On perusal of the affidavit-in-reply filed by the respondents, it is
thus clear that even according to the respondents there are no properties left which would be available in the hands of the petitioner for execution of the
decree/award, if any, passed by the arbitrator. In my prima facie view, petitioner
has made out a case that if the petitioner succeed in arbitration proceedings against the respondents in the facts of the case, petitioner would not be able to
recover any amount from the respondents unless respondents are directed to secure the claim of the petitioner. In my view if the claim of the petitioner is not
secured by passing appropriate order against the respondents, there would be a
paper decree in the hands of the petitioner and such huge claim made by the petitioner would not be recovered. In my view the petitioner has made out case om
under Order 38 Rule 5 of the Code of Civil Procedure, 1908.1
Bombay High Court
H vs Plot No.74, Lane No.3, Natraj ... on 1 April, 2013
Bench: R.D. Dhanuka
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ou
ARBITRATION PETITION NO. 1282 OF 2012 L & T Finance Limited ] Vs.
H
1) Duplex Industries Ltd. ]
1. By this petition filed under section 9 of the Arbitration and h
Conciliation Act, 1996, the petitioner seeks an appointment of the Court ig
Receiver in respect of the properties described in Exhibit "F" to the petition and also seeking an order of deposit of Rs.6,94,70,392.29 by the respondent or in the H
alternative to furnish security of the like amount to secure the claim of the petitioner.
2. On 31.8.2011, pursuant to the application with proposal made by the respondent no.1 for short term financing facility on revolving basis of om
Rs.10 Crores for purchase of goods from Sterlite Industries (I) Limited, the petitioner accorded their consent to the said request and sanctioned the the loan to the tune of Rs.10.00 Crores to the 1st respondent. Both parties thereafter B
entered into facility agreement on 31.8.2011. The respondent no.1 had executed the demand promissory note on 31.8.2011 in favour fo the petitioner. The respondent no.2 executed deed of guarantee on 31.8.2011 in favour of the petitioner.
3. Pursuant to the said facility granted by the petitioner, the
respondent no.1 made payment of three installments to the petitioner and committed default in respect of remaining installments. The petitioner issued a ou
demand-cum-termination notice dated 13.7.2012 through their Advocate and terminated the said agreement and called upon the respondents to pay to the C
petitioner Rs.6,94,70,392.29 with further overdue compensation @36% p.a. from 14.7.2012. There was neither repayment nor response to the said notice issued by h
the petitioner has already appointed sole arbitrator in terms of the arbitration agreement.
ig
H
4. It is case of the petitioner that the respondents have committed default in making installments. Respondents did not even approach the petitioner y
for showing their bonafide for payment of outstanding loan amount or any part ba
thereof with a view to settle the matter. There was no reply to the legal notice by the respondents. In para 11 and 12 of the petition it is averred that the petitioner om
apprehends that the respondents may try to create third party rights with malafide intention to defeat and/or frustrate the award/decree which may be passed by the arbitrator in favour of the petitioner and against the respondents. It is also B
averred that if the respondents are not restrained by an order of injunction, the irreparable loss would be caused to the petitioner as there was no securities left with the petitioner for the recovery of the outstanding loan amount and thus it would be necessary to direct the respondents to disclose the details of their other 3 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 4 arbp.1282-2012 un-encumbered properties to the court to secure the claim amount of the rt
petitioner. The petitioner has therefore sought an appointment of the Court Receiver and injunction in respect of the properties described in Exhibit "F" to ou
the petition, and also seek directions to furnish security against the respondents and in favour of the petitioner.
C
5. The learned counsel appearing for the respondents submits that this h
court has no jurisdiction to entertain and try this petition on the ground that the ig
facility agreement entered into between the parties was admittedly executed at Pune. The learned counsel submits that there is no agreement between the parties H
conferring jurisdiction on this court. He submits that even deed of guarantee was executed and witnessed at Pune. It is submitted that the respondents are carrying y
on business and having their office at Pune. It is submitted that even if part of the ba
cause of action has arisen at Mumbai, in view of the petitioner not having leave under clause 12 of the Letters Patent, the present proceedings filed under section om
9 of the Arbitration and Conciliation Act, 1996 in this court are without jurisdiction.
