Case Note & Summary
The Petitioning Creditor, M/s Sanskar Gem Pvt. Ltd., filed an insolvency petition under the Presidency Towns Insolvency Act, 1909, seeking an order of adjudication of insolvency against the Debtor, Raj Kantilal Shah. The Debtor owed Rs. 21,37,78,446.52 to the Petitioning Creditor pursuant to a decree passed on 9th February 2017 in Summary Suit No. 657 of 2016. The Petitioning Creditor issued an insolvency notice on 16th October 2018, which was served on the Debtor on 8th December 2018. The Debtor failed to make payment within 35 days, and an act of insolvency was committed on 13th January 2019. On 14th January 2019, the Debtor filed a Notice of Motion No. 11 of 2019 to set aside the insolvency notice. The Petitioning Creditor filed the insolvency petition on 23rd January 2019, within three months of the act of insolvency. The court considered whether the petition was maintainable given the pendency of the notice of motion. The court held that the petition was filed within the three-month period, but the notice of motion filed by the Debtor had not been disposed of. The court dismissed the petition as premature, stating that the notice of motion should have been decided before the petition was filed. The court did not decide on the merits of the notice of motion.
Headnote
A) Insolvency Law - Act of Insolvency - Section 9(1) Presidency Towns Insolvency Act, 1909 - Computation of Three Months - The act of insolvency is committed on the expiry of 35 days from service of insolvency notice without payment. The petition must be filed within three months of that date. Filing of a notice of motion to set aside the insolvency notice does not extend the period. (Paras 1-10)
B) Insolvency Law - Insolvency Petition - Section 13 Presidency Towns Insolvency Act, 1909 - Notice of Motion - The court held that the petition was filed within three months of the act of insolvency, but the notice of motion filed by the debtor was not disposed of before the petition was filed. The court dismissed the petition as premature, noting that the notice of motion should have been decided first. (Paras 11-20)
Issue of Consideration
Whether the insolvency petition filed within three months of the act of insolvency is maintainable when a notice of motion to set aside the insolvency notice was filed by the debtor but not disposed of before the petition was filed.
Final Decision
The court dismissed the insolvency petition as premature, holding that the notice of motion filed by the Debtor to set aside the insolvency notice should have been disposed of before the petition was filed. The court did not decide on the merits of the notice of motion.
Law Points
- Act of insolvency
- Insolvency petition
- Notice of motion to set aside insolvency notice
- Section 9(1) of Presidency Towns Insolvency Act
- 1909
- Section 13 of Presidency Towns Insolvency Act
- Computation of time
- Filing within three months of act of insolvency
- Pendency of notice of motion does not extend time
Case Details
2023 LawText (BOM) (12) 94
Insolvency Petition No. 9 of 2020
Mr. Simil Purohit with Mr. Rubin Vakil, Mr. Manish Doshi i/b Vimadalal & Co., for Petitioning Creditor; Mr. M.P.S.Rao, Senior Advocate, a/w Mr. Darshit Jain, Mr. Sunil Patel i/b Sunil & Co., for Judgment Debtor; Ms. M. R. Parkar, Insolvency Registrar present
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Nature of Litigation
Insolvency petition seeking adjudication of debtor as insolvent
Remedy Sought
Order of adjudication of insolvency against the Debtor
Filing Reason
Debtor failed to pay decretal amount of Rs. 21,37,78,446.52 despite insolvency notice
Previous Decisions
Decree on admission passed in Summary Suit No. 657 of 2016 on 9th February 2017; Insolvency notice sealed on 4th December 2018; Notice of Motion No. 11 of 2019 filed by Debtor on 14th January 2019 to set aside insolvency notice
Issues
Whether the insolvency petition was filed within three months of the act of insolvency as required under Section 9(1) of the Presidency Towns Insolvency Act, 1909?
Whether the pendency of a notice of motion to set aside the insolvency notice affects the maintainability of the insolvency petition?
Submissions/Arguments
Petitioning Creditor argued that the petition was filed within three months of the act of insolvency and is maintainable.
Judgment Debtor argued that the notice of motion to set aside the insolvency notice was pending and the petition should not be entertained until that is decided.
Ratio Decidendi
An insolvency petition filed within three months of the act of insolvency is maintainable, but if a notice of motion to set aside the insolvency notice is pending, the petition should not be entertained until that notice of motion is disposed of.
Judgment Excerpts
This petition seeks an order of adjudication of insolvency by this Court against the Debtor Raj Kantilal Shah of Mumbai.
It is not in dispute that the Judgment Debtor owes to the Petitioner Rs. 21,37,78,446.52.
On 13th January, 2019, an act of Insolvency was committed by the Judgment Debtor as he had failed to make payment within 35 days.
On 14th January, 2019, Notice of Motion No.11 of 2019 was presented by the Judgment Debtor for setting aside the Insolvency notice.
Within a period of 3 months from 14th January, 2019, on 23rd January 2019, this Petition on Lodging No. 1 of 2019, was filed by the Petitioning Creditor for an order of adjudication of insolvency of the Judgment Debtor.
Procedural History
The Petitioning Creditor obtained a decree on 9th February 2017 in Summary Suit No. 657 of 2016. An insolvency notice was issued on 16th October 2018 and served on 8th December 2018. The Debtor failed to pay within 35 days, committing an act of insolvency on 13th January 2019. The Debtor filed a Notice of Motion No. 11 of 2019 on 14th January 2019 to set aside the insolvency notice. The Petitioning Creditor filed the insolvency petition on 23rd January 2019. The court reserved order on 7th November 2023 and pronounced on 5th December 2023.
Acts & Sections
- Presidency Towns Insolvency Act, 1909: Section 9(1), Section 13
