Anuj Mangal vs Integrated Capital Services

Rajesh Tandon, J.—Heard Sri Anil K. Joshi, Counsel for the appellant and Sri Pankaj Kaushik, Counsel for the respondent.

By the present First Appeal filed under section 75 (2) of the Provincial Insolvency Act 1920, the appellant has prayed for setting aside the judgment and decree dated 18.5.2007 passed by the Additional District Judge/IV Fast Track Court, Haridwar in Insolvency Petition No. 3 of 2000 Anuj Kumar Mangal v. M/s. Integrated Capital Services, whereby the petition for declaring the appellant as insolvent has been dismissed.

Briefly stated, an Insolvency Petition was filed by the plaintiff/appellant being Insolvency Petition No. 3 of 2000 Ann] Kumar Mangal v. M/s. Integrated Capital Services praying to the following effect:

According to the plaintiff/appellant, he is under a debt of Rs. 4,94,217.95 including interest to the respondent. The plaintiff is a labourer and prior to it he used to trade the shares, wherein he suffered heavy loss and became bankrupt and at present, he has no property to be attached. Plaintiff has further submitted that the defendant has filed a case in the Court in order to recover the money and to arrest the plaintiff and in collusion with the Police Authorities, he wants to get the plaintiff arrested. It has further been stated that the plaintiff is not in good health and mostly remains ill. It has further been stated that he is living separately and none of the family member is residing with him. Thus, the plaintiff is liable to be declared as insolvent.

The respondent has filed a written statement Paper No. 19 Ga denying the averments contained in the insolvency petition. It has been stated that the petition has been filed on wrong facts and is without any basis. It has further been stated that the plaintiff is still involved in trading of shares and is not a labourer. It has been stated that the plaintiff is involved in the trading of shares with his friend Gaurav Mittal P.W. 2 in the name of Ganesh Investment Company and against him a case had been filed being A.M. No. 34 of 1997 M/s Integrated Capital Services Limited v. M/s Ganesh Investment Company before the Sole Arbitrator Arvind Bhide, National Stock Exchange India Limited and 8.10.1997 the award was passed for a sum of Rs. 3,93,003.20 along with interest for a period 8.11.1997 to 14.4.1999 which comes to Rs. 1,01,211/i.e. a total sum of Rs. 4,94,217.95 and Execution Case No. 3 of 1999 is under consideration. It has further been stated that the plaintiff trades in lacks and lives in his house along with his family at Mohalla Jharan, Jwalapur.

Towards the documentary evidence, the plaintiff has filed per list 44 Ga true copy of the plaint of Civil Suit No. 10 of 1992 Paper No. 45 Ga/1 to 45 Ga/3, copy of the application of Civil Suit No. 10 of 1992 under Order 22, Rule 2 of Code of Civil Procedure Paper No. 46 Ga/1 to 46 Ga/2, certified copy of the order dated 23.1.2002 Paper No. 47Ga, original of the Power of Attorney Paper No. 48 Ga and per list 75Ga copy of the assessment Paper No. 77 Ga. Towards the oral evidence, Anuj Kumar Mangal, Mahesh Kumar and Daya Ram have been examined as P.W. 1, P.W. 2 and P.W. 3 respectively.

Towards the documentary evidence, the defendant/respondent has filed per List 26Ga copy of execution case No. 27Ga/l to 27Ga/2, per list 37 Ga certified copy of the sale deed Paper No. 38 Ga/1 to 38Ga/4, per list 65 GA certified copy of the application sent to the Executive Officer Paper No. 66Ga, certified copy of the affidavit of Ankur Kumar Paper No. 67Ga, certified copy of the tax assessment for the year, 2000 Paper No. 68 Ga, certified copy of the tax assessment for the year, 2001 Paper No. 69 Ga and certified copy of the tax assessment Paper No. 70 Ga. Towards the oral evidence, Sri O.P. Gulati has been examined as D.W. 1.

