1 abs IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMONS NO. 1529 OF 2007 WITH COURT RECEIVER’S REPORT NO. 12 OF 2009 IN SUMMARY SUIT NO. 4260 OF 1999 S.B.I. Home Finance Limited .. Plaintiff V/s 1) Western Pqaues India Limited (in liquidation) 2) Maize Products .. Defendants Mr. Tejas Bhide i/b Bhave & Co. for the plaintiff. Mr. Mayur Khandeparkar with Mr. S.S. Purohit i/b Kanga & Co. for the applicant-defendant no.2. Mr. Kedar Dighe for the Official Liquidator. Mr. K.L. Vyas, Court Receiver and Ms. Uma Srivastav, IInd Assistant to Court Receiver, present. CORAM : D.G. KARNIK, J. DATE : 1ST JULY 2009 P.C. : 1. This order disposes the chamber summons as well as the 2 receiver’s report mentioned in the title. 2. Heard the learned counsel for the applicant-defendant no.2 and the Court Receiver. 3. A few relevant facts are briefly stated below:- The defendant no.1 entered into an agreement for construction of a plant for treatment of effluent in the factory of the defendant no.2 on “Build, Own, Operate and Transfer” basis (for short “Boot agreement”). Under the Boot agreement, the plant was to be run by the defendant no.1 for a period of 15 years from the date of commissioning and was to be transferred to the defendant no.2 thereafter. Bio-gas generated by the operation of the plant was to be used by the defendant no.2 for captive consumption, but subject to payment of the price fixed in the Boot agreement. Accordingly, the plant was constructed and commissioned on or about 13th April 1995 by the defendant no.1 by raising finance from the plaintiff. The defendant no.1 did not follow the terms of the financing agreement and, therefore, the plaintiff filed the present suit (Suit No.4260 of 1999) for possession of the plant against the defendant no.1 by joining the defendant no.2 as a party to the suit. In the suit, at the instance of the plaintiff, the Court Receiver, 3 High Court, Bombay was appointed as the receiver of the said plant by an order passed in October 1999. The order of appointment of receiver was acquiesced by the defendants and has become final. A representative of the receiver went to the site on 21st October 1999 and took possession of the plant. At the time of the receiver taking possession, the defendant no.2, through its Administrative Manager Mr. B.N. Thakkar, gave an undertaking to the receiver to act as an agent of the receiver and agreed to execute the agency agreement. Though a formal agency agreement has not been executed by the defendant no.2 so far, learned counsel for the defendant no.2 admits that the defendant no.2 is in possession of the plant since 21st October 1999 as an agent of the receiver. As the defendant no.2 is in possession of the plant and is operating it as an agent of the receiver, it is liable to pay royalty to the receiver. 4. Several meetings were held by the receiver with the representative of the defendant no.2 for fixing the royalty. Initially, the receiver fixed the royalty at Rs.10 lakhs per month as an adhoc measure. As the royalty was not paid, the receiver submitted a report bearing No.158 of 2007 to this Court for necessary direction for recovery of royalty and/or taking back possession of the plant. By an order dated 6th July 2007, the Court directed the receiver to take steps 4 for determination of the final royalty without delay and further directed that the defendant no.2 to pay the adhoc royalty till then. Aggrieved by the order passed by the learned Single Judge, the defendant no.2 filed an appeal (Appeal No.667 of 2007) before a Division Bench. In the meanwhile, in pursuance of the said order dated 6th July 2007 the receiver called a meeting of the parties and after hearing the parties, fixed the final royalty in the sum of Rs.5 lakhs per month. In the appeal, by way of an interim order dated 10th October 2007, the Division Bench directed the defendant no.2 to deposit the sum of Rs.25 lakhs within 4 weeks and further permitted the defendant no.2 to take out appropriate chamber summons before the Single Judge. Accordingly, the present chamber summons has been taken out by the defendant no.2 challenging the royalty of Rs.5 lakhs per month fixed by the receiver. The receiver has also taken out the present report for directions to the defendant no.2 to deposit Rs.5 lakhs per month from 21st October 1999 and to execute a formal agency agreement with a further direction that in the event the defendant no.2 fails to comply with the aforesaid directions, the receiver be permitted to take physical possession of the plant. 5. Before fixing the final royalty, the receiver has obtained an expert valuer’s report dated 14th March 2003. In the report, the expert has 5 opined that the plant would be valued at Rs.5.25 crores in the year 2003 and taking into consideration fair return of 10% per annum, the royalty amount would be Rs.4,37,000/- per month. Taking into consideration this report, the Receiver has fixed the royalty in the sum of Rs.5 lakhs per month. 6. The defendant no.2 challenges the fixation of royalty. Learned counsel for the 2nd defendant firstly submitted that though the suit is filed by the plaintiff for recovery of possession of the plant, no prayer is made in the suit for fixation/recovery of mesne profits. In the absence of prayer for mesne profits, no royalty could be fixed by the receiver. In support, the learned counsel referred to and relied upon the following decisions of the Supreme Court: (i) Mohd. Amin v. Vakil Ahmad – AIR 1952 SC 358 (ii) Shiv Kumar Sharma v. Santosh Kumari – (2007) 8 SCC 600 (iii) Ganpati Madhav Sawant v. Dattur Madhav Sawant–(2008) 3 SCC 183 In Mohd. Amin v. Vakil Ahmed (supra), the Supreme Court has held that the claim for mesne profits could not be included within the expression “possession or occupation of the property together with all 6 rights appertaining thereto” and, therefore, the claim for mesne profits could not be granted in absence of a specific prayer. In Shiv Kumar Sharma v. Santosh Kumari (supra), the Supreme Court had upheld the decree for possession but held that in the absence of