5. AL QAHTANI PIPE COATING TERMINAL V. MINERAL SALES.pdf

Al-qahtani Pipe Coating Terminal V. Minerals Sales (p.) Limited
(Page 1 of 13) Printed For: KRISHNA K G 07-12-2021 On: 02:44:PM
High Court Of Judicature At Bombay
Company Application No. 827 Of 2006 And Company Petition No. 970 Of 1997
Judgment Date:
13-06-2008
Al-qahtani Pipe Coating Terminal ..Petitioner
Minerals Sales (p.) Limited ..Respondent
Bench:
{HONBLE JUSTICE S.C. DHARMADHIKARI, J. }
Citation:
[2008] 34 GSTR 89 (BOM) ; LQ/BomHC/2008/1185 ;
S.C. Dharmadhikari, J.
1. On 13-6-2008 an order was passed dismissing this Company Application. Here are the reasons for dismissing
the same:
The Company Application is instituted for the following relief:
(a) that this Hon'ble Court be pleased to order and direct the Official Liquidator to pay to the Applicants a sum
of USD 3.5 million (approximately Rs. 18,25,00,000) together with interest at the rate of 12 per cent per annum
or such other sum from 20-2-2003 or from such other date that this Hon'ble Court may deem fit as
compensation/damages for the wrongful and illegal removal, misappropriation and/or theft of the Plant and
Machinery belonging to the Applicants from the custody of the Official Liquidator at the factory site of Otoklin
Plant and Equipments Ltd. at 4, Kandla Free Trade Zone, Gandhidham, Kutch, Gujarat.
2. Thus, the prayer is that the Official Liquidator should pay the above sum with interest or such other sum
determined by this Court either from 20-2-2003 or from such other date as this Court deems fit and proper as
compensation/damages for the wrongful and illegal removal, misappropriation and/or theft of the plant and
machinery belonging to the applicants. The misappropriation/wrongful and illegal removal and/or theft is allegedly
from the custody of the Official Liquidator at the factory site more particularly set out in the above prayer. This
Company Application was instituted on 6-7-2006.
One Huzefa Abbas, Manager, Sales and Marketing of the applicant has filed an affidavit in support of this
application. He has contended that the applicants are in business of pipe coating. It is a company based in Saudi
Arabia and incorporated under the laws of that country.

3. The affidavit proceeds to state that the claim is lodged on the basis that the applicants had rented to Otoklin
Plant and Equipments Ltd., company in liquidation plant and machinery listed as Annexure "A" to the affidavit in
support. In the company petition filed by the original petitioner an order was passed by this Court appointing
Official Liquidator as Liquidator of the assets and properties of Otoklin on 4-5-1999. The order dated 4-5-1999 has
been confirmed by the Hon'ble Supreme Court on 15-3-2002. It is stated in the affidavit in support that in or
about 1992, Al-Qahtani and Otoklin formed a Consortium i.e., the 'Otoklin-Al-Qahtani Consortium' 'Consortium' for
the purpose of bidding for two projects of the Oil and Natural Gas Commission 'ONGC known as the ICP-HEERA
Project and the Second Bassein Hazira Trunk pipeline ('SBHT') Project. Al-Qahtani are world renowned Pipe
Coating contractors with a proven track record and a global presence. Al-Qahtani have executed contracts for pipe
coating for some of the larges Oil Producing Companies in the world, such as ARAMCO, Shell, etc., Otoklin had
represented that it wished to enter the field of pipe-coating used in the Oil and Gas sector in India, and it was
agreed between them to form the Consortium.
4. The Consortium put in bids and was selected for the purpose of Pipe Coating for both the said Projects. The
tender of the SBHT Project as awarded to the Consortium on 24-11-1993 and tender for the ICP-Heera Project
was awarded to the Consortium on 26-5-1994. ONGC entered into two separate contracts with the Consortium for
each of the said Projects, ie., Contract dated 15-12-1993 for the SBHT Project and Contract dated 7-7-1994 for
the ICP-Heera Project.
From time to time, Al-Qahtani and Otoklin executed Memorandum of Understanding recording the understanding
between themselves, which finally culminated in the Memorandum of Understanding dated 27-1-1994 'the First
MOU' for the SBHT Project. Thereafter, by a Memorandum of Understanding dated 18-7-1994 between the parties
'the Second MOU', the terms and conditions of the First MOU were modified to the extent set out in the Second
MOU. This was necessitated as by July 1994 the ICP-Heera Project had also been awarded to the Consortium. It
was agreed by the parties that rental charges would be paid for the said Plant and Machinery by Otoklin to Al-
Qahtani. Additionally, a royalty was also to be paid by Otoklin to Al-Qahtani along with certain other charges as
set out in the said January and July Memorandum of Understanding. It had also been agreed with ONGC that
certain sums would be paid to Al-Qahtani directly by ONGC.
5. Broadly, the understanding between Otoklin and Al-Qahtani was that Al-Qahtani would provide to the
Consortium, on a rental basis, the plant and machinery for execution of the contracts with ONGC. This plant and
machinery consisted of a Coat and Wrap Plant, and a Concrete Coating Plant, with related equipment and
accessories. Other consumable items were also supplied by Al-Qahtani for and at the consideration more
particularly set out therein. Al-Qahtani's plant and machinery were to be returned to them on completion of the
Contracts, within the stipulated time.
6. On or about January 1994, Al-Qahtani shipped the said plant and machinery to India in accordance with the
terms of the First MOU. The plant and machinery was the same for both the SBHT and ICP-Heera Projects, and
it was installed at Otoklin's premises situate at Post Box No. 3, Sector VI, Kandla Special Free Trade Zone,
Kandla near Gandhidham, Gujarat ('the Factory Premises').