The Court below after taking into consideration the entire evidence available on record has come to the conclusion that the petition has no force in order to declare Sri Anuj Kumar Mangal as insolvent. Relevant portion of the judgment is quoted below:

A perusal of the record shows that Pankul Kumar has given an application Paper No. 66 Ga for mutation of his name after getting the Will in his favour, but the Will mentioned above has not been filed with the record. It is also important that the Anuj Kumar Mangal had sold of the land of his share to Sri Mahesh Kumar and Sanjay Kumar through registered sale deed dated 28.8.2002 Paper No. 38 Ga. The execution of this sale deed has been admitted by the P.W. 1 in his cross examination. It is also important that the said sale deed has been executed by the plaintiff after filing the Insolvency Petition, which means that Sri Anuj Kumar Mangal was having the property during the pendency of the Insolvency Petition.

Counsel for the appellant has submitted that the Court below has failed to appreciate that O.P. Fulati claiming himself to be the Director of the respondent company has deposed before the Court below that he is Advocate by profession as such his statement that he is the Director of the Company is false and his statement can be taken into consideration. Further it has been submitted that the Trial Court has failed to consider that the property, which was in the name of the appellant''s mother, has already been mutated in the name of Pankul Kumar on the basis of Will and the appellant has no right and interest over that property. It has further been argued that the property which has been sold by the appellant was joint family property and the other owners have given power of attorney to sell the property and the sale consideration has already been received by the coowners and the share of the appellant amounting to Rs. 15000/ has been received much earlier and this fact has been deposed by the purchaser of the property before the Court below.

2008 (72) A. MANGAL v. M/s. INTEGRATED CAPITAL SERVICES (UTT., H.C.) 423

Sale consideration for the property sold by the plaintiff has already been received by him. It has further been stated that the property had already been transferred at the time when the plaintiff became bankrupt.

Counsel for the appellant has submitted that section 291 of the Companies Act provides that in order to file a case or to defend a case on behalf of the Company, there must be a resolution authorizing the person to defend the case on behalf of the Company, but in the present case there is no resolution on record authorising Sri O.P. Gulati to defend the case on behalf of the Company. He has referred M/s. Nibro Limited v. National Insurance Company AIR 1991 Delhi 25, where the Delhi High Court has observed as under:

"23. On the analysis of the judgments, it is clear that Order 29, Rule 1of the Code of Civil Procedure does not authorize persons mentioned therein to institute suits on behalf of the corporation. It only authorises them to sign and verify the pleadings on behalf of the corporation.

In my view, the provision of Companies Act, 1956 and particularly sections 14, 26, 28, Schedule I Table A and section 291 are very clear.

It is wellsettled that under section 291 of the Companies Act except where express provision is made that the powers of a Company in respect of a particular matter are to be exercised by the Company in general meeting in all other cases the Board of Directors are entitled to exercise all its powers. Individual Directors have, such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the Court will not un suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has farreaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the Company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.

Chapter IV of the Delhi High Court (Original Side) Rules deal with the question of presentation of suits. Under this Rule, suit can be presented by a duly authorized agent or by an advocate duly appointed by him for the purpose. This authorization, in my view, in the case of a Company can be given only after a decision to institute a suit is taken by the Board of Directors of the Company. The Board of Directors may in turn authorize a particular Director, Principal Officer or the Secretary to institute a suit."

D.W. 1 Mr. O.P. Gulati in his statement has stated as under:

As will appear from the aforesaid, the defendant was the Director of M/s Capital Integrated Capital Services and in my opinion, a Director is fully entitled to file a suit.

On the other hand, Counsel for the respondent has referred section 7 and 13 of the Provincial Insolvency Act, 1920, stating therein that the ingredients of section 7 and 13 are not justified in order to enable him to claim the relief under the Provincial Insolvency Act. Sections 7 and 13 of the Insolvency Act read as under:

"7. Petition and adjudication. Subject to the conditions specified in this Act, if a debtor commits an act of insolvency, an insolvency petition may be presented either by a creditor or by the debtor, and the Court may on such petition make an order (hereinafter called an order of adjudication) adjudging him an insolvent.

Explanation. The presentation of a petition by the debtor shall be deemed an act of insolvency within the meaning of this section, and on such petition the Court may make an order of adjudication.

