P.V. Ali Mubarak vs Bank Of Tokyo-Mitsubishi Ltd.
2003 Latest Caselaw 264 Bom

JUDGMENT

Dr. D.Y. Chandrachud, J.

1. The Original Plaintiff, the Bank of Tokyo -Mitsubishi Limited, instituted a suit for the recovery of an amount of Rs. 1,10,28,663.56 together with interest at the rate of 16.5% per annum against the Original defendants. On 3rd April, 1987, this Court appointed the Court Receiver as Receiver of a tea estate situated at Kottapadi, District Wynad in the State of Kerala. The Receiver was permitted to appoint any third party as his agent in respect of the estate in question. The Receiver is stated to have taken possession of the properties which form the subject matter of the suit on 2nd May, 1987 and, from time to time appointed third parties as his agents in respect of the tea estate referred to above. In pursuance of an order dated 30th April, 1993 the Receiver had appointed M/s. Travancore Malabar Estates as her agent in respect of the tea estate in question since 23rd June, 1993.

2. Pursuant to the enactment by Parliament of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the suit which was instituted on the Original Side of this Court was transferred to the Debt Recovery Tribunal. The Suit was decreed on 19th July, 2000 by the Debt Recovery Tribunal. The report of the Court Receiver states that in pursuance of the decree and order passed by the Debt Recovery Tribunal on 19th July, 2000, the Original Defendants were directed to make payment of the decretal claim to the Plaintiff Bank, failing which it was provided that the tea estate would be liable to be sold through the Court Receiver, High Court, Bombay. The Court has been informed that the Defendants failed to make payment, whereupon the Plaintiff Bank, in terms of the directions of the Debt Recovery Tribunal moved the Chamber Judge of this Hon'ble Court for seeking a direction for the sale of the tea estate.

3. On 13th September, 2000 an order was passed by the learned Chamber Judge in Chamber Summons No. 1047 of 2000 directing the Recovery Officer to sell the tea estate described in Schedule A of the Chamber Summons in accordance with law. Certain consequential directions were issued in the order of the Court. The tea estate was accordingly sold at a public auction conducted by the Recovery Officer of the Debt Recovery Tribunal on 13th October, 2000. The sale was confirmed and a certificate of sale was issued in favour of the auction purchaser on 30th November, 2000. The Court has been informed that the sale has been confirmed in the total amount of Rs. 4.10 Crores in favour of one Mr. P.V. Ali Mubarak of M/s. Kurchermala Plantations and the entire sale price has been deposited with the Debt Recovery Tribunal. Possession of the suit properties including the tea estate was taken over from the erstwhile agent of the Court Receiver, M/s. Travancore Malabar Estates on 5th December, 2000 and was handed over to the Recovery Officer.

4. In her report dated 29th January, 2002, the Court Receiver has stated in paragraph 11 that though at the time of taking possession, the erstwhile agent had furnished an assurance that a "Nil Liability Certificate" would be lodged with the Court Receiver and that all liabilities in respect of the tea estate would be discharged in terms of the agency agreement, this has not been done.

5. The Court Receiver thereupon moved a report dated 25th June, 2001 before a learned Single Judge drawing attention to the fact that in breach of the agency agreement, the erstwhile agent of the Court Receiver, M/s. Travancore Malabar Estates, had not submitted a nil liability certificate in respect of the suit estate. This report dated 25th June, 2001 came up before a learned Single Judge on 17th July, 2001. By an order dated 17th July, 2001, the learned Single Judge held that in view of a judgment of a Division Bench of this Court in , this Court has no jurisdiction to deal with the matter since the suit had been transferred to the Debt Recovery Tribunal under the provisions of the Act. The learned Single Judge noted that the property had already been auctioned and had been purchased by an action purchaser. In the circumstances, the learned Single Judge was of the view that no useful purpose would be served by continuing the Receiver in respect of the suit property. The Court Receiver was accordingly discharged.

6. The matter was thereafter carried in appeal and by an order dated 29th October, 2001, a Division Bench of this Court consisting of A.P. Shah & S.A. Bobde, JJ., set aside with the consent of the parties the order of the learned Single Judge discharging the Court Receiver. The Division Bench issued the following directions :

"The Court Receiver is at liberty to apply to the Hon'ble the Chief Justice for appropriate directions in terms of para 15 of the Judgment of the Division Bench in Bank of Tokyo Mitsubishi Ltd. v. Chembra Estate .

All contentions of the parties are left open."

In pursuance of the aforesaid direction, the Court Receiver has placed a report dated 29th January, 2002 and an application for clarification of the same date for the consideration of the Court. In the report of the Court Receiver dated 29th January, 2002, the following directions have been sought:

"(a) The erstwhile agent of the Court Receiver viz., M/s. Travancore Malabar Estates may be directed to discharge its liabilities and give 'Nil Liability Certificate' within a stipulated period of time as may be fixed by this Hon'ble Court.

