2004 (12) TMI 386 - HC - Companies Law

Summary

Issues Involved:
1. Confirmation of ex parte ad interim injunction orders.
2. Appointment of a Receiver for the suit property.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
4. Enforcement of Hire Purchase Agreements.
5. Filing of Written Statement by Defendants.

Issue-wise Detailed Analysis:

1. Confirmation of Ex Parte Ad Interim Injunction Orders:
The court examined whether the ex parte ad interim injunction orders should be confirmed. The plaintiff supplied machinery and equipment under two hire-purchase agreements dated 26-3-1993 and 30-7-1993. The plaintiff retained dejure possession of the property, and the defendant defaulted on payment installments. The plaintiff served a legal notice terminating the agreements and refused a one-time settlement offer from the defendants. The court observed that the property ownership remained with the plaintiff until full payment was made. The plaintiff argued that the defendants might sell the machinery, causing irreparable loss.

2. Appointment of a Receiver for the Suit Property:
Given the plaintiff's concerns about potential loss and damage to the machinery, the court considered appointing a Receiver. The court referred to Clause 2(v) of the Hire Purchase Agreements, which allowed the owner to retake possession if the hirer defaulted. The court cited precedents, including Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, which clarified that eviction proceedings against a sick industrial company do not fall under Section 22 of SICA. The court also referenced other cases where Receivers were appointed to take symbolic possession of leased equipment.

3. Applicability of Section 22 of SICA:
The defendants claimed that the suit should be stayed under Section 22 of SICA, as they had filed a reference with the BIFR. However, the court noted that the defendants had not affirmatively stated ownership of the property in question. The court cited several precedents, including Deputy CTO v. Corromandal Pharmaceuticals and Garden Finance Ltd. v. Prakash Industries Ltd., which held that Section 22 does not bar proceedings for the recovery of leased equipment. The court emphasized that Section 22 aims to prevent further financial difficulties for sick companies, not to allow them to continue incurring liabilities.

4. Enforcement of Hire Purchase Agreements:
The court found that the execution of the Hire Purchase Agreements was not contestable, as payments had been made and the defendants had requested extensions and a one-time settlement. The court reiterated that the plaintiff retained ownership of the machinery until full payment was made. The court referred to Patheja Bros. Forgings & Stamping v. ICICI, which held that Section 22 is not attracted when the court's order involves returning property to its rightful owner.

5. Filing of Written Statement by Defendants:
The defendants failed to file a Written Statement within the prescribed ninety days. The court referred to Texstyles v. Kiran Overseas Export Ltd. and K.R. Builders P. Ltd. v. Delhi Development Authority, which held that no further opportunity to file a Written Statement is permissible beyond ninety days. The court considered pronouncing judgment under Order VIII Rule 10 of the CPC but instead directed the plaintiff to lead evidence by way of affidavits.

Conclusion:
The court confirmed the ex parte ad interim injunction orders and appointed Ms. Reema Kalra as the Receiver to take possession of the machinery and equipment. The court dismissed the application under Section 22 of SICA, finding it without merit. The court directed the plaintiff to file evidence by way of affidavits within six weeks and listed the case for further proceedings.