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TMI Blog2017 (3) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... "the Amended Act") passed an Order dated 27th December, 2016, appointing the Court Receiver, High Court, Bombay, as Receiver of certain goods, and communicated the same to the Court Receiver, High Court, Bombay. 2. The Report raises the legal issue as to whether an arbitral tribunal has the power to appoint the Court Receiver, High Court, Bombay as a Receiver under Section 17 of the Amended Act. 3. Given the nature of the issue involved, the Court Receiver engaged Counsel to make submissions on its behalf. Further, the parties to the arbitration were also heard on this issue. Since the issue is of wider significance than this particular matter, a Notice was issued on 7th January, 2017, so that any person interested could make submissions on the question involved. SUBMISSIONS 4. Mr. Jagtiani, on behalf of the Court Receiver, High Court, Bombay ("the Court Receiver"), submitted that an arbitral tribunal has no power to appoint the Court Receiver as a Receiver when passing an interim order under Section 17 of the Amended Act. His submission is based upon the unique position of the Court Receiver as an employee of the High Court of Judicature at Bombay and, therefore, subject to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pore Pte. v. Shiv-Vani Oil and Gas Exploration Services Ltd.." 8. Mr. Jagtiani also submitted that the Amended Act is a Central Legislation and must be understood to have the same meaning throughout the territory of its operation. All over India, the power of civil courts to appoint a Receiver is to be found in Order XL of the Code of Civil Procedure, 1908 ("the CPC"). Under this provision, it is a private person who is appointed to act as a Receiver or a 'Private Receiver' in a particular matter, with such powers as may be conferred upon the Receiver by the civil court. The powers of an arbitral tribunal to make an appointment under Section 17 of the Amended Act are akin to such powers of the civil court under Order XL of the Code of Civil Procedure, 1908. The relevant proviso of the amended Section 17 does not empower an arbitral tribunal having its seat within the territorial jurisdiction of this High Court to appoint the Court Receiver, High Court, Bombay. 9. Mr. Jagtiani further submitted that any interpretation of Section 17 of the Amended Act to allow arbitral tribunals to appoint Court Receiver will lead to interference in the functioning of the Office of the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would allow an arbitrator to appoint the Court Receiver, High Court, Bombay, and it is for the High Court to decide (on the administrative side) whether or not the services of the Court Receiver are to be made available to arbitrators, but that this determination is not a precondition to the exercise of power by the arbitrator. 12. Mr. Sen submitted that the above course of action is not inconsistent with any of the Judgments relied upon by Mr. Jagtiani or Mr. Khandekar and that this Court has in the past, and as recognised by these judgments, permitted the Debt Recovery Tribunal to exercise control over the Court Receiver, High Court, Bombay. He submits that it is a matter of record that the City Civil Court also appoints the Court Receiver, High Court, Bombay, in several matters. 13. Mr. Sen submitted that an arbitral tribunal has wide powers under the Amended Act to make an appointment and it is for the persons so appointed, i.e., the Court Receiver, High Court, Bombay, to accept or refuse such appointment. He submits that this approach is consistent with a harmonious and literal interpretation of the provision. He also relies upon the provision, which appears after Section 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court, Bombay. This has been discussed in various judgments referred to by the parties, which arose in the context of transfer of bank suits (in which the Court Receiver, High Court, Bombay, had already been appointed) to the Debt Recovery Tribunal, when the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("RDB Act") came into force. 17. In I.C.I.C.I Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra), the issues for consideration before this Court were: "(a) whether this Court had jurisdiction to issue directions to the Court Receiver in suits in which the Court Receiver stood appointed prior to 16th July, 1999, i.e., the date on which the Central Government by notification established the Debt Recovery Tribunal under Section 3 of the RDB Act; and (b) If not, whether the High Court was empowered to give directions to the Court Receiver regarding the properties which were in custody of the Court Receiver till such time as the Debt Recovery Tribunal/Central Government set up an alternative office/machinery with a proper infrastructure." 