IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.40 OF 2007 NOTICE OF MOTION NO.40 OF 2007 NOTICE OF MOTION NO.40 OF 2007 IN IN IN NOTICE NO.N/224 OF 2006 NOTICE NO.N/224 OF 2006 NOTICE NO.N/224 OF 2006 Re.: Kishor K. Mehta ...Judgment Debtor Exparte: HDFC Bank Limited ...Judgment Creditor Kishore Jain i/by K.Ashar and Company for HDFC-Judgment Creditor. Shri F.E. D’Vetre, Sr. counsel with Mr. Venkatesh Dhond i/by Shri T.N.Tripathi for the Judgment Debtor. ALONGWITH ALONGWITH ALONGWITH NOTICE OF MOTION NO.112 OF 2006 NOTICE OF MOTION NO.112 OF 2006 NOTICE OF MOTION NO.112 OF 2006 IN IN IN NOTICE NO.N/100 OF 2006 NOTICE NO.N/100 OF 2006 NOTICE NO.N/100 OF 2006 Re.: Mr.Harbhajan Singh Jamitsingh Dhillan & Ors. ...Judgment Debtors Exparte: Bank of India ...Judgment Creditors Shri J.P.Sen with Ms.Kavita Shah i/by Arvind G. Shah for the Judgment Debtors. Shri R.N.Singh i/by M/s.Singh & Co for the Judgment Creditors. ALONGWITH ALONGWITH ALONGWITH INSOLVENCY NOTICE NO.N/90 OF 2006 INSOLVENCY NOTICE NO.N/90 OF 2006 INSOLVENCY NOTICE NO.N/90 OF 2006 Re.: Ashish Subedar Tiwari & Ors ...Judgment Debtors Exparte: The Bharat Co-operative Bank (Mumbai) Limited ...Judgment Creditors None for the Judgment Debtors. Dr. D.R. Talankar i/by Shri U.S.Borade for the Judgment Creditors. AND AND AND INSOLVENCY PETITION NO.81 OF 2005 INSOLVENCY PETITION NO.81 OF 2005 INSOLVENCY PETITION NO.81 OF 2005 Re.: Smt.Chandra Vishnu Choudhari ... 2 ... and another ...Judgment Debtors Exparte: Samradh Co-operative Credit ...Petitioning Society Limited Creditor None for the Insolvent. Ms K.K. Shah for Petitioning Creditor. ---------- CORAM : ABHAY S.OKA, J. CORAM : ABHAY S.OKA, J. CORAM : ABHAY S.OKA, J. DATE ON WHICH ORDER IS RESERVED : AUGUST 21, 2007. DATE ON WHICH ORDER IS RESERVED : AUGUST 21, 2007. DATE ON WHICH ORDER IS RESERVED : AUGUST 21, 2007. DATE ON WHICH ORDER IS PRONOUNCED:SEPTEMBER 04, 2007. DATE ON WHICH ORDER IS PRONOUNCED:SEPTEMBER 04, 2007. DATE ON WHICH ORDER IS PRONOUNCED:SEPTEMBER 04, 2007. P.C.: P.C.: P.C.: 1. By this order I am deciding the following questions which have arisen for consideration: (i) Whether the decision of this Court in the case of Re. Deepak Cochhar and Anr-Debtors and Indusindh Bank Limited- Creditors (2006(3) Bombay Cases Reporter Page 520) is no longer a good law in view of the decision of the Apex Court in the case of Paramjeet Singh Patheja Vs. ICDS Ltd (JT 2006 (10) SC 41)? (ii) Whether an insolvency notice under sub section 2 of section 9 of the Presidency Towns Insolvency Act, 1909 (for short PI Act) can be issued on the basis of a recovery certificate issued under The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ... 3 ... (hereinafter referred to as the RDB Act)? (iii) Whether an insolvency notice under sub section 2 of section 9 of the PI Act can be issued on the basis of an Award made by a Co-operative Court under section 91 of the Maharashtra Co-operative Societies Act, 1960 (for short the Co-operative Societies Act)? (iv) Whether an insolvency notice under section 2 of section 9 of the PI Act can be taken out on the basis of a recovery certificate issued under section 101 of the Co-operative Societies Act? (v) Whether an insolvency notice under sub section 2 of section 9 of the PI Act can be issued on the basis of an Award of the arbitrator in a dispute under section 84 of the Multi-State Co-operative Societies Act, 2002 (hereinafter referred to as the Multi-State Societies Act)? 2. Several matters were fixed before this Court involving the aforesaid issues. Therefore, I permitted the counsel appearing for the various parties in various proceedings to address me on the aforesaid questions. I have accordingly heard submissions of the counsel appearing for the parties ... 4 ... on 07th August, 2007 and 21st August, 2007. 3. In Notice of Motion No.40 of 2007 in Insolvency Notice No.226 of 2006, the learned senior counsel Mr. D’Vetre appearing for the Judgment Debtor has made detailed submissions. He relied upon the decision of the Apex Court in the case of Paramjeet Singh Patheja (supra). He invited my attention to the submissions made before the Apex Court and in particular in clause Nos.