KAIKHUSHROO PIROJSHA GHIARA Vs. C P SYNDICATE LTD

JUDGEMENT

(1.) THIS appeal has been filed by the appellant after obtaining special leave of this Court and it is directed against a judgment and order of a division bench of the Bombay High Court confirming the judgment and order of a single Judge of that Court by which he dismissed the appellant's motion for setting aside an insolvency notice taken out by the respondent-company.

(2.) THE respondent-company is a private limited liability company in which there are only four shareholders, viz. Mrs. Byramji, Mr. and Mrs. Cassad and the appellant. In November, 1945, the company filed a suit (No.1726 of 1945) in the High Court at Bombay against the appellant claiming a number of reliefs, which need not be set out here. Subsequently, Mrs. Byramji and Mr. and Mrs. Cassad applied to be made parties to the suit and they were joined as plaintiffs Nos. 2, 3 and 4 respectively. After the suit had been heard for some time, a settlement was arrived at between the parties and a consent decree was passed on July 15, 1947, in which the terms which are material to the decision of this appeal were these :

(3.) THE appellant failed to pay Rs. 2,50,000 on or before October 15, 1947, and thereupon the respondent applied to the High Court at Bombay for the issue of an insolvency notice against the appellant under Section 9, Clause (i), of the Presidency-towns Insolvency Act. This provision was inserted in the Act in so far as it is applicable to Bombay Presidency by Bombay Act XV of 1039, and reads as follows : 9.A debtor commits an act of insolvency. . . . (i) if after a creditor has served an insolvency notice on him 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 comply with the requirements of the notice. Provided that the debtor shall not be deemed to have committed an act of insolvency for not complying with the requirements of the notice, if he has a counter-claim or set off which equals or exceeds the decretal amount or the amount ordered to be paid by him and which he could not lawfully set up in the suit or proceeding in which the decree or order was made against him. As a result of the respondent's application, the Insolvency Registrar issued a notice dated November 21, 1917, which was served on the appellant on November 26, 1947. THEreafter, on December 17, 1947, the appellant took out a notice of motion to set aside the notice on a number of grounds, the principal grounds being: (1) that the amount for which the notice had been served had not become payable, and (2) that the notice was invalid and bad in law. On January 14, 1948, a single Judge of the Bombay High Court after hearing the parties and considering the objections raised by the appellant dismissed the notice of motion with costs. THE decision of the learned single Judge was upheld on appeal by a division bench on July 22, 1948. It appears from the judgments of the learned Judges who heard the appeal that they were at first of the view that certain parts of the notice were ultra vires inasmuch as they were not authorised by the Insolvency Act. But before the judgment in the case was delivered, an Ordinance was passed by the Government of Bombay, being Ordinance III of 1948, which amended the Presidency-towns Insolvency Act in certain respects and validated : (a) the rules including the forms relating to insolvency notices made by the High Court under the Presidency-towns Insolvency Act, 1903. . . . (b) all insolvency notices issued under any of the rules so as to prevent their being called in question on the ground merely that any of the rules under which or the form in which the notice was issued was not authorised by the provisions of the said Act. THE learned Judges accordingly held that the defects in the notice had been cured by the Ordinance which had been expressly made retrospective and in that view they dismissed the appeal.