Digitally signed

by GAURI
GAURI AMIT
GAEKWAD 1/47 IA-1161-2020.doc
AMIT Date:
GAEKWAD 2023.01.06
13:01:23
+0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION

INTERIM APPLICATION NO.1161 OF 2020

IN
FIRST APPEAL NO.1539 OF 2012
Rajendra Prasad Bansal )
Aged 65.5 years, Occupation : Nil )
Indian Inhabitant residing at Tower B5 – Flat )
801, Sea Breeze Towers, Sector 16, Nerul (W), )
Navi Mumbai – 400 706 ) ….Applicant
In the matter of :
Reliance Communication Limited )
A Company incorporated under the provisions )
of Companies Act, 1956 and having their )
Registered Office at “H” Black, 1st Floor, DAKC, )
Koparkhairane, Navi Mumbai – 400 710 ) ….Appellant
V/s.
Rajendra P. Bansal )
Aged 65.5 years, Occupation : Nil )
Indian Inhabitant residing at Tower B5 – Flat )
801, Sea Breeze Towers, Sector 16, Nerul (W), )
Navi Mumbai – 400 706 ) ….Respondent
----
Mr. Cyrus Bharucha a/w. Mr. Tushad Kakalia, Mr. D.J. Kakalia, Ms. Bhavna
Singh Jaipuria and Mr. Paresh Patkar i/b. Mulla and Mulla and CBC for
appellant.
Mr. Rajendra P. Bansal, respondent present in person.
Mr. Naushad Engineer, Amicus Curiae.
----
CORAM : K. R. SHRIRAM & KAMAL KHATA, JJ.
RESERVED ON : 14th DECEMBER 2022.
PRONOUNCED ON : 4th JANUARY 2023

JUDGMENT (PER K.R. SHRIRAM, J.) :

1 The preliminary issue that falls for consideration in the present

Interim Application is whether respondent can be allowed to withdraw the

monies deposited by appellant pursuant to this Court’s order dated

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10th December 2012 towards stay of execution of the impugned judgment

given that appellant is undergoing CIRP.

2 Appellant is a company incorporated under the provisions of

the Companies Act, 1956 and is, inter alia, engaged in the business of

telecommunication services. Appellant is undergoing Corporate Insolvency

Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code,

2016 (“IBC”) pursuant to the order dated 15th May 2018 passed by the

National Company Law Tribunal, Mumbai (“NCLT”) in C.P. No.(I.B.) 1387

(MB) of 2017. Appellant is being represented in the present proceedings

through its Resolution Professional.

3 Respondent in the abovementioned First Appeal, who is

applicant in the Interim Application, is a former employee of appellant.

4 LIST OF DATES AND EVENTS :

Sr. Date Particulars

No.
1. 29th November 2001 Respondent joined appellant as an employee
pursuant to an Appointment Letter dated
29th November 2001 issued by appellant.
2. 31st October 2006 Appellant unilaterally terminated respondent’s
employment.
3. 10th February 2010 Respondent filed Special Civil Suit No.
127/2010 (“Suit”) in the Court of Civil Judge,
Senior Division, Thane (“Trial Court”), inter
alia, challenging the termination of his
employment by appellant.
4. 28th April 2010 Appellant filed its written statement in the
Suit.
5. March 2011 Respondent and appellant filed their respective

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29th February 2012 affidavits in lieu of examination-in-chief in the

Suit.
6. 30th June 2012 The Trial Court passed a judgment (“Impugned
Judgment”) directing appellant to pay the
following sums of money to respondent:
a) Rs.4,82,112/- towards 3 months’ salary
along with interest @18% p.a. from 1st
November 2006 till the date of
realization.
b) Rs.9,24,006/- towards leave
encashment along with interest @18%
p.a. from 1st November 2006 till the
date of realization.
c) Rs.2,50,000/- towards damages within
3 months from the date of the decree.
7. 5th October 2012 Respondent filed the present appeal
challenging the impugned judgment.
8. 10th December 2012 This Court passed an order directing the stay
of execution of the impugned judgment subject
to appellant depositing the entire decretal
amount (payable as of 10 th
December 2012) with the Trial Court within a
period of four weeks from 10 th
December 2012.
9. 3rd January 2013 This Court passed an order recording
appellant’s statement that the entire decretal
amount had been deposited with the Trial
Court in terms of the order dated
10th December 2012.

Appellant had deposited a sum of

Rs.32,16,909/- with the Trial Court.
10. 18th February 2013 This Court passed an order admitting the First
Appeal.
11. 18th February 2013 This Court passed an order in Civil Application
No.405 of 2013 filed by respondent in the First
Appeal, inter alia, directing that:
a) Respondent was entitled to withdraw
Rs.5,00,000/- without furnishing any
security.
b) Respondent was allowed to withdraw
Rs.10,00,000/- on furnishing security to

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the satisfaction of the Executing Court.

c) The Executing Court was directed to
invest the remaining amount in a fixed
deposit scheme of any nationalised bank
with renewal clause.

NOTE: In terms of the order dated

18th February 2013, respondent has withdrawn
Rs.5,00,000/- without furnishing security and
Rs.10,00,000/- on furnishing security. The
balance sum of Rs.17,16,909/- continues to be
deposited with the Trial Court.
12. 4th January 2018 None appeared for appellant and matter listed
for dismissal.
13. 15th January 2018 Appeal dismissed as none appeared for
appellant.
14. 15th May 2018 The NCLT passed an order admitting appellant
into insolvency.
15. 18th May 2018 The NCLT appointed the Interim Resolution
Professional of appellant-Corporate Debtor.
16. 18th June 2018 Appeal restored. Appeal again dismissed.
17. 19th September 2018 Appellant’s Interim Application No.25147 of
2018 for condonation of delay allowed.
18. 13th January 2020 Respondent filed Interim Application No.1161
of 2020 in the First Appeal seeking, inter alia,
the following reliefs:
a) Release the sum of Rs.17,16,909/-
deposited by appellant in the Trial Court
and order appellant to pay the balance
amount due with applicable interest
immediately.
b) Discharge the surety for Rs.10,00,000/-.

This interim application is under consideration

now.
19. 27th September 2022 Appellant filed its affidavit in reply to Interim
Application No.1161 of 2020 filed by
respondent.
20. 4th October 2022 This Court passed an order in Interim
Application No.1161 of 2020, inter alia,
observing that “even assuming that the First

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Appeal fails on merits, so long as there is a

moratorium in place, the law does not permit a
court to allow Bansal to withdraw the amount
deposited pending the CIRP.”

5 When the Interim Application No.1161 of 2020 referred

to in item 18 of the chronology given above, i.e., this interim application,

came up for hearing, the counsel for appellant submitted that this Court

will not have jurisdiction to entertain and dispose the Interim Application

and the amount deposited by appellant in the Trial Court pursuant

to order dated 10th Deceased 2012 will be affected by the moratorium

granted under Section 14 of the IBC since appellant is undergoing CIRP

under IBC.

6 In order to answer this issue of jurisdiction raised by

Mr. Bharucha, the following questions arise for consideration :

(i) Whether this Court has the jurisdiction to entertain

and dispose of the Interim Application?

(ii) Whether the amount deposited by appellant in the

Trial Court pursuant to the order dated 10th December
2012 is affected by the moratorium under Section 14
of the IBC?

7 Since respondent was appearing in person, this Court

by an order dated 6th December 2022 appointed Mr. Naushad

Engineer, Advocate, as Amicus Curiae. We must express our appreciation

for the assistance rendered and endeavour put forth by Mr. Naushad

Engineer, learned Amicus Curiae, for it has been of immense value

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in rendering the judgment.

Submissions of Mr. Engineer, learned Amicus Curiae :

8 The learned Amicus Curiae submitted that this Court will have

jurisdiction to entertain and dispose the Interim Application. Mr. Engineer

submitted as under :

(a) NCLT is a statutory tribunal and, therefore, its powers are

circumscribed by the provisions of IBC. Unlike a Civil Court, the NCLT does

not have general jurisdiction under Section 9 of the Code. This has been

clarified by the Apex Court in Embassy Property Developments Pvt. Ltd. V/s.