18. The Court at paragraph 5 (pages 215-216) set out a brief history, status and functioning of the Office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts in the personal ledger accounts of the Court Receiver with R.B.I. as also amounts lying in the hands of the Court Receiver in cash and cheques. The office of the Court Receiver, High Court, Bombay has various departments like accounts, department/section, cash department, record department, general administration department, etc. The Court Receiver, High Court, Bombay and the entire staff constitute a permanent department of the High Court. The Court Receiver is a high-ranking official . The present Court Receiver holds the pay scale of Additional Prothonotary and Senior Master. The Court Receiver has to enter into agency agreements after the properties become custodial legis. As a Court Receiver, she has to sign bills/vouchers. At this stage, it is important to note that after deducting costs, charges and expenses as also the commission by the Court Receiver, Banks and Financial Institutions are required to be paid the net royalty amount even during the pendency of the suit pursuant to the orders of the Court. These payments are made by the Court Receiver by cheques. Hence, the Court Receiver is required to sign cheques and payment vouchers by which net royalty amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention advanced that on and from 16th July, 1999, the Court Receiver stood discharged automatically. The Court Receiver can only be discharged by this Court inasmuch as she has been appointed by this Court. Even in cases where proceedings stand transferred to DRT, the properties shall continue to remain custodia legis either under the High Court or under the DRT. By way of clarification it is once again reiterated that the property shall remain custodia legis with the Court Receiver till such time as the DRT appoints a receiver under the Act, in which event, a request will be made by the receiver of DRT to the Court Receiver to hand over the properties to the receiver of DRT. Therefore, there is no merit in the contention advanced that after 16th July, 1999, a fresh application will become necessary, seeking appointment of a receiver, to the DRT. As stated above, the legislature has deleted the words de novo from section 31. This itself indicates that no fresh application for appointment of receiver is required to be made to DRT. If this Court has already appointed a receiver before 16th July, 1999, the property shall continue to remain custodia legis till the suit is disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand DRT is not in a position to take possession and manage the said properties. These assets constitute securities created in favour of the Banks and Financial Institutions. They cannot be permitted to be dissipated. It has been urged on behalf of the Banks and Financial Institutions that till adequate/alternate machinery is set up by the Central Government, this Court should manage the properties which are already custodia legis. On the other hand it has been urged that once the suits/proceedings stand automatically transferred to DRT this Court cannot issue directions regarding preservation and management of the properties after 16th July 1999 and such directions can be given only by DRT. However DRT can only appoint its Receiver. The question is whether the said Receiver would be in a position to take charge of the above properties from the Court Receiver, High Court, Bombay. The matter involves large number of administrative problems. At the outset, it may be mentioned that the Central Government carries a wrong impression that the Court Receiver, High Court, Bombay in the past has lent its services to other Courts. That is not so. As stated above, the Court Receiver, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the legislature intends that the Receiver appointed prior to the transfer shall continue till alternate arrangements are made by the DRT to take charge of the properties which are custodia legis. The office of the Court Receiver, High Court, Bombay has a historical background. It is unique to Mumbai. It has done a wonderful job over the years particularly in the matter of earning revenue for the State. It has been protecting the properties all over India over the years. The authority of the Court Receiver over the properties continues till the Court discharges the Receiver by passing an express order to that effect. It is for this reason that even in execution proceedings after a decree is passed a Receiver can be appointed by the Court to take steps to protect the property till the Banks or Financial Institutions take adequate steps to recover the sale proceeds. Even where a suit is decreed, it has been held that there was nothing in the Code, which limited the power of the Court to appoint a Receiver when it became so necessary. Ultimately, a Court Receiver is appointed under equity jurisdiction. In the case of Hiralal Patni v. Loonkaran Sethiya reported in AIR 1962 SC 21, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manage such properties. I am informed that there are some cases in which the Court Receiver was appointed prior to 16th July 1999. However, before the Court Receiver could take possession, the notification came to be issued. Such marginal cases are kept for hearing on 10th March 2000." 