(i), (j) and (k) of paragraph No.14 of the said decision. He submitted that the recovery certificate issued by the Debt Recovery Tribunal is neither a decree nor an order within the meaning of sub-section 2 of section 9 of the PI Act. He submitted that in paragraph No.27 of the said decision the Apex Court has held that the provisions of the PI Act have to be construed strictly. He, therefore, submitted that the view taken by this Court in the case of Deepak Cochhar that restrictive meaning cannot be given to the words "Decree" or "Order" is no longer a good law. He submitted that the view taken by the learned single Judge that provisions of sub section 2 of section 9 of the PI Act must be given widest possible interpretation is not correct in view of the decision of the Apex Court in the case of Paramjeet Singh Patheja (supra). He submitted that the test laid down by the Apex Court in the aforesaid decision is that ... 5 ... the "Decree" or "Order" contemplated by sub section 2 of section 9 must be of a Court. He submitted that the Apex Court has held that the "Decree" or "Order" contemplated by sub section 2 of section 9 must be of a Civil Court under the Code of Civil Procedure, 1908 (hereinafter referred to as "the said Code"). He submitted that another test laid down by the Apex Court is that the proceeding in which "Decree" or "Order" is passed must be initiated on the basis of a plaint. He submitted that the proceedings before a Debt Recovery Tribunal are not initiated on the basis of the plaint. He submitted that the Apex Court has held that the words "Decree" and "Order" used in the section are as understood under the said Code. He submitted that the Apex Court has held that the Bombay amendment of the year 1939 and later Central amendment of the year 1978 intended to refer to only the "decrees" and "orders" as defined under the said Code. He submitted that all the Tribunals are not Courts and therefore, Debt Recovery Tribunal cannot be termed as a Court. He invited my attention to the conclusions recorded by the Apex Court in paragraph No.60 and submitted that the recovery certificate issued by the Debt Recovery Tribunal is neither a "Decree" nor an "Order". He submitted that the adjudication made by the Debt Recovery Tribunal cannot be treated as an adjudication made in a suit. ... 6 ... 4. He also invited my attention to the decision of the Apex Court in the case of Diwan Brothers Vs. Diwan Brothers Vs. Diwan Brothers Vs. Central Bank of India (AIR 1976 Supreme Court Page Central Bank of India (AIR 1976 Supreme Court Page Central Bank of India (AIR 1976 Supreme Court Page 1503) 1503) 1503) and in particular paragraph Nos.9 and 11 of the said decision. He submitted that the recovery certificate issued by the Debt Recovery Tribunal cannot be a decree in view of the tests laid down by the Apex Court. He submitted that the Apex Court in the case of Paramjeet Singh Patheja has relied upon the said decision in the case of Diwan Brothers (supra). He placed reliance on a decision of Calcutta High Court in the case of State Bank of India Vs. State Bank of India Vs. State Bank of India Vs. Madhumita Construction (Pvt) Ltd and others reported Madhumita Construction (Pvt) Ltd and others reported Madhumita Construction (Pvt) Ltd and others reported in AIR 2003 Calcutta Page 7 in AIR 2003 Calcutta Page 7 in AIR 2003 Calcutta Page 7. He submitted that the a Debt Recovery Tribunal is not a Court under the said Code. He submitted that the decision of the learned single Judge in the case of Deepak Cochhar (supra) is no longer a good law. He pointed out that the view taken by the learned single Judge of this Court in the case of Sidharth Srivastava Vs. K.K.Modi Investment & Sidharth Srivastava Vs. K.K.Modi Investment & Sidharth Srivastava Vs. K.K.Modi Investment & Financial Service Private Limited (2002(4) Maharashtra Financial Service Private Limited (2002(4) Maharashtra Financial Service Private Limited (2002(4) Maharashtra Law Journal Page 281) Law Journal Page 281) Law Journal Page 281) has been upheld by the Apex Court in the case of Paramjeet Singh Patheja. He pointed out that this Court held that though the Award is enforceable as if it were a decree, the same does not become a decree. He submitted that a legal ... 7 ... fiction must be limited for the purpose for which it is created. Shri Sen appearing in Notice of Motion No.112 of 2006 has made similar submissions by relying upon the said decision of the Apex Court. 