Bai Mumbai Trust Vs Suchitra (Bombay High Court)
Issue raised whether GST is applicable on services or assistance rendered by the Court receiver appointed by the Court under order XL of CPC.
Court observed that schedule III provides that services provided by any court or tribunal established under any law is neither a supply of goods nor supply of services. Court Receiver should implement orders of the court and functions under the supervision and direction of the Court. Hence, office of the Court Receiver is an establishment of the High Court through which the orders issued by the Court are given effect to.
Therefore, the services of the Court Receiver are to be considered as services provided by any Court. Accordingly, the fees or charges paid to the Court Receiver are not liable to GST. The Honorable High Court held that GST cannot be levied or recovered on services provided by the Court Receiver.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
1. By an Order dated 24th November 2017 (Coram: S.C. Gupte, J.), this Court appointed Mr. V. Sreedharan, Senior Advocate, as Amicus Curiae. The Court observed:
“Considering the importance of the issue involved in the matter, which bears generally on the liability to pay GST on any payment made to the Court Receiver by way of royalty, Mr. V. Sreedharan, Senior Advocate, is appointed as an amicus curiae to assist the Court on the issue.
2. Let notice also be given to Additional Solicitor General. Stand over to 13 December 2017 at 3.00 p.m.”
2. On 13th December 2017, the Learned Amicus Curiae suggested that the Learned Advocate General may also be heard as GST is shared between the Centre and the State. Accordingly, the papers were directed to be forwarded to the Learned Advocate General as well.
ISSUES CONSIDERED IN THIS JUDGMENT
3. Broadly stated, the issues to be considered by this Court is the applicability of Goods and Services Tax (“GST”) and the mode of discharge of this statutory liability (where it arises) in matters where the Court Receiver is appointed by the Bombay High Court (“Court”) under Order XL of the Code of Civil Procedure, 1908 (“CPC”).
4. The following principal questions arise for consideration in this Court Receiver’s Report:
i. Whether GST is liable to be paid on services or assistance rendered by the Court Receiver appointed by this Court under Order XL of the CPC ?
ii. Whether GST is liable to be paid on royalty or payments under a different head paid by a defendant (or in a given case by the plaintiff or third party) to the Court Receiver in respect of properties over which a Court Receiver has been appointed ?
iii. Specifically, in the facts of the present Suit, where the Plaintiff alleges that the Defendant is in illegal occupation of the Suit Premises: Whether there is any ‘supply’ within the meaning of the CGST Act? Whether payment of royalty for remaining in possession of the Suit Premises, either during the pendency of the Suit, or at the time of passing of the decree, falls within the definition of ‘consideration’ for a ‘supply’ chargeable to payment of GST under Section 9 of the CGST Act ?
iv. If in any circumstance GST is payable or applicable to payments made to the Court Receiver, how is that statutory liability to be discharged? Is it to be paid by the Defendant / party in occupation directly, or by the Court Receiver ?
5. In addressing these questions, reference is made to the provisions of the Central Goods and Services Act, 2017 (“CGST Act”). It may be noted that the provisions of the Maharashtra Goods and Services Tax Act, 2017 (“MGST Act”) are in pari-materia with those of the CGST Act. As pointed out by the Learned Advocate General the provisions also have the same numbering and appear in the same sequence, with the only exception being the transitional provisions and repeal and savings provisions, which are not relevant to the issues presently under consideration. As such, the Court has considered the issues raised with reference to the CGST Act.
FACTUAL BACKGROUND ARISING FROM THE COURT RECEIVER’S REPORT
6. The Plaintiff has filed the present Suit seeking to recover possession of three shops, which together constitute a restaurant, where the Plaintiff trust is carrying on business in the name and style of “Manranjana Hotel” (“Suit Premises”). The Suit proceeds on the cause of action of trespass / unauthorized occupation.
7. The Plaintiff filed Notice of Motion (L) No. 227 of 2017 in the above Suit for interim reliefs pending the hearing and final disposal of the Suit. An Order dated 12th / 20th July 2017 came to be passed in the said Notice of Motion. By kpd 6 / 83 PD-NMSL-227-2017.doc the said Order dated 12th/20th July 2017, a preliminary issue of limitation was framed and pending determination thereof, the Court Receiver, High Court, Bombay was appointed as receiver of the Suit Premises since the Court arrived at a prima facie finding that the Defendant had no semblance of right to the Suit Premises. The relevant portions of the Order dated 12 th / 20th July 2017 are set out below:
6. On these facts, the Defendant, having no semblance of right to the property, cannot simply hold on to the property without payment of any compensation. Considering the overwhelming prima facie case of the Plaintiffs in the present suit and also considering the fact that the litigation under the Rent Control Act has fnally been disposed of in favour of the Plaintiffs by the Small Causes Court, this is a ft case for appointment of Court Receiver, though the Receiver may not disturb the possession of the Defendant during the pendency of the present suit subject to payment of compensation by the Defendant.
7. Considering the nature of the suit premises, namely, the original suit premises in respect of which the conducting license was granted in favour of the predecessor of the Defendant, and the present condition of the premises revealed by photographs tendered before this court (the photographs indicate that the Defendant is actually using a much larger area than what originally formed part of the suit business, the area currently stated to be of about 872 sq.ft.), this court is of the view that Rs.45,000/ per month would be an adequate adhoc royalty / compensation to be paid by the Defendant to the Court Receiver to remain in possession of the suit property as the Receiver’s agent.
8. Accordingly, the following order is passed on the notice of motion :
(I) […..]