a prayer for compensation, the compensation could not have been awarded either as a mesne profits or otherwise. In Ganpatai Madhav Sawant v. Dattur Madhav Sawant (supra), the Supreme Court following its earlier decision in the case of Mohd. Amin held that the mesne profits could not be granted in the absence of a specific prayer therefor in the plaint. In my view, none of the decisions apply to the facts of the present case. Here, we are not concerned whether the plaintiff is entitled to mesne profits. The Court Receiver has been appointed as the receiver by this Court by an order dated 21st October 1999. The receiver was entitled to take physical possession and accordingly took possession of the plan but at the request of the defendant no.2 appointed it as an agent of the receiver and allowed it to remain in possession of the plant. The defendant no.2 is accordingly in possession of the plant as an agent of the receiver and has given an undertaking to execute an agency agreement. The defendant no.2 having accepted the possession of the plant from the receiver as its agent is bound to pay royalty to him. 7. Secondly, learned counsel for the defendant no.2 challenged the 7 quantum of the royalty fixed. He submitted that under the Boot agreement, the defendant no.2 was required to run the plant and was to sell the bio-gas generated from it. All expenses for running of the plant were to be borne by the defendant no.1 while the defendant no.2 was to pay for the bio-gas. He invited my attention to the affidavit of the defendant no.2 dated 17th February 2009 filed in Notice of Motion No.2084 of 2008 and submitted that during the period from 1998-99 till 2006-07, the total amount that the defendant no.2 would have been required to pay to the plaintiff for the bio-gas was Rs.4,18,54,669/- (page 347 of the affidavit). As against this, the defendant no.2 had incurred the expenditure of Rs.4,28,13,847/- for running the plant. The expenditure was more than what the defendant no.2 would have been required to pay to the defendant no.1. Therefore, no royalty was payable by the defendant no.2. I am unable to agree. The receiver is not concerned what was the contract between the defendant no.1 and the defendant no.2. The receiver was appointed for the plant. His appointment has become final. He was entitled to take possession of the plant. The defendant no.2 took possession from the Receiver as his agent. As an agent, the defendant no.2 must pay to the receiver the royalty. Even otherwise, I am not satisfied that the amount of expenditure of Rs.4,28,13,847/- is proved by the defendant no.2. Many of the vouchers of the alleged expenditure are not produced, 8 some of the extracts of the books of accounts are not produced, the extracts are not complete and are said to be summary of entries made in some register which are not produced. The contention of incurring expenditure of Rs.4,28,13,847/-, therefore, cannot be accepted. 8. The royalty can be fixed by different methods. One method may be on the basis of reasonable return on the value of the plant. The Receiver has obtained valuer’s report and the valuer has valued the plant in the year 2003 at Rs.5.25 crores and suggested royalty of Rs. 4,37,000/- per month on the basis of fair return on the value. Learned counsel for the defendant no.2 submitted that the valuation of the plant has been erroneously arrived at by the valuer and the actual value of the plant was only Rs.2.63 crores. He invited my attention to the letter of the defendant no.1 dated 8th October 1991 (Exhibit-A) which showed the valuation of the plant at Rs.2.63 crores. Counsel therefore submitted that the royalty should be fixed as fair return on this value of Rs.2.63 crores. If the fair value of the plant is taken as mean of Rs.2.63 crores as suggested by the defendant no.2 and Rs.5.25 crores as suggested by the valuer, it would come to Rs.3.94 crores. The royalty fixed at the rate of 1% return per month of fair value would come to Rs.3,94,000/- per month. 9 9. Another method of valuation, which is often applied, is the income which a person is likely to receive from the property/plant. On the defendant no.2’s own case, it earned gross income of Rs. 4,18,54,669/- as stated in its affidavit for 9 years. Though some expenditure would be required to be incurred for earning that income, for the reasons stated earlier, I am not inclined to accept the expenditure suggested by the defendant no.2 to be the actual expenditure. If 50% of the gross income is taken as the expenditure, the net income for the period from 1998-99 till 2006-07 (for 9 years) would be Rs.2.09 crores, i.e. to say Rs.2,00,000/- per year. The royalty fixed calculated on this basis would be Rs.2,00,000/- per month. By taking mean of the royalty arrived at by two methods at Rs.2,00,000/- and Rs.3,94,000/-, in my view, the appropriate royalty would be Rs. 3,00,000/- per month. 9. For these reasons, I pass the following order: (a) The chamber summons and the receiver’s report are partly allowed. The royalty fixed by the receiver is reduced from Rs. 5,00,000/- per month to Rs.3,00,000/- per month. The defendant no.2 shall deposit the amount of royalty at the rate of Rs.3,00,000/- per month for the period from 21st October 1999 up-to-date within a period of 4 weeks. The defendant no.2 shall also execute an agency agreement 10 within 4 weeks on usual terms and conditions. The defendant no.2 shall be entitled to the credit of the amount, if any, which has been paid to the receiver and/or deposited in this Court in pursuance of the order of the Division Bench. (b) In the event the defendant no.2 fails to deposit the amount within 4 weeks, the receiver shall be entitled to take possession of the plant forthwith. 10. The receiver has further prayed for a direction to the defendant no.2 to furnish security for possession of the plant. In my view, since the plant is old being in operation for more than 15 years and is situated on the premises of the defendant no.2, it would not be appropriate to direct any security at this stage. (D.G. KARNIK, J.)