7. Subsequently, the SBHT Project and ICP-Heera Project were completed. As Al-Qahtani had not received the
royalty or the rental amounts and the other dues payable by Otoklin under the First and Second MOU,
correspondence was also exchanged between Al-Qahtani and Otoklin in this behalf. The Consortium also had
claims against the ONGC which were referred to arbitration and an Award was passed partially granting the
claims of the Consortium. Proceedings for setting aside the Award were taken out by ONGC in this Hon'ble Court
which were dismissed, and the matter is now pending in the Hon'ble Supreme Court of India. Al-Qahtani has also
filed their appearance separately in the Supreme Court proceedings. Al-Qahtani craved leave to produce the
correspondence exchanged and the proceedings referred to, if required.
8. It is further stated in the affidavit that by a letter dated 2-7-2002, the applicants informed Otoklin Plant and
Equipments Ltd. that termination formalities pursuant to the MOU need to be worked upon. Some meetings were
suggested. The applicants informed that they had appointed Gandhi and Associates, Chartered Engineers to visit

the site at fact or premises to inspect the plant and machinery. There was no reply to this letter. Subsequently,
the site visit was delayed and in fact the case of the applicants is that it took place on 29/30-9-2002. At that
time the applicants for the first time learnt that the company had been ordered to be wound up and Official
Liquidator had been appointed to take charge of the assets. The Official Liquidator had also taken charge of the
entire site including the plant and machinery belonging to the applicant. A report was made by the Chartered
Engineer on these lines. It is in such circumstances that the applicants preferred a Company Application and
prayed that this Court should pass appropriate orders and directions directing the Official Liquidator to return to
the applicants the plant and machinery belonging to the applicants and more particularly set out in Schedule I to
the Company Application on such terms as this Court deems proper. On this Company Application which was
numbered as Company Application No. 865 of 2002, the following order and directions were passed:
Leave under Rule 19(3) of the Company Court Rules, 1959 granted to the applicants to take out a Judge's
Summons in terms of draft Judge's Summons handed in. The Judge's Summons made returnable forthwith.
(2) The applicants have prayed for as under:
(a) That this Hon'ble Court be pleased to pass appropriate orders and directions directing the Official Liquidator,
High Court, Bombay to return to the applicants the plant and machinery belonging to the applicants and
particularised in Schedule I hereto on such terms as this Hon'ble Court deems proper.
(3) In support of the application - the applicants have filed affidavit. The applicants want the plant and machinery
in Schedule I back. According to them, they are the owners of the said plant and machinery described in the
schedule and that they had leased the said plant and machinery to the company in liquidation before the same
went into liquidation. At present the plant and machinery are in the custody of the Liquidator.
(4) The Liquidator shall allow the applicants or their authorised representatives to take inspection of the plant
and machinery at site at their own cost. The applicants shall take with them an officer of the Liquidator at their
own cost. Such inspection shall be completed within a period of three weeks from today. Thereafter, the
applicants shall satisfy Liquidator in respect of the ownership of the said plant and machinery claimed by the
applicants. The Liquidator shall pass appropriate orders within two weeks thereafter.
S.O. five weeks.
The order is reproduced by me since strong reliance has been placed upon the same.
9. Pursuant to this order and a letter dated 17-11-2002 addressed to the then advocates of the applicants, the
Official Liquidator fixed an appointment at the factory premises on 20-11-2002 for verification and identification of
the plant and machinery. The details of the verification and identification are set out in para 7 of the affidavit in
support of the present company in liquidation.
10. Thereafter, it is contended that Official Liquidator held meeting after notice to the creditors of the company
in liquidation at which the applicants duly satisfied him of the ownership of the plant and machinery. No claim
was made by any creditor or any other party in respect of the said plant and machinery. In these circumstances,
the Official Liquidator presented a report to this Court dated 5-2-2003, inter alia, seeking directions with regard
to giving delivery of these equipments to the applicants. An order was passed on this report on 20-2-2003 copy of
which is annexed as Annexure I to the affidavit in support to the present Company Application. Since strong
reliance is placed upon this order also, it is reproduced herein below:
Company Application No. 32 of 2003 has been taken out for directions to the liquidator to return to the applicant
the plant and machinery belonging to the applicant. Perusal of the report of the liquidator and documents
accompanying the same shows that the plant and machinery has been inspected together with all the documents
produced by the Applicant and the liquidator has been satisfied about the ownership of the machinery as per the
list of the Applicant. It was found that except one hoper, which was not found, plant and machinery were found

as per the manifest produced by the Applicant.
In this view of the matter, therefore, as the ownership of the Applicant of the plant and machinery, details of
which are in Schedule "1" to the plaint is now established. The Company Application No. 32 of 2003 is granted
in terms of prayer Clause (a).
Dismantle, removal and transportation of the machineries shall be at the costs of the Applicant, The Official
Liquidator shall give certified copies of the documents relating to the machineries that may be found by the
Liquidator in the record of the Company. The Applicant shall also deposit with the liquidator an amount of Rs.
10,000 towards security charges. The liability of the Applicant to pay the security charges, however, shall be
finally determined after the liquidator puts in a report for recovery of security charges from various persons
including creditors. Company Application No. 32 of 2003 is disposed of.
11. This order is passed on 20-2-2003 and in pursuance thereto the applicants wrote a letter on 10-11-2003
informing the Official Liquidator that they propose to attend the factory premises for dismantling and removing
their plant and machinery. They intimated that this process will take approximately 30 days. The Official
Liquidator by his letter dated 18-11-2003 purported to claim amount of Rs. 5,84,546 by way of security charges
so as to enable his office to take further steps. Thus, the Official Liquidator is accused of delaying the
commencement of dismantling and handing over process.
It appears that there was some dispute with regard to payment of these charges and ultimately, the Liquidator
determined 15-12-2003 onwards as the date on which the process would be undertaken.
