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Abraaj Investment Management Ltd v. Neville Tuli & Others

Abraaj Investment Management Ltd
v.
Neville Tuli & Others

(High Court Of Judicature At Bombay)

Notice Of Motion No. 53 Of 2011 In Insolovency Notice No 28 Of 2011 | 17-12-2012


Oral Judgment:

1. The Judgment Debtor has taken out this Notice of Motion for the following reliefs:

(a) that it be declared that Insolvency Notice No. N/28 of 2011 dated 1st November, 2011, which was served on the Judgment Debtor on 2nd November, 2011 is patently illegal, without jurisdiction and null and void ab initio;

(b) that Insolvency Notice No. N/28 of 2011 dated 1st November, 2011 be annulled and/or set aside;

(c) that pending the hearing and final disposal of this Notice of Motion, Insolvency Notice No. N/28 of 2011 and all proceedings and/or actions and/or steps pursuant thereto or in furtherance thereof or based/premised thereon be stayed;

2. The relevant events/ background in this case is as under:

That on 05.10.2009, two Claim Forms [No. 2009 Folios 1304 & 1305 (the “foreign proceedings)] were issued out of the Commercial Court in London (the “foreign court”), on separate actions brought by the Judgment Creditor (“Abraaj”) against one Bregawn Jersey Limited (“Bregawn”), a Channel Islands Company and the Judgment Debtor [(“Mr. Tuli”) as Guarantor]. Essentially, these were for :

(a) Payment from Mr. Tuli of amounts allegedly due and owing under a Purchasing Agency Agreement dated 12.06.08 (the “PAA”), between Abraaj and Bregawn, relating to the purchase of works of art originating from the Indian subcontinent, Asia and the Arab world;

(b) Payment from Mr. Tuli of amounts allegedly due and owing under a Purchase Agreement of the same date between Abraaj and one India Asia Arab Art Fund Ltd., [also a Company for which Mr. Tuli stood Guarantor (the “IAAAF”)], also relating to the said purchase of art-works;

(c) Alleged damages for breach of guarantee;

(d) Indemnities; and

(e) interest and costs.

3 On 04.11.2009, the foreign proceedings were served on Mr. Tuli. On 11.12.2009, Mr. Tuli’s English Solicitors wrote to Abraaj’s Solicitors, noting the amended Claim Form and requesting an extension of time for service of Mr. Tuli’s defence. On 15.12.2009, Abraaj’s Solicitors replied to the letter, recording their intention in spite of the request, to file applications for summary Judgment. On 21.12.2009, the applications for Summary Judgment were filed under Part 24 of the English CPR. Thereafter, Mr. Tuli’s English Solicitors ceased to act for him. This, he says, was after he failed in fulfilling their fee requirements of about £50,000. No defence on his behalf had yet been filed. On 12.03.2010, Mr. Tuli was finally able to file a Notice of change of solicitors. He was then required to act in person. On 17.03.2010 Mr. Tuli's erstwhile Solicitors informed Abraaj's solicitors of the above change. On 17.03.2010, ignoring the change, Abraaj's Solicitors served its skeleton argument (written submissions) on Mr. Tuli's erstwhile Solicitors and notified them of a deadline for Mr. Tuli's defence (which would expire in a matter of hours). On 19.03.2010 Abraaj's applications for Summary Judgment were heard exparte and on 25.03.2010 the applications were allowed exparte and Summary Judgment passed. On 26.03.2010 by its order, the Foreign Courte entered Judgment for Abraaj in all its claim, exparte. Mr. Tuli was summarily ordered further to pay Abraaj's costs for its application of £ 22,000. Abraaj was told to file its Statement of Claim (for quantification of its claims (allowed ex parte) by 11.05.2010. On 21.05.2010 Abraaj filed its Statement of Claim of Remaining Issues. In the month of July, Bregawn and Mr. Tuli filed their Defence to Abraaj's Statement of Claim of Remaining issues.

4. On 02.08.2010, the foreign court once again passed an exparte Order, directing that unless Mr. Tuli paid the costs (as earlier ordered), his defence would be struck out “without further order”. Upon such payment of costs, Mr. Tuli was given seven days to repeal his defence to comply with the rules of procedure of the foreign court, on failing to do which once again, his defence would be struck out “without further order”. On 11.08.2010, Bregawn addressed a letter to Abraaj's Solicitors informing them of the funding difficulties being faced by and for reengaging legal counsel. Bregawn made it clear that it was unable to guarantee that such funding would arrive in time and hence, requested a deferment of the payment of costs and an extension to resubmit the defence to 6th September, 2010. The Solicitors were (admittedly) explained the fact that at the time, Mr. Tuli was seriously unwell, which had compounded the problems they were facing. On 13.08.2010, Abraaj's Solicitors opposed extensions as requested. On 16.08.2010, the request for extensions was then made to the foreign court.

