Kores
(India) Ltd. Vs. Bank of Maharashtra &
Ors [2006] Insc 812 (16
November 2006)
H.K.
Sema & P.K. Balasubramanyan
(Arising
out of SLP(C) No.18610 of 2004) P.K. BALASUBRAMANYAN, J.
Leave
granted.
Heard
both sides.
1. On
9.1.1990, M/s Jyoti Chemicals leased out its industrial undertaking situate in
the State of Andhra
Pradesh to the
appellant for a term of 11 years on an annual rent of Rs. 20 lakhs. A sum of Rs.
11 lakhs was paid by the appellant as security and every year a sum of Rs. 1 lakh
therefrom was to be adjusted towards the Rs. 20 lakhs payable for that year. It
appears that M/s Jyoti Chemicals had borrowed amounts from the Bank of Maharashtra
on the security of the properties and had agreed to formally mortgage the
properties. On 14.12.1993, the Bank of Maharashtra filed Suit No. 307 of 1994
on the Original Side of the High Court of Bombay for recovery of the amount due
to it on the basis of the loan transaction and for specific performance of the
alleged agreement to mortgage the properties included in Schedule 'B' to that
plaint. It was pleaded that a hypothecation had been created in respect of the
machineries in favour of that Bank as far back as on 25.11.1982. In that suit,
the appellant was not originally made a party. But the Bank moved an
application for appointment of a receiver for the properties of M/s Jyoti
Chemicals situate in Thane as well as the industrial undertaking situate in the
State of Andhra Pradesh. The application under Order XL
Rule 1 of the Code of Civil Procedure in regard to the industrial undertaking
of which the appellant was the lessee, was rejected by the learned single judge
of that court. The learned judge noticed that the loan was advanced by the Bank
in the year 1982; that the Bank had consented to the appellant being put in
possession as a lessee subject to the appellant paying to the Bank a sum of Rs.
20 lakhs as rent. The court further noticed that the amount had not been paid
by the appellant into the Bank from the year 1982 and the suit was filed by the
Bank only in the year 1993. Also, in the mean time, M/s Jyoti Chemicals had
entered into an arrangement with Citi Bank for the liquidation of its loan by
directing the appellant to pay the amount of Rs. 20 lakhs to that Bank. It was
also stated that the Bank of Maharashtra had been negligent in not having taken
prompt steps for recovery of the amounts and under the circumstances it was not
just and convenient to appoint a receiver.
2. The
Bank of Maharashtra filed an appeal before the Division
Bench. By an interim order dated 4.4.1996, the Division Bench appointed a
receiver, the Court Receiver, High Court of Bombay, for the industrial
undertaking. The court also directed the receiver to appoint the appellant as
his agent in respect of the property on usual terms and conditions without
security.
The
undertaking including the machinery which was already in possession of the
appellant as a lessee, was permitted to be continued in the possession of the
appellant. Subsequently, the Division Bench confirmed the order appointing the
receiver. It noticed the contention of the appellant that the court receiver
was not entitled to claim from the appellant anything more than what the
appellant was liable to pay to M/s Jyoti Chemicals. The Division Bench did not
answer that contention but directed the appellant to make that submission
before the receiver and observed that the receiver was bound to take all
relevant materials into consideration. The order also directed that the
appellant should continue to pay a sum of Rs. 20 lakhs per year to the receiver
who in turn would pay over the said amount to Citi Bank. The order also
directed that the receiver should separately fix and collect royalty in respect
of the plant and machinery located in the State of Andhra Pradesh. By a subsequent order, the order
was modified by substituting the figure of Rs. 19 lakhs per year as against Rs.
20 lakhs per year as payable by the appellant since Rs. 1 lakh out of Rs. 20 lakhs
was to be adjusted out of the sum of Rs. 11 lakhs paid as security.
3. The
receiver purported to get a valuation of the plant and machinery. The valuer
suggested a valuation of Rs. 1,15,16,000/- and reported that the written down
value on depreciation would be Rs. 74,44,600/-. It was also suggested by the valuer
that 15% of the written down value would be the quantum of royalty that ought
to be collected.
4. In
view of the liberty given to the appellant by the Division Bench to raise its
contentions regarding the liability to pay royalty and its quantum before the
receiver, the appellant raised the contention that the valuer had grossly
over-valued the plant and machinery and has not properly calculated the written
down value of the 20 years old machinery and it was not correct to have taken
15% of the written down value as the royalty payable by the appellant. It was
also contended that the obligation of the lessee to M/s Jyoti Chemicals could
not be enlarged merely because a creditor had sued M/s Jyoti Chemicals and had
got a receiver appointed for the properties of M/s Jyoti Chemicals. The
receiver accepted the written down value suggested by the valuer but reduced
the royalty to about 10% of the written down value and fixed it at Rs.8,46,000/-
and directed that a sum of Rs. 70,000/- per month had to be paid by the appellant
towards royalty for the plant and machinery in addition to the sum of Rs. 20 lakhs
payable for the immovable property. When the fixation of royalty thus, was
challenged by the appellant before the Division Bench, the Division Bench
directed that the appellant could question the amount of royalty fixed by the
court receiver before the single judge and gave liberty to the single judge to
pass an appropriate order.
