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Kant v Patel [2013] FJMC 368; Bankruptcy Action 69.2013 (26 September 2013)

IN THE MAGISTRATE’S COURT
AT SUVA
CENTRAL DIVISION
REPUBLIC OF FIJI ISLANDS

Bankruptcy Action No.69 of 2013

Re: Rajni Kant
Applicant/Judgment Debtor

Ex Parte: Ramesh Patel and Devanesh Sharma
trading as R Patel Lawyers
Respondent/Judgment Creditor

Applicant/Judgment Debtor: Mr. Niubalavu (M A Khan, Esquire)
Respondent/Judgment Creditor: Mr Pravesh Sharma (R Patel, Lawyers)

Ruling

Introduction

In this matter the Applicant/Judgment Debtor has filed a Notice of Motion and Affidavit seeking an order that any action or other legal process against the judgment debtor including the Bankruptcy Notice dated 9th July 2013 together with the Creditors Petition dated 22nd July 2013 be set aside and stayed permanently and any other relief as the Court thinks just. The Respondent/Judgment Creditors had earlier filed a request for issue of Bankruptcy Notice together with a Bankruptcy Notice, Creditors Petition and an Affidavit Verifying Creditors Petition.

Parties were given time to file submissions on the application before this Court. Both sides have made written submissions, which this Court has considered. Both parties also made oral submissions at the hearing.

The Law

The relevant law dealing with this matter is the Bankruptcy Act. Some of the relevant provisions of the Bankruptcy Act are as follows:

“Proceedings and order on creditor's petition

7.-(1) A creditor's petition shall be verified by affidavit of the creditor, or of some person on his behalf having knowledge of the facts, and served in the prescribed manner.

(2) At the hearing the court shall require proof of the debt of the petitioning creditor, of the service of the petition, and of the act of bankruptcy, or, if more than one act of bankruptcy is alleged in the petition, of some one of the alleged acts of bankruptcy and, if satisfied with the proof, may make a receiving order in pursuance of the petition.

(3) If the court is not satisfied with the proof of the petitioning creditor's debt, or of the act of bankruptcy, or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause no order ought to be made, the court may dismiss the petition.

(4) When the act of bankruptcy relied on is non-compliance with a bankruptcy notice to pay, secure or compound for a judgment debt, or sum ordered to be paid, the court may, if it thinks fit, stay or dismiss the petition on the ground that an appeal is pending from the judgment or order.

(5) Where the debtor appears on the petition, and denies that he is indebted to the petitioner, or that he is indebted to such an amount as would justify the petitioner in presenting a petition against him, the court, on such security (if any) being given as the court may require for payment to the petitioner of any debt which may be established against him in due course of law, and of the costs of establishing the debt, may, instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt.

(6) Where proceedings are stayed, the court may, if by reason of the delay caused by the stay of proceedings or for any other cause it thinks just, make a receiving order on the petition of some other creditor, and shall thereupon dismiss, on such terms as it thinks just, the petition in which proceedings have been stayed as aforesaid.

(7) A creditor's petition shall not, after presentation, be withdrawn without the leave of the court.

Power to stay pending proceedings

11.-(1) The court may, at any time after the presentation of a bankruptcy petition, stay any action, execution or other legal process against the property or person of the debtor, and any court in which proceedings are pending against a debtor may, on proof that a bankruptcy petition has been presented by or against the debtor, either stay the proceedings or allow them to continue on such terms as it may think just.

(2) Where the court makes an order staying any action or proceedings, or staying proceedings generally, the order may be served by sending a copy thereof, under the seal of the court, by post to the address for service of the plaintiff or other party prosecuting such proceeding.

Power to stay proceedings

105. The court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to such conditions as the court may think just.”

The Submissions

This Court has considered the written submissions. In brief they made the following oral submissions.

The Applicants basic argument is that they have defence on merits to set aside the bankruptcy petition and they rely on the provisions of the Bankruptcy Act. The Court has unfettered discretion to set aside the petition (FDB v Isireli Cama). The Applicants further contention is that the JDR has assets and sufficient reasons.