21. The point that the Court Receiver, High Court, Bombay functions only under the control and supervision of this Court, is again apparent from paragraph 11 (at pages 226-227) of the judgment, which states: "In this matter, the learned Acting Chief Justice, High Court, Bombay has received a letter from the Hon'ble Finance Minister of India requesting the High Court to lend the services of the Court Receiver to Debt Recovery Tribunal till alternate arrangements are made. The learned Acting Chief Justice, High Court, Bombay, thereafter invited submissions from the Prothonotary and Senior Master, High Court, Bombay. After due deliberation, it has been decided that administratively it would not be possible to lend the services of the Court Receiver to Debt Recovery Tribunal. Detailed reasons in that regard have been given. Some of the reasons have been mentioned hereinabove. It may be once again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any other court such as the Small Causes Court, etc. Since we are more worried about the protection of the properties worth more than Rs. 2,000 crores instead of holding the jurisdiction judicially which is categorically barred by law, we can certainly direct the Court Receiver to take orders from the DRT till the Government make a provision and set up its own infrastructure and machinery. According to me, the Court Receiver does not stand any higher than the DRT so that he or she cannot receive any orders from the Tribunal. In our anxiety to protect the assets worth more than Rs. 2,000 crores it would only be appropriate for this court to show magnanimity to allow the Court Receiver to function so in the pending matters which are transferred from this court to the DRT to take all such appropriate orders from the DRT in respect of such matters. I, therefore, direct the Court Receiver to receive and act upon the orders passed by the DRT or the Appellate Tribunal in the matters where this court had appointed the Court Receiver and which were transferred to the DRT. It is clarified that the DRT shall not appoint the Court Receiver, High Court, Bombay, in any other matters, new or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iver, High Court, already appointed would continue to act as Court Receiver, but subject to the directions to be issued by the Debts Recovery Tribunal/Appellate Tribunal. (c) The Court Receiver, High Court, Bombay being an employee of the High Court is subject to administrative control of the learned Chief Justice. We would recommend to the Chief Justice that the Court Receiver's services may be made available to the Debts Recovery Tribunal/Appellate Tribunal for a period of one year from today. During the aforesaid period, it would be open to the Tribunal/Appellate Tribunal under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, suo moto, or at the instance of any party to the Suit or other proceedings, to discharge the Court Receiver of the High Court and appoint any other fit person as Receiver of the properties. (d) The Court Receiver, High Court, Bombay, shall function as Court Receiver in respect of all matters transferred to the Debts Recovery Tribunal in which he/she has been appointed as Receiver and obtain directions from the Debts Recovery Tribunal or Appellate Tribunal with regard to his/her functioning. Such directions may be obtained eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court Receiver for the services rendered by him. The High Court (Original Side) Rules are framed in exercise of power conferred on the High Court under the provisions of the Civil Procedure Code. On the Original Side of the High Court it is not the case like in the other cases where private receivers are appointed as the Court Receiver and thus his remuneration of the amount charged by him for fees and commission is to be regulated by the Court. It is undoubtedly true that even under r. 591 ultimate control is vested with the Court and under the Rules a discretion is conferred on the Chamber Judge to reduce the amount chargeable by the Court Receiver. However, the issue which is to be determined is whether the case has been made out by the defendant No. 1 for reduction of charges and/or deviation from the fees prescribed under r. 591 of the Original Side Rules". 27. In Girish M. Joshi v. Jagat Manubhai Parikh (supra), this Court was considering the issue regarding appointment of the Court Receiver, High Court, Bombay by the City Civil Court and the Small Causes Court, Mumbai. This Court, after noticing the Larger/Division Bench decision in Bank of Tokyo-Mistubishi Ltd., (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r record of the matter is available. 29. From a reading and consideration of the above Judgments, I am of the view that it has been clearly held that the Court Receiver, High Court, Bombay, is an employee or a Department of the Bombay High Court and that it is this Court that has the powers to direct its duties and responsibilities. Even where another Tribunal, such as the Debt Recovery Tribunal, was allowed to give directions to the Court Receiver, it was for a limited transitory period of one year and only in those cases where the Court Receiver had already been appointed by this Court. What is of much significance is that this was permitted to be done by an Order of this Court on its judicial side (speaking through the Larger Bench/Division Bench, as indicated above). This was necessitated by the fact that as this Court lost its jurisdiction over bank suits, it would have been anomalous for this Court to continue to issue directions to the Court Receiver. 