The Hon'ble Sri Justice C.V.Nagarjuna Reddy
Civil Revision Petition No.430 of 2008
19-01-2012
K.Vijaya Bhaskar Reddy
The Official Receiver of Entire Kadapa District,
District Court Compound, Kadapa and another
^Counsel for the petitioner: Mr.V.V.Subrahmanyam for Sri S.V.Bhatt
!Counsel for the respondent: -----
? Cases referred:
1. 1998 (1) ALT 740
2. 1999 (2) ALT 305
3. 1999 (2) ALT 305
Order:
Feeling aggrieved by Order, dated 20-12-2007, in E.P.No.14 of 2007 in OP.No.7 of
2005, on the file of the learned II Additional District Judge, Kadapa at
Proddatur, the present Civil Revision Petition is filed by the petitioner.
The petitioner, who is a mortgagee, secured a decree for recovery of certain
amounts from respondent No.2 in OS.No.7 of 2005. In order to execute the said
decree, the petitioner filed EP.No.14 of 2007. While the said EP was pending,
respondent No.2 instituted insolvency proceedings, under the provisions of the
Provincial Insolvency Act, 1920 (for short 'the Act') in the Court of the
learned Senior Civil Judge, Rayachoty, which was registered as IP.No.5 of 2002.
The Court below, by its Order, which is assailed in this Civil Revision
Petition, closed the EP on the ground that the Insolvency Petition filed by
respondent No.2 is pending and that the petitioner shall appear before the
Court, in which the Insolvency Petition is pending, and make his claim before
the Official Receiver. While so holding, the lower Court has raised the
attachment.
At the hearing, Mr.V.V.Subrahmanyam, learned Counsel, representing Sri
S.V.Bhatt, learned Counsel for the petitioner, submitted that the lower Court
has committed a serious error of jurisdiction in raising the attachment and
closing the EP. He placed reliance on the provisions of Section 28 (6) of the
Act to bring home his submission that, being secured creditor, the petitioner is
entitled to execute the decree obtained by him without reference to the
insolvency proceedings. In support of his submission, the learned Counsel
placed reliance on the judgments of this Court in Kadimsetti Somaraju vs.
Chekker Lakshmi Satyanarayana1, Vasavi and Company vs. Nampally Padma2 and
Kolla Subbaiah vs. Nerella Chandrasekhara Rao3.
At the hearing, there is no representation for respondent No.2-judgment debtor.
Section 28 of the Act deals with the effect of an order of adjudication. This
provision adumbrates that, on the making of an order of adjudication, the whole
of the property of the insolvent shall vest in the Court or in a Receiver, and
shall become divisible among the creditors, and thereafter, except as provided
by the Act, no creditor to whom the insolvent is indebted in respect of any debt
provable under this Act shall during the pendency of the insolvency
proceedings shall have any remedy against the property of the insolvent in
respect of the debt or commence any suit or other legal proceedings, except with
the leave of the Court and on such terms as the Court may impose.
Sub-Section 6 of Section 28, however, carved out an exception in respect to the
right of the secured creditor to realize or otherwise deal with security in the
same manner as he would have been entitled to realize or deal with it if Section
28 has not been enacted.
In the instant case, it is not in dispute that the petitioner is a secured
creditor being a mortgagee. A perusal of decree, dated
16-03-2007, shows that the same is in the nature of a mortgage decree.
Therefore, the petitioner falls within the exception carved out to Section 28 of
the Act. This Court, in the judgments referred to above, has held in no
uncertain terms that a secured creditor is entitled to recover the money payable
under a decree notwithstanding pendency of insolvency petition under the Act.
The Court below has, therefore, committed serious jurisdictional error in
raising the attachment and closing the EP.
In the premises as above, Order, dated 20-12-2007, in E.P.No.14 of 2007 in
OP.No.7 of 2005, on the file of the Court of the learned II Additional District
Judge, Kadapa at Proddutur, is set aside. Consequently, E.P.No.14 of 2007
stands restored to file. The lower Court is directed to proceed with the EP
regardless of the pendency or outcome of the Insolvency Petition filed by
respondent No.2.
Accordingly, the Civil Revision Petition is allowed.
As a sequel, CMP.No.564 of 2008 is disposed of as infructuous.
______________________
(C.V.Nagarjuna Reddy, J)
19th January, 2012