(II) Pending determination of this preliminary issue, the Court Receiver, High Court, Bombay, is appointed as receiver of the suit property described in prayer clause (a) of the plaint;
(III) The Court Receiver shall merely take formal possession of the suit property and not disturb the physical possession of the Defendant of the suit property;
(IV) The Defendant shall be appointed as an agent of the Court Receiver under an agency agreement on payment of monthly royalty of Rs.45,000/- to the Court Receiver but without any security;
8. As per the said Order dated 12th / 20th July 2017, the Court Receiver was directed to take formal possession of the Suit Premises and was directed not to disturb the physical possession of the Defendant. The Defendant was permitted to remain in possession of the Suit Premises as an agent of the Court Receiver under an agency agreement to be executed with the Court Receiver, on payment of monthly ad-hoc royalty of Rs. 45,000/. The amount deposited by the Defendant with the Court Receiver was directed to be invested by the Court Receiver in fixed deposits of Nationalised Bank/s.
DISPUTE WITH RESPECT TO PAYMENT OF GST
9. The Plaintiff raised certain concerns regarding the applicability of GST on the royalty amounts to be paid by the Defendant pursuant to the Court’s Order dated 12th / 20th July 2017.
10. The Plaintiff moved an application before the Court for speaking to the kpd 8 / 83 PD-NMSL-227-2017.doc minutes of the Order dated 12th / 20th July 2017, and the Order dated 12th / 20th July 2017 was modified by an Order dated 3rd August 2017 directing the Defendant to pay royalty with applicable GST. The modified Order dated 12th / 20th July 2017 read, inter alia, as follows:
(IV) The Defendant shall be appointed as an agent of the Court Receiver under an agency agreement on payment of monthly royalty of Rs.45,000/- to the Court Receiver but without any security along with GST at the applicable rate;
11. The Advocate for the Plaintiff addressed a letter dated 10 the October 2017 to the Court Receiver with respect to the payment of GST on the royalty directed to be paid by the Defendant to the Court Receiver. According to the Plaintiff, if and when the royalty amount is paid over by the Court Receiver to the Plaintiff, the same would be treated as ‘Income’ of the Plaintiff falling under the category of ‘Income from letting out and use of a shop / commercial premises’. The Plaintiff submits that GST will also be liable to be paid on the royalty. The Plaintiff submits that it comes within the GST net and that it is registered, having GST Registration No. 27AAATV1937B1ZO. Hence, GST will be payable on the amount finally transferred to the Plaintif. It is the Plaintif’s case that if GST is not recovered from the Defendant from time to time, it will be very difficult to recover the same from the Defendant at the time of recovering possession.
12. The Court Receiver filed Court Receiver’s Report No. 213 of 2017 dated 3rd November 2017. The Court Receiver reported that it had oral discussions with a Panel Chartered Accountant regarding the issue of GST. The Report states that:
“8. The office of Court Receiver has a oral discussion with Panel chartered Accountant regarding the issue of G.S.T. His opinion is as follows:
The person paying royalty (i.e. the Defendant) should pay the GST at applicable rate at RCM (Reverse Charge Mechanism) and challan of payment of GST should be produced before the Court Receiver.
Court Receiver cannot get GST number being part of Government as Representative Assessee.
In view of the above, the Court Receiver respectfully submits report seeking directions as under.
(a) What steps the Court Receiver should take regarding the issue of G.S.T.
(b) Whether the defendant/agent be directed to pay the G.S.T. at applicable rate at Reverse Charge Mechanism (RCM) and challan of payment of G.S.T. should be produced before the Court Receiver.
(c) Any other direction this Hon’ble Court deems ft and proper.”
RELEVANT PROVISIONS OF LAW
13. Before dealing with the submissions advanced by the respective parties, it would be appropriate to set out certain provisions of applicable law which will have a bearing on the issues to be decided by this Court.
14. Order XL of the CPC provides for the appointment of receivers.
“1. Appointment of receivers
(1) Where it appears to the Court to be just and convenient, the Court may by order–
(a) appoint a receiver of any property, whether before or after decree;
(b) remove any person from the possession or custody of the property;
(c) commit the same to the possession, custody or management of the receiver, and
(d) confer upon the receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profts thereof, the application and disposal of such rents and profts, and the execution of documents as the owner himself has, or such of those powers as the Court thinks ft.
(2) Nothing in this rule shall authorize the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove.”
15. Chapter XXX of the Bombay High Court Original Side Rules, 1980 (Rule 589 – 599) deals with the Office of the Receiver.
16. Article 246A of the Constitution of India, inserted by the Constitution (One Hundred and First Amendment) Act, 2016, w.e.f 16th September 2016 prescribes special provision with respect to goods and services tax:
“246A. Special provision with respect to goods and services tax.
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have kpd 11 / 83 PD-NMSL-227-2017.doc power to make laws with respect to goods and services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
Explanation.–The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take efect from the date recommended by the Goods and Services Tax Council.”
17. Parliament enacted the CGST Act which came into force on 1st July 2017. The CGST Act is ‘An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto.’
18. Section 9 of the CGST Act, which is the charging provision thereunder, provides as follows:
“9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra- State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.”
19. Section 7 of the CGST Act defines “supply” and provides as follows:
“7. (1) For the purposes of this Act, the expression “supply” includes–
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),–
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as–
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.”
20. Section 7(1)(a)refers to a supply ‘made or agreed to be made for a consideration by a person in the course or furtherance of business’. Section 2(17) of the CGST Act defines ‘business’ and Section 2(31) of the CGST Act defines ‘consideration’ as follows:
“2. (17) “business” includes–
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body ( for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;
2. (31) “consideration” in relation to the supply of goods or services or both includes–
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;”
21. Schedule II and Schedule III referred to in Section 7 of the CGST Act is set out below:
” SCHEDULE II [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
1. […]
2. Land and Building
(a) any lease, tenancy, easement, licence to occupy land is a supply of services;
(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.
3. […]
4. […]
5. Supply of services The following shall be treated as supply of services, namely:-
(a) renting of immovable property;
[….]
SCHEDULE III [See section 7]
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
1. […]
2. Services by any court or Tribunal established under any law for the time being in force.”
22. Other important provisions of the CGST Act are set out below:
“2. (84) “person” includes–
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defned in clause (45) of section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;”
“2. (93) “recipient” of supply of goods or services or both, means–
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;”
“2. (98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;”
“2. (105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;”
“2. (107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24;”
“2. (108) “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;”
“22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day.
