NEUTRAL CITATION
C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (OJ) (FOR ORDERS) NO. 1 of 2018
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2022
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (OJ) NO. 2 of 2017
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (OJ) NO. 3 of 2017
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (OJ) NO. 4 of 2017
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
With
CIVIL APPLICATION (OJ) NO. 5 of 2017
In R/PETN. UNDER ARBITRATION ACT NO. 19 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
================================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ================================================================ VITOL S.A.
Versus ASIAN NATURAL RESOURCES (INDIA) LIMITED & 4 other(s) Page 1 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined ================================================================ Appearance:
MR SN SOPARKAR, SENIOR ADVOCATE WITH MR ADITYA KRISHNAMURTHY WITH MR ASHUTOSH TIWARI WITH MR HARSH N PAREKH(6951) for the Petitioner(s) No. 1 HARDIK D MEHTA(7355) for the Respondent(s) No. 4 MR MANOJ KHATRI WITH MR JWALIT B SONEJI(7895) for the Respondent(s) No. 2 MR NIRAV C THAKKAR(2206) for the Respondent(s) No. 1 MR.VISHAL J DAVE(6515) for the Respondent(s) No. 6 NIPUN SINGHVI(9653) for the Respondent(s) No. 6 MR MEHUL SHAH SENIOR ADVOCATE WITH MR RISHI O MALIK(7727) for the Respondent(s) No. 3,5 SHERLEY S DOSHI(7979) for the Respondent(s) No. 4 VISHAL R BHATT(7991) for the Respondent(s) No. 4 ========================================================== CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 07/10/2023 CAV JUDGMENT
1.Heard learned Senior Advocate Mr. Saurabh N.
Soparkar with learned advocate Mr. Aditya Krishnamurthy and learned advocate Mr. Ashutosh Tiwari with learned advocate Mr. Harsh Parekh for the petitioner and objectors in Civil Application (OJ) Nos. 2 to 5 of 2017, learned Senior Advocate Mr. Mehul Shah with learned advocate Mr. Rishi O. Malik for the liquidator of the company in liquidation, Page 2 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined learned advocate Mr. Manoj Khatri for learned advocate Mr. Jwalit B. Soneji for the Claimant - United Shippers Ltd. and learned advocate Mr. Vishal J. Dave for the liquidator of judgment debtor. No one appeared for the secured creditors - IDBI.
2.These applications are arising out of an International Arbitration Award dated 17.01.2011 passed by the Arbitral Tribunal in reciprocating territory being London, UK awarding principal amount of US$ 68,435,250 with interest and cost in favour of the petitioner.
3.The decree holder - Vitol S.A. had filed Execution Application No.240/2011 before the Bombay High Court to enforce and execute the foreign award against the property of Judgment Debtor M/s. Asian Natural Resources (India) Limited, Formerly known as Bhatiya Page 3 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined International Limited which was within the jurisdiction of Bombay High Court which included inter-alia Office Premises No.101 at Orbit Plaza at New Prabhadevi Road, Mumbai claiming Rs.504.64 crores at the prevalent rate of US$ and GBP in the year 2014.
4.The Judgment Debtor sought to resist the enforcement of Foreign Award under section 48 of the Arbitration and Conciliation Act, 1996 (for short 'the Arbitration Act').
5.Bombay High Court vide judgment dated 15.09.2014 rejected the application filed by the Judgment Debtor holding that Foreign Award dated 17.01.2011 is seen to be enforceable and must be enforced by the Court and therefore, notice taken out under Order XXI Rule 22 of the Code of Civil Procedure, 1908 (For short "the Code") was made absolute and further ordered that execution Page 4 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined application shall proceed. In such circumstances, Foreign Award is deemed to be decree of Bombay High Court by virtue of section 49 of the Arbitration Act.
6.Bombay High Court passed the operative order dated 18.12.2014 as under:
"Various precepts have been issued for attaching the properties in other territorial jurisdictions where the above Award would have to be executed. Consequently, copy of the Execution Application as also a copy of the Award duly certified by the Prothonotary & Senior Master of this Court shall be transferred to various Courts where the properties of the award debtor, movable as well as immovable, are shown to be situated.
7.Judgment Debtor challenged the order passed by Bombay High Court before the Supreme Court by preferring Special Leave Petition. Hon'ble Supreme Court granted stay on the execution of the decree of Bombay High Court vide order dated 19.01.2015 subject to Judgment Debtor Page 5 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined providing bank guarantee of 50% of the decretal amount.
8.The Judgment Debtor failed to comply with the order of the Hon'ble Supreme Court and filed interim application seeking modification of the order dated 19.01.2015 which was also rejected by order dated 13.02.2015.
9.The properties of the Judgment Debtor situated within the jurisdiction of Bombay High Court were not sufficient to satisfy the claim of the Decree Holder. Therefore, when the petitioner-decree holder came to learn that Judgment Debtor was importing cargo of coal and same was lying at various ports in India and one such consignment of coal had arrived at port of Navlakhi, Morbi, Gujarat on the vessel M.V. Liberty Prudencia, Decree holder sought to attach the said cargo discharged from the vessel M.V. Liberty Page 6 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined Prudencia in pursuance of execution of the decree obtained from Bombay High Court and accordingly, obtained transfer of decree from Bombay High Court in respect of the said coal cargo to the District Court at Morbi.
