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2013 DIGILAW 3608 (MAD)

M. Joseph Louis Aloysius v. J. J. Mohan

2013-10-07

R.SUDHAKAR

body2013
Judgment : 1. This Application has been filed by the Applicant-Debtor under Section 9(5) of the Presidency-Towns Insolvency Act, 1909 to set aside the Insolvency Notice issued by the Respondent-petitioning Creditor in I.N. No.51 of 2012. 2. The facts of the case, in brief, are as follows. The Respondent-petitioning Creditor advanced certain amounts to the Applicant-Debtor and on receipt of the amounts, it appears that the Appellant-Debtor executed three Promissory Notes and, as security for the borrowed amounts, issued three cheques. For non-payment of the borrowed amounts, the Respondent-petitioning Credit filed three Suits before the learned V Assistant Judge, City Civil Court, Chennai and in the Plaint filed in the respective Suit, namely, O.S. No.12363 of 2009, O.S. No.12364 of 2009, O.S. No.12365 of 2009, the cause of action and the nature of relief, as pleaded in Paragraph-7, is as follows: O.S. No.12363 of 2009: “7. The Plaintiff submits that in the circumstances, the present Suit is filed in respect of the Promissory Note dated 6.2.2008 for a sum of Rs.1,00,000/-. The Defendant at the time of borrowing the amount has also handed over to the Plaintiff a Cheque for Rs.75,000/- towards security for the above payment. As on this date, after giving due credit to the interest amount paid by the Defendant till April, 2009, a sum of Rs.1,13,675/- (Rupees one lakh thirteen thousand six hundred and seventy five only) being the principal amount of Rs.1,00,000/- and interest of Rs.13,675/-at the rate of 24% per annum on Rs.1,00,000/- from 1.5.2009 to till the date of Plaint, is due and liable to be paid by the Defendant to the Plaintiff.” O.S. No.12364 of 2009: “7. The Plaintiff submits that in the circumstances, the present Suit is filed in respect of the Promissory Note dated 2.2.2008 for a sum of Rs.50,000/-. The Defendant at the time of borrowing the amount has also handed over to the Plaintiff a Cheque for Rs.51,000/- towards security for the above payment. The Plaintiff submits that in the circumstances, the present Suit is filed in respect of the Promissory Note dated 2.2.2008 for a sum of Rs.50,000/-. The Defendant at the time of borrowing the amount has also handed over to the Plaintiff a Cheque for Rs.51,000/- towards security for the above payment. As on this date, after giving due credit to the interest amount paid by the Defendant till April, 2009, a sum of Rs.56,825/-(Rupees fifty six thousand eight hundred and twenty five only) being the principal amount of Rs.50,000/- and interest of Rs.6,825/- at the rate of 24% per annum on Rs.50,000/- from 1.5.2009 to till the date of Plaint, is due and liable to be paid by the Defendant to the Plaintiff.” O.S. No.12365 of 2009: “7. The Plaintiff submits that in the circumstances, the present Suit is filed in respect of the Promissory Note dated 4.10.2007 for a sum of Rs.1,00,000/-. The Defendant at the time of borrowing the amount has also handed over to the Plaintiff a Cheque for Rs.1,00,000/- towards security for the above payment. As on this date, after giving due credit to the interest amount paid by the Defendant till April, 2009, a sum of Rs.1,13,675/- (Rupees one lakh thirteen thousand six hundred and seventy five only) being the principal amount of Rs.1,00,000/- and interest of Rs.13,675/-at the rate of 24% per annum on Rs.1,00,000/- from 1.5.2009 to till the date of Plaint, is due and liable to be paid by the Defendant to the Plaintiff.” The learned V Assistant Judge, City Civil Court passed decrees in respect of the three claims and based on these decrees, the Insolvency Notice was issued in I.N. No.51 of 2012 stating that the Debtor committed default in payment of the decretal amounts and the Creditor has not received any amount in respect of the decrees. The details of the claim made are as under: Particulars of claim Rs. P. Decree amount in O.S. No.12363 of 2009 Rs.1,13,675.00 Interest due at 24% p.a. on Rs.1,00,000/- from 25.11.209 to 8.8.2012 Rs.79,200.00 Cost of the Suit Rs.10,505.00 Decree copy Rs.10.00 Total amount due Rs.2,03,390.00 Particulars of claim Rs. P. Decree amount in O.S. No.12364 of 2009 from 25.11.2009 to 8.8.2012 Rs.56,825.00 Interest due at 24% p.a. on Rs.50,000/- Rs.39,000.00 Cost of the Suit Rs.7,485.00 Decree copy Rs.10.00 Total amount due Rs.1,03,920.00 Particulars of claim Rs. P. Decree amount in O.S. No.12364 of 2009 from 25.11.2009 to 8.8.2012 Rs.56,825.00 Interest due at 24% p.a. on Rs.50,000/- Rs.39,000.00 Cost of the Suit Rs.7,485.00 Decree copy Rs.10.00 Total amount due Rs.1,03,920.00 Particulars of claim Rs. P. Decree amount in O.S. No.12365 of 2009 Rs.1,13,675.00 Interest due at 24% p.a. on Rs.1,00,000/- from 25.11.209 to 8.8.2012 Rs.79,200.00 Cost of the Suit Rs.10,485.00 Decree copy Rs.10.00 Total amount due Rs.2,03,370.00 3. The Insolvency Notice was issued by this Court on 10.8.2012. on receipt of the said notice, the Debtor, the Applicant herein, moved this Court with the present Application No.28 of 2013 to set aside the Insolvency Notice contending that the Respondent-petitioning Creditor pursued three courses of action, namely, preferred a Private Complaint for an offence under Section 138 of the Negotiable Instruments Act in respect of the three Cheques, filed three suits as referred to above before the City Civil Court based on the Promissory Notes and preferred a Complaint under the Chartered Accountants Act, 1949. It is the case of the Applicant-Debtor that on 7th June, 2012, a sum of Rs.50,000/- was paid by D.D. No.096694 to the Respondent-petitioning Creditor. That was done on a direction by the Appellant Authority under the Chartered Accountants Act, 1949. It is the case of the Applicant that the said amount was paid towards the liability of the Applicant due to the Respondent on the basis of the Promissory Notes, which remained unpaid on that date. It is also to be fairly stated that the Letter issued by the Appellate Authority under the Chartered Accountants Act did not disclose under what head the amount was directed to be paid. Nevertheless, the Applicant pleads that there is no other liability as such, besides the amounts due under the Promissory Notes coupled with the decrees passed by the Civil Court. 