- (1.) M. C. Jain, J. M/s. Sitapur Plywood Manufacturers Limited (in liquidation) was would up by this Court's order dated 24th January, 2000 on a petition moved by M/s D. C. M. Shriram Leasing and Finance Limited, New Delhi, which is the applicant of application A-15. The Official Liquida tor was appointed as its liquidator by vir tue of Section 449 of the Companies Act, 1956. Through application A-15. M/s. D. C. M. Shriram Leasing and Finance Limited has prayed for a direction to the Official Liquidator to release in its favour the following equipment: S. N. Equipment Quantity Value 1 Assembled Heavy 1 Rs. 51,94,200/- Duty Particle Board Press with rigid plates 8-Day Light, Closing time 30 seconds with automatic systems complete with motors, drivers, accessaries etc.
(2.) THE case put forth by the said com pany is that M/s. Sitapur Plywood Manufacturers Company having its registered office at Sitapur Cantonment, Sitapur was engaged in the business of manufacturing of Particle Board from Bagpasse as well as wood based particle board, flush doors and windows from tim ber as raw materials. In July 1995, the said company had approached the applicant for taking on hire purchase assembled high duty particles board press (detailed above ). THE total cost of the equipment as per the invoice was Rs. 51, 94,200/ -. THE applicant agreed to give on hire purchase the said equipment to the company (in liquidation) and a hire purchase agree ment was executed on 14th July, 1995 between the parties, which is annexed as An-nexure D to the application. In conse quence of the said agreement, the ap plicant financed to the respondent com pany (in liquidation) a sum of Rs. 50 lacs to be checked towards the cost of such equip ment. THE respondent company through its director Sri M. Zafarulla executed a deemed promissory note of Rs. 78 lacs in favour of the applicant towards the satis faction of the loan amount, inclusive of interest. THE equipment as per the terms of the said hire purchase agreement was delivered to the respondent company where it was working satisfactorily. THE hire purchase price was payable iii twenty equal quarterly instalments of Rs. 3,90,000/- each commencing from 14th July, 1995 and ending on 14th April, 2000. THE respondent company initially made payments of a few instalments, but defaulted thereafter and various cheques issued by it were dishonoured by the Bank with the remarks "account Closed". Two of such cheques were dated 14th April, 1997 and 14th July, 1997 respectively drawn on Punjab National Bank and State Bank of India respectively, dishonoured on 22nd July, 1997. THE respondent company by its letters expressed its inability to pay hire purchase instalments. THE applicant was constrained to terminate the hire purchase agreement by notice dated 5th March, 1998 Annexure K. It also served the respondent company with a notice under Sections 433 and 434 of the Companies Act and presented a winding-up petition whereupon this Court passed the winding up order of the respondent company on 24th January, 2000. THE Official Liquida tor took possession of the company includ ing the equipment of the applicant. As per the terms of the hire purchase agreement the applicant is the owner of the said equipment which the respondent com pany is now liable to return as the hire purchase amount has not been paid. THE respondent company or the Official Liqui dator does not have any right to sell, alienate or possess the said equipment given on hire purchase by the applicant to the respondent company. It is on these allegations that the application A-15 has been made. Application A-18 is an application by another applicant-M/s India Securities Limited against the respondent company with the prayer for a direction to the Official Liquidator to release in its favour the following equipment: S. No. Description of equipment Quantity Total cost 1. Mechanical Vapor Re-com pressor One Rs. 63,20,655/- The case made out by the applicant in its application is that in February 1997 the respondent company approached the applicant for taking on lease the equip ment in question which was required by the respondent company for the purpose of their business. The cost of the said equipment as per the invoice was Rs. 63,20,650/- inclusive of sales tax as per the invoice Annexure-B. In response to the request of the respondent company the applicant agreed to give on lease the said equipment to the respondent company. In pursuance thereto, a lease agreement was executed on 3rd March, 1997 between the parties, the copy of which is Annexure C. In consequence of the said lease agree ment the applicant financed to the respon dent company a sum of Rs. 63,20,655/-, the cost of the said equipment. The respon dent company through its Managing Director Sri M. Zafarulla issued sixty post dated cheques starting from 27th March, 1997 to 27th February, 2002, Le. for the period of five years towards the lease rent al to the applicant. Lease rentals were to be paid monthly by the