S DALIP SINGH Vs. U P F C

JUDGEMENT

(1.) This petition under Article 227 of the Constitution of India has been preferred with respect to the order dated 22nd November, 2003 of the Additional District Judge allowing the appeal of the respondent Uttar Pradesh Financial Corporation (UPFC) against the order dated 31st March, 2001 of the Insolvency Judge, Delhi. The Insolvency Judge had overruled the objection of the respondent/UPFC to the petition for insolvency under the provisions of the Provincial Insolvency Act, 1920 filed by the petitioner and allowed the petition and adjudged the petitioner as insolvent in terms of Section 7(1) of the Insolvency Act. The Additional District Judge on appeal, finding that the only debts owed by the petitioner were to the respondent/UPFC and the State of UP to which arrears of sales tax were owed, held an insolvency petition to be not maintainable qua the debts owed to the government and dismissed the petition. This Court vide ex parte order dated 4th February, 2003, while issuing notice of the petition, stayed the operation of the order of the Additional District Judge. The effect of the interim order of this Court is that the petitioner during the pendency of the petition before this Court remained adjudged as an insolvent.

(2.) The petitioner applied under Section 7 of the Insolvency Act for being adjudged as an insolvent. It was inter alia the case of the petitioner that he owed monies to UPFC and which had issued a certificate for recovery of Rs.2,53,595.45 against him; that the Assistant Collector was demanding the said amount from the petitioner and upon non-payment, threatening to arrest the petitioner. It was also stated in the petition that besides the aforesaid debt to UPFC, a certificate for recovery of Rs.24,000/- has also been issued by the State of UP towards arrears of sales tax. Thus, the only debts owed by the petitioner were to UPFC and State of UP and which the petitioner claims to be unable to pay. UPFC and state of UP only were impleaded as respondents to the said insolvency petition.

(3.) UPFC opposed the aforesaid insolvency petition on the ground of the same being barred by Section 8 and Section 44 of the Insolvency Act. Section 8 of the Insolvency Act prohibits insolvency petitions from being presented against any corporation or against any association or company registered under any enactment. Both, the Insolvency Judge and the Additional District Judge in appeal have rightly held the said provision to be inapplicable. No error can be found with the said reasoning. An insolvency petition can be presented by the debtor as well as the creditor. Section 8 is intended to prevent the creditors of a corporation from presenting a petition for having a corporation adjudged as insolvent. Section 8 has application where the debtor is a corporation and has no application where the creditor is a corporation, as in the present case.