10. Judgment Creditor - Decree Holder made an application on 23.07.2015 to transfer the certified copy of entire Execution Application including the Foreign Award dated 17.01.2011 and certified copy of the order dated 15.09.2014 to the Court of the Additional District Court, Morbi Gujarat along with Certificates as per Order XXI Rule 6 Clause(B) and Clause (C) of the Code of Civil Procedure, 1908 (For short "the Code") as a decree of the Court in terms with the provisions of the Arbitration Act along with affidavit in support of the transfer application.
Page 7 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
11. As per the Bombay High Court Original Side Rules, Chapter 22 pertains to Execution of Decree and Orders. Rule 323 provides for transmission of decree and Prothonotary Senior Master is authorised for the same. Rule 323 reads as under:
"323. Transmission of decree on two or more districts simultaneously:-
When a person against whom execution is sought has property in two or more districts the Prothonotary and Senior Master may, on being satisfied of the necessity, cause a copy of the decree or order obtained against such person to be transmitted for execution of some or all of such districts contemporaneously. In the certificate of non-satisfaction to be sent therewith to the Court of each such district it shall be stated to what other Courts a copy of the decree or order has been sent for execution. At the same time a letter shall be sent to the Judge of one of such Courts requesting him to attach and sell the property in his district (hereinafter mentioned as district "A"), or a sufficient portion thereof, and certify the result to this Court, and with such letter shall be sent a copy of the letter sent to the Judge of each of the other Courts. A letter shall also be sent to the Judge of each of Page 8 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined the other Courts, requesting him to attach the property in his district but not to sell the same until furnished by this Court with information as to the result of the sale of the property in district "A"."
12. Accordingly, Prothonotary authority by letter dated 13.08.2015 forwarded the Certificates (B) and (C), Certified copy of the Execution Application No.240 of 2011 including the Foreign award dated 17.01.2011, Order of the Bombay High Court dated 15.09.2014 and true copy of affidavit in support of Transfer Decree dated 23.07.2015 to the Additional District Judge, Morbi District Court.
13. The Judgment Creditor, thereafter, filed Execution Petition No.3 of 2015 before the Court of Additional District Judge, Morbi, District Rajkot, Gujarat on the execution proceedings being transferred by Bombay High Court for further proceedings. Page 9 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
14. Judgment Creditor also filed an application for attachment of the movable coal cargo along with Execution Petition No.3/2015 under Order XXI Rule 43 and 46 read with section 151 of the Code.
15. Judgment Debtor filed objection to the Execution proceedings before the Morbi Court.
16. District Court, Morbi by order dated 06.01.2016 directed the Decree Holder to submit the order of Bombay High Court transferring the execution proceedings to the Morbi Court. In view of the order passed by the Morbi Court, Judgment Creditor-Decree Holder approached Bombay High Court.
17. The decree holder made an application dated 25.01.2016 to the Prothonotary and Senior Master requesting direction and/or Page 10 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined clarification from the Court in light of the order dated 06.01.2016 passed by the Morbi Court so as to proceed with the execution proceedings at Morbi, Gujarat.
18. Thereafter, Decree holder filed written arguments on 3.02.2016 along with the Rules and proceedings of the Bombay High Court before the District Judge and pointed out that the matter was placed before Hon'ble Mr. Justice A.K. Menon seeking clarificatory order to transfer the decree to Morbi Court. It is stated in the written argument of the Decree Holder that after hearing the advocates for the Decree Holder, the Hon'ble Judge opined that the attention should be drawn towards the General Rules of High Court to the District Court and to inform that the Prothonotary and the Senior Master are generally not ordered to transfer the decree for execution to another Court, but the Page 11 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined decree is transferred pursuant to the Rule 323 of the Bombay High Court Rules.
19. Accordingly, learned District Judge by order dated 03.02.2016 considering the written arguments submitted by the Decree Holder ordered to proceed with the matter with a rider that if anything would be found so far as the proceeding is concerned, which is not correct, learned advocate for the Decree Holder would be held responsible for the same.
20. District Court, Morbi by order dated 28.03.2016 disposed of application Exh.5 and Exh.27 attaching coal cargo lying at Navlakhi Port by appointing the Court Receiver and further directed the possessor of the goods namely, United Shippers Ltd. (USL) to keep the goods in good condition in such a way that it may not cause any damage to the Page 12 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined environment and also to see that the quantity of the goods is not lost. Thereafter, Morbi Court passed the following order on 23.07.2016 on an application to permit the sale of part of the goods attached:
"1). The application is granted.
2). The Nazir is ordered to withdraw the fixed deposit, put into Nationalized Bank, for the amount of Rs.1,53,00,000/- and to take it into the regular Courts Account, with interest.
3). Out of such amount, the amount of Rs.51,03,825/- be paid to Vimal Coal Pvt. Ltd by issuing a cheque of same amount in the name of "Vimal Coal Pvt. Ltd."
4). The remaining amount of F.D. with interest, be deposited again as Fixed Deposit in the Nationalised Bank."
21. In view of aforesaid order, amount of Rs.1,01,96,175/- was lying at Morbi Court in Fixed Deposit in a nationalised bank.
