1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O.C. J. NOTICE OF MOTION NO.60 OF 2009 IN INSOLVENCY PETITION NO.14 OF 2008 Re: M/s.Space Con & Anr. ...Debtors. Versus Ex-parte: Chatrabhuj G.Ramavat & Anr. ...Petitioning Creditors. ....... Mr. R.D. Dube i/b. N.N.Vaishnawa & Co. for the Petitioning Creditors. Mr. Sanjay Jain i/b. Ramesh C.Jain for the Insolvent. Mr.Simil S. Purohit i/b. Purohit &Co. for the Supporting Creditor. Mr.H.W. Kane for the Claimant. Mr.V.Mannadiav for I.C.I.C.I. Bank. Mr.Y.C. Parikh, Official Assignee. ...... CORAM : DR. D.Y. CHANDRACHUD, J. December 15, 2009. P.C.: The Motion before the Court has been taken out by the debtors for annulling an order of adjudication that was passed on 19th November 2008. By the order of this Court, dated 19th November 2008, the Second Debtor was adjudged as an insolvent. This Court observed that the Insolvency Petition was founded on a decree passed 2 by this Court against the debtors on 19th December 2006 in a Summary Suit. Upon the failure of the debtors to pay the amount, an Insolvency Notice was issued on 14th March 2007, which was served on the debtors on 18th May 2007, by substituted service. The act of insolvency was stated to be complete on 20th November 2007 upon the failure of the debtors to pay the amount. The debtors took out a Notice of Motion for setting aside the Insolvency Notice, in which a conditional order was passed by the Court on 20th November 2007. The Court accepted the statement of the debtor that the entire decretal amount payable as on the date of the realisation of the amount would be deposited in this Court on or before 25th January 2008. The Court clarified that in the event that the debtor failed to pay the amount as stipulated, within the time prescribed, the Petitioning Creditors would be free to pursue their remedies on the assumption that the Motion has been dismissed with effect from 28th January 2008. The order of adjudication records that “as the debtors failed to pay the amount or to offer any explanation for non- payment”, the Petitioning Creditor has taken out proceedings for 3 having the debtor declared as an insolvent. Service was effected by substituted service. The debtor was absent before the Court when the matter was called out. Since no explanation was offered on behalf of the debtor, the Petition was allowed. 2. On 17th December 2007, which admittedly was within the period stipulated by this order dated 20th November 2007, the Advocate appearing on behalf of the debtor remitted two Pay Orders to the Advocate appearing on behalf of the Petitioning Creditors. The Pay Orders were in the amount of Rs. 40.50 lakhs towards the principal amount of the decree and in the amount of Rs.8,38,889/- towards the interest. This was accepted by the Advocate appearing on behalf of the Petitioning Creditors without prejudice to their rights and contentions and subject to accounts. On 22nd December 2007, the Petitioning Creditors’ Advocate addressed a letter to the Advocate for the debtor stating that an amount of Rs.3,57,390/- was still due and payable. In response to this letter, the debtor's Advocate addressed a letter on 25th January 2008, recording that on 30th October 2007, a 4 Demand Draft in the amount of Rs.48,88,889/- drawn on Indusind Bank Ltd., in favour of the Petitioning Creditors was tendered to the Creditors during the course of the hearing of the Criminal Case under Section 138 of the Negotiable Instruments Act, 1881 in the 28th Court at Esplanade. The letter records that as a consequence, the debtor was not liable to make the payment of interest after 30th October 2007. The statement that there was a tender of a Demand Draft of Rs.48,88,889/- on 30th October 2007 was not denied when the Petitioning Creditors’ Advocate responded in a letter dated 4th February 2008. The Petitioning Creditors’ Advocate reiterated that the debtor was liable to pay a sum of Rs.3,57,390/- and that what had been paid “is the decretal amount of the decree passed on 19th December 2006” by this Court. 3. The order of adjudication has been passed by this Court on the foundation that the debtor failed to pay the amount and to offer any explanation for non payment. It was on that basis that the debtor came to be adjudged as an insolvent. The grievance of the insolvent 5 before the Court is that this Court was not apprised of the fact that he had, on 30th October 2007, made a tender of an amount of Rs. 48,88,889/-. The tender of this amount, as noted earlier, is adverted to in his Advocate's letter dated 25th January 2008 to which, as already noted earlier, there is no denial in the reply dated 4th February 2008. Be that as it may, Counsel for the insolvent submits that in order to establish the bona fides of the insolvent, he has been instructed to state that the Petitioning Creditor would be paid interest at the decretal rate until today. Two Demand Drafts in the amount of Rs.3,57,390/- and Rs.17,000/- dated 14th December 2009 of the HDFC will, it has been stated, be handed over forthwith to the Advocate for the Petitioning Creditors. Counsel stated that the balance that remains due and payable shall in any event be handed over by the end of the day. This, it has been stated, is without prejudice to the contention of the insolvent that as a matter of fact, interest had ceased to run from 30th October 2007 on the tender of the amount. Counsel appearing on behalf of the Petitioning Creditors stated that cheques in the total amount of Rs.3,57,390/- which were 6 referred to in the Petitioning Creditors’ letter dated 18th April 2009 will be returned back to the Advocate appearing on behalf of the debtor within a period of one week from today. The statement is accepted. -4. On the previous occasion, this Court directed the Official Assignee to issue a notice of the pendency of these proceedings in order to enable the other Creditors, if any, to come before the Court. It is necessary for the Court to clarify that the recalling of the order of annulment will only result in the restoration of the Insolvency Petition to file, and all claims would be duly considered by the Court while determining as to whether a case is made out for a declaration of insolvency in an order of adjudication. At this stage, it is abundantly clear that the basis on which the order of adjudication is passed, is not correct since the Court was not apprised of the full facts relating to the tender of the amount by the debtor. The debtor was not present and a serious grievance has been made before the Court, of the manner in which, substituted service was sought to be effected. It is 7 not necessary to enquire into that aspect of the matter any further since the insolvent has now, in any event, agreed to pay even the interest on the decretal sum until date. -5. In the circumstances, the Notice of Motion is made absolute in terms of prayer clause (a). Insolvency Petition No.14 of 2008 shall stand restored to the file and shall be heard on merits. 6. The Advocate appearing on behalf of the debtor states before the Court that during the pendency of these insolvency proceedings before the Court, the debtor shall not leave the country without seeking prior permission of the Court. Statement accepted. 7. List the Insolvency Petition on board on 19th January 2010. .....