F.I. Rebello, J.
1. The judgment creditors based on the judgment and decree passed in their favour in Summary Suit No. 5217 of 1999, consequent to an order rejecting the Summons for Judgment No. 26 of 2002 took out a Notice under Section 9 of the Presidency Towns Insolvency Act. They would hereinafter be referred to as the petitioners, the judgment debtor hereinafter shall be referred to as the respondent. The judgment debtor/respondent by the present Motion have moved to set aside the Insolvency Notice.
2. A few facts may be set out. The petitioners filed a Summary Suit before this Court being Summary Suit No. 5217 of 1999. On appearance being filed by the respondent Summons for Judgment came to be taken out. Respondents sought leave to defend. After examining the defences as raised a learned Judge of this Court held that defences as raised by the defendants are without any substance and dishonest. Consequently the Summons for Judgment deserved to be granted and accordingly allowed the same. The defence by the respondent was that the dishonoured cheque on which the Summary Suit was filed was given as a security and in those circumstances the petitioner was not justified in presenting the cheque to the bank for payment. Secondly it was urged that the pledged shares had been sold without complying with the requirements of Section 176 of the Contract Act. It was submitted that once petitioner had submitted the cheques to the bank for payment the petitioner was not entitled to sell the shares. The learned Judge after hearing the contentions held that considering the material on record; the post-dated cheques were given by the respondent pursuant to the letter of the petitioner dated 10th June, 1996 and not as a security. The respondent had requested the petitioner to wait for three months and not to sell the shares on the promise that the respondent will pay the loan. The cheques which when presented were dishonoured. It is then stated that the petitioner took steps to sell the shares. It is in these circumstances the Court held that there was no substance in the plea raised by the respondent. It was submitted before the Court that the respondent had filed a suit for recovery of damages against the petitioner for wrongfully selling the shares which were pledged by the respondent with the petitioner. The Court opined that the suit was filed by the respondent for recovery of damages for wrongfully selling the shares. The learned Judge did not find any merit in that contention. An appeal was preferred consequent to a decree being passed under Order XXXVII of the Criminal Procedure Code. That appeal came to be dismissed pursuant to which the respondent herein filed S.L.P. before the Apex Court which came to be rejected on 13th September, 2002.
3. In support of his contention that the Notice be set aside learned Counsel for the respondent has basically formulated the grounds as under :--
(i) That the judgment debtor has a counter-claim or set off against the judgment creditors which is equal to or in excess of the amount due under the decree and which he could not in law for the time being in force prefer in the summary suit in which the decree was passed;
(ii) The decree is not executable under the provisions of law on the date of the application;
(iii) The decree has been induced on the basis of material misrepresentation and on the basis of palpable false statements made by the judgment creditor in the Summary Suit which renders the decree null and void and being incapable of execution.
