DHIRENDRA BHANU SANGHVI Vs. ICDS LIMITED

JUDGEMENT

(1.) IN these three Notices of Motion which have been heard together, a common question of law arises for consideration. The issue which the Court is called upon to decide is whether an Insolvency Notice under sub-section (2) of section 9 of the Presidency Towns Insolvency Act, 1909, can be sustained on the basis of an Arbitral Award that has been passed under the Arbitration and Conciliation Act, 1996. In all the three cases before the Court, an Arbitral Award has been passed against debtors who have moved this Court and the Arbitral Award, it is common ground, had not been challenged under section 34 of the Arbitration and Conciliation Act, 1996. On the basis of the Award, Insolvency Notices came to be issued by the petitioning Creditors under sub-section (2) of section 9 of the Presidency Towns Insolvency Act, 1909. These notices are impugned on the ground that an Arbitral Award is neither a decree nor an order within the meaning of section 9(2) of the Act and that, therefore, such an Award cannot form the foundation of a valid Insolvency Notice. In Notices of Motion Nos.72 of 2002 and 132 of 2001, the principal debtors are companies in respect of which proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 are stated to be pending and, therefore, an ancillary question which has been urged before the Court in these two cases is as to whether the arbitral proceedings were a nullity in so far as the guarantors are concerned, and whether execution proceedings would be required to be preceded by the consent of the BIFR under the provisions of section 22 of the Act.

(2.) THE submissions before the Court in this group of matters have principally been advanced by Mr. S.H. Doctor, Senior Advocate. The other learned Counsel appearing on behalf of the applicants have adopted the submissions made by Mr. Doctor on the question of law involved and have supplemented to those submissions in so far as the facts of individual cases in which they appear are concerned. Written submissions have been filed by the parties. The submissions which have been urged before the Court in support of the challenge to the Insolvency Notices can now be considered.

(3.) IN considering the correctness of the submission which has been urged on behalf of the applicants, it would be meaningful to refer to the legislative history of section 9 of the Presidency Town Insolvency Act, 1909. Section 9 as it stands today is in Part II of the Act, which is entitled "proceedings from act of insolvency to discharge". The marginal note to section 9 is entitled "acts of insolvency". Sub-section (1) of section 9 defines in its eight clauses various acts of insolvency and for the purposes of these proceedings, it would be instructive to advert to those clauses. Sub-section (1) of section 9 is as follows: