Bombay High Court
Asrec (India) Ltd vs Fastgrowth Hospitality Llp And 6 ... on 27 January, 2022
Bench: R. I. Chagla
9.IAL.25021.21 in COMS.213.21.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL SUIT NO. 213 OF 2021
WITH
INTERIM APPLICATION (L) NO. 25021 OF 2021
IN
COMMERCIAL SUIT NO. 213 OF 2021
IIFL Wealth Prime Ltd. & Anr. ... Applicants/
Proposed Plaintiff
In the matter between
IIFL Wealth Prime Ltd. (earlier known
as IIFL Wealth Finance Ltd.) ... Plaintiff
Versus
Fastgrowth Hospitality LLP & Ors. ... Defendants
Mr. Ashish Kamat a/w Mr. Kunal Mehta, Ms. Jinelle Gogri i/b Negandhi
Shah & Himayatullah for the Applicants.
Mr. Mukesh Vashi, Senior Advocate a/w Sean Wassoodew, Viren Vashi and
Rupesh Madhare for the Defendants.
Ms. Rekha Rane, 2nd Asstt. to Court Receiver, present.
CORAM : R.I. CHAGLA, J.
DATED : 27th JANUARY, 2022.
(V.C.)
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ORDER :
1 Heard Mr. Ashish Kamat, learned Counsel appearing for the
Applicants and Mr. Mukesh Vashi, the learned Senior Counsel appearing
for the Defendants.
2 By this Interim Application, the Applicants are seeking relief
in terms of prayer clauses (b), (c) and (d) of the Interim Application.
Insofar as the prayer clause (a) is concerned, an order dated 28.10.2021
has been passed by this Court allowing the Applicants to amend the plaint
in terms of the amendment sought in prayer clause (a) of this Interim
Application by which the Applicant No.2 has come in place of the Original
Plaintiff.
3 Applicant No.2 is seeking to withdraw the present Suit as
upon Applicant No.2 coming in place of the Original Plaintiff, the
jurisdiction will now vest with the DRT. The relief sought is in terms of
prayer clause (b) for withdrawal of the Suit which is not opposed by the
Defendants. However, what really falls for consideration before this Court
is whether the Court Receiver who was appointed by interim order dated
14.09.2021 in respect of the mortgaged properties and this Court had
directed the Court Receiver to take symbolic possession with respect to
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the other mortgaged properties which are subject to the injunction is to be
continued to enable Applicant No.2 to seek formal continuation and/or
appropriate interim order from the Debts Recovery Tribunal ("DRT")
having jurisdiction in the matter.
4 Mr. Ashish Kamat, the learned Counsel appearing for
Applicant No.2 has relied upon the decision of this Court in I.C.I.C.I. Ltd.
vs. Patheja Brothers Forgings And Stampings Ltd. 2000(3) Mh.L.J. pg.
212. In the said decision, the Single Judge of this Court (Coram :
Kapadia, J.) was considering a situation where the proceedings viz. the
Suit filed in this Court was being transferred to the DRT and where the
Court Receiver had been appointed prior to the establishment of the DRT
under Section 3 of the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 ("RDB Act") i.e. vide Central Government
Notification dated 16.07.1999. The Single Judge of this Court was of the
view that the Court Receiver did not stand discharge automatically. It was
held that even in cases where proceedings stand transferred to the DRT,
the properties shall continue to remain custodia legis either under the
High Court or under the DRT. It was clarified that the property shall
remain custodia legis with the Court Receiver of this Court till such time
as the DRT appoints a receiver under the RDB Act, in which event, a
request would be made by the receiver of DRT to the Court Receiver to
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hand over the properties to the receiver of the DRT. Accordingly, the
Single Judge found no merit in the contention advanced that after
16.07.1999 a fresh application will become necessary, seeking
appointment of a receiver, to the DRT.
5 Mr. Ashish Kamat has submitted that the Court Receiver was
appointed by this Court on 14.09.2021 as receiver of the mortgage
properties described in the plaint. A notice had been issued under Section
13(2) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act) by the IIFL
Wealth Prime Ltd. who is the Original Plaintiff in the above Suit. This
notice was issued on 24.08.2021. The Notice has also been responded to
by the Defendants on 27.09.2021. Thereafter, the assignment took place
between the Original Plaintiff -IIFL Wealth Prime Ltd. and Applicant No.2-
ASREC (India) Ltd. on 28.09.2021. In view thereof, the ASREC (India)
Ltd. had filed the present Interim Application seeking withdrawal of the
present Suit as ASREC is a "financial institution" as defined in Section
2(h) of the RDB Act and ASREC (India) Ltd. is entitled to peruse claims
which are subject matter of the present Suit in light of Section 19 of the
RDB Act only before the DRT and not this Court.