respondent company. Each of the said cheques was for a sum of Rs. 1,52,505/ -. As per the agreement, the equipment was delivered to the respon dent company where it was working satis factorily. The respondent company initial ly made payment of few lease rentals as per the schedule but thereafter it failed to pay the subsequent lease rentals. Six cheques issued by the respondent company towards rentals were dishonoured which con stituted an act of default according to paragraph 13 of the equipment lease agreement dated 3rd March,1997. There fore, the applicant terminated the lease vide notice dated 22nd February,1999 which was a composite notice terminating the lease agreement as well as in relation to the outstanding debts which were to the extent of Rs. 46,90,961/ -. A copy of the notice has been annexed as Annexure E to the application. The respondent was also put to notice in accordance with. the provisions of Sections 433 (e) and 434 of the Companies Act, 1956. The Court passed winding up order in relation to the respondent company on 24th January, 2000. As per the clear terms of the lease agreement, the applicant is the owner of the said equipment which the respondent company is liable to return as the lease amount has not been paid. The applicant is entitled to repossess the said equipment. Neither the respondent company nor the Official Liquidator has any right to sell, alienate, or possess the said equipment given on lease to the respondent. It is with such averments that the application A-18 has been made.
(3.) A-16 is the counter-affidavit filed by the Official Liquidator against the ap plication A-15 and A-20 is the counter-af fidavit filed by him against the application A-18. A-19 is report No. 66 of 2000 presented by the Official Liquidator. A-22 is another counter-affidavit filed by him. A-21 is the supplementary affidavit filed by the applicant of application A-15 annexing therewith the copy of the bill dated 4th July, 1995 of the machine supplied to the respondent company as per the hire pur chase agreement. The bill is in the name of the applicant mentioning "a/c Sitapur Plywood Mfis. Ltd. , Sitapur, U. P. " issued by Assam So'1 vex Private Limited. The bill is for Rs. 51 94,2007 -. Annexure S. A. 2 is the Photostat copy of the insurance paper and Annexure S. A. 3 is the copy of the promissory note executed by Mr. M. Zafarulla on behalf of the respondent company in favour of the applicant for a sum of Rs. 78 Lacs. It concerns the hire purchase agreement dated 14th July, 1995. These papers have been filed by the ap plicant of application A-15 to show that the machine had actually been purchased by it for the respondent company and was given to the latter on hire purchase basis in respect of which hire purchase agreement had been executed and a promissory note had also been executed by the Managing Director of the respondent company promising to pay a total sum of Rs. 78 Lacs as hire purchase instalments according to the terms of the hire purchase agreement. A-17. is the rejoinder affidavit filed by the case may be, to take into his custody or under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liqui dator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon, after such notice as he may think it to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1-B) For the purpose of securing com pliance with the provisions of sub-section (1-A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary. " 11. The winding up order having been passed in respect of respondent company (in liquidation), it is the duty of the Official Liquidator to take into his possession or custody all the property and assets of the company (in liquidation ). If the situation so demands, he can take resort to the provisions contained in Section 456 (1-A) and (1-B) of the Companies Act. It can be no excuse to say that ex-workers did not allow possession or custody of the assets of the respondent company to be taken or assumed by him. He is, therefore, to proceed in accordance with the provisions of the Companies Act detailed above to perform his duty of taking into his posses sion or custody the property and assets of the respondent company. 12. Now coming to the claim lodged by the applicants of applications A-15 and A-18, it is borne out from the hire purchase agreement dated 14th July, 1995 (Annexure D to the application A-15) that the equipment in question had been supplied by the applicant to the respondent com pany on the hire purchase basis and the ownership of the equipment remained with the applicant. The respondent com pany was to become the owner of the com pany only on payment of the entire hire purchase charges as per the hire purchase agreement. The agreement also clearly provides for the termination of hire pur chase agreement, inter alia on the failure of the respondent company to pay the hire charges as per the agreement. There is clear averment of the applicant that the respondent company failed to make pay ment of the instalments as per the agree ment and a few cheques issued by it bounced. 