J P TIWARI Vs. BHIMRAJ HARLALKA

JUDGEMENT

(1.) An interesting point under the Insolvency law arises in this appeal. A summary suit was filed by the Respondents against M. and T. Films Ltd. and the appellant, who is the Managing Director of that company. The suit was on a promissory note dated the 5th of June 1952 for Rs. 63,358-5-9. Leave to defend was given to the Defendants, and the litigation went through certain vicissitudes which we need not deal with, and ultimately Mr. Justice Coyajee passed a decree for the amount claimed against both the Defendants. It may be stated in passing that although the appellant made an attempt to get the hearing of the suit adjourned on the ground of his illness the adjournment was refused, and the learned Judge passed the decree on merits. It may also be mentioned that the appellant actual cross-examined the witness of the Plaintiff, although he did not give any evidence himself. The judgment was passed on 22-7-1957. An insolvency notice based upon that judgment was taken out by the Respondents on 19-11-1957. A notice of motion was taken out by the appellant to set aside that insolvency notice. That notice of motion was dismissed by Mr. Justice Shelat, and the appellant has come in appeal.

(2.) Two points have been urged by Mr. Gupte The first is that the decree passed by this Court is not executable, and, therefore, an insolvency notice cannot be founded on that decree. It is well settled that if there is any impediment in the way of a judgment creditor executing the decree or if the decree is not presently executable, no insolvency notice can be founded on such a decree. It is not necessary that execution of the decree should be stayed formally by the executing court. Even without any such formal order of stay, if the judgment creditor is not in a position to satisfy the insolvency court that he has a right to execute the decree in praesenti, the insolvency notice taken out by the judgment debtor must fail. Relying on these principles, what is urged by Mr. Gupte is that the decree was for a certain amount and interest and taxed costs and the insolvency notice calls upon the judgment debtor to satisfy the decree only to the extent of the principal and interest and not with regard to costs. It is said that under the Civil Procedure Code, when a decree is passed by the High Court on its Original Side for a certain amount and costs, the decree is not executable with regard to the amounts unless the Court has given express leave to the judgment creditor to execute the decree only in respect of the amount with interest leaving out the provision with regard to costs, and for this purpose reliance is placed on Section 118 of the Civil Procedure Code. That Section provides that where any such High Court-and our High Court is such High Court-considers it necessary that a decree passed in the exercise of its original civil jurisdiction would be executed before the amount of the costs incurred in a suit can be ascertained by taxation, the Court may order that the decree shall be executed forthwith, except as to so much thereof as relates to the costs. Now, let us understand the principle of this rule. On the Original Side of the this High Court, we have a dual system and we have a system of taxation and when taxed costs are awarded, it takes a considerable time before the costs are taxed. In order not to permit the judgment debtor from holding up execution of a decree, Section 118 provides that the Court may permit the execution of the decree except as to so much thereof as relates to costs. Now, a decree, is the formal expression of the adjudication made by the Court with regard to the question that arose for determination, and when a Judge on the Original Side passed in favour of the plaintiff a judgment for certain amount and costs, the decree being the formal expression of that judgment must embody the whole of that judgment and therefore necessarily the provision with regard to costs. Till such formal expression has been given to the judgment of the court, the decree is not executable, and in order to obviate, the difficulty arising a case where the taxation of the costs would take some time, Section 118 permits the judgment creditor, as it were, to execute a decree which strictly does not constitute the formal expression of adjudication inasmuch as the provision with regard to cost has not been embodied in that decree, and it is perfectly true that an order from the court for a decree to be executed, is required if it is a decree not in the proper sense of the term as defined by Section 2 of the Code. But what is overlooked in putting forward this argument is Rule 289 of the High Court Rules and that Rules provides that whenever costs are awarded, and either party is desirous of having the decree or order drawn up before the same are taxed, the award of the costs of the suit or order, as the case may be, will be inserted, followed by the words "when taxed and noted in the margin hereof". Therefore, Rule 289 permits a judgment creditor to draw up a decree without inserting in it the provision with regard to costs. Therefore under Rule 289, an adjudication which does not include in it the adjudication with regard to costs has been constituted a decree within the meaning of Section 2 of the Civil Procedure Code and if such an adjudication has been constituted a decree, then that decree is executable and Section 118 has no application. When it is permissible to a decree-holder to draw up a decree as provided under Rule 289 and the decree is so drawn up once it is sealed by the seal of the Court, it becomes a formal adjudication contemplated by Section 2, it has all the indicia of a decree and it becomes executable. We cannot accept Mr. Gupte's contention that Rule 289 was only enacted in order to permit drafting of a decree in a particular manner. The drafting of a decree has no significance unless the draft as permitted under the rules is constituted a decree within the meaning of the Code capable of execution. The result of Rule 289 therefore, is that a decree without a provision for costs being drawn up and sealed is capable of execution, and as we said before Section 118 has no application to such a decree. If Rule 289 had not been enacted, undoubtedly a specific order of the court would have been necessary in a case where a judgment creditor wanted to execute a decree which did not contain the provision for costs and that permission would have been necessary because the decree could not have been drawn up and the seal could not have been put upon the decree unless the provision with regard to cots was inserted in it. Therefore, to look at from another point of view, Rule 289 obviates the necessity on the part of a party who obtains a decree from the Court from applying for an order contemplated by Section 118 of the Code.

(3.) The second contention urged by Mr. Gupte is that he wanted to satisfy the learned Judge below that notwithstanding the decree no debt was due by him to the Respondent, and, therefore, the msolvency notice was not well-founded. In support of this contention the well-known principle of the insolvency law is requisitioned into assistance and that principle of insolvency law is that a decree passed by a civil court is not binding upon the msolvency court, that even though the decree may become final and may be binding as between the parties to it, the insolvency court being a court of conscience, can go behind the decree and ascertain for itself whether in fact any amount was due to the creditor. Now, what we have to consider is whether this principle is applicable to an insolvency notice, when the insolvency notice is being challenged as not having been properly taken out. it is perfectly true, as pointed out by Mr. Gupte, that an act of insolvency is committed not by reason of the existence of a judgment against the debtor but by reason of the fact that an amount is due under or in respect of that judgment, which amount has not been paid by the debtor on his being called upon to pay it. Therefore the very basis of the act of insolvency is noncompliance with the insolvency notice, which means that a judgment has been passed against the debtor, that judgment has not been satisfied and although called upon to satisfy the judgment, the debtor fails to do so within the time mentioned in the notice and thereby commits an act of insolvency.