5. On 25.08.2010, Abraaj's Solicitors informed Mr. Tuli that the foreign court had asked the former to inform him that it (the court) had extended time for costs to 31 August 2010 and for re-pleading the defence to 6 September, 2010. They also noted the fact that Mr. Tuli had, till then, not been able to rehire legal counsel. On 13.09.2010 and 15.09.2010, unknown to Mr. Tuli, Abraaj had filed applications for striking out his defence and for Judgment, which Abraaj's Solicitors then served on him.

6. On 28.09.2010, Mr. Tuli, although he understood the seriousness of the matter was unfortunately facing cash flow difficulties, being then away from the UK (in India). Consequently, not only was he prevented from engaging legal advisors, but he was also unable to lodge any defence to Abraaj's claims (as aforesaid). He admittedly explained this to the foreign court, and did so candidly. The court was informed that it had never been his intent to delay or obstruct proceedings. In fact, he was at pains to point out that a duly constituted defence would, in fact, have been looked upon favourably. On 01.10.2010, upon a simple application by notice; and upon Mr. Tuli's inability to comply with the costs order; the foreign court commenced and concluded hearing Counsel for Abraaj for judgment. This was, once again, ex parte. On 04.10.2010, the foreign court ordered Judgment for Abraaj for a sum which was higher than the principle amount, which it had claimed. Additionally, the foreign court awarded nearly $ 4 million as interest. This was topped off with another, roughly £ 100,000 in costs. On 01.11.2011 and 02.11.2011, the captioned Insolvency Notice came to be issued and served on Mr. Tuli.

7. The relevant provisions of the Presidency Towns Insolvency Act, 1909 (“the Insolvency Act”) reads thus:

“2. Definitions – In this Act, unless there is anything repugnant in the subject or context:-

(a) “creditor” includes a decree-holder;

(b) “debt” includes a judgment-debt, and “debtor” includes a judgment-debtor;

(d) “prescribed” means prescribed by rules;

(f) “rules” means rules made under this Act;

(h) “the court” means the Court exercising jurisdiction under this Act;

The relevant provisions of Section 9 (2) to 9(6) of the Insolvency Act as

enacted originally reads as follows:

(9) ….. .….

[9(2)] Without prejudice to the provisions of sub-section (1), a debtor commits an act of insolvency if a creditor, who has obtained a decree or order against him for the payment of money (being a decree or order which has become final and the execution whereof has not been stayed), has served on him a notice (hereafter in this section referred to as the insolvency notice) as provided in sub-section (3) and the debtor does not comply with that notice within the period specified therein:

Provided that where a debtor makes an application under subsection (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 its 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.]

Explanation.--For the purposes of this section, the act of an agent may be the act of the principal, even though the agent have no specific authority to commit the act. “Section 9A of the Insolvency Act (Maharashtra Amendment) reads thus : “Section 9A: 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 consequences of noncompliance with the notice.

(2) Such notice shall not be invalidated by reason only that the sum specified in the notice as 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 misstatement; 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 amount due been correctly specified therein.

8. It is also necessary to note the relevant definitions of the words “order”, “decree”, “judgment”, “foreign court” and “foreign judgment” as provided under Section 2 of the Civil Procedure Code (the C.P.C.) also the relevant provisions for the purpose of this matter :

“order” means the formal expression of any decision of a Civil Court which is not a decree;

“decree” means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within [***] section 144, but shall not include –

(a) any adjudication from which an appeal lies as an appeal from an order, or

(b) any order of dismissal for default.

Explanation.-- A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit. It may be partly preliminary and partly final;

“judgment” means the statement given by the Judge on the grounds of a decree or order;

“foreign Court” means a Court situate outside India and not established or continued by the authority of the Central Government;]

“foreign judgment” means the judgment of a foreign Court;

Sections 13, 14 and 44A of the Civil Procedure are reproduced herein:

“13. When foreign judgment not conclusive. - A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except-

(b) where it has not been given on the merits of the case;

(d) where the proceedings in which the judgment was obtained are opposed to natural justice;

(f) where it sustains a claim founded on a breach of any law in force in [India].

“14. Presumption as to foreign judgments. - The Court shall presume, upon the production of any document purporting to be a certified copy of a foreign judgment, that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction.”

