TMI Blog1991 (10) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... urt Receiver has taken symbolic possession of the above referred equipments. The notice of motion is heard as some length. 3. The relevant facts emerging from the record are as under :- (a) By a master agreement of lease No. TCF/24/1986 dated 28th April, 1986, the plaintiff leased the suit equipments/machineries to the defendant on the terms and conditions set out therein. A supplementary lease schedule/indemnity certificate was also executed by and between the plaintiff and the defendant forming part of the same transaction. Under the said agreements, copies whereof are annexed to the plaint as Exhibits A-1 and A-2 , the defendant agreed to pay certain amount to the plaintiff as rental for the use of the said machines. The duration of the lease agreement in the first instance was stipulated to be 108 months. The said agreement in terms provided that the plaintiffs were the sole owners of the suit equipments and machinery. The said agreement confered right on the plaintiff to terminate the said agreement if the defendant committed default in payment of rental and take back possession of suit equipments and exercise various rights and remedies as set out therein. (b) P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rits. (d) By a letter dated 26th February, 1991, the plaintiff terminated the said lease agreement as the plaintiff was left with no other alternative. The plaintiff thereafter filed this suit on 29th March, 1991 and took out the present notice of motion. 4. At the outset it is necessary to refer to some of the provisions of the above-referred lease agreements copies whereof are annexed as Exhibits A-1 and A-2 to the plaint. The said lease agreement was initially for a duration of 108 months. The said agreement in terms provided that no right title or interest in the equipment was passed to the lessee by virtue of the said agreement. The said agreement in terms provided that the plaintiff alone had sole and exclusive right, title and interest in the said equipment. It was further provided in the said agreement as under :- The lessor and the lessee hereby confirm that their intent is that the equipment shall at all times remain the property of the lessor. By the said agreement, the defendant agreed and undertook not to sell, assign, sublet, pledge, hypothecate or otherwise encumber or suffer a lien upon or against the equipments or remove the equipment from the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to be an afterthought. The defendant has further contended in the said affidavit in reply that on a true construction of the said agreements, the alleged lease agreement is nothing but hire purchase agreement or loan finance agreement. The first question, therefore, which arises for consideration of the Court is as to what is the true nature of the suit transaction, at least prima facie. 7. In D.V. Corporation v. State of Bihar, A.I.R. 1961 Supreme Court 449, the Honourable Supreme Court held that a mere contract of hiring, without more, was a species of the contract of bailment which did not create a title in the bailee. The suit contract is nothing but a contract of hiring the movable making it clear that the plaintiff shall at all times remain the sole and exclusive owner of the suit equipments. Even a contract of hire purchase is nothing but a species of the contract of bailment. Law makes clear distinction between a transaction of leasing of movable and the transaction of hire purchase inasmuch as in case of hire purchase, the hirer has at least an option to purchase the equipment on the terms set out in the Hire Purchase agreement whereas in a leasing agreement, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire agreements in respect of furniture, T.V. sets, motor cars, machinery, equipments and other chattels are styled as leases and cognate expressions are used accordingly. A very useful statement is to be found in Note 11 appended to paragraph 16 of the said standard work. It is clearly stated in the said Note that these agreements which are styled as leases in modern commercial parlance are not true leases. In my judgment, it makes no difference as to whether these transactions as in substance the agreements are nothing but transactions of bailment as defined in section 148 of the Indian Contract Act. 10. It is of some relevance to refer to the unreported judgment dated 3rd and 6th July, 1987 delivered by Shah and Pendse, JJ., in Letters Patent Appeal No. 99 of 1980, Coal India Ltd. v. Tata Engineering Locomotive Co. Ltd. others, In this matter, the question before the Hon'ble Divison Bench was as to whether the vehicles taken by Bharat Mining Corporation Ltd. on hire purchase from Tata engineering Locomotive Co. Ltd. had vested in Coal India Ltd. on passing of the Coal Mines (Nationalisation) Act, 1973. It was contended by the learned Counsel appearing for Coal Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has committed defaults in respect of payment of rentals. After giving several opportunities to the defendant to rectify the default and after serving requisite 14 days' notice, the plaintiff has terminated the lease, Act 1 