13. So far as application A-18 is con cerned, it is gleaned from the lease agree ment (Annexure C to the application) that the equipment had only been leased out to the respondent company by the applicant. The ownership of the equipment remained with applicant. The applicant of application A-18 has also clearly averred that default was made by the respondent company in payment of lease instalments. The lease agreement came to be ter minated consequent upon the defaults committed by the respondent company. 14. Since the ownership of the equip ments in question remained with the ap plicants of application A- 15 and A-18, they (equipments) cannot be deemed to be the property of the respondent company over which the Official Liquidator can lay hands on. It was held in the case of GE Capital Transportation Financial Services Limited v. Dee Pharma Ltd. , (1998) 4 Comp LJ 527 (Delhi), by the Delhi High Court that where the petitioner as owner leased out machinery under hire purchase agreement to the respondent company putting the possession of the machinery at the disposal of the respondent company, the ownership remained vested with the petitioner. Merely putting the machinery at the disposal of the respondent by no stretch of imagination would mean that the ownership of the property vested in the respondent company. A similar view was taken by the Andhra Pradesh High Court in the case of Model Financial Corporation Ltd. v. Montana International Limited, (2000)2 Comp LJ 229 (A. P.), wherein it was held as under: "once the properties are registered and charge is created in favour of the applicant com pany and until the company pays the entire loan, the properties will no become the properties of the company, and the said property still will be the property of the owner as per the terms and conditions of the hire purchase agreement. . . " 15. In the present case also, the applications A-15 and A-18 have amply demonstrated that the ownership of the equipments in question remains with them. Therefore, they are entitled to get back possession of the same. During the course of arguments the Official Liquida tor has submitted that in case the equip ments in question are ordered to be returned to the applicants of applications A-15 and A-18, they should be directed to give an undertaking to reimburse and deposit with him the cost of the equip ments in question in case some other party stakes its claim in respect of equipments and the same is sustained by the Court. Learned Counsel for the applicants did not have any objection to this suggestion made by the Official Liquidator. I am also of the opinion that to balance the rights of the applicants of applications A-15 and A-18 on the one hand and the Official Liquidator on behalf of respondent com pany (in liquidation) such an undertaking should be taken from the applicants of applications A-15 and A-18. 16. In view of the above, I allow ap plications A-15 and A-18 in the following manner: (1) M/s. Shriram Leasing and Finance Limited (applicant of application A-15) shall be delivered the possession of the equipment (Assembled Heavy Duty Particle Board Press with rigid plates 8- Day Light, Closing time 30 seconds with auto matic system complete with motors, drives, accessories) by the official liquidator on an undertaking in writing being given by the applicant to the official liquidator that the applicant would deposit a sum of Rs. 51,94,2007- (value of the equipment) with the Official Liquidator in case someone stakes claim to such equipment which is sustained by the Court. (2) M/s. India Securities Limited (ap plicant of application A-18) shall be delivered possession of the equipment (Mechanical Vapor Recompressor) by the Official Liquidator on an undertaking in writ ing being given by the applicant to the Offi cial Liquidator that the applicant would deposit a sum of Rs. 63,20,655/- valueof the equipment) with the Official Liquidator in case someone stakes claim to such equip ment which is sustained by the Court. (3) The learned Counsel for the ap plicants of applications A-15 and A-18 and the Official Liquidator shall fix up a date by mutual convenience for the delivery of the possession of the equipments in ques tion and the representative (s) of the ap plicants of applications A-15 and A-18 shall accompany the Official Liquidator or his representative to the factory premises or identification of the equipments in question and for taking delivery of the same (in respect of which separate inven tories shall be prepared and signed on behalf of the applicants as well as Official Liquidator or his representative ). The delivery of possession should be made within one month from the date of this order. The applicants of applications A-15 and A-18 as well as the Official Liquidator shall apprise the Court of the compliance of this order in writing within a week from the delivery of the possession of the equip ments. Applications allowed. .;