“44A. Execution of decrees passed by Courts in reciprocating territory. – (1) Where a certified copy of decree of any of the superior Courts of 4[***] any reciprocating territory has been filed in a District Court, the decree may be executed in [India] as if it had been passed by the District Court.

(2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.

(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.

[Explanation 1- "Reciprocating territory" means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and "superior Courts", with reference to any such territory, means such Courts as may be specified in the said notification.

Explanation 2.- "Decree" with reference to a superior Court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect to a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.]

9. The judgment debtor has invoked the provisions of the Insolvency Act and specifically Section 9 and thereby applied for issuance of insolvency notice on 4th October, 2010 on the basis of certified copy of the decree/order dated 26th March, 2010 passed by the High Court of Justice of England, Queen Bench Division, Commercial Court (the Foreign Court) in Claim No. 2009/ Folio 1305/Folio 1304. They also annexed a certificate dated 19th October, 2010 issued by the Foreign Court. They also claimed the interest on the basis of Section 10 of the Foreign Judgments (Reciprocal Enforcement) Act, 1933. The copy of the claim Form dated 5th October, 2009/2nd December, 2009 referred therein. By order dated 26th March, 2010, the Foreign Court directed the Judgment Debtor to pay the amount of Rs. 1,33,36,81,518/which is described in the Form/Notice dated 4th October, 2011, in question.

10. The Insolvency Registrar after considering the averments made in the Notice/supporting Affidavit (N28/ 2011) and the undertaking so given issued exparte notice dated 1st November, 2011 against the Judgment Debtor and thereby asked within 35 days to apply to set aside the notice and in case of failure to apply with the same and/ or to raise counter claim for set of.

11. The Judgment Debtor therefore, taken out this Notice of Motion No. 53 of 2011 on 7th December, 2011 for the reliefs as stated above. The affidavit-in-reply was filed on 14th February, 2012 by the Judgment Creditor. An affidavit-in-rejoinder filed by the judgment-debtor on 6th March, 2012 alongwith the additional compilation.

12. The Notice of Motion listed for final hearing and heard accordingly basically on the issue of jurisdiction to issue such insolvency notice based upon such Foreign Decree/Order.

13. Both the counsel have filed their written notes of arguments also alongwith the supporting judgments. The Judgment debtor has relied on the following judgments.

i) Paramjeet Singh Patheja vs. ICDS Ltd., (2006) 13 Supreme 13 Supreme Court Cases 322.

The Apex Court in this case held that the arbitral award is not a “decree” or “order” for purposes of insolvency notice under section 9 (2) and thereby set aside insolvency notice based on the arbitration award.

ii) Kishor K. Mehta vs. HDFC Bank, 2007 (6) Bom.CR. 666 (JJ).

In this case, this court referring to the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Insolvency Act held that recovery certificate issued by the Debt Recovery Tribunal being not a Civil Court, cannot be stated to be an “order” or a “decree”.

iii) HDFC Bank Ltd. & Anr. vs. Kishore K. Mehta & Ors., 2008 (6) Bom. C.R. 340 (DB).

In this case, a Division Bench of this court has confirmed the above decision of this court, referring to the Supreme Court judgment in Patheja's case (supra.

iv) Johnston vs. Watson [1893] 1QB 21.

In this case, the Foreign Court has held that the procedure by judgment summons under the Debtors Act, 1869, is not “execution” of the judgment debt within the meaning of Section 4 of the Judgments Extension Act, 1868, and that the English Court has no jurisdiction to issue a judgment summons for the purpose of enforcing a registered Irish Judgment.

v) Chanmalapa Chenbasapa Tenguikai vs. Abdul Vahab Muhamed Hussein, 1910 (12) BLR 977In this case, the court referring to Section 14 of the Old Limitation Act, 1877 held that it refers to a court in British India and does not include a foreign court. It is also observed that the legislation is primarily territorial.

14. The learned counsel appearing for the judgment – creditor has relied upon following judgments :

i) M/s. International Woollwn Milla v/s. Standard Wool (UK Ltd.), AIR 2001 Supreme Court 2134 : In this case it is held that even an exparte judgment is a “judgment” on merits.

ii) China Shipping Development Co. Ltd., vs. Lanyard Foods Ltd., (2007) 5 Bom. C.R. 684 : In this case, it is held that a Petition for winding up would be maintainable on the basis of a judgment of a foreign court.

