TaxTMI 
TaxTMI 
TaxTMI 
2000 (3) TMI 922
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....ion. 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 times as the DRT/Central Government sets-up alternate office/machinery with a proper infrastructure ? 5. Before coming to the above two questions, a short prelude needs to be mentioned. Prelude : Before 1929, the 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 ....
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....er has to enter into agency agreements after the properties become custodia legis. As a Court Receiver, she has to sign bills/vouchers. At this stage it is important to note that after deducting costs, charges and expenses as also the commission by the Court Receiver, Banks and Financial Institutions are required to be paid the net royalty amount even during the pendency of the suit pursuant to the orders of the Court. These payments are made by the Court Receiver by cheques. Hence, the Court Receiver is required to sign cheques and payment vouchers by which net royalty amount is remitted to the parties to the suit. The Court Receiver is also required to sign daily vouchers to meet office expenses. The Court Receiver is also required to pay expenses to the officers, who visit the site by way of daily allowances. These officers are also required to go out of Bombay. The Court Receiver is also required to sign salary bills. The Court Receiver is also required to pay security guards who are appointed to protect plants, machinery and immovable properties all over India. The Court Receiver is also required to pay fees to valuers, Architects and Chartered Accountants. In some cases, the ....
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....ases, emergent steps are required to be taken to protect dilapidated properties, vessels, etc. These problems have been brought to the notice of the Central Government. The well-settled position in law is that if the properties, which are custodia legis, stand dissipated on account of neglect on the part of the Court Receiver, it can be sued for damages. It is for this reason that the Court Receiver, High Court, Bombay is required to seek directions at every stage from the High Court. All complaints are heard by the High Court. Either against the Court Receiver or complaints made by the Court Receiver. Even royalty fixed by the Court Receiver is highly debated before this Court and matters are fought on that ground. Moreover, it is important to bear in mind that this office of the Court Receiver, High Court, Bombay earns revenue in crores for the Government even pending a suit. In the circumstances, this Court is now required mainly to consider issuing appropriate directions regarding the fall out of the notification dated 16-7-1999, which incidentally, it may be mentioned, the Central Government should have realised before issuing the notification. This has not been done by the Ce....
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....ad the power to appoint interim receiver in accordance with rules of natural justice in appropriate cases. However, on 17-1-2000, the President of India promulgated Ordinance No. 1 of 2000 whereby section 19 of the original Act has been substituted by a new section 19. Under the amended section 19(6), the dependent has a right to claim set-off against the applicant's demand. Under section 19(8) as amended, a defendant may, in addition to his right of pleading a set-off, also set-up a counter-claim, which will have the same effect as a cross suit. Under the amended section 19(8), the DRT in appropriate cases, may appoint a receiver at the interim stage, even before grant of certificate for recovery of debts. Under the said section, the DRT is empowered to confer on the receiver all powers for realisation, management, protection, preservation and improvement of the property including collection of rents and profits thereof. In the light of this amendment, the earlier lacuna in the Act is filled in. Under section 26 of the Act, the defendant cannot dispute before the Recovery Officer the correctness of the amount specified in the certificate. Section 31 of the Act deals with transfer ....
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....oadly, it was contended on one hand that there was nothing in the DRT Act, which renders orders passed by this Court (including interim orders) as non est. It was urged that in cases where interim proceedings have already become final the orders passed therein are not rendered non est and they will continue notwithstanding the provisions of the DRT Act. In this connection, it was also urged that in any event till DRT substitutes the Court Receiver, High Court, Bombay by its own receiver, the present Court Receiver, High Court, Bombay shall continue. At this stage it may be mentioned that before the ordinance, there was a conflict as to whether DRT had the authority to appoint a receiver. The judgments of the various Tribunals indicate that receivers were appointed by DRT under section 22 on the principles of natural justice. However, with the ordinance coming into picture that controversy is now being resolved. It was also contended that under Order XL, Rule 3 various duties to be performed by the receivers are laid down. Similarly, under Order XL, Rule 4 where a receiver causes loss to the property, or fails to carry out his duty, the Court may direct the property to be attached a....
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....f date. Hence, in matters arising before the Court Receiver after the cut-off date directions can only be given by DRT and that too, only to its own receiver and not the Court Receiver. A third view was also canvassed by advocates viz., that looking to the definition of the word debt under the DRT Act, there was no automatic transfer under section 51. It was urged that under section 2(g), the word debt means any liability which is alleged as due from any person by a bank which is legally recoverable or payable under a decree or order of any Civil Court on the day of the application. It was contended that therefore, in each matter of transfer the Court should examine the question whether the claim of the bank was legally recoverable, that whether the debt was time barred and only if the condition mentioned under section 2(g) are satisfied then the Court should transfer the matters to DRT. At the threshold it may be mentioned that this argument stands rejected by the judgment of the Apex Court in the case of State Bank of Bikaner & Jaipur v. Ballabh Das & Co. JT 1999 (7) SC 102. Before concluding it may be mentioned that before the ordinance, there was a conflict of view regarding tr....
