2000 (5) TMI 1017 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Ownership and possession rights over leased equipment.
3. Appointment of a receiver for the leased equipment.
4. Commencement of arbitral proceedings.

Detailed Analysis:

1. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985:
The petitioner sought interim orders under Section 9 of the Arbitration and Conciliation Act, 1996, to restrain the respondents from selling or transferring the leased waste heat recovery system equipment. The respondents resisted, citing Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, arguing that the appointment of a receiver was prohibited. They relied on the Supreme Court's judgment in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, which held that leasehold interest could be considered as the property of the company under Section 22. However, the court distinguished this case by noting that the Supreme Court's observations were made in the context of statutory tenancy of immovable property, not leased equipment.

2. Ownership and Possession Rights Over Leased Equipment:
The petitioner argued that the leased equipment's ownership remained with them, as stipulated in the lease agreement. The court referenced the judgment in Credit Capital Finance Corporation v. Foremost Industries Ltd., which held that leased equipment could not be considered the property of the lessee company. The ownership of the equipment remained with the lessor, and therefore, Section 22 did not apply. This position was further supported by the judgment in GE Capital Transportation Financial Services Ltd. v. Dee Pharma Ltd., which reiterated that the provisions of Section 22 only apply to the property of the lessee company, not leased equipment.

3. Appointment of a Receiver for the Leased Equipment:
The court concluded that since the ownership of the leased equipment remained with the petitioner, the appointment of a receiver to take possession of the equipment was justified. The court dismissed the respondents' plea that Section 22 barred such an appointment. The court emphasized that accepting the respondents' plea would unfairly deprive the lessor company of its rights over the equipment and the installments due.

4. Commencement of Arbitral Proceedings:
The court directed that the arbitrator appointed by the petitioner should commence proceedings within two weeks. The parties were instructed to complete their pleadings within six weeks, and the arbitrator was to deliver the award within four months from the commencement of the proceedings. This directive was in line with the Supreme Court's judgment in Sundaram Finance Ltd. v. NEPC India Ltd., which emphasized the need for effective steps to commence arbitral proceedings.

Conclusion:
The court held that the ownership of the leased equipment remained with the petitioner, and therefore, Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, did not apply. The appointment of a receiver to take possession of the equipment was warranted. Additionally, the court directed the immediate commencement of arbitral proceedings to resolve the dispute.