State of Karnataka1;

(b) IBC does not confer any such statutory power upon NCLT to

adjudicate upon the First Appeal or the Interim Application in First Appeal;

(c) Section 60(5) of IBC cannot be stated to divests this Court

of its jurisdiction to dispose of the First Appeal and the Interim Application

because NCLT’s jurisdiction is only to entertain or dispose of any application

or proceeding by or against the corporate debtor or corporate person and

any claim made by or against the corporate debtor or corporate person,

including claims by or against any of its subsidiaries. The Apex Court in

Embassy Property (Supra) and Gujarat Urja Vikas Nigam Ltd. V/s. Amit

Gupta2, has construed this provision narrowly;

1. (2020) 13 SCC 308

2. (2021) 7 SCC 209

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(d) In Embassy Property (Supra), the Apex Court has held that

NCLT does not have general jurisdiction like that of a Civil Court and NCLT

cannot, under Section 60(5) of the IBC, exercise jurisdiction over any and

every issue concerning the corporate debtor. In Gujarat Urja (Supra), the

Apex Court held that NCLT can adjudicate upon only those disputes which

arise solely from the insolvency of the corporate debtor under Section 60(5).

Therefore, NCLT cannot exercise jurisdiction over every issue concerning the

corporate debtor simply because the corporate debtor is in insolvency.

Wherever the matter in question falls outside the purview of the IBC, it is

the forum which is otherwise vested with jurisdiction in law that is the right

forum to adjudicate upon the said matter;

(e) Appellant has not established anywhere that the First

Appeal and the Interim Application arise solely from the insolvency of the

corporate debtor. Since the First Appeal arises out of a challenge against the

impugned judgment passed by the Trial Court on the issue of termination of

respondent’s employment, it has nothing to do with the insolvency of the

corporate debtor. In so far as the Interim Application is concerned, it relates

to monies deposited as a condition for stay of execution of the impugned

judgment and, therefore, by no means can be stated to be arising solely

from the insolvency of the corporate debtor, particularly since the monies

were deposited much prior to the commencement of CIRP.

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Moreover, the impugned judgment was passed on 30 th June

2012, the First Appeal was filed on 5th October 2012, monies were deposited

by appellant pursuant to the order dated 10 th December 2012, much before

the insolvency commencement date of 15th May 2018. Therefore, cannot be

arising solely from the insolvency of appellant;

(f) Section 231 of the IBC also does not create a bar since that

applies only where the Adjudicating Authority, i.e., NCLT, has jurisdiction

over a given issue. Since NCLT does not have jurisdiction to adjudicate upon

the First Appeal or the Interim Application, Section 231 cannot bar the

jurisdiction of this Court;

(g) The moratorium under Section 14 of the IBC does not

prohibit the withdrawal of monies deposited by appellant in the Trial Court.

(i) The moratorium extends only to the assets which belong to

the corporate debtor and monies deposited by appellant in the Trial Court

do not constitute an asset of appellant.

(ii) The moratorium that is imposed under Section 14 applies

only to proceedings against the corporate debtor and if monies deposited in

Court does not belong to the corporate debtor, the moratorium would not

preclude a creditor from enforcing its rights against the monies and it is

clear from Section 14 of the IBC. Section 14(1) of IBC under sub-clause (a)

only prohibits the institution or continuation of suits or proceedings against

the corporate debtor and here is a First Appeal that has been filed by the

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corporate debtor. Hence, moratorium would not apply.

(iii) the monies deposited by appellant pursuant to a Court

order is a property that is under the custody and control of this Court.

Hence, NCLT cannot decide and determine how this Court should deal with

the property that is in its control and custody.

(iv) when First Appeal is being decided by this Court, Interim

Application can not be decided by NCLT. That also has to be decided by this

Court only in the First Appeal. The Interim Application seeking withdrawal

of monies pending the adjudication does not amount to execution as held by

this Court in Nahar Builders Limited V/s. Housing Development and

Infrastructure Ltd3.

Sub-clause (b) of Section 14(1) of IBC also is inapplicable

because it applies only to the assets belonging to the corporate debtor and

as held by the Calcutta High Court in Chowthmull Maganmull V/s. Calcutta

Wheat and Seeds Association4, Apex Court in P.S.L. Ramanathan Chettiar &

Ors. V/s. O.R.M.P.R.M. Ramanathan Chettiar5, Madras High Court in

Kamakshi Ammal V/s. Pappathi6, Apex Court in Roshanlal Kuthalia V/s. R.B.

Mohan Singh Oberoi7, Apex Court in Bank of India V/s. Vijay Transport &

Ors.8, this Court in Nahar Builders (Supra) and in Raj Shipping Agencies

V/s. Barge Madhwa9 and Apex Court in Chitra Sharma V/s. Union of India 10,
3. Unreported Judgment dated 21st January 2020 in Commercial Arbitration Petition No.74 of 2017
4. 1924 SCC OnLine Cal 335
5. (1968) 3 SCR: AIR 1968 SC 1049
6. 1975 SCC Online Mad 23
7. (1975) 4 SCC 628
8. (2000) 8 SCC 512
9. 2020 SCC Online Bom 651
10. (2018) 18 SCC 575

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the monies deposited by appellant in the Trial Court pursuant to the order

dated 10th December 2012 do not constitute the asset of appellant.

Sub-clause (c) of Section 14(1) of IBC also is inapplicable since

the present proceedings do not constitute enforcement or recovery of any

‘security interest’ created by the corporate debtor within the meaning of

Section 3(31) of IBC.

Sub-clause (d) of Section 14(1) of IBC would apply only in

instances where the property is occupied by the owner or in the possession

of the lessor. Since the monies deposited by appellant in the Trial Court are

not within the occupation or possession of the corporate debtor, this

provision also is inapplicable.

Therefore, the moratorium under Section 14(1) does not have

any bearing on the rights of respondent to withdraw the monies deposited

in Court. Hence, there is no bar in hearing the Interim Application and the

Court may on the merits of the application decide whether to allow

withdrawal of balance amount deposited and on what terms.

Submissions by Mr. Bharucha :

9 Mr. Bharucha, at the outset, submitted that the Interim

Application ought not to be considered as it is barred by the principles of res

judicata. This was because applicant had earlier made an application on

18th February 2013 in Civil Application No.405 of 2013 filed by respondent

in First Appeal, permitting respondent to withdraw Rs.5,00,000/- without

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furnishing any security and allowing respondent to withdraw a further sum

of Rs.10,00,000/- on furnishing security to the satisfaction of the Executing

Court and the Executing Court was directed to invest the remaining amount

in a fixed deposit scheme of any nationalised bank with renewal clause. In

other words, a similar application has been made earlier and disposed and,

therefore, the current application is hit by the principles of res judicata.

10 We could dispose this objection of Mr. Bharucha before going

into the other major issues. In our view, the said contention is wholly

misconceived and unsustainable, inter alia, for the following reasons :

(a) This Court vide order dated 18th February 2013 had allowed

the withdrawal of a part of the amount deposited. Thereafter, as can be seen

from paragraphs 5 to 15 of the Interim Application, there have been various

subsequent events that have taken place. Nearly a decade has passed since

the partial withdrawal was allowed. Respondent has submitted that he is

suffering from osteoarthritis in both his knees and it is difficult for him to

walk. The orthopaedic surgeons had advised him to go for knee replacement

surgeries in both his knees and hence respondent is in urgent need of

money.

(b) In addition, respondent in the First Appeal had filed Interim

Application No.1923 of 2017 for early hearing. The said application was

allowed on 25th July 2017. The First Appeal was listed on 4th January 2018

when none appeared for appellant and the matter was listed for dismissal.

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On 15th January 2018, the matter was again listed when none appeared for

appellant and the appeal came to be dismissed. Appellant filed an

application for restoration which was allowed vide order dated 18 th June

2018. However, appellant did not comply and the First Appeal again came

to be dismissed. Appellant again filed Interim Application No.25147 of 2018

for condonation of delay, which was allowed vide order dated

19th September 2018. Though the appeal was listed for final hearing, the

same could not be taken up due to the weight of the board. That being so, it

is clear that the delay has been caused by appellant.

(c) All this constitutes a change in facts and circumstances

which would warrant respondent/judgment creditor from applying again for

release of the amount deposited in this Court if this Court so pleases.