Iii) Sharad R/. Khanna vs. ICICI (1993) 1 BCR 546 and Ramanlal Khanna v/s. IFCI (Appeal No. 683 of 1993 dated 17.9.1993). In these judgments, the scheme and the scope of insolvency Act have been reiterated, stating it to be a complete code in itself.

iv) P. Sarathy vs. State Bank of India [(2000) 5 SCC 355].

In this case, by referring to Section 14 of the Limitation Act, the words “civil court” and “court” have been elaborated. It is held further that any Tribunal or Authority deciding the rights of parties, will be treated a “court”.

v) Jagadguru Annadanishwara Mahaswamiji vs. V.C. Allipur & Anr. [(2009) 4 SCC 625]. In this case the Supreme Court has reiterated what constitute a “court” or “competent authority”. In this judgment, Chanmalapa Chenbasapa Tenguikai (supra) cited by the other side is distinguished.

vi) Board of Muslim Wakfs, Rajasthan vs. Radha Kishan & Ors. (1979) 2 SCC 468 (3 Judges Bench).

vii) Assessing Authority vs. East India Cotton Mfg. C.Ltd., AIR 1981 SC 1610

viii) Dilawar Babu Kurane vs. State of Maharashtra : 2002 (1) SCALE 47

ix) Dayal Singh vs. Union of India, 2003 (1) SCALE 499

x) Illachi Devi vs. Jain Society, 2003 (8) SCALE 190

xi) Bombay Dyeing vs. Bombay Environment Action Group, 2006 (3) Bom. C.R. 260 (SC).

xii) B. Premanand and Ors. vs. Mohan Koikal & Ors. (2011) 4 SCC 266 and

xiii) Bharat Aluminium Co. vs. Kaiser Aluminium Technical Service Inc. ( 2012) 9 SCC 592.

The above judgments reiterated the basic principle of interpretation in following words :

(a) Not proper to interpret expression used in another Act.

(b) Effect of omission of words.

(c) Words in statutes not to be brushed aside.

(d) Court not to read anything into statutory provisions, which is, plain and unambiguous.

(e) Interpretation not to lead to interpolation, irrespective of the consequences.

(f) If the provision is unambiguous and the legislative intent is clear, the court need not undertake exercise of interpretation.

(g) It is not the function of the court to supply the provisions which can only be done by the parliament.

15. Both the counsel read and referred the above provisions of the Insolvency Act and made submissions referring to the judgments cited by them, supporting as well as opposing the notice of motion in question.

16. The Insolvency Act deals with every aspects of the insolvency in the Presidency Towns i.e. the High Courts at Calcutta, Madras and Bombay. The term “court” as referred under the Insolvency Act in most of the sections and the rules governs and deals with the “court” exercising jurisdiction under this Act. The Insolvency Act provides the constitution and the powers of court, its jurisdiction and the appeals thereof. All insolvency proceedings, administration of property, the effect of order of adjudication and/or annulment of adjudication and composition and schemes of arrangement and control over person and property of the insolvent and discharge of insolvency; realization of property and discovery and distribution of the property are part of it. The Act also provides about financial assignments, payment and its power and duties. The power of the court and related aspects including limitation and penalties are also provided. Exemption of the corporation and/or related special provisions are also included in the said Act including supplementary provisions. The act also deals with the meetings of the creditors and proof of debts in the relevant schedules annexed.

17. The Presidency Towns Insolvency Rules as contemplated under Section 112 of the Insolvency Act provides for various procedural aspects read with the format of notices as required. The term “the court” includes an officer of the court when exercising the powers of the court pursuant to the Act or these Rules. “The Judge” means the Judge to whom insolvency business is for the time being assigned under section 4 of the Act.

18. It is clear from the provisions and the scheme of the Insolvency Act that the court as read and referred and as defined means the civil court having jurisdiction. In the present case, the High Court of Judicature at Bombay has jurisdiction to deal with the the insolvency matter. The concerned Judge of the court to whom the insolvency business is assigned has a jurisdiction to deal with the same and so also the official assignee as provided under the Insolvency Act and the Rules. There is no other meaning given under the Act to the word “court” or the “judgment”.

19. The territorial jurisdiction of the court is, therefore, also defined and restricted. The provisions of Insolvency Act are not applicable to the any other court and/or area other than so prescribed. As noted above, the concept of “States” means all the territories which immediately before the 1st November, 1956 that comprised within Part A States and Part C States. Apart from other provisions of the Insolvency Act, Section 9 also specifically deals with the concept of “States”. It is also relevant to note Article1 of the Constitution of India which deals with the concept of the “territory” of India which is as follows :

“1. Name and territory of the Union .( 1) India, that is Bharat, shall be a Union of States.

