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2017 DIGILAW 1955 (MAD)

Managing Director v. V. K. Akkaiyasamy

2017-07-11

T.RAVINDRAN

body2017
ORDER : 1. Heard both sides. 2. The respondents 1 to 3 had initiated insolvency proceedings against the fourth respondent/debtor in I.P.No.11 of 2000 and it is also noted that the respondents 1 to 3 had also filed I.A.No.32 of 2000 seeking for pro-order of attachment prohibiting the garnishees i.e., civil revision petitioner and the respondents 5 and 6 from disbursing the amount to an extent of Rs.15,00,000/- payable to the garnishees and to direct that the amount to be deposited into the Court. 3. Initially, in the above said application, it is found that the petitioner and the respondents 5 & 6/garnishees had been set ex parte and it is also found that the petition to set aside the ex parte order was also not entertained, as against which it is also found that C.R.P.No.809 of 2006 had been preferred. In the meanwhile it is also noted that the pro-order of attachment was made absolute in the above said proceedings. 4. The Trial Court, on a consideration of the materials placed, dismissed the I.A.No.32 of 2000 on two grounds i.e., the debtor shown in the insolvency petition and shown in I.A.No.32 of 2000 are different and therefore, the respondents 1 to 3 are not entitled to proceed with the properties of the fourth respondent/creditor in the above said proceedings. The second ground on which the application was dismissed is that the garnishees had initiated surcharge proceedings as against the debtor and appropriated the amount and therefore, I.A.No.32 of 2000 is not entitled for acceptance. 5. It is not in dispute that in I.P.No.11 of 2000, the debtor i.e., fourth respondent herein had been declared as insolvent on 18.08.2005. It is also not in dispute that along with the said I.P.No.11 of 2000, the creditors i.e., respondents 1 to 3 had also preferred I.A.No.32 of 2000 seeking for pro-order of attachment prohibiting the garnishees from disbursing the amount of Rs. 15,00,000/- payable to the debtor and for a direction to deposit the said amount into the Court. It is also not in dispute that the initial order of attachment made in the above said I.A.No.32 of 2000 was subsequently made absolute. 6. 15,00,000/- payable to the debtor and for a direction to deposit the said amount into the Court. It is also not in dispute that the initial order of attachment made in the above said I.A.No.32 of 2000 was subsequently made absolute. 6. Originally, it is found that the garnishees had been set ex parte in I.A.No.32 of 2000 and the application to set aside the same was also not entertained and as against which, C.R.P.No.809 of 2006 had been preferred and pursuant to the order in the above said civil revision petition, it is found that finally, I.A.No.32 of 2000 had been disposed of by the Trial Court and the Trial Court had dismissed the said application on the above said two grounds adverted supra. Challenging the same, the respondents 1 to 3/creditors preferred C.M.A.No.18 of 2007 and the Appellate Court had set aside the order of the Trial Court passed in I.A.No.32 of 2000 and thereby entertained the application filed in I.A.No.32 of 2000. Challenging the same, the petitioner/garnishee has preferred the present civil revision petition. 7. As adverted above, on two grounds, the Trial Court had dismissed the application in I.A.No.32 of 2000. As seen from the records, it is noted that the debtor has been described as G. Sivashanmuganathan, Chairman, Green Lands, in both proceedings. Therefore, as rightly putforth by the learned counsel for the respondents 1 to 3/creditors, it is noted that the above mentioned proceedings had been initiated against the said Sivashanmuganathan, in his capacity as the Chairman of Green Lands and in such view of the matter, the findings of the Trial Court that the fourth respondent/debtor is not one and the same in the above said proceedings and hence the respondents 1 to 3/creditors are not entitled to proceed as against the properties of the Green Lands in the hands of the garnishees are unacceptable. As rightly determined by the Appellate Court, the proceedings having been initiated against Sivashanmuganathan, Chairman, Green Lands, in his capacity as Chairman, it is found that the Appellate Court has rightly held that both the proceedings had been initiated against the same person and hence, the petition laid by the respondents 1 to 3/creditors is maintainable. 8. The second reason given by the Trial Court for rejecting I.A.No.32 of 2000 is that the garnishees had debited the amount of Rs.15,00,000/- and odd towards surcharge proceedings, dated 12.09.2005. 8. The second reason given by the Trial Court for rejecting I.A.No.32 of 2000 is that the garnishees had debited the amount of Rs.15,00,000/- and odd towards surcharge proceedings, dated 12.09.2005. As rightly argued by the learned counsel for the respondents 1 to 3/creditors, the fourth respondent/debtor having been declared as insolvent on 18.08.2005 automatically it is found that Section 28 of the Provincial Insolvency Act, 1920 would come into operation. Section 28 (2) of the Provincial Insolvency Act reads as follows: “28 (2) On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Court, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceedings except with the leave of the Court and on such terms as the Court may impose.” 9. It is also found that as per Section 28(7) of the above said Act, an order of adjudication shall relate back to and take effect from the date of the presentation of the petition on which it is made. 10. The case in hand when dealt in conjunction with the above said provision of law, it is found that the fourth respondent/debtor having been declared as insolvent on 18.08.2005, and the said order of adjudication should relate back to or take effect from the date of the presentation of the petition on which, it is made and when it is found that I.A.No.32 of 2000 had been laid or presented on 14.02.2000, the surcharge proceedings initiated by the garnishees, dated 12.09.2005, without the leave of the Insolvency Court would be illegal and not maintainable. It is mandatory on the part of the creditors to whom the property of insolvent is vested to seek the leave of the Insolvency Court before commencement of any proceedings as against the properties of insolvent. It is mandatory on the part of the creditors to whom the property of insolvent is vested to seek the leave of the Insolvency Court before commencement of any proceedings as against the properties of insolvent. In such view of the matter, when the fourth respondent/debtor had been admittedly declared as insolvent in I.P.No.11 of 2000 on 18.08.2005 and the said order being effective from the date of presentation of the petition, it is found that the surcharge proceedings initiated by the garnishees on 12.09.2005 without the leave of the Insolvency Court is not legal and therefore, it cannot override the rights of the respondents 1 to 3/creditors in taking action against the properties of the fourth respondent/creditor pursuant to the orders obtained by them in the insolvency proceedings. 11. The Appellate Court has rightly found that the failure of the garnishees in seeking the leave of the Insolvency Court before initiating surcharge proceedings is against law and therefore, the Appellate Court has held that the surcharge proceedings initiated by the garnishees is void and non-erst in the eye of law. In the light of the provisions of the Provincial Insolvency Act, 1920 as adverted above, it is found that the Appellate Court has rightly held that the surcharge proceedings has no legal force and binding upon the respondents 1 to 3/creditors. 12. In the light of the afore-mentioned reasons, the two grounds on which the Trial Court had rejected I.A.No.32 of 2000 being found to be incorrect and against the provisions of law and the same having been rightly set aside by the Appellate Court and in such view of the matter, the Judgment of the Appellate Court does not call for any interference from this Court. 13. Accordingly, the civil revision petition is dismissed with costs. Consequently, connected miscellaneous petition is closed.