Escorts Finance Ltd. vs Hilton Rubber Ltd. And Ors.
2003 Latest Caselaw 121 Del

JUDGMENT

S. Mukerjee, J.

1. The petitioner (M/s Escorts Finance Limited) vide agreement dated 31.3.1998, had provided lease-finance facility to the respondent in relation to the following equipments :

1.1500 Kgs/Hr. Capacity Oil Fired Horizantal smoke tube tire three pass fully Automatic Steam Boiler;

2.1500 Kgs/Hr. Capacity Steam Boiler Along with its Accessories;

3.Dust Collector Systems, and

4.300 LPH Capacity Reserve Osmosis Plant Along with its Accessories for 36 months.

2. The petitioner's case is that it had disbursed a sum of Rs.34 lakhs towards the purchase of the said equipments. The said amount was, agreed to be re-paid by respondent to the plaintiff, with interest at flat rate of 6.27% per annum, in three years by way of 36 equal monthly Installments.

3. It has been established on record that respondent defaulted in making timely re-payment. As many as 49 cheques issued by the respondent were alleged to be dishonoured.

4. As on 18.10.2001, it is contended, the respondent was in arrears in respect of Rs.39,12,766.22/- as per the lease finance facility divided into two accounts maintained by the respondent.

5. Vide notice dated 17.2.2000, the petitioner called upon the respondent to make payment of the amounts due including interest as on 2.2.2000, as per agreement dated 31.3.2000.

6. The respondent vide it's communication dated 31.8.2000 reportedly assured that payment would be made at Rs.50,000/- per month.

7. Ultimately, the petitioner vide notice dated 23.3.2001 called upon the respondent to pay a sum of Rs.34,94,674/- towards the outstanding amount Along with interest and future Installments, in terms of Clause 26 of the lease agreement and also appointed Mr. A.K. Mehra, advocate as the Sole Arbitrator to adjudicate upon the claims/disputes between the parties.

8. The respondent in it's reply filed to the petition, while dealing with the corresponding paragraphs, has not been in a position to deny that it failed to respond to the legal notices of the plaintiff.

9. The the petitioner further contends that respondents are clearly defaulting in payment of the amount due to the petitioner, and that respondents have also forfeited their option for purchasing the said plant and machinery, which would have been otherwise permitted in the event of due and successful compliance of the lease finance agreement, by them.

10. In the above circumstances, prayer has been made for appointment of a Receiver, with direction to seize the assets and take possession thereof and for certain other allied reliefs.

11. The respondents, by way of the reply filed as well as the supplementary reply, have disputed the contentions of the petitioner by contending that there were in all only 42 (and not 49) cheques, out of which 20 have been encashed and that further Rs.50,000/- was paid on 9.4.2001, and thereby in all the petitioner has paid Rs.20,45,386/- to the respondent.

12. It is further submitted that the entire net worth of the respondent No.1 having eroded as on 31.3.1999, that resulted in the respondents inability to honour the cheques, and that the case of the respondent is before BIFR and that the respondent No.1 will make it's best endeavor, to clear the payment in terms of such scheme, as may be sanctioned by the BIFR.

13. Having given my detailed consideration to all the aspects of the matter, I find that it stands established that the respondent is in substantial default, as far as payment of Installments according to the lease finance agreement is concerned. The petitioner has duly served notices upon the respondent, which stands unrebutted atleast in relation to the final notice dated 23.3.2001.

14. In this view of the matter, there is no legal impediment to the direction for appointment of a Receiver, to take custody of the leased equipment as has been provided under the provisions of the written contract between the parties.

15. Accordingly, the petition under Section 9 of the Arbitration & Conciliation Act, 1996, is allowed to the following extent and subject to the following directions :

(i) Sh. Anand Rao, representative of the petitioner company, or any other officer nominated by the petitioner company by Board Resolution, shall stand appointed as a Receiver with direction to forthwith seize the assets being (1) 1500 Kgs/Hr. Capacity Oil Fired Horizantal smoke tube tire three pass fully Automatic Steam Boiler, (2) 1500 Kgs/Hr. Capacity Steam Boiler Along with its Accessories, (3) Dust Collector Systems (4) 300 LPH Capacity Reverse Osmosis Plant Along with its Accessories, owned by the petitioner and more specifically detailed at paragraph No.7.6 of the petition.

(ii) Receiver will be entitled to take possession of above assets from the respondents, or from anyone else whoever be found to be in possession of the said assets;

(iii) For the above said purposes, it will be open to the Receiver to take necessary steps for dis-connecting the above said equipment, from any other equipment to which the same may be connected or attached;

(iv) For the above said purpose it is directed that all concerned, including the technical personnel of the respondent No.1, or anyone else representing the respondents or other interests, will extend every co-operation in carrying out/effecting the seizing of assets and taking possession thereof by the Receiver as per the present order;

(v) It will open to the Receiver to bring, or associate any technical persons for the purposes of carrying out the orders passed today and for the said purpose to open or dis-connect or dismantle any other attached equipment, or pipelines, or cables, or anything else;

(vi) In the event of any foundation or boards or attachment device or otherwise from anything else being required to be cut upon or broken or being subject to any process to facilitate the seizure and taking possession of the equipment, then that shall be deemed to be permitted to the Receiver appointed today under the present orders.

16. The Receiver will take photographs from atleast four different angles and will produce the said photographs on the record of this Court. In the event of any process having been to be carried out in relation to any other attached or nearby located equipment or cable etc., the said process will be video recorded and the video tape produced to this Court Along with two additional copies thereof.

17. It will also open to the Receiver to place the seized equipments in safe custody at any place including any secure premises within the respondents' premises, or at any other place as deemed appropriate by the Receiver.

18. For the said purpose, on the Receiver disclosing the place to which the equipment is to be moved in writing, all who may concerned authorities, will permit the uninterrupted and free movement of all the equipments to the city/location as desired by the Receiver, as having been permitted under the orders of this Court.

19. The Respondent will at all times ensure due diligence and care in relation to the seized equipment, and in relation to proper storage and preservation thereof in a manner so that it does not suffer any loss of commercial value on account of anything happening/taking place after the equipment has been seized and taken possession of;

20. On the request of Receiver, the Officer In-charge of the concerned Police Station to extend immediate and adequate police assistance forthwith and without delay to the Receiver. The Receiver, shall also be entitled to do all whatsoever else is necessary to enable the Receiver to carry out the orders of this Court.

21. The Receiver shall also be entitled to sell the aforesaid seized assets subject to sending written intimation by registered post to both the respondent and the counsel for respondent, stipulating the date of sale/auction, with atleast four weeks time in the interegnum, conveying clearly the terms and conditions of the sale/auction.

22. Liberty is granted to both the parties to approach this Court for any further directions as may be required.

23. In the event of respondent making payment of an amount of Rs.10 lakhs to the Receiver, either immediately or furnishing an immediate written undertaking to this Court withina week, and also making full payment within a period of one week thereof, then the Receiver shall refrain from seizing/taking possession of the equipments.

24. This undertaking will be received by the Receiver as an undertaking to this Court and in such eventuality the respondent will be liable for all consequences accordingly.

25. With the above observations, this petition is disposed of, but with no order as to costs.