(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferer or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal.
Explanation.–For the purposes of this section,–
(i) the expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
(iii) the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution.”
“24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-
(i) persons making any inter-State taxable supply;
(ii) casual taxable persons making taxable supply;
(iii) persons who are required to pay tax under reverse charge;
(iv) person who are required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
(viii) Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;
(x) every electronic commerce operator;
(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and
(xii) such other person or class of persons as may be notifed by the Government on the recommendations of the Council.”
23. Section 92 provides for the levy and recovery of GST from a Court of Wards, Administrator General, Official Trustee, receiver or manager.
“92. Where the estate or any portion of the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever be his designation, who in fact manages the business) appointed by or under any order of a court, the tax, interest or penalty shall be levied upon and be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver or manager in like manner and to the same extent as it would be determined and be recoverable from the taxable person as if he were conducting the business himself, and all the provisions of this Act or the rules made thereunder shall apply accordingly.”
24. Section 161 of the Income Tax Act, 1961, which was referred to during the course of submissions is also reproduced below:
“Liability of representative assessee.
161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.
(1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub- section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate :
Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him.
(2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act.”
SUBMISSIONS ADVANCED
SUBMISSIONS ON BEHALF OF THE AMICUS CURIE
25. The Learned Amicus Curiae submitted as follows:
i. Services provided by the Court Receiver is to be treated as ‘Services by any court or Tribunal established under any law for the time being in force’ within the meaning of Paragraph 2 of Schedule III to the CGST Act and is, accordingly, an activity or transaction which shall not be treated as a supply of goods or a supply of services. Therefore, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver for deputing its resources and completing the mandate given to it by this Court as these services are ‘Services by any court or Tribunal established under any law for the time being in force’.
ii. If the Court Receiver is in control of an estate or portion thereof of a taxable person owning a business in respect of which GST is payable, such tax, penalty, and interest thereon may be determined and recovered from the Court Receiver under Section 92 of the CGST Act in like manner and to the same extent as it would be determined and recovered from the taxable person as if he were conducting the business himself.
iii. Section 92 of the CGST Act provides for the collection of GST from the Court Receiver. The Court Receiver would be a convenient point for the revenue to collect its tax being the person who is in direct receipt of the consideration / royalty where such payment itself is liable to be taxed under the provisions of the CGST Act.
iv. Whilst a transaction which is not in the course or furtherance of ‘business’ may otherwise attract GST, but the Court Receiver will not be liable to pay tax on such a transaction under Section 92 of the CGST Act. It is submitted that the language of Section 92 of the CGST Act is consciously and considerably narrow than Section 161 of the Income Tax Act, 1961, which is the corresponding section under the Income Tax Act which may require the Court Receiver to pay Income Tax as a representative assessee. The use of specific language in Section 92 of the CGST Act namely ‘taxable person owning a business’ and ‘tax, interest or penalty shall be levied upon and be recoverable from […] receiver or manager in like manner and to the same extent as it would be determined and be recoverable from the taxable person as if he were conducting the business himself’ makes it clear that the legislative intent of Section 92 of the CGST Act is to permit GST to be determined and collected from the Court Receiver provided he is running the business of a taxable person. The running of a business is sine qua non to levying and collecting GST from the Court Receiver under Section 92 of the CGST Act as a representative assessee.
v. Assuming that the Court Receiver is liable to pay GST (as a supplier) by virtue of Section 92 of the CGST Act, the liability can be discharged by an agent of the Court Receiver ‘acting as such on behalf of such supplier’ within the meaning of Section 2 (105) of the CGST Act (definition of supplier). If this is done, the Court Receiver will not be liable to pay GST again.
vi. Where a dispute concerns price / payment for an earlier taxable supply, any amount paid under a court’s order / decree or an out of court settlement is taxable if, and to the extent that, it is consideration for an earlier supply. In such cases, the making of a ‘supply’ is not disputed, but the dispute is regarding payment for supplies already made. The order / decree of the court links the payment to the taxable supply and the requisite element of reciprocity between supply and consideration is present.
vii. If the dispute is settled out of court or compromised without the defendant admitting that the alleged supply took place, the payment made by the defendant may be characterised as an agreed estimate of the true worth of the plaintif’s claim, rather than consideration for an alleged supply, and as such will be outside the scope of VAT / GST. In such cases, compensation may be considered to be repatriation or restitution in respect of loss or damage. Any compensatory payment made would not be consideration for a supply.
viii. However, a payment made under a court’s order or an out of court settlement will attract VAT / GST where it amounts to consideration for one or more taxable supplies efected in terms of the court or terms of settlement.
ix. As an illustration, where the plaintiff grants future rights (for example rights to exploit copyrighted material in the future) any payment received for such right will be treated as consideration for a new supply and is subject to levy of tax under GST laws. However, the portion of the payment which is related to past infringement will not be taxable as the same will not constitute a consideration for any supply made but it will be in the nature of damages for the alleged wrong.
x. However, a distinction between future supplies and prospective damages for a continuing wrong should also be noted. In cases where prospective damages are awarded for a continuing wrong, instead of granting an injunction or specific performance, the payment received will not be a consideration for any supplies made but a payment of damages in lieu of the court’s refusal to enforce the plaintiff’s rights via an injunction. The court does not, in such cases, require the plaintiff to make any supply to the defendant, only that the plaintiff accepts the payment in return for non-enforcement of its property rights.
xi. The method adopted for quantifying the damages i.e. value of goods or services purportedly supplied should not confuse the issue. Citing Senairam Doongarmall vs. Commissioner of Income Tax1 it is submitted that it is the quality of the payment and not the method of the payment or its measure that makes it fall within capital or revenue.
xii. Payment ordered in an action for damages arising out of property damage, illegal trespass, negligence causing loss of profits, wrongful use of trade name, breach of copyright, termination or breach of contract or personal injury is made to compensate loss suffered, and is not a payment towards any supply and hence no GST liability would arise.
