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2013 Supreme(Mad) 1329
High Court of Judicature at Madras
R.K. AGRAWAL, J.
India Cements Capital Ltd.
Versus
Auto Pins (India) Ltd.
O.P. No. 783 of 2008
Decided On : 15-03-2013
For the Petitioner:M. Aravind Subramaniam, Advocate.
For the Respondent:K.V. Babu, Advocate.
Headnote:
Arbitration - Lease Agreement - Arbitration and Conciliation Act, 1996, Section 11(6) - Summary of Acts and Sections: Arbitration and Conciliation Act, 1996, Section 11(6); Sick Industrial Companies Act, 1956, Section 22(1); Code of Civil Procedure, 1908, Section 120; Letters Patent, Clause 12 - The court discussed the applicability of the Arbitration and Conciliation Act, 1996, Section 11(6) and the Sick Industrial Companies Act, 1956, Section 22(1) in relation to the dispute between the parties. It also considered the jurisdiction of the court based on the Code of Civil Procedure, 1908, Section 120 and the Letters Patent, Clause 12.
Fact of the Case:
The Petitioner, a finance company, sought appointment of a Sole Arbitrator to adjudicate upon disputes with the Respondent regarding lease rentals. The Respondent, declared a Sick Company, argued lack of territorial jurisdiction and the need for BIFR approval for settlement of dues.
Finding of the Court:
The court found that the Petition was not maintainable due to lack of cause of action within its jurisdiction. It dismissed the Original Petition.
Issues: The issues included the maintainability of the Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, the jurisdiction of the court, and the impact of the Sick Industrial Companies Act, 1956, on the dispute.
Ratio Decidendi: The court held that the Petition was not maintainable as no cause of action had arisen within its jurisdiction. It also discussed the principles of jurisdiction under the Code of Civil Procedure, 1908, Section 120 and the Letters Patent, Clause 12.
Final Decision: The Original Petition was dismissed by the court due to lack of cause of action within its jurisdiction.
1. This Application has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), seeking appointment of a Sole Arbitrator to adjudicate upon the disputes/claims between the Petitioner and the Respondent in accordance with Clause 33 of the Lease Agreement entered into between them on 27.1.2001.
2. According to the Petitioner, it is a reputed Public Limited Company engaged in the business of extending finance facilities as a Non-Banking Finance Company to prospective customers under various schemes such as Loans, Hire Purchase, etc. The Respondent approach the Petitioner for availing least finance facility and the Petitioner extended the said facility to the Respondent. The parties entered into a Lease Agreement bearing No.7200018 on 27.1.2001 for finance of the purchase of Parabolic Leaf Springs Automation and Hydraulic Systems with Servo Control. The Respondent under took to pay the monthly lease rentals to the Petitioner on the due dates mentioned in the Agreement. However, since the very inception of the Agreement, the Respondent had been irregular in making payments of the monthly rentals and had defaulted in payment thereof from the 42nd lease rental. Despite letters and remainders and Personal visits from the Petitioner’s side, the Respondent was not forthcoming with outstanding dues. According to the Petitioner as on 4.7.2008, a sum of Rs.17,80,500/-was payable by the Respondent towards lease rentals; a sum of Rs.37,76,592/- was outstanding towards lease compensation charges levied at the contracted rate for belated payment/default made in payment of lease rentals; a sum of Rs.56,500/- was due towards legal charges; a sum of Rs.9,00,000/- was due towards the residual value and a sum of Rs.18,87,953/- was due (towards interest on lease deposit, thus adding up to a total outstanding of Rs.84,01,545/-. It is the case of the Petitioner that the Respondent is trying to evade Payment of the dues under the pretext of becoming a Sick Company. Therefore, the Petitioner was constrained to refer the dispute to Arbitration, as contemplated by the Lease Agreement entered into between the parties. The Arbitration clause incorporated in the Lease Agreement contemplates any dispute/claim arising between the parties touching any matter covered by the Agreement to be referred to the Arbitration of two Arbitrators, one of which to be appointed by each party to the dispute in accordance with the Arbitration Act, 1940. Accordingly, the Petitioner issued a Notice on 4.7.2008, in voking Arbitration clause. However in view of the specific bar provided under Section 10 of the Act that the number of Arbitrators shall not be even number, the Arbitration clause in the present Lease Agreement could not be invoked and has become inoperative as it is not in consonance with Section 10 of the Act. Therefore, the Petitioner has approached this Court with present Petition for the relief as stated above .
3. The Respondent has filed a Counter Statement wherein it has raised a preliminary issue of maintainability of the present Petition before this Court as it suffers from lack of territorial jurisdiction. According to the Respondent, the entire cause of action arose only at New Delhi, in that Lease Agreement, coupled with the demand Promissory Note, the Agreements of Lease and Guarantee were all executed on 27.1.2001 at New Delhi, and hence, the present Petition ought not be entertained by the Court at Chennai. The allegation of irregular payments right from the inception of the lease is denied by the Respondent. However, thereafter, based on the audited Balance Sheet dated 31.12.2003, the Respondent-Company had come to be declared a Sick Company by the Board of Industrial Finance and Reconstruction (‘BIFR’ for short) in case No.194 of 2004 and by order dated 29.8.2008, the BIFR had appointed Canara Bank as the operating agency to work out a scheme of revival of the Respondent-Company.
