1. The short question is whether the insolvency Court has any discretion to issue a notice to the opponents debtors after admitting the insolvency perition and before directing public notice to issue. One more significant fact is that the debors had already filed a caveat and served copy thereof to one of the petitioninja creditors prior to filing of the insolvency petition. Yet without heariag the opponents-debtors, the trial Court has passed the following order:
'General and public notice and special notice to issue according to law. Public notice to issue in Gujarat Government Gazette also. Applicant to deposit Rs. 700 for the expenses. Notice be issued in daily Jana Satta'.'
2. The debtors filed an application Ex. 26 praying that the order of public notice below, Ex. I be stayed and the other orders also be stayed since they were passed without any notice to them (the debtors). It was pointed out in the application that the caveat, application No. 25/82 was filed in the Court on 22nd March 1992 and the petitioner No. I had received the same on 30th March 1982 and yet the original applicants had obtained ex parte order of public notice on 7th April 1982. It was pointed out that the order of public notice has Likely serious, adverse, irreparable and irreversible effect on the business and reputation of the opponents-debtors.
3. The learned trial Judge heard. the application and initially passed an order on 28th April, 1982 granting a stay for two days and thereafter full length hearing partly granted the application holding partly that 'it is not mandatory on the Court that such public notice should be issued immediately mechanically' and ordered that the order issuing public notice be stayed till further orders and the applicatian is kept pending for rest, of the prayers'.
4. The original applicants preferred Civil Appeal No. 119/82 to the District Court at Nadiad. The learned Extra Assistant Judge allowed the appeal holding Assistant Judge allowed the appeal holding that the trail Court was in error in staying the order regarding isuing of public notice passed below Ex. 1
5. The learned counsel for the petitioners-original debtors have contended that the learned Appellate Judge has clearly gone wrong. The learned Appellate Judge in para 8 of his order holds that as the debtors had filed caveat before filing of the insolvency petition by the creditors it was necessary for the Court to hear the debtors before passing any order below Ex. 1, and agreed with the submissions of the teamed Advocate of the debtors. However, the learned Appellate Judge proceeded further to observe that since the trial Court, had given hearing to both the sides, it, was not, necessary to stay the order of public notice and the order . of public notice should have been allowed to take effect and implemented. This assumption bv the lower Appellate Court that the trial Court had heard the parties on the insolvency petition is clearly contrary to record. The order of the 'trial Court shows that the trial Court has only considered the application Ex. 26 for stay of the ex parte order below Ex. 1. On merits whether there was a prima facie case for issuing public notice or not,there is no consideration whatsoever in fact the trial Court had reserved that consideration for a later occasion and had decided only the preliminary question whether the debtors were entitled to any hearing before issuing public notice. Therefore, the reasoning of the learned Appellate Judge that the trial Court had heard the debtors on the question of prima facie case and necessity of issuing public notice is contrary to the record and the reasonings given by the Appellate Court cannot be sustained under any circumstances. Even the learned counsel for the original applicants did not make any.atte.mpt to support the judgment af the lower Appellate Court on that count.
6. However, the learned counsel for the opponents-original applicants, has strongly relied on the judgment in the case of Hasmukh Engineering Works v. Babubhai Chhotalal Amin, (1978) 19 Guj LR 172 and contended, as held by the Division Bench that there was no obligation on the trail Court to hear opponents debtors before issuing public notice under S. 19(1) of Provincial Insolvency Act. The learned counsel is right that there is no such obligation. But the Division Bench has further observed that the trail Court has the discretion to issue notice to the concerned debtor and hear him and if the Court finds that the application prima facie does not make out any act of insolvency, it may not proceed with the matter further and in such cases it would not be necessary for the Court to issue public notice contemplated. In exercise of its discretion, the trial Court may consciously decide to issue public notice straightway in the facts and circumstances of a given case or may issue notice to the debtor and give him opportunity. If the Court being conscious of its discretion exercises that discretion judicously there may not be any occasion to complain against the same. However, if under some misconception of the legal position or mechanically order is passed ex parte to issue public notice, such order is liable to be easily challenged. In the facts of the present case, the learned trial Judge has observed that it is not mandatory on the Court that suchpublic notice should be issued immediately mechanically and he has therefore directed bipartite hearing, on the question of necessity of issuing public notice. The consequence of public notice are serious and that is also recognised by the Division Bench, because, that is likely to cause irreparable damage to the business reputation of the debtor and the subsequent dismissal of the petition and awarding of the costs or even liability, for damages would be no recompense for the debtors. The Division Bench observed:
'It cannot be gainsaid that irreparable damage or harm could be caused to the alleged debtors, who ultimately may turn out to have not committed any act of insolvency and the unhappy situation cannot be retrieved even in an appreciable way. '
Having regard to the serious effect of the public notice in an insolvcncy petition, the court may in exercise of its discretion first issue a personal notice to the debtor and after hearing him decide whether the public notice was to be issued or not. S. 19 of the Provincial insolvency Act, 1920 provides for notice fixing date for hearing of the petition. Sub-rule (3) provides for notice to the debtor. S. 19 itself does not provide for, a public notice It merely provides for notice to creditors in the manner as amy be prescribed. Rule 24 framed by the Bombay High Court (which applies to Gujarat State prescribes public notice. As held by the Division Bench the insolvency Court has discretion first to issue personal notice to the debtor and after hearing him, decide the question whether or not to issue public notice. It is not obligatory once insolvency petition is admitted, public notice has merely to follow. The Division Bench clearly negatived such an argument in the following words:
'We are not in agreement with the observation of the learned trial judge that these provisions specifically negative the Court's power to hear the debtor before issusing a public notice, as has been thought by the learned judge. However, for want of antthing contrary, express or implied, in the language of S. 19 of the Act, we say that the concerned debtor and hear him and if the Court finds that the application prima facie does not make out any act of insolvency, it may not proceed with the matter further and in such cases it would not be necessary for the Court to issue a public notice contemplated.
7. In view of the discretion of the trial Court not to issue public notice before hearing the debtor the lower Appellate Court was not at all justified in acts or in law, to reverse the order of the trial Court postponing the of the public notice. The lower Appellate Court has committed material illegality and irregularity and it has erroneously directed public notice to issue before the debtors.
8. In the result, the Revision Application succeeds and the order of the lower Appellate Court is quashed andIset aside and that of the trial Court is, restored. Since this matter has become very old on the preliminary question the trial Court is directed to dispose of this matter as expeditiously as possible and in any case before 30th June, 1984. Rule made absolute with costs.
9. Application allowed.