R. Sivagnanam vs Pravin Kumar rep. by his father Devichand Tarajee and Another

Ramalingam, J.—The applicant namely R. Sivagnanam, the judgment debtor, has filed this application under S.9(5) of the Presidency Towns

Insolvency Act (hereinafter referred to as the Act) to set aside the insolvency notice issued under the following circumstances. The respondents

herein have issued notice under S.9(2) of the Act on the ground that the decree obtained by them in O.S. 2307 of 1978 as modified in A.S. 683 of

1983, has not been satisfied and that a sum of Rs. 23,000 is due and payable to them, representing mesne profits. The applicant states that since

he had preferred a SLP on the file of the Supreme Court in SLP 11220 of 1985, now numbered as C.A. 3728 of 1985, and obtained stay of the

proceedings, the insolvency notice issued by the respondents is not sustainable. The respondents contended that the debtor has obtained partial

stay order and there is no stay for recovery of mesne profits.

The question that arises for consideration in this application is, whether the notice issued by the respondents under S.9(2) of the Act is

sustainable, by virtue of the stay obtained by the applicant before the Supreme Court in C.A. 5728 of 1985.

S.9(2) of the Act reads as follows�

Without prejudice to the provisions of sub-S.(1), a debtor commits an act of insolvency, if a creditor, who has obtained a decree or order against

him for the payment of money (being a decree or order, which has become final and the execution whereof has not been stayed), has served on

him a notice (hereafter in this section referred to as the insolvency notice) as provided in sub-S.(3) and the debtor does not comply with that notice

within a period specified therein;

Provided that, where a debtor makes an application under sub-S.(5) for setting aside an insolvency notice�

(a) in a case where such application is allowed by the Court, he shall not be deemed to nave committed an act of insolvency under this sub-section;

and

(b) in a case where such application is rejected by the Court, he shall be deemed to have committed an act of insolvency under this sub-section on

the date of rejection of the application or the expiry of the period specified in the insolvency notice for its compliance, whichever is later;

Provided further, that no insolvency notice shall be served on a debtor residing, whether permanently or temporarily, outside India, unless the

creditor obtains the leave of the Court therefore.

In this case, there is no dispute that the debtor has obtained stay before the Supreme Court in C.A. 5728 of 1985 (S.L.P. 11220 of 1984) on 9-

1-1986 and it reads as follows:�

There will be interim stay of dispossession pending disposal of the appeal.

The learned counsel for the judgment debtor-applicant contended that in case he succeeds in the appeal to be heard, whatever money that is paid

towards mesne profits has to be recovered from the decree holder and the adjudication of the judgment debtor as an insolvent would tarnish his

image in the eyes of the public. As such, the notice issued under S.9 (5) is liable to be set aside. The fact that the Supreme Court has not

specifically mentioned stay of mesne profits, is not a bar for setting aside the Insolvency notice, because eventually, if the judgment debtor

succeeds before the Supreme Court, the adjudication of the judgment debtor as an insolvent for non-payment of mesne profits will bring down his

image in the eyes of the public. I find much force in the contention of the learned counsel for the judgment debtor. The main relief for possession

has been stayed, as such the execution of the decree for the consequential relief of mesne profits is not proper. As such, I find the stay obtained by

the judgment debtor before the Supreme Court falls well within the stay contemplated under S.9 (2) of the Act and as such the notice issued by the

decree holder under S.9 (5) of the Act for realisation of mesne profits, is not maintainable and the insolvency notice is set aside.

In the result, the petition is allowed as prayed for.