4. In answer on behalf of the petitioner creditor, it is contended that the issue that the judgment creditors are secured because the judgment creditors possessed 4,000 shares of Sesa Goa Ltd., belonging to the father of the judgment debtor and the judgment debtor has a counter claim in the form of a Suit No. 1673 of 1998, challenging the sale of 35,000 equity shares by the Judgment Creditors, which were pledged by the judgment debtor were raised by the respondent herein in Suit No. 5217 of 1999 in which the order and decree came to be passed and which has become final. There is no stay of that decree. In these circumstances it is not open to the judgment debtor to once again raise the same challenges in the Insolvency Notice. It is specifically pointed out that the 4,000 equity shares of Sesa Goa Ltd., do not belong to the respondent, but to his father and considering the language of Section 12(2) of the Presidency Towns Insolvency Act 1909 the said shares will not be available to the Official Assignee and/or creditors of the judgment debtor for the purpose of realising the dues. The submission is based on the contention that the security contemplated under Section 12(2) of the Insolvency Act are securities of the judgment debtor and not securities given by any other person guaranteeing the amount advanced to the judgment debtor. Adverting to the contention of the respondent that the shares are fungible, it is pointed out that the shares of the concerned Company, Sesa Goa Ltd., have been compulsorily dematerialised so that the former distinctive numbers of the shares no longer exist and the quantity and value of the shares exist only in dematerialised form and shown in the dematerialised statement issued by the depositories. There are no Share Certificates or Distinctive numbers of shares anymore. Apart from that, the highest price attained by the shares in or after 1998, was Rs. 354/-. Therefore, the value of the said 4,000 shares could never have equaled or exceeded the judgment creditor's balance decretal dues. This material has come in the form of an affidavit in sur rejoinder which was directed to be filed by this Court. The respondent has opposed taking on record the said affidavit in sur rejoinder. The order directing the petitioners to submit the information was based on the arguments advanced at the bar by the Respondent; that in an Insolvency petition, the Court must, as a Court of conscience consider all aspects of the matter. It is in that context that the petitioners were called upon to file the affidavit. The petitioners in the affidavit in sur rejoinder in para 7 have specifically reiterated that the 4,000 shares are still with the petitioners even today. The submission on behalf of the respondent was that the pledged shares are not in the same form as when they were given with their distinctive numbers and this must make all the material difference. That will be dealt with while dealing with the arguments.
Insofar as counter claim is concerned of 35,000 equity shares, it is pointed out that it does not equal or exceed the claim in the Insolvency notice. It is pointed out that this contention was rejected in the summary proceedings taken out under Order XXXVII of Civil Procedure Code by three Courts upto the Apex Court. The claim in Suit No. 1673 of 1998 is by way of damages. It is, therefore, not a debt due and payable. No interim relief of any nature has been granted in the said suit. It is then pointed out that the highest price of the share after 1998 was Rs. 354/- and even assuming that there was alleged wrongful sale. The price realised could never have equaled or exceeded the judgment creditor's balance decretal claim. It is also pointed out that the Insolvency Court cannot go behind the decree and in any case not at the stage of the Insolvency notice. At the stage of the petition the Insolvency Court may exercise discretion to go behind the decree very rarely as observed by the division Bench of this Court in J. P. Tiwari v. Bhimraj Harlalka. Dealing with the issue that Insolvency notice cannot be issued without drawn up and sealed decree, it is pointed out that Section 9(2) of the Presidency Towns Insolvency Act. Rule 52A(1) of the Bombay Insolvency Rules, 1910 and Rule 314 of the Rules and Forms of the High Court of Judicature at Bombay, Original Side, 1980 all refer to decree or order and do not use any such phrase or expression as 'drawn-up decree' or 'sealed decree'. Even otherwise it is pointed out that in the affidavit in support of the Motion for setting aside the notice this ground was not specifically raised and what was contended was that the decree was not executable on the ground that it was procured by fraud, suppression of fact, etc.
