Presidency Towns Insolvency Act, 1909 – s.9(2) – Recovery of Debts and Bankruptcy Act – s.19(22A) – One ‘BDL’ availed credit facilities from a consortium of 15 banks, including the Appellant-Bank – The facilities were secured by mortgage through deposit of title deeds, and the original respondentDirector of ‘BDL’, along with other directors, executed personal guarantees – Upon default, and after the invocation of personal guarantees failed, Appellant-Bank approached DRT which directed issuance of a recovery certificate against the original respondent, followed by a recovery certificate in 2004 – Based on the recovery certificate, the Insolvency Registrar issued an insolvency notice u/s.9(2), Insolvency Act – Notice challenged by respondent contending that a recovery certificate of the DRT could not form the basis of an insolvency notice – Single Judge held that no insolvency notice could have been issued on the basis of a recovery certificate – Order upheld by Division Bench – Challenge to – Appellant-Bank contended that s.19(22)A, RDB Act, included vide an amendment in 2016, explicitly provides that a recovery certificate issued by a DRT is deemed to be a decree of the Court for the purpose of initiation of insolvency proceedings under any law:
Held: Insertion of sub-section (22A) in s.19 of the RDB Act instead of supporting the Appellant-Bank demolishes its case – s.19(22A), as it now stands, aids in settling the issue – The fact that Parliament found it necessary in 2016 to insert subsection (22A) in s.19 of the RDB Act for the express purpose of equating a recovery certificate with a ‘decree or order’ is clear legislative recognition that such equivalence did not exist earlier – By necessary implication, a recovery certificate issued prior to the 2016 amendment could not form the basis for initiating insolvency proceedings – To hold otherwise would be to supply what the legislature omitted- a clear casus omissus – Moreover, the amendment has not been given retrospective effect – The issue herein must be decided on the basis of the law as it stood when the litigation commenced – A claim which was untenable on the date the suitor entered the portals of the Court cannot become tenable simply because a fortuitous event during the pendency of the trial has made it so – The lis must be decided on the basis of rights and liabilities as they stood on the date of institution, unless the statute or equity of the case otherwise requires – s.19(22A) of the RDB Act does not aid the AppellantBank – Appeal dismissed. [Para 14, 15, 18, 19, 23] Words and Phrases – Recovery of Debts and Bankruptcy Act – s.19(22A) – “recovery certificate issued by … under … shall be deemed to be decree or order for … initiation of … insolvency proceedings … under any law for the time being force …”:
Held: Respondents are also right in pointing out that s.19(22A), even if it were to apply on its very terms, the Appellant-Bank is not entitled to any relief – The phrase “recovery certificate issued by … under … shall be deemed to be decree or order for … initiation of … insolvency proceedings … under any law for the time being force …” has been emphasised in support of the proposition that the stage of initiation of proceedings did not fructify because the notice of insolvency itself, issued u/s.9(2) of the Insolvency Act, stood quashed by the High Court. [Para 22] Relief – Rights of the parties stand crystallized on the date of commencement of litigation:
Held: The right to relief must be judged to exist as on the date a suitor institutes the legal proceeding – The right of a party is determined by the facts as they exist on the date the action is instituted – Granting the presence of such facts, then he is entitled to its enforcement – Later developments cannot defeat his right because, had the court found his facts to be true the day he sued he would have got his decree – The Court’s procedural delays cannot deprive him of legal justice or right crystallised in the initial cause of action – Presidency Towns Insolvency Act, 1909 – s.9(2). [Para 16]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey the principle underlying the insolvency law seems to be that the death of the insolvent during the pendency of the application for insolvency does not cause the proceedings to abate but that they must be continued so th. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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