| SooperKanoon Citation | sooperkanoon.com/965158 |
| Court | Chennai High Court |
| Decided On | Apr-01-2013 |
| Judge | VINOD K.SHARMA |
| Appellant | L and T Finance Limited |
| Respondent | C.T.Ramanathan Infrastructure Pvt. Ltd. |
01. 04/2013 CORAM THE HON'BLE MR.JUSTICE VINOD K.SHARMA A.No.5314 of 2012 M/S. L & T FINANCE LIMITED REP BY ITS ASST MANAGER MR C BALASUBRAMANIAN vs C.T. RAMANATHAN INFRASTRUCTURE PVT LTD FLAT NO.4/3 II FLOOR SK ENCLAVE 4 NEW NO.4 SNOWROJI ROAD CHETPET CHENNAI 3 OFFICE OF THE CHIEF ENGINEER SOUTHERN RAILWAYS ERNAKULAM GENERAL MANAGER (ACCOUNTS) SOUTHERN RAILWAYS CONTRACT CHENNAI 3 ORDER This application under Order XIV Rule 8 of O.S. Rules read with Sec.9(ii)(a),(b) (c) & (e) of the Arbitration & Conciliation Act, 1996 has been filed by the applicant, for issuance of prohibitory order restraining the Garnishees from making the payment upto a limit of Rs.2,73,11,000/- (Rupees two crores seventy three lakhs and eleven thousand only) and consequently, direct the Garnishees to deposit the amount so withheld into this Court, pending enforcement of the award that may ultimately be passed by the sole Arbitrator. 2 The applicant is a non Banking Finance Company having its registered office at Mumbai with branches all over India. In the course of its business, the applicant advanced unsecured loan for its working capital requirements of Rs.2,00,00,000/- (Rupees two crores only) which was repayable in 24 monthly instalments, together with interest @ 9.04% p.a. 3 It is pleaded that the respondent was irregular in making payment of instalments and committed default from third instalment which fell due on 5.5.2012. In exercise of powers conferred under the agreement, the agreement was terminated, and notice was issued to recall the amount. Notice was also issued to the guarantor. In reply to notice it was stated that amount is recoverable from Garnishee, therefore, the respondent was unable to pay the amount. 4 The case of the applicant, is that on the date of filing this application, a sum of Rs.2,73,11,000/- (Rupees two crores seventy three lakhs and eleven thousand only) was due along with future interest @ 36% p.a. The agreement also contains arbitration clause. In the notice, it was stated that in the event of failure to pay the amount, one Mr.Bharat B.Jain shall be appointed as Arbitrator. On the pleadings referred to above, this application has been filed. 5 Reading of provisions of C.P.C. shows, that the order of Garnishee can be passed in case of recovery from the judgment debtor meaning thereby that the provisions of Order 21 Rule 46A to 46C are applicable only after passing of decree. Furnishing of security pending arbitral proceedings therefore will be governed by underlying principle of Order 38 Rule 5 of Code of Civil Procedure. It is only in rarest of rare cases that provisions of Order 21 Rule 46A to 46C can be invoked pending arbitral proceedings, and not in a routine manner. The reason being that the relationship of Garnishee with the debtor or creditor is not governed by arbitration clause between the parties to the dispute. In case of any dispute with regard to claim, the Garnishee cannot approach the Arbitrator for want of arbitration agreement. Though under section 9 of the Arbitration and Conciliation Act, it is open to the Court to pass interim order against a party who is not a party to arbitration agreement or arbitration proceedings, but it can be with regard to subject matter of arbitration and not otherwise. The Court can pass order against third party in exceptional cases in the interest of justice to protect the property from being transferred or becoming vested with third party illegally. 6 The Hon'ble Supreme Court in Firm Ashok Traders vs. Gurumukh Das Saluja (A.I.R. 2004 SC 1433.was pleased to lay down that since remedy under section 9 flows from arbitration agreement, a third party who is not a party to the arbitration agreement or arbitration proceedings, cannot seek any relief in this section, nor he can be pleaded as party in any application under section 9 of the Arbitration and Conciliation Act, 1996. Therefore, it is in the rarest of rare case, that the relief against Garnishee would be competent under Sec.9 of the Arbitration and Conciliation Act and not otherwise. It is also well settled law that unsecured loan cannot be converted into a secured loan, by invoking Order 38 Rule 5 of C.P.C. 6 Furthermore, in the agreement executed between the parties, stipulated as under: "This agreement shall be governed and construed in all respects with the Indian laws, and the parties hereto agree that any matter or issue arising hereunder or any dispute hereunder shall be subject to the exclusive jurisdiction of the courts at Mumbai." 7 In view of the agreement between the parties the exclusive jurisdiction vests with Courts at Mumbai, therefore, this application is not maintainable in this Court. It is settled law that parties by consent cannot give jurisdiction to a Court which does not have jurisdiction, but can restrict jurisdiction to particular Court if more than one Court has jurisdiction. In this case, exclusive jurisdiction vests with Mumbai Courts. 8 The learned counsel for the applicant placed reliance on the judgment of the Hon'ble Division Bench of this Court in Garlapati Ramanaiah Naidu and another vs. L & T Finance Ltd. (2012(5) CTC