22. Thereafter, the proceedings before the Page 13 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined Morbi Court were transferred to the Executing Court i.e. Commercial Court, Rajkot in view of provisions of Commercial Courts Act, 2015. Subsequently, in view of the amendment in the Arbitration Act, by order dated 13.01.2017 proceedings pending before the Commercial Court, Rajkot were transferred before this Court which is numbered as Petn. Under Arbitration Act No.19 of 2017 relying upon the judgment of the Division Bench of this Court dated 11.11.2016 in Misc. Civil Application in case of M/s. OCI Corporation v. Kandla Export Corporation wherein it is held that execution proceedings arising out of Foreign Award would lie before the High Court.
23. This Court (Coram: Hon'ble Mr. Justice Akil Kureshi, As His Lordship was then) by order dated 10.03.2017 passed an order for sale of coal lying at Navlakhi Port as an Page 14 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined interim measure as under:
"1. The petitioner is a decree holder. The petitioner had filed execution petition before the concerned Civil Court. Being a decree in connection with international arbitration, execution petition has been transferred to the High Court. The petitioner seeks sale of coal presently lying at Navlakhi Port which had arrived in four separate consignments in four separate cargo ships. Though the weighment indicated in the letter dated 03.11.2015 of the Gujarat Maritime Board to the United Shippers Ltd, Morbi is not and cannot be taken to be completely accurate, for ready reference, we may note the name of the vessels and the approximate cargo in the form of coal which has been offloaded:
"Mv. Lorentzos - 17376.290 Mtons Mv. Iolcos Confidence - 40600.000 Mtons Mv. River Globe - 05794.700 Mtons"
2. As part realization of the decree, the petitioner seeks that the cargo may be sold and the amount be paid over to the petitioner. There are, however, multiple rival claimants including respondent No.3 herein.
3. Insofar as the coal offloaded from vessel Mv Lorentoz and Mv River Globe is concerned, one M/s. Sharp Corporation claims ownership Page 15 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined thereof. Certain proceedings were filed before the Bombay High Court and I am informed, the present petitioner has now filed applications before this Court in connection with such claim. Before me, learned advocate Mr. Manoj Khatri appearing for the United Shippers Ltd stated that his client also has lien over the entire cargo. However, in view of the possible deterioration of the goods if allowed to remain at the port for indefinite period, without prejudice to the rights and contentions of such company he would agree to the coal being sold and the price fetched be deposited in the Court. This is precisely the suggestion made by the counsel for the petitioner and all other contesting parties except Mr. Manoj Popat who is representing M/s. Sharp Corporation submitted that his client should be interested in receiving the coal itself and not any sale proceeds thereof.
Respondent No.3 has filed application dated 13.12.2016 Exh 83 in which also the request is made for prompt disposal of the coal.
4. As an interim measure, therefore, it would be appropriate in view of the consensus between the parties to sale in the open market the coal lying at Navlakhi Port offloaded from one vessel Mv Iolocs Confidence.
5. The coal offloaded from other two Page 16 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined vessels namely Mv. Lorentoz and Mv. River Globe may be set apart in view of the disputed claim of M/s. Sharp Corporation.
6. The task of actual sale of the coal may be entrusted to the Registry of this Court, however, before that, it would be better to evaluate the coal. For such purpose, the petitioner as well as respondent No.3 herein, Bhatia Global Trading Ltd shall present on the next date of hearing, their independent valuations. The valuer's report may also indicate the broad parameters applied for arriving at the specific price as also what according to them is current price prevailing in international as well as domestic market of similar quality of coal.
For such purpose, various
representatives of both parties
would have liberty to take out samples from the said stored coal consignments.
7. S.O. to 24.03.2017."
24. It appears that other creditors have also preferred Application Nos.20, 21, 22 and 23 with Civil Applications in Arbitration Petition No.19/2017 for raising their claims against the coal cargo of Judgment Debtor lying at Navlakhi Port.
Page 17 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
25. This Court by order dated 28.04.2017 initiated the proceedings to sell the remaining cargo of coal by public auction.
26. By order dated 05.05.2017, draft of auction notice was finalised. The public auction notice was ordered to be published in English Newspaper Times of India in all editions across the country, however, mistakenly this advertisement was published on 10.05.2017 only in Ahmedabad edition of Times of India due to which public auction failed and thereafter, this Court decided to sale the coal by way of private treaty by inviting bids of interested parties in a sealed cover.
27. During the process of executing the decree against the concerned person through sale of coal lying at Navlakhi Port, it was Page 18 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined brought to the notice of the Court that Interim Resolution Professional (IRP) was appointed by National Company Law Tribunal, Ahmedabad and therefore, the IRP was ordered to be joined as a necessary party in the proceedings.
28. By order dated 13.10.2017, this Court confirmed the sale of coal in favour of successful bidder namely, M/s. Inter Ocean Bulk Trading LLP who deposited a sum of Rs. 4 crores for the quantity of coal of 20,000 metric tons. However, successful bidder actually lifted only 18706.120 metric ton coal, therefore, by order dated 02.02.2018, amount of Rs.25,87,760/- was ordered to be returned to the successful bidder.
29. Meanwhile Liquidator was appointed for Asian Natural Resources (India) Limited by NCLT. This Court by order dated 28.09.2018 Page 19 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined joined the Liquidator as respondent no.5.