[(2) The States and the territories thereof shall be as specified in the First Schedule.]

(3) The territory of India shall comprise –

(a) The territories of the States;

[(b) The Union territories specified in the First Schedule; and]

(c) such other territories as may be acquired.

CPC deals with the respective courts' jurisdiction and the procedure to be followed by the court while dealing with the civil rights of the parties. Section 1 (3) described limits and extent of the CPC in the following words :

“S.1(3) It extends to the whole of India except-

(a) the State of Jammu and Kashmir;

(b) the State of Nagaland and the tribal area:

Provided that the State Government concerned may, by notification in the Official Gazette, extend the provisions of this Code or any of them to the whole or part of the Stte of Nagaland or such tribal areas, as the case may be, with such supplemental, incidental or consequential modifications as may be specified in the notification. Explanation .In this clause, “tribal areas” means the territories which, immediately before the 21st day of January, 1972, were included in the tribal areas of Assam as referred to in paragraph 20 of the Sixth Schedule to the Constitution.

The word “India” as defined in section 2 of subsection (7B) is as under:

(7B) “India”, except in sections 1,29,43,44, [44A], 78,79,82,83 and 87A, means the territory of India excluding the State of Jammu and Kashmir;]

Section 4 and Section 84 are as under :

“S.4. Savings--- (1) In the absence of any specific provision to the contrary, nothing in this Code shall be deemed to limit or otherwise affect any special or local law now in force or any special jurisdiction or power conferred, or any special form of procedure prescribed, by or under any other law for the time being in force.

(2) In particular and without prejudice to the generality of the proposition contained in subsection (1), nothing in this Code shall be deemed to limit or otherwise affect any remedy which a landholder or landlord may have under any law for the time being in force for the recovery of rent of agricultural land from the produce of such land.”

S. 84 : When foreign States may sueA foreign State may sue in any competent Court:

Provided that the object of the suit is to enforce a private right vested in the Ruler of such State or in any officer of such State in his public capacity.

20. As per Section 9(2) of the Insolvency Act, a creditor/decree holder who has obtained a decree and or order against the debtor for the payment of money, being a decree or order which has become final on other aspects and the execution so filed based upon such final decree has not been stayed are the basic requirements which the court and its officers have to consider before issuing any notice in the prescribed form and to be served in the prescribed manner. The debtor if failed to comply with the notice within the prescribed 35 days, as per this provisions, the debtor's acts of insolvency set in. There is a specific provision under section 9(5) whereby the judgment debtor within the prescribed time, after receipt of the insolvency notice apply to the court to set aside the insolvency notice on any of the grounds so mentioned. The grounds so mentioned are the basic illustrations and are not exhaustive list of the circumstances which are necessary and/or essential to apply for setting aside the insolvency notice. The other additional grounds and circumstances are elaborated in various judgments including the lack of territorial jurisdiction and/or the jurisdictional issue.

21. The facts and circumstance of each case need to be taken note by the court. It is clear, therefore, that while exercising jurisdiction by the Court and or Judge under the Insolvency Act, it is necessary to consider whether the judgment/decree has attained finality or not. Pending execution of the final decree, the court and/or its officers can issue insolvency notice, the court, therefore, as defined in this Act is different than the court so referred of which the final decree is a must. The Insolvency Act, therefore, covers Indian laws and the Indian Civil Courts jurisdiction and the practice. The final decree so contemplated under the Insolvency Act means the decree obtained from the Indian Civil Court as per the provisions of the (India Code) CPC. The civil court, therefore, so referred means the court as prescribed and defined under the CPC.

22. The CPC no where specifically defines the word “Court”. The word “the court” as defined in clause (h) of Section 2 of the Insolvency Act need to be read in the context in which it is used. The words “final order” or “final decree” so mentioned in subsection (2) of Section 9 of the Insolvency Act, as not specifically defined, we must read those terms in reference to the provisions of C.P.C. To mean the “order” / “decree” passed by the court as contemplated under the CPC. This means a court of law in hierarchy of courts established for the purpose of administration of justice through out the union.

23. The concept of court, subordination of courts including appellate or original, apart from the High Court or Supreme Court and all other related district courts/offices in the States and all other related aspects including suits, litigations, final decree/judgments are governed by the CPC. The Insolvency Act no where deals or provides all these aspects of the courts including final decree and/or its execution and/or its judgment. Both these acts, therefore, are interlinked and interconnected to achieve respective objects. The concept of “foreign court” means a court situate outside India and not established or continued by the authority of the Central Government. The judgment of a foreign court is also separately defined under the CPC. The “decree” and/ or “order”/ “Judgment” which has a definite meaning under the CPC so also the term “decree holder” and the “judgment debtor”.

