Sanjiwan Sahni vs Citi Bank

Y.K. Sabharwal, J.

(1) In R.F.A. (OS) 20/82, on 8/04/1983, a consent decree was passed in favor of Citi Bank, N.A. respondent herein and against Sanjiwan Sahni and others. Sanjiwan Sahni agreed to become surety u/s 145, CPC and the consent order provides that he will be jointly and severally liable Along with the other judgment debtors for the amount of the decree. Para 3 of the application containing terms of the consent decree reads as under :

"SH.Sanjiwan Sahni son of late Shri Sita Ram Sahni, residentofA-2,Maharani Bagh, New Delhi, hereby stands surety to this Court u/s 145 CPC for payment of the amount of the decree with the condition that execution against him will be filed atleast nine months after the execution has been filed against M/s.Forgings Pvt. Ltd. except with respect to this nine months time lag provided under this clause. Shri Sanjiwan Sahni will be jointly and severally liable Along with other judgment debtors for the amount of the decree."

(2) According to the respondent Sanjiwan the payment in terms of the decree was not made. The Bank gave notice u/s 6(2) of Provincial Insolvency Act to the petitioner in October, 1984 and thereafter the insolvency petition was filed by the respondent against Sanjiwan Sahni.The insolvency petition seems to have been filed sometime in the year 1984.Sometimes in the year 1989 an application under Order 6 Rule 17 read with Section 151 CPC was filed by the petitioner seeking amendment of his reply to the insolvency petition. The said application was dismissed by the Insolvency Judge on 6/01/1990. inter alia. holding that the amendment sought for appears to be most malafide and has been filed to delay the proceedings .The appeal filed by the petitioner was dismissed by the Additional District Judge on 1/12/1990. Now the petitioner is before this Court in this revision petition.

(3) The petitioner has sought amendment so as to incorporate in the reply the plea to the following effect :

"THE petitioner in C.A. No. 744/87 filed before the Ld.Company Judge of the Delhi High Court at New Delhi made an unequivocal statement that the petitioner will not execute the decree against the principal debtor i.e. M/s. Forgings Private Limited. The petitioner having agreed with the principal debtor not to execute the decree against the principal debtor, the respondent has been legally discharged of his liability under the decree and the decree, as such, has become unexecutable against the respondents. The petitioner in view of the statements referred to hereinabove has become disentitled to proceed with the insolvency proceedings initiated against the respondent and the insolvency petition is liable to be dismissed. The petitioner is obliged in law to first attempt to recover the decretal amount from the mortgaged property/charged properties and it is only in the event of the recovery being not made from the principal debtor and mortgaged properties that the decree holder can proceed with the execution and seek to recover the decrial amount from the respondents, who was stated to be a surety within the contemplation of Section 145 of C.P.C."

(4) The plea that the decretal amount shall be first recovered from the principal debtor and then alone the surety should have been proceeded is against the terms of the consent decree which provides that the petitioner will be jointly and severally responsible Along with the other judgment debtors .In State Bank of India Vs. Messrs. Indexport Registered and others, the Supreme Court has held that decree-holder can execute the decree against the guarantor without proceeding against the mortgaged property and that the liability of the guarantor is co-extensive with that of the principal debtor. The amendment is, therefore unnecessary.

(5) Reverting now to the first part of the amendment sought for it would be useful to reproduce the order made on C.A. 744/87 on 24/07/1989 as also orders made on 12/09/1989 an C.A. 4153/89. These orders read as under :

"24.7.89C.A.744/87Citi Bank of India has filed the present application u/Sec.446 of the Companies Act, 1956 read with Section 151 of C.P.C.thereby seeking leave of this Court to proceed with the execution Case No. 1 /84 now pending on the Original Side of this Court. I have been informed that the case of the respondent-company is being considered by the Board for Financial and Industrial Reconstruction constituted under the Sick Industrial Companies( Special Provisions )Act. 1985. Learned Counsel for the applicant submits that as the matter is pending before the Board for the time being the applicant wants to execute the decree against the other judgment debtors other than the respondent-company. C.A. stands disposed of. 24/07/1989. Sd/- S.N. Sapra, J."