I. The amount deposited by appellant in the Trial Court pursuant to the

order dated 10th December 2012 is affected by the moratorium under
Section 14 of the IBC?

11 This Court, by its order dated 10th December 2012, granted a

stay of the impugned judgment on the condition that appellant deposit the

decretal amount in the Trial Court. Appellant duly deposited the decretal

amount. The amount deposited by appellant is thus, “ security” given by

appellant for the due performance of the impugned judgment, as

contemplated in Order 41 Rule 5(3)(c) of the Code of Civil Procedure, 1908

(“CPC”).

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12 The nature of a deposit made by a judgment debtor for the

purpose of obtaining a stay of a decree, particularly the question of whether

title in such a deposit passes to the decree holder, has been dealt with by the

Hon’ble Supreme Court in P.S.L. Ramanathan Chettiar (Supra), where the

Hon’ble Supreme Court held that the facts of a judgment-debtor’s depositing

a sum in Court to purchase peace by way of stay of execution of the decree

on terms that the decree holder can draw it out on furnishing security, does

not pass title to the money to the decree holder. He can, if he likes, take the

money out in terms of the order but so long as he does not do it, there is

nothing to prevent the judgment debtor from taking it out by furnishing

other security, say, of immovable property.

13 The judgment in P.S.L. Ramanathan Chettiar (Supra) thus

unequivocally holds that the title to money deposited by a decree holder in

Court to obtain stay of a decree does not pass to the decree holder. This

necessarily means that title to the money remains with the judgment debtor.

The effect of the deposit of the money in Court, the judgment in P.S.L.

Ramanathan Chettiar (Supra) says in paragraph 13 “The real effect of

deposit of money in court as was done in this case is to put the money

beyond the reach of the parties pending the disposal of the appeal. The

decree holder could only take it out on furnishing security which means that

the payment was not in satisfaction of the decree and the security could be

proceeded against by the judgment-debtor in case of his success in the

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appeal. Pending the determination of the same, it was beyond the reach of

the judgment debtor”.

14 In the premises, although the money deposited by a judgment

debtor in Court is placed beyond its reach, the title in the money remains

with the judgment debtor. In other words, the money continues to remain

the property of the judgment debtor. The principle that money deposited by

a decree holder effectively remains the property of the judgment debtor has

been affirmed by the Hon’ble Andhra Pradesh High Court in Kothamasu

Venkata Subbaya V/s. Udattha Pitchayya11.

15 Relying upon Keshavlal V/s. Chandulal12, the Court said “In my

opinion this is the correct way of regarding the deposit in the present case

also; it was primarily a deposit of security rather than a deposit of the

decretal debt, and the decree-holder cannot claim it as his own unless the

judgment-debtor fails to satisfy the decree by the payment of the money due

under the decree.” The Court held that all that the decree-holder could

claim was the sum found due under the decree with interest and that no

more could be given to him, while the profit must go to the person who had

made the deposit. The amount which had been deposited did not go

towards the satisfaction of the decree, and the decree-holder was entitled in

law to proceed against either of the judgment-debtors for the realisation of

the entire decretal amount. It follows that the appellant had not made out a

11. 1959 SCC OnLine AP 216

12. AIR 1935 Bom. 200

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case for restitution.

The Hon’ble Andhra Pradesh High Court in K.V. Subbayya

(Supra) has, therefore, held that even the dismissal of the judgment debtor’s

appeal does not, on its own, make the amount deposited by the judgment

debtor under Order 41 Rule 5(3)(c) the property of the decree holder. The

amount deposited is not towards satisfaction of the decretal debt. It is only

upon judgment debtor’s failure to satisfy the decretal debt that the decree

holder would be able to claim the deposited amount as his own. Implicit in

this is the principle that the amount deposited by the judgment debtor

remains the property of the judgment debtor while it is deposited in Court

and pending the appeal. Even after dismissal of the appeal against the

judgment debtor the deposit continues to remain the property of the

judgment debtor. The judgment debtor’s title in the deposit does not pass till

the Court makes an order to apply the same in satisfaction of the decretal

debt. The judgments cited by the learned Amicus Curiae do not detract from

the above principle at all. In fact, the said judgments will show Courts in

India have time and again, affirmed the principle that money deposited in

Court is merely placed beyond the reach of the judgment debtor pending the

appeal. The principle that the deposited money remains the property of the

judgment debtor pending the appeal, as laid down in P.S.L. Ramanathan

Chettiar (Supra), has not been disturbed.

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16 The judgment of the Hon’ble Madras High Court in Kamakshi

Ammal (Supra) is not at odds with the judgment of the Hon’ble Supreme

Court in P.S.L. Ramanathan Chettiar (Supra). A necessary implication of the

observation that the decree holder merely has a lien over the amount

deposited by the judgment debtor in Court is that the ownership of the

money remains with the decree holder. Moreover, the postponement of the

vesting of the decree holder’s right to the money to a point of time beyond

his success in the appeal, once again means that the deposit remains the

property of the judgment debtor pending such appeal. This is precisely what

the Hon’ble Supreme Court has held in P.S.L. Ramanathan Chettiar (Supra).

Only when a decree holder succeeds in the appeal does his right to the

amount deposited in Court relate back to the date of the deposit.

17 The judgment of the Hon’ble Supreme Court in Roshanlal

Kuthalia (Supra) is similarly consistent with the above principle, as it says

that a mere security deposit does not become an automatic satisfaction of

the decree when the appeal fails is simple enough. The judgment of the

Hon’ble Supreme Court in Roshanlal Kuthalia (Supra), therefore,

recognises : (i) the principle that the security furnished by the judgment

debtor does not automatically amount to satisfaction of the decree upon the

failure of the appeal; (ii) the principle that the title to money deposited in

Court changes only upon dismissal of the appeal in favour of the decree

holder as it is only then that such deposit may not be withdrawn or

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substituted by the depositor/judgment debtor; and (iii) the principle that

there exists equity in favour of the judgment debtor to the extent of the

amount deposited by such judgment debtor in Court. In other words, the

Hon’ble Supreme Court, in Roshanlal Kuthalia (Supra) recognised the fact

that the title in the money deposited in Court remains with the judgment

debtor. A careful perusal of Roshanlal Kuthalia (Supra) and the judgment in

Sheo Gholam Sahoo V/s. Rahut Hossein, ILR13 referred to therein makes it

clear that the Hon’ble Supreme Court’s observation that the Court holds

money deposited in trust for the decree holder applies only to a situation in

which the judgment debtor’s appeal has failed. The said observations cannot

be applied to the present case to conclude that the deposit made by

appellant does not belong to it pending the appeal.

18 There can be no quarrel with the proposition that money

deposited in Court by a judgment debtor is custodia legis to the credit of the

party who is ultimately successful, as has been held by the Hon’ble Supreme

Court in Bank of India (Supra). This does not, however, mean that the title

in the money so deposited would cease to exist in the judgment debtor upon

its deposit in Court, particularly when an appeal is pending. Even the

judgment of the Learned Single Judge of this Court in Nahar Builders

(Supra) relied upon by the learned Amicus Curiae recognises that neither

party can automatically claim a right to money deposited in Court without

an adjudication. In any event, it is most pertinent to note in the judgment of

13. (1906) 4 Cal 6

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this Court in Nahar Builders (Supra) :

(a) The award in Nahar Builders (Supra) had attained finality

and was not subject to the outcome of any pending challenge. This is a

position contrary to the facts as existing in the present case in that the

decree in the present case is the subject matter of challenge in a First Appeal

filed by appellant; and

(b) The judgment of the Learned Single Judge was carried in

appeal to a Division Bench of this Court. The appeal culminated in the

judgment in HDIL V/s. Nahar Builders14. Although the appeal was dismissed,

the Division Bench noted in paragraph 6 of its judgment “Learned Senior

counsel for the Respondent states that any amount received by the

Respondent has to be subject to orders which may be passed by the NCLT

and learned counsel for the appellant states that in that view of the matter,

the Appeal could be disposed of recording that the amount received by the

Respondent pursuant to the impugned order would be subject to such orders

which may be passed by the NCLT. In view of the stand taken by the learned

Senior counsel for the Respondent, it is obvious that the amount received by

the Respondent would be subject to orders which may be passed by the

NCLT.”

