Madras High Court
M/S.First Leasing Company Of India ... vs M/S.Lilliput Kidswear Ltd on 17 January, 2013
Author: Vinod K.Sharma
Bench: Vinod K.Sharma
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17/01/2013 CORAM THE HON'BLE MR.JUSTICE VINOD K.SHARMA O.A.No.513 of 2012 & A.No.2747 of 2012 in C.S.No.428 of 2012 O.A. No.513 of 2012 ------------------- M/S.FIRST LEASING COMPANY OF INDIA LIMITED, REP. BY ITS MANAGER (RECOVERY) P.GOVARTHANAN, 749, ANNA SALAI, CHENNAI-600 002. VS M/S.LILLIPUT KIDSWEAR LTD REP. BY ITS CHAIRMAN & MANAGING DIRECTOR, MR.SANJEEV NARULA D-95 OKHALA INDUSTRIAL AREA, PHASE-I, NEW DELHI-110 020. MR.SANJEEV NARULA S/O.MADANLAL NARULA E-109, GK PART II, NEW DELHI - 110 048. A. No.2747 of 2012 ------------------ M/S.FIRST LEASING COMPANY OF INDIA LIMITED, REP. BY ITS MANAGER (RECOVERY), P.GOVARTHANAN, 749, ANNA SALAI, CHENNAI-600 002. VS M/S.LILLIPUT KIDSWEAR LTD REP. BY ITS CHAIRMAN & MANAGING DIRECTOR, MR.SANJEEV NARULA D-95, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI-110 020. MR.SANJEEV NARULA S/O.MADANLAL NARULA, E-109, GK PART II, NEW DELHI-110 048. ORDER
O.A.513 of 2012: This application has been moved by the plaintiff/applicant for grant of ad-interim injunction, restraining the respondents, their men, agents, staff, subordinates or any person claiming through or holding on behalf of them from in any way dealing with the schedule I & II mentioned assets / machineries installed at schedule premises by way of alienation / parting with possession or dealing with the same, pending disposal of the suit.
A.No.2747 of 2012: This application has been filed to appoint an Advocate Commissioner to go and seize the schedule I & II mentioned assets or machineries more fully described hereunder wherever it is found with the help of police aid and to break open the locks if necessary and to hand over the same to the plaintiff/applicant, pending disposal of the suit.
2. It is pleaded, that the plaintiff/applicant has file a suit for issuance of direction to the defendants/respondents to deliver Schedule I & II mentioned machineries to the plaintiff at their office at Chennai on their own risks and costs and in default by the defendants, order repossession of the Schedule I & II mentioned property through Court process. The prayer is also for issuance of permanent injunction, restraining defendants, their men, agents, staff, subordinates or any person claiming through or holding on behalf of them from in any way dealing with the schedule I & II mentioned assets / machineries installed at schedule premises by way of alienation / parting with possession or dealing with the same.
3. The plaintiff/applicant is a Non-Banking Financial Company regulated and registered with the Reserve Bank of India and is a company registered under the Companies Act. It is submitted, that it entered into a loan agreement dated 15.06.2010 at Chennai. The defendant no.1 availed a loan of Rs.10,00,00,000/- (Rupees Ten Crores only), which was agreed to be repaid with interest @ 12% p.a. and in the event of default, @ 33% p.a. The loan was advanced for purchase of plant and machinery, furniture and fit outs as detailed in the Schedule I.
4. The amount was to be repaid in equated monthly installments of Rs.60,98,000/- (Rupees Sixty Lakhs and Ninety Eight Thousand only). The 2nd defendant had executed a Deed of Personal Guarantee on 22.06.2010, guaranteeing the due payment of the amount. The loan was also secured by a Deed of Hypothecation dated 15.06.2010, hypothecating the schedule-I mentioned machineries for the amount due under the agreement, which was held by Supplement Deed of Hypothecation dated 28.02.2011.
5. Thereafter, the 1st defendant availed additional loan of Rs.3,58,95,050/- (Rupees Three Crores Fifty Eight Lakhs Ninety Five Thousand and Fifty only) out of sanctioned loan of Rs.15 Crores, which was also to be repaid in 18 equated monthly installments @ 14.50% p.m. and in default 33% p.a. This was also guaranteed by way of personal guarantee.
