KORES LTD. V. BANK OF MAHARASHTRA AND ORS INSC 812

Name- KORES LTD. V. BANK OF MAHARASHTRA AND ORS

Year Decided- 2006

Facts- M/s Jyoti Chemicals leased an industrial project in Andhra Pradesh to Kores(India) Ltd in 1990, . In 1993 Jyoti Chemical, was sued by the bank of Maharashtra, which was the creditor, to collect unpaid debts and requested the designation of a receiver for the leased property. Although the initial request for a receiver was denied, a division bench of the Bombay High Court later appointed a receiver and directed Kores to pay the rent and royalty for the property and machinery. Kores challenged the receiver's royalty amount and the obligation to pay it, but their appeals were denied by the Debts Recovery Tribunal and later appellate bodies. A writ petition was filed by Kores in the High Court, which upheld the tribunal's decision. The matter was appealed to the Supreme Court.

Issue- Whether Kores Ltd was liable to pay the royalty for the plant and machinery in addition to the agreed rent and was the receiver's set royalty amount reasonable?

Decision- The Supreme Court partially allowed the appeal, reducing the royalty payable by Kores but upholding their liability to pay it.

Majority Decision Reasoning- The Supreme Court held that Kores was legally entitled to challenge the liability to pay the royalty even though earlier temporary court decisions had addressed the issue. However a complete reevaluation of liability was not possible because of Kores's compliance with previous proceedings and the absence of Citi Bank, a necessary party. Regarding the amount, the Court found the valuation of machinery and the 10% royalty rate to be excessive. It reduced the royalty to 6% of the written down value, determining it to be fair according to the current circumstances.

Dissenting Opinion Reasoning- There was no dissenting opinion given in this case.

Impact of the case- This case emphasizes the rights of tenants under court appointed management and the extent to which they can challenge earlier temporary court decisions during a case. It establishes that fair valuation and proportional liability are essential in order to determine dues under receivership while reinforcing the necessity of including all affected parties in litigation.