R VAIKUNTU BULIGU Vs. PANGAL NAYAK BANK LTD

JUDGEMENT

(1.) Pursuant to a decree made in O.S. No. 74 of 1968 on the file of the Civil Judge, Mangalore, at the instance of the respondent a notice was issued under Section 6A of the Provincial Insolvency Act, as applicable to the Mysore State (hereinafter referred to as 'Act') seeking payment of money within 30 days in I.C. 48/79. Petitioners filed an application to set aside the said notice but no order was made on that application and the proceedings stood closed. Thereafter a petition was filed under Sections 6, 7 and 9 of the Provincial Insolvency Act for adjudication of the petitioners as Insolvents before the Principal Civil Judge, Mangalore, in I.C. No. 17 of 1980 and the same was allowed. Against the said order Miscellaneous Appeal No. 16 of 1984 was filed before the District Judge of Dakshina Kannada at Mangalore and the same having been dismissed, this revision petition is filed. Though several contentions have been raised in this petition, it is sufficient to consider only one of them.

(2.) Before I take up the consideration of the contentions it is necessary to briefly survey the provisions of the Act. If a debtor commits an act of insolvency a petition can be filed under Section 7 of the Act to adjudge him an insolvent. Under Section 24(1)(c) of the Act one of the matters on which the court requires proof is that the debtor has committed an act of insolvency alleged against him. In the case of a petition presented by a creditor if the court is not satisfied with the proof of his alleged act of insolvency, it shall dismiss the petition as provided under Section 25(1) of the Act. Thus the insolvency court has no power to adjudicate any person as insolvent unless he is a debtor and has committed an act of insolvency as defined in the Act. The foundation of jurisdiction for insolvency court to adjudge a person insolvent is act of insolvency. The acts of insolvency are enumerated in Section 6 of the Act. To the Act Section 6(1) was added by Mysore Act 7 of 1963. Section 6 in the Provincial Insolvency Act was substantially amended by adding sub-sections (2) to (5) and renumbering the existing Section 6 of the Act as sub-section (1). The explanation thereto remains unaffected. After the act as was amended by Central as stated above, the Mysore Insolvency Rules were amended which came into force in 1982.

(3.) Old Section 6(1) of the Act states that a debtor commits an act of insolvency if after a creditor has served a notice on him under the Act in respect of a decree or an order for the payment of any amount due to such creditor, the execution of which is not stayed he does not, within the period specified in the notice which shall not be less than one month, either comply with the requirements of the notice or satisfy the Court that he has a counter claim or set off which equals or exceeds the decretal amount he could not lawfully set up in the suit or proceeding in which the decree or order was made against him. Section 6A provides procedure regarding issue of notice and sub-section (2) of Section 6A states that 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 mis- statement, 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 actual amount due been correctly specified therein. Rule 5 of the Rules framed under the Act provides for the form in which notice could be issued and also that any person served with such notice, may, within the time allowed for compliance apply to the Court for sufficient reasons see fit to allow, apply to the court to set aside the insolvency notice on the ground that he has paid the amount claimed or furnished security thereof or on the ground that he has a counter-claim which he could not set-up in the suit or on any other ground would in law entitle him to have the notice set aside. In identical terms new Section 6(5) provides for similar reasons to invalidate the notice except for the last reason. Thus, in substance, there is no difference between the provisions in old Section 6(i) and new section 6(2) of the Act in regard to the issue of notice and service of notice and compliance thereof or the effects of non-compliance. What was provided in old Section 6(i) is provided in new Section 6(2) and (3) and old Section 6A becomes part of new Section 6(3). What was provided in Rule 5(9) becomes part of the Act under new Section 6(5). Therefore to constitute an act of insolvency there must be a notice issued under old Section 6(i) or under new Section 6(2).