5. Shri Jain appearing for the Judgment Creditor invited my attention to various provisions of the PI Act. He also invited my attention to the relevant provisions of the RDB Act. He pointed out the qualifications laid down by the RDB Act for appointing a person as a presiding officer of a Debt Recovery Tribunal. He pointed out that only a person who is qualified to be a District Judge can be a presiding officer of the said Tribunal. He placed reliance on section 19 of the RDB Act. He pointed out that there are various provisions therein which permit the Defendant to file a counter claim or to claim a set off against the claim of the Plaintiff. He pointed out that the proceeding before the Tribunal are required to be initiated on the basis of an Application which is nothing but a plaint. He submitted that the very fact that section 19 requires written statement to be filed and permits counter claim or set off shows that the proceedings before the Debt Recovery Tribunal are initiated on the basis of an Application which is nothing but a plaint. He pointed out that an elaborate adjudication is required ... 8 ... to be made by the Debt Recovery Tribunal. He pointed out sub-section 20 of section 19 which requires the Debt Recovery Tribunal to pass a final order. He pointed out that a recovery certificate is required to be issued on the basis of the final order passed by the Tribunal. He submitted that though by virtue of provisions of section 22 of the RDB Act, the Tribunal is not bound by the procedure laid down in the said Code, the Tribunal possesses all the trappings of a Civil Court as indicated by section 23 and 25. He pointed out that even the provisions of the Limitation Act, 1963 are applicable. He pointed out that sub section 25 of section 19 confers an inherent power on the Tribunal which is on par with section 151 of the said Code. He pointed out that infact section 31 provides for transfer of pending suits to the Debt Recovery Tribunal. He also invited my attention to provisions of section 31A of the RDB Act. He submitted that the Tribunal has power to issue a recovery certificate on the basis of a decree or order passed by any Court before commencement of the said Act. 6. Shri Jain further submitted that in clause (e) and (h) of sub section 1 of PI Act there is a specific reference to a decree of "any Court" and whereas the words "Decree" or "Order" used in sub section 2 of ... 9 ... section 9 are not qualified by the words "of any Court". He submitted that in the case of Paramjeet Singh Patheja the issue which arose for consideration was that whether an Award passed under the said Act of 1996 can be the basis of an insolvency notice. He submitted that the only issue which is decided by the Apex Court is whether an Award made by the arbitrator is a decree within the meaning of sub section 2 of section 9. He submitted that the Apex Court in the said decision has made a distinction between a Court and Tribunal created by the machinery of the State on one hand and an arbitrator appointed by the parties on the other hand. He submitted that the Apex Court has held that the basic and fundamental feature which is common to both Courts and Tribunals is that they discharge judicial function and exercise judicial powers which inherently vests in the sovereign State. He, therefore, submitted that ratio in the case of Paramjeet Singh Patheja (supra) has no applicability to the case where insolvency notice is sought to be taken out on the basis of an order passed by the Debt Recovery Tribunal. 7. The learned counsel appearing for the Judgment Debtor in rejoinder stated that section 31A of the RDB Act applies to only "Decrees" or "Orders" passed by any Court only before commencement of the RDB Act. He ... 10 ... invited my attention to sub section 5 of section 9 of the PI Act and submitted that sub section 5 refers to the decree or order passed in any suit or proceedings. He further submitted that the reference to the word "proceeding" in sub section 5 is to an interim proceedings. 8. Shri Samdani, the learned senior counsel also made submissions. Though he has generally adopted the submissions made by Shri Jain, he submitted that the definition of a "debt" under section 2(b) of the PI Act is an inclusive definition. He pointed out that in sub- section 2 of section 9, the words "Decree" or "Order" are not qualified by providing that the "Decree" or "Order" must be by a Court. He submitted that when an order is passed by a Debt Recovery Tribunal after adjudication, the order passed by the Tribunal will be an order within the meaning of sub section 2 of section 9 of the PI Act. He relied upon the dictionary meaning of the words "Decree" and "Order". He relied upon a decision of Allahabad High Court in the case of Mrs.Panzy Fernandes Vs. Mrs. Mrs.Panzy Fernandes Vs. Mrs. Mrs.Panzy Fernandes Vs. Mrs. M.F.Queros and others (AIR 1963 All 153) M.F.Queros and others (AIR 1963 All 153) M.F.Queros and others (AIR 1963 All 153). 