30. Liquidator of Asian Natural Resources (India) Limited has preferred Civil Application (For Orders) No. 1 of 2022 with a prayer to release/disburse amount of Rs.3,74,12,240/- deposited and lying with the Registry of this Court by virtue of order dated 13.10.2017 and further prayed to release/disburse the amount of Rs. 2,00,000/- also deposited with the Registry of this Court after deducting necessary advertisement expenses in favour of the Liquidator as per the provisions of Insolvency and Bankruptcy Code, 2016 (For short "IBC") along with accrued interest.
31. During the pendency of the main proceeding, National Company Law Tribunal, Indore Bench at Ahmedabad in IA 89 of 2018 in TP 162 of 2019 had passed liquidation order Page 20 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined dated 29.05.2020 against Bhatia Global Trading Ltd Judgment Debtor under section 33 of the IBC and further by virtue of order dated 22.10.2020 liquidator of Judgment Debtor company was appointed.
32. Learned Senior Advocate Mr. Mehul Shah with learned advocate Mr. Rishi Malik for the liquidator of Judgment Debtor company in liquidation submitted that pursuant to the order dated 29.05.2020 passed by the NCLT against the Judgment Debtor under section 33 of the IBC, no suit or proceedings would continue against such company in liquidation and therefore, the present execution proceedings as well as any order passed therein against the coal cargo would lapse and become ineffective and even otherwise in view of various orders passed by this Court, no further orders are required to be passed in execution proceedings and therefore, the Page 21 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined amount deposited in this Court being Rs.3,74,12,240/- and amount of Rs. 2 lakh would become part of Liquidation Estate of the company in liquidation.
33. Learned Senior Advocate Mr. Shah referred to and relied upon the provisions of section 36(2)(b) of the IBC to submit that execution proceedings would therefore, be required to be transferred to NCLT along with amount deposited with accrued interest thereon.
34. Learned Senior Advocate Mr. S.N.
Soparkar assisted by learned advocate Mr. Aditya Krishnamurthy, learned advocate Mr. Ashutosh Tiwari and learned advocate Mr. Harsh Parekh for the petitioner and objectors in Civil Application (OJ) Nos. 2 to 5 of 2017 submitted that as per section 73 of the Code whereby it is prescribed that proceeds of Page 22 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined execution-sale to be ratably distributed amongst the decree holder read with section 39 of the Code pertaining to transfer of decree, the application filed by the Liquidator of the company in Liquidation - Judgment Debtor is not maintainable as the sale proceeds realised on sale of coal cargo in the auction held by this Court as well as amount realised by Morbi Court would not be part of Liquidation Estate, as such sale proceeds is already realised prior to the date of liquidation order dated 29.05.2020.
35. Learned Senior Advocate Mr. Soparkar referred to and relied upon the decision in case of Amrita Lal Kundu v. Anukul Chandra Das reported in (1915) ILR 586 wherein it is held that distribution of proceeds which have come into Court before the application was made to pass an order in favour of the liquidator must be governed by the provisions Page 23 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined of the Code as the liquidator of a company differs in this respect from the Official Assignee in that the property of the company does not vest in him.
36. Learned Senior Advocate Mr. Soparkar thereafter referred to and relied upon the decision of Bombay High Court in case of Rikhabchand Mohanlal Surana v. The Sholapur Spinning and Weaving Company Ltd. reported in 1973 SCC OnLine Bom 126 wherein Bombay High Court in similar facts held that where assets held by a Court are available for ratable distribution among Judgment Creditors who have obtained decrees for payment of money against the same Judgment Debtor under section 73 of the Code which is attached under order XXI Rule 46 of the Code and therefore, such assets held by the Court for ratable distribution amongst the Judgment Creditors of the Judgment Debtors cannot with Page 24 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined any show of logic or reason be said to be assets held by the Court for the benefit of the judgment-debtor.
37. It was therefore, submitted that when the company in Liquidation was divested of the asset once the same is held by the Court for ratable distribution amongst Judgment Creditors and hence, Liquidator by no stretch of imagination can claim such asset held by the Court as Liquidation Estate.
38. Learned Senior Advocate Mr. S.N.
Soparkar also referred to and relied upon the decision of the Supreme Court in case of Embassy Property Developments Private Limited v. State of Karnataka and others reported in (2020) 13 Supreme Court Cases 308, wherein it is held that NCLT is not conferred with the jurisdiction to decide all types of claims to property under section 18 read with section Page 25 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined 20 of the IBC. It was held that section 18 speaks about the duties of the Interim Resolution Professional and Section 25 speaks about the duties of Resolution Professional and both these sections use the word "assets", while Section 20(1) uses the word "property" together with the word "value". It was therefore, held that in light of the statutory scheme of IBC, it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, especially in the realm of the public law, they cannot, through the Resolution Professional, take a bypass and go before NCLT for the enforcement of such a right. It was therefore, submitted that once this Court is having the sale proceeds realised on sale of coal cargo of the Judgment Debtor, for ratable distribution amongst the Judgment Creditors-Decree Holders, liquidator would Page 26 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined not have any right qua such sale proceeds which would never vest with the Liquidator as Liquidator is only an assignee of the Estate of the company in liquidation. It was therefore, submitted that as per the provisions of section 73 of the Code, it is the executing Court only which can distribute the amount realized amongst the Judgment Creditors and Liquidator cannot claim the said amount as Liquidation estate of the company in liquidation.