xiii. Liability to pay GST would arise only where the payment received can be linked to a supply. In case of compensatory damages, the payment is for loss suffered and not supply effected. While the process of determining loss suffered may be the value of the consideration receivable if the contract had been performed, such process of computing damages will not alter the character of the payment, namely a compensation for loss suffered. This is premised on the principle that the supply doctrine does not encompass a wrongful unilateral act or any act resulting in payment of damages.
xiv. A supply must involve enforceable reciprocal obligations. If something has been used, but there was no agreement for its supply between the relevant parties, any payment subsequently received by the aggrieved party is not consideration for supply. The receipt of payment is not premised on the enforcement of reciprocal obligations between parties and cannot be linked to a supply for levying GST. Such a payment is compensatory.
xv. A payment made by a judgment debtor is in satisfaction of a judgment debt created by an order of court and not for any supply made by the party in whose favour the suit is decided. Whether such payment is towards a supply or is compensation for violation of a legal right is to be seen in the facts of a given case.
xvi. In the facts of the present Suit, there is no agreement or contract for supply by the Plaintiff to the Defendant. Rather, the Plaintiff’s grievance is that the Defendant is a trespasser / illegal occupier of the Suit Premises. Whilst the royalty / monthly amount may be calculated in accordance with prevailing rate of market rent, the transaction itself will not constitute a supply, as the reference to prevailing rent is only a means to arrive at the amount of damages.
xvii. Even the language of Paragraph 5(e) of Schedule II to the CGST Act will not result in the present activity to be a supply. Paragraph 5(e) of Schedule II to the CGST Act provides:
” SCHEDULE II [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
1. […]
2. Supply of services
The following shall be treated as supply of services, namely:-
[…]
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and […]”
Thus, an activity will be a supply if it is agreeing to the obligation to :
i. refrain from an act, or
ii. to tolerate an act or a situation, or
iii. to do an act.
An award of damages for trespass / illegal occupation is not an agreement to the obligation to refrain from an act, to tolerate an act or situation, or to do an act as contemplated by Paragraph 5(e) of Schedule II to the CGST Act.
SUBMISSIONS ON BEHALF OF THE COURT RECEIVER
26. Mr. Jagtiani, Learned Counsel for the Court Receiver submits as follows:
i. There is a distinction between fees or remuneration of the Receiver (charged as per Rule 591 of the Bombay High Court (Original Side) Rules, 1980) and moneys which may be paid to or deposited with the Court Receiver by a litigant / third person during the course of a litigation pursuant to orders of the Court. The former is entirely exempt from GST whereas GST may be applicable on the latter depending on the facts and circumstances of the case.
ii. It is necessary to understand true nature of the office of the Court Receiver. The Court Receiver is an adjunct of this Court and a permanent department of the Court. It is through the office of the Court Receiver that various interim orders of protection are given effect to.
iii. In Shakti International Private Limited vs. Excel Metal Processors Private Limited 2 this Court has held that the office of the Court Receiver is an establishment of the High Court and a permanent department of the High Court. The office of the Court Receiver is maintained by the High Court, Bombay, and it’s staff are employed by the High Court, Bombay. The appointment, functioning and discharge of the Court Receiver is governed by Chapter XXX of the Bombay High Court (Original Side) Rules, 1980 in addition to the provisions of Order XL of the CPC. The Court Receiver functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the office of the Court Receiver, High Court, 2 2018 (4) Arb LR 17 (Bom) : 2017 (3) ABR 388. Bombay. Accordingly, services provided by the Court Receiver fall under Sr. No. 2 of Schedule III read with Section 7 of the CGST Act, namely, ‘Services by any court or Tribunal established under any law for the time being in force’ which transaction or activity is not to be considered a supply of goods or services under the CGST Act.
iv. With respect to monies paid to the Court Receiver which are not towards the Court Receiver’s fees or remuneration, but paid in the course of litigation pursuant to an order of the Court, it must be seen if the underlying relationship between the parties, or claims made in that regard fall within the ambit of the CGST Act. If they do not, the taxable event of ‘supply’ cannot be any alleged or notional contract between either of the parties and the Court Receiver.
v. Relying on the decision of this Court in Humayun Dhanrajgir vs. Ezra Aboody3, Mr. Jagtiani submitted that the true nature of the payments made by one party to another / the Court Receiver for use and occupation of property is to be decided by the Court looking to the circumstances of the case and evidence on record. If, upon ascertaining the true nature of the payment the Court is of the view that the transaction or activity is a supply, GST is payable. For example, during the tenure of permissive use of a property, what is paid by the occupier to the right owner is 3 (2008) Bom C.R. 862. the contractual consideration. If such permissive use or occupation is terminated or comes to an end and the occupation becomes unlawful, the nature of payment to be paid to the right owner changes from contractual consideration to damages or mesne profits for unauthorised use and occupation of the property. GST is payable on the former contractual consideration, but not on damages payable for unauthorised use and occupation of the property. The fact that the measure of damages is to be based on market rent should not conflate the nature of the payment being made i.e. a payment to compensate the right owner for violation of his legal right.
vi. In the facts of the present Suit, where royalty is to be paid by the Defendant as ‘compensation’ for prima facie unauthorised occupation of the Suit Premises, the royalty is in the nature of compensation for violation of the Plaintiff’s legal right and not towards payment of contractual consideration which is agreed to be paid but is otherwise not paid / refused to be paid.
vii. If payments made pursuant to or under an order of receivership in a given case attracts CGST, that liability may be discharged by the Court Receiver under Section 92 of the CGST Act (akin to a representative assesse), or by the party acting as agent of the Receiver under Section 2(105) of the CGST Act.
viii. In such a scenario, the office of the Court Receiver may be directed to include a clause in the standard form of the agency agreement to the effect that where any payment to be made under an order of the Court attracts CGST, the agent appointed by the Court Receiver must have / obtain CGST registration and make such payment on behalf of the Court Receiver and indemnify the Court Receiver for any liability that may fall upon the Court Receiver under Section 92 of the CGST Act. This may obviate the requirement of the Court Receiver having to obtain separate CGST Registration for each matter or transaction in respect of which it is appointed to act by the Court. Needless to state, in the facts of a given case if the Court deems fit, the Court may direct the Court Receiver to apply for registration for the payments relatable to a particular matter. At any rate it is preferable from an audit and administrative perspective for there to be separate GST registration for each matter, where the same is paid for by the Court Receiver.
