TMI Blog2017 (3) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of the office and position of the Court Receiver, High Court, Bombay - also the language of Section 17 of the Amended Act does not alter this conclusion at all. The language appearing after Section 17(ii)(e) of the Amended Act, really concerns itself with the powers to make interim orders. It is for the making of such interim orders that the arbitral tribunal's powers are treated as the same as that of a court. One cannot read into this language a conclusion that an arbitral tribunal is itself a particular court, such as the High Court, Bombay, so as to be able to do everything that the High Court, Bombay could do, such as appoint its employee or officer to function as a Receiver in a given matter. The question is answered in negative. - Court Receiver's Report No. 476 of 2016 - - - Dated:- 16-3-2017 - S.J. Kathawalla, J. For Appellant: J.P. Sen, Senior Advocate, Rohaan Cama, A. Lad and Biju Joseph instructed by B.J. Law Offices LLP, Advocates For Respondents: Rashmin Khandekar and Madhu instructed by Naik and Naik, Advocates JUDGMENT S.J. Kathawalla, 1. The above Court Receiver's Report dated 28t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2001 (2) Mh. L.J. 206; (iii) The Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others 2001 Vol. 103 (2) Bom. L.R. 501; and (iv) Girish M. Joshi v. Jagat Manubhai Parikh and others1 6. Mr. Jagtiani then referred to the provisions of Chapter XXX of the Bombay High Court (Original Side) Rules, which deal with the appointment of the Court Receiver and connected provisions relating, inter alia, to filing of accounts, fees/charges to be paid and discharge of the Court Receiver. He submitted that even under the said High Court Rules, the Bombay High Court has the power to appoint any other person to act as a Receiver in a matter. 7. Mr. Jagtiani then submitted that the power of an arbitral tribunal under Section 17 of the Amended Act is to appoint any person to act as a private receiver, but that cannot include any appointment of a Court Receiver. He then submitted that on a correct interpretation of the provisions of the Amended Act, and in particular Section 17 and Section 9 thereof, whilst the powers of an arbitrator are undoubtedly wider than they previously were, an arbitral tribunal is still not a Court -or, in the case of an arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resources. It will also operate unfairly because resources will be deployed for the benefits of parties in newly commenced arbitrations instead of for the benefit of litigants who have been in queue from much prior in point of time. Further, he submitted that this problem will be compounded because under the Amended Act, arbitrations are to be completed in a very short time frame and if the Court Receiver is allowed to be appointed directly by arbitral tribunals, then it would amount to priority being given to those appointments. 10. Mr. Khandekar, appearing for the Respondent, also made submissions in support of the contention that the arbitral tribunal has no power under Section 17 of the Amended Act to appoint the Court Receiver, High Court, Bombay, to act as a Receiver in an arbitral dispute. His submissions were on the same lines as those advanced by Mr. Jagtiani. In addition to the Judgments on the position of the Court Receiver relied upon by Mr. Jagtiani, he relied upon a judgment in the case of ICICI Bank Ltd. v. J.K. Synthetics Anr. 2005 Vol 107(2) Bom. LR 272. He too made submissions on the relevant provisions of the High Court Rules and on the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intment. This, however, according to him, cannot be a reason to read Section 17 of the Amended Act restrictively. In support of the argument on interpretation, he relies upon the Notes on Clauses for the Arbitration and Conciliation (Amendment) Bill, 2015, which says that the arbitral tribunal shall have power to grant all kinds of interim measures which the Court is empowered to grant under Section 9. 14. Mr. Jagtiani, in response argued that the requirement of having every appointment of a Court Receiver, High Court, Bombay, approved by this Court (usually by the Receiver placing a report before this Court on its judicial side), is contrary to the purpose of Section 17 of the Amended Act, and would lead to a form of supervision or intervention of the Court over orders of the arbitral tribunal, which is inconsistent with Section 5 of the Act. He also submitted that in the absence of any administrative policy or directions on this issue at hand, the appointment of the Court Receiver, High Court, Bombay, is not contemplated by the statutory provisions at all, by reason of the official position he holds. If the Original Claimant's argument is correct, an arbitral tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a salaried office on the establishment of the High Court. As a result, in 1929 the Government created the post of the Court Receiver, who took over all the pending Receiverships from the private Receiver. The system sanctioned by the Government for running the office, after it was taken over, was that the office should budget for its normal expenditure which the Government will pay in the first instance but which had to be recouped to them from