1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. NOTICE OF MOTION NO.875 OF 2008 IN SUIT NO.4771 OF 2000 SBI Capital Markets Limited ..Plaintiff. Vs. Gilt Pack Limited ..Defendant. .... Mr. Cyrus Ardeshir i/b M/s. Kanga & Co. for the Plaintiff. Mr. H.N. Thakore with Ms. A Baredia i/b Thakore Jariwala & Associates for the Defendant. .... CORAM : DR.D.Y.CHANDRACHUD, J. 14th March, 2008. P.C. : 1. The suit came to be instituted by the Plaintiff herein seeking (i) a declaration that the Plaintiffs are owners of certain leased equipment more particularly described in Exhibits A and C to the Plaint; (ii) a declaration that the lease agreements dated 23rd February, 1993 and 26th May, 1995 stood validly terminated and that the Defendant has no right, title or interest in respect of the equipment; (iii) a decree directing the Defendant to return the 2 leased equipment forthwith in good order and condition and (iv) a permanent injunction restraining the Defendant from alienating, encumbering or creating third party rights in respect of the leased equipment. 2. A Notice of Motion was taken out by the Plaintiff for the appointment of a Receiver which was dismissed by a Learned Single Judge on 1st December, 2000. An appeal against the order of the Learned Single Judge was allowed by a Division Bench of this Court on 3rd October, 2007. The prayer for appointment of a Receiver was granted and the Court Receiver was directed to initially take symbolic possession and offer the agency of the leased equipment to the Defendant on usual terms and conditions including royalty and security. The Division Bench directed that if the Defendant did not execute an agency agreement within a period of six weeks from the date on which it was offered to the Defendant, the Receiver shall take physical possession of the machinery and hand it over to the Plaintiffs who shall act as his agents on usual terms and conditions without security or royalty. In 3 such an event, the Plaintiffs were granted liberty to apply for further reliefs. 3. The judgment of the Division Bench records the essential facts of the case and it would be necessary for the purpose of this order to recapitulate them. The judgment of the Division Bench records that there is no dispute about the fact that the Plaintiffs are owners of the machinery which was given on lease to the Defendant. Similarly, there is no dispute about the fact that there was a default on the part of the Defendants in paying the agreed lease rentals. The Division Bench observed that though the Defendant was before the B.I.F.R., the pendency of those proceedings could not have affected the claim of the Plaintiffs because the suit instituted by the Plaintiffs was for the recovery of their own property. A rehabilitation scheme was framed under which lease rentals were agreed to be paid by the Defendant to the Plaintiffs. Even after the scheme was sanctioned the Defendant did not pay the lease rentals and the lease was terminated by the Plaintiffs. The Defendants were found to be in possession of the 4 machinery even though the original period of lease has expired. The Plaintiffs had not been paid either the arrears or the current lease rentals. As admitted the machinery belonged to the Plaintiffs and the lease stood terminated. The Division Bench held that the Plaintiffs were entitled to claim that the Court Receiver should be appointed in respect of the machinery. 4. After the Division Bench delivered judgment on 3rd October, 2007, the representative of the Court Receiver visited the site at Pitampur in the State of Madhya Pradesh for taking symbolic possession and offering agency of the leased machinery to the Defendants. During the course of his visit the representative of the Receiver was informed by Chandraprakash P. Sharma, a Director of the Defendant company that the Defendant refuses to act as the agent of the Receiver or to hand over symbolic possession. The representative of the Receiver was informed that the machinery is not in running condition and production activity has been closed down. Even the electric supply had been disconnected for a period of nearly three years. The representative 5 of the Receiver personally verified that there was no production activity at site, the machinery was not in operation and the electricity had been disconnected. The Court Receiver’s representative was unable to take symbolic possession or to appoint the Defendant as his agent in view of the refusal of the Defendant. 