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IN THE HIGH COURT OF BOMBAY
S.H. Kapadia, J.
I.C.I.C.I. Limited..... Plaintiffs.
Versus
Patheja Brothers Forgings Stampings Limited others..... Defendants.
Suit No. 2784 of 1999, decided on 3-3-2000.
Advocates appeared :
Virendra Tulzapurkar, for the Indian Banks Association.
Arif Bookwalla i/b Malvi Ranchhoddas Co., for the debtor Chockani International.
Ravi Kadam i/b Amarchand Mangaldas Suresh A. Shroff Co., for I.C.I.C.I.
Ms. Rajani Iyer i/b Mehta and Girdharlal, for Sree Ram Security Consultancy Services.
Aspi Chinoy i/b Udwadia Udeshi Bergis, for the debtor - National Housing Bank.
Ms. Farzana Behram Kamdin i/b Wadia Gandhi Co., for Bank of India.
Janak Dwarkadas i/b B.B. Parikh, for the debtor-Mardia Chemicals.
P.N. Modi i/b Hariani Co., for the debtor-Seeta Industries.
D.Y. Chandrachud, Addl. Solicitor General, for Central Government.
Ms. A. Rodrigues, Court Receiver, present.
Sections 3 and 31-Transfer of and proceedings to Debts Recovery Tribunal-Court Receiver appointed by High Court not automatically discharged after 16th July, 1999-Property remains custodia legis - Till Debts Recovery Tribunal appoints its Receiver, High Court can issue direction on report of Court Receiver for management and protection of custodia legis assets.- The Court Receiver appointed by the High Court does not stand automatically discharged after 16th July, 1999. Till such rights are determined by Debt Recovery Tribunal, the property remains custodia legis. Even after coming into force of the Debt Recovery Tribunal Act and the Debt Recovery Tribunal the said rights to the possession of the funds / properties held by the receiver remain undecided and, therefore, till Debt Recovery Tribunal appoints its receiver under Debt Recovery Tribunal Act, 1993 the High Court can certainly issue directions on the reports of the Court Receiver regarding management and protection of the assets which are custodia legis. The Court Receiver, High Court, Bombay directed to act in all matters pending before her regarding fixation and recovery of royalties, regarding fixation of sale price, regarding implementation of agency agreements already executed, etc. In all cases where the Court Receiver is seized of the properties and assets she is empowered to take all necessary steps to preserve and manage such properties.
Section 31(1)-Central Government notification dated 16th July, 1999 establishing Debts Recovery Tribunal under Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993-All suits and other proceedings pending in the High Court before 16th July, 1999, the cut-off date, stand transferred to the Debts Recovery Tribunal-This will include even execution applications in which Court Receiver is appointed by the High Court before the cut-off date.-On 16th July, 1999, the Central Government by notification established the Debt Recovery Tribunal under Section 3 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. Consequent upon the said notification, all suit~/proceedings pending before High Court involving claim of Rs. 10 lakhs and above stood transferred to the Debts Recovery Tribunal. The Act is a complete Code by itself. Looking to the scheme of the said Act, it is clear that all suits and pending proceedings including interim proceedings pending before 16th July, 1999 stand transferred to Debt Recovery Tribunal. Proceedings in which Court Receiver is appointed before 16th July, 1999 cannot be said to have worked out. They continue to remain pending on the cut-off date and therefore, the said proceedings also stand transferred to Debt Recovery Tribunal. After the properties become custodia legis under the orders passed before the cut-off date the management of such properties is an on going continuous process and such monitoring/management requires appropriate directions to be given by Debt Recovery Tribunal. Therefore, all such pending cases stand covered by Section 31 of the Act. No fresh application for appointment of receiver is required to be made to Debt Recovery Tribunal. Where the High Court has already appointed a receiver before 16th July, 1999, the property shall continue to remain, custodia legis till the suit is disposed of by the Debt Recovery Tribunal. Hence no fresh application for appointment of receiver is required to be made to Debt Recovery Tribunal. It may be open to Debt Recovery Tribunal, on an application of a party, to discharge its receiver. However, ipso facto by reason of transfer of suits and proceedings the Court Receiver does not stand discharged. There will be no question of making a fresh application for appointment of receiver. Notwithstanding transfer of suits and proceedings to Debt Recovery Tribunal the High Court can continue to give appropriate directions to the Court Receiver. High Court, Bombay regarding management of the assets and properties in the hands of the Court Receiver till the receiver appointed by the Debt Recovery Tribunal takes charge of the said assets and properties. During the pendency of the suit, the rights of the parties to the possession of the funds/properties held by the receiver is not determined. It is only in the final decree that such rights are determined.
Section 31(1)- Transfer of ;s to tribunal.-All suits and other proceedings pending before High Court involving claim of Rs. 10 lakhs and more than that automatically transferred to tribunal on its constitution by Central Government including even execution application.
2.After 16th July, 1999 in several proceedings before the Court receiver parties have challenged the right of the Court Receiver to manage the properties on the ground that in view of D.R.T. Act, 1993, the Court Receiver had no authority to act in the matter. Hence, the Court Receiver has moved this Court. Pursuant to notice, the above matters have come up for hearing.
3.In the circumstances, the Court Receiver has moved this Court for adjudication of various points, which arise for determination consequent upon the above notification.
4.The following points arise for determination:
(i) Whether this Court has jurisdiction to issue directions to Court Receiver in suits in which the Court Receiver stands appointed prior to 16th July 1999 ?
(ii) If not, whether this Court is empowered to give directions to its Court Receiver regarding the properties which are in the custody of the said Receiver till such time as the D.R.T./Central Government sets-up alternate office machinery with a proper infrastructure ?
5.Before coming to the above two questions, a short preclude needs to be mentioned.
Prelude : Before 1929, receivership was granted to private persons, Gradually, the business in the hands of the private Receiver increased and it was thought it had grown too big to be entrusted to a single private individual. It was, therefore, decided that the work should be assigned to a salaried officer on the establishment of the High Court. As a result, in 1929 the Government created the post of the Court Receiver, who took over all the pending receiverships from the private Receiver. The system sanctioned by the Government for running of the office, after it was taken over, was that the office should budget for its normal expenditure which the Government will pay in the first instance but which had to be recouped to them from the takings of the office other than the Receiver's commission. In 1932, the office was made a permanent department of the High Court. The Court Receiver was directed to continue to charge to the estates under his management all expenses incurred in connection with his office including the payment of rent and to credit all recoveries to the Government. Accordingly, Rule 592 of the Original Side Rules, inter alia, provides that the Court Receiver shall charge to the estates under his management a sum towards the expenses of his office including his salary. Under Rule 591, the Court Receiver is directed to charge fees according to a prescribed scale. Under Rule 595, a Receiver is required to file accounts in the office of the Commissioner. In appropriate cases, this Court is also empowered to appoint a Receiver other than the Court Receiver. Such receiver is also required to file accounts in the office of the Commissioner (See Rule 594(a)). When the Court Receiver is discharged, he is required to file his accounts upto the date of his discharge. Similarly, under Rule 924, the accounts of the Court Receiver are required to be audited by Accountant General and if any question between the auditor and the Court Receiver relating to accounts arises for determination, the question is required to be referred to the Chief Justice. This is under Rule 926. As stated in my order dated 4th February 2000, properties, both moveable and immoveable, worth Rs. 2000 crores are in possession of the Court Receiver, High Court, Bombay. These consist of shares, fixed deposits, jewellery, plant and machinery, buildings, dry-docks, tea estates, ships, amounts in the personal ledger accounts o
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