9911796707
TMI Blog1999 (4) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... that the proceedings have been registered before B.I.F.R. under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The defendants have received the communication dated 12th March, 1999 intimating that the reference dated 19th February, 1999 was registered as Case No. 58 of 1999. It is also clear that this Court by Order dated 11th December, 1998 had granted ad-interim injunction in terms of prayer Clause (b) till the Court Receiver takes possession. Admittedly, it is the defendant who is in possession of the property. In affidavit in support of the Judge's Order, the plaintiffs have set out that when the Court Receiver pursuant to the communication dated 22nd February, 1999 went to take possession on 9th March, 1999 the defendants declined to hand over possession on the ground that proceedings have been registered before B.I.F.R. By the present Judge's Order, the plaintiffs seek an Order that the Court Receiver be directed to take forcible physical possession of the suit property from the 1st defendant or any other person found in possession and/or occupation thereof by breaking open the lock and if necessary with the help of the Police. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985 is no longer res integra having been settled in the case of Real Value Appliances Ltd. v. Canara Bank and others, . The Apex Court in paragraph 30 (Bom.C.R. para 29) has observed as under :- Once the reference is registered and when once it is mandatory simultaneously to call for information/documents from the informant and such a direction is given, then inquiry under section 16(1) must - for the purposes of section 22 - be deemed to have commenced. Section 22 and the prohibitions contained in it shall immediately come into play. The Apex Court has also explained the objectives behind the Act in the following words :- It is also the legislative intention to see that no proceedings against the assets are taken before any such decision is given by the B.I.F.R. for in case the Company's assets are sold or the Company wound up it may indeed become difficult later to restore the status quo ante. For that purpose section 22(1) of the Act may also be referred to for deciding the issue in controversy, which reads as under :- 22(1) Where in respect of an Industrial Company, an inquiry under section 16 is pending or any scheme referred to under section 17 is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, the case of the plaintiffs that what they are seeking is merely administrative directions and consequently the Judge's Order prayed by them can still be proceeded with. They seek to make a distinction between an Order inter parties and an order of appointment of a Receiver qua third party. In so far as inter parties is concerned, it is pointed out that the order takes effect immediately and the property vests in the Receiver and consequently the property is custodia legis. Considering the above, the various judgments cited can now be referred to advantageously. 4. When can the property be said to be custodia legis. For that purpose it will be necessary to consider the provisions of Order XL, Rule (1). The said Rule reads as under:- Order XL, Rule (1) : (1) Where it appears to the Court to be just and convenient, the Court may by Order - a) appoint a Receiver of any property, whether before or after decree; b) remove any person from the possession or custody of the property; c) commit the same to the possession, custody or management of the Receiver; and d) confer upon the Receiver all such powers, as to bringing and defending suits and for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual or constructive, and the conferral of special powers on him require specific orders under Clause (b), (c) and (d) of the same Rule and no such order was passed at that time. In Raja Jagadish Chandra Deo Dhabal Deb v. Bhubaneswar Mitra and others, A.I.R. 1923 Calcutta 121, the Division Bench again in the matter of appointment of Receiver observed as under :- Until the appointment has been perfected and the Receiver is actually in possession, a creditor is not debarred from proceeding to execution. The order appointing a Receiver is for the benefit of the parties to the action. It does not affect third persons until the appointment is completed and perfected. An execution creditor may therefore seize chattels after an order has been made appointing a Receiver on his giving security but before the security has been given or possession taken. In Nilkantha Narayan Singh v. M.S. Zoha, Official Receiver, Calcutta and another, A.I.R. 1943(30) Patna 297, a Division Bench of the Patna High Court was considering the contention on behalf of the petitioners before it, that mere appointment of the Official Receiver as Receiver of the Judgment Debtor's estate would not transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Receiver can be said to have taken possession. Commenting on the Order of the subordinate Court which held that on giving security the property would vest in the Receiver, the Division Bench observed as under : It is contrary to the general rule that the Receiver has to take possession and assume charge of the estate in respect of which he is appointed Receiver and that he cannot be deemed to be in possession merely because he furnishes security. In Mohamed Hanif Abdul Hamid and others v. Chunilal Ukabhai Padia and others, , the learned Single Judge referred to the case of Veerappa Chettiar v. Mohamed Mytheen Mana Pillai, , wherein it was observed that the property is custodia legis on the property coming into possession of the Receiver. Thereafter, the learned Single Judge referred to the case of Kanhaiyalal v. Dr. D. B. Banaji, in para 10 of its Judgment for the observation that Of Course, any Court which is holding the property in custodia legis through a Receiver or otherwise is moved to grant permission for taking legal proceedings in respect of that property, the Court ordinarily would grant such permission if considerations of justice require. In that case the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. others, . There also the Receiver was appointed on 13th February, 1990. Possession was taken on the same date. Proceedings under B.I.F.R. were registered on 3rd June, 1991. It is, therefore, clear that the Receiver was in possession and consequently the reference to that Judgment would be of no assistance in so far as the present case is concerned. Learned Counsel for the defendants, however, has drawn my attention to the following sentences namely The appointment of the Court Receiver, High Court, Bombay as the Receiver of the suit property was made on 13th February, 1990. Receiver had taken possession of the suit properties on 23rd February, 1990. The suit properties became custodia legis through its duly appointed Receiver on 23rd February, 1990. This was for the purpose of pointing out that the expression custodia legis could only be after the Receiver takes possession . On behalf of the defendants heavy reliance was placed on the Judgment in the case of Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Ltd. and anothers, 1995 Bank. J. 52(S.C.) : 1993(78) Com.Cas. 803. To my mind the said Judgment would be of no assistance for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession by force in another words a coercive step. By virtue of section 22, this Court would be prohibited from so doing. By a Judge's Order the Court is not merely passing an administrative Order, the Court is judicially deciding an issue before it. In order to decide that issue, it will have to continue the proceedings before it, which jurisdiction is ousted by the language of section 22 as now interpreted. The effect of operation of section 22 is not as if the plaintiffs are barred from taking any steps. All that the law requires is for the plaintiffs to move B.I.F.R. and seek permission to proceed with the proceedings. It is for the B.I.F.R. then to decide whether the plaintiffs should be permitted to proceed with the proceedings or not. Even if the argument that the property is custodia legis is to be accepted which to my mind it is not, a property to be custodia legis in a case where the defendant is in possession would require dispossession of the defendants and taking over possession by the Receiver. The Order of this Court is clear that pending the Receiver taking possession, the defendant has been restrained by an injunction with dealing with the property. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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