the takings of the office other than the Receiver's commission. In 1932, the office was made a permanent department of the High Court . The Court Receiver was directed to continue to charge to the estates under his management all expenses incurred in connection with his office including the payment of rent and to credit all recoveries to the Government. Accordingly, Rule 592 of the O.S. Rules, inter alia, provides that the Court Receiver shall charge to the estates under his management a sum towards the expenses of his office including his salary. Under Rule 591, the Court Receiver is directed to charge fees according to a prescribed scale. Under Rule 595, a Receiver is required to file accounts in the office of the Commissioner. In appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sign salary bills. The Court Receiver is also required to pay security guards who are appointed to protect plants, machinery and immovable properties all over India. The Court Receiver is also required to pay fees to Valuers, Architects and Chartered Accountants. In some cases, Court Receiver is also required to sign returns under the Income Tax Act. All these facts are mentioned only to indicate that in Bombay the Court Receiver, High Court, Bombay discharges a very important function. The properties are spread over in India between Assam and Kanyakumari. One more fact needs to be mentioned that the State Government provides annual grant to the High Court. The budget allocation also includes office of the Court Receiver, High Court, Bombay. After deduction all costs, charges and expenses, the Court Receiver remits the balance amounts to the State Government. In the last Financial Year ending on 31st March, 1999, the office of the Court Receiver, High Court, Bombay earned net revenue for the State Government of about ₹ 2 crores. These facts are required to be mentioned also for a different reason. With the coming up of the DRT, all suits, in which the claim is below ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will be no question of making a fresh application for appointment of a receiver. As stated above, proceeding before the Court Receiver is an ongoing process till the rights of the parties to the properties in the hands of the receiver are decided. Only informal handing over of the properties by the Court Receiver to the receiver of DRT will follow and, therefore, there is no question of 'de novo' proceedings being adopted for appointment of Court Receiver. (emphasis supplied) 20. With respect to issue (b), the Court further stated that the Debt Recovery Tribunal did not have adequate machinery to take possession and management of the properties, which were already custodia legis. Therefore, till the Debt Recovery Tribunal appointed its own receiver, this Court held that it could certainly issue directions on the reports of the Court Receiver regarding the management and protection of the assets which were custodial legis. However, this Court decided that administratively, it would not be possible to lend the services of the Court Receiver to the Debt Recovery Tribunal as in the past too, the Court Receiver's services were not lent to the Small Cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment. 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. In this connection, the position in law can also be seen. When a Court Receiver is appointed by the Court, the properties come under the management of the Court. The Receiver enters into an agency agreement after taking formal possession. During the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that where a Receiver is appointed in a suit without his tenure being expressly defined he will continue to be the Receiver till he is discharged. It may be mentioned that in the said judgment also it has been laid down that although as between the parties to the suit the functions of the Receiver have terminated with the determination of the suit, the Court Receiver is still amenable to the Court as its officer until he has complied with the Court's direction as to the disposal of the funds which he has received during the course of his receivership. It is also laid down that in appropriate cases, upon sufficient cause being shown, the Court can continue the receiver even after disposal of the suit depending upon the exigencies of the case. The reason is very clear that during the pendency of the suit, the rights of the parties to the possession of the funds/properties held by the Receiver is not determined. It is only in the final decree that such rights are determined. 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 appo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others (supra), this Court (R.J. Kochar, J.) once again considered the issue of whether this Court could direct the Court Receiver to sell the suit property in proceedings that were before the Debt Recovery Tribunal. The Court discussed the aforementioned judgment in I.C.I.C.I Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra). 