2003 (11) TMI 344 - HC - Companies Law

Court stresses reasons for receiver appointment, sets aside order lacking rationale, emphasizes asset protection, debt recovery

The Court emphasized the need for reasons when appointing a receiver, citing principles of natural justice and precedents. The impugned order appointing a ... Application to Tribunal Issues:1. Appointment of a receiver to seize and sell property by auction.2. Violation of principles of natural justice in the impugned order.3. Jurisdiction of the Tribunal to appoint a receiver or commissioner.4. Availability of alternative remedy under Section 20 of the Act.Analysis:1. The impugned order appointed a receiver to seize and sell the petition schedule property through auction. The petitioner argued that such an extreme step requires the Tribunal to record reasons, citing a Bombay High Court decision. The respondent contended that the appointment was necessary to realize the amount owed and safeguard their interest, supported by the provisions of the Recovery of Debts Due to Banks & Financial Institutions Act, 1993. The respondent emphasized the wider powers of the Tribunal compared to ordinary courts and cited relevant case law. The Court acknowledged the Tribunal's power but stressed the need for reasons when appointing a receiver, citing precedents and principles of natural justice.2. The petitioner raised concerns about the violation of natural justice due to the lack of reasons in the impugned order. Despite no contest by the petitioners, the Court held that the Tribunal must provide reasoned orders when taking extreme steps like appointing a receiver. The Court rejected the argument that the availability of an alternative remedy under Section 20 of the Act precludes the use of Article 227 of the Constitution in cases of orders violating natural justice. The Court set aside the impugned order for lack of reasons and remitted the matter to the Tribunal to provide an opportunity to both parties and pass appropriate orders with recorded reasons within four weeks.3. The legal provisions under Section 19(18) of the Act empower the Tribunal to appoint a receiver or commissioner for property seizure and sale. The Court emphasized that while the appointment of a receiver is a harsh remedy, it can be justified based on the circumstances of the case. The Tribunal's powers in appointing a receiver or commissioner are deemed wider than those of ordinary civil courts. The Court highlighted the importance of safeguarding assets and maximizing recovery in such cases, citing relevant case law and the objectives of the Act.4. The respondent argued that the availability of an appeal remedy under Section 20 of the Act renders the Civil Revision Petition under Article 227 of the Constitution unnecessary. However, the Court held that the lack of reasons in the impugned order, violating natural justice, overrides the availability of alternative remedies. The Court emphasized that when an order lacks reasons and violates natural justice, the availability of alternative remedies does not bar the use of constitutional remedies. As a result, the Court allowed the Civil Revision Petition, setting aside the impugned order, and remitted the matter for reasoned consideration by the Tribunal.