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2019 Supreme(Mad) 2490
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. MANIKUMAR, J.
M/s. Shriram City Union Finance Ltd., - Applicant
Versus
M/s. Shri Ramana Geavy Engineering P. Ltd., Chennai & Others – Respondents
Application No.1830 of 2015
Decided On : 30-09-2019~
For the Applicant :Arvind Subramanian, Advocate.
For the Respondent:A.R. Ramanathan, Advocate.
The judgment emphasizes the importance of establishing a prima facie case and considering the balance of convenience in applications for prohibitory orders and interim measures.
Headnote:
Garnishee - Loan Agreement Dispute - Indian Companies Act, 1956 - Arbitration and Conciliation Act,1996 - Section 9(1)(ii)(b) and (e) - Order 21 Rule 46A to 46I CPC - Order 38 Rule 5 CPC - Section 36 of the Act - interim measures - balance of convenience - grave injustice
Fact of the Case:
The applicant, a non-banking finance company, sought a prohibitory order against the Garnishee to prevent payment to the first respondent until the loan dues were satisfied. The first respondent had defaulted on loan repayments, leading to a dispute.
Finding of the Court:
The court found that the applicant failed to establish a case for a prohibitory order against the Garnishee. It noted that the balance of convenience did not lie in the applicant's favor and that denial of the order would not result in grave injustice.
Issues: The key issues revolved around the applicability of garnishee proceedings, the requirements of Order 38 Rule 5 CPC, and the balance of convenience in granting a prohibitory order.
Ratio Decidendi: The court held that the applicant did not satisfy the requirements of Order 38 Rule 5 CPC and failed to establish a prima facie case for passing a prohibitory order. It emphasized the need to consider the balance of convenience and the potential for grave injustice in such cases.
Final Decision: The application was dismissed, and no costs were awarded.
JUDGMENT :
(Prayer: Application praying that this hon’ble Court be pleased to ass an order prohibiting Garnishee from making payment to first Respondent to the extent of sum of Rs.14,81,869/- until the dues are satisfied by the Applicant from first respondent or to any one claiming on their behalf, the amounts mentioned against their name and further prohibit the First Respondent from receiving any payment form the Garnishees and also direct the Garnishees to deposit the amount of Rs.14,81,869/- (Rupees Fourteen Lakhs eighty one thousand eight hundred and sixty nine only) into this Court to the credit of the above application.)
This application is filed by M/s.Shriram City Union Finance Ltd., Chennai for an order prohibiting the Garnishee/4th respondent from making payment to the first respondent to the extent of a sum of Rs.14,81,869/- until the dues are satisfied by the applicant from the first respondent, and to prohibit the first respondent from receiving any payment from the Garnishee and also to direct the Garnishee to deposit the sum of Rs.14,81,869/- into this Court to the credit of this application.
2. Facts leading to the filing of this application are that the applicant is a non-banking finance company registered under the provisions of the Indian Companies Act, 1956. The applicant carries on the business of extending loan facility to its customers. The first respondent is a Private Limited Company registered under the Companies Act, 1956. The first respondent, through the second respondent approached the applicant in the month of November, 2011 with a request for business working capital, which was acceded to by the applicant. The first respondent entered into a Loan Agreement No.TFHO1TF11100003, dated 10.11.2011 with the applicant. In that, the respondents 2 and 3 have joined as co-borrowers guaranteeing due performance of the obligations of the first respondent under the agreement. Thus, the respondents 2 and 3 are jointly and severally liable to pay the loan amount.
3. As per the Loan Agreement, the total loan amount of Rs.39,51,984/- (Rs.30,00,000/- being the principal amount and Rs.9,51,984/- being the interest amount) was repayable by the first respondent in 24 monthly instalments at the rate of Rs.1,64,666/- each. In case of default in the payment of instalments, an additional interest at the rate of 36% would be levied. The first instalment commenced in December, 2011 and the last instalment would end in November, 2013. The first respondent paid 18 instalments in full and the 19th instalment was paid on several dates and as per the statement of accounts, a sum of Rs.1,15,334/- was paid towards the 19th instalment and the balance of Rs.49,332/- was due. Thereafter, the respondents did not pay the remaining instalments as per the loan Agreement, despite repeated demands made by the applicant. In terms of clauses 8 and 9 of the Agreement, in the event of default made by the respondents, the applicant is entitled to claim the entire amount due under the Agreement and the clause 11 of the Agreement provides for appointment of an Arbitrator. As on 19.02.2015, a sum of Rs.14,81,869/- is due and payable by the respondents under the loan Agreement.
4. On 21.02.2015, the applicant issued a notice through its learned counsel to the respondents to pay a sum of Rs.14,83,591/- as on 21.02.2015 and in spite of the same, the respondent did not send any reply. However, the first respondent informed the applicant that it is not in a position to repay the loan amount and that the Garnishee is due to pay a sum of Rs.92,02,169/- to the first respondent. Under Section 9(1)(ii)(b) and (e) of the Arbitration and Conciliation Act, the applicant can seek the claim before or during arbitral proceedings at any time, after making the arbitral award but before it is enforced under Section 36 of the Act and therefore, the applicant has filed this application for a direction to the Garnishee not to make payment of Rs.14,81,869/- to the first r
