Gujarat High Court
Vitol S.A vs Asian Natural Resources (India) ... on 7 October, 2023
Bench: Bhargav D. Karia
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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
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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)
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Appearance:
MR SN SOPARKAR, SENIOR ADVOCATE WITH MR ADITYA
KRISHNAMURTHY WITH MR ASHUTOSH TIWARI WITH MR HARSH N
HARDIK D MEHTA(7355) for the Respondent(s) No. 4
MR MANOJ KHATRI WITH MR JWALIT B SONEJI(7895) for the
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
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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,
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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20 of the IBC. It was held that section 18
speaks about the duties of the Interim
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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;
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(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,
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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.
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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
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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.
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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
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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.
NEUTRAL CITATION
C/ARBI.P/19/2017 CAV JUDGMENT DATED: 07/10/2023
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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