5. Following the report which was submitted by his representative on 17th January, 2008 the Court Receiver addressed a letter dated 21st January, 2008 to the advocates for the Defendant stating that a fresh appointment was being fixed on 4th February, 2008 for the purpose of taking physical possession of the machinery and for handing it over to the Plaintiff as agent of the Receiver in terms of the order passed by the Division Bench of this Court. The Defendant responded by instituting an application before the High Court of Madhya Pradesh on 1st February, 2008. The application refers to the communication of the Court Receiver dated 21st January, 2008 fixing a meeting on 4th February, 2008 for taking over physical possession of the machinery. The Defendant 6 has prayed in the application for a direction to the Court Receiver restraining him from taking possession of the machinery or any other assets / properties of the company without the permission of the High Court of Madhya Pradesh. The Defendant has purportedly relied upon a direction issued by the B. I. F.R. in its order dated 8th January, 2007. The B. I. F. R. in the course of that order has come to the conclusion that the company should be wound up in terms of Section 20(1 ) of the Sick Industrial Companies (Special Provisions) Act, 1985. In the meantime, the company and its promoters were directed in terms of 22-A(b) to safeguard the assets till such time as the Official Liquidator took possession of the assets. 6. The relief that has been sought in the present Notice of Motion is for a direction to the Court Receiver to take physical possession of the machinery which forms the subject matter of the suit and thereafter to hand it over to the Plaintiff, with liberty reserved to the Plaintiff to dispose of the machinery and retain the proceeds thereof. 7 7. The judgment of the Division Bench makes a reference to the fact that the admitted position is that the Plaintiffs are the owners of the machinery which was granted on lease to the Defendant. There was a default on the part of the Defendant in payment of the lease rentals and neither the arrears nor the current lease rentals were paid though under the rehabilitation scheme these were to be paid by the Defendant. The terms of the lease had expired. With a view to safeguard the interest of the Plaintiff, the Division Bench appointed the Court Receiver as Receiver but directed him initially to take symbolic possession and offer agency to the Defendant on usual conditions including royalty and security. The Defendant refused to accept agency when the Receiver's representative visited the site, stating that production had come to a stand still, the machinery was not in operation and even the electricity has been disconnected. The Court Receiver did then what he was required to do to comply with the order passed by the Division Bench by issuing a letter dated 21st January, 2008. The Defendant has thereupon moved an application before the Madhya 8 Pradesh High Court claiming that in terms of the direction contained in the order of the B. I. F. R. recommending winding up, the company and its promoters have been directed to safeguard the assets till such time as the Official Liquidator takes possession of the assets. Now it is evident from a bare reading of the order of the B.I.F.R dated 8th January, 2007 that the operative direction to the company and its promoters to safeguard the assets refers to the assets of the company. The machinery which forms the subject matter of the suit in this Court is admittedly not an asset of the company nor has the Defendant during the course of submissions before this Court even contended that the machinery forms part of the assets of the company. The machinery is owned by the Plaintiff and constitutes an asset of the Plaintiff. The Defendant having failed to accept agency, the Receiver was duty bound to offer the agency to the Plaintiffs. The Division Bench has reserved to the Plaintiffs, liberty to apply for further reliefs and in terms thereof, the Plaintiffs have now applied for a direction to the Receiver to take physical possession and for consequential directions for the sale of the machinery. 9 8. There is merit in the submission which has been urged on behalf of the Plaintiffs that, it would not be in the interest of justice if the machinery continues to lie in the premises of the Defendant having regard to the fact that it has already fallen into disuse. The Plaintiffs as owners of the machinery are justified in seeking a direction to the Receiver to hand over physical possession thereof to the Plaintiffs. In my view, the interests of justice also require that the prayer for the sale of the machinery should be allowed. This Notice of Motion shall accordingly stand disposed of in terms of the following directions : i) The Court Receiver is directed to take physical possession of the suit machinery in terms of the directions issued by the Division Bench and the judgment and order dated 3rd October, 2007 in Appeal 71 of 2001 arising out of Notice of Motion 3341 of 2000; ii) The Court Receiver shall thereupon forthwith appoint the 10 Plaintiff as his agent without security and royalty in terms of the order passed by the Division Bench; iii) The Court Receiver shall take expeditious steps for the sale of the machinery and, within a period of four weeks hereafter place a report before the Court seeking appropriate directions in that regard; iv) In the meantime, the Plaintiffs are permitted to take inspection of the machinery and to have it inspected by a valuer at the costs and expenses of the Plaintiffs. Counsel appearing for the Defendant has assured the Court that the Defendant shall co-operate in all respects in ensuring due compliance of this order and shall not obstruct the representative of the Receiver in complying with the aforesaid directions. ******