30. Apart from this, the Larger Bench/Division Bench made a recommendation to the Chief Justice for the services of the Court Receiver to be made available to the Debt Recovery Tribunal for a period of one year. Importantly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, Bombay, or in proceedings instituted by banks after the Recovery of Debts Due to Banks and Financial Institutions Act came into force, no appointment of the Court Receiver, High Court, Bombay, could be made by the Debt Recovery Tribunal at all. 33. The categorical view that it is only this Court that can appoint the Court Receiver, High Court, Bombay, also finds mention in the Judgment of Girish M. Joshi (supra). Whilst it is true that the City Civil Court, Mumbai does appoint the Court Receiver, High Court, Bombay, it is that very practice, the origins of which are indeed difficult to trace, that was questioned by this Court in Girish M. Joshi. The practice followed by the City Civil Court, the correctness of which was questioned by this Court, cannot form a legal basis for allowing an arbitral tribunal to appoint the Court Receiver, High Court, Bombay, thereby overlooking the position as it emerges from the aforementioned Judgments. 34. Taking into consideration all of the above, I am of the view that an arbitral tribunal cannot appoint the Court Receiver, High Court, Bombay, to act as a Receiver, under Section 17 of the Amended Act. This follows from the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Receiver, High Court, Bombay, functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the Office of the Court Receiver, High Court, Bombay. 37. It cannot, therefore be said that the Court Receiver, High Court, Bombay is capable of being appointed by an arbitral tribunal. As to the submission that such appointment is subject to the approval from the administrative side of this Court and the interpretation of Section 17 of the Amended Act, I will consider that submission separately. INTERPRETATION OF SECTION 17 OF THE AMENDED ACT 38. Prior to dealing with the submissions relating to the interpretation of Section 17 of the Amended Act, it is necessary to set out Section 17 of the Arbitration and Conciliation Act of 1996 ("the 1996 Act") and of the Amended Act, as also Section 9 of the 1996 Act and the Amended Act. It would also be relevant to consider the definition of the expression "Court" in Section 2(1)(e) of the 1996 Act. 39. Section 17 of the 1996 Act read as under: "Interim measures ordered by arbitral tribunal.-(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:- (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tired, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it." 42. Section 9 of the Amended Act reads as under: "9. Interim measures, etc., by Court.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but does not include any Civil Court of a grade inferior of such principal Civil Court, or any Court of Small Causes; (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, have jurisdiction to decide the questions forming the subject-matter of the arbitration if he same had been the subject-matter of a suit, and in other case, a High Court having jurisdiction to hear appeals from decrees of Courts subordinate to that High Court." 44. It is the accepted position in the submissions of all the parties that Section 17 of the Act as amended, confers much wider powers on the arbitral tribunal than before the amendment. Before considering the language of Section 17 of the Amended Act, it may be relevant to consider some decisions on the powers or absence of powers of arbitral tribunals to grant interim reliefs at various points of time and under the different arbitration regimes. 45. Under the Arbitration Act, 1940, ("the 1940 Act") the Hon'ble Supreme Court noted in MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd. (supra), at paragraphs 42 - 43, page 646 and paragraphs 47 - 48, pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made a rule of court; the same is enforceable on its own force. Even under Section 17 of the 1996 Act, an interim order must relate to the protection of the subject-matter of dispute and the order may be addressed only to a party to the arbitration. It cannot be referred to other parties. Even under Section 17 of the 1996 Act, no power is conferred upon the arbitral tribunal to enforce its order nor does it provide for judicial enforcement thereof...." (Emphasis Supplied) 47. Before the 1940 Act, the position was that matters relating to the grant of an injunction and appointment of a receiver could not even be considered by an arbitrator. In this regard, the Judgment of Surendra Kumar Roy Chowdhury v. Sushil Kumar Roy Chowdhury (supra) is relevant. The Court held at paragraphs 8 and 9 on pages 258-259, as follows: "8. ...There is authority for the proposition that where on account of the arbitration clause in a partnership agreement or lease or the like, by which the parties agreed to refer all their disputes to arbitration, the Court stays proceedings pending itself, it retains jurisdiction to deal with a prayer for injunction or for a receiver: Law v. Garret; Compagn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oll ICS Cecons O & M Co. Pvt. Ltd. v. National Highways Authority of India (supra), the Delhi High Court at paragraphs 15-18 on pages 1026-1027 dealt with the scope of powers under Sections 9 and 17 of the Act. In brief, the Court expressed the view that the powers of an arbitral tribunal under Section 17 of the 1996 Act are much narrower than that of a Court under Section 9 of the Act, although there may be some overlap. The Court in Intertoll (supra), held that an arbitral tribunal can only protect the subject matter of the dispute, which must be tangible property, and therefore it cannot order the furnishing of a security for securing a money claim. 