1 NMS.1114.2011-S.468.99.sxw mnm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 1114 OF 2011 IN SUIT NO.468 OF 1999 ICICI Bank Ltd. ...Plaintiffs Vs. Jayant Vitamins Ltd. ...Defendants And International Assets Reconstruction Co. ...Applicants Mr. Sachin Chandarana a/w. Ms. Mrinalini Rajpal i/b. M.K. Ambalal & Co. for the Plaintiffs Mr. Zal Andhyarujina a/w. Mr. Neerav B. Mechant a/w. Mr. Pramod Keni i/b. Thakordas & Madgavkar for Defendant No.1 Mr. B. Colabawala a/w. Mr. G. Ardheshir a/w. Mr. Nikhil Rajani i/b. V. Deshpande & Co., for Defendant No.2 Mr. V.N. Ajikumar i/b. S.M. Kadam for Defendant No.4 Mr. Vivek Deo i/b. Prakash Punjabi & Co. for Defendant No.6 Ms. Sushma Singh for Defendant No.7 CORAM : SMT. ROSHAN DALVI, J. Date of Reserving for Order: 25thJuly, 2011 Date of Pronouncing the Order: 3 rd August 2011 ORDER : 1. This Notice of Motion is taken out by the Defendant No.2 for discharge of the Court Receiver in respect of a part of the suit properties for which the Court Receiver was appointed with further directions to the Receiver to handover possession of the said properties to the Receiver appointed by the Debt Recovery Tribunal (DRT). 2. The Plaintiff, Defendants 3,4,5 & 6 who are also banks and public 2 NMS.1114.2011-S.468.99.sxw sector companies and who have a pari passu charge in respect of the suit properties, have not opposed this Notice of Motion. 3. Defendant Nos.1 and 7 have opposed the Notice of Motion though under an interim order of this Court all the parties including Defendant No.1 and 7 agreed to jointly dispose off the properties for payment of the liabilities of Defendant No.1 to the Plaintiffs as also Defendants 2 to 6. 4. The Defendant No.7 is a sister concern of Defendant No.1 and is stated to have certain machinery on the properties for which the Court Receiver is appointed. 5. Mr. Andhyarujina on behalf of Defendant No.1 contended that the defendant No.1 had filed an application with Board for Industrial and Financial Reconstruction (BIFR) for reconstruction of Defendant No.1 Company and has filed an appeal from the order of the Board before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) under the Sick Industrial Companies (Special Provisions) Act 1985 (SICA). Consequent thereupon this suit cannot proceed. He has shown that in fact this Court passed 3 orders in this suit adjourning certain applications in the suit in Court Receiver’s Report sine die to be considered after the application before the AAIFR is decided. 6. The application of Defendant No.2 however is not for prosecuting the suit. The suit indeed cannot be prosecuted pending the application before the AAIFR. The Defendant No.2 has in fact 3 NMS.1114.2011-S.468.99.sxw applied for an order recalling an interim order already passed. The discharge of the Court Receiver would mean that the interim order of appointment of Court Receiver would not take effect in this suit so far as that portion of the suit property is concerned. All that the Receiver has to do is to handover possession of the properties mentioned in the Notice of Motion, which are a small part of the suit properties, to the Receiver appointed by the DRT. The Court Receiver will, therefore, not be custodia legis with regard to that portion of the suit property in this Suit. It will have to be seen whether such an order would tantamount to prosecuting the suit and would fall within the mischief of Section 22 of SICA, which requires suspension of “legal proceedings, contracts etc.”. 7. It may at once be mentioned that if the Plaintiff desired to prosecute the suit even by an interim proceeding calling upon the Court Receiver to sell, dispose off or to do any other act as the officer of the Court in charge of the suit properties, it may tantamount to continuation of the legal proceedings which is the suit. The Defendant No.2, on the other hand, desires the Court Receiver to call it a day. He desires the Court Receiver not to act any further. He has applied for an order of discharge of the Court Receiver and handing over the possession to another Court Receiver in another proceeding. 8. It is not for this Court to see whether that proceeding can be continued or not. That proceeding is in the Court of co-ordinate jurisdiction. In fact it is a special proceeding under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act). 4 NMS.1114.2011-S.468.99.sxw Whether or not Defendant No.2 can proceed with the Receiver of the DRT will have to be seen by the DRT. The only application of Defendant No.2 here is to discharge the Receiver and handover possession of the properties which Defendant No.2 claims. 9. My attention has been drawn to the judgment of Division Bench of this Court in the case of J.K. Synthetics Ltd. Vs. The Industrial Credit and Investment Corporation of India & Ors. 1999(3) ALL MR 145 in which modification of the agency to be granted by the Court Receiver came to be allowed pending an application before the BIFR. In that suit the Court Receiver was appointed. The Court Receiver appointed his agent. The agent entered into an agreement of agency. The agent had to comply with the terms of the agreement. The Agent failed to adhere to the terms of the agency. The Plaintiff in the suit required another agent to be appointed. That was contested. It was observed in paragraph 11 of the judgment that the rights of the Defendant Company in respect of the ownership of the properties were not being proceeded against either by way of execution, distress or the like. It was observed that what was prohibited under Section 22 of SICA was proceedings for winding-up the industrial company, or for execution, distress or the like or for appointment of the Court Receiver. It was observed that the property being custodia legis even a third party could have been appointed as the agent of the Receiver and a preference was given to one such party. The use of the property to be given to the Appellant was as Agent of the Court Receiver and not as an absolute owner. Consequently though the suit could not proceed the application for change of the agent of the Receiver was allowed pending the suit. 5 NMS.1114.2011-S.468.99.sxw 10.In this case the application is not made for winding up, in execution, for any assets, sale or for appointment of a Receiver. In fact the application is quite the reverse; it is for discharge of the Receiver already appointed prior to the application being made before the BIFR and AAIFR. All that is to be done is that to the extent claimed by the Applicant the Receiver would have to be discharged. Once the Receiver is discharged to that extent he would have to handover the properties. This would be to the Receiver appointed by the DRT. 11.The Defendant No.2 has obtained the Recovery Certificate of the DRT in respect of its dues against Defendant No.1. It would be for Defendant No.2 to execute the recovery certificate obtained by it. That would be under the DRT Act and under the supervision of the DRT. It is not for this Court to consider how Defendant No.2 would then proceed. This Court is only called upon to consider whether or not it would be competent to discharge the Court Receiver and call upon the Court Receiver to handover the possession to another Court Receiver. 