12. In para 15 of the affidavit in support of the present Company Application this is what is stated:
15. Al-Qahtani's representatives including two U.S. based Experts accompanied the Official Liquidator's
representative to the factory site at Kandla for dismantling and removal of their plant and machinery
particularized in Exhibit 'A' hereto. On reaching the site, Al-Qahtani's representatives were shocked to discover
that more than 70 per cent of Al-Qahtani's plant and machinery was not available and had literally disappeared
from the factory site. Even the remaining part of the plant and machinery was rendered unusable and otherwise
damaged/stripped. Al-Qahtani's plant and machinery of U.S. original/make were installed at the factory site (most
of it embedded in the earth) in factory shed/s over an area of 10,000 sq.mts. (approximately) with Conveyor Belts
of lengths admeasuring 400 ft. The said plant and machinery weigh 400 tonnes (approximately) requiring fork lifts
and cranes of 30 tonnes at the minimal to remove the same. Even on dismantlement of the plant, the said plant
and machinery would require at least 40 trucks (approximately) including special sized trucks to load and remove
the same from the Factory premises. Al-Qahtani has had photographs taken of the said plant and machinery,
when the same was verified, identified, listed, etc., in November 2002. The situation at the factory premises on
15/16-12-2003 have also been photographed, which would show that the huge plant and machinery of Al-Qahtani
have been literally taken away from the custody of the Official Liquidator. Al-Qahtani craves leave to refer to both
these sets of photographs when produced. The Official Liquidator's representative has made two Site Reports, one
dated 15-12-2003 and the other dated 16-12-2003 duly tabulating the limited available plant and machinery of Al-
Qahtani (constituting less than 30 per cent of the total plant and machinery). The said Reports allege that Al-
Qahtani's plant and machinery has been dismantled and removed sometime between 1-7-2003 to 9-8-2003 and
purportedly that was done, in the presence of representatives of the Official Liquidator, by persons deputed by
Centurion Bank. Copy of the Factory Site Reports of the Official Liquidator's representatives' site visits on
15/16-12-2003 dated 15-12-2003 and 16-12-2003.
13. Therefore, the matter was taken up by the applicant with the Official Liquidator at a meeting held by him on
17-12-2003. They requested him to take immediate steps so as to retrieve the plant and machinery. He addressed
two letters one dated 18-12-2003 to the security agency for filing of compliant and another dated 19-12-2003 to
Centurion Bank demanding the name and address of the person who dismantled the plant and machinery in the
factory premises.

The applicants called upon the Official Liquidator by their letter to retrieve the plant and machinery with police
assistance and if Centurion Bank had removed it, then, appropriate steps may be taken to return their properties
without further loss of time. They requested the Official Liquidator to appraise them of the steps taken by him
and to submit the report to this Court seeking further directions in these extraordinary circumstances.
14. The Official Liquidator addressed a letter to the inspector of police, Kandla Police Station in the State of
Gujarat requesting them to investigate into the matter and retrieve the plant and machinery and equipments. It is
alleged that all these matters are an afterthought and covering up of the actions and conduct of the Official
Liquidator The applicants brought certain relevant facts on record by their further letter dated 23-12-2003. It
appears that the applicants became aware of the fact that the plant and machinery had been disposed of by the
third parties and that is how they took up the matter with the Liquidator. The Liquidator addressed a letter to
the Gandhidham Police Station and annexed statementoof one Mr. Shetty who was the representative of the
Official Liquidator.
15. The Official Liquidator requested the police to make immediate investigation. The dismantling agent was one
R.K. Steel Syndicate. It appears that the allegation is that the Official Liquidator has wrongfully permitted the
third parties to remove the plant and machinery belonging to the applicant. This act is illegal. It is alleged that
the third parties took 5 to 6 weeks for removal of machinery by cranes and trucks etc. All this has been done
surreptitiously and with full knowledge, connivance and collision of the Official Liquidator. It is alleged that the
plant and machinery removed bore the stamp, name and serial number of the applicant on it and in spite the
same was wrongfully and illegally permitted to be removed. It appears that the inspection/valuation report was
called for by the Official Liquidator and even that came to be forwarded to Centurion Bank and police authorities.
16. The Official Liquidator filed his report dated 2-1-2004 and sought directions from this Court. That report came
to be disposed of by this Court on 21-6-2004. The applicant places reliance upon this order and I will make a
due reference to the same at an appropriate stage.
The plant and machinery which was dismantled had already been sold as scrap to Deepak Steel and Pankaj
Traders of Rajkot and in the light of this Centurion Bank was asked to give details on affidavit. It appears that
several affidavits have been filed pursuant to the directions of this Court and reference to that has been made by
Mr. Justice A.M. Khanwilkar in his order. It is alleged that the affidavits disclosed that the entire plant and
machinery has been removed and misappropriated in complete collision, connivance and conspiracy of the Official
Liquidator. An inventory has also been directed by this Court and all these materials have been referred to in the
said order.
17. It appears that pursuant to the order and directions therein, the police authorities in Gandhidham have
registered an FIR. The said fact is mentioned by the Official Liquidator in his report dated 22-4-2004. Pursuant to
this report an order was passed on 28-4-2005 by this Court recording that special Inspector of Gandhidham Police
Station has taken no steps or action on the complaint filed by the Official Liquidator and therefore, the said
Deputy Commissioner was directed to investigate into the matter and file necessary report within four weeks.
Even the inquiry was ordered into the conduct of the employees of the Official Liquidator's office. In addition,
Registar General of this Court was directed to conduct inquiry against employees of office of Court Receiver and
submit compliance report.
18. The applicants then placed reliance upon a valuation report prepared by one J.B. Goda Surveyors Pvt. Ltd.
Copy of this valuation report is annexed to the Company Application in support (Exhibit BB). In para 33 of the
affidavit in support, once again the applicants referred to the investigations and request that the police authorities
be directed to conduct an immediate investigation against those responsible at the earliest. Further, the request is
that compensation be paid as computed in prayer (a) on the basis that the valuable plant and machinery has
been removed illegally, misappropriated and/or stolen. Moreover, the sale proceeds arising therefrom have been
illegally misappropriated by third parties in collision with and connivance with the office of Official Liquidator.
