IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE AP No.202 of 2014 SREI EQUIPMENT FINANCE LTD.Versus M/S.AQDAS MARITIME AGENCY PVT.LTD.AP No.234 of 2014 M/S.AQDAS MARITIME AGENCY PVT.LTD.Versus SREI EQUIPMENT FINANCE LTD.AP No.235 of 2014 M/S.AQDAS MARITIME AGENCY PVT.LTD.Versus SREI EQUIPMENT FINANCE LTD.AP No.278 of 2014 M/S.AQDAS MARITIME AGENCY PVT.LTD.Versus SREI EQUIPMENT FINANCE LTD.Appearance: Mr.Satarup Banerjee, Adv.Ms.S.Mondal, Adv...for the petitioner.
Mr.Tilak Bose, Sr.Adv.Mr.S.Sen, Adv.Mr.N.Adhya, Adv...for the respondent.
BEFORE: The Hon'ble JUSTICE SANJIB BANERJEE Date : July 9, 2014.
The Court : In view of the stand taken by the finance company that the order dated December 4, 2013 implied that a sum of Rs.2.85 crore remained due only on account of defaulted instalments and not in respect of the entire amounts claimed in respect of the five agreements, no further order can be passed on the present proceedings.
Three petitions were carried to this Court under Section 9 of the Arbitration and Conciliation Act, 1996 in respect of three agreements.
On August 14, 2013, two of the matters were taken up and it was recorded that the respondent had handed over a chart indicating the payments made and the receipts issued by the finance company in respect thereof.
The two matters were adjourned to enable the parties to reconcile the accounts.
All three petitions, AP No.790 of 2012, AP No.812 of 2012 and AP No.816 of 2012, were next taken up on October 8, 2013 when it was recorded that the parties were negotiating a settlement and the finance company’s submission was also noticed that it would take no steps in the criminal proceedings before the matters were taken up next.
On November 27, 2013 all three matters were taken up when the finance company submitted that there was a sum in excess of Rs.5 crore due from the respondent in respect of the three subject agreements and in respect of two other agreements for which no proceedings had been initiated.
The order recorded the respondent’s submission that a sum of Rs.5.75 crore had been paid by the respondent to the petitioner but the finance company had not been able to explain the manner in which the payments had been adjusted.
The order required the finance company to indicate all the payments received from the respondent and demonstrate how such payments had been adjusted against the five agreements.
It must be noticed that though only three agreements were before Court in the three petitions, the parties had roped in two other agreements in respect whereof no proceedings had been instituted in Court.
On December 4, 2013, there was an air of reconciliation and the order of such date reflects the same.
It was submitted by the parties that five agreements had been executed by them and a sixth agreement was executed between the finance company and Citizen Transport Company Limited, presumably an associate concern of the respondent.
The second sentence of the order dated December 4, 2013 recorded as follows: “The parties have attempted to resolve their disputes pertaining to all the agreements between the petitioner and the respondent and even the agreement pertaining to Citizen Transport Company PVT.Ltd.” It is evident that it was at the express invitation of the parties that the Court took cognizance of matters which were not strictly covered by the three petitions which were before Court pertaining to three of the five agreements executed between the parties.
The second paragraph of the order of December 4, 2013, which the finance company now seeks to give a new twist to, should be seen in its entirety: “According to the accounts furnished by the finance company to the respondent, a total sum of about Rs.2.85 crore remains due and owing from the respondent to the finance company in respect of the five agreements executed by them as at November 22, 2013.” The accounts that had been furnished must have been in pursuance of the direction contained in the order of November 27, 2013.
It appears to be obvious from the second paragraph of the order dated December 4, 2013 that the entire claim of the finance company against the respondent in respect of all the agreements that had been executed by the parties stood at Rs.2.85 crore as at November 22, 2013; which implied that the respondent was entitled to interest after November 22, 2013 which had not been reflected in the relevant accounts.
The second paragraph of the order of December 4, 2013 does not also indicate as to whether the sum of Rs.2.85 crore was the principal amount on which interest would run or it was the amount calculated together with interest and was the figure arrived at upon considering both the principal and the interest component as at November 22, 2013.
But what is undeniably apparent from the relevant recording is that if an amount of Rs.2.85 crore was paid off by the respondent to the petitioner together with an extra component of interest (the principal on which the interest would operate is not clear).the entire claim of the finance company in respect of the five agreements would stand satisfied.