What the Division Bench effectively did was to permit

withdrawal of the amount deposited in Court by the award holder upon an

undertaking by the award holder that the amount would be subject to

14. Judgment dated 30th January 2020 in Comm. Appeal (L) No.32 of 2020

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orders of the NCLT. This completely militates against the principle that the

money deposited is the unfettered property of the award holder. It however

upholds the principle that the money remains the property of the corporate

debtor since otherwise, there would be no question of the money realised by

the award holder being subject to the order of the NCLT. The judgment of

the Learned Single Judge cannot be read de hors the judgment of the

Division Bench of this Court.

s

19 Lastly, the judgment of the Hon’ble Calcutta High Court in

Chowthmull (Supra), relied upon by the learned Amicus Curiae also does

not run contrary to the above submissions. In fact, the judgment of the

Hon’ble Supreme Court in P.S.L. Ramanathan Chettiar (Supra) expressly

says so in dealing with the judgment in Chowthmull (Supra) “The

observations in Chowthmull case do not help respondent. In that case, the

appeal was not proceeded with by the Official Assignee. Consequently, the

decree holder could not be deprived of the money which had been put into

court to obtain stay of execution of the decree as but for the order, the

decree holder could have levied execution and obtained satisfaction of the

decree even before disposal of the appeal”. The distinction drawn by the

Hon’ble Supreme Court applies with equal force to the facts of the present

appeal. Unlike in Chowthmull (Supra) the appeal in the present case is

pending and is being proceeded with. The impugned judgment has been

stayed. It is, therefore, not open to respondent to proceed with execution of

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the impugned judgment, whether against the amount deposited in Court or

otherwise.

What, therefore, emerges from the facts set out above is that

money deposited by a judgment debtor in Court under Order 41 Rule 5(3)

(c) of the CPC, remains the property of the judgment debtor (in this case,

appellant), although it may be placed beyond its reach pending the appeal.

20 Under Section 14(1)(a) of the IBC, inter alia, the institution of

suits or continuation of pending suits or proceedings against the corporate

debtor including execution of any judgment, decree or order in any court of

law, tribunal, arbitration panel or other authority from the insolvency

commencement date is prohibited.

21 Under Section 14(1)(a) of the IBC, the continuation of any and

all proceedings against a corporate debtor is prohibited. The mention of

execution proceedings in Section 14(1)(a) is inclusive in nature and does

not restrict the prohibition therein merely to such proceedings. In the

circumstances, the present Interim Application for withdrawal of the money

deposited in Court by appellant, and of which, appellant is even now the

owner, cannot be proceeded with in view of the express bar contained in

Section 14(1)(a). Section 14(1)(a) is a salutary provision to preserve the

insolvency estate of appellant. In the premises, the amount deposited by

appellant in the Trial Court pursuant to the order dated 10 th December 2012

is covered by the moratorium under Section 14 of the IBC.

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II. This Court does not have the jurisdiction to entertain and dispose the
Interim Application?

22 The IBC contains a jurisdictional bar in respect of any matter

which the NCLT is empowered thereunder, to entertain. This bar is

contained in Section 231, which provides :

231. No civil court shall have jurisdiction in respect of any

matter in which the Adjudicating Authority is empowered by, or
under, this Code to pass any order and no injunction shall be
granted by any court or other authority in respect of any action
taken or to be taken in pursuance of any order passed by such
Adjudicating Authority under this Code.

23 Section 60(5) of the IBC also provides for the matters which the

NCLT has the jurisdiction to entertain. Section 60(5) is provides :

60.(5) Notwithstanding anything to the contrary contained in

any other law for the time being in force, the National Company
Law Tribunal shall have jurisdiction to entertain or dispose of —
(a) any application or proceeding by or against the corporate
debtor or corporate person;
(b) any claim made by or against the corporate debtor or
corporate person, including claims by or against any of its
subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts,
arising out of or in relation to the insolvency resolution or
liquidation proceedings of the corporate debtor or corporate
person under this Code.

24 The present Interim Application is both : (i) an application/

proceeding against the corporate debtor, i.e., appellant; and (ii) a claim

made against the corporate debtor. The jurisdiction of this Court to entertain

the present Interim Application is, therefore, barred on a conjoint reading of

Sections 60(5) and 231 of the IBC. The judgments of the Hon’ble Supreme

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Court in Embassy Property (Supra) and Gujarat Urja (Supra), buttress the

above submission.

25 In Embassy Property (Supra), the Hon’ble Supreme Court, after

considering the scheme of the IBC and the provisions therein relating to

inter alia, the jurisdiction of the NCLT, held “ Therefore in light of the

statutory scheme as culled out from various provisions of the IBC, 2016 it is

clear that wherever the corporate debtor has to exercise a right that falls

outside the purview of the IBC, 2016 especially in the realm of public law,

they cannot, through the resolution professional, take a bypass and go

before the NCLT for the enforcement of such a right.”

26 The above principle has been reiterated and further clarified by

the Hon’ble Supreme Court in Gujarat Urja (Supra), where the Court held

“Therefore, we hold that the RP can approach the NCLT for adjudication of

disputes that are related to the insolvency resolution process. However, for

adjudication of disputes that arise dehors the insolvency of the Corporate

Debtor, the RP must approach the relevant competent authority. For

instance, if the dispute in the present matter related to the non-supply of

electricity, the RP would not have been entitled to invoke the jurisdiction of

the NCLT under the IBC. However, since the dispute in the present case has

arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT

is empowered to adjudicate this dispute under Section 60(5)(c) of the IBC.”

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27 The present Interim Application is an application against the

corporate debtor, viz., appellant in the present case. Section 60(5) of the

IBC confers power only upon the NCLT to hear such application. Section

60(5) is a non obstante provision and consequently overrides all other laws

for the time being in force. Section 231 of the IBC does not permit any civil

Court to hear or adjudicate that which the NCLT is empowered to hear or

adjudicate upon. The Hon’ble Supreme Court in Embassy Property (Supra)

has held that the resolution professional cannot by virtue of Section 60(5) of

the IBC avoid other fora if they have jurisdiction to hear the concerned

matter and go only to the NCLT. The Hon’ble Supreme Court in Gujarat Urja

(Supra) has, however, clarified that if the issue arises solely on the ground

of the insolvency of the corporate debtor, then it is the NCLT who would

adjudicate the same in light of Section 60(5) of the IBC. In cases arising

other than on the ground of insolvency of the corporate debtor, the same

must be agitated before the relevant fora having jurisdiction to adjudicate

such case. In the present case, the main issue is whether or not the

judgment creditor (respondent) is entitled to the money deposited by

appellant in Court pending the present appeal and pending its ongoing CIRP.

The main issue in the present case thus is an issue arising solely on the

ground of the insolvency of appellant. In light of the above and in light of

Section 60(5) read with Section 231 of the IBC, the NCLT is the appropriate

forum to adjudicate the above issue.

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28 Therefore, this Court does not have the jurisdiction to entertain

and dispose the Interim Application.

FINDINGS AND CONCLUSIONS :

We hereby proceed to answer two questions that has arisen for

our consideration.

WHETHER THIS COURT HAS JURISDICTION TO ENTERTAIN AND

DISPOSE THE INTERIM APPLICATION :

29 (a) The jurisdiction to adjudicate upon the issue of withdrawal

of the monies deposited in the Trial Court pursuant to the order dated

10th December 2012 lies with this Court and not with the NCLT.

(b) It is important to note, at the outset, that the NCLT is a

statutory Tribunal and, therefore, its powers are circumscribed by the

provisions of the statute which confers jurisdiction upon it. Unlike a civil

court, the NCLT does not have general jurisdiction under Section 9 of CPC.

This was clarified by the Hon’ble Supreme Court in Embassy Property

(Supra) where it held in paragraph 30 as follows:

“30. The NCLT is not even a civil court, which has jurisdiction by
virtue of Section 9 of the Code of Civil Procedure to try all suits of a
civil nature excepting suits, of which their cognizance is either
expressly or impliedly barred. Therefore NCLT can exercise only such
powers within the contours of jurisdiction as prescribed by the statute,
the law in respect of which, it is called upon to administer. Hence, let
us now see the jurisdiction and powers conferred upon NCLT.”

