Case Note & Summary
The case involves two notices of motion filed by judgment debtors (Vikram Saboo and Shalini Saboo) seeking to set aside an insolvency notice issued by the judgment creditor, SICOM Ltd., under Section 9(2) of the Presidency Towns Insolvency Act, 1909. The insolvency notice was based on an order dated 1 July 2008 passed by a learned Single Judge of the Bombay High Court under Section 31(1)(aa) of the State Financial Corporations Act, 1951 (SFC Act), directing the judgment debtors, who were directors and guarantors of Marvel Industries Ltd., to pay Rs.18.52 crores with interest to SICOM. The order was upheld by a Division Bench on appeal and became final. The judgment debtors argued that the order under Section 31(1)(aa) of the SFC Act does not amount to a decree or order within the meaning of Section 9(2) of the Insolvency Act and is a nullity, thus no insolvency notice could be based on it. The court, after hearing submissions, held that the order under Section 31(1)(aa) is a decree or order for payment of money and is valid and executable against the guarantors. The court dismissed both motions, allowing the insolvency notice to proceed.
Headnote
A) Insolvency Law - Decree or Order for Payment of Money - Section 9(2) of Presidency Towns Insolvency Act, 1909 - An order under Section 31(1)(aa) of the State Financial Corporations Act, 1951 directing payment of money by guarantors is a decree or order for payment of money within the meaning of Section 9(2) of the Insolvency Act. The court held that such an order is a final determination of rights and is executable, thus can form the basis of an insolvency notice. (Paras 2-5) B) State Financial Corporations Act - Validity of Order under Section 31(1)(aa) - Section 31(1)(aa) of State Financial Corporations Act, 1951 - The order passed under Section 31(1)(aa) against guarantors is not a nullity. The court held that the SFC Act empowers the court to pass orders for payment of money against guarantors, and such orders are valid and enforceable. (Paras 2-5) C) Insolvency Law - Insolvency Notice - Section 9(5) of Presidency Towns Insolvency Act, 1909 - The judgment debtors' motion to set aside the insolvency notice was dismissed. The court held that the insolvency notice was properly based on a final order for payment of money, and the debtors failed to show any ground for discharge. (Paras 5-6)
Issue of Consideration
Whether an order passed under Section 31(1)(aa) of the State Financial Corporations Act, 1951 amounts to a decree or order within the meaning of Section 9(2) of the Presidency Towns Insolvency Act, 1909, and whether such order is a nullity and not executable against the judgment debtors.
Final Decision
Both notices of motion are dismissed. The insolvency notice is upheld.
Law Points
- Order under Section 31(1)(aa) of SFC Act is a decree or order for payment of money within Section 9(2) of Presidency Towns Insolvency Act
- 1909
- Order under Section 31(1)(aa) of SFC Act is not a nullity and is executable against guarantors
- Insolvency notice can be based on such order