39. Learned advocate Mr. Manoj Khatri for learned advocate Mr. Jwalit B. Soneji for one of the claimants - United Shippers Ltd. (USL) submitted that Civil Application No.1 of 2018 is filed for claim of Rs.1,08,58,199/- towards storage charges and other miscellaneous charges. It was submitted that the claimant USL carries on business of stevedoring, Port Services, Barging Services Page 27 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined and Internal Transportation of Cargo from Jetty to the Plot and thereafter from plot to the destination of the clients. It was submitted that USL provided services of unloading, shifting, and storing of coal cargo of 40,600 M.T. for respondent no.1 Judgment Debtor which was attached in the present proceedings.
40. It was submitted that coal cargo that was unloaded from vessel was lying at Port premises allotted to USL at Navlakhi Port and could not be delivered due to order of attachment.
41. It was submitted that now the goods have been delivered to the successful bidder pursuant to the auction sale conducted by this Court. It was therefore, submitted that USL has handled the cargo for respondent no.1 Judgment Debtor and stored the cargo on the Page 28 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined plot allotted by Gujarat Martitme Board (GMB) and therefore, maintenance of the same are required to be paid being the charges for storing the cargo and other miscellaneous charges to maintain and store the coal as it had custodian lien on the said cargo for recovery of all the charges and expenses incurred.
42. It was submitted that USL was under pressure from Gujarat Maritime Board to remove the coal cargo from the Port due to pollution, damage to other cargo and other issues which included smouldering of the coal and only because of the efforts of the USL, cargo could recover the value, otherwise the entire coal cargo would have been wasted and reduced into coal ash.
43. Learned advocate for the applicant USL submitted that accordingly USL is entitled to Page 29 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined receive a sum of Rs.1,08,58,199/- towards storage charges and other miscellaneous charges as the coal was attached by the Court.
44. Learned advocate Mr. Manoj Khatri invited the attention of the Court to the statement of accounts from the books of accounts of USL along with copies of invoices raised on respondent no.1 Judgment Debtor to justify the claim.
45. On the other hand, learned Senior Advocate Mr. S.N. Soparkar vehemently objected the claim made by USL and submitted that there was a contract between USL and the respondent no.1 - Judgment Debtor for charges of unloading, storing, etc. It was submitted that USL can raise a claim before the Liquidator of the Judgment debtor-respondent no.1 and cannot be made payment of its Page 30 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined invoices out of the sale proceeds realised on sale of coal cargo.
46. It was submitted that as per the statement of account submitted by the applicant USL, there was outstanding dues of Rs. 19,68,792.10 with regard to the storage charges of coal unloaded from vessel M.V. Liberty Prudencia and as per the statement of account produced on record for the storage charges of coal of 40600 M.T. unloaded from vessel M.V. IoIcos Confidence BGTL as on 4.07.2018, the outstanding balance is 10,481,546/-. It was therefore, submitted that the applicant USL is not entitled to get any amount from the sale proceeds deposited before this Court. It was further submitted that the USL would be suffering no loss whatsoever if they would have raised invoices during the pendency of attachment and therefore, it is purely a private dispute Page 31 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined between USL and the respondent no.1- Judgment Debtor from whom USL can seek to recover alleged loss in absence of any causal connection with attachment levied by the Court in execution proceedings against respondent no.1 Judgment Debtor and purported losses sustained by USL.
47. Having heard the learned advocates for the respective parties and considering the submissions advanced by the learned advocates, Civil Application No. 1 of 2022 filed by the liquidator of the company in liquidation Judgment Debtor is considered first because if the said application is allowed then no further order would be required to be passed in the matter.
48. In order to decide the application filed by the liquidator of the company in liquidation Judgment Debtor it would be Page 32 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined necessary to refer to various provisions of the Code of Civil Procedure, 1908 and the Insolvency and Bankruptcy Code,2016 as under:
-:Code of Civil Procedure, 1908:-
73. Proceeds of execution sale to be rateably distributed among decree- holders.
(1) Where assets are held by a Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realization, shall be rateably distributed among all such persons:
Provided as follows:--
(a) where any property is sold subject to a mortgage or charge, the mortgage or incumbrancer shall not be entitled to share in any surplus arising from such sale;
(b) where any property liable to be sold in execution of a decree is subject to a mortgage or charge, the Court may, with the consent of the Page 33 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined mortgagee or incumbrancer, order that the property be sold free from the mortgage or charge, giving to the mortgagee or incumbrancer the same interest in the proceeds of the sale as he had in the property sold;
(c) where any immovable property is sold in execution of a decree ordering its sale for the discharge of an in cumbrance thereon, the proceeds of sale shall be applied-- First, in defraying the expenses of the sale;
Secondly, in discharging the amount due under the decree;
thirdly, in discharging the interest and principal monies due on subsequent incumbrances (if any); and fourthly, rateably among the holders of decrees for the payment of money against the judgement-debtor, who have, prior to the sale of the property, applied to the Court which passed the decree ordering such sale for execution of such decrees, and have no obtained satisfaction thereof.
(2) Where all or any of the assets liable to be rateably distributed under this section are paid to a person not entitled to receive the same, any person so entitled may sue Page 34 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined such person to compel him to refund the assets.
(3) Nothing in this section affects any right of the Government.