23. While the Court agreed on the first issue that the High Court, Bombay had no jurisdiction in matters that were transferred to Debt Recovery Tribunal after 16th July, 1999, with respect to the second issue, the Court held that the Court Receiver must take orders from the Debt Recovery Tribunal till the Government makes a provision and sets up its own machinery and infrastructure for proceedings initiated prior to 16th July, 1999. Further, the Court was of the view that permitting the Court Receiver to act under instructions of the Debt Recovery Tribunal would prevent multiplicity of suits as the parties would not approach the High Court for enforcement of directions of the Debt Recovery Tribunal to the Court Receiver. Further, the Court opined that there was no legal bar or ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conflict between the Judgments in ICICI Ltd. (supra), and Bank of Tokyo - Mitsubishi Ltd.(supra), as to whether this Court can continue to issue directions to the Court Receiver appointed by it, in bank suits transferred to the Debt Recovery Tribunal, the matter was referred to a larger bench of this Court. 25. The decision of the Division Bench (Larger Bench) (Coram: B.N. Srikrishna and S.D. Gundewar, JJ.) was by an Order dated 23rd July, 2001 in The Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others and Court Receiver, High Court, Bombay (supra). The Division Bench (in paragraphs 14 and 15) agreed with the view taken by the Court in Bank of Tokyo - Mitsubishi Ltd. (supra). For reasons of practical expediency, the Division Bench also recommended to the Chief Justice of this Court that the Court Receiver's services be made available to the Debts Recovery Tribunal/Appellate Tribunal for a period commencing from 23rd July 2001 until the completion of 1 (one) year therefrom, unless discharged by the Debt Recovery Tribunal either suo moto or on application by the parties. The Division Bench held that the Debt Recovery Tribunal or its Appellate Tribunal woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Appellate Tribunal. (e) The Court Receiver, High Court, Bombay shall be at liberty to apply for discharge from all or any of the proceedings now pending before the Debts Recovery Tribunal or the Appellate Tribunal under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, either at the expiry of one year from today or at any earlier point of time, if so directed by the Hon'ble the Chief Justice. (f) The Debts Recovery Tribunal or the Appellate Tribunal has jurisdiction to issue all appropriate directions to the Court Receiver. (Emphasis Supplied) 26. In ICICI Bank Ltd. v. J.K. Synthetics Ltd. Anr. (supra), this Court (Coram: S.U. Kamdar, J.) also had an occasion to comment on the status of the Court Receiver, High Court, Bombay. The question before the Court related to the powers of the Chamber Judge to vary the charges/fees for services rendered by the Court Receiver, fixed by the Bombay High Court (Original Side) Rules. In this context, it was observed that: 10. I have considered the rival submissions between the parties. There are two factors which are required to be set out at the outset before I d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Division Bench Notes that: the Court Receiver, High Court, Bombay is an employee of the High Court who is subject to the administrative control of the Hon'ble Chief Justice. There is no provision either in the Original Side Rules or in the Rules framed under the City Civil Courts Act which empowers the City Civil Court to appoint the Court Receiver, High Court, Bombay as a Receiver in the suits and proceedings filed in the City Civil Court at Bombay.... ............. 5. In the report of the Court Receiver various orders passed by the City Civil Court have been pointed out. The office of the Court Receiver is already under enormous pressure as by virtue of orders passed by this Court in various suits and proceedings including the arbitration petitions under section 9 of the Arbitration and Conciliation Act, 1946, the Court Receiver is required to look after very large and valuable immovable properties in the City of Bombay and at other places. In fact, by virtue of appointment as of the Court Receiver in suits filed in this Court, the Receiver has to look after properties which are situated even outside the State of Maharashtra. Considering the enor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, Bombay, is subject to the administrative control of the Learned Chief Justice. Significantly, none of the judgments contemplate a situation of the appointment of the Court Receiver, High Court, Bombay, being made by the Debt Recovery Tribunal, in new or pending matters. The appointment of the Court Receiver, High Court, Bombay, was only by this Court and not by virtue of an order of the Debt Recovery Tribunal. 