2013 Supreme(Bom) 408

High Court of Judicature at Bombay
R.D. DHANUKA, J.
Tata Capital Financial Services Limited & Another
Versus
M/s Deccan Chronicle Holdings Limited & Others
Arbitration Petition Nos. 1321 of 2012 & 1095 of 2012
Decided on: 21-02-2013

Headnote:

Whether the Court can grant interim measures under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred as “the Act”) for recovery of money claim simplicitor, even if the property or things are not subject matter of the dispute in arbitration.

Fact of the Case:

The petitioners sanctioned grant of working capital term loan facility in favour of respondent No.1 for meeting the working capital requirement of the company of an amount of Rs.100,00,00,000/(100 crores) on the terms and conditions recorded therein. The respondents executed various documents in favour of the petitioner to secure the repayment of loan amount. By letter dated 5th April 2012, the petitioner communicated about the amended fixed rate of interest to the respondents. By letter dated 15th April 2011, the first respondent requested the petitioner to disburse the entire loan amount of Rs.100 crores into their bank account with Canara Bank, Prime Corporate Branch, Secunderabad. The petitioner accordingly disbursed the said amount as requested by the first respondent. By letter dated 12th July 2012, addressed to the first respondent, the petitioner brought to their notice that there was downgrading of their rating for long term bank facilities/instruments to CARE B from CARE AA and short term bank facilities from CARE A1+ to CARE A4 with credit “watch” by the Credit Analysis and Research Limited. The petitioner informed that the revision in rating was due to default by the first respondent on short term non convertible debentures. The petitioner placed reliance upon the press release in this regard. The petitioner called upon the first respondent to cure the said material adverse effect as per clause 1.1(e) of the agreement within seven days from the date of the said letter and to make immediate payment of all the outstanding dues under the said term loan. There was no reply to the said letter. By letter dated 3rd August 2012, the petitioner requested the first respondent to make payment of all the outstanding dues on or before 12th August 2012 as they had not cleared the material adverse effect within the stipulated time period. The petitioner called upon the first respondent to forthwith create additional security in favour of the petitioner to secure the credit facility till all the outstanding dues were fully repaid/liquidated. There was no reply to the said letter. By letter dated 17th August 2012, the petitioner through its Advocate called upon the first respondent being the principal borrower and second respondent No.2 being the Guarantor, jointly and/or severally to pay to the petitioner a sum of Rs.100,86,97,052/payable as on 10th August 2012 with further additional interest @ 3% per annum over and above the agreed interest rate from 11th August 2012; making it clear that in case, respondents failed to comply with the said notice, the said notice shall be construed as a notice invoking arbitration against the respondents. The respondents failed to make any payment to the petitioner.

Finding of the Court:

The Court held that the petitioner has made out a case for attachment before judgment and satisfies the principles of order 38 rule 5 in this case and deserve to be granted interim measures.

Issues: Whether the Court can grant interim measures under Section 9 of the Act for recovery of money claim simplicitor, even if the property or things are not subject matter of the dispute in arbitration.

Ratio Decidendi: The Court observed that Section 9(ii)(b), (d) and (e) of the Act empowers the Court to grant interim measures even if the property or things are not subject matter of the dispute in arbitration. The Court further observed that the principles laid down in the Code of Civil Procedure, 1908 for grant of interlocutory remedies must furnish guide to the Court when it determines the application under section 9 of the Act and underlying basis of order 38 rule 5 thereof has to be borne in mind while deciding application under section 9(ii)(b).

Final Decision: The Court granted interim measures in favour of the petitioner, including the appointment of a Court Receiver, attachment of bank accounts, and injunction against the respondents from parting with the possession, creating third party rights, alienating or encumbering the properties in question.