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....ints the Court Receiver, the proceedings which are interim in nature come to an end. It would be an anomalous position to say that although the main suit has been transferred to the DRT, the interim proceedings in which the Court Receiver is appointed before the cut-off date continue to remain within the jurisdiction of this Court. The scope of the various provisions, discussed hereinabove, clearly show that all suits and other proceedings pending in this Court before the cut-off date shall stand transferred to the DRT. This will include even execution applications in which the Court Receiver is appointed prior to the cut-off date. It may be mentioned that as regards execution proceedings the decree holder will have to move the DRT. The DRT shall issue the recovery certificate after examining the quantified decretal amount and on such certificate the Recovery Officer, under the Act, can proceed to recover the decretal dues. The Act is a complete code by itself. Looking to the scheme of the said Act, as discussed above, it is clear that all suits and pending proceedings including interim proceedings pending before 16-7-1999 stand transferred to DRT. It needs to be reiterated that pr....
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....tion for appointment of receiver. As stated above, proceedings before the Court Receiver is an ongoing process till the rights of the parties to the properties in the hands of the receiver are decided. Only a formal handing over of the properties by the Court Receiver to the receiver of DRT will follow and, therefore, there is no question of de novo proceedings being adopted for appointment of Court Receiver. 9. In the case of United Bank of India v. DRT 1999 Bankers Journal, it has been held by the Supreme Court that the word debt has to be given widest amplitude to include any liability due from any person to the bank, whether secured or unsecured, whether payable by decree or otherwise. That the entire averments in the plaint have to be looked into to ascertain whether DRT has the jurisdiction. In that matter, the High Court took a view that the suit was for damages and compensation which required quantification by a decree and therefore, it did not come within the purview of the Act. However, looking to the definition of the word 'debt' under the Act the Supreme Court found that the word 'debt' included all claims arising out of debts owe to the Banks and Financial Institution....
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....ere cannot be an automatic transfer to DRT. In the above judgment, the Apex Court has clearly laid down that if the bank has made its claim on the basis of an allegation that the liability of the defendant had arisen during the course of its business activity and if it is alleged that the liability is subsisting and legally recoverable then the suit shall stand transferred to DRT. Point No. (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 DRT/Central Government sets up alternate office/machinery with a proper infrastructure ? 10. Although I have come to the conclusion that all suits and proceedings stood transferred on 16-7-1999 an important point which arises on the facts of these cases is that the DRT has no infrastructure to take possession of the properties worth Rs. 2,000 crores. Although, DRT is now given the power to appoint receivers, there is no adequate infrastructure provided to DRT to take possession and charge of the properties which are in the custody of the Court Receiver, High Court, Bombay. The working of the receiver's office as de....
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....ue 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 DRT takes charge of the said assets and properties. In this connection, the position in law can also be seen. When a Court Receiver is appointed by the Court, the properties come under the management of the Court. The receiver enters into an agency agreement after taking formal possession. During the subsistence of the agency agreement, the receiver monitors implementation of the terms and conditions mentioned in the agency agreement. To give an illustration, a Court Receiver has been appointed in the case of a Tea Estate in one of the above suits. The Tea Estates are located outside Bombay. The highest bidder is appointed as agent. That bidder enters into an agency agreement with the Court Receiver. As long as that agency agreement subsists, the Court Receiver is required to protect and manage the Tea Estates. It is for this reason that till the Court passes an order discharging the Court receiver with or without passing of accounts the agency agreement subsists. The jurisdiction of the ....
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.... upon the exigencies of the case. The reason is very clear that 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. In the present matter, the suits are pending. The rights to possession of the funds/properties held by the receiver have not been decided. In the circumstances, it cannot be said that the Court Receiver appointed by this Court stands automatically discharged after 16-7-1999. Till such rights are determined by DRT, the property remains custodia legis. Even after coming into force of the DRT Act and the DRT the said rights to the possession of the funds/properties held by the receiver remain undecided and, therefore, till DRT appoints its receiver under DRT Act, 1933 this 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 is hereby directed to act in all matters pending before her regarding fixation and recovery of royalties, regarding fixation of sale price, regarding implementation ....