(emphasis supplied)

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(c) Therefore, the NCLT can exercise jurisdiction and adjudicate

upon the First Appeal or the Interim Application only if it is statutorily

empowered to do so. The IBC does not confer any such statutory power

upon the NCLT to sit in appeal over a judgment and decree of a Civil Court,

nor decide an interim application arising out of such civil appeal. This is a

power that is solely vested in a civil court under Section 96 of CPC.

Appellant has argued that Section 60(5) of the IBC divests this Court of its

jurisdiction to dispose the First Appeal and the Interim Application. This

would not be a correct reading of the provision. Section 60(5) reads as

follows :

“60.(5) Notwithstanding anything to the contrary contained in

any other law for the time being in force, the National Company
Law Tribunal shall have jurisdiction to entertain or dispose of—

(a) any application or proceeding by or against the corporate

debtor or corporate person;

(b) any claim made by or against the corporate debtor or

corporate person, including claims by or against any of its
subsidiaries situated in India; and

(c) any question of priorities or any question of law or facts,

arising out of or in relation to the insolvency resolution or
liquidation proceedings of the corporate debtor or corporate
person under this Code.”

(d) Although at first blush, the language of Section 60(5)

appears to be all encompassing and gives the impression that it would

include within its ambit virtually all matters concerning the corporate

debtor, the Hon’ble Supreme Court in Embassy Property (Supra) and

Gujarat Urja (Supra) has construed this provision narrowly.

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(e) In Embassy Property (Supra) after underscoring that the

NCLT does not have general jurisdiction like that of a Civil Court, the

Hon’ble Supreme Court held that under Section 60(5)(c) of the IBC, the

NCLT cannot exercise jurisdiction over any and every issue concerning the

corporate debtor. The Court held as follows :

“37. …The only provision which can probably throw light on

this question would be sub-section (5) of Section 60, as it speaks
about the jurisdiction of the NCLT. Clause (c) of sub-section (5)
of Section 60 is very broad in its sweep, in that it speaks about
any question of law or fact, arising out of or in relation to
insolvency resolution. But a decision taken by the Government
or a statutory authority in relation to a matter which is in the
realm of public law, cannot, by any stretch of imagination, be
brought within the fold of the phrase “arising out of or in
relation to the insolvency resolution” appearing in clause (c) of
sub-section (5). Let us take for instance a case where a
corporate debtor had suffered an order at the hands of the
Income Tax Appellate Tribunal, at the time of initiation of CIRP.
If Section 60(5)(c) of the IBC is interpreted to include all
questions of law or facts under the sky, an Interim Resolution
Professional/Resolution Professional will then claim a right to
challenge the order of the Income Tax Appellate Tribunal before
the NCLT, instead of moving a statutory appeal under Section
260-A of the Income Tax Act, 1961. Therefore the jurisdiction of
the NCLT delineated in Section 60(5) cannot be stretched so far
as to bring absurd results. [It will be a different matter, if
proceedings under statutes like Income Tax Act had attained
finality, fastening a liability upon the corporate debtor, since, in
such cases, the dues payable to the Government would come
within the meaning of the expression “operational debt” under
Section 5(21), making the Government an “operational
creditor” in terms of Section 5(20). The moment the dues to the
Government are crystallised and what remains is only payment,
the claim of the Government will have to be adjudicated and
paid only in a manner prescribed in the resolution plan as
approved by the adjudicating authority, namely, the NCLT.]

……

40. If NCLT has been conferred with jurisdiction to decide all

types of claims to property, of the corporate debtor, Section
18(1)(f)(vi) would not have made the task of the interim
resolution professional in taking control and custody of an asset
over which the corporate debtor has ownership rights, subject to
the determination of ownership by a court or other authority. In
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fact an asset owned by a third party, but which is in the

possession of the corporate debtor under contractual
arrangements, is specifically kept out of the definition of the
term “assets” under the Explanation to Section 18. This assumes
significance in view of the language used in Sections 18 and 25
in contrast to the language employed in Section 20. Section 18
speaks about the duties of the interim resolution professional
and Section 25 speaks about the duties of resolution
professional. These two provisions use the word “assets”, while
Section 20(1) uses the word “property” together with the word
“value”. Sections 18 and 25 do not use the expression
“property”. Another important aspect is that under Section
25(2)(b) of the IBC, 2016, the resolution professional is obliged
to represent and act on behalf of the corporate debtor with third
parties and exercise rights for the benefit of the corporate
debtor in judicial, quasi-judicial and arbitration proceedings.
Sections 25(1) and 25(2)(b) reads as follows…

This shows that wherever the corporate debtor has to exercise

rights in judicial, quasi-judicial proceedings, the resolution
professional cannot short-circuit the same and bring a claim
before NCLT taking advantage of Section 60(5).

41. Therefore in the light of the statutory scheme as culled out

from various provisions of the IBC, 2016 it is clear that
wherever the corporate debtor has to exercise a right that falls
outside the purview of the IBC, 2016 especially in the realm of
the public law, they cannot, through the resolution professional,
take a bypass and go before NCLT for the enforcement of such a
right.”

(emphasis supplied)

(f) In Gujarat Urja (Supra) the Hon’ble Supreme Court laid

down the test to ascertain the matters which can be adjudicated upon by the

NCLT under Section 60(5)(c) and held that only those disputes which arise

solely from the insolvency of the corporate debtor can be entertained by the

NCLT under this provision. The Court observed as follows:

“69. … Therefore, considering the text of Section 60(5)(c) and

the interpretation of similar provisions in other insolvency
related statutes, NCLT has jurisdiction to adjudicate disputes,
which arise solely from or which relate to the insolvency of the
corporate debtor. However, in doing so, we issue a note of
caution to NCLT and Nclat to ensure that they do not usurp the

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legitimate jurisdiction of other courts, tribunals and fora when

the dispute is one which does not arise solely from or relate to
the insolvency of the corporate debtor. The nexus with the
insolvency of the corporate debtor must exist.”

(emphasis supplied)

(g) Therefore, the position of law which emerges from the

decisions in Embassy Property (Supra) and Gujarat Urja (Supra) is that :

(i) The NCLT cannot exercise jurisdiction over every issue

concerning the corporate debtor simply because the corporate debtor is in

insolvency. It is only those issues which arise solely out of the insolvency of

the corporate debtor that can be adjudicated upon by the NCLT under

Section 60(5)(c) of the IBC.

(ii) The Interim Resolution Professional/Resolution Professional

cannot short-circuit its obligation under Section 25(2)(b) of the IBC of

representing the corporate debtor in judicial/quasi-judicial proceedings by

bringing all matters before the NCLT. Wherever the matter in question falls

outside the purview of the IBC, it is the forum which is otherwise vested

with jurisdiction in law that is the right forum to adjudicate upon the said

matter.

(h) It is therefore clear that in order for appellant to establish

that this Court is divested of its jurisdiction to entertain the First Appeal or

the Interim Application, it would have to be established that the First Appeal

and the Interim Application arise solely from the insolvency of the corporate

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debtor. Such is clearly not the case here, since the First Appeal arises out of

a challenge against the Impugned Judgment passed by the Trial Court on

the issue of termination of respondent’s employment. It has nothing to do

with the insolvency of the corporate debtor. The NCLT could never sit in

appeal over the judgment/decree of a Civil Court. Such a judgment/decree

can only be corrected in appeal and, therefore, the NCLT would not have

jurisdiction to hear and decide the First Appeal.

(i) Insofar the Interim Application is concerned, it concerns

monies deposited by appellant pursuant to an order passed by this Court in

the First Appeal as a condition for stay of execution of the Impugned

Judgment. By no means is the Interim Application arising solely from the

insolvency of the corporate debtor since the monies were deposited much

prior to the commencement of CIRP.

(j) Appellant has contended that the since the issue in the

Interim Application is whether the judgment creditor can withdraw the

money deposited by appellant in this Court pending the corporate

insolvency resolution process, the issue arises solely from the insolvency of

the corporate debtor and therefore, must be adjudicated by the NCLT under

Section 60(5). This submission is incorrect for the following reasons :

(i) The Impugned Judgment was passed on 30 June 2012. The

First Appeal was filed on 5 October 2012. The monies were deposited by

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appellant in this Court pursuant to the order dated 10 th December 2012.

