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DBS Bank Ltd. Versus M/s. Innoventive Industries Ltd.

2015 (10) TMI 1523 - BOMBAY HIGH COURT

Appointment of Liquidator - Interim Restrain order for disposal of company's assets – Respondent proposes to dispose of its assets in pursuance of the CDR scheme; without making any payment to Applicant and with a view to defeat the legitimate claim of Applicant – Appellant sought an order of provisional liquidator; Respondent submits that no jurisdiction of court lies to either continue its order of protective relief qua the property of the company.

Held That:- Respondent shall not d .....

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ated:- 13-10-2015 - S. C. Gupte, J. For the Petitioner : Mr. Huzefa Nasitwala a/w Freddy Daruwala & Raman Misra i/b. Nasikwala Law Office For the Respondent : Mr. Ashish Kamat a/w/ Kunal Mehta and Ms.Shivani Parekh i/b. Crawford Bayley & Co. ORDER The company application seeks appointment of provisional liquidator of the Respondent company and an interim restraint order concerning the disposal of the company's assets pending such appointment. 2 The company is said to be indebted to t .....

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rence made to the CDR cell. It is the case of the Applicant that the company has not proposed any scheme for discharge of its outstanding claim. It is submitted that the company inter alia proposes to dispose of its assets in pursuance of the CDR scheme and also otherwise without making any payment to the Applicant and with a view to defeat the legitimate claim of the Applicant. It is submitted that the financials of the company present a dismal picture of the financial standing of the company a .....

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ents this court from passing appropriate protective orders concerning the property of the company. In the premises, this Court, in its order dated 31 July 2015, noted the statement of the company's counsel that certain assets specified in the order shall not be dealt with by the company until further orders. 4. It is, however, submitted on behalf of the Respondent company that on 22 July 2015, it has been declared as a relief undertaking under the Bombay Relief Undertakings Act, 1958 ( B.R.U .....

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dgment of the Supreme Court in Binod Mills Co. Ltd. Ujjain (M.P.) Vs. Suresh Chandra Mahaveer Prasad Mantri (1987) 3 SCC 99 and of this Court in Baroda Rayon Corporation Ltd. Vs. ICICI Ltd. (Debenture Trustees) 2002 Bom.C.R.608 in support of his submissions. 5. Sections 3 and 4 of the B.R.U. Act, which is an enactment making temporary provisions for industrial relations and other matters as a measure of preventing unemployment or of unemployment relief, provide as follows :- 3. Declaration of re .....

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fect from the date specified for the purpose in the notification, be conducted to serve as a measure of preventing unemployment or of unemployment relief and the undertaking shall accordingly be deemed to be a relief undertaking for the purposes of this Act. (2) A notification under sub-section (1) shall have effect for such period not exceeding twelve months as may be specified in the notification; but it shall be renewable by like notifications from time to time for further periods not exceedi .....

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t of the period for which the relief undertaking continues as such under subsection (2) of section 3- (a) all or any of the laws in the Schedule to this Act or any provisions thereof shall not apply (and such relief undertaking shall be exempt therefrom), or shall, if so directed by the State Government, be applied with such modifications (which do not however affect the policy of the said laws) as may be specified in the notification ; (b) all or any of the agreements, settlements, awards or st .....

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otification ; (iii) rights, privileges, obligations and liabilities shall be determined and be enforceable in accordance with clauses (i) and (ii) and the notification; (iv ) any right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking and any remedy for the enforcement thereof shall be suspended and all proceedings relative thereto pending before any court, tribunal, officer or authority shall be stayed; (b) the right, privilege, obl .....

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ction (1) shall have effect from such date, not being earlier than the date referred to in sub-section (1) of section 3, as may be specified therein, and the provisions of section 21 of the Bombay General Clauses Act, 1904, shall apply to the power to issue such notification. If the conditions prescribed in Sub-Section (1) of Section 3 are satisfied, the State Government is empowered to declare an industrial undertaking specified in the notification as a relief undertaking. This power exists as .....

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The effect of such declaration is provided for in Section 4. In the first place, laws specified in the Schedule to the B.R.U. Act do not apply or apply with such modifications as may be specified in the notification. Secondly, agreements, awards etc. made under the laws specified in the schedule applicable to such undertaking immediately before its acquisition or take-over by the State Government or provision of loan, financial assistance, etc. to it by the Government, stand suspended in operat .....

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ing to have force and proceedings which were stayed can then continue. 6. The submission of learned counsel for the Respondent is that this protection is even larger than SICA, since not only the proceedings, but even underlying contracts are suspended. That is not quite correct. Only those contracts, settlements, etc. which are made under the laws specified in the schedule remain suspended. (The present contract, with which we are concerned, is not under any of those laws.) Generally, however, .....

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an enforcement of such right or liability. The purpose of granting an interim order is to preserve the property, which is the subject matter of a proceeding or which is necessary to be preserved, pending adjudication of the rights or liabilities so as not to deny the fruits of the final order to the successful party. Even when a suit is stayed under the provisions of the Code of Civil Procedure, say, under Section 10 thereof, the Court can always grant interim relief on this basis. By its very .....

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for execution. This decree was passed by Bombay High Court against an undertaking declared to be a relief undertaking under the State law of M.P. The undertaking objected to the execution citing Section 5 of the M.P. Act. The Section is quoted below :- 5. Suspension of suits or other legal proceedings against relief undertakings. - As from the date specified in the notification under sub-section (1) of section 3, no suit or other legal proceedings shall be instituted or commenced or, if pending .....

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he contentions of the undertaking and allowed the execution to continue. The M.P. High Court upheld the trial Court order, holding that the determination of rights between the parties had to be in accordance with the substantive law applicable to the State of Maharashtra and once such rights were adjudicated upon as per that law, such rights could not again be subjected to and/or regulated by any law in the State of M.P. to which the decree was sent only for execution. The Supreme Court reversed .....

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or other provisions, no suit or other legal proceedings shall be instituted or commenced or if pending shall be proceeded against the industrial undertaking as from the date specified in the notification under sub- section (1) of Section 3 during the period in which it remains a relief undertaking." So read, the object of the section becomes clear. The section seeks to confer benefit to the relief undertakings from the ravages of litigation during the period it remains a relief undertaking .....

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t; in the section would take in execution proceedings. It is not disputed that the Section bars institution of suits and starting of other proceedings. What is disputed is that expression "other legal proceed- ings" will not take in execution proceedings. The contention is grounded on the general principle that the execution court cannot go behind a valid decree and that the execution court cannot, therefore, refuse to execute it. It is admitted that the decree obtained from the Bombay .....

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tention. If we are to accept this submission, it would be rendering section 5 of the Act nugatory and to 258 destroy the benefits sought to be conferred by that section. Nobody questions the validity of the decree. All that is sought to be done is to suspend its animation for the period mentioned in the notification. No Court in Madhya Pradesh can question its validity, nor can refuse to execute it after the period is over. To direct execution of the decree in the teeth of Section 5 would be to .....

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after such period. 8. Relying on the judgment in Binod Mills' case, our Court in Baroda Rayon Corporation's case (supra) held that State legislation of Gujarat declaring an undertaking as a relief undertaking would cover properties of the undertaking within the State of Gujarat and execution against such properties could not be proceeded with. 9. These judgments do not lay down that as long as proceedings remain stayed, no interim relief can be granted to a creditor or claimant against .....

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