49. As against this, this Court in Baker Hughes Singapore Pte. v. Shiv-Vani Oil and Gas Exploration Services Ltd. (supra) took a broader view (at paragraphs 40, 50 - 51) of the arbitral tribunals powers under Section 17 of the 1996 Act. This Court also distinguished the Judgment in the case of Intertoll (supra). This Court held, in Baker Hughes (supra), that an arbitral tribunal can, in a given case, make an appropriate order of security. 50. A perusal of these decisions is helpful because it brings into focus the reason why Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceeding before it." 57. The issue of enforceability of such orders is now expressly addressed by Section 17(2) of the Amended Act, which provides that such orders of the arbitral tribunal, "... shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court." 58. In light of the enhanced powers and efficacy of recourse under Section 17 of the Amended Act, there have been corresponding changes to Section 9 of the Amended Act as well. Section 9(3) of the Amended Act states that, "once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious." 59. Whilst all of the above explains the rationale and purpose for amending the provisions of Section 17 of the Amended Act, the question still remains: whether there is anything in the language of Section 17 of the Amended A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 'court' and not the defined term 'Court', the legislature was not intending to refer to a particular 'Court' as defined under the Act but was only generally stating that the powers of the arbitral tribunal for the making of interim orders will be that of a court. 65. The use of the expression 'court' and not 'Court', in my view, militates against the submission that an arbitral tribunal is clothed with all the powers and consequences of a particular Court, such as the High Court, Bombay, to be able to do only what the High Court, Bombay can do in terms of appointment control and supervision of the Court Receiver, High Court, Bombay. 66. In any event, for the other reasons already mentioned, I am of the view that even if we read the particular word as "Court" in the defined sense, it still does not mean that the arbitral tribunal is entitled to do what only the High Court, Bombay can do, which is to appoint the Court Receiver, High Court, Bombay. 67. So also, the provisions of Section 17(2) of the Amended Act, provide for a deeming fiction as to the order of the arbitral tribunal being deemed to be an order of the Court for all purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be subject to a decision or approval on the judicial side of this Court upon a Report being submitted to it, it would result in a situation where the implementation of the very order of the arbitral tribunal being subject to the approval of this Court. Such a sheme is unknown to Section 17 as amended, and would defeat the very purpose of Section 17 as amended, which was to make the powers of the arbitral tribunal self-contained and exhaustive. 72. Further, the two-tier process submitted above viz. appointment of the Court Receiver by the arbitral tribunal and approval by this Court, would also contravene the scheme under Section 5 of the Act. Section 5 of the Act contemplates intervention by a judicial authority only where expressly provided for in Part I. Clearly, there is no room for any form of 'intervention' by way of this Court approving the appointment of the Court Receiver, High Court, Bombay, as made by an arbitral tribunal. All this indicates that the scheme as contended by the Original Claimant for the manner in which the appointment of the Court Receiver, High Court, Bombay, is to be made by an arbitral tribunal, is not known to the Amended Act. Hence, for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, aids the Original Claimant, but even if it did, the Court can always consider the consequences of such interpretation and construe it to avoid the hardship or inconvenience. 77. For this reason, also, I am of the view that the Court Receiver, High Court, Bombay cannot be appointed by an arbitral tribunal. 78. Lastly, Mr. Vivek Patil, Advocate, who appeared in response to the Notice dated 7th January, 2017, made a submission in support of the view that the Court Receiver can be appointed by an arbitral tribunal. He relied upon a Judgment of a Single Judge of the Kerala High Court in the case of Pradeep K.N. v. The Station House Officer & Ors. (unreported decision in WP(C) No. 38725 of 2015). 79. This Judgment dealt with a common question of law regarding the "... enforcement of the interim order issued under Section 17 [of the Amended Act]" as set out in paragraph 1. In paragraph 12, the Court whist noticing the powers of the arbitral tribunal to make orders of repossessing vehicles, raised the question as to when such orders are not obeyed or honoured by the parties, can the order be enforced like an order of the civil court, by the arbitral tribunal or the party. After ana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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