Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (Act I of 1986) does not bar a lessor from taking action against a lessee who has defaulted on lease payments, where the equipment leased is not the property of the lessee.

Headnote:
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - SECTION 22 - LEASE AGREEMENT - OWNERSHIP OF EQUIPMENT - APPOINTMENT OF RECEIVER - The plaintiff, the owner of certain equipment, leased it to the defendant under a lease agreement. The defendant defaulted on the lease payments, and the plaintiff terminated the agreement and filed a suit for possession of the equipment. The defendant resisted the suit, claiming that the equipment was its property and that the Sick Industrial Companies (Special Provisions) Act, 1985 (Act I of 1986) barred the plaintiff from taking any action against it. The court held that the equipment was the property of the plaintiff and that the defendant had no title to it. The court also held that section 22 of Act I of 1986 did not bar the plaintiff from taking action against the defendant, as the equipment was not the property of the defendant.
Fact of the Case:

The plaintiff, a leasing company, leased certain equipment to the defendant, a sick industrial company. The defendant defaulted on the lease payments, and the plaintiff terminated the agreement and filed a suit for possession of the equipment. The defendant resisted the suit, claiming that the equipment was its property and that the Sick Industrial Companies (Special Provisions) Act, 1985 (Act I of 1986) barred the plaintiff from taking any action against it.
Finding of the Court:

The court held that the equipment was the property of the plaintiff and that the defendant had no title to it. The court also held that section 22 of Act I of 1986 did not bar the plaintiff from taking action against the defendant, as the equipment was not the property of the defendant.
Issues: 1. Whether the equipment was the property of the plaintiff or the defendant. 2. Whether section 22 of Act I of 1986 barred the plaintiff from taking action against the defendant.
Ratio Decidendi: 1. The court held that the equipment was the property of the plaintiff because: - The lease agreement clearly stated that the plaintiff was the owner of the equipment. - The defendant had never claimed ownership of the equipment in its balance sheet or otherwise. - The plaintiff had been claiming depreciation in respect of the equipment as the owner thereof, as permissible under the Income-tax Act, 1961. - The defendant had been paying rental as agreed to the plaintiff till March 1988. 2. The court held that section 22 of Act I of 1986 did not bar the plaintiff from taking action against the defendant because: - The equipment was not the property of the defendant. - The contractual right of the defendant to use the equipment had been lawfully terminated.
Final Decision: The court appointed the Court Receiver, High Court, Bombay, as receiver of the equipment with all powers under Order XL, Rule 1 of the Code of Civil Procedure, excluding the power of sale. The court also directed the Court Receiver to appoint the defendant as his agent to use the equipment on payment of monthly royalty.

JUDGMENT - D.R. DHANUKA, J.:---The plaintiff has taken out this notice of motion for appointment of Court Receiver, High Court, Bombay, as receiver of the suit equipments described in Schedule (Exhibit 'F' to the plaint) with all powers under Order XI, Rule 1 of the Code of Civil Procedure including the power to take actual physical possession of the said equipment and to hand over the same to the plaintiff and for various orders of interim injunctions. The defendant has resisted the notice of motion on several grounds.

2. By an order dated 26th April, 1991, Jhunjhunuwala, J., appointed the Court Receiver, High Court, Bombay, as ad interim receiver in terms of prayer (f) of the notice of motion and also granted limited interim injunction in terms of prayer (g) thereof. Being aggrieved by the said order, the defendant preferred an appeal, being Appeal No. 521 of 1991. Pursuant to the orders passed by the Hon'ble Divison Bench, the Court Receiver has taken symbolic possession of the abovereferred equipments. The notice of motion is heard as some length.

3. The relevant facts emerging from the record are as under :---

(a) By a master agreement of lease No. TCF/24/1986 dated 28th April, 1986, the plaintiff leased the suit equipments/machineries to the defendant on the terms and conditions set out therein. A supplementary lease schedule/indemnity certificate was also executed by and between the plaintiff and the defendant forming part of the same transaction. Under the said agreements, copies whereof are annexed to the plaint as Exhibits "A-1" and "A-2", the defendant agreed to pay certain amount to the plaintiff as "rental" for the use of the said machines. The duration of the lease agreement in the first instance was stipulated to be 108 months. The said agreement in terms provided that the plaintiffs were the sole owners of the suit equipments and machinery. The said agreement confered right on the plaintiff to terminate the said agreement if the defendant committed default in payment of rental and take back possession of suit equipments and exercise various rights and remedies as set out therein.

(b) Particulars of the said equipments/machineries are set out in the Schedule at Exhibit 'F' to the plaint.

(c) The defendant paid the agreed amount of lease rent to the plaintiff only for the period upto March 1988. In view of the defaults committed by the defendant, the plaintiff called upon the defendant to pay a sum of Rs. 3,78,158/- towards instalments which had already become due and certain other amounts towards delayed payment charges etc. within 14 days of the receipt of the said letter. It was also stated in the said letter that in the event of the defendant failing and neglecting to comply with the requisitions contained in the said later, it will be treated that the defendant was in default. It was stated in the said letter, that in that event the plaintiff will be entitled to enforce the remedies available under the aboverferred lease agreement dated 28th April, 1986. The defendants failed and neglected to pay the said amount or any part thereof. By a letter dated 25th January, 1991 addressed to the defendant, the plaintiff declared that in view of the defaults committed by the defendant, all the sums due under the lease agreement for the full term of the lease had become due and payable by the defendant to the plaintiff forthwith. By the said letter, the plaintiff called upon the defendants to pay sum of Rs. 5,78,015/- including Rs. 41,703/- being rentals due from February 1991 to the end of the lease tenor within 14 days from the receipt of the said letter. It was stated in the said letter that in default, the plaintiff shall be constrained to terminate the lease agreement and demand the return of the said equipment. By a letter dated 30th January, 1991 (Exhibit 'D' to the plaint), the defendant informed the plaintiff that the defendant was registered as a sick unit with the Board for Industrial and Financial Reconstructio

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