Order XXI Rule 46
46. Attachment of debt, share and other property not in possession of judgment-debtor.--(1) In the case of--
(a) a debt not secured by a
negotiable instrument,
(b) a share in the capital of a
corporation,
(c) other movable property not in the possession of the judgment- debtor, except property deposited in, or in the custody of, any Court, the attachment shall be made by a written order prohibiting,--
(i) in the case of the debt, the credit or from recovering the debt and the debtor from making payment thereof until the further order of the Court;
(ii) in the case of the share, the person in whose name the share may be standing from transferring the same or receiving any dividend thereon;
(iii) in the case of the other movable property except as aforesaid, the person in possession of the same from giving it over to the judgement-debtor.
(2) A copy of such order shall be affixed on some conspicuous part of Page 35 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined the court-house, and another copy shall be sent in the case of the debt, to the debtor, in the case of the share, to the proper officer of the corporation, and, in the case of the other movable property (except as aforesaid), to the person in possession of the same.
(3) A debtor prohibited under clause
(i) of sub-rule (1) may pay the amount of his debt into Court, and such payment shall discharge him as effectually as payment to the party entitled to receive the same."
-:The Insolvency and Bankruptcy Code, 2016:-
36. Liquidation Estate-
(1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub- section (3), which will be called the liquidation estate in relation to the corporate debtor.
(2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors.
(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following:--
(a) any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate Page 36 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the corporate debtor including but not limited to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights;
(e) assets subject to the
determination of ownership by the
court or authority;
(f) any assets or their value recovered through proceedings for avoidance of transactions in accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a secured creditor has relinquished security interest;
(h) any other property belonging to or vested in the corporate debtor at Page 37 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined the insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation:--
(a) assets owned by a third party which are in possession of the corporate debtor, including--
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;
(iv) other contractual arrangements which do not stipulate transfer of title but only use of the assets; and
(v) such other assets as may be notified by the Central Government in consultation with any financial sector regulator;
(b) assets in security collateral held by financial services providers and are subject to netting and set- off in multi-lateral trading or clearing transactions;
Page 38 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
(c) personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate debtor; or
(e) any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor."
49. As per the provisions of section 73 of the Code where assets are held by Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decree for the payment of money passed against the same judgment-debtor, then after deducting the costs of realization, the Court is required to distribute the proceeds of the execution i.e. amount realised on sale of assets ratably amongst all such persons. Therefore, Page 39 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined the moot question that would arise as to whether amount realised on sale of the coal cargo by this Court as well as amount deposited before the District Court, Morbi on sale of part of coal cargo whether the said amount is required to be transferred to the liquidator of the Judgment Debtor company or it is required to be ratably distributed amongst the persons who have claimed against the Judgment Debtor company.
50. It would, therefore, have to be determined as to whether amount realised on sale of coal cargo would be of Liquidation Estate of the company in liquidation which is a Judgment Debtor in execution proceedings or not as per Section 36 of the IBC which refers to Liquidation Estate. Division Bench of Bombay High Court in case of Rikhabchand Mohanlal Surana (supra) had an occasion to consider such issue and in facts of the said Page 40 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined case appellant Rikhabchand Mohanlal Judgment Creditor supplied certain goods to the Sholapur Spinning and Weaving Company Ltd. Judgment Debtor and as sale proceeds of the goods remained unpaid, suit was filed, and decree was passed. However, subsequently, when the Judgment Creditor filed an Execution Application seeking to attach certain moneys in the hands of Canara Bank, Sholapur, an attachment order under Order XXI Rule 46 of the Code was accordingly passed and the bank deposited the amount in the Court. Division Bench of the Bombay High Court therefore, considered the issue as to what are rights of attaching creditor when garnishee has deposited the money in the Court and a final order is made by Executing Court, as Judgment Debtor was ordered to be wound up under section 433 of the Companies Act, 1956. Bombay High Court considered the commentary on Mulla's Code of Civil Procedure and Page 41 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined noticed that there are differences in England and India respectively as to the position of attaching creditors as under:
"Attachment creates no charge or lien upon the attached property. It only confers a right on the decree- holder to have the attached property kept in custodia legis for being dealt with by the Court in accordance with law. It merely prevents and avoids private alienations; it does not confer any title on the attaching creditors. There is nothing in any of the provisions of the Code which in terms makes the attaching creditor a secured creditor or creates any charge or lien in his favour over the property attached. But an attaching creditor acquires, by virtue of the attachment, a right to have the attached property kept in custodia legis for the satisfaction of his debt, and an unlawful interference with that right constitutes an actionable wrong."
51. Division Bench also referred to the decision of Madras High Court concerning insolvency law in case of Kristnasawmy Mudaliar v. Official Assignee of Madras reported in (1903) ILR 26 Mad 673, wherein Page 42 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined it is held as under:
"In our judgment the making of an order of attachment in favour of a judgment- creditor obtained under section 268 of the Code of Civil Procedure only operates so as to give the judgment-creditor certain rights in execution. It does not operate, when these rights are not exercised before the presentation of a petition in insolvency, so as to create in favour of the judgment- creditor a title which prevails against that of the Official Assignee under a vesting order in insolvency made after the order of attachment."
52. Considering the similar judgment of various High Courts, it was opined by Bombay High Court as under :
"37. In our opinion, this difference arises because it is said that in England the sheriff seizes the goods and brings them to the Court, whereas in India attachment is in the form of a prohibitory order which basically restricts or restrains the alienation of the attached property. We shall presently revert to this aspect of the matter to show that on the facts of this case and by reason of the fact that the moneys had already been brought into Court the Page 43 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined distinction between the English view and the Indian view will not prevail."
