M. Joseph Louis Aloysius vs J.J. Mohan

R. Sudhakar, J.—This Application has been filed by the Applicant-Debtor u/s 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. 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

Applicant-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 Creditor 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:

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:

The Plaintiff submits that in the circumstances, the present Suit is tiled 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:

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:

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 u/s 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 of June, 2012, a sum of Rs. 5,00,000/- was paid by D.D.

No. 096694 to the Respondent-petitioning Creditor. That was done on a direction by the Appellate 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.

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 per 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.

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 u/s 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. The provisions of Section

60 of the Indian Contract Act would not ensure 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. 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 establishes 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 u/s 9(2) of the Presidency-Towns 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 u/s 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. 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.