of 1986 known as the Sick Industrial Compaines (Special Provisions) Act, 1985 (hereinafter referred to as the '1985 Act') does not impose any restriction on the right of the plaintiff to terminate the said lease. Prima facie, the termination of the lease is lawful. The plaintiff has remained the owner of the suit equipments throughout. On termination of the lease, the contractual right of the defendant to use the said equipments conferred by the plaintiff on the defendant under the said contract came to an end. Accordingly, a strong prima facie case is made out by the plaintiff for appointment of the Court Receiver, High Court, Bombay, as the receiver of the suit equipments. It is just and convenient to do so. The defendants do not have any title to or proprietary interest in the suit equipments and then contractual right of user is lawfully terminated. 12. Shri S.H. Doctor, the learned Counsel for the defendants, has submitted that application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remains suspended. It is common ground that no order has been passed by the Board suspending the contract or suspending any of the rights thereunder or otherwise. Shri S.H. Doctor, the learned Counsel for the defendant, has heavily relied on the reamble to the provisions of the said Act. The said preamble reads as under:- An Act to make in the public interest, special provisions with a view to securing the timely decision of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22(1) of the Act cannot be construed so as to make section 22(3) of the Act nugatory. The defendants have no contractual right to use the machinery after the termination of the contract. Thus, the defendants have no right, title or interest in the suit machinery/equipments in any sense of the term. 15. Shri S.H. Doctor, the learned Counsel for the defendant, has invited my attention to the judgment of the Supreme Court in the case of Ahmed G.H. Ariff v. The Commissioner of Wealth Tax, Calcutta. In this case, the Supreme Court was concerned with interpretation of section 2(e) of the Wealth Tax Act, 1957 defining the expression assets . Since the definition of the expression assets in the said Act provided for inclusion of property of every description in the world 'asset' for the purpose of the Wealth Tax Act, the Court observed that the word 'property' used in the said definition clause of the word 'asset' was a term of the widest import. With respect, the said judgment is of no relevance whatsoever to this case where the defendants had merely hired the suit machineries and the hiring agreement is terminated due to non-payment of agreed rentals. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned or owned by it would not lie. It is however imperative that the asset in question must belong to the industrial company concerned in order that the bar created by section 22(1) of the Act can operate. 16. An exactly identical view as taken by Brother Justice Chaudhari of or Court while deciding an application for ad interim relief in Suit No. 2790 of 1990, First Leasing Company of India Ltd. v. Orsen Electronics Ltd., The learned Judge observed that he was prima facie of the opinion that the properties concerned were owned by the leasing company and the same could not be described as properties of the defendant company in that suit. The learned Judge observed that section 22(1) could not create any bar in the way of the Court appointing receiver. By his said order the learned Judge appointed the Court Receiver, High Court Bombay, as ad interim receiver of the assets in question that case. I have arrived at my conclusion independently of the said observations and on my own analysis of the provisions of Act I of 1986. I am reinforced in the view taken by me by the abovereffered precedents. 17. The learned Counsel for the defendant then submitted that the suit machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of creating security in respect of an immovable property. The learned Judge held that the English law relating to fixtures did not apply into to India. The learned Judge rightly held that it was not an absolute rule in India that whatever was fixed to the soil belonged to the owner of the soil. The learned Judge further observed that the test to be applied was as to what was the object for which the engine was fixed with nuts to a concrete platform. After applying the test laid down by Lord Lindley in Reynolds v. Ashvy, (1904) A.C. 466, the learned Judge held that the attachment of the engine with the fixed nut to a concrete platform was with an object that the machinery itself could be better utilised and not with an object of creating a permanent improvement to the premises in question. Applying the test laid down by the High Court of Madras in the above referred case, which has been followed in several other Indian cases also, I hold that there is no substance in this contention of the defendant and the suit transaction is not a transaction of hiring of a chattel or, movable, but is a transaction of lease of an immovable property. 19. Having regard to the overall view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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