This is the grievance which has been projected and highlighted.

19. The Company Application was served on the Official Liquidator and the Official Liquidator has in his affidavit
in reply contended thus:
(3) At the further outset, I say and submit that the Application as taken out by the applicants is misconceived
and devoid of merits and not in compliance with the order dated 21 -6-2004 and therefore, is liable to be
rejected with costs.
(4) It is submitted that complicated question of facts are raised by and between the parties which will have to be
decided and examined by competent court after leading evidence of various parties involved. Thus, it is submitted
that this Hon'ble Court in summary proceedings in the form and nature of an application taken out cannot arrive
at a complete and proper conclusion of the issues involved in the matter. By order dated 21-6-2004 this Hon'ble
Court has held that the proper course would be to examine various issues inter alia, ownership with regard to
items which are now missing as there is dispute regarding ownership of the goods as well as it is not possible to
quantify the value of the lost goods and that all these aspects can be and will have to be examined in a
substantive proceedings to be taken out by the applicants. It is thus submitted that the application as taken out
is not in compliance with the order dated 21-6-2004 and thus, the application be rejected with costs.
(5) The application also suffers from the vice of non-joinder of necessary party and unless and until Centurion
Bank of Punjab Ltd. and their agents viz, R.K. Steel Syndicate, officers of the Court Receiver, officers of the
Customs Authorities, Valuers, Crack Detective Network Pvt. Ltd., Security Agency of Vashi and others are joined
as parties to these proceedings, the application as filed is liable to be rejected with costs.
(6) It is further submitted that the applicants have alleged collusion, misappropriation and/or theft against the
respondent. It is pertinent to note that the then Official Liquidator was discharging his duty in his official
capacity and in good faith and under orders passed by this Hon'ble Court and thus cannot be made liable under
the Act. Without prejudice to the above, ii is submitted that the cause of action if any, is against all the officers
concerned at the relevant time viz., that of the officer of the Court Receiver, Customs Authority and also all other
concerned. As the applicants have failed to specify and seek appropriate reliefs against the concerned officers, the
application as filed be rejected with costs.
20. The sum and substance of the objection of the Official Liquidator is that the applicant as well as Centurion
Bank of Punjab Ltd. are claiming to be the owners of the missing items. There is a dispute regarding ownership
of goods which are allegedly missing. Therefore, evidence will have to be led for arriving at the conclusion as to
who is the owner of the goods. Thus, only after ownership of the goods is determined, an application can be
made to quantify the loss of the concerned party. It is also alleged that the applicants have not furnished proof
of the machineries imported by them. The Official Liquidator has denied that valuation of the assets was not done
at the time of taking inventory and that is how no reliance can be placed upon a valuation of August 2005. The
valuation certificate is disputed and there is no basis for the claim as made. Therefore, even with regard to
valuation, further investigation will have to be made which is not possible in these proceedings. Reliance is also
placed upon the report submitted by the Gandhidham police and the order passed pursuant thereto by the Judicial
Magistrate, First Class, Gandhidham Court on 26-7-2005. Since further investigation has been ordered, extension
was sought by the police authorities for the sale of complete investigation. Now, it appears that chargesheet has
been filed.
21. A rejoinder affidavit has been filed by the applicants and it is urged that it will not be open for the
liquidator to take the stand that this Court has no jurisdiction to deal with issues raised in the Company
Application. The allegations against the Official Liquidator and his officers/employees have been reiterated. It is
stated that the respondent No. 1 Official Liquidator alone is responsible and liable for the harm and loss and the
injuries suffered.
22. The applicants urged that it is not disputed that the plant and machinery belonging to them were lying at
the factory premises till 1-7-2003. They have referred to the proceedings instituted by Centurion Bank of Punjab
Ltd. They have also referred to the appointment of Court Receiver therein. It is their case that the Court

Receiver was directed by this Court to take possession of the equipments purportedly leased by the Centurion
Bank to the company in liquidation under the supervision of the Official Liquidator Para 4 of the rejoinder
affidavit makes reference to all these facts. The applicants are aware of the order dated 10-4-2003 in the suit
filed by the Centurion Bank. Yet, they reiterate the contents of the affidavit in support.
23. On this Company Application orders have been passed permitting impleadment of the following parties:
(2) The Court Receiver, High Court, Bombay, having its office at Bank of India Building, 2nd Floor, M.G. Road,
Mumbai 400 023.
(3) The Centurion Bank of Punjab, having its registered office at Shanta Durga Niwas, M.G. Road, Panaji, Goa
403 001 and its Branch office at 207, Centre Point, Dr. Ambedkar Road, Parel, Bharat Mata Cinema, Mumbai 400
012.
(4) R.K. Steel Syndicate, Shop Nos. 2-3, Chunawala Plot, Opp. Kurla Bus Depot, Kurla (W), Mumbai 400 078.
(5) Crack Detective Network Ltd., 2, Welfare Chamber, 1st Floor, Sector 17, Vashi, Navi Mumbai 400 703.
(6) Dy. Commissioner of Customs Office of the Development Commissioner, Kandla Special Economic Zone,
Ministry of Commerce & Industry, Gandhidham, Kutch 370 230.
