Pendency of insolvency proceedings does not divest Court of power of committing judgment debtor to prison.

It is also stated that the executing Court is bound to inform the arrested judgment debtor that he may apply for insolvency, since the provisions of the Section 55 are mandatory. Even then, failure to inform does not invalidate the warrant of arrest and the pendency of the insolvency proceedings does not divest the Court of the power of committing the judgment debtor to prison. (Sarkar, Code of Civil Procedure, 11th Edition 2006, Vol.1, Page 403).

Madras High Court

R.Saravanan vs E.Raju on 6 November, 2008

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

THE HONOURABLE MR.JUSTICE S.PALANIVELU

The petitioner is defendant in O.S.No.277 of 2004 on the file of the District Munsif Court, Bodinayakanur. The respondent is the plaintiff who obtained money decree in the said suit, levied execution proceedings in E.P.No.44 of 2007 on the file of the above said Court for the recovery of money by arresting and detaining the judgment debtor namely the petitioner herein.

2. The petitioner appeared through Advocate and filed his counter. On 08.03.2007, the executing Court took up the matter for enquiry and examined the judgment debtor. On 26.06.2007, since there was no representation for the respondent (this petitioner), he was called absent, his evidence was closed and the matter was posted for argument on 05.07.2007. On 24.07.2007, arguments were heard. Even though the matter was posted for orders on 09.08.2007, it was Suo motu reopened for clarification. On 13.09.2007, it was reported to the Court that insolvency petition was filed by the judgment debtor on the file of the Sub-Court Periyakulam. On various subsequent hearing dates, copy of insolvency petition was not furnished. There was no representation for the judgment debtor on 22.04.2008 and hence he was set ex parte on 03.06.2008. The Court, after perusing the proof affidavit recorded its findings that the means was proved and ordered arrest by 24.06.2008. On 17.07.2008, he was arrested and produced before the Court at 1.20 p.m. On that date, the judgment debtor paid a sum of Rs.5,000/- towards P.S. (Part satisfaction) and the same was recorded. The Court released him on security for the payment of entire balance and adjourned the matter to 31.07.2008. On that date, neither he appeared before the Court nor paid the balance amount and was called absent and order for arrest was passed to arrest him by 08.08.2008. Since he was out of station, a fresh order of arrest was passed on 08.08.2008 to arrest him by 04.09.2008. The respondent filed an application for steps seeking police help and the same was also ordered by the Court. Arrest was to be made by 29.09.2008. Thereafter, on payment of cash batta, arrest was to be effected by 24.10.2008.

3. On 15.10.2008, the judgment debtor was arrested and produced at 3.30 p.m and jail batta was paid. On that date, at 4.50 p.m. the Court recorded on the execution petition as follows:- (as found in the typed set) "Jail batta paid already, sufficient opportunity given to judgment debtor and he was released on executing of security. But he has not appeared and paid the balance amount. Hence, the judgment debtor is sent to prison for 45 days on payment of subsistence allowance by the D.H and J.D filed a copy of the I.P petition filed by him but not produced any interim order to stay the execution. Hence, judgment debtor security is ....E.P. Terminated."

4. It is to be noted that even though the petitioner produced a copy of the insolvency petition filed by him, he has not obtained interim order to stay execution. Now he is in civil prison.

5. Only if the judgment debtor obtained an interim protection order under Section 31 of the Provincial Insolvency Act, release from the arrest could be considered by the executing Court. He is not protected from arrest by the mere fact of his having applied in insolvency.

6. Merely because the judgment debtor presented a insolvency petition before the Insolvency Court, the executing Court need not stay its proceedings in the absence of any adjudication by the Sub-Court. This proposition has been laid down by this Court in a decision reported in AIR 2006 Madras 10, Sudhandiran V. S.Krishnan, wherein this Court while taking such view has referred an earlier decision of this Court reported in 1971 (2) MAD LJ 252, Ponnudurai V. Kumaraswami Mudaliar, in which it is held thus:- "Section 52 will have no application when a Receiver had not been appointed in respect of the insolvent's properties. So an executing Court while executing a decree passed against the insolvent need not stay its hands merely on the admission of an insolvency petition."