5. With the above, we may now deal with the contentions as raised on behalf of the petitioner herein. As stated earlier the first challenge is that the judgment debtor has a counter claim or set off, against the judgment creditors which is equal to or in excess of the amount due under the decree which he could not in law for the time being in force prefer as a summary suit when a decree was passed. The language of the section itself is clear. What Section 9(5)(a) contemplates is that the counter claim or set off against a creditor must be equal to or in excess of the amount due under the decree or order and which the respondent could not under any law for the time being in force prefer in the suit or proceedings in which the decree or order was passed. Can it be said on the facts of the present case that the respondents herein was precluded from raising the defence that the 35,000 shares pledged by the respondent in favour of the petitioner was a claim or defence which he could not raise in the suit where the decree was passed. As noted earlier one of the defences raised by the respondent herein was that the securities could not have been sold. That issue, therefore, was in issue and has been answered by the Court while disposing of Summons for Judgment. It was specifically pointed out to the Court at the time of passing the order in Summons for Judgment that the respondent herein in respect of the sale of the 35,000 shares had filed a suit for damages for wrongful sale of the said shares. In other words the claim was the subject matter of a pending suit. Secondly that claim or defence in respect of that claim was in issue before the Court while answering the Summons for Judgment. The learned Judge rejected the defence and allowed the Summons for Judgment and proceeded to pass a decree. It is no doubt true that it is contended that those proceedings are Summary proceedings and being summary proceedings the decree passed therein cannot foreclose the case of the respondent herein more so in the suit which is pending and filed by the respondent. It was pointed out that in summary proceedings if conditional leave is granted to defend a suit by deposit and a party because of some reason is not in a position to deposit the amount a decree follows. In these circumstances it is contended that the opportunity in the summary proceedings is not an effective opportunity and consequently this Court is not precluded from looking into the defence. Let us look at this aspect of the matter. Reliance was placed on the judgment in the case of Indian Bank v. Maharashtra State Co-operative Marketing Federation Ltd., : [1998]3SCR187 to contend that the judgment in a summary proceeding should not be considered as concluding the issue. That judgment really is of no assistance as what the Apex Court was considering therein was an issue of stay of a suit filed under Order XXXVII of Civil Procedure Code. The Apex Court held that the application for stay of the suit filed, under Order XXXVII would only be at the stage when leave to defend has been granted and the defendant in a suit is called upon to file his written statement. That judgment to my mind therefore, really is of no assistance in answering the issue raised herein. Next, reliance is placed on a judgment of this Court in Framroze Merwanji Desai v. Hormasji Maneckji AIR 1947 Bom. 204. It is true that in that case, this Court took a view that in proceedings in insolvency petition it will be open to the Insolvency Court to determine the prima facie nature of the claim which has been put forward by the judgment debtor as under Order XXXVII of Civil Procedure Code on the party being unable to deposit the amount a decree follows. The judgment would be clearly distinguishable as what now has to be considered is Section 9(5)(a) as it now stands pursuant to the amendment. Secondly the claim ought to be a claim which the respondent on account of law could not have raised. This latter contention has been answered by holding that in fact the respondent has filed a suit in respect of that claim which is pending and secondly it was taken as a defence in the summary suit in answer to Summons for Judgment and was rejected by this Court. Clearly, therefore, it cannot be said that the first ground as raised is sustainable. On behalf of the petitioner it was contended that once this contention was a defence in the summons for judgment and the decree having been passed it must operate as res judicata and is no longer open for consideration. I will advert to the judgment referred to in support, but it may not be proper to answer it fully as in my opinion that will have to be finally concluded in the pending suit, where the petitioner herein can raise that defence. A Division Bench of this Court in Baldevdas Karsondas Patel v. Mohanlal Bapalal Bahia and Ors. AIR 1948 Bom. 232 noted that it is perfectly clear and by now well established that an ex parte decree can operate as res judicata because an ex parte decree is a decree on merits. Considering the test and applying to a decree under Order XXXVII the Apex Court held that in cases of a summary suit where the condition on which leave to defend in given is not complied with, his absence is a result of the coercive process of the law, but both in the first case and in second case the decree passed by the Court is an ex parte decree and, as pointed out, an ex parte decree is a decree on merits passed by the Court after it has heard and decided the matter. Once that be the case the principles of res judicata would be applicable. This judgment was noted and followed by another Division Bench of this Court in Messrs D. Shanlal v. Bank of Maharashtra 1988 M.L.J. 956 : 1988(3) BCR 114. Therefore, assuming that this Court could have examined the issue being open, the principles of res judicata prima facie will also apply insofar as the suit under summary procedure is concerned. As noted earlier, I do not propose to conclude this issue in the present Motion as a suit by the respondent is pending in this Court and it will be an issue to be decided finally in that suit. At any rate the first contention must be rejected.