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6 Mr. Ashish Kamat has further submitted that in view of the
interim order passed by this Court on 14.09.2021 by which the Court
Receiver was appointed of the mortgage properties and particularly
considering that this is a mortgage Suit, the interim order appointing the
Court Receiver of this Court is required to continue to enable Applicant
No.2 to seek a formal continuation and/or appropriate interim order from
the DRT in the application when filed by Applicant No.2. He has
submitted that if such relief is not granted and the Suit is withdrawn, the
Applicant No.2 will suffer irreparable loss, harm and injury. He has
submitted that the decision of this Court in I.C.I.C.I. Ltd. vs. Patheja
Brothers Forgings And Stampings Ltd. (supra) is relevant in support of his
submission that this Court has the power to continue the Court Receiver
till the Receiver is appointed by the DRT.
7 Mr. Mukesh Vashi, the learned Senior Counsel appearing for
the Defendants has placed reliance on the decision of the Division Bench
of this Court in Manilal Govindji Khona vs. Indian Bank (2012) 6 Bom CR
544 which has referred to the decision of the Single Judge of this Court in
I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And Stampings Ltd. (supra).
He has in particular relied upon the paragraphs 17 and 20 of the said
decision which reads thus :
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"17. The decision of the Division Bench of this Court in
case of Bank of Tokyo-Mitsubishi Ltd. & Ors. vs. Chembra
Estates And Court Receiver, High Court Bombay [(2001)
1 Bom CR 842], in paragraph 13 of the judgment has
observed thus:
'13. After carefully considering the judgments of
the two learned Single Judges (Kapadia, J. and
Kochar, J.), we are inclined to agree with the
view taken by R.J. Kochar, J., namely, that after
the coming into force of the RDB Act, 1993, this
Court would have no jurisdiction to give
directions to the Receiver, whether appointed
pending a suit or in execution. In fact, even
Kapadia, J. also took the same view, but
recognising the practical difficulties that would
arise on account of the Debts Recovery Tribunal
not being equipped with a separate office of
Court Receiver, and the exceedingly high value
of the properties already put in custody of the
Court Receiver of the High Court, the learned
Single Judge (Kapadia, J.) was inclined to direct
that the Court Receiver should take directions
from this Court for a specified period. We are
not inclined to say that this direction was
erroneous in law for, apart from being Civil
Court, this Court is also a Court of Record. In
exercise of the powers of this Court, both as
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Court of Record and under section 151 of the
Civil Procedure Code, the learned Single Judge
was justified in continuing the Receiver and
directing her/him to obtain directions from this
Court, ex debito justitiae'."
20. Similarly, the learned counsel for the respondent
has argued that this Court in case of I.C.I.C.I. Ltd. vs.
Patheja Brothers Forgoings and Stampings Ltd. & Ors.
[2000 (3) Mh. L. J. 212] considered the issue i.e....
'If not, whether this Court is empowered to give directions
to its Court Receiver regarding 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?'
It is contended that relevant observations in paragraph 10
of the decision of the learned Single Judge in case of
I.C.I.C.I. Ltd. reads thus:
'Although I have come to the conclusion that all suits and
proceedings stood transferred on 16th July, 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. 2000 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
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working of the receiver's office as detailed hereinabove,
the question that arises is what steps this Court should
take to protect and manage the said properties during the
transitional period? On one hand, the Court's jurisdiction
has been transferred to DRT and on the other hand DRT is
not in a position to take possession and manage the said
properties. These assets constitute securities created in
favour of the banks and financial institutions. They cannot
be permitted to be dissipated. It has been urged on behalf
of the banks and financial institutions that till
adequate/alternate machinery is set up by the Central
Government, this Court should manage the properties
which are already custodialegis. On the other hand it has
been urged that once the suits/proceedings stand
automatically transferred to DRT, this Court cannot issue
directions regarding preservation and management of the
properties after 16th July, 1999 and such directions can be
given only by DRT. However, DRT can only appoint its
receiver. The question is whether the said receiver would
be in a position to take charge of the above properties
from the Court Receiver, High Court, Bombay. The matter
involves large number of administrative problems. At the
outset, it may be mentioned that the Central Government
carries a wrong impression that the Court Receiver, High
Court, Bombay in the past has lent its services to other
Courts. That is not so. As stated above, the Court Receiver,
High Court, Bombay is an establishment of the High
Court. As stated above, it is required not only to protect
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the properties, but it is also required to maintain accounts
of the royalty received and the expenses debited. The
remission of the revenue goes to the State Government. It
is not clear as to whether the Central Government and the
State Government had entered into any agreement to
share the revenue. Moreover, the Court Receiver, High
Court, Bombay is required to attend a large number of
non-banking suits, which are pending in this Court and if
the services of the Court Receiver, High Court, Bombay are
required to be lent to other Courts, additional staff would
be required. The fact therefore, remain that the Central
Government should take immediate steps to set up an
independent machinery to assist the DRT and during the
concessional period this Court is of the view that
notwithstanding transfer of suits and proceedings to DRT
this Court can continue 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.'
