J.B Goel, J.— This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996 (for short “the Act”) for appointment of a Receiver to seize the leased plant and machinery.

Briefly, the case of the petitioner is that the petitioner, a non-banking financial company engaged in the business of leasing and hire of equipment and plant and machinery etc. on the request of the respondent, had given to the respondent the following plant and machinery on lease:—

2 Numbers, Steam Sterilizer (Autoclave) Type: KE-SS-30 Horizontal Rectangular High Pressure Vacuum, Steam Sterilizer.

1 Number, Rubber Stopper/Treatment system Air Handling, Air Filtration System for Bulk & Sterile Formulation Plant

1 set Linear Vial Washer with infeed loading platform, unsrambler, pumps, filters, controls etc. & Sterilizing Tunnel with drying-sterilizing-cooling stabilizing zones, electrical control panel, S.S, biopragm for which lease agreement No. 03.BLR/L/088 dated 25.3.1995 was entered into. The respondent was to pay lease money in 20 quarterly instalments of Rs. 15.00 lakhs each. Some payments were made and some cheques given were dishonoured. These instalments have not been paid as agreed in spite of demands and promises and a sum of Rs. 2,27,49,374/- remains due from the respondent. The agreement has been terminated on 27.1.1998 It is claimed that the petitioner is the owner of the plant and machinery in question and so is entitled to take and seize the same. Hence this petition for appointment of a Receiver.

The respondent in reply has disputed this; petitioner's ownership is denied. It is denied that the plant and machinery in question was given on licence. It is claimed that it has paid Rs. 1.35 croes in 9 instalments and the respondent is its owner. It is further pleaded that the respondent is a sick industrial company and a reference has been made under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short “SICA”) before the BIFR and in view of section 22(1) of sica, this petition for appointment of Receiver is not maintainable. It is also alleged that the lease agreement in question is not enforceable in law because they were forced to sign the same under compelling circumstances. It is denied that Rs. 2,27,49,374/- are due from the respondent. Further that in pursuance of arbitration agreement, arbitrator has been appointed by both the parties and in view of the arbitration proceedings also this petition is not maintainable.

No one appeared on behalf of the respondent at the time of arguments. I have heard learned counsel for the petitioner who has contended that the plant and machinery in question was given on lease under lease agreement and its terms are binding on the parties; that in terms of the lease agreement, the plant and machinery belong to the petitioner and it has right to seize and take it into possession. section 22 of sica is not attracted in these circumstances. She has inter alia relied on GE Capital Transportation Financial Services Ltd. v. Dee Pharma Ltd. 76 (1998) DLT 273 and the judgement of the Division Bench thereon dated 14.10.1998 dismissing the appeal (Co. A. 29/98).

sub-section (1) of Section 22 of SICA so far is relevant provides as under:—

“22. Suspension of legal proceedings, contracts, etc. - (1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.”

This provision, inter alia, provides that where an enquiry under Section 16 is pending, no proceeding for (1) execution, distress or the like against any of the properties of the industrial company; or (2) for appointment of a Receiver in respect thereof shall lie or be proceeded with further except with the consent of the Board or, as the case may be, the Appellate Authority. This shows that a Receiver cannot be appointed in respect of the properties belonging to the industrial company in respect of which a reference/enquiry/appeal is pending under the Act.

Scope of this provision came for consideration in M/s: Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras AIR 1992 SC 1439 where the question was whether a landlord could seek eviction of the sick industrial company under the Karnataka Rent Control Act, 1961. It was held that the interest of a sick company which is continuing in occupation of the premises as a statutory tenant by virtue of the said Rent Act cannot be regarded as property of the company for the purpose of sub-section (1) of Section 22 of the SICA. In other words, there is no bar to institute or continue the proceedings under the provisions in respect of property that does not belong to the sick company.

This question was directly in issue in similar circumstances in the case of GE Capital Transportation Financial Services Ltd. v. Dee Pharma Ltd. (supra) where also it was held that, where the ownership of the machinery vested with the petitioner though the possession of the same was with the respondent, mere registering of the case by BIFR would not be a bar for the appointment of a Receiver for seizing such machinery. This judgement was upheld in appeal by the Division Bench in M/s. Dee Pharma Ltd. v. GE Capital Transportation Financial Services Ltd. (CoA.No 29/98 -decided on 14.10.1998).