7. In a subsequent decision of this Court reported in AIR 1983 Madras 314, Kuppu Boyan V. Sengottaiyan, an identical view has been echoed, so also in AIR 2001 AP 358, Pothuganti Venkateshwarulu V. Yangala Mallaiah.

8. The learned counsel for the petitioner would contend that inasmuch as the procedures have not been followed by the Court below as per law, the order of committing him to civil prison is not sustainable. He would further contend that the executing Court has failed to observe that the petitioner had no means to pay the debt and the order of arrest does not stand. In support of his version, he garnered support from a decision of the Supreme Court reported in AIR 1980 Supreme Court 470, (Jolly Geroge Varghese and another V. The Bank of Cochin) wherein Their Lordships have observed that while the Court is dealing with the procedure under Section 51 read with Order 21 Rule 37 as regards arrest and detention of a judgment debtor in a civil prison, it has to be ascertained by the executing Court whether the judgment debtor was having means to pay subsequent to the date of decree and mala fides and dishonesty have also to be found in him before he was committed to civil prison. The petitioner cannot take recourse to the above said principles for the reason that even after filing the execution petition on 17.07.2008, he paid a sum of Rs.5,000/- towards the decree debt and the Court had already recorded its findings on 03.06.2008 that the means was proved. Pertinent it is to note that he had not preferred any appeal or revision from the said order.

9. The learned counsel for the petitioner also draws attention of this Court to a decision of the High Court of Andhra Pradesh in AIR 2000 Andhra Pradesh 219, Sanapala Narasamma and others Vs Mallana Laxminarayana and others wherein the learned Judge, while dealing with Sections 31 and 23 of the Provincial Insolvency Act, 1920, (for short 'the Act'), observed that protection under Section 31 of the said Act is not available as no order of adjudication is made in the insolvency proceedings and the applicant could be released by virtue of Section 23. The learned Judge has clarified that Section 23 would come into play only when the judgment debtor is under arrest or imprisonment in execution of the money decree passed by any Court. Section 23 does not empower the Court to pass an order to prevent the arrest of the judgment debtor. The decision pertains to the procedures as per the Provincial Insolvency Act.

10. The procedure to be followed in these matters are adumbrated in Sections 51, 55, 58 and Order 21 Rule 40. It is profitable to have extraction of relevant provisions and rule for better understanding of the procedure to be followed in the like matters, which are as follows: "Sec.51. Powers of Court to enforce execution - Subject to such conditions and limitations as may be prescribed, the Court may, on the application of the decree holder, order execution of the decree-

(a) omitted

(b) omitted

(c) by arrest and detention in prison (for such period not exceeding the period specified in Section 58, where arrest and detention is permissible under that Section]..

Sec.55.Arrest and detention:-

(1) and (2) omitted

(3) Where a judgment debtor is arrested in execution of a decree for the payment of money and brought before the Court, the Court shall inform him that he may apply to be declared an insolvent, and that he (may be discharged) if he has not committed any act of bad faith regarding the subject of the application and if he complies with the provisions of the law of insolvency for the time being in force.

(4) Where a judgment debtor expresses his intention to apply to be declared an insolvent and furnishes security, to the satisfaction of the Court, that he will within one month so apply, and that he will appear, when called upon, in any proceeding upon the application or upon the decree in execution of which he was arrested, the Court [may release] him from arrest, and if he fails so to apply and to appear, the Court may either direct the security to be realised or commit him to the civil prison in execution of the decree."