53. After considering various case laws as well as the provisions of Order XXI Rule 46 of the Code, it was held as under:
"62. In our view, this judgment goes to show that an attaching creditor who had obtained the bringing into Court of certain moveable property, viz. the engine, had certain rights perhaps falling short of being a secured creditor but those rights had also been lost because the attaching creditor had misconceived his remedy and had allowed the engine to be given away to the Official Liquidator.
63. Now in the light of the discussion of the authorities cited before us, it is necessary to consider what are the rights of the judgment-creditor in the matter before us. At this stage, we may refer to s, 456 of the Companies Act because it is in the light of the relevant provisions of the Companies Act that this point will have to be decided.
64. It has already been noted that unlike a Receiver in Insolvency or an Official Assignee, the property of a company on winding up does not vest in the Official Liquidator. The Page 44 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined property, if at all, continues to remain as the property of the company and the Official Liquidator is only given the custody thereof. Section 456 of the Companies Act contains the heading "Custody of Company's property" and enjoins on him where a winding up order has been made to "take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled." That is what sub-s(1) says.
65. It is significant that sub-s(1- A) has been introduced because the liquidator could not obtain possession of books, papers, properties and assets of the company on his own and it was, therefore, thought necessary that he should have the assistance of the Chief Presidency Magistrate or the District Magistrate; so that sub-s. (1-A) provides that the Official Liquidator may request the Chief Presidency Magistrate or the District Magistrate to take possession of the company's property to which the Official Liquidator may lay claim. Now, it will be at once noticed that when the property is in the hands of the Court then it would not be possible for the Chief Presidency Magistrate or the District Magistrate to be of any assistance to the Official Liquidator in getting hold of such property.
Page 45 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
66. Section 456 would, therefore, go to show that certain properties which may have belonged to the company may by reason of intervening judicial process be outside the reach of the Official Liquidator no matter whether he has the assistance of the Chief Presidency Magistrate or the District Magistrate or not. It would follow that it would not be possible also for the Official Liquidator to get into possession of the property which may have been earlier attached without applying to the Court concerned and obtaining a suitable order on proving the necessary facts.
67. We have seen that an order of attachment simpliciter does not create any charge or lien on the property attached because such an order is invariably of a prohibitory nature. In the case of immoveable property it must obviously be so. In the case of moveable property it may ordinarily be so but need not be and as we have seen in Govardhandas's case, the engine being moveable property was brought to the Court and was in the physical custody of the Nazir.
68. But what happens when, after an order of attachment has been issued, a further stage is reached whereby the property and in the case before us very conveniently the money itself is brought into the Court? Can it be said that even though the money has come into the executing Page 46 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined Court and as an asset realised is capable of being immediately and physically handed over to the judgment creditor at Whose instance the attachment order was made, the judgment-creditor has no specific. rights in relation to that money which as we have said is within his reach? It has been suggested that the property or the money which is brought into Court is on account of the judgment-debtor to whom it belongs and that it is in the custody of the Court for the judgment-debtor. Apart from the fact that it cannot be necessarily so, this argument overlooks the fact that in the case of a diligent judgment-creditor his efforts in filing an execution application, obtaining an order of attachment, obtaining the deposit or the bringing into Court of the money would lead to nothing and be totally lost to him if some other creditor per chance files a petition for winding-up of the Judgment debtor company.
69. In our opinion, although so long as the attachment order is of a prohibitory nature, the judgment- creditor may have no rights or security in the property, once the money is brought into Court the attaching creditor is entitled to insist that money should be handed over to him in satisfaction of his decree. As stated in Halsbury's Laws of England, "the judgment creditor Page 47 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined is entitled to insist on payment to himself by the garnishee."
70. We have noticed that in Culverhouse v. Wickens, Bovill, C.J. was of the view that the plaintiff had a lien on the money which had been paid into Court. After all a lien is a right to retain possession of a thing unless the claim is satisfied. Of course, there would be no fien where there was no possession either actual or constructive. That is why we are of the view that when the attachment is only by a prohibitory order then the attaching creditor has no rights in the property attached but once the property of the moneys come into the possession of the Court then it would follow that they are constructively held by the Court for the judgment-creditor. There would be otherwise no point in attaching the moneys and bringing them into Court. It can never be said that such custody of the Court is so tenuous that the Official Liquidator could for the mere asking take away the moneys from the Court. It is stated in the commentary by Mulla that in certain cases when the property is brought into Court it is custodia legis. No doubt that is so, but for whom? Here is a judgment- creditor who files execution proceedings, obtains an attachment order, obtains an order for bringing the money into Court and gets the money to be actually brought to the Court. In fact he takes all steps to Page 48 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined obtain payment against the decree. Can he then he told by the judgment- debtor that all that may be to the good but the Court is holding money not for the judgment creditor but for the judgment-debtor? In the case, particularly of a garnishee order, the payment by the garnishee in the Court gives him complete discharge. In other words, the judgment-creditor can no longer proceed to recover that amount. To put it in different language, it may be said that the amount or property has gone from the judgment-debtor's hands and it is even now in the custody of the Court for the purpose of satisfying the decree of the judgment-creditor Any other construction would lead to the undesirable result that inspite of diligence the attaching creditor may get no satisfaction of his decree whether the assets are realised or not, if some other person over whom he has no control obtains a winding up order of the judgment-debtor- company.