4. Mr. J. Balagopal, learned Counsel for the Applicant-Debtor filed a Memo of Calculation dated 28.2.2013 stating that the calculation made in the Insolvency Notice making a claim of Rs.5,10,680/-is an error and has been wrongly calculated by the Respondent-petitioning Creditor. According to him, the correct calculation as pet the decrees, which is not disputed by the Debtor, is Rs.4,66,180/-and the details of which have been given in the annexure to the Memo of calculation, the Respondent, having been served, does not object to the calculation. According to him, the correct calculation as pet the decrees, which is not disputed by the Debtor, is Rs.4,66,180/-and the details of which have been given in the annexure to the Memo of calculation, the Respondent, having been served, does not object to the calculation. In effect, it is the case of the Applicant that the sum due under the three decrees passed by the Civil Court is Rs.4,66,180/-only and therefore, the payment of Rs.5,00,000/-through the Appellate Authority under the Chartered Accountants Act is in full discharge of the claim under the three decrees and therefore, the Insolvency Notice has to be set aside, as there is no liability as on today. 5. Mr. N. Kanagasabai, learned Counsel for the Respondent-petitioning Creditor stated that the amount of Rs.5,00,000/- is admitted. However, the Debtor had failed to mention for what liability the amount was paid and therefore, the Respondent is at liberty to collect the above said amount and even to pursue the claim before the Criminal Court, where he has initiated proceedings under Section 138 of the Negotiable Instruments Act. The learned Counsel also placed reliance upon the provisions of Section 60 of the Indian Contract Act in support of his submission. 6. The provisions of Section 60 of the Indian Contract Act would not enure to the benefit of the Respondent-Creditor for the following reasons. In Paragraph-7 of the Plaint in the respective three Suits, which has been extracted above, there is a clear statement by the Respondent-Creditor that the sums had been borrowed under the Promissory Notes and the cheques were also given towards security. It is therefore for the Respondent to establish his case before the Criminal Court that he is entitled to pursue the claim in respect of the cheques said to have been defaulted. Section 60 of the Indian Contract Act clearly states that the circumstances under which the payment was made is relevant for considering the payment made in discharge of the debt. In the present case, the Insolvency Notice was issued based on the Promissory Notes, against which the Suits were filed and the decrees were obtained. It is also not the case of the Respondent that a different amount other than the one claimed under the Promissory Notes is liable to be paid in the proceedings initiated before the Appellate Authority under the Chartered Accountants Act. It is also not the case of the Respondent that a different amount other than the one claimed under the Promissory Notes is liable to be paid in the proceedings initiated before the Appellate Authority under the Chartered Accountants Act. The entire cause of action for the money claim was based on the Promissory Notes and the three cheques for which proceedings have been initiated before the Criminal Court. Further, the sum of Rs.5,00,000/- received by the Respondent is not in dispute. There is no other material placed by the Respondent to say that he is appropriating the amount at his discretion. On the contrary, the Respondent has not even indicated that he is appropriating the sum of Rs.5,00,000/-towards the claim under the Negotiable Instruments Act, allowing him to pursue the matter before this Court. The statement made in the Insolvency Notice that no amount itself has been received is factually an incorrect statement. Such a plea, in the face of an admitted payment of Rs.5,00,000/-, is not justified. On the reading of the Plaint and the proceedings before the Appellate Authority under the Chartered Accountants Act, the payment of Rs.5,00,000/- clearly established that the Applicant-Debtor had paid the said sum to the Respondent and if the Memo of Calculation is taken as correct, there is a payment in excess of the three decrees passed by the Civil Court. Since the Respondent issued the Insolvency Notice under Section 9(2) of the Presidency-Town Insolvency Act for non-payment of the monies due under the three decrees and the Applicant-Debtor having established his case that he had discharged the amounts in excess of the decrees, the Court is inclined to accept the Applicant’s plea to set aside the Insolvency Notice under Section 9(5) of the Presidency-Towns Insolvency Act. The facts and circumstances of the case clearly indicate that the payment of Rs.5,00,000/-was towards the discharge of the Suit claim and therefore the reliance upon Section 60 of the Indian Contract Act by the Respondent-Creditor does not appear to be correct. The facts and circumstances of the case clearly indicate that the payment of Rs.5,00,000/-was towards the discharge of the Suit claim and therefore the reliance upon Section 60 of the Indian Contract Act by the Respondent-Creditor does not appear to be correct. As the Applicant-Debtor has satisfied the ingredients of Section 9(5)(a) of the Presidency-Towns Insolvency Act, wherein it is stated that any person served with an Insolvency Notice may, within the period specified therein for its compliance, apply to the Court to set aside the Insolvency Notice on the ground that he has a counter-claim or set off against the Creditor which is equal to or is in excess of the amount due under the decree or order and which he could not under any law for the time being in force prefer in the Suit or proceeding in which the decree or order was passed, this Application is allowed and the Insolvency Notice is set aside.