The third paragraph of the order of December 4, 2013 recorded the respondent’s assessment that no more than a sum of about Rs.2 crore was due to the finance company under the five agreements.
The respondent offered to put in the amount of Rs.2 crore on the condition that upon deposit of such amount further interest and penal interest should stop running on the claim.
The respondent was permitted to make the deposit of the amount of Rs.2 crore in two equal instalments by December 15, 2013 and by the last day of the month.
The order also provided that upon the deposit of Rs.2 crore being made, no further interest or penal interest in terms of the agreement would be payable.
The order of December 4, 2013 further recorded that the parties had agreed that the finance company would not take steps in the arbitral references and an attempt would be made to reconcile the accounts and the parties would abide by the result of the reconciliation.
The parties were given liberty to have their accounts reconciled by the end of January, 2014.
All three petitions were disposed of.
The receivers were discharged and the subsisting orders were vacated on the Court’s impression that the deposit in terms of the order would be made, that the reconciliation of the accounts would be completed as directed and the parties would abide by the figure arrived at upon the reconciliation of the accounts.
The only area of dispute was whether the total amount due under the five agreements as at November 22, 2013 was Rs.2.85 crore or it was Rs.2 crore.
The scope of the reconciliation was also limited to such aspect.
It does not appear from the order of December 4, 2013 that the three or the five agreements were to continue after such order in accordance with their tenure.
There are two very good reasons for the same.
First, the three agreements in respect whereof matters were carried to Court had been terminated and the order of December 4, 2013 did not record the cancellation of the termination of the agreements.
Thus, the termination stood and the entire claim of the finance company upon the termination of the agreement was considered in passing the order of December 4, 2013.
Secondly, if an order disposes of only a part of the disputes between the parties, say, the amount in default on a particular date, the order would specifically record the same and the order would provide that the future relationship between the parties would be governed by the terms of the agreement upon the termination being set aside following the default in payment of instalments under the agreement being made good by the hirer.
The order dated December 4, 2013 was silent on such aspect.
The order dated December 4, 2013 clearly implied the severance of the obligations of the parties to each other upon the payment of the sum of Rs.2 crore in accordance therewith and the further sum that would be thrown up following the reconciliation of the accounts being completed.
The deposit in terms of the order of December 4, 2013 was not made and a further petition, A.P.No.202 of 2014, was carried by the finance company under Section 9 of the 1996 Act complaining of the hirer’s failure to comply with the order of December 4, 2013.
Three other petitions, A.P.No.234 of 2014, A.P.No.235 of 2014 and A.P.No.278 of 2014, were filed by the hirer in respect of the three agreements which were the subject-matter of the previous lot of proceedings seeking, in effect, a discharge of the security furnished to the finance company.
All four petitions were taken up for the fiRs.time on February 20, 2014.
The opening line of the order of February 20, 2014 records the finance company’s petition being founded on the order of December 4, 2013.
The order of February 20, 2014, thereafter, proceeded to record the essence of the order of December 4, 2013 and the failure of the hirer to make payment in terms thereof.
The order observed that in the light of the hirer’s conduct it did not deserve any latitude and one of the receivers originally appointed was re-appointed as receiver “for the purpose of taking possession of all the assets covered by the three agreements in respect whereof the hirer has now filed petitions.” Of the 139 assets forming the subject-matter of the three relevant agreements, the finance company says that the receiver is in possession of 103 of the same.
Some of the assets have been sold and a sum of about Rs.1.51 crore has been obtained.
The sale was in the presence of both the hirer and the finance company.
Another offer of about Rs.49 lakh has been brought by the hirer for a further asset.
It is the hirer’s contention that on a proper interpretation of the order of December 4, 2013, it would be evident that the highest claim of the finance company was that it was entitled to a sum of Rs.2.85 crore as at November 22, 2013 together with interest on the basis of the relevant agreements running thereon (or on the principal amount, which is not clearly indicated in the relevant order) till the entire amount was paid off.
According to the hirer, if the sum of Rs.2.85 crore is taken to be the amount due as at November 22, 2013 and the interest as payable under the agreements allowed to operate on such figure till the time that the entire amount is cleared off, the obligation of the hirer, in terms of the order of December 4, 2013, would be to pay the sum of Rs.2.85 crore together with interest at the contracted rate till the date of payment.