SUBMISSIONS ON BEHALF OF THE STATE OF MAHARASHTRA
27. The Learned Advocate General, on behalf of the State of Maharashtra, has submitted written submissions with respect to the issue of levy of GST on royalty paid by a litigant to the office of the Court Receiver.
28. It is submitted on behalf of the State (with reference to the provisions of the MGST Act the relevant provisions whereof are in pari materia with the CGST Act) that:
i. As per the language of Section 92 of the MGST Act, the receiver will be liable to levy and collection of GST only if the taxable person whose estate is under the control of the receiver is conducting a ‘business’.
ii. GST may be recovered from the Court Receiver under Section 92 only if it is conducting a business of a taxable person. In the facts of the present case, the Plaintiff’s rental income is above the ceiling limit, and the Plaintiff is registered under both Central and State GST laws. Hence, the Plaintiff is liable to pay GST on supplies.
iii. In the present case, a binding contract under the authority or with the imprimatur of the Court (albeit with hardly any liberty to the parties except to accept the offer or vacate the premises) has come into existence.
iv. The order permitting the Defendant to remain in possession of the Suit Premises is essentially a contract, and payment of royalty is ‘consideration’ for this ‘supply’ of premises to the Defendant pursuant to an order of Court. GST will be liable to be paid under the MGST Act.
v. Since the payment of royalty is towards a ‘supply’, GST may be recovered from the Court Receiver under Section 92 of the MGST Act. In other words, the transaction in question is the renting of immovable property for consideration as contemplated by Paragraph 5(a) of Schedule II to the MGST Act.
vi. The definition of ‘supply’ under Section 7 of the MGST Act and the definition of ‘business’ under Section 2(17) of the MGST Act is an inclusive definition and very wide in it’s ambit.
vii. The transaction in question is ‘incidental to’ the business of the Plaintiff trust as contemplated under Section 2(17)(b) of the MGST Act.
viii. The transaction is question is akin to ‘renting in relation to immovable property’ which is one of the instances of supply prescribed in Item No. 5(a) of Schedule II to the MGST Act. The phrase ‘renting in relation to immovable property’ is defined in Clause 2(zz) of Notification No. 12/2017-State Tax (Rate) Mumbai, dated 29th June 2017:
‘(zz) “renting in relation to immovable property” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;’ Hence, the transaction in the present case is a supply.
ix. Based on: (a) the interim order of the Court, (b) the legal status of the Court Receiver, and (c) the authority and capacity of the Court Receiver to enter into contracts, a contract has come into existence whereby the Defendant is permitted to occupy the Suit Premises. The offer in this contract is the option available to the Defendant to pay royalty and remain in possession of the Suit Premises. The Defendant elected to accept the offer, and therefore the royalty amount represents the consideration paid by the Defendant to the Court Receiver (who is in possession of the Suit Premises on behalf of the Court). The Learned Advocate General relied on a judgment of the Supreme Court in Assistant Commissioner, Ernakulam vs. Hindustan Urban Infrastructure Ltd.4 (which considers Rule 54 of the Kerala Sales Tax Rules which is in pari materia with Section 92 of the MGST Act) in this regard to contend that the act of permitting the Defendant to remain in possession of the Suit Premises is a contract and the transaction in question is a supply, even if the same is pursuant to an order of the Court. Relying on Assistant Commissioner, Ernakulam (supra) the Learned Advocate 4 (2015) 3 SCC 745.
General submits that sales tax was levied on sale of properties by the Official Liquidator under Rule 54 of the Kerala Sales Tax Rules (which is in pari materia with Section 92 of the MGST Act) even though the express consent of the Company in Liquidation is not present.
x. The monetary value of compensation is equivalent to, if not equal to, the market rent payable to the Plaintiff. Hence, the ad-hoc royalty amount of Rs. 45,000/- is covered within the definition of ‘consideration’ under Section 2(31) of the MGST Act for supply of services. The nomenclature of the amount will not affect the taxation under GST laws.
xi. Alternatively, even if the transaction in the present dispute is not to be considered a ‘supply’, the Court Receiver is nevertheless liable to be registered under the CGST Act inasmuch as there may be a situation where the Court Receiver is liable to pay GST under Section 92.
xii. Separately, it is submitted on behalf of the State that the meaning of the word ‘Court’ as per the provisions of the Court Fees Act, 1870 and as determined by the Supreme Court in Virindar Kumar Satyawadi vs. The State of Punjab5 and Dr. Subramanian Swamy vs. Arun Shourie6 does not include the office of the Court Receiver. Therefore, services rendered by the Court Receiver are not entitled to 5 AIR 1956 SC 153.
the exemption under Paragraph 2 of Schedule III of the MGST Act namely the exemption from payment of GST on services by any court or tribunal established under any law for the time being in force.
xiii. This approach would also prevent any probable mischief where the right owner and occupier create a false dispute to evade payment of GST.
29. Accordingly, the Learned Advocate General submitted that the estate under receivership is a ‘business’ and the Court Receiver is liable to pay GST at 9% under both the MGST Act and CGST Act and at 18% p.a. under the IGST Act. The Written Submissions filed on behalf of the State also deal with whether the Court Receiver should obtain a single registration or multiple registrations with respect to activities or transactions where GST is applicable.