24. It is clear from the provisions of CPC that the foreign judgment/ decree is executable in India but only on the condition as elaborated under section 44A and subject to the filtration through section 13 of the CPC. Therefore, any foreigner and/ or a decree holder of foreign judgment just cannot initiate such execution in India except the procedure so prescribed. Section 9(2) and or other provisions of the Insolvency Act has recognized that the execution of a final decree is different than the initiation of any insolvency proceedings under the Insolvency Act. It has different and distinct facets. Both are having different and distinct provisions/sections. The insolvency proceedings cannot be treated as execution proceedings and or vice versa.

25. The concept of territorial jurisdiction and pecuniary jurisdiction of the respective courts are also well known. The term “court” though not specifically defined but the CPC deal and govern various aspects of “courts” ,”jurisdiction” and its “procedure” right from inception of the suit till execution of the decree and or subsequent action arising out of the same. Every body is bound by the limitation, jurisdiction and boundaries so prescribed under the CPC and the relevant laws. The term “foreign court” is defined under the CPC and so also a “foreign judgment”. The term “judgment”, “order”, and “decree” which defined to mean only the judgment and or order and or decree passed by the court in India. Having once defined specifically the term “foreign court” and ''foreign judgment', we have to respect these provisions for all the purposes and basically in all civil proceedings which are governed and controlled by the provisions of the CPC. The Insolvency Act as recorded above has defined the “court” means the court exercising jurisdiction under this Act. The sections as well as rules so framed deal with the concept of “court” means the court where the person or a party who initiate proceedings and or file petition and or application as prescribed including all such other steps. It is clear that the Insolvency Act has also its own limitation, including territorial jurisdiction and all subsequent action arising out of the same. The court having jurisdiction in insolvency under this Act as recorded above shall be the High Court at Calcutta, Madras and Bombay. Any action beyond this, will be treated as without jurisdiction and authority.

26. It is necessary to consider the concept and the term “decree” and or “order” as referred in section 9(2) of the Insolvency Act. The “decree” or “order” so referred is certainly of the court in India because there is nothing in the Insolvency Act to show and or define the concept of “court” or “any court” means a “foreign court” or “judgment” means a “foreign judgment”. Even Section 9(2) refers about finality and or execution of decree. This itself means a “final decree” and or “order” passed by the Indian Court and so also the Indian executing court. As contended, for the purposes of section 9 of subsection (2) and or other provisions to mean the final judgment and or final decree and or pending execution and stay of such execution in foreign court. This is in my view is wrong reading of the provisions of the Insolvency Act. Basically when the Insolvency Act itself is silent on this count, we cannot put something in it for the purpose enlarging its definition and or meaning of the term “decree” or “order” of court. The CPC no where permits or provides for any proceeding whereby the decree holder can initiate such insolvency proceeding in any court in India based upon the foreign judgment and or decree. The Insolvency Act is definitely silent in initiation of such insolvency proceedings. It is clear, after reading and going through the provisions of the Insolvency Act that the provisions of the CPC are only applicable for all the purposes to initiate any insolvency proceedings. All the provisions are necessarily need to be read together for taking any steps under the Insolvency Act.

27. The CPC provides specific provisions for execution of the decree passed by the court in reciprocating territory. The reciprocating territory means the territory as is defined under section 44A of the CPC. It is clear even from this specific provision that any foreign judgment or decree cannot be put for execution unless there is reciprocating agreement or treaty as contemplated. The national or international treaties and or conventions and or agreements have its own value for the purposes of interborder transactions and various such jurisdictional aspects. Every thing is under control of the respective provisions of the respective States and the countries. Nothing is free and or no one can take any steps in any country without the sanction / permission and or the filtrations so contemplated under the respective acts of the country. Section 13 contemplates when a foreign judgment shall be conclusive so that appropriate suits and or proceedings can be initiated by the concerned court/ parties in India. It provides the procedure to be followed before accepting the foreign judgment's conclusiveness. It also mean the merits of such judgments. Section 14 contemplates presumption so far as the foreign judgments are concerned. Section 114 of the Evidence Act deals with the presumptive value even of the foreign judgment. The concept presumption itself means that it is always rebutable if a case is made out. Therefore, merely because it is a foreign judgment and or decree that itself is not conclusive judgment for the purpose of final execution in India. Both required pretesting or pre-filtrations as provided under the CPC and other relevant laws and rules. I am inclined to accept that there is no provisions whereby any party/person can directly invoke the insolvency Act, based upon such foreign exparte judgment/decree. Even the foreign award can not be executed in such fashion in India. It is also subject to the procedural filtration and the challenge.

