Jaishree Steels Private Limited And Ors vs. Shivam Dhatu Udyog Private Limited And Ors

Facts

The appellants, Jaishree Steels Private Limited and Ors., filed an appeal against a judgment dated 17th June, 2021, refusing to appoint a Receiver to inventory assets in the factory premises of respondent No.1, Shivam Dhatu Udyog Private Limited. The appellants sought this appointment to protect their interest based on an alleged oral agreement for the transfer of the respondents' factory and shareholdings. The appellants claimed to have paid significant GST liabilities for the respondents and intended to meet future liabilities. The respondents denied the oral agreement. An earlier order dated 28th January, 2021, had already granted an injunction restraining the respondent from creating third-party rights over its assets and appointed a receiver for books and records. Subsequently, an order dated 23rd April, 2021, restrained respondents from operating the factory, but this was partially set aside by an appellate court on 9th June, 2021, noting the appellants were already protected by the January 28, 2021 order.

Held

The Court held that no further protective order beyond the subsisting interim order dated 28th January, 2021, was required. The Court noted that the appellants' cause of action was based on an alleged oral agreement, which was denied by the respondents. While the appellants asserted payment of GST liabilities and future commitment to meet other liabilities, the Court found no indication of substantial consideration for the alleged oral agreement. The Court acknowledged that parties would have the liberty to prove their respective cases at the trial. Regarding the appellants' submission for an inventory of movables, the Court observed that companies undergo annual audits and prepare quarterly statements of accounts containing details of movables and stocks as a statutory requirement. Therefore, the Court directed the respondents to make available to the appellants a relevant quarterly statement of accounts pertaining to the time when the appellants took over possession of the factory from them. The appeal and connected application were disposed of accordingly.

Key Issues

1. Whether the learned single judge erred in refusing to appoint a Receiver to make an inventory of the assets in the factory premises of the respondent No.1, thereby failing to adequately protect the appellants' interests, considering the alleged oral agreement and substantial GST liabilities paid by the appellants. Contentions of the Appellants: The appellants argued that the existing interim order dated 28th January, 2021, was insufficient to protect their interests, especially given the disputed oral agreement and the significant financial liabilities they claimed to have discharged on behalf of the respondents. They sought a Receiver to create a comprehensive inventory of movables in the factory premises to safeguard their alleged investment and future liabilities. Contentions of the Revenue/State: The judgment does not record specific arguments made by the revenue or state. However, it notes the respondents' denial of the oral agreement and their challenge to the territorial jurisdiction of the Court. The learned single judge's observation, endorsed by the appellate court, was that the appellants' interests were adequately protected by the subsisting order dated 28th January, 2021, and no factual basis was shown for this order being frustrated.