2009 Supreme(Mad) 5556

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE V. RAMASUBRAMANIAN
ECC Leasing Company Limited
Versus
Paramount Airways Pvt. Ltd.
Application Nos.4806 and 4807 of 2009
Decided on : 15-12-2009

Ratios:
a. Principles governing the grant of interim orders under the provisions of CPC can be kept in mind while dealing with a prayer for interim custody of a property under Section 9 of the Arbitration and Conciliation Act, 1996.
b. A Court would order the custody of a property to be handed over permanently to a party pending final adjudication of the dispute, only under extraordinary circumstances.
c. The Court granting custody of a property to a person can get it back at any time and restore it to the person from whom it was taken.
d. When a court appointed receiver takes possession of a property, its custody becomes custodia legis and in such case, the Court holds de jure possession of the property.
e. Granting interim custody of a property to a foreigner who may not be amenable to or available within the jurisdiction of the Court would not be proper as it would actually become permanent custody, shutting the doors for the respondent to seek any relief other than monetary relief before the appropriate Forum.
f. For grant of interim orders, the Court should weigh the balance of convenience in favour of both the parties and assess as to who would suffer irreparable loss and hardship, by the grant or refusal to grant an interim order. If one party is sure to suffer loss and damage and another party would only be exposed to a risk (in contra distinction to actual damage), the Court should only prefer that alternative, by which the sufferance of the damage is prevented, even while the risk factors are reduced.

Headnote:(A)Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.9-Code of Civil Procedure, 1908 (5 of 1908)-Or. 33, 38, 39-Arbitration-Custody-Interim custody-Foreign company-Petitioner had leased out aircraft to the respondent on certain terms-Respondent committed default-After terminating the lease, petitioner moved for appointment of commissioner to take interim custody of the aircraft-When petition was pending, respondent paid the lease amount due in full but other terms were to be complied with-Petitioner was a foreign company and wanted repossession to take the aircraft to its country-Respondent contended that the power under Sec.9 is in the nature of interim custody and the repossession by the petitioner would result in permanently removing the aircraft beyond the jurisdiction of the Court-Held, petitioner being a foreign company, handing over the possession of the aircraft to the petitioner would result in removal of the aircraft out of the jurisdiction of the Court permanently-Prayer for repossession rejected but certain directions were issued to safeguard the interest of the parties.

       (B)Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.9-Code of Civil Procedure, 1908 (5 of 1908)-Or. 33, 38, 39-Arbitration-Custody-Interim custody-Principles governing the grant of interim orders under the provisions of CPC can be kept in mind while dealing with a prayer for interim custody of a property under Section 9 of Arbitration and Conciliation Act, 1996- A Court would order the custody of a property to be handed over permanently to a party pending final adjudication of the dispute, only under extraordinary circumstances.

       On a cumulative consideration of the above provisions, it is clear that a Court would order the custody of a property to be handed over permanently, only under extraordinary circumstances. This is for the reason that except in cases that would fall under Order 39, Rules 6, 9 or 10, CPC or under Order 26, Rule 10C, CPC, the grant of custody pending final adjudication, could only be by way of interim custody and not final custody. Though the provisions of the Code of Civil Procedure are not, per se, made applicable, in express terms, to the proceedings under the 1996 Act, the principles governing the grant of interim orders under the above provisions of the CPC, can certainly be kept in mind, while dealing with an interim prayer under Section 9. Para 25

       (C)Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.9-Code of Civil Procedure, 1908 (5 of 1908)-Or. 33, 38, 39-Custody-Interim custody- Restitution-The Court granting custody of a property to a person can get it back at any time and restore it to the person from whom it was taken-When a court appointed receiver takes possession of a property, its custody becomes custodia legis and in such case, the Court holds de jure possession of the property.

       When a Civil Court grants interim custody of a property to a Receiver, the property virtually comes under Court custody and the Court becomes custodia legis. The Court in such cases, holds de jure possession of the property through the Receiver. Therefore it can always put the person from whom the property was taken away, back into possession. Even in cases where the custody of a property is handed over to one of the parties, pending final adjudication of the dispute, the Court is vested with the power to order restitution at any point of time. Para 26

       (D)Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.9-Code of Civil Procedure, 1908 (5 of 1908)-Or. 33, 38, 39-Arbitration-Custody-Interim custody-Foreign company- Granting interim custody of a property to a foreigner who may not be amenable to or available within the jurisdiction of the Court would not be proper as it would actually become permanent custody, shutting the doors for the respondent to seek any relief other than monetary relief before the appropriate Forum.

       But unfortunately, in cases of this nature, where the property which is the subject matter of the applications under Section 9 of the Arbitration and Conciliation Act, 1996, is sought to be taken out of the jurisdiction of this Court, by a person who may not be amenable to or available within the jurisdiction of this Court, it would not be proper for the Court to grant custody of the property to the applicant. The grant of custody in such cases would actually become permanent custody, shutting the doors for the respondent to seek any relief other than monetary relief before the Arbitral Tribunal. What is actually contemplated by Section 9 is an interim measure of protection and not a part or whole of the final remedy to a party. What is prayed for in these applications is in the nature of a part of the final remedy and hence, in my considered view, the same cannot be granted. Para 27

       (D)Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.9-Code of Civil Procedure, 1908 (5 of 1908)-Or. 33, 38, 39-Arbitration-Custody-Interim custody-Balance of convenience- For grant of interim orders, the Court should weigh the balance of convenience in favour of both the parties and assess as to who would suffer irreparable loss and hardship, by the grant or refusal to grant an interim order. If one party is sure to suffer loss and damage and another party would only be exposed to a risk (in contra distinction to actual damage), the Court should only prefer that alternative, by which the sufferance of the damage is prevented, even while the risk factors are reduced.

       It is a fundamental principle governing the grant of interim orders that the Court should weigh the balance of convenience in favour of both the parties and assess as to who would suffer irreparable loss and hardship, by the grant or refusal to grant, an interim order. If one party is sure to suffer loss and damage and another party would only be exposed to a risk (in contra distinction to actual damage), the Court should only prefer that alternative, by which the sufferance of the damage is prevented, even while the risk factors are reduced. Para 33