6. With that we come to the second contention namely that the decree is not executable under the provisions of law on the date of the application. The basis for this submission is the decree based on which the notice is taken out was passed on the petitioner's solemn case that the petitioner was giving up the pledged 4,000 equity shares as set out in the averment in the plaint itself and which are described in Exhibit 'A' to the Notice of Motion. Reliance is also placed on the evidence of the petitioner in Criminal proceedings where the petitioner has reiterated that 4,000 shares are lying with them which have not been sold. The further contention is that having sold the 4,000 shares the petitioner ought to have given credit to the respondent for the said amount which has not been done. Apart from that fraud was played on the Court and in these circumstances it was open to this Court to go behind the decree. The case of the petitioner, it is pointed out must be based on its own merit and not whether the defendant has a good defence or has been unable to prove his defence.
Let us firstly advert to the material on record insofar as these 4,000 shares are concerned. Pramod Parmeshwarlal Banka, Constituted Attorney of the Respondent has filed an affidavit in reply in answer to the Motion dated 2nd December, 2002. He has referred to and adverted to various averments made by the petitioner herein in the affidavit in reply to Summons for Judgment No. 26 of 2000 in Suit No. 5217/99. Para 7(o) of the reply specifically deals with this issue of 4,000 shares and it may be reproduced herein :--
'7(o) With reference to paragraph 18 of the plaint, I say that the said 4000 shares were never a part or and/or connected with the transaction being the subject matter of the above suit. I say that since the Plaintiffs did not return the said 4000 shares to my father despite the fact that the loan of Rs. 50,00,000/- taken by my father against the pledge of 19000 shares was fully repaid, my father has filed a criminal case bearing No. 6/S/98. It is the case of my father in the said complaint that the accused therein are guilty of the offences of misappropriation, breach of contract and breach of trust. In view of the reasons more particularly set out therein, I further say that the said 4000 shares of SGL belonging to my father Mr. Harinarayan G. Bajaj and which are the subject matter of the complaint No. 6/S/98 referred to hereinabove were never pledged by him or adjusted against the aforesaid loan of Rs. 1 crore taken by me against the pledge of 35,000 shares of SGL. In this regard I reiterate and contents of paragraph Nos. 8(f) and 8(g) hereof,'
This is again reiterated in para. 7(g). Reliance is also placed on the rejoinder filed on behalf of the petitioner in Summons for Judgment. The respondent himself has referred to and relied upon the evidence of the petitioner in the criminal proceedings and which have been set out in para 6 of the affidavit in support of this Motion. A specific question was put to the petitioner as to whether the petitioner had given credit of 4,000 shares to the father of the respondent. In answer on oath it was set out by the petitioner that as the shares are not sold the question of credit does not arise. Even assuming that for the sake of argument that the said 4,000 shares were sold at the highest the petitioner ought to have given credit for the respondent in respect of 4,000 shares. Whether this amounts to a fraud is a question which will be dealt with subsequently. The respondent has brought evidence on record that after 1998 the highest price of the share was Rs. 358/- per share. If that is taken into consideration there would be still due and payable by the respondent to the petitioner in terms of the decree a sum over Rs. 500/- based on which the Insolvency Petition would be maintainable. At any rate it would be difficult at this stage of the Motion to permit the respondent to take a plea that those 4,000 shares were pledged as security for the loan advanced to him considering his own pleas in the defence raised in the Summons for Judgment and in the suit.
