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2015 Supreme(Bom) 1369
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
Aditya Birla Finance Limited - Petitioner
Versus
Carnet Elias Fernandes & Anr. - Respondents
ARBITRATION PETITION NO. 1118 OF 2015
Decided On : 4.9.2015
Mr.Bhavik Manek, a/w. Mr.Rahul Mehta, i/b. KMC Legal Venture for the Petitioner.
Mrs.Shobha Menon, Senior Advocate, a/w. Mr.Brijesh Pathak for Respondent Nos. 1 and 2.
The main legal point established in the judgment is that the court has jurisdiction to entertain a petition under section 9 of the Arbitration Act, and the proceedings under section 9 are not equivalent to a suit for land. The court also established that interim measures, including the appointment of a Court Receiver, can be granted to secure the petitioner's claims.
Headnote:
Arbitration and Conciliation Act - Appointment of Court Receiver - Clauses 22.1 to 22.6, Exclusive jurisdiction of Mumbai courts, Jurisdiction to entertain petition, Suit for land, Interim measures, Appointment of Court Receiver, Efficacious alternate remedy, Prima facie case for appointment of Court Receiver
Fact of the Case:
The petitioner sought appointment of the Court Receiver for a property and physical possession, injunction against respondents, and other reliefs under the Arbitration and Conciliation Act, 1996. The respondents failed to repay the loan, resulting in defaults and dishonoured cheques. The petitioner initiated arbitration proceedings and sought appointment of a receiver to secure the loan amount.
Finding of the Court:
The court found that it had jurisdiction to entertain the petition as the material part of the cause of action had arisen within its jurisdiction. The court held that the proceedings under section 9 of the Arbitration Act were not equivalent to a suit for land and granted interim measures, including the appointment of a Court Receiver, to secure the petitioner's claims.
Issues: Jurisdiction of the court to entertain the petition, Suit for land, Prayers for interim measures, Efficacious alternate remedy, Prima facie case for appointment of Court Receiver
Ratio Decidendi: The court held that it had jurisdiction to entertain the petition as the material part of the cause of action had arisen within its jurisdiction. It also ruled that the proceedings under section 9 of the Arbitration Act were not equivalent to a suit for land and granted interim measures, including the appointment of a Court Receiver, to secure the petitioner's claims.
Final Decision: The court appointed the Court Receiver for the property, granted an injunction, and directed the respondents to disclose their assets. The arbitration petition was disposed of accordingly.
By this petition filed under section 9 of the Arbitration and Conciliation Act, 1996, the petitioner seeks appointment of the Court Receiver of the property described in Ex.'U' to the petition and to handover physical and vacant possession thereof to the petitioner with liberty to dispose off the said property, seeks injunction against the respondents from dealing, selling, alienating, disposing and/or creating third party rights in respect of the said property and for other reliefs. Some of the relevant facts for the purpose of deciding this petition are as under :-
2. Sometime in the month of September 2012, respondent nos. 1 and 2 approached the petitioner for a loan to the extent of Rs.18 crores for the purpose of infusion of equity/quasi equity unsecured loan in GEI and to takeover the existing loan from HDFC bank.
3. On 27th September, 2012, the petitioner issued a sanctioned letter in favour of the respondents which was duly accepted by the respondents. The petitioner and respondent no.1 executed facility agreement for the total amount of Rs.18 crores. Under the said agreement, the respondents agreed to repay to the petitioner the said amount at an agreed rate of interest i.e. at the floating rate of 12.90% per annum linked to the petitioner's long term reference rate less margin of 3.10%. The respondents also agreed to pay penal interest in case of default in repayment of the facility on due dates to the petitioner.
4. Respondents also signed KYC forms, demand promissory note promising to pay the entire loan amount with agreed interest to the petitioner, executed letter of continuity for demand promissory note dated 28th September, 2012 confirming that the said promissory note shall be continuing security for any borrower by respondents at any time to the petitioner, executed a declaration cum confirmation deed thereby declaring and confirming the mortgage by deposit of title deeds in respect of immoveable properties dated 24th September, 2012 described in Ex.'U' and Net Worth Certificate dated 1st December, 2011 issued by the chartered accountants of respondent no.1.
5. It is the case of the petitioner that pursuant to the said agreement, the petitioner had disbursed the loan to the respondents in two parts i.e. (1) on 9th October, 2012 a sum of Rs.5,49,84,932/- and (2) on 23rd November, 2012 a sum of Rs.12,46,00,000/-.
6. The respondents availed of three more facilities from the petitioner wherein there are certain defaults according to the petitioner. The facilities, amount stood changed from Rs.18 crores to Rs.21,06,87,404/-.
7. By their letter dated 31st October, 2014, the petitioner requested the respondents to clear the overdue sum of Rs.3,03,43,841/- without prejudice to their rights which the respondents failed and neglected to pay as on 31st October, 2014. It is the case of the petitioner that various postdated cheques provided by the respondents towards the due repayment of the loan stood dishonoured when presented for payment for the reasons 'Insufficient Funds'. The petitioner through their advocates' letter dated 26th November, 2014 issued under section 138 of the Negotiable Instruments Act, 1881 called upon the respondent no.1 to pay the outstanding liability of Rs.3,40,58,423/-. The respondents did not make any payment in response to the said notice. The petitioner has already initiated action under section 138 of the Negotiable Instruments Act, 1881 against respondent no.1.
8. By their advocate's notice dated 8th January, 2015, the petitioner called upon the respondents jointly and/or severally to pay a sum of Rs.22,91,51,703/- as on 8th January, 2015 together with further interest @ 24% per annum making it clear that in case of failure on the part of the respondents, the petitioner would be constrained to have invoked the arbitration clause as contained in the loan agreement. The said notice was duly delivered upon the respondents. The respondents neither paid any amount in response to the said not