The
appellant thereupon moved the learned single judge and questioned the direction
to pay royalty at all and further questioned the quantum. Meanwhile, on the
constitution of the Debts Recovery Tribunal, the suit filed by the Bank of Maharashtra
was transferred to the Debts Recovery Tribunal. The Debts Recovery Tribunal
dealt with the application of the appellant challenging the liability imposed
on it for paying royalty at Rs. 70,000/- per month. The Debts Recovery Tribunal
rejected the challenge. On the aspect of liability, the Tribunal thought that
the appellant having acquiesced in the order of the Division Bench regarding
liability, the same could not be questioned and the challenge had to be limited
to the quantum and having considered the approach made by the receiver it held
that there was no reason to interfere with the quantum of royalty fixed as
payable. The appellant challenged that order before the Debts Recovery
Appellate Tribunal. The Appellate Tribunal dismissed the appeal. The appellant
thereupon approached the High Court with a Writ Petition. The High Court took
the view that the order dated 17.12.1998 precluded the appellant from
challenging the liability itself and on the materials available, there was no
reason to interfere with the fixation of royalty at Rs. 70,000/- per month.
Thus, the Writ Petition was dismissed by the Division Bench. It is this order
that is challenged before us by the appellant.
5.
Before considering the contentions raised by learned counsel for the appellant
we have to notice that Citi Bank to whom the sum of Rs. 19 lakhs was payable by
the appellant described as rent of the immovable property by the order of the
High Court, has not been impleaded in this appeal. It is therefore not possible
to pass any order in this appeal that may prejudice Citi Bank or that may
interfere with the working of the order passed by the High Court in favour of Citi
Bank. This aspect may have relevance when we consider some of the contentions
raised on behalf of the appellant by their Senior Counsel.
6. It
is contended by the learned Senior Counsel that the appellant was a lessee long
prior to the filing of the suit by the Bank of Maharashtra, a creditor, against
M/s Jyoti Chemicals and the lease itself was granted to the appellant by M/s Jyoti
Chemicals with the consent of the Bank. Learned counsel submitted that merely because
a creditor had filed a suit against M/s Jyoti Chemicals and got a receiver
appointed, the liability and obligation of the lessee could not be enhanced and
the obligation of the lessee would remain the same as the one contained in the
indenture of lease. Learned counsel sought support from the decision of this
Court in Supp. 7 S.C.R. 669] for this position. This contention is sought to be
met on behalf of the Bank mainly on the basis that the appellant had acquiesced
in the earlier order of the Division Bench of the High Court directing that Rs.
20 lakhs, the agreed lease amount, is to be paid towards the rent of the
immovable property and that the appellant would be liable to pay royalty for
the plant and machinery in addition to that amount. We are not impressed with
the argument. A litigant is not bound to appeal against every interlocutory
order passed against him; he can wait until the final order is passed and in
appeal against that final order challenge all orders leading to the final order
and affecting that decision. Stated the Government [(1859) 7 Moo Ind. App. 283]
:- "We are not aware of any law or Regulation prevailing in India which
renders it imperative upon the suitor to appeal from every interlocutory order
by which he may conceive himself aggrieved, under the penalty, if he does not
do so, of forfeiting forever the benefit of the consideration of the Appellate
Court. No authority or precedent has been cited in support of such a
proposition, and we cannot conceive that anything would be more detrimental to
the expeditious administration of justice than the establishment of a rule
which would impose upon the suitor the necessity of so appealing, whereby on
the one hand he might be harassed with endless expense and delay, and on the
other inflict upon his opponent similar calamities." The two exceptions to
the rule are Section 105(2) of the Code of Civil Procedure which precludes an
order of remand being challenged at a subsequent stage, while challenging the
decree passed pursuant to the order of remand and Section 97 of the Code where
while filing an appeal from the final decree, a litigant is not entitled to
question the preliminary decree on which it is based and which had earlier
become final. Since the Code of Civil Procedure is not applicable in terms to
the Supreme Court, it was held by this Court in Satyadhayan Ghosal & S.C.R.
74 at page 81] that even Section 105 (2) of the Code, did not preclude this
Court from examining the correctness of the earlier order of remand passed by
the High Court in an appeal arising from the decree passed subsequent to the
remand. But as regards the High Court, the order of remand would be final. (see
the Anr. [(1972) 1 S.C.R. 836]. Therefore, on principle, the argument that the
appellant cannot challenge in this appeal the order holding that he should pay
royalty for the plant and machinery in addition to the rent on the ground that
as far as the High Court is concerned it had become final, cannot be accepted.
7.
But, here we find some difficulty in accepting this contention of the appellant
in the absence of Citi Bank from the array of parties. Any finding on liability
different from the one rendered by the High Court by us and another arrangement
regarding payment, may have an impact on the order of the High Court directing
that Rs. 19 lakhs payable by the appellant (after adjusting Rs. 1 lakh from the
security) be paid to Citi Bank on the basis that separate royalty is payable
for the plant and machinery and that is liable to be paid to the Bank of Maharashtra.