With that we may now consider the judgments relied upon by the respondent in Moran Mar Basselios Catholicos and Anr. v. Most Rev. Mar Poulose Athanasius and Ors. AIR 1954 SC 526 the Apex Court noted that it is for the plaintiffs to establish their own title and get it decided in their favour rather than to destroy the defendants title by getting issues decided against the defendants, for a mere destruction of the defendants title, in the absence of plaintiffs establishments of their own title carries the plaintiffs no-where. In Punjab Urban Planning & Development Authority v. Shiv Saraswati Iron & Steel Re-rolling Mills, : AIR1998SC2352 , the Apex Court was pleased to observe that the plaintiff/appellant must succeed or fail on his own case and cannot take advantage of weakness in the defendant/respondent's case to get a decree. It is then contended on behalf of the respondent that the Court can go behind the decree even at the stage of the notice and need not have to wait for the issue to be agitated at the stage of the petition. It was also argued on behalf of the Respondent herein that as a Court of conscience the Insolvency Court is not estopped from going behind the decree to satisfy itself as to the validity of the debt and that is not the same thing as the right of judgment debtor to challenge the decree by asking the Insolvency Court to reagitate the question already decided by a competent Court. For this contention reliance was placed on the judgment of this Court in J. P. Tiwari v. Bhimraj Harlalka (1958) 60 BLR 963. In appeal in that case one of the points raised was that the decree passed by the Court is not executable and, therefore, the Insolvency notice cannot be founded on that decree. While answering the contention this Court observed as under:--
'Now, what we have to consider is whether this principle is applicable to an insolvency notice, when the insolvency notice is being challenged as not having properly taken out. It is perfectly true, as pointed out by Mr. Gupta, that an act of insolvency is committed not by reason of the existence of a judgment against the debtor, but by reason of the fact that an amount is due under or in respect of that judgment, which amount has not been paid by the debtor on his being called upon to pay it. Therefore, the very basis of the act of insolvency is non-compliance with the insolvency notice, which means that a judgment has been passed against the debtor, that judgment has not been satisfied and although called upon to satisfy the judgment, the debtor fails to do so within the time mentioned in the notice and thereby commits an act of insolvency.'
After discussing the challenges available the learned Division Bench observed that the ground raised cannot be a ground which challenges the very validity of the decree. For the purpose of the insolvency notice the Court must accept the decree as final and binding upon the judgment-debtor and that it is not for the insolvency Court at that stage to permit the debtor to challenge the very validity of the decree. On behalf of the respondent in answer the learned Counsel relied upon unreported judgment in the case of Eruchshaw Ardeshir Dubhash v. Messrs Ice Supplies, Bombay in Appeal No. 60 of 1956 In Solvency No. N/46 of 1956 decided on 27th July, 1956 by Chagla, C.J. It may be noted that the learned C.J. was also a party to the judgment in J. P. Tiwari (supra). In that case the insolvency notice was sought to be set aside on the ground that there was an agreement between the judgment creditor and the appellant that the decree would not be executed and that satisfaction would be entered upon on that decree. The contention of the appellant was that in view of the agreement no amount was due under the decree and no insolvency notice could be founded on that decree. The Court posed to itself the following question :--
'Therefore, the narrow question that the concerns us in this appeal is whether it is open to the Insolvency Court, when an insolvency notice is challenged on the ground that nothing is due under the decree, to consider that plea and to give relief to the debtor.'
The Court answering it, held that to constitute an act of insolvency two conditions are necessary, firstly, there must be a decree against the debtor and secondly, an amount must be due under that decree. It is in that context that the learned Division Bench observed rejecting the contention raised on behalf of the respondent therein that it was difficult to understand why a debtor should be prevented from satisfying the Court on the very question at an earlier stage and thus avoid the serious consequence of committing an act of insolvency. To my mind the ratio of this judgment does not depart from the ratio laid down in the earlier judgment of the Division Bench in the case of J.P. Tiwari. On the contrary the judgment proceeds on the footing that the judgment debtor can point out that a decree is unexecutable on the face of it, consequent to subsequent understanding between the parties.