Section 58 Detention and release:- Every person detained in the civil prison in execution of a decree shall be so detained:- (a) omitted

(b) Omitted

Provided that he shall be released from such detention before the expiration of the [said period of detention]

(i)on the amount mentioned in the warrant for his detention being paid to the officer in charge of the civil prison, or

(ii)On the decree against him being otherwise fully satisfied, or (iii)On the request of the person on whose application he has been so detained or

(iv)on the omission by the person, on whose application he has been so detained, to pay subsistence allowance;

Order 21 Rule 40 (1) CPC:-

40.Proceedings on appearance of judgment debtor in obedience to notice or after arrest: (1) When a judgment debtor appears before the Court in obedience to a notice issued under Rule 37, or is brought before the Court after being arrested in execution of a decree for the payment of money the Court shall proceed to hear the decree-holder and take all such evidence as may be produced by him in support of his application for execution and shall then give the judgment debtor an opportunity of showing cause why he should not be committed to the civil prison.

11. In 1986 (2) MLJ 300, Thavasiappa Gounder V. A.C.Narayanaswamy, this Court, when considering Section 51 of CPC, which deals with procedure for execution, observed that execution by detention in prison is not to be ordered unless giving the judgment debtor an opportunity of showing cause why he should not be committed to prison and the Court has to record its reasons in writing as to its satisfaction to the circumstances as per the provisions of Section 51. As per the decision, if the Court passes an order mechanically to arrest the judgment debtor, then it would suffer from serious infirmity inasmuch as it discloses a total non-application of mind to the provisions of Section 51 and 55 and Order 21 Rule 37, 39 and 40 of the CPC.

12. It is well settled proposition that unless the decree holder proves the means and also the circumstances specified under Section 51(c)CPC, the judgment debtor who is brought before the Court under arrest cannot be ordered to be detained in civil prison. If any violation of the provision is found that it is excess of the jurisdiction vested on the Court and if the procedures are not observed, there is failure to exercise jurisdiction vested in the executing Court.

13. As far as the facts of the present case are concerned, Section 55 is not attracted since the judgment debtor already applied in insolvency before the competent Court and filed the copy of the same on 05.10.2008 itself. Sub- Section 4 of Section 55 of the Act provides for release of the judgment debtor for which he has to satisfy twin requirements enshrined in the Sub-section. The two heads of covenants contemplated in the Section are:- (a). that he will within one month, apply to be declared as insolvent and (b). that he will appear, when called upon, in any proceeding upon application or upon the decree in execution of which he was arrested.

14. The petitioner filed insolvency petition in I.P.No.13 of 2008 before the Sub-Court, Periyakulam. But, he did not get interim protection order. On 13.09.2007, he expressed his intention to file insolvency petition but he appears to have presented the insolvency petition fairly after a long time. On 17.08.2008, only the insolvency petition was received in the Sub-Court, Periyakulam. Thus, he has not satisfied the statutory mandate of filing Insolvency Petition within one month from the date of expressing his intention. It is to be added that the Court has no jurisdiction to extend the period of one month stipulated in the Section.

15. As for the second condition also, he has breached the statutory requirements by violating the undertaking furnished to the Court. As regards Sub-rule 1 to Rule 40 to Order 21 CPC, it consists of two parts, graphically narrating the procedures to be adopted on two occasions. One is proceedings subsequent to notice under Rule 37 of Order 21 from the Court to judgment debtor and another is his production before the Court after being arrested in execution of decree. The law expects the executing Court to conduct enquiry on both the occasions for affording ample opportunities to the judgment debtor to show cause as to why he should not be committed to civil prison. If the executing Court does not follow the procedure prescribed in the above said provision, then it ought to be observed that the proceedings before the executing Court are vitiated.

