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of <h1>Court dismisses Defendants' objections, suit proceeds. Receiver to take symbolic possession, offer agency. Possession if not done in 8 weeks.</h1> The Court dismissed the Defendants' preliminary objections, allowing the suit to proceed. It granted the Notice of Motion, directing the Receiver to take ... - Issues Involved:1. Jurisdiction of the Court in light of the arbitration agreement.2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act (S.I.C.A.) to the suit.3. Maintainability of the suit against the guarantor.Detailed Analysis:1. Jurisdiction of the Court in light of the arbitration agreement:The Defendants raised two preliminary objections regarding the jurisdiction of the Court. The first objection was based on the arbitration clause in the lease agreement between the Plaintiff and Defendant No. 1, which was invoked by Defendant No. 1, leading to an application under Section 11 of the Arbitration and Conciliation Act, 1996, pending before the Delhi High Court. The Defendants argued that under Section 42 of the Arbitration Act, this Court could not entertain the present suit. The second objection was that the subject matter of the suit is covered by an arbitration agreement, and an oral application under Section 8 of the Act had been made to refer the parties to arbitration, invoking Section 5 of the Arbitration Act.The Court refuted these objections, noting that the application under Section 11 before the Chief Justice of the Delhi High Court was an administrative power and not a judicial one, as per the Supreme Court's judgment in Ador Samia Pvt. Ltd. v. Peekay Holdings Ltd. Therefore, Section 42 did not bar the jurisdiction of this Court. Regarding Section 8, the Court emphasized that an application under this section must be written and accompanied by the original arbitration agreement or a duly certified copy. As no such written application was made, the provisions of Section 5 did not come into play. Additionally, the subject matter of the suit included both the lease agreement and the guarantee agreement, the latter of which did not contain an arbitration clause, thus lacking the identity of subject matter required under Section 8.2. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act (S.I.C.A.) to the suit:The Defendants argued that the suit was barred under Section 22 of the S.I.C.A. Act as it involved recovery of money from Defendant No. 1, an industrial company registered with the B.I.F.R. The Plaintiffs countered this by stating that the suit was primarily for recovery of lease equipment, with the money decree being incidental. The Court agreed with the Plaintiffs, noting that Section 22 barred suits for recovery of money or enforcement of security against the industrial company. However, the present suit was essentially for recovery of the Plaintiff's property (lease equipment), and the claim for arrears of lease money was incidental. Thus, the suit was not barred by Section 22 of the S.I.C.A. Act.3. Maintainability of the suit against the guarantor:The Defendants contended that the suit against Defendant No. 2, the guarantor, was barred under Section 22 of the S.I.C.A. Act, referencing the Supreme Court's judgment in Patheja Bros. Forgings & Stamping and Anr. v. I.C.I.C.I. Ltd. & others. The Plaintiffs argued that Section 22 barred suits for enforcement of guarantees related to loans or advances to the industrial company, not lease agreements. The Court concurred with the Plaintiffs, stating that the guarantee in question was not for a loan or advance but for lease payments. Therefore, the bar under Section 22 did not apply. The Court also noted that if the suit against the industrial company was not barred, the suit against the guarantor could not be barred either.Conclusion:The Court dismissed the preliminary objections raised by the Defendants, allowing the suit to proceed. It granted the Notice of Motion in terms of prayer clause (e), excluding the bracketed portion, directing the Receiver to take symbolic possession of the machinery and offer Defendant No. 1 to be appointed as an agent of the Receiver. If Defendant No. 1 did not execute the agency agreement within eight weeks, the Receiver would take actual possession of the machinery and hand it over to the Plaintiffs. The ad interim order in terms of prayer clause (f) would operate until the Receiver took possession. The Court also directed that the Receiver should not take possession of the machinery for six weeks from the date of the order at the request of the Defendants' counsel.
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