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HIGH COURT OF JUDICATURE AT MADRAS
V. RAMASUBRAMANIAN, J.
M/s. L&T Finance Ltd., Represented by its Zonal Legal Manager, C. Balasubramanian
Versus
M/s. J.K.S. Constructions Pvt. Ltd., & Others
Application Nos. 441, 442, 444 & 445 & A. No. 5712 of 2013
Decided on: 10-02-2014
ARBITRATION - LOAN AGREEMENTS - Arbitration and Conciliation Act, 1996, Section 9 - Summary Seized and Possessed - Prohibitory Order - A.Nos.441, 442, 444, 445, 5712 - The court discussed the maintainability of the applications under Section 9, finding them maintainable at both pre-reference and post-award stages. The court rejected the argument that the applications had become infructuous after the awards were passed. It also held that the dispute raised by the applicant was arbitrable, as it involved a hypothecation of movable properties. The court further discussed the merits of the dispute, finding the respondent's objections to be dishonest and ordered a prohibitory order against the Garnishees in A.No.5712 of 2013.
Fact of the Case:
The applicant extended credit facilities to the respondent for the purchase of machinery and equipment. The respondent defaulted in making payments, leading the applicant to file applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking the appointment of Advocate Commissioners and a prohibitory order against Garnishees.
Finding of the Court:
The court found the applications under Section 9 to be maintainable and rejected the argument that they had become infructuous. It held that the dispute raised by the applicant was arbitrable, as it involved a hypothecation of movable properties. The court also found the respondent's objections to be dishonest and ordered a prohibitory order against the Garnishees in A.No.5712 of 2013.
Issues: The court addressed the maintainability of the applications under Section 9, the arbitrability of the dispute, and the respondent's objections to the applicant's claims.
Ratio Decidendi: The court held that applications under Section 9 are maintainable at both pre-reference and post-award stages, rejected the argument that the applications had become infructuous, and found the dispute to be arbitrable as it involved a hypothecation of movable properties. The court also found the respondent's objections to be dishonest and ordered a prohibitory order against the Garnishees in A.No.5712 of 2013.
Final Decision: The court dismissed A.Nos.441, 442, 444, and 445 of 2013 and ordered a prohibitory order against the Garnishees in A.No.5712 of 2013, directing them to bring into Court the amounts due and payable by them to the respondent.
1. All these applications are filed under Section 9 of the Arbitration and Conciliation Act, 1996, praying inter alia for the appointment of Advocate Commissioners to seize and possess the hypothecated equipment and for the issue of a prohibitory order restraining the Garnishees from making payment to the borrower.
2. I have heard Mr.M.S.Krishnan, learned Senior Counsel for the applicant and Mr.K.Prahalad Bhat Ravi, learned counsel for the respondent.
3. The applicant, at various points of time, extended credit facilities to the respondent, for the purchase of machinery and equipment. Under one agreement dated 11.02.2010, bearing Deal No.549303, the applicant financed the purchase of one machine. The amount financed was re-payable in 36 monthly instalments commencing from March 2010 and ending in February 2013.
4. Under the second loan agreement dated 11.11.2010, bearing Deal No.646427, the applicant financed the purchase of two machinery and equipment and the amount financed was re-payable in 35 monthly instalments commencing from December 2010 and ending in October 2013.
5. Under the third loan agreement dated 13.12.2010, bearing Deal No.646428, the applicant financed the purchase of four machinery and equipment and the amount financed was re-payable in 23 instalments commencing from January 2011 and ending in November 2012.
6. Under the fourth loan agreement entered into on 30.3.2011 bearing Deal No.711954, the applicant financed the purchase of four machinery and equipment and the amount financed was re-payable in 35 monthly instalments commencing from May 2011 to March 2014.
7. Under the loan agreement dated 08.8.2011, bearing Deal No.776327, the applicant financed the purchase of one machine and the amount financed was re-payable in 36 monthly instalments commencing from March 2012 and ending in February 2015.
8. Contending that the respondent committed default in making payment of the various instalments under the loan agreements dated 11.02.2010, 11.11.2010, 13.12.2010 and 08.8.2011, the applicant came up with four applications in A.Nos.441, 442, 444 and 445 of 2013, praying for appointment of Advocate Commissioners to seize and possess the machinery and equipment financed under those four agreements. On 30.01.2013, this Court passed an ex parte order appointing an Advocate Commissioner for seizing and possessing the machinery and equipment. But, the Advocate Commissioner has not so far been able to seize and possess the machinery and equipment.
9. In the meantime, the respondent committed default even in respect of the agreement dated 30.3.2011. Therefore, going by past experience, the applicant came up with A.No.5712 of 2013, not for the appointment of advocate commissioner, but for a prohibitory order against Garnishees. Therefore, the said application was also taken up along with the other applications. After the arguments in all the applications commenced, the applicant came up with better affidavits, containing additional pleadings. These pleadings were primarily intended to bring on record two facts, namely, (a) that during the pendency of the first four applications, namely A.Nos.441, 442, 444 and 445 of 2013, the applicant invoked the arbitration clause and the arbitrator had actually passed awards on 03.7.2013, and (b) that there is an imminent necessity for safeguarding the interest of the applicant, in view of the financial position of the respondent. In other words, in respect of loan agreements dated 11.11.2010, 13.11.2010, 11.02.2010 and 08.8.2011, which corresponds to A.Nos.441, 442, 444 and 445 of 2013, the applicant has already secured arbitration awards on 03.7.2013. In respect of loan agreement dated 30.3.2011, which corresponds to A.No.5712 of 2013, the agreement itself was terminated only on 22.11.2013 and the arbitration clause has been invoked. Therefore, no award has been passed in respect of the loan agreement dated 30.3.2011.
10. In the light of the fact that the applicant has already secured awa
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