This is much before the insolvency commencement date of 15 th May 2018.

Therefore, the deposit of monies by appellant and the consequent

withdrawal of monies by respondent is not arising solely from the

insolvency of appellant.

(ii) The pendency of corporate insolvency resolution process

may have a bearing on a whole host of matters pending before various

judicial/quasi-judicial fora, but that does not in any manner imply that the

issue before the judicial/quasi-judicial fora is one which arises solely from

the insolvency of the corporate debtor. It is one thing for the insolvency to

give rise to a cause of action (which would fall within the ambit of NCLT’s

jurisdiction under Section 60(5) as per Gujarat Urja), and it is another thing

to contend that all legal proceedings would have to be transferred to the

NCLT merely because one party is in CIRP/liquidation. This has expressly

been negatived in Embassy Property (Supra) and Gujarat Urja (Supra).

(k) Therefore, it is this Court which is the only appropriate

forum to exercise jurisdiction over the First Appeal and the Interim

Application, and not the NCLT.

(l) Appellant has also sought to rely upon Section 231 of the

IBC to contend that the jurisdiction of this Hon’ble Court is barred. Section

231 creates a bar on the jurisdiction of a civil court only where the

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Adjudicating Authority (i.e., NCLT in this case) has the jurisdiction over a

given issue. Since, as held above, the NCLT does not have jurisdiction to

adjudicate upon the First Appeal or the Interim Application, Section 231

cannot bar the jurisdiction of this Court.

THE MORATORIUM UNDER SECTION 14 OF THE IBC DOES NOT

PROHIBIT THE WITHDRAWAL OF MONIES DEPOSITED BY APPELLANT IN
THE TRIAL COURT

30 (a) The moratorium that has come into existence under Section

14 of the IBC as a result of appellant going into insolvency does not

preclude respondent from seeking withdrawal of the monies deposited

pursuant to the order dated 10th December 2012. This is because (A) the

moratorium extends only to the assets which belong to the corporate debtor

and (B) the monies deposited by appellant in the Trial Court do not

constitute an asset of appellant.

A. The scope of moratorium under Section 14 of the IBC

(b) The moratorium that is imposed under Section 14 applies

only to proceedings against the corporate debtor and only applies qua the

assets and properties of the corporate debtor. If monies deposited in court or

any other asset/property does not belong to the corporate debtor, the

moratorium would not preclude/prevent a creditor from enforcing its rights

against the monies/assets/properties. This is clear from a plain reading of

Section 14 of the IBC.

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(c) Sub-section (1) of Section 14 of the IBC reads as follows:

“14.(1) Subject to provisions of sub-sections (2) and (3), on the

insolvency commencement date, the Adjudicating Authority
shall by order declare moratorium for prohibiting all of the
following, namely: -

(a) the institution of suits or continuation of pending suits or

proceedings against the corporate debtor including execution of
any judgement, decree or order in any court of law, tribunal,
arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing off by the

corporate debtor any of its assets or any legal right or beneficial
interest therein;

(c) any action to foreclose, recover or enforce any security

interest created by the corporate debtor in respect of its
property including any action under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where

such property is occupied by or in the possession of the
corporate debtor….”

(d) A bare perusal of Section 14(1) makes it clear that sub-

clause (a) only prohibits the institution or continuation of suits or

proceedings against the corporate debtor. This clearly would not be

attracted in the present case as the present proceedings are an appeal filed

by the corporate debtor. That being so, the moratorium can never apply to

the present First Appeal since it is filed by the corporate debtor.

(e) As set out below, the monies that are deposited in court

pursuant to a court order are not the assets of the corporate debtor, but is

property that is under the custody and control of this Hon’ble Court

pursuant to the order dated 10th December 2012. In that view of the matter,

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it could hardly be contended that the NCLT is to decide the present Interim

Application and determine how this Court should deal with property that is

in its custody and control.

(f) Since the First Appeal is being decided by this Court, all

interlocutory applications would also have to be decided by this Court.

(g) The Interim Application seeking withdrawal of monies

pending the adjudication does not amount to execution as held by this Court

in Nahar Builders (Supra).

(h) Sub-clause (b) is also inapplicable because it applies only to

the assets belonging to the corporate debtor. As explained later, the monies

deposited by appellant in the Trial Court pursuant to the order dated

10th December 2012 do not constitute the asset of appellant.

(i) Sub-clause (c) on its own terms is inapplicable since the

present proceedings do not constitute enforcement or recovery of any

‘security interest’ created by the corporate debtor within the meaning of

Section 3(31) of the IBC.

(j) Sub-clause (d) applies in instances where the property is

occupied by the owner or in the possession of the lessor. The monies

deposited by appellant in the Trial Court are obviously not within the

occupation or possession of the corporate debtor.

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(k) Therefore, the moratorium under Section 14(1) does not

have any bearing on the rights of respondent to withdraw the monies

deposited in Court.

(l) In Embassy Property (Supra), in paragraph 45, the Hon’ble

Supreme Court has held that the purpose of Section 14 of IBC is to preserve

status quo and not to create a new right in favour of the corporate debtor.

Therefore, if it is found, as demonstrated below, that as on the date of the

commencement of CIRP, the monies deposited by appellant with the Trial

Court did not constitute a part of the assets/property of the corporate

debtor, allowing the withdrawal of the deposited sum does not contravene

Section 14 of the IBC.

B. The monies deposited in the Trial Court do not constitute the assets of
Appellant

(m) The sum of Rs.32,16,909/- which has been deposited by

appellant with the Trial Court as a condition for stay of the execution of the

Impugned Judgment does not constitute the asset of appellant.

(n) The position of law on the status of monies deposited in

court as a condition for stay of execution of a decree has been settled for

almost a century. The Hon’ble Calcutta High Court in Chowthmull (Supra)

was called upon to consider an almost identical issue. In that case, the

judgment debtor had filed an appeal challenging the decree passed against

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him. The judgment debtor deposited monies in court as a condition for stay

of the decree. During the pendency of the appeal, the judgment debtor was

declared as an insolvent. The Official Assignee of the judgment debtor

contended that the monies deposited in court by the judgment debtor

formed a part of the estate of the judgment debtor and therefore, ought to

be distributed amongst the creditors of the judgment debtor. The Court

negatived this submission and held that the monies deposited in Court did

not constitute a part of the estate of the judgment debtor, and that such

monies were of plaintiff subject to him succeeding in the suit. The Hon’ble

Court observed as follows:

“In my judgment the effect of the order was that the money was
paid into Court to give security to the plaintiffs that in the event
of their succeeding in the appeal they should obtain the fruits of
their success. See Bird v. Barstow [[1892] 1 Q.B. 94.] . It may be
put in other words, viz., that the amount paid into Court was
the money of the plaintiff respondents subject to their
succeeding in the appeal and thereby showing that the decree in
their favour by the learned Judge on the Original Side was
correct. The words which were used by Lord Justice James in
the case of Ex parte Banner, in re Keyworth [(1874) L.R. 9 Ch.
App. 379.] are applicable to this case. The learned Lord Justice
said that the effect of the order was that ‘the money which was
paid into Court belonged to the party who might be eventually
found entitled to the sum.’”

(emphasis supplied)

(o) Subsequently, the Hon’ble Supreme Court in P.S.L.

Ramanathan Chettiar (Supra) in paragraph 13, held that once the money

has been deposited in court as a condition for stay of execution of appeal, it

is put beyond the reach of the judgment-debtor. The Court held as follows:

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“13. The real effect of deposit of money in court as was done in

this case is to put the money beyond the reach of the parties
pending the disposal of the appeal. The decree-holder could
only take it out on furnishing security which means that the
payment was not in satisfaction of the decree and the security
could be proceeded against by the judgment-debtor in case of
his success in the appeal. Pending The determination of the
same, it was beyond the reach of the judgment-debtor.”

