitioning Creditor sent

letter to the Respondent inter alia informing him, for attachment of

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the shop and to sell the Shop in Public auction, as per the law, as the

xerox copy of the agreement dated 12 June, 2003, produced by the

Debtor, was not stamped and registered and the shop is still in the

name of the Debtor in the record of the Society, as the owner thereof.

10 On 6 June, 2009, the Respondent made the Application to SRO

for establishing his rights on the shop, under the Maharashtra

Cooperative Societies Act, 1960 (MCS Act). The SRO, after hearing all

concerned parties, passed the order inter alia rejecting the Application

of the Respondent, with the Order. The premises attached belonged to

Respondent No.3, ShriKrishna Ganpat Karekar (i.e. the Debtor herein)

therefore the attachment and punchanama, carried out, is legal.

11 On 9 September, 2009, the Respondent challenged the order

dated 6 June, 2009 of the SRO, before Divisional Joint Registrar (DJR)

by filing Revision Application No.174 of 2009, some where on

June/July 2009. The DJR, by the order dated 9 September, 2009

rejected said Revision Application and confirmed order dated 6 June,

2009 of the SRO, by observing that "In view of the facts and

circumstances, it appears that the aforesaid Agreement for is an

arrangement made between the Applicant (i.e. the Respondent

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herein) and Respondent No. 5 (i.e. the Debtor herein) to escape or

delay the recovery execution. Hence it appears that Respondent No.1,

SRO, i.e. the Petitioning Creditors have properly initiated the Recovery

Execution, on the basis of the said Recovery Certificate, thereby,

following due process of law. Therefore in view of this, I declined to

interfere with the impugned order dated 6 June, 2009. Hence I

rejected the present Revision Application, on admission stage by

passing following order "The Revision Application is rejected".

Neither Debtor nor the Respondent has produced the Registered

Agreement before the DJR, from the date of filing argument and till

order/judgment dated 9 September, 2009, as observed by the DJR.

12 On 15 December, 2009, the Petition was filed, under Section

9(b) of the Insolvency Act, i.e. the Debtor transferred/sold the shop to

the Respondent, with intent to delay and defeat the claim of the

Petitioning Creditors

13 On 16 December, 2009, the Respondent, withdrew Writ Petition

No.8951 of 2009, filed against order dated 9 September, 2009, of DJR,

in the High Court and it was allowed to be withdrawn on 16

December, 2009, thereby the judgment of the DJR was upheld. The

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Petition presented on 15 December 2009, on the date of cause of

action as mentioned in para 9 i.e. 31 October 2009, has came to know

about the transfer of shop, through Writ Petition No.8951/2009. In

para 8, the averments are about registered agreement dated

12.06.2003 which was registered on 29.06.2009 by executing deed of

confirmation. The averments are made that the transfer was void,

illegal. We are concerned with insolvency proceedings. The scope is

limited.

14 Section 9(1)(b) of the Insolvency Act is reproduced as under :

"9. Acts of insolvency (1) A debtor commits an

act of insolvency in each of the following cases, namely:-

(a) ....

(b) if, in the States or elsewhere, he makes a

transfer of his property or of any part thereof with intent to defeat or delay his creditors."

Section 12(1)(c) is as under :

12. Conditions on which creditor may petition. - (1) A

creditor shall not be entitled to present an insolvency

petition against a debtor unless -

(c ) the act of insolvency on which the petition is

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grounded has occurred within three months before the

presentation of the petiton:

[Provided that where the said period of three months

referred to in clause (c ) expires on a day when the

Court is closed, the insolvency petition may be

presented on the day on which the Court reopens.]

The foremost question, therefore, is delay in taking out

proceedings under the Act against the Debtor in Section 12(1)(c).

The purpose and object of the Act just cannot be overlooked while

considering the aspect of delay in such matter. In the present case,

the admitted facts and the debt so referred above, need to be taken

into consideration without going to the trial of the matter.

16 The initiation of proceedings under the MCS Act and the

pendency of the same are not in dispute. The insolvency proceedings

based upon recovery certificate under Section 101 of the MCS Act

itself is a doubtful proposition. Admittedly the respondent Praidp was

also not the debtor. The respondent's suit in City Civil Court is still

pending. The debtor has also opposed the petition on all counts

specially its maintainablity on the ground of limitation. He has denied

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even the liability of the petitioner Bank.