7. We then come to the issue whether the decree has been induced on the basis of material misrepresentation made by the judgment creditor in the summary suit which renders the decree null and void and therefore, incapable of execution. This entire argument is founded on the basis that there was a pledge of shares in favour of the petitioner by the respondent's father as guarantee for the loan advanced to the respondent. The stand of the respondent in his suit is that these shares were never pledged for the loan advanced in favour of the respondent, but were security for the loan advanced in favour of the respondent's father. Considering the consequences of the Court rejecting the challenge to the Insolvency Notice and as argued, that this is a Court of conscience, that aspect may be examined. We have already noted that while considering the case of insolvency notice it is not possible for the Court to go behind the decree unless from the decree itself it is clearly spelt out that the decree is a nullity at law. This is based on the proposition that a decree which is nullity at law can be challenged anywhere and every where when it is sought to be enforced, including in collateral proceedings. In the summary suit filed by the petitioner herein it was pleaded that the shares pledged by the father of the respondent were not taken into consideration. The case of the respondent, however, is that subsequent material from Sesa Goa shows that in fact the shares were sold. In the evidence of the petitioner in the criminal proceedings on oath the petitioner has stated that the shares were not sold. In the sur rejoinder filed before this Court it is stated that the shares were not sold. Of course there is some argument as the distinctive numbers of the shares. To my mind prima faice at the highest if the 4,000 shares were sold the respondent would be entitled to set off or adjustment of the amount of those 4,000 shares. Even if that was done the decree would not be satisfied. It is not the case of fraud being played on the Court. Reliance placed on behalf of the respondent in case of S.P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by LRs. and Ors., : AIR1994SC853 no doubt supports the proposition that a litigant who approaches the Court is bound to produce all the documents executed by him which are relevant to the litigation. If a litigant withholds a vital document in order to gain advantage on the other side, then such a litigant would be guilty of playing fraud on the Court as well as on the opposite side. From the facts of that case it is clear that a suit for partition was filed by the plaintiff, who had no title to the property. It is in those circumstances that the Apex Court was pleased to make the observations as set out therein. This can be of no assistance insofar as the present case considering both the stand of the respondent and the material before this Court.
8. Incidentally the other issue was whether the suit considering Section 176 could have been maintained insofar as the pledged shares which were sold. Insofar as the 35,000 shares concerned, that was an issue in the summary proceedings and there is a specific finding that the shares were sold after notice. That ground is not available. In the present case the issue is out of 4,000 shares of the father of the respondent. On behalf of the respondent his learned Counsel has drawn my attention as to what will be legal position considering Sections 172 to 176 of the Contract Act. Reliance is placed firstly on the judgment in the case of Lallan Prasad v. Rahmat Ali and Anr., : [1967]2SCR233 , Considering the provisions pertaining to pledge the Apex Court observed as under:--
'So long, however, the sale does not take place the pawner is entitled to redeem the goods on payment of the debt. It follows, therefore, that where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt. The right to sue on the debt assumes that he is in a position to re-deliver the goods on payment of the debt and, therefore, if he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree.'
The Apex Court further observed as under:--
'But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to redeliver the goods he cannot have both the payment of the debt and also the goods.'
In Bharat Chandulal Nanavati v. UCO Bank 94 BLR 4 a Division Bench of this Court considering Section 12(2) of the Presidency Towns Insolvency Act, observed that it would apply only in relation to security which the petitioner creditor can relinquish for the benefit of the general body of creditors in the event of the debtor being adjudicated insolvent. In other words in the instant case the pledged shares would not be available for being returned to the respondent, but in favour of the father of the respondent. To my mind, at any rate on the facts of this case and the material as it stands there is no merit also in that contention which must be rejected.
9. It was lastly contended that the decree cannot be executed as the decree is not sealed. An insolvency notice can be founded based on an ascertained amount, considering Section 12. In the instant case the Apex Court confirmed the judgment of this Court on 13th September, 2002. Even otherwise such a specific ground was not raised in the affidavit in support of the Motion. The requirement of the Section is that the amount must be ascertained. A decree is a formal drawn up expression of the judgment and order of the Court. Therefore, the Insolvency Petition can be taken out even if the decree is not drawn up. See W. B. Essential Commodities Supply Corporation v. Swadesh Agro Farming & Storage Pvt. Ltd. and Anr., : AIR1999SC3421 . The Apex Court observed after the amendment to the Act being Act of 1996 of Civil Procedure Code that a decree will come into existence immediately on the pronouncement of the judgment. If further observed that a decree becomes enforceable the moment the judgment is delivered and merely because there will be delay in drawing up decree, it cannot be said that the decree is not enforceable till it is prepared.