172) to contend that this Court also has the jurisdiction to entertain and try the present application. The Hon'ble Division Bench in this case was pleased to lay down that: "40 The execution of the Loan-cum-Hypothecation Agreement and the Deeds of Guarantee is not in serious dispute. As per Clause 19, no exclusive jurisdiction has been conferred on the Courts of the State of Mumbai and it has been clearly indicated in the said clause that the Non-Exclusive jurisdiction of the Courts of the State of Mumbai shall not, however, limit the rights of the lender (Respondent herein) to take appropriate proceedings in any other Court of competent jurisdiction. Accordingly, the respondent has invoked the jurisdiction of this Court and filed the application under Section 9 of the Arbitration Act, 1996. 41 It is also pertinent to point out at this juncture that the Deeds of Guarantee were executed at Chennai and one of the clauses of the Letter of Guarantee also states that nothing contianed in Section 17 of the Arbitration Act, shall in any way, affect the right of any of or preclude the parties to/from seek/seeking such interim relief/s in any Court of competent jurisdiction, including the interim relief under Section 9 of the Arbitration Act and Rules framed thereunder. 42 Clause (e) of the letter of guarantee also reads that the venue of Arbitration shall be Mumbai or such other place as the lender may in the sole discretion determine and the Courts in Mumbai or such other place shall have exclusive jurisdiction." 9 The contention on the face of it is misconceived. The Hon'ble Division Bench rejected the objection to the jurisdiction, firstly on the ground that it was not open to the appellant to raise plea of territorial jurisdiction first time in appeal. Secondly that, the parties had not given exclusive jurisdiction to the Mumbai Courts alone. 10 But in the case in hand, exclusive jurisdiction is given to Mumbai Courts. 11 It may also noticed that Sec.9 of the Arbitration and Conciliation Act, cannot be used to convert this Court into Recovery Agents to pass an order against Garnishee, even before serving notice. 12 The provisions of Order 21 Rule 46A and 46C cannot apply to proceeding under Sec.9 of the Arbitration and Conciliation Act, as underlying principle of Order 21 Rule 46A to 46C can be invoked after passing the decree, as the words used are judgment debtor and not debtor or parties. The security or attachment pending proceedings are governed by provisions of Order 38 Rule 5 of C.P.C. 13 The Hon'ble Supreme Court in Arvind Constructions Co. (P) Ltd. vs. Kalinga Mining Corporation and others ((2007)6 SCC
798) was pleased to lay down as under: "15. The argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control the exercise of power under Section 9 of the Act cannot prima facie be accepted. The reliance placed on Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja & Ors. [(2004) 3 S.C.C. 155] in that behalf does not also help much, since this Court in that case did not answer that question finally but prima facie felt that the objection based on Section 69 (3) of the Partnership Act may not stand in the way of a party to an arbitration agreement moving the court under Section 9 of the Act. The power under Section 9 is conferred on the District Court. No special procedure is prescribed by the Act in that behalf. It is also clarified that the Court entertaining an application under Section 9 of the Act shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it. Prima facie, it appears that the general rules that governed the court while considering the grant of an interim injunction at the threshold are attracted even while dealing with an application under Section 9 of the Act. There is also the principle that when a power is conferred under a special statute and it is conferred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. No doubt, a view that exercise of power under Section 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power under Section 9 of the Act is not controlled by Order XVIII Rule 5 of the Code of Civil Procedure is a view taken by the High Court of Bombay. But, how far these decisions are correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally. But, we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver." 14 Even on the admitted facts pleaded in this case, it can safely be said that this application is nothing but misuse of process of Court, as application framed under Sec.9 of the Act, is not competent in this Court for want of jurisdiction and for the reason that order against Garnishee can be passed to execute a decree. No merit, dismissed with costs, which are assessed at Rs.25,000/- (Rupees twenty five thousand only). vaan