SUBMISSIONS ON BEHALF OF THE UNION OF INDIA
30. The Learned Additional Solicitor General submits on behalf of the Union of India as under:
i. Royalty is, in substance, a rent. As per the decision of this Court in Humayun Dhanrajgir vs. Ezra Aboody (supra), royalty is a compensation payable by the occupier to the right owner in the property. It is submitted that the royalty is meant to compensate the right owner who permits or allows others to use his rights in his property.
ii. To this extent, there is a clear supply of service of notionally providing premises (subject of course to the final determination of the rights of the parties to the suit). Such letting or providing of premises is clearly covered in the scope of ‘supply’ under Section 7 of the CGST Act as also under the definition of ‘services’ under Section 2(102) of the CGST Act.
iii. The Plaintiff is providing, or is deemed to be providing a service. The act of supplying these services i.e. permitting the Defendant to occupy the premises in consideration of payment of royalty is clearly a business as understood under the CGST Act. The broad definition of business aids such interpretation.
iv. That the Court Receiver acts as the agent of the Plaintiff who is liable to be taxed under the CGST Act and is therefore liable to make payment of GST on monies received by him as royalty on behalf of the Plaintiff under Section 92 of the CGST Act.
v. Section 92 of the CGST Act gives express statutory recognition to this position in law. The Court Receiver is collecting royalty for and on behalf of the Plaintiff and hence, the same would be liable to tax.
vi. The Court Receiver wears two hats, one as an agent of the Court, and another as an agent of the Plaintiff on whose application he is appointed. Tax is only levied on the services rendered by the Court Receiver as an agent / on behalf of the Plaintiff.
FINDINGS AND REASONING STATUS OF THE COURT RECEIVER
31. In order to answer the issues raised and appreciate the various submissions advanced by the Learned Amicus Curiae, the Union of India, the State of Maharashtra, the Court Receiver, and the respective parties to the Suit, it would first be relevant to appreciate the status and nature of the office of the Court Receiver.
32. This Court has considered the status of the Court Receiver (albeit in a different context i.e. whether an arbitral tribunal may appoint the Court Receiver attached to the Bombay High Court under Section 17 of the Arbitration and Conciliation Act, 1996) in Shakti International Private Limited vs. Excel Metal Processors Private Limited (supra).
33. In Shakti International Private Limited (supra), this Court observed as follows:
“STATUS OF THE COURT RECEIVER – HIGH COURT, BOMBAY
16. To appreciate whether the Court Receiver, High Court, Bombay, is liable to be appointed by a private forum like an arbitral tribunal, it would be relevant to understand the status or position of the Court Receiver, High Court, Bombay. This has been discussed in various judgments referred to by the parties, which arose in the context of transfer of bank suits (in which the Court Receiver, High Court, Bombay, had already been appointed) to the Debt Recovery Tribunal, when the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDB Act”) came into force.
17. In I.C.I.C.I Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra), the issues for consideration before this Court were:
“(a) whether this Court had jurisdiction to issue directions to the Court Receiver in suits in which the Court Receiver stood appointed prior to 16th July, 1999, i.e., the date on which the Central Government by notification established the Debt Recovery Tribunal under Section 3 of the RDB Act; and
(b) If not, whether the High Court was empowered to give directions to the Court Receiver regarding the properties which were in custody of the Court Receiver till such time as the Debt Recovery Tribunal/Central Government set up an alternative office/machinery with a proper infrastructure.”
18. The Court at paragraph 5 (pages 215-216) set out a brief history, status and functioning of the Office of the Court Receiver as follows:
“….. prelude
Before 1929, Receivership was granted to private persons. Gradually, the business in the hands of the private Receiver increased and it was thought it had grown too big to be entrusted to a single private individual. It was, therefore, decided that the work should be assigned to a salaried office on the establishment of the High Court. As a result, in 1929 the Government created the post of the Court Receiver, who took over all the pending Receiverships from the private Receiver. The system sanctioned by the Government for running the office, after it was taken over, was that the office should budget for its normal expenditure which the Government will pay in the first instance but which had to be recouped to them from the takings of the office other than the Receiver’s commission. In 1932, the office was made a permanent department of the High Court. The Court Receiver was directed to continue to charge to the estates under his management all expenses incurred in connection with his office including the payment of rent and to credit all recoveries to the Government. Accordingly, Rule 592 of the O.S. Rules, inter alia, provides that the Court Receiver shall charge to the estates under his management a sum towards the expenses of his office including his salary. Under Rule 591, the Court Receiver is directed to charge fees according to a prescribed scale. Under Rule 595, a Receiver is required to file accounts in the office of the Commissioner. In appropriate cases, this Court is also empowered to appoint a Receiver other than the Court Receiver. Such Receiver is also required to file accounts in the office of the Commissioner [See Rule 594 (a)]. When the Court Receiver is discharged, he is required to file his accounts upto the date of his discharge. Similarly, under Rule 924, the accounts of the Court Receiver are required to be audited by Accountant General and if any question between the auditor and the Court Receiver relating to accounts arises for determination, the question is required to be referred to the Chief Justice. This is under Rule 926. As stated in my order dated 4th February, 2000, properties worth Rs. 2000 crores are in possession of the Court Receiver, High Court, Bombay. These consist of shares, fixed deposits, jewellery, plant and machinery, buildings, dry docks, tea estates, ships, amounts in the personal ledger accounts of the Court Receiver with R.B.I. as also amounts lying in the hands of the Court Receiver in cash and cheques. The office of the Court Receiver, High Court, Bombay has various departments like accounts, department/section, cash department, record department, general administration department, etc. The Court Receiver, High Court, Bombay and the entire staf constitute a permanent department of the High Court. The Court Receiver is a high-ranking official. The present Court Receiver holds the pay scale of Additional Prothonotary and Senior Master. The Court Receiver has to enter into agency agreements after the properties become custodial legis. As a Court Receiver, she has to sign bills/vouchers. At this stage, it is important to note that after deducting costs, charges and expenses as also the commission by the Court Receiver, Banks and Financial Institutions are required to be paid the net royalty amount even during the pendency of the suit pursuant to the orders of the Court. These payments are made by the Court Receiver by cheques. Hence, the Court Receiver is required to sign cheques and payment vouchers by which net royalty amount is remitted to the parties to the suit. The Court Receiver is also required to sign daily vouchers to meet office expenses. The Court Receiver is also required to pay expenses to the officers, who visit the site by way of daily allowances. These officers are also required to go out of Bombay. The Court Receiver is also required to sign salary bills. The Court Receiver is also required to pay security guards who are appointed to protect plants, machinery and immovable properties all over India. The Court Receiver is also required to pay fees to Valuers, Architects and Chartered Accountants. In some cases, Court Receiver is also required to sign returns under the Income Tax Act. All these facts are mentioned only to indicate that in Bombay the Court Receiver, High Court, Bombay discharges a very important function. The properties are spread over in India between Assam and Kanyakumari. One more fact needs to be mentioned that the State Government provides annual grant to the High Court. The budget allocation also includes office of the Court Receiver, High Court, Bombay. After deduction all costs, charges and expenses, the Court Receiver remits the balance amounts to the State Government. In the last Financial Year ending on 31st March, 1999, the office of the Court Receiver, High Court, Bombay earned net revenue for the State Government of about Rs. 2 crores. These facts are required to be mentioned also for a diferent reason. With the coming up of the DRT, all suits, in which the claim is below Rs. 10 lakhs, remained within the jurisdiction of this Court. Apart from the Bank suits, we have private suits. In thousands of these suits Court Receiver’s office still continues to have jurisdiction. As stated hereinabove, the office of the Court Receiver, High Court, Bombay is a department of the High Court. In last 60 years, this office has worked only for the High Court and not for any other Court like Small Causes Court. It is made clear once again that the Court Receiver has not worked for Small Causes Court or any other judicial forum.”
