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Hasmukh Engineering Works and anr. Vs. Babubhai Chhotalal AmIn and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtGujarat High Court
Decided On
Judge
Reported in(1978)19GLR172
AppellantHasmukh Engineering Works and anr.
RespondentBabubhai Chhotalal AmIn and anr.
Excerpt:
- - 2 and 3, (its partners) had failed to pay the amount of rs. mehta, appearing for the appellants-original debtors, urged, and urged with some force, that at the hands of undiscerning persons claiming to be creditors of the alleged debtors, an irreparable damage may be done to the business reputation of the original opponent to the insolvency petition and subsequent dismissal of the petition and awarding of the costs and even the subsequent liability for damages of the original creditors would be a poor recompense for the debtors......the petition is admitted. then sub-section (2) of section 19 enjoins upon the court to issue a notice to creditors in the manner prescribed. rule 24 framed by the bombay high court (which applies to gujarat state) reads as under:24. (1) the notices to be given under section 30 and 37(2) of the act shall be published in the bombay government gazette, in english xxxx(2) the notices to be given under sections 19(2), 38(1) and 41(1) of the act shall be published in any suitable english or regional language newspaper and if the court so directs, in the bombay govt. gazette, and copies of the notices in english and in the language of the court shall be affixed to the notice board of the court.the above quoted sub-rule (2) of rule 24 shows that in the case of notices given under section.....
Judgment:

N.H. Bhatt, J.

1. This is an appeal by the original debtors of the Insolvency Petition No. 8 of 1971 of the City Civil Court at Ahmedabad. It was an application given on behalf of the present respondents Nos. 1 and 2 claiming to be the creditors of the appellants-debtors. The allegation was that the opponent No. 1 (the original appellant No. 1, a partnership firm) and the appellants Nos. 2 and 3, (its partners) had failed to pay the amount of Rs. 15,000/- under a promissory note, the amount having been paid by the applicants to the firm on 1-1-1970.

2. The said application had been admitted and then a notice was issued to the debtor and also a general notice under Section 19(2) of the Provincial Insolvency Act has been ordered to be issued. The present appellants, however, prayed to the court and requested the court that before a general notice inviting the alleged other creditors of the appellants was issued, they should be heard. The learned Judge, however, on interpretation of Section 19(2) held that the issuance of a general notice to the general body of creditors was the inevitable consequence of the admission of the insolvency petition and the court had no authority at law to hear the concerned debtors before issuing the said notice. In the words of the learned Judge: 'the contentions of the opponents nos. 1 and 2 can only be examined when the main petition comes up for final hearing, but at this stage, it cannot be said one way or the other whether the said contentions are true or false. It is, therefore, also necessary that a public notice be issued in this connection of the date of hearing. I do not find in any provisions of the Rules in question which lays down that a public notice should not be issued without making an inquiry as suggested by opponent Nos. 1 and 2. Against the said order, the present appellants had filed the first appeal No. 219 of 1972, but it had come to be dismissed summarily by the single Judge of this Court. The present letters Patent appeal has been preferred by the original debtors against the said order of the learned single Judge.

3. Mrs. Mehta, appearing for the appellants-original debtors, urged, and urged with some force, that at the hands of undiscerning persons claiming to be creditors of the alleged debtors, an irreparable damage may be done to the business reputation of the original opponent to the Insolvency petition and subsequent dismissal of the petition and awarding of the costs and even the subsequent liability for damages of the original creditors would be a poor recompense for the debtors. 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.

4. Going to the provisions of the Provincial Insolvency Act, we find that as per Section 18, the procedure laid down in the Code of Civil Procedure, 1908 with respect to the admission of plaints has got to be followed in the case of insolvency petitions. Under the Civil Procedure Code, the examination of the plaint is to be undergone only with a view to ascertain that the application on the face of it discloses causes of action, that it is duly verified and stamped and other procedural requirements are complied with. For the purpose of admission of the plaint, no preliminary hearing is envisaged by the Civil Procedure Code and it would be, therefore, too much to say that in all cases of insolvency petitions, a notice for preliminary hearing is a matter of obligation for the court. In this connection Mrs. Mehta had urged that looking to the gravity of the likely situation that may develop, we should invoke the application of the principles of natural justice. Looking to the scheme of the Act, however, we do not see any scope for the application of the said principles.

5. Section 19(1) deals with the courts' obligation to make an order fixing a date for hearing of the petition, after the petition is admitted. Then Sub-section (2) of Section 19 enjoins upon the court to issue a notice to creditors in the manner prescribed. Rule 24 framed by the Bombay High Court (which applies to Gujarat State) reads as under:

24. (1) The notices to be given under Section 30 and 37(2) of the Act shall be published in the Bombay Government Gazette, in English xxxx

(2) The notices to be given under Sections 19(2), 38(1) and 41(1) of the Act shall be published in any suitable English or regional language newspaper and if the court so directs, in the Bombay Govt. Gazette, and copies of the notices in English and in the language of the court shall be affixed to the notice board of the court.

The above quoted Sub-rule (2) of Rule 24 shows that in the case of notices given under Section 19(2) of the Act, they are to be published in any suitable English or regional language newspaper and the copies of the notices in English and in the language of the court shall be affixed on the notice board of the Court. This is the only procedure provided for in the Rules. However, reliance was sought to be placed on behalf of the appellants to Sub-rule (3) of Rule 24; which reads as under:

24 (3) Notice of the date fixed for the hearing of an insolvency petition under Section 19(1) of the Act shall be sent by the court by registered post, if the petition is by the debtor, to all creditors mentioned in the petition, and if the petition is by a creditor, to the debtor, not less than 14 days before the said date.

The provision of Sub-rule (3) are in addition to and not in substitution of the provision of Sub-rule (2). Over and above the issuance of a public notice contemplated by Sub-rule (2) an individual notice has been provided for in Sub-rule (3). It cannot, therefore, be urged that Sub-rule (3) makes any departure and lends a support to the contention advanced on behalf of the appellants before us.

5. We have, therefore, to hold that there is no obligation on the court to hear opponent-debtor: before issuing a public notice under Section 19(1) of the Act. However, we are not in agreement with the observation of the learned trial Judge that these provisions specifically negative the court's power to bear the debtor before issuing a public notice, as has been thought by the learned Judge. However, for want of anything contrary, express or implied, in the language of Section 19 of the Act, we say that the concerned court of insolvency may, in its discretion, issue a 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 a public notice contemplated.

6. In above view of the matter, the appeal is partly allowed and the matter is remanded to the concerned Judge of the insolvency Court, Ahmedabad for dealing with the matter in the light of the observations made hereinabove. There will be no order as to costs in the High Court in the First Appeal and the Letters Patent Appeal.


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