Telangana High Court

P.Subhashini And Another vs M.G.R. And Sons And Another on 7 June, 2024

THE HONOURABLE SMT. JUSTICE M.G. PRIYADARSINI

                   SECOND APPEAL No.573 OF 2003

JUDGMENT:

This Second Appeal is filed by defendant Nos.1 and 3

challenging the judgment and decree dated 31.12.2002 passed

in A.S.No.358 of 2001 on the file of the learned X Additional

Chief Judge, City Civil Court, Hyderabad, confirming the

judgment and decree dated 17.07.2001 passed in O.S.No.5695

of 1998 on the file of the learned V Junior Civil Judge, City Civil

Court at Hyderabad. Thus, the present Second Appeal is filed

against the concurrent findings of trial Court as well as first

Appellate Court.

2. For the sake of convenience, the parties hereinafter are

referred to as they are arrayed before the trial Court.

3. The brief facts of the case, which necessitated the

appellants/defendant Nos.1 and 3 to file the present appeal, are

as follows:

a) The plaintiff filed O.S.No.5695 of 1998 against defendant

Nos.1 to 3 for recovery of money. The brief averments of the

plaint are that the plaintiff is the proprietary concern doing

wholesale saree business situated at Patel market, Hyderabad.

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The defendants are carving on business in the name and style

of "Sri Srisha Cloth Emporium) and they used to purchase the

sarees on credit basis from the plaintiff. Whenever the

defendants purchase saree from the plaintiff, a cash credit

memo being issued to the defendants stating about the number

of the items purchased and total value of the items. When the

defendants paid amounts, the plaintiff used to issue receipt in

favour of the defendants. The defendants, who are wife and

husband, made last payment to the plaintiff on 16.06.1998 and

there was a balance of Rs.74,503/- with interest. The

defendants avoided to pay the balance on one pretext or the

other despite request of the plaintiff. Hence, the suit.

b) In reply to the plaint averments, the defendant Nos.1 and

3 filed written statement, which was adopted by defendant

No.2. The brief averments of the written statement filed by the

defendant Nos.1 and 3 is that the business of defendant No.1

sustained losses for various reasons. As the creditors are

harassing her, she has no other go except to file Insolvency

Petition No.6/1998 before the Senior civil Judge at Sangareddy,

Medak District. The plaintiff is one of the parties in the said

Insolvency Petition. The Insolvency Court granted interim

protection to the first defendant. As per the accounts of the

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first defendant, she is liable to pay Rs.40,420/- and not liable to

pay Rs.74,503/-. The plaintiff is aware of the loss sustained by

her and also filing of Insolvency Petition and the notice in the

Insolvency Petitions were sent to him. When the plaintiff

purposefully avoided to receive the same, the notices were

affixed to the door. The plaintiff knowing about the Insolvency

Proceedings with a malafide intention and to harass the

defendant No.1 filed the suit on false grounds with false

accounts. The plaintiff came to court with unclean hands. The

brother of the plaintiff by name Sanjiv Agarwal was making

regular visits to the defendants along with antisocial elements

and threatening that they will kill the defendants. As

Insolvenyc proceedings have already been commenced before

filing of the suit, the present suit is not maintainable and the

first defendant is not in a position to pay the amounts to the

plaintiff. The plaintiff has suppressed the receipts issued by

him for payments made by the defendants and thus, prayed to

dismiss the suit.

c) Based on the pleadings of both sides, the trial Court

framed the following issues:

1) Whether the plaintiff is entitled for recovery of the suit

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amount?

2) Whether the plaintiff is entitled for future interest at 30% per annum?

3)    To What relief?

d)    During the court of trial, the plaintiff got examined

himself as PW2 and Exs.A1 to A8 were marked. On behalf of

defendants, the first defendant was examined as DW1 and got

marked Exs.B1 to B17.

e) The trial Court after considering the rival contentions,

decreed the suit for Rs.65,938/- with future interest of 12% per

annum in favour of plaintiff against defendant Nos.1 and 3 and

whereas the suit against defendant No.2 was dismissed.

Aggrieved by the judgment and decree, the defendant Nos. 1

and 3 filed the appeal before the learned X Additional Chief

Judge, City Civil Court, Hyderabad vide A.S.No.358 of 2001,

which was also dismissed on 31.12.2002. Aggrieved by the

concurrent finding given by the trial Court as well as first

appellate Court, the defendant Nos.1 and 3 have filed the

present appeal to set aside the impugned judgments.

4. Heard both sides and perused the record including the

grounds of appeal.