"12-9-1989C.A.5153/89The present application has been filed by Smt. Satish Sondhi,respondent No. 2 u/s 446 of the Companies Act, 1956and Order 47 of the Code of Civil Procedure, thereby seeking review of the order passed by this Court on 24/07/1989 inC.A. No. 744 of 1987.The Citi Bank N. A. filed an application being C.A.No. 744/87 thereby seeking leave of this Court to proceed with the execution Case No. 1 of 1984 which was then pending on the original side of this Court. Vide my order dated 24/07/1989, I granted permission to the Citi Bank N.A. to execute the decree against the Judgment debtors other than the Company. Learned Counsel for applicant submits that the order passed by this Court, is being interpreted in a way, which will deprive the guarantor of their right to file objections to the execution of the decree. Moreover, the permission to execute a decree is required only against the company not the other persons. As far as my order is concerned, that is very clear. What I meant was that the Bank could not execute the decree against the company .The Bank was at liberty to execute or not to execute the decree against the other judgment debtors. With this clarification C.A. 4153 of 1989 stands disposed of.12-9-89 Sd/- S.N. Sapra, J."

(6) The aforequoted order on C.A. 744/87 shows that the bank did not make a statement that it will not execute the decree against the principal debtor as sought to be pleaded by the petitioner by amendment. What was stated by Counsel for the Bank and recorded in the order dated 24/07/1989 is that as the matter is pending before the Board for Industrial and Financial Reconstruction constituted under the Sick Industrial Companies(Special Provisions) Act. 1985 the bank for the time being wants to execute the decree against the other judgment debtors and that it will not execute the decree against the bank. Under these circumstances permission was granted to the bank to execute the decree against the judgment debtors other than the company. The order dated 12/09/1989 is only clarificatory in nature as it borne from a bare reading of the order.

(7) Learned Counsel for the petitioner places strong reliance on a decision of the Supreme Court in The State of Punjab Vs. S. Rattan Singh, holding that the Insolvency Court is not precluded by Section Ii from enquiring into the question whether the alleged debtor was really a debtor and liable to pay sums said to be payable by him. Reliance is placed on this decision to support the argument that the Insolvency Court, has wide power and it can both at the time of hearing the petition for adjudication of a person as insolvent and subsequently at the stage of proof of debt reopen the transaction on the basis of which the creditor had secured the judgment of a Court against the debtor. There can be no quarrel with the aforesaid proposition in regard to the powers of the Insolvency Court. but it has no applicability to the present case. The amendment sought for is based on the order passed on 24/07/1989 on the basis of statement made by Counsel for the bank and the misreading of the said statement by The petitioner, to put it mildly. I may also notice another aspect of the cited decision .The Supreme Court has also held that a decree is binding only on the parties in the suit in which the judgment was decreed but the said binding effect is only to be respected by the Insolvency Court in circumstances where nothing is reasonably alleged against the correctness of the judgment debt. The Supreme Court further proceeds to opine that Insolvency Court has jurisdiction to re-open such debts and will do so when such debts have been obtained by fraud, collusion or any circumstances indicating that there might have been miscarriage of justice. The present case does not fall in any of the categories. It is not the case of the petitioner that the decree dated 8/04/1983 was obtained by fraud or collusion. Reference to Sections 134 and 135 of the Contract Act, in the context of the present case, is also misconceived. This amendment sought for is also unnecessary.

(8) For the reasons stated above, I concur with the view expressed by the Courts below that the amendment application is malafide and has been filed to delay the proceedings. The amendment sought for is wholly unnecessary for deciding the subject matter of controversy in the insolvency petition .There is no ground to interfere in this petition. The petition is, accordingly ,dismissed leaving the parties to bear their own costs.