Contents of petition. (1) Every insolvency petition presented by a debtor shall contain the following particulars, namely:

(a) a statement that the debtor is unable to pay his debts;

(b) the place where he ordinarily resides or carries on business or personally works for gain, or, if he has been arrested or imprisoned, the place where he is in custody;

(c) the Court (if any) by whose order he has been arrested or imprisoned, or by which an order has been made for the attachment of his property, together with particulars of the decree in respect of which any such order has been made;

(d) the amount and particulars of all pecuniary claims against him, together with the names and residence of his creditors so far as they are known to, or can by the exercise of reasonable care and diligence be as certained by him;

(e) the amount and particulars of all his property, together with:

(i) a specification of the value of all such property not consisting of money;

(ii) a place or places at which any such property is to be found; and

(iii) a declaration of his willingness to place at the disposal of the Court all such property save insofar as it includes such particulars (not being his books of account) as are exempted by the Code of Civil Procedure, 1908 (5 of 1908), or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree;

(f) a statement whether the debtor has on any previous occasion filed a petition to be adjudged an insolvent, and (where such a petition has been filed):

(i) if such petition has been dismissed, the reasons for such dismissal,

or

(ii) if the debtor has been adjudged and insolvent, concise particulars of the insolvency, including a statement whether any previous adjudication has been annulled and, if so, the grounds therefor.

(2) Every insolvency petition presented by a creditor or creditors shall set forth the particulars regarding the debtor specified in clause (b) of subsection (1), and shall also specify:

(a) the act of insolvency committed by such debtor, together with the date of its commission; and

(b) the amount and particulars of his or their pecuniary claim, or claims against such debtor."

As will appear from the application itself that no statement has been furnished regarding the inability to pay the amount by the debtor in order to claim the benefit of section 13 of the Act.

Further Counsel for the respondent has referred Yenumula Malludora v. Peuri Seetharathnam and others AIR 1966 SC 918 (V 53 C 173), where the Apex Court has observed as under:

"(7) The next question is whether the Subordinate Judge should have exercised his discretion under section 25 to dismiss the petition of the creditors treating the deposit of the money as sufficient cause. Section 25 of the Provincial Insolvency Act is in wide terms but it is impossible to give effect to those wide terms so as to confer a jurisdiction to ignore an act of insolvency at least in cases where the debtor continues to be heavily indebted and there is no proof that he is able to pay his debts. The section reads as follows:

"25. Dismissal of petition. (1) In the case of a petition presented by a creditor, where the Court is not satisfied with the proof of his right to present the petition or of the service on the debtor of notice of the order admitting the petition, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts, or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition."

Further, the plaintiff/appellant is not fulfilling the contents of the petition as provided in section 13 of the Provincial Insolvency Act as he has not filed any genuine statement, which can establish that the plaintiff/appellant has actually become insolvent. Further the plaintiff/appellant has not filed signed receipts, whereby he has taken loan from various creditors.

I have gone through the judgment passed by the Court below and record. While dismissing the suit of the plaintiff, the Court below has taken into consideration the sale deed of the property, which had been executed by the appellant/plaintiff on 28.2.2002 i.e. after the filing of the Insolvency Petition. Further along with the affidavit filed by Mahesh Kumar P.W. 2, no documentary proof has been filed, which can establish that the appellant had taken so much rupees and could not pay the same. Further D.W. 1 has submitted in his statement that the daughter of the appellant is studying in M.C.A. Roorkee in payment seat for which he must be paying a huge amount and again he has submitted that a small piece of land was sold by the plaintiff/appellant on 28.8.2002 for a sale consideration of Rs. 90,000/. It has further been stated that there is a property of the plaintiff at Mohalla Kashwagan Jwalapur, which costs Rs. 20,00,000/, which is in the name of his father Jagdish Kumar Gupta. It has further been stated that there is a property at Mohalla Pull Jatwala Jwalapur in Khata No. 114/104 in the name of plaintiffs mother, which contains twelve shops, which costs Rs. 30,00,000/ and the income which comes from those shops are collected by Anuj Kumar.

In view of the above, I do not find any infirmity or illegality in the judgment and decree passed by the Court below and the same deserves to be confirmed.

Consequently, First Appeal is dismissed. No order as to costs.