The hirer suggests that since a sum of about Rs.1.51 crore has already been realised and a further amount of Rs.49 lakh would be obtained upon sale of another asset today, the hirer should be permitted some time to put in the balance sum of Rs.85 lakh and the hirer should then be required to pay the interest on the amount of Rs.2.85 crore in accordance with the agreements.
The hirer says that the relevant agreements do not indicate the benchmark rate of interest.
In such circumstances, the hirer is agreeable to pay interest at 15% per annum which is the maximum that the Court generally allows in such cases.
It is at such point that the finance company seeks to take a completely different stand.
This is what is represented on behalf of the finance company: that the figure of Rs.2.85 crore as indicated in the order of December 4, 2013 was the figure on account of defaulted instalments as at such date and not the entire claim in respect of the five agreements; that the five agreements were to continue till or about 2015 or later and the instalment payments for the subsequent months had to be paid by the respondent irrespective of what may have been recorded in the order of December 4, 2013; and, the order of December 4, 2013 did not imply that the rights and obligations of the parties would come to an end only upon the payment of the sum of Rs.2 crore in terms thereof and the amount to be ascertained after the reconciliation of accounts.
This submission appears to be ex facie inconsistent with the finance company’s unequivocal and unreserved stand as reflected in the order of December 4, 2013 and the finance company’s attempt to found its subsequent petition on the order dated December 4, 2013.
Indeed, if it was the finance company’s case otherwise, that should have been pointed out in the subsequent petition filed by the finance company and should have been specifically alluded to when the matter was taken up on February 20, 2014.
All these have led to a rather curious situation that the Court is helpless to address or resolve.
As has been noticed above, only three agreements had been carried to Court but the parties agreed to resolve their disputes relating to five agreements executed between them in all and another agreement executed by the finance company and an associate of the hirer.
It is elementary that the authority of the Court under Section 9 of the 1996 Act is limited.
The measures that the Court directs to be taken are all in aid of the reference and the award that may be passed at the conclusion of the reference.
Oftentimes orders which appear to be in excess of the interlocutory authority of the Court are passed, but that would be on the express or implied invitation of the parties and would be on the basis of the implied consent of the parties thereto.
It is in such light that the order of December 4, 2013 has to be read.
Now that the finance company has changed tack and seeks to reopen matters that had been closed by the order of December 4, 2013 on the volition of the finance company, the Court cannot force the finance company to accept what the hirer offers nor can the Court interpret the order of December 4, 2013 and force the consequence thereof down the throat of this recalcitrant finance company.
The finance company has to agree to any order that can be made to give the disputes between the parties a quietus; or the Court, plainly, has no jurisdiction to do so.
Since the completely unacceptable and, perhaps, dishonest stand of the finance company cannot be reconciled with the orders that have been passed at the parties’ invitation, nothing more can be done in these matteRs.What will remain affixed to the finance company is that it would not be entitled to any more than Rs.2.85 crore in respect of the five agreements as at November 22, 2013 with the principal component thereto being undetermined since that was not specified in the relevant order.
Whether now the finance company can institute three or five references and whether these references can proceed on the basis of any claim de hors the admission of a total claim of Rs.2.85 crore on account of all five agreements as at November 22, 2013, is a matter that has to be left to the concerned arbitratORS.But some amount of rationality must be restored.
The receiver would now hold the assets without taking any further steps to sell or allow use of the same without an express order from an appropriate forum in such regard.
The receiver will ensure that the assets which are in his possession are preserved in their present condition.
The costs and expenses in such regard will be borne by the receiver after obtaining funds from the finance company.
The receiver will also be entitled to a monthly remuneration of 2000 GM to be paid by the finance company.
As to the injunction issued against the hirer by the order dated February 20, 2013, restraining it from dealing with or disposing of or alienating or encumbering the relevant assets, such injunction is lifted, but the parties will be guided by the terms of the relevant agreements in such regard notwithstanding the injunction being vacated.
Upon the receiver dealing with the assets now in his possession in accordance with the orders of the appropriate forum, the receiver will stand discharged without being required to file any accounts.
AP No.202 of 2014, AP No.234 of 2014, AP No.235 of 2014 and AP No.278 of 2014 stand disposed of without any order as to costs.
Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(SANJIB BANERJEE, J.) A/s/sg.