1998 (7) TMI 642 - HC - Companies Law

Summary

Issues Involved:
1. Appointment of a Court Receiver for leased equipment.
2. Jurisdiction of the Court.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
4. Ownership rights over the leased equipment.
5. Validity of the lease agreement and its registration status.

Issue-wise Detailed Analysis:

1. Appointment of a Court Receiver for leased equipment:
The petitioners sought the appointment of a Court Receiver for the leased equipment as per Order 40, Rule 1 of the Code of Civil Procedure, 1908. They also sought an injunction to restrain the respondents from dealing with or disposing of the leased equipment. The petitioners claimed that the respondents defaulted on lease rentals and failed to pay the amounts due under the lease agreement, leading to the termination of the lease. Consequently, the petitioners argued that they were entitled to recover possession of the leased equipment and sought the Court's intervention to protect their rights.

2. Jurisdiction of the Court:
The respondents contested the jurisdiction of the Court, arguing that the petitioners did not obtain leave under Clause XII of the Letters Patent, as the respondents' office was in Delhi, and the property was located in Madhya Pradesh. The Court examined the pleadings and found that the petitioners had their office in Bombay, and the lease rentals were payable in Bombay. The arbitration proceedings were also conducted in Bombay. Therefore, the Court held that it had jurisdiction to entertain the petition and that the requirement to obtain leave under Clause XII of the Letters Patent did not apply in this case.

3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA):
The respondents argued that the petitioners could not file the petition without obtaining leave or consent from the Board for Industrial and Financial Reconstruction (BIFR) under Section 22 of SICA. The Court held that Section 22 of SICA did not apply to the present case, as the leased equipment was not the property of the respondents. The Court relied on various judgments to support the view that the ownership of the leased equipment remained with the petitioners, and therefore, the protection under Section 22 of SICA was not available to the respondents.

4. Ownership rights over the leased equipment:
The lease agreement clearly stated that the ownership of the equipment remained with the petitioners, and the respondents were merely lessees. The agreement included clauses that affirmed the petitioners' ownership and restricted the respondents' rights to transfer or encumber the equipment. The Court concluded that the petitioners retained ownership rights over the leased equipment, and the respondents did not have any property rights in respect thereof.

5. Validity of the lease agreement and its registration status:
The respondents contended that the lease agreement was not registered and therefore could not be enforced. The Court held that the leased equipment was not immovable property, even though it was temporarily affixed to the flooring for functional purposes. The Court determined that the equipment remained movable property and that the petitioners' right to remove the equipment upon termination of the lease was not affected by its temporary affixation. Consequently, the lack of registration did not invalidate the petitioners' rights under the lease agreement.

Conclusion:
The Court found in favor of the petitioners, holding that they had the right to seek protection of their property. The petition was made absolute in terms of prayer (a), and the Court appointed a receiver for the leased equipment. The receiver would appoint the respondents as the receiver's agent on terms and conditions as to royalty but without security.