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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
L & T Finance Limited – Petitioner
Versus
M/s. Saumya Mining Ltd., (Borrower)- Respondent
ARBITRATION PETITION NO.290 OF 2014, ARBITRATION PETITION (L) NO. 269 OF 2014, ARBITRATION PETITION (L) NO. 271 OF 2014, ARBITRATION PETITION NO. 341 OF 2014
Decided on: 8TH JULY, 2014
The Court held that the provisions of Chapter IIIB of the Reserve Bank of India Act, 1934 (RBI Act) shall have the overriding effect notwithstanding anything inconsistent therewith contained in any other law which includes the Money Lenders Act, a State law. The Court further held that if there is any inconsistency between the provisions of RBI Act and Money Lenders Act, so far as it relates to companies, as defined under section 2(4) of the Money Lenders Act, in that case the provisions of RBI Act, will prevail.
Fact of the Case:
The Petitioner, a non-banking financial company registered with the Reserve Bank of India (RBI), filed four petitions under section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) for interim measures against the Respondents, who had defaulted on loan repayments. The Respondents raised various objections, including that the Petitioner had not obtained a license under the Bengal Money Lenders Act, 1940 (Bengal Money Lenders Act), and that the loan agreements were not properly stamped.
Finding of the Court:
The Court found that the Petitioner was not required to obtain a license under the Bengal Money Lenders Act because it was not a money lender as defined under the Act. The Court also found that the loan agreements were properly stamped and that the Petitioner had jurisdiction to file the petitions in Mumbai.
Issues: 1. Whether the Petitioner was required to obtain a license under the Bengal Money Lenders Act, 1940. 2. Whether the loan agreements were properly stamped. 3. Whether the Court had jurisdiction to entertain the petitions.
Ratio Decidendi: 1. The Court held that the Petitioner was not required to obtain a license under the Bengal Money Lenders Act, 1940 because it was not a money lender as defined under the Act. The Court relied on the definition of "money lender" in the Act, which excludes companies registered under the Companies Act, 1956. The Court also noted that the Petitioner was registered with the RBI as a non-banking financial company and was therefore subject to the provisions of the RBI Act, which overrides the Bengal Money Lenders Act. 2. The Court held that the loan agreements were properly stamped. The Court relied on the provisions of the Maharashtra Stamp Act, 1958, which allow for the payment of deficit stamp duty within three months of the date of receipt of the document in Maharashtra. The Court found that the Petitioner had not yet brought the loan agreements to Maharashtra and therefore had not yet incurred any liability for deficit stamp duty. 3. The Court held that it had jurisdiction to entertain the petitions. The Court relied on the provisions of the Arbitration Act, which allow for the filing of petitions for interim measures in the court having jurisdiction over the subject matter of the arbitration. The Court found that the subject matter of the arbitration was the loan agreements, which were executed in Mumbai and were to be performed in Mumbai. Therefore, the Court had jurisdiction to entertain the petitions.
Final Decision: The Court granted the Petitioner's applications for interim measures, including the appointment of a receiver to take possession of the Respondents' equipment.
Petitioner has filed these four petitions under section 9 of Arbitration and Conciliation Act, 1996 for interim measures. The respondents have raised various issues which are common in all the four matters. By consent of parties, all the four matters are heard together and are being disposed of by a common order.
2. Some of the relevant facts of the above four matters are as under :
Arbitration Petition No. 290 of 2014
(a) Respondent no. 1 is borrower. Respondent no.2 is a guarantor to the loan obtained by respondent no.1. The respondent no. 3 and 4 are the debtors of respondent no. 1 and 2 and have been joined as parties to secure the claim of the petitioner against respondent no. 1 and 2.
(b) On 31st December, 2011 the petitioner and the respondent no. 1 and 2 entered into a loan agreement. Petitioner granted loan of Rs.28,35,000/- to the respondent no. 1 and 2 on the terms and conditions described in the said agreement. Respondent no. 1 executed demand promissory note on 31st December, 2011 in favour of the petitioner promising to pay the said loan to the petitioner for value received with interest. On 31st December, 2011 respondent no. 1 executed a deed of hypothecation in favour of the petitioner. Under the said deed of hypothecation two equipments described in Exh. G to the petition are hypothecated in favour of the petitioner by respondent no. 1. Similarly on 31st December, 2011 respondent no. 2 also executed a deed of guarantee in favour of the petitioner.
(c) The respondent no. 1 and 2 were liable to make repayment of the loan amount with interest in 35 installments. The loan agreement was executed at Kolkata.
(d) It is the case of the petitioner that since the respondent no.1 and 2 committed default in making payment of some of the installments, petitioner through their advocate issued notice on 10th September, 2013 terminating the loan agreement and called upon the respondent no. 1 and 2 to pay outstanding amount of Rs.24,20,542.28 and invoked the arbitration agreement. There is no response to the said notice of demand. It is the case of the petitioner that as on 28th August, 2013, the petitioner is entitled to recover a sum of Rs.24,20,542.28 with further interest thereon till payment and or realization. Arbitration Petition (L) No.269 of 2014
(e) Vide loan agreement dated 30th November, 2011 between the petitioner and respondent no.1, petitioner granted loan of Rs.1,92,62,000/- to respondent no.1 on the terms and conditions mentioned therein. The loan was repayable in 34 monthly installments. On 30th November, 2011 the respondent no.1 executed a demand promissory note in favour of the petitioner promising to pay the loan with interest. On the same date the respondent nos.1 and 2 executed a deed of hypothecation thereby hypothecating equipment in favour of the petitioner which are described in Exh.G to the petition. The respondent no. 2 executed deed of guarantee dated 30th November, 2011 in favour of the petitioner.
(f) It is the case of the petitioner that since the respondent nos. 1 and 2 committed default in making payment of some of the installments, petitioner issued a notice of demand dated 10th September, 2013 through their advocate and called upon the respondent nos.1 and 2 to pay a sum of Rs.80,85,435.55 as on 28th August, 2013 and further interest thereon. By the said notice the petitioner terminated the loan agreement and appointed an arbitrator. There was neither any repayment nor any response to the said notice. According to the petitioner, they are entitled to recover Rs.80,85,435.55 with further interest thereon from respondent nos. 1 and 2 from 29th August, 2013 till payment and/or realization. Respondent nos. 3 and 4 are the debtors of respondent nos. 1 and 2 and have been joined as parties to secure the claim of the petitioner against respondent nos. 1 and 2.
Arbitration Petition (L) No. 271 of 2014
(g) On 5th July, 2012, vide a loan agreement the petitioner granted loan of Rs.1,25,00
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