(b) If the aforesaid agent fails to comply with the directions as per the prayer (a), the concerned parties whose claims are outstanding may be directed to take appropriate legal action against the said Agent.

(c) Any other directions that this Hon'ble Court may deem fit to give in the matter.

(d) That the costs of this application and the order passed thereon be fixed at Rs. 1,000 and be directed to come out of the funds in the hands of the Court Receiver as Receiver herein."

7. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was brought into force with effect from 24th June, 1993. Section 17 of the Act confers exclusive jurisdiction on the Debts Recovery Tribunals to entertain and decide applications from banks and financial institutions for the recovery of debts due to them. The jurisdiction of all other Courts and authorities is barred by Section 18 of the Act and Section 31 provides for the transfer of existing suits and proceedings to the newly constituted Debts Recovery Tribunal. On an order passed by a learned Single Judge (R.J. Kochar, J.) of this Court on 20th October, 2000, a reference was made to a Division Bench of this Court, since the learned Judge expressed doubt as regards the correctness of a view that had been taken earlier in an order dated 3rd March, 2000 passed by another learned Single Judge (S.H. Kapadia, J.). S.H. Kapadia, J., held that on and after the issuance of the notification dated 16th July, 1999 all pending suits and proceedings would stand transferred to the Debt Recovery Tribunal but, notwithstanding the transfer of suits and proceedings to the Debt Recovery Tribunal, this Court could continue to give appropriate directions to the Court Receiver regarding the management of the assets and properties in his hand till a Receiver appointed by the Debt Recovery Tribunal took charge of the assets and properties. R.J. Kochar, J., on the other hand was of the view that upon the issuance of the notification dated 16th July, 1999 this Court ceased to have jurisdiction to issue any directions to the Court Receiver in respect of suits which have been transferred to the Debt Recovery Tribunal. The reference before the Division Bench which arose in Suit No. 954 of 1987 (filed by the Bank of Tokyo Mitsubishi Limited out of which these proceedings arise) was disposed of by a Division Bench of this Court consisting of Mr. Justice B.N. Srikrishna (as the learned Judge then was) and Mr. justice S.D. Gundewar on 23rd October, 2001. The reference was answered in the following terms :

"(i) After the coming into effect of the Recovery of debt Due to Banks and Financial Institutions Act, 1993 and the establishment of the Debts Recovery Tribunal with effect from 19th July, 1999, this Court ceased to have any jurisdiction to issue directions to the Court Receiver, High Court, Bombay appointed in Suits or other proceedings pending on the said date.

(ii) In all such cases which were pending before this Court on the Original Side on 16th July, 1999 and stood transferred to the Debts Recovery Tribunal by reason of Section 31 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Court Receiver, High Court, already appointed would continue to act as Court Receiver, but subject to the directions to be issued by the Debts Recovery Tribunal/Appellate Tribunal.

(d) The Court Receiver, High Court Bombay being an employee of the High Court is subject to administrative control of the learned Chief justice. We would recommend to the learned Chief Justice that the Court Receiver's services may be made available to the Debts Recovery Tribunal/Appellate Tribunal for a period of one year from today. During the aforesaid period, it would be open to the Tribunal/Appellate Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, suo motu, or at the instance of any party to the suit or other proceedings, to discharge the Court Receiver of the High Court and appoint any other fit person as Receiver of the properties.

(e) The Court Receiver, High Court, Bombay shall function as Court Receiver in respect of all matters transferred to the Debts Recovery Tribunal in which he/she has been appointed as Receiver and obtain directions from the Debts Recovery Tribunal or Appellate Tribunal with regard to her/his functioning. Such directions may be obtained either by a report made by the Court Receiver to the Debts Recovery Tribunal or the Appellate Tribunal or by application moved by the parties before the Debts Recovery Tribunal or the Appellate Tribunal.

(f) The Court Receiver, High Court, Bombay shall be at liberty to apply for discharge from all or any of the proceedings now pending before the Debts Recovery Tribunal or the Appellate Tribunal under the Recovery of Debts to Banks and Financial Institutions Act, 1993, either at the expiry of one year from today or at any earlier point of time, if so directed by the Hon'ble the Chief Justice.

(g) The Debts Recovery Tribunal or the Appellate Tribunal has jurisdiction to issue all appropriate directions to the Court Receiver, High Court, Bombay which were hitherto being given by this Court".

8. In the present case, the Court Receiver was appointed as Receiver of the Suit properties including the tea estate in pursuance of an order passed by this Court. M/s. Travancore Malabar Estates came to be appointed as an agent of the Court Receiver over the material period. Under the terms of the agency agreement dated 22nd December, 1997, the agent inter alia covenanted to perform the following conditions;

"6. The Licensees shall carry on the business at their own costs, expenses and risk in all respects and shall indemnify and keep indemnified the Licensor against all claims, demands, actions, damages, suits, proceedings, and costs, that may be made or brought against or incurred by the Licensor vicariously or otherwise howsoever."