10. The learned Counsel on behalf of the respondent had drawn my attention to the Judgment in the case of Sharad R. Khanna and Ors. v. Industrial Credit and Investment Corporation of India Ltd., and Ors. 1993(1) BCR 546, in which a learned Judge of this Court had taken a view that after amendment by Parliament to the Presidency Insolvency Act the only grounds of challenge to a notice would be as available under Section 9(5). In Re : Bijaysingh Mansingh Baid and Ors., Ex pane Mansingh H. Baid, : (2000)1BOMLR760 that issue had come up before this Court for consideration where also this Court has answered the said issue. Answering the issue this Court observed as under:--
'7. It is thus clear that learned Judge was clear, as the Judgment reflects, that the grounds as contained in Section 9(5) alone were the grounds under which an Insolvency Notice could be challenged. It is, however, true that in paragraph 16 the Court did consider whether the contention of secured creditor could be raised at the time of the notice itself. That was because an argument was so advanced by and on behalf of the Judgment Debtor. In that case on the facts the Judgment Creditor was not admittedly a secured creditor. The observation therefore in paragraph 16 cannot be said to be a ratio of the Judgment. It was not required to be decided at least after the observations in para. 10 and para. 19 where the learned Judge has clearly held that the challenge to a notice can only be under grounds set out under Section 9(5). I need not further dwell on that subject as I have held that the Judgment Creditor was not secured. That contention must therefore also has to be rejected. If mere security was sufficient, at the stage of challenging the notice, the provisions in the Act requiring the debtor to pay or secure to the satisfaction of the creditor would be otiose.'
The correctness of these views, however, seems to have been doubted by another learned Judge of this Court in Notice No. 79 of 1999 in Notice No. 63/99 Hemant M. Nabar and Ors. v. Farohar & Co., and Ors., decided on 29th March, 2001. The learned Judge has taken a view that Article 372 of the Constitution of India had not been taken into consideration by the earlier Benches of this Court. Article 372 if considered would result in pre-constitutional laws being saved. Once those laws were saved the rules framed by this Court before the amendment of 1978 would also be the law in force and consequently grounds other than those contained in Section 9(5) would be available as for example under the Rules framed by this Court. The matter is now before the Division Bench.
However, the position needs to be clarified considering the reference. The grounds as raised before this Court apart from the fact of counter-claim were based on the Rules made by this Court before the amendment of the Act by Parliament. It is true that Article 372 saves Pre-constitutional laws. Under Article 366(10) 'existing law' means any law, Ordinance, order, bye-law, rule or regulation passed or made before the commencement of the Constitution by any Legislature, authority or person having power to make such a law, Ordinance, order, bye-law, rule or regulation. However, Article 372 will have to be read with Article 254. For the sake of discussion hereinafter Article 254 may be reproduced :--
'254. Inconsistency between laws made by Parliament and laws made by the Legislatures of State. -- (1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Current List, then, subject to the provisions of Clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void.
(2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Current List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State;
Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.'
From the reproduction of the Article it will be clear that in case of a law made by the State Assembly and saved. Parliament is still competent to make a law. If law made by Parliament occupies the same field in respect of the Law made by the State then by virtue of Article 254 the law made by Parliament must prevail over the State Law. It is not that the law made by Parliament must contain each and every ground as may be available in the State Law. All that is required is that the field must be occupied. Section 9 occupies the field insofar as discharge of Notice is concerned. Once that be the case it is only on the grounds available under Section 9(5), can a notice be discharged on a Notice of Motion taken out by a judgment debtor. The issue may also be looked at from another angle. Insofar as concurrent list is concerned, if there be a law made by the Parliament then that law would prevail irrespective of a law made by the State Assembly. Only saving provision is contained in Article 254(2) whereby State law is saved. Parliament by enacting a law can impliedly repeal the law made by the State Assembly. There is no question of repealing a Rule. Rules, Bye-laws. Regulations, etc., are subordinate legislation. They are not primary laws. On the repeal of the principal legislation, the subordinate legislation must give away. In other words once a new law is enacted, the Rules made under the previous law, unless expressly saved will cease to have force. Article 372 by its language does not convert a subordinate legislation into a primary legislation. It only saves the provision so as to make the law effective. The subordinate legislation will continue to be subordinate legislation.