9. Dr. Talankar appearing in the Insolvency Notice No.90 of 2006 submitted that an insolvency notice under section 9(2) of the PI Act can be issued ... 11 ... on the basis of a recovery certificate under section 101 of the Co-operative Societies Act. He submitted that the certificate under section 101 of the Co-operative Societies Act is an order which is covered by sub section 2 of section 9 of the PI Act. He submitted that the order under section 101 of the Co-operative Societies Act is required to be issued after making an adjudication. He pointed out that the authority i.e the Registrar or Deputy Registrar who decides the proceeding under section 101 of the Co-operative Societies Act has an authority to adjudicate upon the dispute between the parties as regards liability to pay the amount. He submitted that the proceeding under section 101 of the Co-operative Societies Act commences on the basis of Application which has to satisfy all the requirements of the plaint. He submitted that in view of the recent decision of the Apex Court in the case of Greater Bombay Co-operative Bank Limited Vs. Greater Bombay Co-operative Bank Limited Vs. Greater Bombay Co-operative Bank Limited Vs. M/s.United Yarn Textiles Private Limited and others M/s.United Yarn Textiles Private Limited and others M/s.United Yarn Textiles Private Limited and others (Civil Appeal No.432 of 2004) (Civil Appeal No.432 of 2004) (Civil Appeal No.432 of 2004) the remedy under section 101 of the Co-operative Societies Act will have to be treated on par with a remedy available to a bank under the RDB Act. Shri Vengurlekar, learned counsel supported the submission of Dr.Talankar. However, he submitted that an order passed under section 101 of the Co-operative Societies Act will be a decree within ... 12 ... the meaning of sub section 2 of section 9 of the PI Act. He invited my attention to section 156 of the Co-operative Societies Act and Rule 2(d) of the Maharashtra Co-operative Societies Rule 1961 and submitted that in view in view of clause (a) of sub section 1 of section 156, a certificate under section 101 or under section 137 will have to be treated as a decree. He relied upon a decision of this Court in the case of Rupchand R. Shah Vs. Janata Consumers Rupchand R. Shah Vs. Janata Consumers Rupchand R. Shah Vs. Janata Consumers Co-operative Society (AIR 1988 Bom Page 193) Co-operative Society (AIR 1988 Bom Page 193) Co-operative Society (AIR 1988 Bom Page 193) and submitted that the Registrar exercises power of a Court. 10. I had requested Shri Kishore P. Jain, the learned counsel to make submissions on the issue relating to section 101 of the Co-operative Societies Act. His submission is that an order of recovery certificate under section 101 of the Co-operative Societies Act is neither a decree nor an order under section 9(2) of PI Act. He submitted that the enquiry contemplated by section 101 is a summary enquiry. He placed reliance on a decision of learned single Judge of this Court in the case of Vasan Joganputra Vs. Vasan Joganputra Vs. Vasan Joganputra Vs. Bank of India Staff Sanpada Co-operative Housing Bank of India Staff Sanpada Co-operative Housing Bank of India Staff Sanpada Co-operative Housing Society Limited (2005(1) Bombay Cases Reporter Page Society Limited (2005(1) Bombay Cases Reporter Page Society Limited (2005(1) Bombay Cases Reporter Page 86) 86) 86). He submitted that this Court has held that while deciding an Application under section 101 the ... 13 ... Registrar is not expected to engage himself in the process of long drawn adjudication or to analyse each aspect or arguments. He submitted that while deciding an Application under section 101 of the Co-operative Societies Act the authority has to only broadly consider the main issue as to whether the concerned member was in arrears and whether the claim of the society is substantiated. He submitted that this Court has held that a recovery certificate has to be based on a resolution of the society authorising the demand. He submitted that on plain reading of sub section 2 of section 156 of the Co-operative Societies Act, the Registrar is a Civil Court only for the purpose of applicability of law of limitation and for enforcing the recovery certificate. He submitted that this Court has repeatedly held that a recovery certificate is not a decree. He submitted that the Apex Court has held that in the case of Paramjeet Singh Patheja (supra) that the "Order" or "Decree" contemplated by sub section 2 of section 9 must be by a Court and not by a Tribunal. Shri Nikam supported the submissions made by Shri Jain. 11. Shri C.K.Tripathi, the learned counsel submitted that though there is a power vesting in the Registrar under section 101 to issue recovery certificate as regards payment of amounts advanced by ... 