31. The judgment of ICICI Ltd. v. Patheja Brothers (Coram: S.H. Kapadia, J.) (supra), though disagreed in its conclusion as to the power of this Court to continue to give directions to a Court Receiver, makes several relevant observations about the Court Receiver, High Court, Bombay, being an employee of this Court alone, and subject to the control and supervision of this Court alone. It recognises that the services of the Court Receiver have never been lent to any other Court. Although this observation may not be entirely accurate in view of the fact that the City Civil Court at Bombay does appoint a Court Receiver, High Court, Bombay, (a practice that was questioned in the Judgment of Girish M. Joshi (supra), the observations on this point in the Judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court, Bombay, as explained above. As discussed below, the language of Section 17 of the Amended Act does not alter this conclusion at all. 35. In reaching the above conclusion, I am also supported by the Judgment of Iridium India Telecom Ltd. v. Motorola Inc. (2005) 2 SCC 145 which recognises (at paragraphs 27 and 28, page 156) the distinct position of the Bombay High Court in framing its own Rules. The relevant portion of the said Judgment states: 27. The learned counsel for the respondent, however justifiably contends that the purpose of retaining Section 129 in the present form is exactly the purpose for which it was inserted, in the first place, in CPC of 1882 by amending Act 13 of 1895, namely, to recognise the practical expediency of leaving such High Courts some latitude in the direction of adapting the provisions of the ordinary law to meet their requirements and further, it had been found by experience that these provisions were not in all respects convenient in the case of original proceedings in those courts. The amendment, therefore, became necessary to bring the Code into perfect harmony with the provisions of the Letters Patent and to enabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1). 40. In contrast, Section 17 of the Amended Act, reads as under: (1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to the arbitral tribunal- (i) For the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) For an interim measure of protection in respect of any of the following matters, namely:- (a) The preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) Securing the amount in dispute in the arbitration; (c) The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or making orders as it has for the purpose of, and in relation to, any proceedings before it. 42. Section 9 of the Amended Act reads as under: 9. Interim measures, etc., by Court.- (1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court:- (i) for the appointment of a guardian for a minor or a person of unsound mind for the purpose of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:- (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or an observation to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efs at various points of time and under the different arbitration regimes. 45. Under the Arbitration Act, 1940, ( the 1940 Act ) the Hon'ble Supreme Court noted in MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd. (supra), at paragraphs 42 - 43, page 646 and paragraphs 47 - 48, pages 647 -648, that an arbitrator had no powers to pass interim orders of protection in the absence of an agreement to the contrary. As regards the powers of the arbitrator the Hon'ble Supreme Court observed as follows: 42. An arbitrator in a situation of this nature had no jurisdiction to pass the interim order under the Arbitration Act, 1940, in absence of any specific agreement in relation thereto. The learned arbitrator by an interim order could not have placed the parties in a situation which would travel beyond the subject of disputes and differences referred to for arbitration. As no claim and counter-claim had been filed before the arbitrator, the arbitrator was not even aware of the nature of claims of the parties. He neither found any prima facie case nor balance of convenience for passing the said interim order. Furthermore, an arbitrator is bound by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 258-259, as follows: 8. ...There is authority for the proposition that where on account of the arbitration clause in a partnership agreement or lease or the like, by which the parties agreed to refer all their disputes to arbitration, the Court stays proceedings pending itself, it retains jurisdiction to deal with a prayer for injunction or for a receiver: Law v. Garret; Compagnie du Senegal v. Woods; Hasky v. Windham; and Piri v. Roncoroni. In the case of Willesford v. Watson, Lord Selborne expressed the view that, if since the passing of the Common Law Procedure Act, parties chose to determine for themselves that they will have a forum of their own selection instead of resorting to the ordinary Courts, a prima facie duty is cast upon the Courts to act upon such arrangement. That the plaintiff 's right to a receiver and injunction is not a matter to refer can hardly be disputed. As regards injunction, there is clear authority, see Willesford v. Watson, where Lord Selborne says: It is said that the arbitrator could not grant an injunction. No doubt he could not grant an injunction; but he might say that the thing was not to be done and there being liberty to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) took a broader view (at paragraphs 40, 50 - 51) of the arbitral tribunals powers under Section 17 of the 1996 Act. This Court also distinguished the Judgment in the case of Intertoll (supra). This Court held, in Baker Hughes (supra), that an arbitral tribunal can, in a given case, make an appropriate order of security. 50. A perusal of these decisions is helpful because it brings into focus the reason why Section 17 as amended, was enacted. 51. Under the 1940 Act, the position was, as stated by the Hon'ble Supreme Court in MD, Army Welfare Housing Organization (supra), that an arbitral tribunal is not a Court of law and its orders are not judicial orders and its functions are not judicial functions. 