Full Judgment Text
:1:
2005:BHC-OS:2973-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.77 OF 2005
IN
ARBITRATION PETITION NO.7 OF 2005
Ashok Leyland Finance Ltd. ..Appellant.
(Orig.Petnr.)
Vs.
M/s.Sanatan Transport Co.
Pvt. Ltd. & Anr. ..Respondents.
(Orig.Respdts.)
Ms.Shakuntala Joshi, Advocate for the Appellant.
Mr.R.R.Sharma for the Respondents.
CORAM: A.P.SHAH AND CORAM: A.P.SHAH AND CORAM: A.P.SHAH AND
S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ.
DATED: 9TH MARCH, 2005
DATED: 9TH MARCH, 2005 DATED: 9TH MARCH, 2005
ORAL JUDGMENT : ORAL JUDGMENT : (Per S.J.Vazifdar, J.) ORAL JUDGMENT :
By consent, the Appeal is admitted and taken up
for final hearing.
2. The Appeal challenges the order passed by the
learned single Judge dated 18.1.2005 rejecting the
Appellant’s petition under section 9 of the
Arbitration and Conciliation Act, 1996. The learned
Judge held that the Appellants ought to make an
application under section 17 of the said Act before
the learned Arbitrator and that it would not be
appropriate to entertain the Petition.
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3. The facts as regards the transaction are not in
dispute. An agreement dated 21.8.2003 was entered
into between the Appellant and the Respondents.
Under the said agreement, Respondent No.1 was
entitled to avail of a Affinity Card Facility from
the Appellant which enabled Respondent No.1 to
purchase from Bharat Petroleum Corporation Ltd.
goods such as diesel, lubricant oils, genuine spares
of the Appellant and other utilities by using the
said card issued by Bharat Petroleum Corporation
Ltd.
Respondent No.2 the Managing Director of
Respondent No.1 stood as a guarantor in respect of
the dues of Respondent No.1 under the aforesaid
credit card facility. Under clause 11 of the
agreement, the said vehicle in respect of which
interim orders are sought in the above Petition, was
hypothecated in favour of the Appellant. Respondent
No.1 by letter dated 3.9.2003 addressed to the
Divisional Manager, New India Assurance Company
requested the company to hypothecate the said
vehicle in favour of the Appellant.
4. That Respondent No.1 was issued the said card
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and utilised the same is not in dispute. The only
dispute is regarding the amount that is now
repayable by Respondent No.1 to the Appellant.
5. Mr.Sharma, the learned counsel appearing on
behalf of the Respondents submitted that in view of
the fact that the proceedings had commenced before
the learned arbitrator the application for interim
reliefs can only be made before the learned
arbitrator under section 17 of the said Act and that
the application for interim reliefs is not
maintainable before this Court under section 9 of
the said Act. The submission is not well founded.
6. Section 9 of the Arbitration and Conciliation
Act, 1996 reads as under :
"9. Interim measures etc. by Interim measures etc. by Interim measures etc. by
Court Court.- A party may, before or during Court
arbitral proceedings or at any time
after the making of the arbitral
award but before it is enforced in
accordance with section 36, apply to
a court-
(i) for the appointment of a
guardian for a minor or a
person of unsound mind for
the purposes of arbitral
proceedings; or
(ii) for an interim measure of
protection in respect of any
of the following matters,
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namely:--
(a) the preservation,
interim custody or
sale of any goods
which are the
subject-matter of the
arbitration
agreement;
(b) securing the
amount in dispute in
the arbitration;
(c) the detention,
preservation or
inspection of any
property or thing
which is the
subject-matter of the
dispute in
arbitration, or as to
which any question
may arise therein and
authorising for any
of the aforesaid
purposes any person
to enter upon any
land or building in
the possession of any
party, or authorising
any samples to be
taken or any
observation to be
made, or experiment
to be tried, which
may be necessary or
expedient for the
purpose of obtaining
full information or
evidence;
(d) interim injunction or
the appointment of a
receiver;
(e) such other
interim measure of
protection as may
appear to the court
to be just and
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convenient,
and the Court shall have the same
power for making orders as it has
for the purpose of, and in
relation to, any proceedings
before it."
The language of the section is clear. It
expressly provides that "A party
may,..........during the arbitral
proceedings...........apply to a court". The
language of this section does not even require any
interpretation. It expressly permits a party even
during the subsistence of the arbitral proceedings
to make an application for interim reliefs of the
nature specified therein.