In Deep Chand v. State of U.P. : AIR1959SC648 the Apex Court observed as under:--
'(29) Nicholas in his Australian Constitution, 2nd Edition, page 303, refers to three tests of inconsistency or repugnancy :--
'(1) There may be inconsistency in the actual terms of the competing status;
(2) Though there may be no direct conflict, a State law may be inoperative because the Commonwealth law, or the award of the Commonwealth Court, is intended to be a complete exhaustive code; and
(3) Even in the absence of intention, a conflict may arise when both State and Commonwealth seek to exercise their powers over the same subject matter.'
This Court in Tika Ramji v. State of Uttar Pradesh, : [1956]1SCR393 accepted the said three rules, among others, as useful guides to test the question of repugnancy. In Zaverbhai Amaidas v. State of Bombay, : [1955]1SCR799 , this Court laid down a similar test. At page 807 (of SCR) (at p. 757 of AIR), it is stated :
'The principle embodied in Section 107(2) and Article 254(2) is that when there is legislation covering the same ground both by the Centre and by the Province, both of them being competent to enact the same, the law of the Centre should prevail over that of the State.' Repugnancy between two statutes may thus be ascertained on the basis of the following three principles;
(1) Whether there is direct conflict between the two provisions;
(2) Whether Parliament intended to lay down an exhaustive code in respect of the subject matter replacing the Act of the State Legislature; and
(3) Whether the law made by Parliament and the law made by the State Legislature occupy the same field.'
In T. Barai v. Henry Ah Hoe and Anr., : 1983CriLJ164 the Apex Court observed as under :--
'The proviso to Article 254(2) empowers the Union Parliament to repeal or amend a repugnant State law even though it has become valid by virtue of the President's assent. Parliament may repeal or amend the repugnant State law, either directly, or by itself enacting a law repugnant to the State law with respect to the 'same matter'. Even though the subsequent law made by Parliament does not expressly repeal a State law, even then, the State law will become void as soon as the subsequent law of Parliament creating repugnancy is made. A State law would be repugnant to the Union law when there is direct conflict between the two laws. Such repugnancy may also arise where both laws operate in the same field and the two cannot possibly stand together, e.g. where both prescribe punishment for the same offence but the punishment differs in degree or kind or in the procedure prescribed. In all such cases, the law made by Parliament shall prevail over the State law under Article 254(1). That being so, when Parliament stepped in and enacted the Central Amendment Act, it being a later law made by Parliament 'with respect to the same matter', the West Bengal Amendment Act stood impliedly repealed.'
That being so to my mind the position in law would be that it is only those grounds which are now available under Section 9(5) which would be the grounds available to a debtor to seek setting aside or discharge of a notice. This position has been set out for the purpose of clarifying the position as the attention of the learned Judge who has referred the matter to the Division Bench, attention was not invited to Article 254 and consequently has not taken into consideration the effect of Article 254 of the Constitution of India.
11. Considering the above, to my mind the respondent judgment debtor has failed to make out a case for setting aside the Notice. In the light of that Notice of Motion dismissed. In the circumstances of the case each party to bear their own costs.
Learned Counsel for the respondent seeks stay of the above order. Considering the effect of rejection of the Motion, to my mind the consequences which will be that any creditor of the petitioner can come and file petition, the above order not to be given effect to for a period of four weeks from today.
Parties/Authorities to act on an ordinary copy of this order duly authenticated by the Insolvency Registrar.
Certified copy expedited.