The other relevant observations in paragraph 10 of the
judgment reads thus:
'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 16th July, 1999. Till
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such rights are determined by DRT, the property remains
custodialegis. 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 the DRT Act,
1993 this Court can certainly issue directions on the
reports of the Court Receiver regarding management and
protection of the assets which are custodialegis. 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 of agency agreements already
executed, etc. In other words in all cases where the Court
Receiver is seized of the properties and assets she is
empowered to take all necessary steps to preserve and
manage such properties. I am informed that there are
some cases in which the Court Receiver was appointed
prior to 16th July, 1999. However, before the Court
Receiver could take possession, the notification came to be
issued. Such marginal cases are kept for hearing on 10th
March 2000.'
8 The Division Bench of this Court in Bank of Tokyo Mutsubishi
Ltd. referred to in the said decision considered in reference the differed
views of two Single Judges of this Court, Kapadia, J. in I.C.I.C.I. Ltd. vs.
Patheja Brothers Forgings And Stampings Ltd. (supra) and R.J. Kochar, J.
Waghmare 10/17
9.IAL.25021.21 in COMS.213.21.doc
in Bank of Tokyo Mutsubishi Ltd. vs. Chembra Estate (2001) 1 Bom CR
821. The Division Bench of this Court was of the view that the decision of
the Single Judge R.J. Kochar, J. in Bank of Tokyo Mutsubishi Ltd. (supra)
was the correct view, namely, that after the coming into force of the RDB
Act, this Court would have no jurisdiction to give directions to the
Receiver, whether appointed pending a suit or in execution. The Division
Bench of this Court in the said decision considered the view taken by
Kapadia J. in I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And Stampings
Ltd. (supra) and in fact found that the same view was taken but
recognising the practical difficulties that would arise on account of the
DRT not being equipped with a separate office of Court Receiver, and the
exceedingly high value of the properties already put in custody of the
Court Receiver of the High Court, Kapadia, J. was inclined to direct that
the Court Receiver should take directions from this Court for a specified
period. This is apparent from paragraph 10 of that decision. The decision
of the Division Bench of this Court in Manilal Govindji Khona (supra)
after referring to the aforementioned decisions was of the view that it is
for the DRT to decide the issue arising therein, namely, whether the
auction conducted by the Receiver in view of the directions issued by this
Court, after the Suits and proceedings were transferred to the DRT on
16.07.1999 were sustainable in law.
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9 Mr. Mukesh Vashi has submitted that the facts in I.C.I.C.I.
Ltd. vs. Patheja Brothers Forgings And Stampings Ltd. (supra) were
clearly different from the facts in the present case as that case concerned
a transfer of the jurisdiction from this Court to the DRT. The direction of
the Single Judge in that case, namely, that the Court Receiver should take
directions from this Court for a specified period after establishment of
DRT was due to the DRT not being equipped with separate office of Court
Receiver. He has submitted that in the present case considering that the
DRT after that decision which was passed way back on 03.03.2000 has
equipped itself with the office of Court Receiver, it is not fit for the
Applicants as to seek continuation of the Court Receiver appointed by this
Court. They would have to make a denovo Application for appointment
of Court Receiver before the DRT. He has accordingly submitted that
prayer clause (c) cannot be granted to the Applicants.
10 The learned Senior Counsel for the Defendants has further
submitted that prayer Clause (d) is premature as the Applicants are still to
take steps under Section 13 (4) and Section 14 of the SARFAESI Act.
Hence, in that view this relief also cannot be granted to the Applicants.
11 Having considered the rival submissions, I am of the view
that the decision of the Single Judge of this Court (Coram : Kapadia, J.) in
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I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And Stampings Ltd. (supra)
has to be read in light of the facts of that case. In that decision, the Single
Judge of this Court was considering cases where the Court Receiver had
been appointed prior to the establishment of the DRT under Section 3 of
the RDB Act, i.e. by Central Government Notification issued on
16.07.1999. In the context of these facts, the Single Judge of this Court
had not found any merit in the contention advanced that on and from
16.07.1999 the Court Receiver stood discharge automatically. The Single
Judge has accordingly clarified that the property shall remain custodia
legis with the Court Receiver till such time as the DRT appoints a receiver
under the RDB Act, in which event a request will be made by the receiver
of the DRT to Court Receiver to handover the properties to the receiver of
DRT.