24. Therefore, some of them have filed their affidavits in reply. One Mahesh Murty, Deputy Manager of Centurion
Bank has in the affidavit while placing reliance upon the order passed on 21-6-2004 by this Court has also denied
that the applicants entire plant and equipment have been removed and misappropriated during the period
1-7-2003 to 9-8-2003. The deponent has specifically contended that no order be passed against the Centurion
Bank of payment of compensation for the alleged illegal acts as it is in no way responsible for the same. Even
the security agency has filed an affidavit. The final affidavit dealing with the above allegations has been filed by
the applicants in this Court on 19-3-2008. The applicants deal with the affidavit of Centurion Bank and placed
their own interpretation on para 12 of order dated 21-6-2004 passed by this Court in the earlier Company
Application. They urged that their title to the machineries has been established beyond doubt.
25. It is not necessary to make a detailed reference to the case of the applicants qua Centurion Bank of Punjab
Ltd. inasmuch as Mr. Diwan, learned senior Counsel appearing for the applicants contended that the claim in the
present application is against the Official Liquidator and the applicants are not seeking any relief in these
proceedings against Centurion Bank or other parties. He submits that the applicants grievance is against the
Official Liquidator and once the title to the goods had been held to be proved by this Court and when the goods
were admittedly in the custody of the Official Liquidator then, Official Liquidator is bound and liable to make
good the loss sustained by their wrongful and illegal removal.
26. Therefore, the Official Liquidator be directed accordingly. He submits that if at all the Official Liquidator
wants to dispute the valuation of the articles in question, then, this Court should issue appropriate directions in
that regard. In other words, the dispute about valuation could be referred to an Independent authority/person and
he should decide the quantum and make a recommendation/report to this Court. Thus, computation of the losses
suffered is something which can be segregated at this stage. The Official Liquidator must be directed to pay to
the applicants damages/compensation or else there will be total miscarriage of justice. He submits that the issue
is extremely serious. There is removal of goods from the custody of the Official Liquidator. Once the goods are
"custodia legis", then, it is the duty of this Court to issue appropriate directions to the Official Liquidator or else
there will be no sanctity to the orders and directions of this Court. People will violate and breach them with
impunity and yet there will be no accountability. In such circumstances, this Court should take cognizance of the
request of the applicants and issue appropriate directions.
27. Mr. Diwan then submits that the objections raised by the Official Liquidator have no merit. It is only by way
of abundant caution the applicants filed subsequent application for impleading respondent Nos. 2 to 6 as party

respondents. An order in that behalf was made on 30-4-2007 permitting amendment to the present application for
adding parties. However, that does not mean that the issue of ownership can be reopened. That objection must
be therefore overruled straightway.
28. That apart, Mr. Diwan has contended that the contention that the present application is not maintainable is
manifestly fallacious and contrary to the provisions of the Companies Act, 1956 ('Act'). The respondent No. 1 is
an officer of the Court. The said plant and machinery were under the custody of respondent No. 1 pursuant to
the directions of this Hon'ble Court. Admittedly, this Hon'ble Court had, by its order dated 20-2-2003, directed
the respondent No. 1 to permit the applicants to remove the said plant and machinery from the factory premises.
Admittedly, more than 70 per cent of the said plant and machinery has been unlawfully removed from the factory
site while in the custody of respondent No. 1. The respondent No. 1 has till date failed to comply with the said
order dated 20-2-2003. In the circumstances, this Hon'ble Court has jurisdiction under the provisions of the Act to
direct the respondent No. 1 to make good the loss caused to the applicants by its gross negligence and
dereliction of statutory duty. The applicant then pointed out the relevant provisions of the Act on which it relies
upon in support of the maintainability of the present application.
29. Mr. Diwan has placed heavy reliance upon Sections 443 and 446 of the Companies Act and then contended
that once this Court has directed the Official Liquidator to permit the applicants to remove their plant and
machinery, then, as a logical corollary, the present application is maintainable and this Court is competent to
issue directions. Mr. Diwan has placed reliance upon Sections 456, 457, 460 and 543 of the Companies Act.
Further, Mr. Diwan had relied upon the inherent powers of this Court. He submits that the officer of the Court is
akin to a trustee. The applicants are creditors of the company in liquidation. Therefore, whether inherent powers
or otherwise, the request could be made and taken note of.
30. In the instant case, the said plant and machinery admittedly belonged to the applicants. Admittedly,
respondent No. 1 was in possession thereof pursuant to the orders of this Court. Admittedly, the said plant and
machinery is missing from the custody of the respondent No. 1 and cannot be returned to the applicants despite
the said order dated 20-2-2003. The applicants have been unable to put the said plant and machinery to any use
because of the gross negligence and dereliction of duty on the part of the applicants. Thus, the applicants are
entitled for compensation even on the principle of restitution as stated in the ONGC case hereinabove. In the
circumstances, it is submitted by Mr. Diwan that the present application is maintainable even on the principle of
restitution.
31. With respect to the contention of the respondent No. 1 that the present application is contrary to the
directions issued by this Hon'ble Court in its order dated 21-6-2004 it is submitted by Mr. Diwan that the same
were passed upon the report dated 2-1-2004, made by the respondent No. 1 and not upon an application of the
applicants. Further, the direction was issued by the Hon'ble Court in view of prayer (b) of the said report dated
2-1 -2004 which reads as under:
(b) In view of para 14 above whether this Hon'ble Court will be pleased to direct the Centurion Bank Limited
and its dismantling agent R.K. Steel Syndicate to make good of the loss of value of the machineries removed
from the site at Kandla Gandhidham at the time of removal of lease machineries to Centurion Bank.
Paragraph No. 14 of the said report dated 2-1-2004 reads as under:
(14) That the Official Liquidator submits that the Security Guards engaged at the site and the representative of
Official Liquidator deputed at the time of giving delivery of leased machines to Centurion Bank Limited made a
statement that the machineries belonging to M/s. Al-Qahtani Pipe Coating Terminal were lifted by the Centurion
Bank Limited and/or their dismantling agent M/s. R.K. Steel Syndicate and as such they are liable to make good
of the loss of the value of machineries removed from the site.
