2003 (9) TMI 560 - HC - Companies Law

Summary

Issues Involved:
1. Whether the agreement between the applicant and the respondent is a hire purchase agreement or a refinance agreement.
2. Whether the respondent can challenge the validity of the hire purchase agreement.
3. The impact of the respondent being declared a Sick Industry on the applicant's right to repossess the machinery.
4. The appointment and extension of time for the Advocate Commissioner to take possession of the machinery.

Issue-wise Detailed Analysis:

1. Nature of the Agreement:
The primary issue is whether the agreement between the applicant and the respondent is a hire purchase agreement or a refinance agreement. The respondent argued that the agreement should be treated as a refinance agreement, asserting ownership of the machinery based on invoices in their name. However, the court noted that the agreement dated 28-3-1997 was explicitly titled as a "hire purchase agreement," identifying the applicant as the owner and the respondent as the hirer. The respondent had not filed any counter to dispute the hire purchase agreement, nor questioned its validity at any earlier stage. The court concluded that the agreement was indeed a hire purchase agreement, based on the consistent treatment of the applicant as the owner and the respondent as the hirer in various documents, including a supplementary agreement and a letter of guarantee.

2. Validity of the Hire Purchase Agreement:
The respondent's challenge to the validity of the hire purchase agreement was dismissed by the court. The court emphasized that the agreement was validly entered into, with both parties consciously agreeing to its terms. There was no evidence of fraud, coercion, undue influence, or misrepresentation. The respondent had not questioned the agreement's validity until the filing of the present petition and had not filed a counter to the notice issued by the applicant. The court held that the respondent was estopped from challenging the agreement, citing principles of estoppel as stated in previous judgments, including B.L. Sreedhar v. K.M. Munireddy and Shish Ram v. State of Haryana.

3. Impact of Respondent's Sick Industry Status:
The respondent argued that as a Sick Industry, proceedings before the Board for Industrial and Financial Reconstruction (BIFR) should prevent the applicant from repossessing the machinery. The court referred to a Division Bench decision in Ananta Udyog (P.) Ltd. v. Cholamandalam Investment & Finance Co. Ltd., which clarified that Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, does not bar the repossession of machinery under a hire purchase agreement. The machinery, being the property of the applicant (owner), does not belong to the industrial company (hirer). Therefore, the proceedings before BIFR do not impede the applicant's right to repossess and sell the machinery.

4. Appointment and Extension of Time for Advocate Commissioner:
The court had previously appointed an Advocate Commissioner to take possession of the machinery and file a report. Due to the inability to complete the task in the allotted time, an extension was sought. The court allowed the extension, directing the Advocate Commissioner to carry out the directions in the warrant and file a report within four weeks.

Conclusion:
The court ordered an interim injunction restraining the respondent from alienating, encumbering, or otherwise dealing with the machinery. The application for the extension of time for the Advocate Commissioner was granted, and the Advocate Commissioner was directed to file a report within four weeks. The judgment reaffirmed the validity of the hire purchase agreement and the applicant's right to repossess the machinery despite the respondent's status as a Sick Industry.