(emphasis supplied)

(p) The Hon’ble Madras High Court in Kamakshi Ammal

(Supra) has followed the decision of the Hon’ble Calcutta High Court in

Chowthmull (Supra) and in paragraph 3 and 7 has held that once monies

are deposited, the money does not belong to either the judgment debtor or

the decree holder but is custodia legis:

“3. In a case like this it is essential to view the subject on a

broader perspective, as any other approach to it may lead to
inequitable results. When the money was deposited by the
judgment-debtor as a condition precedent for the grant of stay
at the time when the second appeal was admitted, then such
money so deposited into court is in custodia legis and is no
longer under the control of either the judgment-debtor or the
decree-holder. Once the second appeal has been dismissed, the
money so deposited and which is in the custody and control of
the court automatically becomes the property of the decree-
holder and he has a vested right in him to withdraw the said
amount. The mere lapse on his part to take out a petition for
withdrawal of the amount soon after the dismissal of the second
appeal will not militate against him nor will it adversely affect
his vested right. When once the second appeal has been
dismissed and in consequence the decree for money, though for
arrears of rent, has been upheld by this court, then the money
deposited by the judgment-debtor loses its character as arrears
of rent. It is simply the country's coin, which the decree-holder
is entitled to as a result of the money decree obtained by him.
Such a vested right which enables him to withdraw the amount
in court deposit would not make that amount an ‘outstanding
rent’ payable by the cultivating tenant-judgment-debtor. The
relief granted under Section 3 of the Tamil Nadu Cultivating
Tenants Arrears of Rent (Relief) Act, 1972 (Act 21 of 1972), is
to the effect that all arrears of rent payable by a cultivating
tenant to the landlord and outstanding on the 30th June, 1971
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shall be deemed to be discharged, whether or not a decree or

order has been obtained therefor…. The question is whether
that portion of the amount which has been deposited by the
cultivating tenant into Court in legal proceedings pursuant to
the orders of court as stated above can any longer be impressed
with the badge of rent which can be said to be outstanding and
payable by the cultivating tenant. A metamorphosis has come in.
The cultivating tenant has paid money into court and this
money will find its level and way according to the decision in
the second appeal and once the second appeal filed by the
judgment-debtor has been dismissed, there is an automatic
vesting of a right to collect that money in court deposit in the
decree-holder and the said amount can no longer be
characterised as arrears of rent or rent which was outstanding
on the notified date.

…….

7. The ratio of the above decisions makes it clear that the

plaintiff decree-holder has a lien over the amount deposited in
court by the judgment-debtor and the Court holds the said
amount in trust for the person who might ultimately succeed in
the action. There is only a postponement of the right of the
plaintiff to receive the said amount which is necessitated
because of the pendency of the second appeal. As soon as the
second appeal is disposed of against the judgment-debtor eo
instanti the decree-holder is the person, who is entitled to the
said amount, as on the date when it was deposited it belonged
to him and there was only a postponement of the right to collect
the money because of the pendency of the civil proceeding.”

(emphasis supplied)

(q) The Hon’ble Supreme Court in Roshanlal Kuthalia (Supra)

in paragraphs 37 and 38 has quoted with approval the decision in

Chowthmull (Supra). The Court held as under:

“37. What are the principles vis-a-vis the problem here? That a
mere security deposit does not become an automatic satisfaction
of the decree when the appeal fails is simple enough. But when
the judgment-debtor has paid into court cash by way of security
conditioned by its being made available to discharge the decree
on disposal of the appeal and for reasons beyond the control or
conduct of the judgment-debtor the money is not forthcoming to
liquidate the liability can he be asked to pay over again?
In Chowthmull Manganmull v. Calcutta Wheat and Seeds

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Association [ILR (1930) 51 Cal 1010] , Sanderson, C. J.

observed (at p. 1013) :

‘In my judgment the effect of the order was that the money was
paid into court to give security to the plaintiffs that in the event
of their succeeding in the appeal they should obtain the fruits of
their success. See Bird v. Barstow [(1892) 1 QBD 94] . It may be
put in other words viz. that the amount paid into court was the
money of the plaintiff respondents subject to their succeeding in
the appeal and thereby showing that the decree in their favour
by the learned Judge on the original side was correct. The words
which were used by Lord Justice James in the case of Ex parte
Banner, in re Keyworth [(1874) 9 Ch 379 : 30 LT 620] are
applicable to this case. The learned Lord Justice said that the
effect of the order was that ‘the money which was paid into court
belonged to the party who might be eventually found entitled to
the sum’.’

38. The headnote in Sheo Gholam Sahoo v. Rahut Hossein [ILR

(1906) 4 Cal 6] reads :

‘When money or movable property has been deposited in court

on behalf of a judgment-debtor in lieu of security, for the
purpose of staying a sale in execution of a decree pending an
appeal against an order directing the sale, which is afterwards
confirmed on appeal, neither the depositor, nor the judgment-
debtor, can afterwards claim to have such deposit refunded or
restored to him, notwithstanding that the decree-holder has
omitted to draw it out of court for more than three years, and
that more than three years have elapsed since any proceedings
have been taken in execution of the decree, and that the decree
for that reason is now incapable of execution.

Semble.—When money or movable property is deposited in

court in such a case as the above, the court, upon confirmation
of the order for a sale, holds the deposit in trust for the decree-
holder, and is at liberty to realise it and pay the proceeds over to
him to the extent of his decree.’

The equity in favour of an obligor, who has deposited the

obligated sum into court pending proceedings in which he assails
his liability, is underscored by these rulings and the principle
cannot be different merely because the obligee who ordinarily
would have, without reference to the obligor, drawn the money
from court is unable to get it for extralegal reasons as here…”

(emphasis supplied)

(r) Thus, the Supreme Court in Roshanlal Kuthalia (Supra)

categorically affirmed the principle that a court holds money deposited

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before it in trust for the decree holder. In such a situation, the judgment

debtor, i.e., appellant herein, cannot claim any rights over the monies

deposited with the Court and such monies are left outside the scope of

assets of the judgment debtor under the IBC.

(s) Similarly, the Hon’ble Supreme Court in Bank of India

(Supra) in paragraph 37 has held that monies deposited in Court by way of

security and held by the Court is custodia legis to the credit of the party

which is ultimately successful.

(t) A very recent decision which is on identical facts is the

decision of this Hon’ble Court in Nahar Builders (Supra). In this case,

Housing Development and Infrastructure Limited (“HDIL”) had deposited a

sum of Rs. 8 crores in court pursuant to an order passed in a petition filed

under Section 9 of the Arbitration and Conciliation Act, 1996 (“1996 Act”).

HDIL suffered an award which attained finality. Nahar Builders Limited

(“Nahar”) sought to withdraw the sum of Rs. 8 crores. At the time of Nahar’s

request for withdrawal, HDIL had become insolvent. Therefore, HDIL took

the defence that in light of the moratorium under Section 14 of the IBC,

Nahar could not be allowed to withdraw any amount. This Hon’ble Court

rejected HDIL’s submission in the following terms:

“7. The opposition from HDIL is that since there is a moratorium

that has came in to play in view of the insolvency proceedings
under the Insolvency & Bankruptcy Code, 2016, the amount of
Rs. 8 crores deposited in this Court is ‘the property of HDIL’
within the meaning of Section 14 of the IBC. That submission
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does not commend itself. Once an amount is deposited in this

Court, it is placed beyond the reach of either party without
permission of the Court. It is, therefore, not ‘the property’ of
either party pending an adjudication as to entitlement by the
Court. Once the Arbitrator held that it was Nahar Builders that
was entitled to this amount, and that award became enforceable
as a decree of this court, then no question remained of the
amount being claimed by HDIL. In another manner of speaking,
from the time the deposit was made until the time withdrawal is
ordered, that amount is not the property of either party to the
dispute.

8. It is true that an execution against HDIL is presently stayed

but this is not an application for execution, nor is it, within the
meaning of Section 14(1)(d), an application for ‘the recovery of
any property by an owner or lessor where such property is
occupied by or is in the possession of corporate debtor’. To read
only the words ‘recovery of any property’ as Ms Patil does, but
not to read the rest of clause (d) is materially incorrect.

9. The provisions regarding a moratorium cannot possibly apply

to such cash deposits made in this Court. As Mr Dwarkadas for
Nahar Builders put it, money has no colour. Once it is deposited
in Court no party can automatically claim any right to it without
an adjudication by a Court. There is no dispute that there is an
unchallenged and unsatisfed award in favour of Nahar Builders
against HDIL. There is also no dispute that an amount of Rs. 8
crores is available with this Court.