Now, the question is whether the plant and machinery in question belongs to the petitioner or not. If it belongs to it, in view of this legal position, this petition would lie. For that purpose, it will be relevant to look into the terms of the lease agreement dated 25.3.1995

The agreement executed between the parties is described as a “Lease Agreement”, the petitioner as Lessor and the respondent as Lessee. In Clause 3, it is stated that the Lessor has let on lease to the Lessee and the Lessee has taken on lease from the Lessor the equipment/property described in the Schedule thereto and under clause 4, the Lessor has undertaken to pay to the Lessee for this equipment/property lease rentals as shown in Schedule II thereof. And Clause 8 of the agreement read as under:—

8. Ownership

The Lessee acknowledges, confirms and declares that it holds the equipment/property as a mere bailee of the Lessor and that it shall not have any proprietory right, title or interest in the equipment/property or any part thereof and shall at all times protect and defend as bailee/licensee of the equipment/property the Lessor's absolute and paramount ownership right and title thereto and that he shall not any time, advance or make any claim adverse to or in derogation of the Lessor's absolute and permanent ownership right and title. The Lessee further agrees and covenants that he shall not claim any benefits under the Tax Laws associated with the ownership of the equipment/property such as depreciation, investment allowance etc.”

Clause 21 provides that upon the determination of this lease, the Lessee is bound to deliver and cause to be delivered to the Lessor the lease equipment. Clause 23, which is a default clause, it provides that in the event of the Lessee, inter alia, committing default in making payment of the lease rentals, the Lessor in its absolute discretion may re-take and remove the equipment/property and for that purpose to enter upon any land or factory or premises where the same is situate and for that purpose to detach and dismantle the same. Schedule II attached thereto shows the cost and amount financed by Lessor as Rs. 2.00 crores and the amount payable with lease rentals amounting to Rs. 3.00 crores in, 20 quarterly instalments commencing from 30.3.1995 to 30.12.1999 @ Rs. 15.00 lakhs per quarter.

It is not the case of the respondent that they have fully paid this amount as agreed. According to the petitioner, a sum of Rs. 2,27,49,374/- was due on 11th September 1998 when this petition was filed. Further liability would also accrue due to non-payment of agreed instalments. Respondent has alleged that a sum of Rs. 1.35 crores has been paid which is denied by the petitioner. The respondent has not placed on record the details with dates of payment of the amounts whether paid in time or not and proof thereof. In any case, as against 20 quarterly instalments of Rs. 15.00 lakhs each, only 9 instalments are alleged to have been paid. This shows that it is not the case of the respondent that they have discharged the liability under this lease agreement. On this basis also, 11 instalments of Rs. 15.00 lakhs, i.e, Rs. 1.65 crores and perhaps also overdue charges admittedly remains outstanding and by now 5 years period is also over with the liability still outstanding. Under the terms of the agreement, as noticed above, the petitioner is the owner of the leased equipment till the liability is discharged and the petitioner has reserved its right to seize and take possession of the same at any time in case of default after terminating the lease agreement. Petitioner has terminated the lease agreement due to the defaults on the part of the respondent. The petitioner is thus entitled to seize and take possession of the lease equipment in question.

The other plea taken by the respondent is that their signatures on this lease agreement were obtained under compelling circumstances. This plea is vague and without particulars. It is not disputed by the respondent that the parties have acted on this lease agreement, the petitioner had given the plant and machinery to the respondent and the respondent had taken possession thereof and has also made some payments under this agreement. Prima facie, this plea has no merit.

The lease equipment belongs to the petitioner. The respondent has no right to retain and use it. If it is allowed to be used by the respondent without making the payments due, not only the petitioner is deprived of their property but a valuable security would be lost/destroyed due to its use and by passage of time. In these circumstances, it is just, proper, convenient and expedient in the interest of justice that a Receiver should be appointed to seize and take possession of the aforesaid plant and machinery from the possession of the respondent wherever it is available.

I accordingly allow this petition and appoint Mr. Krishna Kumar, Marketing Executive, an officer of the petitioner company whose name has been suggested by the learned counsel for the petitioner as a Receiver for this purpose. He is authorised to seize and take possession of the aforesaid plant and machinery from premises No. A-3/2, Industrial Area, Sikandrabad, District Bulandshahr, U.P where it is stated to be lying or from any other place where it may be found/available and if necessary after dismantling the same and also by entering the premises where it may be lying by break-opening the locks and doors thereof after making an inventory of the equipment with its accessories.

In case any resistance/obstruction is caused by the respondent or on their behalf in so seizing, the petitioner will approach the local police for police aid who will provide police aid or help to the petitioner as may be necessary for the purpose.

This petition is disposed of accordingly.