33. On a bare perusal of the said prayer (b) and the said paragraph No. 14 of the said report dated 2-1-2004
shows that the directions issued by this Hon'ble Court in its said order dated 21-6-2004 was in light of the said

report dated 2-1-2004 made by the respondent No. 1 seeking directions from this Hon'ble Court to order the
respondent Nos. 3 and 4 who are third parties, with whom the applicants have no privity, to compensate the
applicants for the acts of the respondent No. 1. However, the present application has been made by the
applicants seeking compensation from the respondent No. 1 alone and not from some other third party. In the
circumstances, it is submitted that the proceedings which led to the said order dated 21-6-2004 are entirely
different and have no bearing on the facts and circumstances of the present application. In other words, the
directions passed by this Hon'ble Court in the said order dated 21-6-2004 cannot and ought not act as bar to the
present application.
34. Without prejudice to what is stated in paragraph No. 21 hereinabove, it is submitted that on a careful
reading of the said order dated 21 -6-2004, it crystal clear that the direction of this Hon'ble Court to the
applicants to file substantive proceedings to establish their ownership and valuation of the lost plant and
machinery would arise only in the event of the applicants seeking any reliefs against third parties. Admittedly, in
the present application the applicants are seeking reliefs only against the respondent No. 1. Admittedly it was the
respondent No. 1 who submitted the report dated 5-2-2003 which led to the said order dated 20-2-2003. Till the
filing of its affidavit dated 14-12-2006 in reply to the present application, Official Liquidator addressed several
correspondences and filed report admitting the ownership of the applicants in respect of the said plant and
machinery. In the circumstances, the respondent No. 1 is estopped from questioning the ownership of the
applicants in respect of the said plant and machinery.
35. In other words, as between the applicants and respondent No. 1 there is not a dispute save and except with
respect to valuation of the plant and machinery. The dispute referred to in the said order dated 21 -6-2004 is the
dispute that would arise if the applicant files another proceeding against third party, claiming that the machinery
taken by the third party belonged to the applicants. The dispute of valuation can be resolved by leading evidence
in the present application which this Hon'ble Court is competent to take. Further, the summary proceedings
referred to in the said order dated 21-6-2004 is the Official Liquidator's report and not a company application. In
the premises aforesaid, the applicants submit that the present application is maintainable and be made absolute.
36. Finally it is contended that the Official Liquidator as an Officer of the Court, who is put into custody of vast
properties and in absence of any accountability for gross negligence and dereliction of duty committed by the
office of the Official Liquidator as in the instance case, it will send wrong signals to the public at large rendering
their faith in the justice system and indeed its reputation, in grave jeopardy.
37. In support of the above contentions, Mr. Diwan relies upon following decisions:
(1) Augustine Meenattoo v. Mathai Mathai [1954] 26 Comp. Case 51.
(2) Amba Tannin v. Official Liquidator .
(3) Maharashtra State Financial Corporation v. Official Liquidator : AIR1993Bom392 .
(4) Nilesh Lalit Parekh In re : 2002(1)BomCR357 .
(5) Sudarshan Chits (I) Ltd. v. O. Sukumaran Pillai : [1985]1SCR511 .
(6) Meghal Homes (P.) Ltd v. Shree Niwas Girni K.K. Samiti : AIR2007SC3079 .
(7) Smt. Basavva Kom Dyamangouda Patil v. State of Mysore : 1977CriLJ1141 .
(8) Intercontinental Agencies (P.) Ltd. v. Amin Chan Khanna : 1980CriLJ689 .
(9) ONGC v. Association of Natural Gas Consuming Industries [200l] 6 SCC 627 .

38. Mr. Samdani, learned senior Counsel appearing for the Official Liquidator while reiterating the statements in
the affidavit in reply, submitted that this application is not maintainable. He submits that the applicant is fully
aware that the present application is not its remedy. It is fully aware of the observations in the order dated
21-6-2004 passed by this Court. That order has become final. No appealhas been preferred nor any proceedings
initiated to challenge that order.
39. Thus, these observations conclude the issue. He submits that the contention now canvassed that Court may
direct the liquidator to pay a sum as compensation to the applicant and quantification may be done by appointing
a valuer or other appropriate method does not mean that the present application is maintainable straightaway.
This concession is given because the applicant is fully aware of the observations of this Court and its remedy in
law. There cannot be a piecemeal adjudication or determination. Mr. Samdani submits that the bifurcation as
suggested by Mr. Diwan is wholly impermissible in the facts of the present case. This Court cannot pass a
declaratory order and thereafter grant liberty to the applicant to initiate proceedings for quantification and
computation of the loss/damages/compensation. All this will amount to by passing the normal civil remedies. They
cannot be by passed in this manner and when the applicant knows fully well that it will have to institute a civil
suit. He submits that the relief claimed will have to be seen as a whole and together with the pleas in the
affidavit in support. Having alleged that there is a collusion between the Official Liquidator and his officials
together with Centurion Bank and third parties the applicant claims compensation or damages. All such persons
are impleaded as party respondents. Now, urging that the claim be restricted to Official Liquidator is an
afterthought.
40. Mr. Samdani invited my attention to prayer (a) of the Company Application and contended that his
submissions are fully supported by bare reading of the said prayer. The nature of the relief claimed itself
indicates that the Company Application is not the remedy. The Company Court will have no jurisdiction to convert
this application into a civil suit for damages and compensation. More so, when on own showing of the applicant
the other respondents are necessary parties, it is the applicant who applied for amendment to the Company
Application and impleaded them. It cannot now say that the claim or the relief is restricted to the Official
Liquidator and others may be excluded from the purview of the same. Such a course, if permitted, would result
in miscarriage of justice and would mean that the liquidator alone is called upon to answer the allegations.