10. There is no bar to this application for withdrawal. The

application for withdrawal cannot be conceivably be considered
a suit, proceeding or execution within the meaning of Section
14(1)(a).”

(emphasis supplied)

Therefore, the decision in Nahar Builders (Supra) emphatically

holds that the right of a decree-holder/award holder to withdraw monies

deposited in court prior to the commencement of CIRP is not affected by the

moratorium under Section 14 of the CIRP.

(u) It must be noted that the judgment of the learned Single

Judge in Nahar Builders (Supra) was challenged before the Hon’ble Division

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Bench of this Court. This Court, vide its Judgment dated 30th January 2020,

passed in HDIL V/s. Nahar Builders (Supra) did not interfere with the order

of the learned Single Judge and recorded that there was nothing shown in

the appeal which would militate against the legal principle set out in the

decision of the Learned Single Judge.

(v) A learned Single Judge of this Court has, in Raj Shipping

(Supra) held that when a ship is arrested, it becomes custodia legis and if it

is sold under the orders of the Court and the money is received by the

Court, the interest of the owner is limited to the extent of receiving the

balance of the sale proceeds after satisfaction of all claims. By drawing an

analogy, the principle can be applied even to the facts of the present case.

Once the decretal sum is deposited by the judgment debtor in court, it

ceases to be the property of the judgment debtor and is custodia legis. The

interest of the judgment debtor would only be to receive any balance after

the claims of the judgment creditor are satisfied.

(w) At this stage, it is important to deal with the decision of the

Hon’ble Supreme Court in Chitra Sharma (Supra). Mr. Bharucha for

appellant has relied upon paragraphs 48 and 48.1 of the said decision to

contend that the monies deposited with the Trial Court cannot be

withdrawn by respondent. This contention in our view, is based on an

erroneous reading of the decision in Chitra Sharma (Supra) for two

reasons :

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(a) In Chitra Sharma (Supra), the Hon’ble Supreme Court had

directed the deposit of a sum of Rs.2000 Crores (out of which Rs.750 Crores

were deposited) after the commencement of CIRP of the corporate debtor.

Therefore, as on the date of commencement of CIRP, the amount belonged

to the entity which had deposited the money. On the other hand, in the

present case, appellant was directed to deposit the decretal amount as far

back as on 10th December 2012, i.e., way prior to the commencement of

CIRP of appellant. Once the amount had been deposited in court, appellant

ceased to be entitled to/owner of the amount and, therefore, as on the date

of commencement of CIRP, the amount did not belong to appellant.

(b) The homebuyers who sought the pro-rata distribution of the

sum of Rs. 750 crores did not have any decree in their favour. Nor was there

any adjudication of their entitlement to this amount. Therefore, the Court

was not holding the amount in trust for the homebuyers. On the other hand,

in the present case, respondent has already obtained a decree in his favour

and the monies deposited by appellant are being held in trust by the Court

for the party that eventually succeeds in the appeal.

(x) Further, the observations of the Hon’ble Supreme Court in

paragraph 12 of P.S.L. Ramanathan Chettiar (Supra) also do not further

appellant’s case. This is for two reasons :

(a) The Court’s observation that deposit of money in court by a

judgment debtor does not pass title to the money to the decree holder was

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made in the background of the facts of Keshavlal (Supra) referred to by the

Court in paragraph 11. In that case, this Hon’ble Court had rejected the

decree-holder’s attempt to claim entitlement to the accretions on the money

deposited by the judgment-debtor in court. It is in this context that the

Hon’ble Supreme Court in P.S.L. Ramanathan Chettiar (Supra) held in

paragraph 12 that deposit of money in court does not transfer title to the

decree-holder.

(b) In the paragraph 12, although the Hon’ble Supreme Court

has held that the deposit of money in court by a judgment debtor does not

pass title to the money to the decree holder, it has also at the same time

emphasised (in paragraph 13) that the money deposited in court is beyond

the reach of the judgment debtor. There is no finding in the decision of the

Hon’ble Supreme Court that the judgment debtor continues to be the owner

of the money deposited in court.

(y) Appellant has also relied upon the decision of the Hon’ble

Andhra Pradesh High Court in K.V. Subbayya (Supra) to contend that the

decree holder, i.e., respondent herein does not automatically become the

owner of the money deposited in court as a condition for stay of execution

of the decree. Reliance on the judgment is inapposite for the following

reasons:

(a) The judgment related to a case where one judgment debtor

alleged collusion between the judgment creditor and another judgment

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debtor. The facts of the case were that despite the judgment creditor

succeeding in the appeal, the monies deposited were withdrawn by one of

the judgment debtors. Therefore, the other judgment debtor submitted that

it should be assumed that the claim of the judgment creditor had been

satisfied since the judgment creditor and the judgment debtor were

colluding. It is in this context that the Court observed the mere availability

of a certain sum for the satisfaction of a decree cannot be equated with the

actual satisfaction of a decree and that the amounts deposited were as

security and do not ipso facto become the property of the decree holder. The

said factual scenario is completely different and therefore, reliance on the

said judgment is misplaced.

(b) Even this judgment nowhere states that the monies

deposited in court continue to be the asset of the judgment debtor. Even

though the decree holder may not become the owner of the money

deposited in court till the time that the appeal is dismissed, this does not in

any manner imply that the money deposited by the judgment debtor

continues to vest in the judgment-debtor and forms a part of the assets of

the judgment debtor. As held above, the money deposited in court is put

beyond the reach of the judgment-debtor and it cannot form a part of the

assets/estate of the judgment debtor upon insolvency.

CONCLUSION

31 Therefore, from an overview of the judgments, what is apparent

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is that the Hon’ble Calcutta High Court in the case of Chowthmull

(Supra) which was approved by the Hon’ble Supreme Court in Roshanlal

Kuthalia (Supra) and the Hon’ble Bombay High Court in Nahar

Builders (Supra) have considered the same fact situation that

where the judgment debtor had deposited monies in court as a condition

for stay of execution of a decree and subsequently gone into insolvency/

CIRP, the courts have consistently held the money so deposited did

not remain the asset of the insolvent/corporate debtor and there was

no impediment in the judgment creditor seeking withdrawal of the same.

These judgments are squarely applicable to the facts of the present case.

32 The decision of the Hon’ble Supreme Court in P.S.L.

Ramanathan Chettiar (Supra) as also the decision of the Hon’ble

Andhra Pradesh High Court in K.V. Subbayya (Supra) also do not

further the case of appellant-judgment debtor. None of the judgments

lay down that the monies deposited continue to remain the asset of

the judgment debtor. The finding that the title in the money deposited

does not pass to the judgment creditor was made in the context that

any surplus amount/accretions on the amount deposited in excess of

the decretal sum would be paid back to the judgment debtor and it is

only in that context that the Hon’ble Courts have held on deposit of

monies the title did not pass to the judgment creditor. However, the

judgments have in categoric terms stipulated that once the monies are

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deposited in court, they are out of the reach of either party. That

being so, clearly the monies that were deposited by appellant herein

do not constitute the asset/property of the judgment debtor.

33 Therefore, what is clear from all the judgments that have

been cited for consideration is that once the monies have been deposited,

they cease to remain the asset of the judgment debtor. The monies

are custodia legis. They are placed beyond the reach of the parties. They

are held in trust by the Court. The monies are secured for the benefit of

the judgment creditor and “there is only a postpone of the right of the

plaintiff to receive the said amount which is necessitated because of the

pendency” of the First Appeal [Kamakshi Ammal (Supra)].

34 Considering what is set herein above, once appellant

had deposited the sum of Rs.32,16,909/- in the Trial Court pursuant

to this Court’s order dated 10th December 2012 as a condition for stay of

execution of the Impugned Judgment, the said amount ceased to

belong to/be in the control of appellant. Appellant was not entitled to/the

‘owner’ of the said amount as on the date of commencement of CIRP

(i.e., 15th May 2018). Once appellant ceased to be the entitled to/owner

of the said amount, the said amount is unaffected by the moratorium

which comes into effect under Section 14 of the IBC upon the

commencement of CIRP. Resultantly, there is no bar on this Court from

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allowing the withdrawal of the amount by respondent if this Court so deems

fit.

(KAMAL KHATA, J.) (K. R. SHRIRAM, J.)

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