12 The Division Bench of this Court in Manilal Govindji Khona
(supra) has referred to another decision of the Division Bench in Bank of
Tokyo Mutsubishi Ltd. (supra). The views of the two Single Judges of this
Court were referred to the Division Bench in Bank of Tokyo Mutsubishi
Ltd. (supra). The Division Bench held that the view taken by the Single
Judge Kapadia, J. in I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And
Stampings Ltd. (supra) was a view taken at the time when the DRT was
facing practical difficulties as the Debts Recovery Tribunal was not
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equipped with a separate office of Court Receiver and the exceedingly
high value of the properties were already put in custody of the Court
Receiver of this Court. Accordingly, the Single Judge directed that Court
Receiver should take directions from this Court for a specified period.
The Division Bench of this Court in Bank of Tokyo Mutsubishi Ltd.
(supra), has further held that they were inclined to agree with the view
taken by R.G. Kochar, J. in Bank of Tokyo Mutsubishi Ltd. vs. Chembra
Estate (supra) namely that after come into force RDB Act, this Court
would have no jurisdiction to give directions to the receiver, whether
appointed pending a Suit or in execution. The Division Bench further
found that Kapadia, J. had also taken the same view but due to the
circumstances in which the DRT was faced, the view was taken that the
Court Receiver should take direction from this Court for a specified
period.
13 In fact it is clear from the issue which was before the Single
Judge in I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And Stampings Ltd.
(supra) namely, whether this Court is empowered to give directions to its
Court Receiver regarding properties which are in the custody of the Court
Receiver till such time as the DRT/Central Government sets up alternate
office/machinery with a proper infrastructure, that this Court was
considering a case where the DRT/Central Government was still to set up
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alternate office/machinery with a proper infrastructure. I am of the view
that in the present scenario the DRT is well equipped with a separate
office of Receiver and hence no such practical difficulties is faced as was
faced in the case of I.C.I.C.I. Ltd. vs. Patheja Brothers Forgings And
Stampings Ltd. (supra) which was decided in the year 2000 and at a time
when the DRT was just established.
14 Further, in view of the Applicant No.2 seeking leave of this
Court to withdraw the above Suit with liberty to file fresh proceedings
before the DRT, the Court Receiver appointed by this Court by interim
order dated 14.09.2021 cannot be permitted to continue pending such
fresh application made by the Applicant No.2 -ASREC (India) Limited
before the DRT. By the Applicant No.2 seeking withdrawal of the Suit, the
proceedings in the above Suit comes to an end. Hence, I am not inclined
to continue the appointment of the Court Receiver appointed by this
Court as sought for by the Applicants.
15 Insofar as prayer clause (d) is concerned, having arrived at
the aforementioned view that appointment of the Court Receiver cannot
continue upon withdrawal of the above Suit, this prayer does not survive.
In any event Applicant No.2 is still to take steps under Section 13(4) and
Section 14 of the SARFAESI Act.
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16 The learned Senior Counsel appearing for the Defendants on
instructions states that in view of the above Suit being withdrawn by
Applicant No.2/Plaintiff, pending any application made for appropriate
interim order from the DRT and till the disposal of such application, the
Defendants undertake not to deal with in any manner including alienate,
encumber, dispose of the mortgaged properties as well as other assets
disclosed by the Defendants before this Court. The statement is accepted.
17 The Applicant No.2/Plaintiff is permitted to withdraw the
above Suit with liberty to file denovo application before the DRT under
the RDB Act.
18 All contentions of the parties are expressly kept open. The
Suit is disposed of as withdrawn.
19 In view of the disposal of the above Suit, the Court Receiver
stands discharged without passing of accounts and on payment of costs
charges and expenses by the Applicant No.2/Plaintiff. It is made clear
that the discharge of the Court Receiver by this Court will not come in the
way of any denovo Application made by Applicant No.2/Plaintiff before
the DRT under the RDB Act for appointment of Court Receiver.
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20 Court fees are to be refunded in accordance with the Rules.
For the purposes of Section 43 of the Maharashtra Court Fees Act and the
proviso to that Section, today's date is the date of making a claim for
repayment. The Prothonotary & Senior Master will issue a certificate for a
refund of Court Fees computed according to the Rules. He will act on
production of an authenticated copy of this order without requiring a
separate application.
21 Interim Applications do not survive and are disposed of.
Digitally
signed by
WAISHALI
WAISHALI SUSHIL
WAGHMARE
(R.I. CHAGLA, J.)
SUSHIL
WAGHMARE Date:
2022.01.29
16:31:21
+0530
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