B
6. The learned counsel for the respondents then submits that the properties in respect of which the Receiver is prayed by the petitioner are not in favour of the petitioner or no security in respect thereof is created in favour of the petitioner by the respondents. The learned counsel for the respondents invited 4 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 5 arbp.1282-2012 my attention to the paragraphs 19 and 22 of the affidavit-in-reply in support of rt
his submission that the properties mentioned by the petitioner in Exhibit "F" to the petition are already mortgaged/hypothecated to the Consortium Bankers-(a) ou
State Bank of India (Lead bank), (b) Yes Bank Ltd., (c)Dhanlaxmi Bank Ltd and (d) ICICI Bank Ltd as far back in the year 2008. It is submitted that so far as the C
plot no.74, Lane No.3, Natraj Co.op. Hsg. Scociety, Karve Nagar, Pune is concerned, the same was standing in the name of Anand Vishnu Satpute, the h
guarantor and same has been already gifted by him to his daughter Mrs. Anita ig
Salekar vide gift deed which is registered with the sub-Registrar of Assurances at Pune. He submits that the said gift deed in favour of the daughter of the H
guarantor was executed on 18.9.2008 which was prior to execution of the facility agreement in favour of respondent no.1 by the petitioner and thus there is no y
question of 1st respondent transferring any property with an intention to frustrate ba
the decree, if any, passed in favour of the petitioner by the arbitrator. om
7. The learned counsel for the respondents submits that of for seeking an order for furnishing security as prayed by the petitioner, the petitioner has to make out a case under Order 38 Rule 5 of the Code of Civil Procedure which has B
failed. The learned counsel placed reliance upon the judgment of the Division bench of this court in case of Nimbus Communication Ltd. Vs. Board of Control for Cricket in India reported in 2010(5) Bom.C.R. 114 and particularly para-22 thereof which thus reads:
5 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 6 arbp.1282-2012 "22. The judgment of the Supreme Court in Adhunik Steels has noted the earlier decision in Arvind Constructions which holds rt
that since Section 9 is a power which is conferred under a special statute, but which is exercisable by an ordinary court without laying down a special condition for the exercise of the power or a ou
special procedure, the general rules of procedure of the court would apply. Consequently, where an injunction is sought under Section 9 the power of the Court to grant that injunction cannot be exercised independent of the principles which C
have been laid down to govern the grant of interim injunctions particularly in the context of the Special Relief Act 1963. The Court, consequently would be obligated to consider as to whether there exists a prima facie case, the balance of convenience and irreparable injury in deciding whether it h
would be just and convenient to grant an order of injunction. Section 9, specifically provides in subclause (d) of clause (ii) for ig
the grant of an interim injunction or the appointment of a receiver. As regards subclause (b) of clause (ii) the interim measure of protection is to secure the amount in dispute in the H
arbitration. The underlying object of Order 38 Rule 5 is to confer upon the Court an enabling power to require a defendant to provide security of an extent and value as may be sufficient to satisfy the decree that may be passed in favour of the y
plaintiff. The exercise of the power to order that security should be furnished is, however, preconditioned by the requirement ba
of the satisfaction of the Court that the defendant is about to alienate the property or remove it beyond the limits of the Court with an intent to obstruct or delay execution of the decree that may be passed against him. In view of the decisions of the om
Supreme Court both in Arvind Constructions and Adhunik Steels, it would not be possible to subscribe to the position that the power to grant an interim measure of protection under Section 9(ii)(b) is completely independent of the provisions of the Code of Civil Procedure 1908 or that the exercise of that power is untrammeled by the Code. The basic principle which B
emerges from both the judgments of the Supreme Court is that though the Arbitration and Conciliation Act 1996 is a special statute, Section 9 does not either attach a special condition for the exercise of the power nor does it embody a special form of procedure for the exercise of the power by the Court. The second aspect of the provision which has been noted by the Supreme Court is the concluding part of Section 9 under which it ha been specified that the Court shall have the same power for making orders as it has 6 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 7 arbp.1282-2012 for the purpose of and in relation to any proceedings before it. This has been interpreted in both the judgments to mean that the normal rt
rules that govern the Court in the grant of an interlocutory order are not jettisoned by the provision. The judgment of the Division Bench of this Court in National Shipping Company (supra) ou
notes that though the power by Section 9(ii)(b) is wide, it has to be governed by the paramount consideration that a party which has a claim adjudicated in its favour ultimately by the arbitrator should be in a position to obtain the fruits of the arbitration while C
executing the award. The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave injustice to the party seeking a protective order. The h
obstructive conduct of the party against whom such a direction is sought was regarded as being a material consideration. However, ig
the view of the Division Bench of this Court that the exercise of power under Section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in H
view of the decision of the Supreme Court in Adhunik Steels. "
y
8. Mrs. Joshi, learned counsel appearing for the petitioner in rejoinder ba
invites my attention to the averements made in the petition to indicate that the petitioner has already made out a case under Order 38 Rule 5 of the Code of om
Civil Procedure. The learned counsel for the petitioner states that the petitioner averred that there are no securities in favour of the petitioner which could have been made available for the purposes of satisfying the decree, if any, passed by B
the arbitrator. It is submitted that the respondents have admittedly committed default in making payment of installments. The respondents have not even bothered to respond to the legal notice of demand issued by the petitioner. It is submitted that as the respondents have prima facie no defence to the demand 7 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 8 arbp.1282-2012 made by the petitioner and in view of the admitted facts in the affidavit-in-reply rt
that all the properties described in Exhibit "F" to the petition are already mortgaged in favour of various Consortium Bankers, there are no other ou
properties of the respondent no.1 and therefore it is the fit case to direct the respondents to furnish security in the sum of suit claim so as to secure the claim C
of the petitioner.
