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IN THE HIGH COURT OF JUDICATURE AT MADRAS
RMT. TEEKAA RAMAN, J.
V. Gudipalli Sai – Appellant
Versus
M/s. Sundaram Finance Limited, Rep. By its Senior Manager Legal, Chennai & Others – Respondents
CMA No. 1611 of 2022 & CMP No. 11960 of 2022
Decided On : 24-07-2023
Attachment before Judgment - Arbitration Proceedings - Arbitration and Conciliation Act, 1996, Section 37 - Section 53 of The Transfer of Property Act, 1882 - The court confirmed the validity of the attachment order passed by the tribunal and dismissed the Civil Miscellaneous Appeal.
Fact of the Case:
The appellant filed a Civil Miscellaneous Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, to set aside the order made in I.A.No.87 of 2019, whereby, the Sole Arbitrator refused to raise the attachment before judgment passed by him. The dispute arose from arbitration proceedings initiated by the 1st respondent to adjudicate a claim under a loan agreement, resulting in an order of attachment of the appellant's property.
Finding of the Court:
The court found that the transfer of property by the appellant's mother to him was a fraudulent transfer, aimed at avoiding the creditor's claim. The court confirmed the validity of the attachment order and the award passed in the arbitration proceedings, dismissing the Civil Miscellaneous Appeal.
Issues: The key issue was whether the transfer of property from the appellant's mother to him was a genuine transaction or a fraudulent transfer to avoid the creditor's claim.
Ratio Decidendi: The court relied on Section 53 of The Transfer of Property Act, 1882, which deals with fraudulent transfers, and held that the transfer in question was a gratuitous and fraudulent transfer aimed at avoiding the creditor's claim. The court also emphasized that once the creditor expresses the intention to avoid the transfer, it is for the transferee to show that they are a bona fide purchaser or transferor for value without notice of the claim.
Final Decision: The court confirmed the validity of the attachment order passed by the tribunal and dismissed the Civil Miscellaneous Appeal, with no costs incurred.
JUDGMENT
(Prayer: This Civil Miscellaneous Appeal is filed under Section 37 of the Arbitratio and Conciliation Act, 1996, against the order dated 03.02.2022 made in I.A.No.87/2019 in Arbitration Case No.VKT/SF/08/2019 and Contract No.M004000740 before the Sole Arbitrator V.K.Thirunavukkarasu, Chennai.)
1. This Civil Miscellaneous Appeal is filed under Section 37 of the Arbitration and Conciliation Act, 1996 to set aside the order made in I.A.No.87 of 2019, whereby, the Sole Arbitrator has refused to raise the attachment before judgment passed by him.
2. The short facts that are necessary for determination of this Civil Miscellaneous Appeal, is as under.
(a) The Arbitral proceedings were initiated between the 1st respondent and respondents 2 to 6 in proceedings in Arbitration Case No.VKT/SF/08/2019 before the Sole Arbitrator V.K.Thirunavukkarasu, Chennai. The learned Arbitrator passed an order of attachment before Judgment and Schedule ''3'' refers to the property.
(b) Since an entry/encumbrance had been created, the appellant filed an application in I.A.No.87 of 2019 in Arbitration Case No.VKT/SF/08/2019 before the learned Arbitrator substantiating his claim with his title document on 14.10.2010. After enquiry, the learned Arbitrator has refused to raise the attachment order in so far as schedule ''3'' relating to his property and hence, the Civil Miscellaneous Appeal.
3. Heard the learned counsel for the appellant, learned counsel for 1st respondent/Sundaram Finance Limited and learned counsel for respondents 3 and 4 and perused the documents.
4. After perusal of the documents filed in the typed set of papers by both the parties and hearing the rival submissions made, I find that the claimant/1st respondent herein initiated the arbitration proceedings to adjudicate the claim under the loan agreement dated 26.09.2017, entered into by the 2nd respondent herein. It is apt to point out that the Loan agreement on behalf of the 2nd respondent was signed and executed by its Managing Director (i.e.) the 4th respondent/mother of the appellant herein. The other two directors of the 2nd respondent Company i.e., the 5th and 6th respondents along with the 3rd and 4th respondents joined in the above transactions as the guarantors, guaranteeing the due performance of the obligations under the above loan agreement by the borrower i.e., the 2nd respondent.
5. Under the said loan agreement, a sum of Rs.19,62,400/- is repayable in 33 instalments. Though the 2nd respondent undertook to pay the amount in 33 monthly instalments, after paying the amount due under the 3rd instalment, committed default from the 4th instalment which fell due on 17.03.2018. A sum of Rs.3,93,862/- was due and payable by respondents 2 to 6. Invoking the arbitration clause enunciated under the loan agreement and the Deed of Guarantee, Sundaram Finance Limited/1st respondent initiated arbitration proceedings to adjudicate the claim under the said agreement. In the said arbitration proceedings, the learned Arbitrator, after affording sufficient opportunities to the respondents 3 to 6 passed an order of attachment of the immovable properties of the 4th respondent on 02.11.2019. Pursuant to the order, the properties of the 4th respondent were attached and the attachment is in force as on this date.
6. It is the specific case of the appellant/petitioner that the transfer is not fraudulent in nature and he is not a party to the loan agreement between the 1st respondent-Sundaram Finance Limited and respondents 2 to 6 and further contended that there is no privity of contract between the appellant and the Sundaram Finance Limited/1st respondent herein. The appellant has not been arrayed as a party to the Arbitration Proceedings and hence, he is not aware of the same and no notice was sent to him before passing of the award.
7. As stated supra, the loan agreement is between the 1st respondent/Sundaram Finance Limited and the 2nd respondent company wherein
AI
A transfer made with knowledge of an attachment before judgment can be contested as fraudulent under Section 53 of the Transfer of Property Act.
The main legal point established in the judgment is that a claim petition filed under Order XXI Rule 58 of CPC shall be adjudicated upon as if it is a regular suit, and any adjudication on the rights....
Fraudulent transfer of property to defeat the rights of a creditor can be voidable, justifying attachment under the Civil Procedure Code.
Debt can be defined as an obligation to pay an ascertained sum of money, and therefore, a claim for compensation does not come within that purview.
Civil courts are enjoined to consider disputes between parties and when substantive rights are created and such rights are being flouted, it is for civil court to consider respective contentions and ....
Rule 58 of Order XXI C.P.C., which is extracted as adjudication of claims to or objections to attachment of property.
Collusive transfer to defeat creditor voidable under execution proceedings despite preceding attachment if lacking bona fides.
An order of attachment in arbitration proceedings may be vacated by the Court when the parties have reached a post-award settlement and the respondent consents to the request.
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