14 ... the Co-operative Banks. He submitted that the enquiry under section 101 of the Co-operative Societies Act is a summary enquiry and considering the drastic nature of the consequences of an insolvency notice, the order made under 101 cannot be termed as an order under sub section 2 of section 9. 12. The learned counsel Dr.Talankar made submissions on the question whether an Award made by a Co-operative Court in a dispute covered by section 91 of the Co-operative Societies Act is a "Decree" or "Order" on the basis of which an insolvency notice can be taken out. He submitted that the jurisdiction of ordinary Civil Court in respect of cases covered by section 91 has been withdrawn and the same has been conferred on a Co-operative Court. He submitted that the Judges of the Co-operative Courts are judicial officers and the dispute under section 91 is to be initiated by a dispute which is in the nature of a plaint. He submitted that the procedure to be followed by the Co-operative Court while deciding the dispute is on par with the procedure followed by the Civil Court while deciding the civil suit. He relied upon the judgment of the Apex Court in the case of Paramjeet Singh Patheja (supra) and submitted that Co-operative Court is a Court which is created by the machinery of the State and therefore an Award made in ... 15 ... dispute under section 91 is a decree. 13. Shri Vengurlekar appearing in Notice of Motion No.58 of 2007 in Insolvency Notice No.36 of 2007 submitted that an Award made by an Arbitrator by deciding the dispute covered under section 84 of the Multi-State Societies Act is a decree. He pointed out that the arbitration under section 84 is a statutory arbitration and the arbitrator is appointed by the Registrar appointed by the Central Government. He submitted that the dispute which is governed by the section 84 of the Multi-State Societies Act is governed by law of limitation which is applicable to ordinary Civil Suit. He, therefore, submitted that an insolvency notice under section 9(2) can be taken on the basis of an Award made in a dispute governed by section 84 of the Multi-State Societies Act. 14. I have carefully considered the submissions. Relevant part of sub section 2 of section 9 reads thus: "(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 ... 16 ... become final and the execution whereof has not been stayed), has served on him a notice (hereinafter in this section referred to as the insolvency notice) as provided in sub-section (3) and the debtor does not comply with that notice within the period specified therein:" It will be necessary to refer to the decision of this Court in the case of Re.Deepak Cochhar and others (supra) (the said case is hereinafter referred to as the case of Deepak Cochhar). The question which arose for consideration before the learned single Judge in the said case was whether a notice of insolvency under sub section 2 of section 9 of the PI Act can be issued on the basis of a recovery certificate issued by the Debt Recovery Tribunal under the RDB Act. The learned single Judge came to the conclusion that the words "Decree" or "Order" used in sub section 2 of section 9 were not qualified with the words "of any Court". The learned Judge therefore held that it is not permissible to restrict the meaning of the said words "Decree" or "Order" by resorting to and relying upon sub-section 2 and sub-section 14 of section 2 of the said Code. The learned Judge held that it is not permissible to give a restrictive meaning to the words "Decree" or "Order" particularly under sub section 2 ... 17 ... of section 9 of the PI Act so as to defeat the provisions of law and the provisions of sub section 2 of section 9 must be given a widest possible interpretation. The learned Judge held that the issuance of recovery certificate is a procedural requirement for the purposes of execution of an order of recovery passed by the Debt Recovery Tribunal under sub section 20 of section 19 of the RDB Act. The learned Judge held that once a Debt Recovery Tribunal has passed an order after adjudicating the