Bankruptcy Case Summary 2012

MAUDARBOCUS v MCB 2012 SCJ 17

On 22 February 2006, the applicant was required and summoned by way of a “Bankruptcy Notice” to pay the respondent the sum of Rs 7,024,461.58 cents representing the debit of the applicant’s overdrawn accounts which the applicant had failed to pay to the respondent.

It was further averred in the “Bankruptcy Notice” that should the applicant fail to pay the amount due as required, the respondent would apply to the Bankruptcy Court for an order compelling the applicant “to pay or secure or compound for such debt with interest and costs”.

The applicant had denied being indebted in any sum whatsoever and had objected to the matter being heard by the Bankruptcy Court. On 23 September 2009, the Bankruptcy Court overruled the applicant after the Court had found, from the documentary evidence, that the applicant was liable in respect of two overdrawn accounts in the sum of Rs 10,683,270.89. The Court found that the documents produced in Court disproved the applicant’s unsupported contention that his overdrawn accounts had already been paid. As a result, the Court ordered the applicant to “pay, secure or compound that amount” within a period of 3 months.

The order of the Bankruptcy Court for applicant “to pay, secure or compound his debt” was confirmed on appeal by the Court of Civil Appeal.

The applicant is now seeking leave to appeal to the Judicial Committee of the Privy Council against the judgment of the Court of Civil Appeal upholding the decision of the Bankruptcy Court.

In either situation, leave can only be granted if there has been a ‘final decision’ in civil proceedings. This does not seem to be the case in the present matter. The serving of a Bankruptcy Notice upon the applicant and the order by the Court for him to pay, secure or compound the debt within such time as may be allowed by the Court are steps in the initial stages of bankruptcy proceedings. It is only where the applicant fails to comply with such an order that he commits an act of bankruptcy and the Court may, upon the presentation of a bankruptcy petition, make a “receiving order” under section 6 of the Act. This again will have to be followed by various other procedural steps under the Act before the applicant can be adjudged bankrupt.

Even after there has been an order adjudging the applicant bankrupt, it does not bear the stamp of a ‘final decision’ such as is required for the purposes of section 81 of the Constitution for leave to be granted to appeal to the Judicial Committee. This was authoritatively stated in Roy v Société de Vallon Vert [1984 MR 154] where the Court had this to say at page 155:

“The question arises whether the decision of the Bankruptcy Court upheld on appeal by the Supreme Court, adjudging the applicant bankrupt is a final decision. It seems to us that the question ought to be looked at in the perspective of the totality of the proceedings with which the Bankruptcy Court is seized and not in relation to any particular decision on any individual step in a process that envisages a succession of steps leading to the final winding up of the affairs in which, we must observe, both the applicant and his unsatisfied creditors necessarily have a vital interest. In this regard, those proceedings must be distinguished from the kind of civil proceedings where one party has a claim against another and the decision of the competent court disposes of the matter in a manner which is final one way or another. Admittedly the adjudication of the applicant as a bankrupt, just as the making of a receiving order (vide Roy v Société de Vallon Vert [1983 SCJ 268]), is a most important step but it is not an irrevocable and final step”.

The Court, before concluding that it does not constitute a ‘final decision’, pointed out that any such decision to adjudge the applicant bankrupt must be viewed within the perspective of the bankruptcy proceedings as a whole and not in the perspective of the incidental consequences which the various steps in the course of bankruptcy proceedings may entail.

The Court can only grant leave to appeal under section 81(1)(b) or section 81(2)(a) of the Constitution in respect of a final decision in civil proceedings. The order made by the Bankruptcy Court and which has been upheld on appeal relates only to one, albeit important, stage in the bankruptcy proceedings. It does not, however, mark the end of the bankruptcy proceedings. The case still has to proceed to its final stages until the Bankruptcy Court, in accordance with the Bankruptcy Act, takes a final decision which disposes of the matter.

It is to be noted that although the Bankruptcy Act has been repealed and replaced by the Insolvency Act 2009 with effect from 1st June 2009, the transitional provisions embodied in section 415(2)(c) of the Insolvency Act provide that all proceedings commenced under the Bankruptcy Act and which were pending immediately before the commencement of the Insolvency Act, shall be deemed to have commenced and may be continued under the Bankruptcy Act.

Since there is no decision or order which, at this juncture, bears the mark of finality in connection with the bankruptcy proceedings, we hold that there is as yet no ‘final decision’ which falls within the scope of application of either section 81(1)(b) or 81(2)(a) of the Constitution.

MCB v SAROO 2012 SCJ 135

This is a petition for a bankruptcy order pursuant to section 4(1)(a) of the Insolvency Act 2009 (the Act) on the ground of failure to comply with a bankruptcy notice under section 4(2)(a) (i) of the Act. In his affidavit, the respondent has pleaded in limine litis that “he was not a trader at the time he stood as guarantor nor at the time of the judgment delivered on the 20th October 2009”. He claims that he was not amenable before the Bankruptcy Court.

As regards the second plea in limine litis, counsel was oblivious of the provision of section 5(3) of the Act where it is clear that the law speaks of a debtor and not necessarily a trader. He could not in his argument say why the Act was not applicable to a non-trader and he could not offer any argument in reply to the submission of learned counsel for the petitioner who has referred to section 5(3) of the Act to state that the Act applies also to an individual who is not a trader. The law has not defined who is a debtor and it must therefore be given its ordinary dictionary meaning. Now, the conditions for the making of a bankruptcy order upon a debtor are that he:

(i)                   be domiciled in Mauritius; and

(ii)                  be present in Mauritius on the day on which the petition for a bankruptcy order is presented; or

(iii)                 have, at any time in the period of three years ending with that date

(a) been ordinarily resident or had a place of

residence, in Mauritius; or

(b) have carried on business in Mauritius (vide section 5(3) of the Act.

In the case in hand, it is not denied that the respondent is domiciled and was represented by attorney in court and was present on the dates of hearing and is a resident of Mauritius at the time of the proceedings. [emphasis added] Section 5(3) of the Act does not say that he must be a trader and the use of the word or is of crucial importance. If the legislator had only in mind traders, it would have made it clear by either using the word “and” instead of “or” so that the bankruptcy order applies only to traders.

It must also be borne in mind that the Insolvency Act 1982 which had been repealed by the Act dealt with individuals who are not traders while the Bankruptcy Act which was similarly repealed by the Act dealt with traders. It is clear in the explanatory notes to the Insolvency Bill 2008, that the Act is meant amongst other things “to provide straightforward and fair procedures for realising and distributing the assets of insolvent individuals and companies” and “to provide alternatives to bankruptcy for individuals facing insolvency and to provide procedures for workout and administration of companies as alternatives to winding up with a view to their rehabilitation”.

The Act does not define who is a debtor. Under section 4(1)(a) of the Act, it provides that “a debtor is adjudicated bankrupt where a creditor of the debtor petitions the court for a bankruptcy order.” Failure to comply with a bankruptcy notice will be one of the grounds upon which the Court shall make a bankruptcy order (vide section 4(2)(a)(i) of the Act).