Summary
A recovery certificate issued by a Debts Recovery Tribunal before the 2016 insertion of Section 19(22A) in the RDB Act is not a 'decree or order' on which an insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909. Following Paramjeet Singh Patheja v. ICDS Ltd., and holding that the prospective 2016 amendment confirms the earlier position, the Court dismissed the bank's appeal.
Issues
- Whether an insolvency notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909 can be founded on a recovery certificate issued by a DRT under the RDB Act as it stood before 2016.
- Whether Section 19(22A) of the RDB Act, inserted in 2016, assists a creditor whose insolvency notice was issued before the amendment.
Provisions considered
- Section 9(2), Presidency Towns Insolvency Act, 1909The phrase 'decree or order' in Section 9(2) was construed strictly, given the grave consequences of insolvency, and in the sense of the CPC definitions; it does not include a pre-2016 DRT recovery certificate, so the insolvency notice could not be issued on it. (¶¶ 1, 2, 3, 10, 11, 12, 20)
- Section 2(2) and Section 2(14), Code of Civil Procedure, 1908Applied through Paramjeet Singh Patheja: 'decree or order' in the Insolvency Act takes its meaning from the CPC definitions, which presuppose adjudication by a court. (¶ 11)
- Section 19(22A), Recovery of Debts and Bankruptcy Act, 1993The 2016 insertion deeming a recovery certificate to be a decree or order for initiating insolvency proceedings was read as legislative recognition that no such equivalence existed earlier; it is not retrospective and, in any event, the insolvency notice had already been quashed so no proceedings had been initiated. (¶¶ 13, 14, 19, 22)
Held
- The ratio of Paramjeet Singh Patheja rests on a wider principle than arbitral awards: the Insolvency Act must be strictly construed; 'decree or order' must be read in light of the CPC definitions; and an insolvency notice is not a mode of executing a debt. A DRT recovery certificate issued under the pre-amended RDB Act is therefore not a 'decree or order' under Section 9(2). (¶¶ 10, 11, 12, 20)
- That recovery certificates only came into existence after the RDB Act in 1993, unlike arbitral awards which predated the Insolvency Act, makes no difference in view of the wider ratio. (¶ 12)
- Parliament's insertion of Section 19(22A) in 2016 to equate a recovery certificate with a decree or order shows that the equivalence did not exist before; reading it into the earlier law would supply a casus omissus, and the amendment was not made retrospective. (¶ 14)
- Rights of parties crystallise on the date of institution of the proceedings; just as later events cannot defeat a valid claim, a claim untenable when filed does not become tenable because of a fortuitous change during pendency, unless the statute or equity requires otherwise (Rameshwar v. Jot Ram; Beg Raj Singh). (¶¶ 15, 16, 17, 18, 19)
- Even on its own terms Section 19(22A) would not help, since the deeming operates for initiation of insolvency proceedings and the insolvency notice itself stood quashed. (¶ 22)
- Paramjeet Singh Patheja, though once doubted, was held by a three-Judge Bench in 2015 not to require reconsideration. (¶ 21)
Result
Appeal dismissed; notice of motion before the Single Judge, if pending, closed qua the deceased original respondent; the bank left free to pursue remedies against the other certificate debtors in accordance with law, if not barred.