41. Mr. Samdani was at pains to point out that in the application itself the applicant alleges that there is a
collision between third parties/those who removed plant and machinery and the Official Liquidator. That is
specifically alleged in paragraphs 22 and 26 of the affidavit in support. That allegation is again reiterated in para
34 is the contention of Mr. Samdani. In his submission therefore, such an application should not be entertained
and must be dismissed.
42. Since Mr. Diwan restricted his submissions only as far as to the Official Liquidator (respondent No. 1) Mr.
Milind Vasudeo appearing for Centurion Bank and other respondents did not address the Court. Suffice it to state
that they have not admitted the allegations. They have relied upon their affidavits and Centurion Bank's case is
that the articles which were lying at the site or at least some of them are securities of the Centurion Bank. It
has instituted a civil suit and applied for interlocutory reliefs. The Court Receiver, High Court was appointed as
receiver by this Court and was permitted to dispose of the movables. That is how Centurion Bank and the Court
Receiver so also the third parties came on the scene. Therefore, it is their submission that they should not be
prejudiced in any manner by rendering findings without complete opportunity to them to rebut the case of the
applicant and place all materials in support of their contentions.
43. I have perused the Company Application and all annexures thereto. With the able assistance of the learned
senior Counsel appearing for both sides, I have also perused the earlier orders. The order dated 21 -6-2004, a
copy of which is annexed as Annexure "Z" to the affidavit in support in the present application is rendered on
the application/report of the Official Liquidator placed before the learned Judge. The report dated 2-1-2004 prayed
for following reliefs:
(a) In view of paras 11, 12 and 13 supra whether this Hon'ble Court may be pleased to direct the Police

authorities at Gandhidham to register the FIR and take up immediate investigation on the basis of in formation
furnished by the Official Liquidator in respect of the missing plant and machineries belonging to Al-Qahtani Pipe
Coating Terminal, Saudi Arabia and book the culprits as well as recover the missing plant and machineries.
(b) In view of para 14 above, whether this Hon'ble Court will be pleased to direct the Centurion Bank Ltd. and
its dismantling agent R.K. Steel Syndicate to make good of the loss of value of the machineries removed from the
site at Kandla, Gandhidham at the time of removal of lease machineries to Centurion Bank Ltd.
(c) for such other and further directions as this Hon'ble Court may deem fit and proper.
44. Thus, the controversy is regarding the removal of the goods and the nature of the remedy that is to be
pursued by the applicant was squarely raised before the Court. In paragraphs 5 and 6 of the order the learned
Judge has referred to an order dated 27-1-2003 passed in the civil suit instituted by Centurion Bank. Thereafter,
there is a reference to order dated 10-4-2003. There is a specific finding in the order of 10-4-2003 in the said
suit as to whether liquidator can claim the leased equipment. It was observed that the equipment leased to the
Centurion Bank is not and was never asset of the Company in liquidation. It is pertinent to note that there is no
bifurcation of the materials/movables in the orders. Considering all this, the learned Judge referred to the
developments at site, the availability of the goods till 3-7-2003 and their movement from that day till 9-8-2003. In
paragraph 11A the learned Judge refers to the Report of security guards and whether the third parties were
involved in the acts complained of by the present applicant. All arguments of the present applicant were before
the learned Judge, canvassed as they were in details. It is in such circumstances that the learned Judge observed
as under:
(12) Be that as it may, the question is whether it is possible for this Court to issue directions in terms of relief
(b) prayed by the Official Liquidator. As is seen from the record, the substantial part of the plant and machinery
(almost 70 per cent) belonging to AQH has been allegedly dismantled and the left over machinery on the site has
been rendered either in damaged condition or useless. It is also seen from the record that all the dismantled
goods have already been removed from the site by the representatives of CBL and RKS on the pretext that the
same belonged to CBL. It is stated on behalf of the RKS has sold the dismantled goods in the form of scrap to
the two dealers named earlier, who in turn, promptly took away the goods from the site. Since the goods have
changed its original form and also changed hands, it is not possible for this Court to issue direction to CBL and
its dismantling agent RKS to bring back the goods, so as to restore status quo ante. Therefore, the question is
whether in this summary proceedings, it is possible for this Court to direct the CBL and its dismantling agent
RKS, who worked on the site together for dismantling and removal of the goods, to pay the value of the goods
belonging to AQH, which have been taken away and to make good the loss or damage caused to the left over
items of AQH. This, to my mind, cannot be answered in the present proceedings. For, the affidavits which have
come on record indicate that both sides have claimed ownership with regard to some of the items which are now
missing from the site. As there is dispute regarding ownership of the goods, and more so, it is not possible in
this summary proceedings to quantify the value of the lost goods or the goods removed from the site as also the
goods which are left behind and rendered damaged or useless, the appropriate course, to my mind, is to relegate
AQH to take recourse to appropriate proceedings against CBL or RKS or any other person including M/s. Deepak
Steel or Pankaj Traders, who in turn, have purchased the dismantled goods as scrap from the site. If such
proceedings are taken out, the parties will have to establish the ownership of their respective items and abo
adduce evidence with regard to the actual loss caused to them due to the loss of items removed from the site
and also the damage which has been suffered to the items which are left behind on the site. All these aspect
can be and will have to be examined in such substantive proceedings to be taken out by AQH.
(13) In view of the course that I have adopted, I have consciously not elaborated on the arguments canvassed on
behalf of the respective parties including regarding ownership claimed in respect of the items which are now
found to be missing from the site as that would affect the outcome of the proposed proceedings.