12.Following the analogy in the case of J.K. Synthetics (supra) this Court would be entitled to do so. The order of discharge and handing over possession would not tantamount to prosecuting the suit which has been adjourned sine die. It would also not tantamount to giving directions to the Court Receiver who has been directed to effect a joint sale of the suit properties for which the Plaintiff as also Defendants 2 to 6 have a pari passu charge. It would also not tantamount to calling upon the Court Receiver to 6 NMS.1114.2011-S.468.99.sxw perform any of the duties and functions of a Court Receiver as an officer of the Court for the custody, possession or management of the properties in his charge or for resolution, management, protection preservation and improvement of the property, collection of rents and profits thereof, disposal of the rents and profits or execution of documents which may be the function of the Court Receiver under Order 40 Rule 1 (c) & (d) of the C.P.C. 13.It is contended by Mr. Andyarujina on behalf of Defendant No.1 that the order of appointment of Court Receiver contemplated joint execution by all the creditors of Defendant No.1. The order of discharge of the Court Receiver of a part of the property claimed by Defendant No.2 and handing over its possession to the DRT Receiver, would mean that only one Creditor would take that property to the exclusion of others. The other Creditors have not disputed the claim of Defendant No.2. It is surprising that Defendant No.1 seeks to advocate on behalf of other Creditors. Even assuming that the Defendant No.1 would be vitally interested in having the claim of all other Creditors settled jointly, Counsel on behalf of Defendant No.2 states that the Defendant No.2 does not desire to take the property and appropriate it to itself individually and singly. Defendant No.2 has obtained the recovery certificate. Defendant No.2 would execute the recovery certificate in accordance with law. In that execution the amount which is recovered for the property which has been realized from out of the suit properties in this suit upon the discharge of the Court Receiver shall be utilized for discharging the liability of all the Creditors jointly in accordance with law and as per the order of appointment of Court Receiver in this suit. Of course all the 7 NMS.1114.2011-S.468.99.sxw Creditors in the suit have a charge on the property. They claim a pari passu charge. They are, therefore, secured Creditors. Their claims would be considered jointly in execution by the competent Court. The application for discharge has nothing to do with how the properties would be later managed and appropriated between the Creditors. 14.Counsel on behalf of Defendant No.7, which is the sister concern of Defendant No.2, claimed that all the parties to certain Notices of Motion taken out in this suit at the time of appointment of Court Receiver have not been served. The parties to the suit have been served. The parties in the Notice of Motion need not be served with a copy of subsequent Notice of Motion taken out by one of the parties in the suit. Of course, if the parties are going to be prejudicially effected they would have to be heard. 15.One of the parties who was a party in another earlier Notice of Motion is one Prerna Thakur. She is one of the Directors of Defendant No.1 Company. She is part of Defendant No.1 Company. She does not have to be separately served. The other such party is the Collector Ratlam, Madhya Pradesh. This party was made a Respondent in the earlier Notices of Motion in which the Court Receiver came to be appointed because the suit properties are in Ratlam, Madhya Pradesh. The Collector, is stated to be representing the interest of certain employees of Defendant No.1 company. The order of discharge of the Court Receiver of a part of the property itself would not effect these third parties. They would be effected if and when Defendant No.2 proceeds in execution in accordance with 8 NMS.1114.2011-S.468.99.sxw law. It would then be open to those parties to execute or challenge the execution and the recovery made thereunder. They may claim a part of the recovery, along with the secured Creditors of the Company having a charge also, as per law. It is in such application that their interest may be required to be considered. This application only precedes such an application in which they may partake. 16.Counsel on behalf of Defendant No.7 drew my attention to several parties being Advocates of the parties in the suit and others such as the Collector Ratlam M.P and Defendant No.6 who were sent the letter by the Court Receiver. These parties are none other than the aforesaid parties in the Notices of Motion taken in the suit. 17.The act of Defendant Nos.1 and 7 in opposing the reliefs in the Notice of Motion is only made with the oblique and ulterior motive of defeating the claim of Defendant No.2 in the recovery proceedings Defendant No.2 filed before the DRT and obtained a recovery certificate. The defence is misconceived. The application for discharge of the Court Receiver for a part of the properties specifically described in para (a) of the Notice of Motion which concerns Defendant No.2 and the consequent handing over of the possession of such properties to the Receiver of the DRT must be granted. 18.Notice of Motion is, therefore, made absolute in terms of prayer (a). This order is stayed for 2 weeks. (SMT. ROSHAN DALVI, J.)