h
9. On perusal of the facility agreement entered into between the ig
petitioner and the respondents which reveals that the respondents are liable to make repayment to the petitioner at Mumbai and at such office as may be H
specified by the petitioner by telegraphic, telex or mail transfer to the account of such office or by cheque, bank draft etc. The documents annexed to the petition y
also indicates that the promissory note as well as the deed of guarantee were ba
submitted by the respondents to the petitioner at Mumbai. In para-24 of the petition the petitioner averred that the petitioner's corporate office is situated at om
Mumbai from where the loan was sanctioned and disbursed to the 1 st respondent. It is averred that the respondents agreed to repay the said loan amount at the registered office of the petitioner at Mumbai. In my view, as the part of cause of B
action has admittedly arisen within the territorial jurisdiction of this court, the petition filed under section 9 of the Arbitration and Conciliation Act, 1996 is maintainable in this court. In my view, this court has jurisdiction to entertain and try and dispose of this petition.
8 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 9 arbp.1282-2012 rt
10. In view of the fact that part of cause of action arisen within the territorial jurisdiction of this court, in my view, no leave under clause 12 of the ou
Letters Patent is required for the purposes of conferring jurisdiction of this court for entertaining petition under section 9 of the Arbitration and Conciliation Act, C
1996.
h
11. As far as the relief sought by the petitioner for direction to furnish ig
security by the respondents so as to secure the claim of the petitioner is concerned, it is not in dispute that the properties described in Exhibit "F" to the H
petition were not created as securities in favour of the petitioner. In my prima facie view the respondents have committed default in making payment of y
installments to the petitioner and thus the suit claim is required to be protected. ba
The respondents in their affidavit, and more particularly paragraphs 19 and 22 of the said affidavit have admitted that immovable properties mentioned therein om
have been already mortgaged/hypothecated to the Consortium Bankers as far back as in the year 2008. As far as the plot no.74,Lane No.3, Natraj Co.op. Hsg. Scociety, Karve Nagar, Pune is concerned, it is stated by the respondent no.2- B
guarantor that by gift deed dated 18.9.2008 the said plot has already been gifted by the guarantor in favour of his daughter. 9 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 10 arbp.1282-2012 12 The respondents have also deposed in para 22 of their affidavit that rt
there are no properties of the 1st respondent or 2nd respondent except properties described in para 19 which are already encumbered and/or transferred. ou
13. On perusal of the affidavit-in-reply filed by the respondents, it is C
thus clear that even according to the respondents there are no properties left which would be available in the hands of the petitioner for execution of the h
decree/award, if any, passed by the arbitrator. In my prima facie view, petitioner ig
has made out a case that if the petitioner succeed in arbitration proceedings against the respondents in the facts of the case, petitioner would not be able to H
recover any amount from the respondents unless respondents are directed to secure the claim of the petitioner. In my view if the claim of the petitioner is not y
secured by passing appropriate order against the respondents, there would be a ba
paper decree in the hands of the petitioner and such huge claim made by the petitioner would not be recovered. In my view the petitioner has made out case om
under Order 38 Rule 5 of the Code of Civil Procedure, 1908.
14. Resultantly, I pass the following order: B
i) The respondents are directed to furnish the security to the satisfaction of the Prothonotary and Senior Master of this court in the sum of Rs.6,94,70,392/- with further interest @ 18% per annum thereon to be calculated from 14.7.2012 till the date of 10 / 11
::: Downloaded on - 07/04/2013 15:44:14 ::: 11 arbp.1282-2012 furnishing the security within 4 weeks from today. rt
ii) It is made clear that the security to be furnished by the respondents as directed shall be subject to the outcome of the ou
arbitration proceedings.
C
15. Arbitration Petition is disposed of the aforesaid terms, with no order as to costs.
h
R.D. DHANUKA, J.
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