7. The Supreme Court in Sundaram Finance Ltd. v.
NEPC India Ltd. (1992) 2 Supreme Court Cases, 479
considered the question whether an application under
section 9 is maintainable where no arbitration
proceedings were pending and even before an
arbitrator had been appointed. The High Court of
Madras observed that no effort at the time of filing
of the application under section 9 had been made to
have an arbitrator appointed. It was therefore held
that the application was misconceived and that the
Court had no jurisdiction to entertain such an
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application. While dealing with this question, the
provisions of section 9 fell for consideration, The
Supreme Court while considering this question also
held that an application under section 9 could be
made even during the arbitral proceedings. The
Supreme Court held as under :
11. The reading of Section 21
clearly shows that the arbitral
proceedings commence on the date on
which a request for a dispute to be
referred to arbitration is received
by the respondent. It is in this
context that we have to examine and
interpret the expression "before or
during arbitral proceedings"
occurring in Section 9 of the 1996
Act. We may here observe that though
Section 17 gives the Arbitral
Tribunal the power to pass orders,
the same cannot be enforced as orders
of a court. It is for this reason
that Section 9 admittedly gives the
court power to pass interim orders
during the arbitration proceedings.
13. Under the 1996 Act, the court
can pass interim orders under Section
9. Arbitral proceedings, as we have
seen, commence only when the request
to refer the dispute is received by
the respondent as per Section 21 of
the Act. The material words
occurring in Section 9 are "before or
during the arbitral proceedings".
This clearly contemplates two stages
when the court can pass interim
orders, i.e., during the arbitral
proceedings or before the arbitral
proceedings. There is no reason as
to why Section 9 of the 1996 Act
should not be literally construed.
Meaning has to be given to the word
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"before" occurring in the said
section. The only interpretation
that can be given is that the court
can pass interim orders before the
commencement of arbitral proceedings.
Any other interpretation, like the
one given by the High Court, will
have the effect of rendering the word
"before" in Section 9 as redundant.
This is clearly not permissible. Not
only does the language warrants such
an interpretation but it was
necessary to have such a provision in
the interest of justice. But for
such a provision, no party would have
a right to apply for interim measure
before notice under Section 21 is
received by the respondent. It is
not unknown when it becomes difficult
to serve the respondents. It was,
therefore, necessary that provision
was made in the Act which could
enable a party to get interim relief
urgently in order to protect its
interest. Reading the section as a
whole it appears to us that the court
has jurisdiction to entertain an
application under Section 9 either
before arbitral proceedings or during
arbitral proceedings or after the
making of the arbitral award but
before it is enforced in accordance
with Section 36 of the Act.
(emphasis supplied)
8. In the circumstances, we reject Mr.Sharma’s
submission that the application is not maintainable.
9. On merits, as observed earlier, the fact that
Respondent No.1 availed the said facility is not in
dispute. It is pertinent to note that before the
learned Single Judge the Respondents remained
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absent. It is also admitted that the vehicle was
hypothecated in favour of the Appellant. There is
nothing on record to suggest that the Appellant’s
claim of almost Rs.7,00,000/- is disputed. That
however ultimately is a matter for the learned
arbitrator to decide.
It is pertinent to note that three cheqeus were
issued by Respondent No.1 which were dishonoured.
The only contention raised in the affidavit in reply
filed on behalf of the Respondents in this Court was
that the same were given by way of security with the
understanding that the same were not be presented to
the bank for encashment. There is nothing on record
to substantiate this case. We are not inclined to
accept the bare word of the Respondents in this
regard.
10. Mrs.Joshi stated that there were several other
vehicles also similarly hypothecated in favour of
the Appellant in respect of separate facilities
granted to the Respondent in which under independent
proceedings a Court Receiver had been appointed by
this Court. The Appellant was not permitting the
Respondent to take possession. These are
independent proceedings with which we are strictly
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not concerned in the present matter. We enquired
from Mr.Sharma whether his client was present in
Court and would be willing to make a statement that
subject to any orders of this Court in the aforesaid
proceedings, the Respondents would cooperate and
comply with the orders by permitting the Respondent
to take possession of the vehicles as per the
orders. He refused to do so. This bold refusal to
comply with the orders of this Court exposes the
mala-fides of the Respondent.
11. In the circumstances, the following order is
passed :
(i) The impugned order is set aside.
(ii) The Court Receiver, High Court, Bombay is
appointed as Receiver in respect of the said
vehicle referred to at Exhibit "D" to the
Petition with all powers under Order XL Rule
1 of the Code of Civil Procedure, 1908. The
Court Receiver shall however not sell the
said vehicle at this stage. The Court
Receiver shall appoint Respondent No.1 as
his agent on the usual terms and condition
including as to payment of royalty and
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security.
(iii) In the event of the amount of royalty
exceeding the amount due to the Appellant,
liberty to the Respondents to apply for
discharge of the Receiver.
(iv) There shall be no order as to costs.