19. […]
20. […]
21. The point that the Court Receiver, High Court, Bombay functions only under the control and supervision of this Court, is again apparent from paragraph 11 (at pages 226-227) of the judgment, which states:
“In this matter, the learned Acting Chief Justice, High Court, Bombay has received a letter from the Hon ‘ble Finance Minister of India requesting the High Court to lend the services of the Court Receiver to Debt Recovery Tribunal till alternate arrangements are made. The learned Acting Chief Justice, High Court, Bombay, thereafter invited submissions from the Prothonotary and Senior Master, High Court, Bombay. After due deliberation, it has been decided that administratively it would not be possible to lend the services of the Court Receiver to Debt Recovery Tribunal. Detailed reasons in that regard have been given. Some of the reasons have been mentioned hereinabove. It may be once again stated that in the past Court Receiver’s services have not been lent to the Small Causes Court. In any event, in the light of this judgment, the question of lending services of the Court Receiver to Debt Recovery Tribunal does not arise.”
22. In Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others (supra), this Court (R.J. Kochar, J.) once again considered the issue of whether this Court could direct the Court Receiver to sell the suit property in proceedings that were before the Debt Recovery Tribunal. The Court discussed the aforementioned judgment in I.C.I.C.I Ltd. v. Patheja Brothers Forgings and Stampings Ltd. (supra).
24. Due to the conflict between the Judgments in ICICI Ltd. (supra), and Bank of Tokyo – Mitsubishi Ltd. (supra), as to whether this Court can continue to issue directions to the Court Receiver appointed by it, in bank suits transferred to the Debt Recovery Tribunal, the matter was referred to a larger bench of this Court.
25. The decision of the Division Bench (Larger Bench) (Coram: B.N. Srikrishna and S.D. Gundewar, JJ.) was by an Order dated 23rd July, 2001 in The Bank of Tokyo-Mitsubishi Ltd. v. M/s. Chembra Estates and others and Court Receiver, High Court, Bombay (supra). The Division Bench (in paragraphs 14 and 15) agreed with the view taken by the Court in Bank of Tokyo – Mitsubishi Ltd. (supra). For reasons of practical expediency, the Division Bench also recommended to the Chief Justice of this Court that the Court Receiver’s services be made available to the Debts Recovery Tribunal/Appellate Tribunal for a period commencing from 23rd July 2001 until the completion of 1 (one) year therefrom, unless discharged by the Debt Recovery Tribunal either suo moto or on application by the parties. The Division Bench held that the Debt Recovery Tribunal or its Appellate Tribunal would have jurisdiction to issue all appropriate directions to the Court Receiver which were hitherto given by this Court, where the Court Receiver had been appointed in respect of proceedings pending before the Debt Recovery Tribunal. The relevant conclusions of the Division Bench at paragraph 15 are as follows:
[…]
26. In ICICI Bank Ltd. v. J.K. Synthetics Ltd. & Anr. (supra), this Court (Coram: S. U. Kamdar, J.) also had an occasion to comment on the status of the Court Receiver, High Court, Bombay. The question before the Court related to the powers of the Chamber Judge to vary the charges/fees for services rendered by the Court Receiver, fixed by the Bombay High Court (Original Side) Rules. In this context, it was observed that:
“10. I have considered the rival submissions between the parties. There are two factors which are required to be set out at the outset before I deal with the issue at hand. Firstly, on the Original Side of High Court of Mumbai, the office of the Court Receiver is maintained by the High Court in its regular discharge of function. On the Original Side in almost all the matters where the Receiver is appointed it is the Receiver of the High Court who takes charge and under the control and direction of the Court supervises and also manages the property and afairs thereof. The office of the Court Receiver, High Court, Bombay has staf regularly employed on the basis of permanent employment by the High Court and the office is maintained by the Court. The second signifcant factor which is also required to be considered is that as and by way of usual features and regular guidelines, r. 591 specifcally prescribes the rates of charges and commission which has to be paid in each of the matters on the percentage basis. These provisions are provided for under the High Court (Original Side) Rules with an intention that there is a non-arbitrary yard stick in respect of the amount to be recovered by the Court Receiver for the services rendered by him. The High Court (Original Side) Rules are framed in exercise of power conferred on the High Court under the provisions of the Civil Procedure Code. On the Original Side of the High Court it is not the case like in the other cases where private receivers are appointed as the Court Receiver and thus his remuneration of the amount charged by him for fees and commission is to be regulated by the Court. It is undoubtedly true that even under r. 591 ultimate control is vested with the Court and under the Rules a discretion is conferred on the Chamber Judge to reduce the amount chargeable by the Court Receiver.