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5. The defendant Nos.1 and 3 have raised the following two

substantial questions of law in this appeal:

"1) That the Courts below failed to consider the matter in proper perspective and came to wrong conclusion that I have filed I.P.No.6 of 1998 before the Senior Civil Judge, Sangareddy, Medak District and obtained interim protection order dated 29.12.1998 much prior to the filing of the suit in O.S.No.5695 of 1998, after passing of the judgment and decree passed by the trial Court, the insolvency court adjudicated the insolvency petition and allowed the same by passing the judgment and decree dated 08.03.2001, the said judgment and decree obtained from the Senior Civil Judge, Sangareddy Medak District and filed the same before the Lower Appellant Court by way of additional evidence and the Appellant Court marked the said judgment and decree ex-B-18.

the suit is filed on 20.11.1998 and the Insolvency Petition was filed much prior to the filing of the suit in the trial Court on 12.10.1998.

2) When the Insolvency Court granted interim protection order in favour of the appellant and subsequently the Insolvency Petition No.I.P.No.6 of 1998 was allowed by the said Court declaring that the Appellant is an Insolvent. Both the Courts below have not appreciated the substantial question of law as such the verdicts of these lower courts are beyond their jurisdiction and scope of the case. As such the judgment of the lower appellant court and trial Court is not sustainable either in law or on the facts of the case. Further, it may also be emphasized that both the Courts have surpassed the provisions of law under the Insolvency Court and further both the Courts below have forgotten the cardinal principle of giving priority of mandatory provisions lad down in the Insolvency Act under Section 28 (2) of the Act and under the above set of circumstances, the Respondent/Plaintiff should have obtained leave from the Insolvency Court and therefore, the Judgment and decree passed by the lower court is not maintainable as such the decree is

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not executable in view of the interim protection order and judgment and decree passed by the Insolvency Court. The authorities quoted by the Lower Court by the appellant have not been looked into by the Lower Appellant Court and this amounts to gross miscarriage of justice.

6. As can be seen from the impugned judgment passed by

the trial Court, it is clear that Sections 5, 23, 27 and 28 (2) of

the Insolvency Act were discussed at page Nos.11 and 12 and

then observed that as per Section 23 of the Insolvency Act, the

Court can pass order on the date of admitting the petition and

that the order passed under Section 23 of the Insolvency Act is

an interim protection order. A perusal of Section 23 of the

Insolvency Act discloses that such an order may be passed to

prevent arrest of the debtor in execution of decree for payment

money. The Court may dismiss the petition under Section 25 of

the Insolvency Act if there is no proof of insolvency of the

petitioner. If the Court does not dismiss the petition under

Section 25 of the Insolvency Act, the Court has to pass an order

of adjudication under Section 27. As rightly observed by the

trial Court, the provisions of Sections 25 and 27 of the

Insolvency Act come into play after full fledged enquiry. The

defendant Nos.1 and 3 are intending to take shelter under

Ex.B17, which is an interim order passed by the trial Court

under Section 23 of the Insolvency Act giving protection to the

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defendant Nos.1 and 3 from attachment and arrest. Thus,

there is no ambiguity that as per Ex.B17 the suit filed by the

plaintiff was not stayed by the Insolvency Court.

7. Admittedly there is no dispute that the defendant Nos.1

and 3 have filed the Insolvency Petition No.6 of 1998 on

12.10.1998 and whereas the plaintiff filed the suit before the

trial Court on 20.11.1998. Though the defendant Nos.1 and 3

contended that the plaintiff has received the notices of

insolvency petition and aware of the proceedings, the trial Court

observed at page No.10 of the judgment that a perusal of

EXs.B16 and B17 shows that the Hon'ble Senior Civil Judge

under I.A.No.811/1998 in I.P.No.6/1998 is observed that the

respondents 3, 4, 8 to 10, 12 and 13, 6 and 7 and 11 are set

exparte. Respondent Nos.1, 2, 5 and 14 absent. Issue fresh

notices. It is to be noted that the respondent No.5 is the

plaintiff herein. Thus, by the date of passing Ex.B17 dated

29.12.1998 the notices were not served on the plaintiff. Thus,

the defendants cannot contend that despite having knowledge

about filing of the Insolvency Petition, the plaintiff has filed the

suit before the trial Court.

8. It is the contention of the defendants that they have

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already obtained an interim protection from the insolvency

court, as such, the suit filed by the plaintiff is not maintainable.

