PRAKASH MOHTA Vs. PREM RATAN KOTHARI

JUDGEMENT

(1.) This appeal raises a short but an interesting question of law. The question being, if a decretal debt is barred at the time of filing of an insolvency petition under The Presidency Towns Insolvency Act, 1909 (hereinafter referred to as the said Act) can it be made a ground of insolvency in such petition. The relevant provisions of the said Act are set out herein below: Sec. 9. Acts of Insolvency. (2) Without prejudice to the provisions of sub-section (1), a debtor commits an act of insolvency if a creditor, who has obtained a decree or order against him for the payment of money (being a decree or order which has become final and the execution whereof has not been stayed), has served on him a notice (hereafter in this section referred to as the insolvency notice) as provided in sub-section (3) and the debtor does pot comply with that notice within the period specified herein : (3) An insolvency notice under sub-section (2) shall

(2.) The short facts of this case are as follows: On 6th December, 1968 a decree was passed against the appellant and in favour of the plaintiff for a sum of Rs. 21,320.34p. with interest on the principal sum at the rate of 6% per annum from the date of decree until realisation and costs. In the year 1978 the amending Act was passed whereby sub-section (2) was included as an act of insolvency as set out above. On 14th November 1980 in purported exercise of power conferred by sub-section (2) the respondent caused to be served upon the appellant a notice whereby he was called upon to spay the decretal dues within a month. On 5th December, 1980 the time to execute the decree expired. On 14th December, 1980 the period of one month referred to in the notice dated 14th November, 1980 expired. On 27th February, 1981 an application was made by the respondent for adjudicating the appellant as insolvent as the appellant has failed to pay the decretal dues pursuant to the said notice, dated 14th November, 1980. An order was passed on 26th March, 1981 by learned Trial Judge adjudging the appellant as an insolvent. An application was taken out on the 16th April, 1981 whereby the appellant prayed that the order of adjudication passed on the 26th March, 1981 be set aside and/or recalled. It was contended in the said application that at the time of filing of this application on 27th February, 1981 and at that time of the order of adjudication, dated 20th March, 1981, the claim was barred by limitation. The learned Judge dismissed this contention and rejected the application. The learned Judge accepted the contention of the respondent and held that the act of insolvency was committed by the petitioner by non-compliance with the statutory notice of demand under the 1978 amendment and the rules made thereunder by this Court and as soon as the said act is committed the petitioning creditor's right to apply accrues for filing the petition of insolvency against the debtor and therefore Article 137 of the limitation Act can apply and the application cannot be said to be barred by limitation. In this connection the learned Judge relied on the Supreme Court decision in Kerala State Electricity Board vs. T. P. Kunha Humma AIR 1977 S. C. 282 where it has been held that Article 137, which prescribes three years as the period, of limitation applies to all application matter under any Act. It was held that the right to apply accured only when the act of insolvency was committed, i.e., when the notice period expired and not before that and therefore if the act, was committed within three years prior to the filing of the insolvency petition, then the application is not out of time. The application having been filed on 27th February 1981 which is within three years from the date of the act of insolvency, i.e., non payment of the decretal amount after the statutory notice, it is not barred. Being aggrieved by the same this appeal has been preferred.

(3.) Mr. Chatterjee has repeated the same contentions before us as contended by him before the Court. He has submitted that there must be debt due on the date of the presentation of the winding up petition and at the hearing. The date of presentation of the petition being dated 27th February 1981, as the decree dated 6th December 1968 being barred on that, date, there was no debt due at the date of the proceedings. In this connection he relied on the following decisions Ahmed Md. Paruk vs. Profulla Nath Tagore AIR 1939 Calcutta 35; Re: Messrs Bhimji Nauji & Co. 71 Bombay Law Reporter, 638 Kerala State Electricity Board vs. T. P. Kunha Humma, AIR 1977 SC 282, Modern Dekor Painting Contracts P. Ltd. vs. Jenson and Nicholson (India) Ltd. 58 (1985) Company Cases 255 at page 259.