To counter this position, learned Senior Counsel submitted that the appellant
had surrendered the undertaking on 30.9.2000 on the expiry of the term of the
lease and the Bank of Maharashtra has subsequently sold the undertaking and had
recovered substantial amounts towards the liability of M/s Jyoti Chemicals and
under those circumstances this Court could pass an order holding that no
royalty was payable by the appellant to the Bank of Maharashtra. We also find
from the particulars furnished by the appellant itself that the appellant was
permitted to continue as agent of the receiver on usual terms and conditions
without security and royalty for the plant and machinery was fixed pursuant
thereto. We may also notice that a specific ground challenging the order
holding that royalty was payable is also not set out in the grounds of appeal
so as to put the respondent Bank on notice of such a contention though of
course reference is made to the decision in Anthony C. Leo (supra) and the
obligations of the appellant as a lessee being confined to the rent payable.
The
appellant has also acquiesced in this part of the order since the appellant
could have, according to us, validly contended that there was no reason to
dispossess it during the subsistence of the lease and it would have been for
the court to direct that the sum of Rs. 19 lakhs payable by the appellant
should be paid to the receiver and not to M/s Jyoti Chemicals. We have already
indicated that the order we may pass may have an impact on the right of Citi
Bank in collecting the sum of Rs. 19 lakhs per year during the subsistence of
the lease, since, we may have to find on the terms of the lease deed executed
by the appellant that the rent for the immovable property was fixed only at
Rs.60,000/- per year and the rest of the rent was royalty for the plant and
machinery which was also specified as immovable property therein and that would
raise questions as to whether the plant and machinery having been hypothecated
to the Bank of Maharashtra, it did not have a priority to claim that amount as
against Citi Bank. In this situation, we are satisfied that though legally the
appellant could have challenged its obligation to pay anything more than the
amount agreed upon under the indenture of lease, on the facts and in the
circumstances of the case, the appellant has precluded itself from raising that
challenge before us by not impleading a necessary party who might be affected
by our decision and by acquiescing in that decision. We, therefore, overrule
that contention of learned Senior Counsel for the appellant.
8.
Then comes the question as to whether there is any justification in interfering
with the quantum of royalty fixed by the receiver and approved by the Debts
Recovery Tribunal and the High Court. Learned counsel for the appellant points
out that even at the time of entering into the lease transaction, the parties
had valued the plant and machinery at Rs. 11,01,912.44 and that valuation was
as on 30.6.1985 and if at all, there was only further depreciation of the value
and under the circumstances the valuer had grossly overvalued the plant and
machinery at Rs.1,15,16,000/- and in determining the written down value at Rs.
74,44,600/-. Learned counsel also submitted that 10% of the written down value
fixed as royalty by the court receiver and approved by the court, was also on
the higher side. Learned counsel for the Bank on the other hand contended that
there was no proper or tenable objection to the valuation made by the valuer
and it was too late in the day for the appellant to question the valuation.
Learned counsel further submitted that there was no reason to interfere with
the acceptance of that valuation and the fixation of royalty at 10% thereof by
the receiver. He also submitted that 10% of the written down value was
reasonable under the circumstances.
9. We
think that on the facts and in the circumstances of the case, taking note of
the various aspects that had been projected before us, it would be appropriate
to fix the royalty at 6% of the written down value as found by the valuer. That
would mean that the royalty would come to Rs.4,46,676/- per year. We think it
appropriate to round off that figure to Rs.5 lakhs per year.
The
order of the receiver as affirmed by the Debts Recovery Tribunal and the High
Court fixing the quantum at Rs. 70,000/- per month therefore requires
modification.
We
therefore modify that part of the order and hold that the royalty payable by
the appellant per year in addition to the sum of Rs. 20 lakhs (minus Rs. 1 lakh
to be adjusted out of the security) would be Rs. 5 lakhs and the yearly sum at
that rate has to be paid towards liability for the period from 5.7.1996 to
30.9.2000.
10. It
is seen that the appellant had deposited a sum of Rs. 34,99,232.87 on
12.10.2004 in the light of the order passed by the Debts Recovery Tribunal and
the extension of time granted by this Court for making that payment.
Out of
this amount, the Debts Recovery Tribunal will disburse to the Bank of Maharashtra
royalty at the rate of Rs.5 lakhs per year for the relevant period and refund
the balance to the appellant. If the amount deposited had earned any interest,
the interest on the sum of Rs. 5 lakhs per year will also be disbursed to the
respondent Bank.
Since
the appellant had surrendered the premises on expiry of the term on 30.9.2000,
the above adjustment would put an end to the obligation of the appellant
imposed by the court on appointing a receiver at the instance of the Bank of Maharashtra.
The balance amount with interest, if any, would be refunded to the appellant.
11.
The appeal is thus allowed as above to the limited extent with a direction to
the parties to suffer their respective costs in this Court.
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