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
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN INSOLVENCY
NOTICE OF MOTION NO. 53 OF 2011
IN
INSOLOVENCY NOTICE NO. 28 OF 2011
Abraaj Investment Management Ltd.,
V/s.
Mr. Neville Tuli s/o. Ramjidas Tuli ..
CORAM : ANOOP V. MOHTA, J.
PRONOUNCED ON : 17 DECEMBER, 2012
Citation;AIR 2013 (NOC)91 bombay
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 artworks;
(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, ex parte. 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 non
compliance 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 beeither
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 affidavitinreply was filed on 14th February, 2012 by the
Judgment Creditor. An affidavitinrejoinder 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 977
In 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 sue A 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 sub
sequent 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 prefiltrations 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 non
compliance 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.
(ANOOP V. MOHTA, J)
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