52. This position changed under the 1996 Act, but in relation to Section 17 of the 1996 Act, the same Judgment of Army Welfare (supra), says that the power is a limited one, and that the arbitral tribunal has no power to enforce its own order nor is it made judicially enforceable. 53. Even though different Courts may have taken different views on the scope of the powers under Section 17 of the 1996 Act, it is very clear that the powers were narr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amended Act states that, once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious. 59. Whilst all of the above explains the rationale and purpose for amending the provisions of Section 17 of the Amended Act, the question still remains: whether there is anything in the language of Section 17 of the Amended Act that entitles an arbitral tribunal to function as the High Court, Bombay, so as to enable it to issue orders of appointment, supervision and control over an employee and department being the Court Receiver, High Court, Bombay? 60. In my view this question must be answered in the negative. In addition to my above findings and conclusion as to the status and Office of the Court Receiver, High Court, Bombay, I am of the opinion that the language of Section 17 of the Amended Act, does not mean that the arbitral tribunal is itself a Court, or in this case, the High Court, Bombay. 61. There is a clear distinction between an arbitral tribunal having the same powers as that of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Receiver, High Court, Bombay. 66. In any event, for the other reasons already mentioned, I am of the view that even if we read the particular word as Court in the defined sense, it still does not mean that the arbitral tribunal is entitled to do what only the High Court, Bombay can do, which is to appoint the Court Receiver, High Court, Bombay. 67. So also, the provisions of Section 17(2) of the Amended Act, provide for a deeming fiction as to the order of the arbitral tribunal being deemed to be an order of the Court for all purposes and also for the purpose of enforceability under the CPC. None of this alters the position as expressed above and nor does it enable the arbitral tribunal to appoint officers of the High Court, Bombay, being a Chartered High Court, in exercise of powers under Section 17 of the Amended Act. 68. I am of the view that the power under Section 17(1)(ii)(d) of the Amended Act, to appoint a Receiver, is obviously derived from Order XL of the CPC. This allows the arbitral tribunal to appoint such persons that are capable of being appointed to act as receivers in relation to the dispute. This is how all civil courts- other than co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also contravene the scheme under Section 5 of the Act. Section 5 of the Act contemplates intervention by a judicial authority only where expressly provided for in Part I. Clearly, there is no room for any form of 'intervention' by way of this Court approving the appointment of the Court Receiver, High Court, Bombay, as made by an arbitral tribunal. All this indicates that the scheme as contended by the Original Claimant for the manner in which the appointment of the Court Receiver, High Court, Bombay, is to be made by an arbitral tribunal, is not known to the Amended Act. Hence, for this reason also, I am not inclined to accept this submission of Mr. Sen. 73. I am also of the view that any interpretation that would allow for the Court Receiver, High Court, Bombay, to be appointed, and thereby subjected to the control and supervision of an arbitral tribunal, would cause considerable difficulty in the functioning of the Office of the Court Receiver. 74. As pointed out to me, the Office of the Court Receiver, High Court, Bombay, has a total working strength of 83 members (Class I to IV), working in different sections. Of them, only the Court Receiver, the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a Single Judge of the Kerala High Court in the case of Pradeep K.N. v. The Station House Officer Ors. (unreported decision in WP(C) No. 38725 of 2015). 79. This Judgment dealt with a common question of law regarding the ... enforcement of the interim order issued under Section 17 [of the Amended Act] as set out in paragraph 1. In paragraph 12, the Court whist noticing the powers of the arbitral tribunal to make orders of repossessing vehicles, raised the question as to when such orders are not obeyed or honoured by the parties, can the order be enforced like an order of the civil court, by the arbitral tribunal or the party. After analysing the meaning of 'enforcement' as being a sovereign or State function, the Court observed: 13. ... Nevertheless, it confers no power on the Tribunal to enforce its own order. Conferring the power of the Civil Court to the Tribunal for passing an interim order does not mean that the Tribunal is conferred with the power of enforcement. The Tribunal, by its constitution or creation, inherently lacks power to deal with any sovereign function or public law in the sense that their authority is founded in a contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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