However, the issue which is to be determined is whether the case has been made out by the defendant No. 1 for reduction of charges and/or deviation from the fees prescribed under r. 591 of the Original Side Rules”.
27. In Girish M. Joshi v. Jagat Manubhai Parikh (supra), this Court was considering the issue regarding appointment of the Court Receiver, High Court, Bombay by the City Civil Court and the Small Causes Court, Mumbai. This Court, after noticing the Larger/Division Bench decision in Bank of TokyoMistubishi Ltd., (supra), by its Judgement and Order dated 11th September, 2009, stated in paragraphs 4 and 5, pages 2 – 3, that:
“The Order of the Division Bench Notes that:
“the Court Receiver, High Court, Bombay is an employee of the High Court who is subject to the administrative control of the Hon ‘ble Chief Justice. There is no provision either in the Original Side Rules or in the Rules framed under the City Civil Courts Act which empowers the City Civil Court to appoint the Court Receiver, High Court, Bombay as a Receiver in the suits and proceedings filed in the City Civil Court at Bombay….
………….
5. In the report of the Court Receiver various orders passed by the City Civil Court have been pointed out. The office of the Court Receiver is already under enormous pressure as by virtue of orders passed by this Court in various suits and proceedings including the arbitration petitions under section 9 of the Arbitration and Conciliation Act, 1946, the Court Receiver is required to look after very large and valuable immovable properties in the City of Bombay and at other places. In fact, by virtue of appointment as of the Court Receiver in suits fled in this Court, the Receiver has to look after properties which are situated even outside the State of Maharashtra. Considering the enormous pressure on the office of the Court Receiver, High Court, Bombay, and the lack adequate infrastructure, the said office cannot be burdened any further. There is no provision of law under which any Court subordinate to this Court can appoint the Court Receiver, High Court, Bombay, as a Receiver. Therefore, necessary directions may be required to be issued on the administrative side. It is, therefore, directed that a copy of this order shall be placed before the Hon ‘ble the Chief Justice for considering the matter on the administrative side.”
28. […]
29. From a reading and consideration of the above Judgments, I am of the view that it has been clearly held that the Court Receiver, High Court, Bombay, is an employee or a Department of the Bombay High Court and that it is this Court that has the powers to direct its duties and responsibilities.
[…]
36. […] The appointment, functioning and discharge of the Court Receiver is governed by Chapter XXX of the Bombay High Court (Original Side) Rules in addition to the provisions of Order XL of the CPC. These rules further establish that the Office of the Court Receiver, High Court, Bombay, functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the Office of the Court Receiver, High Court, Bombay.”
(Emphasis Supplied).
34. As held in Shakti International Private Limited (supra), the status of the Court Receiver, High Court, Bombay is that of an employee or a department of the High Court, Bombay who is subject to the administrative control of the Hon’ble Chief Justice. The office of the Court Receiver is ‘an establishment of the High Court’ and ‘a permanent department of the High Court’.
35. The judgment in ICICI Bank Ltd. v. J.K. Synthetics Ltd.7 referred to in Shakti International Private Limited (supra), reiterates that the office of the Court Receiver is maintained by the High Court, Bombay, and its staff is employed by the High Court, Bombay. The appointment, functioning and discharge of duties of the Court Receiver are governed by Chapter XXX of the Bombay High Court (Original Side) Rules in addition to the provisions of Order XL of the CPC. These rules further establish that the office of the Court Receiver, High Court, Bombay, functions only under the supervision and control of this Court. These Rules institutionalise the manner of functioning of the office of the Court Receiver, High Court, Bombay.
36. It is also relevant to note the language of Order XL of the CPC which empowers the Court to appoint a Receiver as an interim measure of protection.
“ ORDER XL
APPOINTMENT OF RECEIVER
1. Appointment of receivers
(1) Where it appears to the Court to be just and convenient, the Court may by order—
(a) appoint a receiver of any property, whether before or after decree;
(b) remove any person from the possession or custody of the property;
(c) commit the same to the possession, custody or management of the receiver, and
(d) confer upon the receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereoj the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Court thinks fit.
(2) Nothing in this rule shall authorize the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove.
2. Remuneration
The Court may by general or special order fix the amount to be paid as remuneration for the services of the receiver.
3. Duties
Every receiver so appointed shall—
(a) furnish such security (if any) as the Court thinks fit, duly to account for what he shall receive in respect of the property;
(b) submit his accounts at such periods and in such form as the Court directs;
(c) pay the amount due from him as the Court directs; and
(d) be responsible for any loss occasioned to the property by his wilful default or gross negligence.
4. Enforcement of receiver’s duties
Where a receiver—
(a) fails to submit his accounts at such periods and in such form as the Court directs, or
(b) fails to pay the amount due from him as the Court directs, or
(c) occasions loss to the property by his wilful default or gross negligence,
the Court may direct his property to be attached and may sell such property, and may apply the proceeds to make good any amount found to be due from him or any loss occasioned by him, and shall pay the balance (if any) to the receiver.
5. When Collector may be appointed receiver
Where the property is land paying revenue to the Government, or land of which the revenue has been assigned or redeemed, and the Court considers that the interests of those concerned will be promoted by the management of the Collector, the Court may, with the consent of the Collector, appoint him to be receiver of such property.”
37. Order XL Rule 1 of the CPC contemplates that a Court may, inter alia, confer upon the receiver all such powers, as to bringing and defending suits and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Court thinks fit. Rule 2 provides that the Court may by general or special order fix the amount to be paid as remuneration for the services of the receiver. Rules 591 and 592 of the Bombay High Court (Original Side) Rules, 1980 read as under:
“591. Fees of Receiver – Unless otherwise ordered by the Judge, the Court Receiver shall charge fees according to the following scale:-
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