(14) Although, the relief of quantifying damages will be gone into in the substantive proceedings, if taken out by
AQH, it needs to be placed on record that the Officials of Court Receiver as well as Official Liquidator and even

for that matter, the Customs Authorities have not discharged the role that was expected of them to ensure that
the items belonging to AQH which/were imported items and were in the custody of the Official Liquidator, were
unaffected in any manner during the process of dismantling of goods belonging to CBL or for that matter, the
possibility of the goods belonging to AQH being removed from the site under the pretext of removing the
dismantled goods of CBL, Indeed, the present situation has occurred and is the making of the concerned Officials
of the Court Receiver, Official Liquidator and the Customs Officials, The laxity of the Officials and perhaps
because of their connivance, not only the imported items belonging to AQH are clandestinely removed from the
site but that has also resulted in loss to the public exchequer in the form of customs duty etc. This is a serious
matter and it is necessary for the concerned higher authorities to examine the cause of such lapses and to take
appropriate corrective action against the concerned Officers including taking steps for recovery of the revenue.
That be done as expeditiously as possible and compliance report be submitted to this Court within six months
from the receipt of writ of this Court.
[Emphasis supplied]
45. It is thereafter that the further directions have been issued. A perusal of the entire order and more
particularly para 12 leaves me in no manner of doubt that the learned Judge has observed that both sides have
claimed ownership with regard to some of the items which are now missing from the site. There is a dispute
regarding ownership of the goods, the proceedings before the learned Judge are summary in nature and therefore,
the appropriate course would be to relegate the present applicant to take recourse to appropriate proceedings
against all parties including those who have purchased the dismantled goods as scrap from the site. The parties
have to establish the ownership of the goods by adducing evidence with regard to actual loss caused to them if
also a clear finding. Mr. Diwan's reliance on General Principles pertaining to the status of a liquidator apart, the
applicants cannot be permitted to now urge that the relief be granted in their favour in the present Company
Application. Mr. Diwan is aware that the present application is in sense also a summary proceedings.
46. Now, it is not open for Mr. Diwan to urge that this application is maintainable on the premise that there is
no dispute with regard to the title/ownership of the goods. Despite the earlier orders including that of Mr. Justice
D.K. Deshmukh, Mr. Justice A.M. Khanwilkar in his subsequent order dated 21-6-2004 has made the above
reproduced observations. They are clearly binding upon the applicants. They cannot now say that the title and
ownership is proved and only quantification of loss and damage remains. Once they have to lead evidence to
establish ownership and title so also the loss and damage sustained by them, then, obviously the present
Company Application is not the proceedings contemplated in the above order.
47. Further, the applicant will have to explain as to what steps it took to claim 30 per cent of the machinery at
the site. It is stating on oath that 70 per cent of the movables are removed by the Bank, Court Receiver and
third parties. The Official Liquidator urges that the applicant did not take steps for February 2003 till November
2003. Further, it is alleged that the applicant were aware of the proceedings initiated by Centurion Bank of
Punjab Ltd. (Company Application No. 604 of 2002) and the order dated 10-4-2003 passed thereon. Thus, the
applicant had notice of the fact that Official Liquidator has been directed to return the leased equipment of the
Bank. Reliance is placed by Official Liquidator on the letter dated 27-6-2003. All this material was placed before
this Court when it passed an order dated 21-6-2004.
48. Hence, Mr. Diwan's usual vehemence apart, the applicant will have to establish its case as set up in the
affidavit-in-support by complete evidence. There is no question of the applicant being allowed to circumvent the
order by piecemeal or part adjudication as suggested by Mr. Diwan. If evidence has to be led by bringing in all
parties and proving the case against each of them, then, obviously civil suit is the remedy. Even this application
is summary remedy in the sense spoken of by brother Khanwilkar.
49. Therefore and when the applicants have themselves impleaded all parties, then, this Court cannot by pass the
competent Civil Court. More so, when some of the parties are not within the territorial jurisdiction of this Court.
It is for this reason that this Court made the observations in para 13 and thereafter in 14 as well. In my view,
without entering into any larger controversy and considering the above observations and peculiar facts of this

case, it can safely be concluded that the present application is not maintainable.
50. The judgments referred to by Mr. Diwan and more particularly with regard to the role of a liquidator, the
property being "custodia legis" are something which would not be straightaway applicable. The role of the Official
Liquidator emphasised by the Travancore Cochin High Court in the decision relied upon is in the context of the
question as to whether appeal by the auction purchaser at a sale conducted by the Official Liquidator of the
Company in liquidation was maintainable. It is in that context the observations have been made. While it is true
that the liquidator is an officer of the Court and Court cannot ratify or ignore allegations of misconduct on his
part, yet, everything depends upon the facts of each case. The Court has observed that the inquiry is summary
but strangers can be brought into inquiry or not would ultimately depend upon the facts of each case.
51. Similarly, the observations in Amba Tannin & Pharmaceuticals Ltd. v. Official Liquidator [1915] 45 Comp. Cas.
457 (Bom.) would not apply in this case. In the context of the powers of the liquidator it is undisputed that he is
answerable to Court. However, whether he can be directed to compensate parties like the applicant for losses
when disputed and contentious issues are raised is something which must be decided on facts of each case. He
being an officer of the Court and acting in finding capacity is a principle about for which there can be no
quarrel.
52. The judgment of this Court in Nilesh Lalit Parekh In re 2002 (1) Bom. CR 357 is upon an issue, as to
whether consent terms which were filed in a winding up petition in which the guarantee is given by the
Managing Director to make payment would entail in his being proceeded against under the Presidency Towns
Insolvency Act, 1909 on the premise that he has committed act of insolvency by not making the payment. This
Court made the observations relied upon by Mr. Diwan in that context. That is how Section 443 has been
referred to. That is a power conferred upon the Court while deciding a winding up petition.
53. Similarly, the provisional which have been referred to by Mr. Diwan and decisions on the same are rendered
in the backdrop of the peculiar factual controversies. In none of these decisions it has been held that when the
observations of the above nature are made and remedies specified, recourse to an application before the Company
Court is permissible. That too, for deciding disputes of title to movables.
54. In such circumstances, I am of the view that the decisions relied upon are of no assistance to Mr. Diwan. It
is in this light that I have passed the order dismissing the present Company Application.
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