IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 14.09.2009 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.Nos.297 and 298 of 2009 and M.P.No.1 of 2009 G.Raghavan .. Appellant in both the O.S.As. Vs. 1.Upasana Finance Limited, Rep. By its Senior Manager (Finance ) & Secretary, Mr.R.Krishnan, No.90/1, Luz Church Road, Mylapore, Chennai – 600 004. now having office at 3rd floor, Auras Corporate Centre, No.98/A, Dr.Radhakrishnan Salai, Mylapore, Chennai – 600 004. 2. Maruti LaboratoriesLtd., No.9, 1st Cross Street, Kasturba Nagar, Adayar, Chennai – 600 020. 3. Dr.G.Srinivasanm, now residing at New No.16, Old No.8, Chinniah Street, T.Nagar, Chennai – 600 017. .. Respondents in both the OSAs. These appeals have been preferred under ORDER XXXVI RULE 9 of O.S. Rules read with section 8(2)(b) of the Presidency Town Insolvency Act, 1909 and Clause XV of Letters Patent against the Application Nos.191 & 192 of 2009 dated 20.7.2009 in I.N.No.12 of 2009 For Appellant : Mr.S.R.Rajagopal https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT (The judgment of the Court was delivered by M.CHOCKALINGAM, J.) These two appeals challenge the common order of dismissal made by the learned single Judge of this Court made in Application No.191 of 2009 seeking to set aside the Insolvency notice dated 11.3.2009, while application No.192 of 2009 is to declare the said notice as invalid. 2. These two applications were filed by the appellant under the following circumstances. The respondent/creditor filed the Insolvency notice No.12 of 2009 on the strength of a decree made in his favour in C.S.No.650 of 1998 whereby a decree for payment of Rs.12,991,422/- along with interest was passed against the appellant and three others. The said decree was pursuant to a memorandum of compromise entered into between the parties and filed into Court. According to the memorandum, all the defendants agreed to pay the said sum with interest at the rate of 30% per annum. It was also agreed that the amount were to be paid in instalments commencing from August 1999 to 28.4.2001. If there was any default, an additional interest was payable and if four instalments are not paid, the petitioning creditor would be at liberty to execute the entire decree and also could repossess and sell the assets given on hire purchase. The criminal case filed under section 138 of the Negotiable Instrument Act was agreed to be withdrawn on receipt of the 17th instalments. Since the terms of the memo was not adhered to by the defendants including the appellant/applicant, the Insolvency notice was issued. On service of notice, the appellant filed the above said applications. 3. The learned Single Judge, after looking into the materials and hearing the submissions made by the appellant/appellant and also the respondent/petitioning creditor dismissed both the applications. Hence, these appeals. 4. The learned counsel for the appellant urged before this Court as he has done before the learned single Judge that the appellant was only a surety for the loan which was availed by the first defendant; that out of Rs.12 lakhs and odd, a sum of Rs.8,51,000/- has already been paid and the balance was only Rs.4.40 lakhs but the entire amount what has been paid was appropriated towards interest which was unlawful and the interest what was charged was onerous and usurious; that the first defendant was the real judgment debtor and was liable to pay the entire loan amount and if the petitioning creditor/decree holder could not satisfy the decree from the borrower, he should proceed against the appellant; that the liability was not joint and several and hence, the proceedings against the applicant/appellant was malafide and the winding up proceedings against the first defendant company have already been initiated and hence, the petitioning creditor should proceed against the properties of the first defendant. Added further learned counsel that the proceedings https://hcservices.ecourts.gov.in/hcservices/ initiated against the Presidential Insolvency Act was not maintainable. Apart from that, under section 146 of the Indian Contract Act, the appellant surety was liable to contribute equally with the principal debtor. Hence, the entire liability cannot be thrust upon the appellant. The calculation of interest was not correctly done but all the above aspects have not been considered by the learned single Judge while dismissing the applications. Under such circumstances, the appeals have got to be admitted and have got to be disposed of on merits. 5. After hearing the learned counsel for the appellant and looking into the materials available, in particular, the order under challenge, the Court is of the considered opinion that no case is made out even for admission of the appeals. 6. Admittedly, a decree came to be passed in C.S.No.650 of 1998 pursuant to a compromise memo filed by the parties. As could be seen from the compromise memo pursuant to which the decree came to be made, the defendants agreed to pay a sum of Rs.12,26,000/- with interest at the rate of 30% per annum. The decree amount was payable in instalments from April 1999 to April 2001 and if there was any default in payment of instalments, the additional interest was also payable by the defendants and if there was default in payment of four instalments, the plaintiff/decree holder was at liberty to execute the decree for the entire amount and the decree holder was also at liberty to repossess and sell the assets given on hire purchase. Having been a party to such a decree and while there was default in payment of the decretal amount as agreed, the appellant cannot be allowed to state that he was only a guarantor and the defendants were jointly and severally liable to pay the decree amount. 7. The other contention putforth that the interest was onerous and usurious cannot be accepted in view of the clause found in the compromise decree as to the interest. The other contention that the decree holder should proceed first against the principal debtor and thereafter, he should proceed against the appellant cannot also be countenanced. It is not always obligatory for the decree holder to avail the remedy through execution proceedings and there is no impediment for him to initiate insolvency proceedings. The learned single Judge has relied on the judgment of Pavithra Agencies rep. by its Partners and others Vs. Jayashree P.Khatri reported in (2007)4 MLJ 222 to state that Section 9(2) of the Provincial Insolvency Act is available to the decree holder as a matter of right and Section 9 (5) of the said Act is an enabling provision for the judgment debtor to offer a defence but section 9(2) of the said Act is not enabling provision for the judgment debtor. Hence, so long as the petitioning creditor was able to show that the payments were not made as per the compromise decree which he was liable to satisfy jointly and severally along with others, the appellant cannot be permitted to raise the above contentions. 8. Under such circumstances, the learned single Judge is correct in dismissing the applications and hence, it does not require any https://hcservices.ecourts.gov.in/hcservices/ interference. Accordingly, both the appeals are dismissed. No costs. Consequently, M.P.No.1 of 2009 is closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar vsi To The Sub Assistant Registrar, Original Side, High Court, Madras. 1 cc To Mr.S.R.Rajagopal, Advocate, SR.46821 OSA.Nos.297 & 298 of 2009 BV(CO) SRA(30/9/2009) https://hcservices.ecourts.gov.in/hcservices/