This beautifully authored judgment of the Madras High Court in M/s Millenium Steel India Pvt Ltd., & Ors., Vs Reckitt Benckiser India Pvt Ltd., & Ors., [2022 (1) CTC 1] discusses in detail the adjudication of property attached before judgment as contemplated under Order XXXVIII and rateable distribution of assets among the Decree Holders as contemplated under Section 73, CPC.
FACTS IN BRIEF: IL&FS Financial Services Ltd. (IL&FS) obtained a decree dated 5.01.2018 in CS 950 of 2017 in the Madras High Court for Rs.103.60 crores with interest of 17% p.a. from the date of decree till the date of realisation against IndBharat Thermal Power Ltd. (ITPL). The suit arose out of the default of ITPL on a loan extended by IL&FS on the security of receivables amounting to about Rs.102 crores from TANGEDCO who purchased power from ITPL.
Three coal suppliers to ITPL, namely, M/s. Millenium Steel India Pvt. Ltd., M/s. Trimex Industries Pvt. Ltd., and M/s. Black Burn Fuels Pvt. Ltd. filed suits, viz. CS No. 301, 402 and 403 of 2017 in the Madras High Court and obtained decrees for a cumulative sum of about Rs.89 crores. They obtained prohibitory orders against TANGEDCO, the garnishee from disbursing sums due to ITPL. Eventually, TANGEDCO deposited about Rs.89 crores into court to the credit of their 3 suits during the pendency of the said suits, which was directed to be deposited in FD bearing interest of 10.5% interest p.a.
IL&FS filed EP 69 of 2018 and sought attachment of the said sum of Rs. 89 crores with interest accrued credited to the three suits, while the Plaintiffs in CS No. 301, 402 and 403 of 2017 filed applications for withdrawal of the sums deposited to the credit of each of their suits.
SUBMISSIONS MADE:
M/s Millenium Steel and two other Decree-Holders contended that since the sums were credited to their suits, IL&FS had no right to the same and they should each be allowed to withdraw the sums credited to their respective suits. IL&FS on the other hand contended that the former has no lien or priority over the said moneys, which continued to be the property of the Judgment Debtor (i.e.ITPL) till Court orders disbursement.
IL&FS further contended that theirs was a secured debt and had priority over other debts. This was opposed pointing out that IL&FS had only a money decree and not a decree enforcing the charge. IL&FS contended that the Court had the power under Order 21 Rule 52 CPC to decide both title and priority to the said moneys and could peruse the pleadings and evidence in the suit to determine whether the debt was a secured debt or ordinary debt, in which case IL&FS had to be accorded priority.
Further, while IL&FS filed execution petitions, the others merely filed applications for withdrawal, which were not maintainable and hence the entire sum should be disbursed to IL&FS.
Alternatively, if the withdrawal applications are also construed as execution petitions, the moneys should be rateably distributed under Sec. 73 CPC in the proportion of the decretal amount in each suit, since the sum continued to be the property of the judgment debtor, i.e., ITPL till disbursal.
Justice N. Anand Venkatesh by his order dated 29.11.2021 held as follows:
· The moneys continued to be the property of the Judgment Debtor till disbursement as held by the Supreme Court in Kotak & Co. vs State of UP [(1987)1SCC 455];
· The Decree Holders did not have any lien or priority over the same merely because they were credited to their suits as evident from Order 38 Rule 8 and 10 CPC;
· The Court had ample power to determine issues of title and priority in relation to the moneys depositedunder Order 21 Rule 52 CPC;
· The withdrawal applications are permissible under Order 39 Rule 28 of OS Rules of the High Court and there is no necessity for them to seek reattachment;
· Hence, the Court held that the moneys ought to be rateably distributed under Sec. 73 CPC and directed that monies be attached to the credit of EP 69 of 2017 and disbursed in the following proportion: M/s Trimex – 14.99%, Rs.16.84 crores; M/s Millenium Steel – 22.32%, Rs.25.09 crores; M/s Blackburn– 9.51%, Rs.10.69 crores; IL&FS – 53.18%, Rs.53.79 crores
· The monies shall forthwith cease to be the property of the judgment debtor and become the property of the decree-holders in the proportion set out above from the date of the order.
PVS Giridhar for Giridhar &Sai – Counsel for IL&FS
Revathi Manivannan – Counsel for Millennium Steel & Black Burn Fuels
Anand Natarajan – Counsel for Trimex Industries
Anirudh Krishnan – Counsel for ITPL
(We thank advocate PVS Giridhar for bringing this judgment to our attention and for providing us his notes. We are always thankful for his continuous support & encouragement in all our endeavour.)
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