28. It is clear from the reading of both the acts that the concept of execution of any decree and or order is different than initiation of the insolvency action based upon the decree or order. If these two concepts are totally different then it is difficult to accept the submission that for the initiation of the insolvency proceedings, no steps or permission and or the filtrations is necessary, as there is no specific boundaries or rules to restrict the same. I am not inclined to accept that if the execution of a foreign judgment is permissible then there cannot be any bar to initiate insolvency proceedings in India based on the foreign judgment and or order. The issue is also of direct initiation of insolvency proceedings in such fashion. I am inclined to observe that as the provisions of these both Act are silent on the issue, there is no reason to submit or enlarge the plain meaning of court or decree other than the court or decree of the Indian Court. The bar is for want of specific provision to initiate insolvency proceedings directly through the official assignee under the Insolvency Act.

29. Another facets is that the Indian law has taken care and made the specific provision and permits the foreign judgment and decree to be executed in India but subject to the provisions so prescribed. There is no specific provisions for such insolvency actions. No one can set in such foreign judgment/ decree, the officer to initiate insolvency notice in such fashion. Once the insolvency notice is issued and if not complied with, the consequences are quite disastrous. The Insolvency Act provides various consequences in case the party in spite of service of insolvency notice failed to comply with the same. The acts of insolvency in the commercial World has its own effect to destroy and or hamper the name, fame and the market and the business. Once the act of insolvency is committed, the declaration will be “for all the debtors” though action was initiated by the party for recovery of their respective monetary claims. The concept of “action in rem” and its effect just cannot be overlooked even at this stage, while considering the scheme of the insolvency Act.

30. Strikingly, in view the Insolvency Act, the officer/official assignee based upon the averments made by the decree holder and believing the certified copies and or copies of the foreign judgment and or decree thought it to be correct and binding even on merit and issued the insolvency notice. The debtor after receipt of the same if failed to comply with the same, asked to face the consequences as referred above. For execution of a foreign decree, the filtration is provided and it is difficult for the party to execute the foreign judgment and or decree in India without following the procedure of law how the official assignee can initiate insolvency notice straightway on the basis of such foreign judgment by treating the same to be a final decree or order passed by the foreign court. Admittedly, there is nothing under the Insolvency Act and or CPC which permit and or entitles any one to put such foreign decree or judgment as the basis for initiating the insolvency proceedings in such fashion. If there is no provisions there is no permission. I am inclined to observe that the Indian Court under the Insolvency Act is not empowered and or authorized to initiate insolvency proceedings in such fashion directly on the basis of the foreign judgment and or order.

31. I am inclined to observe that such initiation of insolvency proceedings based upon a foreign judgment and or decree directly without any testing and or filtration as available for execution of the foreign decree in India will create more complications because of its various multifaceted problems and the situations. The initiation of such proceedings itself is not sufficient. There are various stages which need to be controlled and checked apart from the necessary permission when it comes to releasing the money to the foreigner. The aspect of initiation of proceedings without delay or within limitation from the date of the final foreign decree and the conclusive steps as prescribed are also relevant factors. There is no provisions under the insolvency Act by which even the official assignee who has authority and or jurisdiction to decide such issue before issuance of such insolvency notice. I am inclined to accept the statement that the initiation of such proceedings is in no way sufficient to declare a person as insolvent but one cannot overlook the effect of noncompliance of such notice and its effect. This mean that the party must come to the court and give their justification and apply for setting aside the motion on the grounds so prescribed under section 9 of subsection 5 of the Insolvency Act. The Insolvency Act has the foundation and is workable only if the judgment and or order decree is of Indian Court, the concerned official would be in position to test and or understand relevance of the settle provisions of law and provisions of the CPC and the effect of finality given to the decree or judgment by the Indian Court. He may be in a position to initiate and or issue insolvency notice even if the execution against a decree and or order is pending and or has not been stayed. Such jurisdictional objections including territorial jurisdiction therefore need to be tested only before the court on moving such application for setting aside the insolvency notice. This in my view causes great injustice and hardship to the person against whom the insolvency notice is issued by the official assignee based upon the presumptive value of the decree or a foreign judgment. The burden is totally shifted upon by the judgment debtor or the person to whom such notice is served to apply to the court to set aside such insolvency notice. The foreign judgment or decree once attained finality after following the procedure so prescribed is executable in India. There are various permissible challenges which a party can raise while deciding the validity and or finality of final foreign judgment and or order which is put to the execution by the other side. The court permits thereafter only to execute such decree and or judgment. In Insolvency Act, there is no such procedure. At least in the present case, there is nothing pointed out that the judgment and decree was firstly put for execution and thereafter, the insolvency proceedings have been initiated. Admittedly, the foreign judgment or decree has been put to as foundation to initiate insolvency proceedings.