17 It is relevant to note apart from the scheme and purpose of

insolvency proceedings the observations of the Supreme Court in

Firm Mukand Lal Veer Kumar and Anr. Vs. Purushottam Singh and

Ors. [AIR 1968 SC 1182] which reads as under:

"10. It was therefore submitted that the starting point of

the three months' period prescribed under S. 9(1)(c) of the Act should be the date of execution of the deed of gift

and not the date of registration. We are unable to accept this argument as correct. Section 123 of the Transfer of Property Act states that for the purpose of making a gift of

Immovable property the transfer must be effected by a

registered instrument in the prescribed manner. Under this section therefore a gift of Immovable property is not

valid unless it is effected by a registered instrument. It is true that under S.47 of the Indian Registration Act once a document is registered the effect begins to commence

from the date of execution, but if the document is not registered it can never have any legal effect as a deed of gift. Under S.49 of the Indian Registration Act it is provided that no document required by S.17 or by any provision of the Transfer of Property Act, 1882, to be registered shall affect any Immovable property comprised therein unless it had been registered. The section

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necessarily implies that such a document by reason of its execution alone cannot have the effect of transferring the

property. In the present case, therefore, the deed of gift

executed by Mukand Lal in favour of Veer Kumar dated October 31, 1957 cannot be considered to be an act of insolvency unless a valid transfer of property was made by

that document and such a valid transfer could be said to have been made only when the document was registered

on March 11, 1958. The question in the present case is not what was the effect of the registration of the deed of

gift, but when did the event take place which effectively transferred the property. We are not concerned with the

point of time from which the document became operative but with the point of time at which the deed of gift

became legally effective. The contrary viewpoint for which

the appellant contends would ignore the circumstance that if the registration of the deed of gift was not effected within the period of three months the creditor would be

deprived of his remedy of relying upon the act of transfer as constituting an act of insolvency. Such an interpretation should be avoided as it would nullify the intention of the

statute."

According to the decision of the Supreme Court, therefore, the relevant date for the purpose of reckoning the limitation for filing such petition based on act of insolvency would be date of registration of the sale deed.

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18 This Court also while dealing with Section 12 and the provisions

of the Insolvency Act has observed in Re Nazir Mohammad Shaikh

and anr. as under:

"11 It has been observed in the ruling in the case of

Chintaman v. Ramgopal, I.L.R. (1948) Nagpur 523, that Section 9(1)(c) of the Provincial Insolvency Act does not

lay down the period of three months as a period of limitation, but a condition precedent to the filing of an

Insolvency Petition.

16 In that case in order to ensure that the debtor is not under a perpetual stress, strain, risk or pressure, the

yardstick provided under section 12(1)(c) of the

Presidency Town Insolvency Act is that the petition is to be filed on the basis of the act of insolvency on which the petition has been granted has occurred within three

months before the presentation of the petition. This period of three months cannot be construed as a period of limitation, but is a condition precedent. Hence if it is

a condition precedent, section 5 of the Limitation Act is not applicable. It is in order that the debtor does not remain under constant apprehension of the insolvency proceedings being filed against him that the debtor is relieved of his apprehension if the petition is not filed within 90 days of the debtor having committed act of

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insolvency. The creditor who is sincerely interested in prosecuting his claim against his debtor is required to

comply with the provisions of this Act and file a petition

within 90 days and must pursue his petition and the law is not enacted to keep the debtor under constant pressure or apprehension which he would be placed under if the

creditor is allowed to present his petition after the expiry of 30 days seeking to take advantage of section 5 of the

Limitation Act. An act of insolvency places the debtor in a very serious position as it alters the status of the person

who is adjudged insolvent and it is the bounden duty of the Court to ensure that the conditions which are the

basis of the presentation of the petition are satisfied before the petition is admitted, the condition being that

the act of insolvency is required to be committed within

the period of three months, it is not open to the petitioning creditor to keep this period under suspension or extend it to enable him to file the petition at his

whims and fancies."

19 In Mokshamadanlal v. Hariprasad Vishnuprasad [AIR 1956

Bombay 650] in a similarly situated matter while dealing with

provisions of the Insolvency Act this Court observed as under:

"The petition having been presented more than three months after the date on which the act of insolvency

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occurred it must be regarded as not complying with the requirement of S. 9 of the Provincial Insolvency Act."

20 Therefore, taking over all view of the matter it is clear that the

provisions so referred and read by the parties are mandatory. There is

no question of extension of limitation by applying and/or invoking the

provisions of the Limitation Act. There is no question of even

condonation of delay. In this background in view of the above

admitted position on record, I am inclined to observe that the petition

so filed by the Bank is beyond limitation and, therefore, rejected

without expressing anything on merits.

21 It is made clear that in view of the above, there is no question of

granting any relief of declaration referring to the arguments to deed of

confirmation dated 12th June 2003 and 29th June 2009. The remedy

is elsewhere.