In summary the Respondent has submitted that there is no stay in the High Court and the Applicant did not apply for a stay of the Judgment in the High Court and as there is no stay the Applicants cannot go into the merits of the case. The application before the High Court is setting aside and the judgment has not been appealed. As the Applicant is trying to get the Judgment set aside Section 7 (4) of the Bankruptcy Act does not apply. The Respondent has not showed more money than that owed for the Court to set aside the Petition.

Analysis

Following the Judgment of the High Court in favour of the Judgment Creditor (JCR) on the 1st of July 2013. The JCR filed the Bankruptcy Notice in this Court and this was also followed by the filing of the Creditors Petition and the Affidavit Verifying the Creditors Petition. The JCR has complied with the procedural requirements of the Bankruptcy proceedings in this Court.

The JCR has come to this Court with a Judgment of the High Court against the Applicant/JDR. No appeal of that Judgment is on foot and neither has a stay been granted for that matter by the High Court. The Court is informed that he Applicants are seeking to set aside the Judgment in the High Court. No appeal is pending. Therefore Section 7 (4) of the Bankruptcy Act is not applicable in this case.

This Court has powers under Section 105 of the Bankruptcy Act “...at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to such conditions as the court may think just.” This Court will read this provision together with what the Fiji Court of Appeal stated in March v Bank of Hawaii [2000] FJCA 47; [2000] 1 FLR 230 (10 October 2000) – “On the authorities, the Court `does not make a practice of depriving a successful litigant of the fruits of his litigation, and locking up funds to which prima facie he is entitled, pending an appeal' (The Annot Lyle (1886) 11 PD, At 116 C.A), Monk v Bartram [1891] UKLawRpKQB 15; (1891) 1 Q. B. 346). However, `when a party is appealing exercising his undoubted right of appeal, this Court ought to see that the appeal, if successful, is not nugatory'. [Wilson v Church (No.2) (1879) 12 Ch.D at Pp.458, 459 C.A.] So, 'without the very strongest grounds' the Court will not make an order 'the possible effect of which would be to render nugatory, even for a time, a judgment of the High Court'. (McBride v Sandland [1918] HCA 59; 25 C.L.R. 369 at 374).

The grant or refusal of a stay is a discretionary matter for the Court [A.G. v Emberson (1889), 24 QBD pp 58. 59]. It will be granted where the special circumstances of the case so require. There has to be sound reasons sufficient to justify the Court in suspending the rights of the successful party. In exercising its discretion the Court will look at the facts and circumstances which led to the judgment. The balance of convenience has also to be looked at as well as the competing rights of the parties before it,..."

Having noted Section 105 and the case law in March v. Bank of Hawaii this Court finds that there is no evidence of any stay of execution of the judgment obtained by the JCR and similarly the JDR has not secured the debt or attempted to satisfy this Court that he has a counterclaim set off or cross demand against the JCR. The JCR are entitled to the fruits of their litigation. There are no sound reasons for this Court to suspend or put on hold the rights of the JCR who is armed with a Judgment of the High Court. There is no appeal on foot. As there is no appeal on foot the issue does not arise of the success or otherwise of that appeal. This Court has also not been shown that the JDR has the funds to pay the JCR or clear the debt. Given the fact that there is no appeal on foot to support the JDR's position the balance of convenience test favours the JCR as they are entitled to the fruits of their litigation. This Court sees no reason why the JCR should wait any longer given the fact they have a judgment of the High Court.

This Court for the reasons given herein dismisses the application for stay by the JDR and being satisfied that the JCR has complied with the Bankruptcy Act grants a receiving order against the JDR.

Orders
This Court Orders as follows:

(a) Application for stay of Bankruptcy Proceedings is dismissed.
(b) Receiving Order against the Applicant/Judgment Debtor.
(c) Costs $500.00 to the Respondent/Judgment Creditor.

Chaitanya Lakshman
Resident Magistrate

26th September 2013