32. There cannot be a dispute and or quarrel with regard to the proposition revolving around the principles of interpretation . The judgments so cited by the learned counsel appearing for the judgment creditor need no further discussion. The law is settled. Based upon these settled principles itself I am inclined to observe that there is no question of enlarging and or extending the definition of the word “order” and “court” if it is not specifically provided under the Insolvency Act. The governing law i.e. the CPC also no where permit or provide to initiate such insolvency proceedings. There is no question of permitting the party to invoke insolvency provisions when the CPC and or insolvency Act no where permits to initiate insolvency proceedings based upon the foreign judgment and or decree. The concept of foreign court and or judgment is defined and prescribed under the CPC. This itself means that the concept and term “court” as provided under the insolvency Act means an Indian Court only. I am declined to accept that the court and or order and or decree so contemplated under the insolvency Act means a foreign court, foreign judgment or foreign decree. Such drastic proceedings just cannot be initiated which have presumption or assumption value and or by enlarging definitions as sought to be contended by the learned counsel appearing for the judgment creditor in support of initiation of such insolvency proceedings. In my view it is impermissible and it is without jurisdiction. We have to read intention of the legislature by reading the plain language used in the statute, considering the scheme and purports of the C.P.C. and the insolvency Act, apart from the concept of intraborder or national or international treaties and convention and aspects of territorial as well as courts' jurisdiction. If the Act is silent and if there is no provision, there is no question to read or go beyond the existing provisions of law. The court cannot read anything beyond the statutory provisions which has plain language. There is no question to enlarge the meaning and or putting something into the statute, specifically when the provisions are clear and specific.

33. The learned counsel appearing for the judgment debtor has relied upon the judgments which deal with the initiation of insolvency proceedings on the basis of Award passed by the arbitral tribunal and or order passed by the authority which is not a “court” as contemplated under the law. We are not concerned with any foreign award or such court for the present case. The foreign court or the foreign judgment as defined under CPC has its own recognition but subject to the provisions of respective laws. There is no issue here that the foreign court and or foreign judgment is not a foreign court or foreign judgment. We are concerned with the initiation of the insolvency proceedings as done in the present case by invoking the insolvency Act in question.

34 The express provision debars implied provision including uncontrolled and unguided interpretation. I am not inclined to read into or subtract or read down the statute. Above approach in no way destroys the object and purpose of the insolvency Act. It is necessary to consider the recent trend and development in view of the evolutive precedents, while interpreting old statute. Every final order passed by any court or tribunal just cannot be the basis of insolvency notice by the official assignee.

35. Having once come to the above conclusion, I am inclined to observe that in the present facts and circumstances, without expressing anything on merits of the matter, the initiation of the insolvency proceedings and the issue of insolvency notice in question is illegal without jurisdiction and bad in law, therefore, liable to be set aside.

36. Resultantly, the Notice of Motion No. 53 of 2009 is allowed in terms of prayer clauses (a), (b). There shall be no order as to costs.

Advocates List

For the Creditor Kishore Jain a/with C.D. Mehta, Ms. Sandhya Tolat & Ms Nisha Parmar, Ms. Vrinda Daga i/by Dhruva Liladhar & Co., Advocates. For the Debtor V.R. Dond, Sr. Advocate a/with Rohan S. Kelkar, Gaurav Shah, Ms. Shreevardhini Parchure, Ms. Jyoti Sinha i/by, Negandhi Shah & Himayatullah, Advocates.

For Petitioner
  • Shekhar Naphade
  • Mahesh Agrawal
  • Tarun Dua
For Respondent
  • S. Vani
  • B. Sunita Rao
  • Sushil Kumar Pathak

Bench List

HON'BLE MR. JUSTICE ANOOP V. MOHTA

Eq Citation

2013 (1) ABR 701

2013 (2) ALLMR 818

2013 (2) BOMCR 865