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2005:BHC-OS:2973-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.77 OF 2005
IN
ARBITRATION PETITION NO.7 OF 2005
Ashok Leyland Finance Ltd. ..Appellant.
(Orig.Petnr.)
Vs.
M/s.Sanatan Transport Co.
Pvt. Ltd. & Anr. ..Respondents.
(Orig.Respdts.)
Ms.Shakuntala Joshi, Advocate for the Appellant.
Mr.R.R.Sharma for the Respondents.
CORAM: A.P.SHAH AND CORAM: A.P.SHAH AND CORAM: A.P.SHAH AND
S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ.
DATED: 9TH MARCH, 2005
DATED: 9TH MARCH, 2005 DATED: 9TH MARCH, 2005
ORAL JUDGMENT : ORAL JUDGMENT : (Per S.J.Vazifdar, J.) ORAL JUDGMENT :
By consent, the Appeal is admitted and taken up
for final hearing.
2. The Appeal challenges the order passed by the
learned single Judge dated 18.1.2005 rejecting the
Appellant’s petition under section 9 of the
Arbitration and Conciliation Act, 1996. The learned
Judge held that the Appellants ought to make an
application under section 17 of the said Act before
the learned Arbitrator and that it would not be
appropriate to entertain the Petition.
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3. The facts as regards the transaction are not in
dispute. An agreement dated 21.8.2003 was entered
into between the Appellant and the Respondents.
Under the said agreement, Respondent No.1 was
entitled to avail of a Affinity Card Facility from
the Appellant which enabled Respondent No.1 to
purchase from Bharat Petroleum Corporation Ltd.
goods such as diesel, lubricant oils, genuine spares
of the Appellant and other utilities by using the
said card issued by Bharat Petroleum Corporation
Ltd.
Respondent No.2 the Managing Director of
Respondent No.1 stood as a guarantor in respect of
the dues of Respondent No.1 under the aforesaid
credit card facility. Under clause 11 of the
agreement, the said vehicle in respect of which
interim orders are sought in the above Petition, was
hypothecated in favour of the Appellant. Respondent
No.1 by letter dated 3.9.2003 addressed to the
Divisional Manager, New India Assurance Company
requested the company to hypothecate the said
vehicle in favour of the Appellant.
4. That Respondent No.1 was issued the said card
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and utilised the same is not in dispute. The only
dispute is regarding the amount that is now
repayable by Respondent No.1 to the Appellant.
5. Mr.Sharma, the learned counsel appearing on
behalf of the Respondents submitted that in view of
the fact that the proceedings had commenced before
the learned arbitrator the application for interim
reliefs can only be made before the learned
arbitrator under section 17 of the said Act and that
the application for interim reliefs is not
maintainable before this Court under section 9 of
the said Act. The submission is not well founded.
6. Section 9 of the Arbitration and Conciliation
Act, 1996 reads as under :
"9. Interim measures etc. by Interim measures etc. by Interim measures etc. by
Court Court.- A party may, before or during Court
arbitral proceedings or at any time
after the making of the arbitral
award but before it is enforced in
accordance with section 36, apply to
a court-
(i) for the appointment of a
guardian for a minor or a
person of unsound mind for
the purposes of arbitral
proceedings; or
(ii) for an interim measure of
protection in respect of any
of the following matters,
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:4:
namely:--
(a) the preservation,
interim custody or
sale of any goods
which are the
subject-matter of the
arbitration
agreement;
(b) securing the
amount in dispute in
the arbitration;
(c) the detention,
preservation or
inspection of any
property or thing
which is the
subject-matter of the
dispute in
arbitration, or as to
which any question
may arise therein and
authorising for any
of the aforesaid
purposes any person
to enter upon any
land or building in
the possession of any
party, or authorising
any samples to be
taken or any
observation to be
made, or experiment
to be tried, which
may be necessary or
expedient for the
purpose of obtaining
full information or
evidence;
(d) interim injunction or
the appointment of a
receiver;
(e) such other
interim measure of
protection as may
appear to the court
to be just and
::: Downloaded on - 26/06/2024 07:33:18 :::
:5:
convenient,
and the Court shall have the same
power for making orders as it has
for the purpose of, and in
relation to, any proceedings
before it."
The language of the section is clear. It
expressly provides that "A party
may,..........during the arbitral
proceedings...........apply to a court". The
language of this section does not even require any
interpretation. It expressly permits a party even
during the subsistence of the arbitral proceedings
to make an application for interim reliefs of the
nature specified therein.