16. In so far as the enquiry before the arrest is concerned, materials are available before this Court that the executing Court has conducted the enquiry after giving sufficient opportunities to the judgment debtor and since he ignored the Court, the Court passed the order of arrest after recording that means was proved. If it is conceded that he participated in the enquiry after notice under Order 37, in case if he were not present and no representation on his behalf, the executing Court would very well be within its competence to order for arrest, at least to ensure his presence and production in the Court. It is to be borne in mind that on 10.04.2007 itself, the Court examined P.W.1 who was examined in cross also by the judgment debtor and substantial evidence was on record as to the means possessed by the judgment debtor. On 03.06.2008, he was set ex parte, in spite of affording ample opportunities and the Court had recorded that means was proved and made order for arrest.

17. Noted it is to be that the oral evidence from the judgment creditor entered into record only with participation of the judgment debtor. Means has to explicitly and affirmatively be proved by the decree holder and judgment debtor need not establish the negative. Hence, the executing Court has fulfilled the requirements of Part-I of Sub-rule 1 to Rule 40, Order 21. There is no further show cause notice contemplated under Order 21 Rule 40 after the Court has recorded the finding that the judgment debtor having sufficient means, neglected or avoided to pay the amount under the decree.

18. As per Part II in Sub-Rule 1 of Rule 40, Order 21, after production before the executing Court on two occasions, the Court had afforded generous opportunities. On 17.07.2008, while he was produced before the Court, the matter was passed over for payment of jail batta and at that time, he paid Rs.5,000/- and the same was also recorded. He was released on security for payment of entire balance and matter was adjourned to 31.07.2008. Reiterated it is that on 31.07.2008 balance was not paid; he was called absent and arrest was ordered. On 08.08.2008, since he was not available, fresh order for arrest was passed and notice to security was also issued. Only with the help of police, as directed by the executing Court, he could be arrested and was produced on 15.10.2008 before the Court. On that date, it was recorded by the Court that he was already released on execution of security. But as per the undertaking, he did not appear before the Court and paid the balance amount.

19. These circumstances show that necessary opportunity was extended to him on the date of his production before the Court anterior to committing to civil prison so as to enable him to put forth his submissions before the Court and whatever representation he had got, he was at liberty to express them before the Court. So, in the considered view of this Court, sufficient audience was provided to him at the time of his production before the Court.

20. Since Order 21 Rule 40 directs an enquiry to be held, it is irregular on the part of the Court exclusively to act on the affidavit of the decree holder filed prior to issue of warrant under Order 21 Rule 37. But in the case on hand, an inquiry has been conducted by recording oral evidence as to means.

21. In such view of this matter, it has to be necessarily observed that the II Part in Sub-rule 1 of Rule 40, Order 21 has duly been satisfied by the executing Court.

22. In AIR 2002 Madras 340, (K.Manokaran Vs. A.U.Subbannan) this Court while dealing with the above said provisions, has held that there is nothing in the code which would indicate or compel the executing Court either to give an opportunity to the judgment debtor or the decree holder to adduce evidence to have a full-fledged enquiry and record its reasons in writing before passing an order of arrest against the judgment debtor. It is also stated that adjudication order without a protection order does not prevent the judgment debtors arrest and it is the duty of the Court to require him to give security under Section 55(4) CPC.

23. It is also stated that the executing Court is bound to inform the arrested judgment debtor that he may apply for insolvency, since the provisions of the Section 55 are mandatory. Even then, failure to inform does not invalidate the warrant of arrest and the pendency of the insolvency proceedings does not divest the Court of the power of committing the judgment debtor to prison. (Sarkar, Code of Civil Procedure, 11th Edition 2006, Vol.1, Page 403).

24. In the light of the discussions above made and of well nigh settled legal principles, the orders of arrest and committal to civil prison passed by the executing Court have gratified the statutory requirements, which do not suffer from any legal infirmity. There is no circumstance to hold that any such of proceedings in the execution proceedings has not been dealt with by the Court ignoring the mandates of law. The civil revision petition is devoid of merits, which suffers dismissal.

In fine, the civil revision petition is dismissed. Consequently, connected M.P. is closed. No costs.

ssm

To

The District Munsif Court,

Bodinayakanur.

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