"7. The Licensees shall pay electricity charges, water charges and all other charges, taxes, fees, cesses, dues payable from time to time and indemnify and keep indemnified the Licensor against all claims and demands in respect thereof."

"12. The Licensees shall pay discharge and provide for all liabilities contractual or otherwise howsoever incurred by them in respect of the business including liabilities for purchase of seeds, plants, manure, payment of salaries, wages, compensation, bonus, provident fund, retirement benefits including gratuity and superannuation payable to employees of estate retiring during the period of this Agreement (which shall be an expense for the period of the Agreement) and shall be paid by the Licensees or other remuneration or complements whatsoever to the workmen, premium for insurance, excise duty, income tax, agricultural tax, sales tax and other taxes, if any, charges for supply of consumption of water and electricity and all other costs, charges and expenses whatsoever of or incidental to the business commencing from the date of delivery of possession of the assets to the Licensees under this Agreement."

"22. The Licensees shall at their own costs every month issue/furnish a certificate to the Licensor confirming the payment/discharge of all the statutory liabilities concerning the estate including payment of salaries, wages, bonus, leave with wages and other benefits statutory or otherwise to the staff deductions and payment of Provident Fund dues, the Employees State Insurance Premiums, LIC premium, Co-operative Stores contribution, medical/hospital benefits, electricity charges, sales tax, income tax, agricultural tax, excise duties, cesses and other charges/duties etc., to the concerned authorities, together with supporting documentary evidence for payment thereof and certifying "nil' pending liabilities."

9. A perusal of the material clauses of the agency agreement would thus amply demonstrate that M/s. Travancore Malabar Estates came to be appointed as an agent of the Court Receiver under an order of this Court and had expressly assumed the obligation under the terms of the agency executed in this Court to discharge all liabilities whether contractual or otherwise howsoever incurred by them in respect of the business. These liabilities included liabilities towards workmen, electricity dues and the outstandings due and payable to the revenue by way of taxes. Under Clause 22, the agent assumed the obligation of furnishing a nil liability certificate every month to the Court Receiver in token of having discharged all the outstanding liabilities. M/s. Travancore Malabar Estates has admittedly failed to discharge its liabilities and to furnish anil liability certificate as required by the terms of the agency agreement, to the Court Receiver. The property was custodian legis in pursuance of an order passed by this Court. An unconditional obligation was assumed by the agent by the execution of the agency agreement in pursuance of an order of this Court. This Court, therefore, clearly has the jurisdiction to hold the agent responsible to perform the agency terms and to hold the agent responsible for a breach. The report of the Court Receiver has also adverted to the fact that the Constituted Attorney of the agent had undertaken to lodge a nil liability certificate and to ensure that the agent will discharge all the liabilities at the earliest. In the site report dated 5th December, 2000, which has been signed by the Constituted Attorney of the agent of the Court Receiver, the following statement is contained in that regard :

"Shri Yeldo, the Constituted Attorney of M/s. Travancore Malabar Estates being the Agents of the Court Receiver states that at present the Agents i.e., TME have (sic) produced the "Nil liability certificate" to the Court Receiver and have not discharged all the liabilities namely all the contractual and statutory liabilities of the suit estate since the office of the estate is closed. Shri Yeldo further undertakes on behalf of the aforesaid Agents that they will lodge the "Nil liability certificate "and that the Agents shall discharge all the liabilities as per the Agency Agreement in respect of the suit estate at the earliest. Shri Yeldo further undertakes that they will deposit the arrears of royalty amounting to Rs. 12,24,194 with the Court Receiver at the earliest."

The site report is signed by the Constituted Attorney of the agent.

10. In view of the undertaking which was furnished by the Constituted Attorney on behalf of the agent of the Court Receiver, we are of the view that the undertaking must be made good and can be enforced in proceedings before this Court.

11. The only defence that was urged on behalf of the erstwhile agent was that in terms of the judgment of the Division Bench dated 23rd January, 2001, this Court could not entertain the report of the Court Receiver and that the Receiver should apply for directions before the Debt Recovery Tribunal. We do not find any merit in the submission. M/s. Travancore Malabar Estates having been appointed as an agent of the Court Receiver is pursuance of an order of this Court is answerable to this Court for the obligation assumed by it in its capacity as an agent of the Court Receiver and in terms of the agency agreement which defines the obligations which it must perform. This Court has ample jurisdiction to ensure that the agent who was appointed in pursuance of the order of this Court duly discharges he obligation of agency which has been assumed by it. To repeat, no defence on merits is urged by Learned Counsel appearing for him. In the circumstances, we are of the view that the directions as prayed by the Court Receiver in her report dated 29th January, 2002 must be granted and they are accordingly granted in terms of prayer Clauses (a), (b) and (d).

In the circumstances, no separate orders are required to be passed on the application for clarification. The Court Receiver, shall accordingly stand discharged subject to and without affecting in any manner the right of the Receiver to take necessary steps for the purposes of ensuring that the liabilities due and payable by the erstwhile agent of the Court Receiver are duly paid.