7. The Supreme Court in Sundaram Finance Ltd. v.
NEPC India Ltd. (1992) 2 Supreme Court Cases, 479
considered the question whether an application under
section 9 is maintainable where no arbitration
proceedings were pending and even before an
arbitrator had been appointed. The High Court of
Madras observed that no effort at the time of filing
of the application under section 9 had been made to
have an arbitrator appointed. It was therefore held
that the application was misconceived and that the
Court had no jurisdiction to entertain such an
::: Downloaded on - 26/06/2024 07:33:18 :::
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application. While dealing with this question, the
provisions of section 9 fell for consideration, The
Supreme Court while considering this question also
held that an application under section 9 could be
made even during the arbitral proceedings. The
Supreme Court held as under :
11. The reading of Section 21
clearly shows that the arbitral
proceedings commence on the date on
which a request for a dispute to be
referred to arbitration is received
by the respondent. It is in this
context that we have to examine and
interpret the expression "before or
during arbitral proceedings"
occurring in Section 9 of the 1996
Act. We may here observe that though
Section 17 gives the Arbitral
Tribunal the power to pass orders,
the same cannot be enforced as orders
of a court. It is for this reason
that Section 9 admittedly gives the
court power to pass interim orders
during the arbitration proceedings.
13. Under the 1996 Act, the court
can pass interim orders under Section
9. Arbitral proceedings, as we have
seen, commence only when the request
to refer the dispute is received by
the respondent as per Section 21 of
the Act. The material words
occurring in Section 9 are "before or
during the arbitral proceedings".
This clearly contemplates two stages
when the court can pass interim
orders, i.e., during the arbitral
proceedings or before the arbitral
proceedings. There is no reason as
to why Section 9 of the 1996 Act
should not be literally construed.
Meaning has to be given to the word
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"before" occurring in the said
section. The only interpretation
that can be given is that the court
can pass interim orders before the
commencement of arbitral proceedings.
Any other interpretation, like the
one given by the High Court, will
have the effect of rendering the word
"before" in Section 9 as redundant.
This is clearly not permissible. Not
only does the language warrants such
an interpretation but it was
necessary to have such a provision in
the interest of justice. But for
such a provision, no party would have
a right to apply for interim measure
before notice under Section 21 is
received by the respondent. It is
not unknown when it becomes difficult
to serve the respondents. It was,
therefore, necessary that provision
was made in the Act which could
enable a party to get interim relief
urgently in order to protect its
interest. Reading the section as a
whole it appears to us that the court
has jurisdiction to entertain an
application under Section 9 either
before arbitral proceedings or during
arbitral proceedings or after the
making of the arbitral award but
before it is enforced in accordance
with Section 36 of the Act.
(emphasis supplied)
8. In the circumstances, we reject Mr.Sharma’s
submission that the application is not maintainable.
9. On merits, as observed earlier, the fact that
Respondent No.1 availed the said facility is not in
dispute. It is pertinent to note that before the
learned Single Judge the Respondents remained
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absent. It is also admitted that the vehicle was
hypothecated in favour of the Appellant. There is
nothing on record to suggest that the Appellant’s
claim of almost Rs.7,00,000/- is disputed. That
however ultimately is a matter for the learned
arbitrator to decide.
It is pertinent to note that three cheqeus were
issued by Respondent No.1 which were dishonoured.
The only contention raised in the affidavit in reply
filed on behalf of the Respondents in this Court was
that the same were given by way of security with the
understanding that the same were not be presented to
the bank for encashment. There is nothing on record
to substantiate this case. We are not inclined to
accept the bare word of the Respondents in this
regard.
10. Mrs.Joshi stated that there were several other
vehicles also similarly hypothecated in favour of
the Appellant in respect of separate facilities
granted to the Respondent in which under independent
proceedings a Court Receiver had been appointed by
this Court. The Appellant was not permitting the
Respondent to take possession. These are
independent proceedings with which we are strictly
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not concerned in the present matter. We enquired
from Mr.Sharma whether his client was present in
Court and would be willing to make a statement that
subject to any orders of this Court in the aforesaid
proceedings, the Respondents would cooperate and
comply with the orders by permitting the Respondent
to take possession of the vehicles as per the
orders. He refused to do so. This bold refusal to
comply with the orders of this Court exposes the
mala-fides of the Respondent.
11. In the circumstances, the following order is
passed :
(i) The impugned order is set aside.
(ii) The Court Receiver, High Court, Bombay is
appointed as Receiver in respect of the said
vehicle referred to at Exhibit "D" to the
Petition with all powers under Order XL Rule
1 of the Code of Civil Procedure, 1908. The
Court Receiver shall however not sell the
said vehicle at this stage. The Court
Receiver shall appoint Respondent No.1 as
his agent on the usual terms and condition
including as to payment of royalty and
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:10:
security.
(iii) In the event of the amount of royalty
exceeding the amount due to the Appellant,
liberty to the Respondents to apply for
discharge of the Receiver.
(iv) There shall be no order as to costs.
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