As stated supra, the protection order under Ex.B17 is only to

the extent of attachment and arrest but not to the extent of

filing any suit. Moreover, the plaintiff is not aware of protection

order under Ex.B17. Furthermore, it can be seen from the

record that prior to the date of obtaining order under Ex.B17,

the plaintiff has filed the suit before the trial Court on

20.11.1998. As per Section 28 (2) of the Insolvency Act, as on

the making of an order of adjudication, the estate vests in the

receiver and no suit shall be commenced except with the leave

of the Court. It is to be seen that admittedly the adjudication in

I.P.No.6 of 1998 was made on 08.08.2001 and whereas the suit

was decree on 17.07.2001 i.e., prior to the adjudication in

I.P.No.6 of 1998. Admittedly, the defendant No.1 has obtained

only interim protection order under Ex.B17 and that the

Insolvency Petition is pending by the date of decree and

judgment under the appeal. A careful perusal of Section 28 of

the Insolvency Act makes it clear that the provision of Section

28 of the Insolvency Act comes into operation only after an

order is passed under Section 27 of the Insolvency Act. When

the adjudication in I.P.No.6 of 1998 was not yet made by the

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Insolvency Court by the date of decree and judgment passed by

the Court, certainly the defendants cannot take shelter under

the provisions of Section 28 (2) of the Insolvency Act. The

provision further makes it clear that only when the debtor is

adjudged as insolvent under Section 27 of the Insolvency Act,

the creditor is prohibited from filing and commencing suit

proceedings against the debtor that too with the leave of the

Insolvency Court.

9. The trial Court in the impugned judgment at page No.14

clearly made a mention that there is no adjudication in favour

of the first defendant; when there is an attachment, then the

Court will give protection to the insolvent under Section 31 of

the Insolvency Act; Section 31 of the Insolvency Act clearly says

any insolvent in respect of whom an order of adjudication has

been made may apply to the court for protection and the Court

may on such application make an order for the protection of the

insolvent from arrest or detention; if the first defendant

adjudged as insolvent and a protection is given and such

protection will be given under Section 31 of the Insolvency Act

but not under Section 23 of the Insolvency Act. It was further

observed that when there is no adjudication under Section 27 of

the Insolvency Act, section 28 (2) of the Insolvency Act does not

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come into operation. Thus, from the above observations of the

trial Court, it is clear that when there is no adjudication under

Section 27 of the Act, there is no bar for the plaintiff to file a

suit, more particularly, when it is established that the notices in

I.P.No.6 of 1998 were not served on the plaintiff by the date of

Exs.B16 and B17.

10. The first appellate court relied upon a decision of Full

Bench of Allahabad High Court in Official Receiver, Jhansi v.

Jugal Kishore Lacchi Raam 1, wherein it was observed as

under:

"21. The only other, question that requires our attention is whether the provisions of Section 28 of the Provincial Inscolvency Act (hereinafter referred to as the Insolvency Act) are fatal to this suit. I have already given dates showing that the suit had already been commenced before the adjudication order was passed by the Insolvency Judge. Section 28(2) had no reference to suits or other proceedings actually pending at the date of the order of adjudication. It is settled that adjudication order does not affect suits already filed. (See Re Wray, (1887) 36 Ch. D. 138 at p 143 and Re Berry. (1896) 1 Ch 939 at p. 946). It is also well established that if a suit was validly filed and the Court had jurisdiction to entertain it on the date of the institution subsequent events would not lead to the defeat of the suit unless expressly provided to that effect by a legislative enactment. (See Venugopala Reddiar v. Krishnaswami Reddiar, AIR 1943 FC 24)."

1 1963 ALL page 459

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11. It is not the case of the defendants that the learned trial

Court as well as learned first appellate Court has not

considered the aspect of Section 28 (2) of the Insolvency Act. As

seen from the judgments passed by the first appellate Court

and trial Court, the bar to file suit under Section 28 (2) of the

Insolvency Act was considered in proper perspective and arrived

to a conclusion that the defendants cannot take shelter under

Section 28 (2) of the Insolvency Act, especially when the first

appellate court placed reliance on Official Receiver, Jhansi's

case (supra) while arriving to a conclusion. The defendants

could have availed shelter under Section 28 (2) of the Insolvency

Act for denying the suit claim of the plaintiff, if they could have

conveyed their intention of filing the insolvency petition before

filing of the suit by the plaintiff. There is no material placed

either before the trial Court or first appellate Court by the

defendants to substantiate that the despite having knowledge of

filing the insolvency petition by the defendants, the plaintiff has

filed the suit for recovery of money, more particularly, when it is

established that the notice of filing insolvency petition by the

defendants was not served on the plaintiff by the date of filing of

the suit by the plaintiff. Though the date of filing insolvency

petition was prior to the date of filing of the suit by the plaintiff,

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the notices in insolvency petition were not served on the

plaintiff, who was shown as respondent No.5 in the insolvency

petition. Hence, viewed from any angle, the defendants cannot

escape the suit claim of the plaintiff by invoking Section 28 (2)

of the Insolvency Act.