71. Our attention was invited by Mr. Buch to a decision of a single Judge of this Court in Sorabji Edulji Warden v. Govind Bamjis [(1891) I.L.R. 16 Bom. 91] to show that there was no difference between the assets realised and money brought in Court so that both of them have the same character. In that case the only point that the Court had to consider was whether the money being in fact paid into the custody of the Page 49 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined Court was to be regarded as falling under the words "assets realised by sale or otherwise in execution of a decree" within the meaning of s. 295 of the old Code of Civil Procedure and Telang, J., who decided the case, held "And I am of opinion that it must be so regarded."
72. Now, s. 295 of the old Code of Civil Procedure is s. 73 of the Code of Civil Procedure, 1908, with a slight change that for the words "whenever assets realised are by sale or otherwise in execution of a decree", the words used are "where assets are held by a Court", It is to be noticed that the assets held by a Court are available for rateable distribution among judgment-creditors who have obtained decrees for payment of moneys against the same judgment-debtor. One of the assets said to be held by the Court within the meaning of s. 73 are debts attached under Q. XXI, r. 46 and paid into Court by a garnishee. It is obvious that the assets held by the Court for rateable distribution amongst the judgment-creditors of the judgment- debtor cannot with any show of logic or reason be said to be assets held by the Court for the benefit of the judgment-debtor."
54. Similarly in case of Amrita Lal Kundu (supra), Before Jenkins C.J. and Holmwood J. Page 50 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined of Calcutta High Court in 1915, held as under:
"JENKINS C. J. AND HOLMWOOD J. We must discharge this Rule. Though the matter is by no means clear we feel that apart from any defect of jurisdiction the distribution of the proceeds in Court must be governed by the provisions of the Code of Civil Procedure. The proceeds came into Court before the application was made to us to pass an order in favour of the liquidator. The liquidator's argument before us has been to a certain degree based upon the idea that the property of the company vested in the liquidator. It is better that that idea should be at once removed The liquidator of a company differs in this respect from the Official Assignee in that the property of the company does not vest in him. We are of course leaving out of consideration the possible vesting of the property of an unregistered company under a vesting order."
55. Respectfully agreeing with the above view when the asset in form of either movable or immovable property for realisation of sale amount is held by the Court for ratable distribution among the Judgment Creditors who Page 51 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined have obtained decree or payment of money against the same Judgment Debtor and such asset was already attached under order XXI Rule 46 of the Code then liquidator of the Judgment Debtor company cannot claim the same to be Liquidation Estate as such asset or realisation of sale value or the amount realised on sale of such asset which was already attached by the Court in execution proceedings and held as such, would be out of the purview of the liquidator as such asset would never vest in him as the property of the company never vests in the liquidator of the company as he is not an official assignee in the property. Once the property is attached and sold by the Court in the execution proceedings, the same would go from the hands of Judgment Debtor and it would be held in the custody of the Court for satisfying the decree of the Judgment Creditor.
Page 52 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
56. Therefore, liquidator of the company in liquidation - Judgment Debtor cannot claim the amount realised on sale of assets attached by the Court for satisfaction of the decree in view of the winding up of the Judgment Debtor company at the instance of some other person upon whom the Judgment Creditor has no control.
57. Hence in view of above conspectus of law, liquidator of the company cannot have any lien over the amount deposited before this Court or the Morbi Court.
58. Civil Application No. 1/2022 is accordingly ordered to be dismissed.
59. With regard to Civil Application Nos.2 to 5 of 2017 are concerned, they are filed by Judgment Creditor raising objections against Page 53 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023 NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined the claim of other creditors. Judgment Creditor has a claim of more than Rs. 500 Crore by virtue of the Foreign award passed in the year 2011, whereas, the amount deposited in Registry of this Court is around Rs.3.75 Crore. The amount which is transferred from Morbi Court pursuant to order passed by this Court on 20.02.2023 is around Rs. 1.48 crores and therefore, total amount lying before this Court is Rs.5.23 crores approximately. Therefore, other creditors would not get any amount except USL to whom amount of Rs. 17,34,632/- is required to be disbursed in view of reimbursement of expenses incurred by it as stated by learned advocate for USL. Balance amount of Rs.5,05,65,368/- is therefore, required to be paid to Judgment Creditor M/s. Vitol S.A. with accrued interest thereon by Account Payee cheque by the Registry. Page 54 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023
NEUTRAL CITATION C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023 undefined
60. In view of the foregoing reasons, Arbitration Petition No.19/2017 is partly allowed. Civil Application (OJ) (For Orders) No. 1 of 2018 is also partly allowed whereas Civil Application (OJ) Nos.2 to 5 of 2017 are disposed of as having become infructuous and Civil Application (For Orders) No.1/2022 is ordered to be dismissed.
61. Registry is therefore, directed to pay Rs. 17,34,632/-with proportionate interest accrued thereon to United Shippers Ltd. by Account Payee Cheque and pay the remaining amount of Rs.5,05,65,368/- with proportionate interest accrued thereon to the Judgment Creditor M/s. Vitol S.A. Ordered accordingly.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 55 of 55 Downloaded on : Sat Oct 07 20:47:49 IST 2023