12. Admittedly, this Second Appeal is filed against the

concurrent findings of trial Court as well as first Appellate

Court. In Narayanan Rajendran and another v. Lekshmy

Sarojini and others 2 the Honourable Supreme Court observed

as under:

"24. Similarly, before amendment in 1976, this Court also had an occasion to examine the scope of Section 100 C.P.C. In Deity Pattabhiramaswamy v. S. Hanymayya and Others 3, the High Court of Madras set aside the findings of the District Judge, Guntur, while deciding the second appeal. This Court observed that notwithstanding the clear and authoritative pronouncement of the Privy Council on the limits and the scope of the High Court's jurisdiction under Section 100, Civil Procedure Code, "some learned Judges of the High Courts are disposing of Second Appeals as if they were first appeals. This introduces, apart from the fact that the High Court assumes and exercises a jurisdiction which it does not possess, a gambling element in the litigation and confusion in the mind of the litigant public. This case affords a typical illustration of such interference by a Judge of the High Court in excess of his jurisdiction under Section 100, Civil Procedure Code. We have, therefore, no alternative but to set

3 AIR 1959 SC 57

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aside the Judgment of the High Court which had no jurisdiction to interfere in second appeal with the findings of fact arrived at by the first appellate Court based upon an appreciation of the relevant evidence.

30. In Bholaram v. Amirchand 4 a three-Judge Bench of this court reiterated the statement of law. The High Court, however, seems to have justified its interference in second appeal mainly on the ground that the judgments of the courts below were perverse and were given in utter disregard of the important materials on the record particularly misconstruction of the rent note. Even if we accept the main reason given by the High Court the utmost that could be said was that the findings of fact by the courts below were wrong or grossly inexcusable but that by itself would not entitle the High Court to interfere in the absence of a clear error of law.

31. In Kshitish Chandra Purkait v. Santosh Kumar Purkait 5, a three judge Bench of this Court held: (a) that the High Court should be satisfied that the case involved a substantial question of law and not mere question of law; (b) reasons for permitting the plea to be raised should also be recorded; (c) it has the duty to formulate the substantial questions of law and to put the opposite party on notice and give fair and proper opportunity to meet the point. The court also held that it is the duty cast upon the High Court to formulate substantial question of law involved in the case even at the initial stage.

32. This court had occasion to determine the same issue in Dnyanoba Bhaurao Shemade v. Maroti Bhaurao Marnor 6. The court stated that the High Court can exercise its jurisdiction under Section 100 C.P.C. only on the basis of substantial questions of law which are to be framed at the time of admission of the second appeal and the second appeal has to be heard and decided only on the basis of the such duly framed substantial questions of

4 (1981) 2 SCC 414 5 (1997) 5 SCC 438 6 (1999) 2 SCC 471

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law."

13. It is also well settled principle by a catena of decisions of

the Honourable Apex Court that in the Second Appeal filed

under Section 100 of the Code of Civil Procedure this Court

cannot interfere with the concurrent findings arrived at by the

learned trial Court as well as learned first Appellate Court,

which are based on proper appreciation of the oral and

documentary evidence on record. Further, in Gurdev Kaur v.

Kaki 7, the Apex Court held that the High Court sitting in

Second Appeal cannot examine the evidence once again as a

third trial Court and the power under Section 100 of the Code

of Civil Procedure is very limited and it can be exercised only

where a substantial question of law is raised and fell for

consideration.

14. In Suresh Lataruji Ramteke v. SAU. Sumanbai

Pandurang Petkar and others 8 the Honourable Apex Court

observed that jurisdiction under second appeal not to be

exercised merely because an alternate view is possible. It was

7 (2007) 1 Supreme Court Cases 546

8 2023 Live Law (SC) 821

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observed in Hamida v. Mohd. Khalil 9 that while exercising

jurisdiction under Section 100 CPC, cannot reverse the findings

of the lower appellate court on facts merely on the ground that

on the facts found by the lower appellate court another view

was possible. This position was reiterated by Avtar Singh and

Others v. Bimla Devi and others 10. However, there are certain

exceptions to the rule as pointed out by the Apex Court in Nazir

Mohamed v. J. Kamala 11 as under:

"33.4. The general rule is, that the High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well recognised exceptions are where: (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. A decision based on no evidence, does not refer only to cases where there is a total dearth of evidence, but also refers to case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding."

15. In a second appeal, the jurisdiction of the High Court

being confined to substantial question of law, a finding of fact is

not open to challenge in second appeal, even if the appreciation

of evidence is palpably erroneous and the finding of fact

9 (2010) 12 SCC 740 10 (2021) 13 SCC 816 11 (2020) 19 SCC 57

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incorrect as held in V. Ramachandra Ayyar v. Ramalingam

Chettiar [V. Ramachandra Ayyar v. Ramalingam Chettiar 12.

16. Having considered the entire material available on record,

rival contentions and also the findings recorded by the learned

trial Court as well as the learned first Appellate Court, this

Court finds no ground or reason warranting interference with