6. The 1st defendant is said to have committed default in repayment of loan amount and also violated the terms of hypothecation agreement. It is submitted, that defendant no.2 is jointly and severally liable for all the dues agreed under the said deeds.
7. It is the case of the plaintiff/applicant, that under the loan agreement, right is given to the company or its bankers to inspect the premises to verify the offered security. That it is open to the plaintiff/applicant in the event of default to recall all the principal and accrued interest thereon and enforce the securities for recovery of the amount.
8. It is further case of the plaintiff/applicant, that though it is an agreement for loan, but in fact it is a hire purchase agreement, as the ownership right vests with the plaintiff/applicant. According to a newspaper Report, the plaintiff/applicant gathered that the defendant company is financially unsound and had committed default in repayment of monthly installments. These averments cannot be accepted, as it is not understood how hire purchase goods could be hypothecated.
9. It is submitted, that 1st defendant is not doing good business and the foreign investors have withdrawn their investment in the company. That the defendant no.2 did not properly utilize the loan amount, which resulted in issuance of notice dated 18.10.2011, calling upon the Directors to repay jointly and severally a sum of Rs.7,51,27,177.26 (Rupees Seven Crores Fifty One Lakhs Twenty Seven Thousand One Hundred and Seventy Seven and Paise Twenty Six only), being the loan amount due on 18.10.2011.
10. It is further case of the plaintiff/applicant, that on receipt of notice, defendant no.2 requested the plaintiff/applicant to drop action, as he will regularize the amount and also furnish security for the amount. The plaintiff/applicant accordingly withdrew the notice, but inspite of this, the defendants did not keep their commitment and neglected to pay the amount. Some of the cheques issued by the defendants were dishonored and the plaintiff/applicant has initiated proceedings under Section 138 of Negotiable Instruments Act.
11. The loan agreement was terminated on 06.03.2012 as per Clause 15 of the Loan Agreement and the Deed of Hypothecation. The Supplementary Loan Agreement was also invoked as also the personal guarantee.
12. It is pleaded in Para-15, that thought the plaintiff/applicant asked the defendant to repay the amount due as per the statement of account, but keeping in view the fact, that personal guarantee furnished by the defendant no2 had the arbitration clause, the plaintiff/applicant has also appointed an Arbitrator to arbitrate the dispute arising out of the said matter against the defendant no.2.
13. This averment is factually incorrect, as in the statement of claim filed with the Arbitrator, defendant no.1 has also been impleaded as party respondent, and relief is claimed against defendant no.1 also.
14. It is the case of the plaintiff/applicant that inspite of legal notice, loan amount has not been repaid. That the plaintiff/applicant is the owner of the schedule I & II mentioned machineries and the 1st defendant being the principal borrower, was in arrears as on 20.05.2012 The jurisdiction of this Court has been invoked, as the agreement was executed at Chennai, where the loan was availed by hypothecated schedule mentioned property.
15. It is submitted, that though the outstanding amount is Rs.6,22,77,194.70 (Rupees Six Crores Twenty Two Lakhs Seventy Seven Thousand One Hundred and Ninety Four and Paise Seventy only), but for the purpose of Court fee, the plaintiff/applicant has assessed the valuation as Rs.25,01,000/- (Rupees Twenty Five Lakhs and One Thousand only) and claimed the relief of mandatory direction to deliver the schedule mentioned property.
16. It is not understood how in view of the pleading loan was advanced for purchase of plant and machinery, which was more than Rs.13,00,00,000/- (Rupees Thirteen Crores only), the suit is valued only for Rs.25,00,000/- (Rupees Twenty Five Lakhs only). Not only this, it is admitted case, that while suit has been filed for mandatory injunction, the plaintiff/applicant also initiated proceedings for recovery of amount by appointing an Arbitrator in terms of the arbitration agreement entered into between the plaintiff and defendant no.2.
17. Along with the suit, the plaintiff/applicant filed this application for grant of ad-interim injunction, restraining, respondents, from dealing with the schedule mentioned property or alienating or parting with the possession thereof.
18. Learned Senior Counsel appearing on behalf of the plaintiff/applicant vehemently contends, that defendants/respondents had agreed to repay the amount with interest in equated monthly installment, it was also agreed between the parties that in the event of failure to pay the amount, it was open to the plaintiff/applicant to recall the loan amount, which it has done, therefore, there is prima facie case in favour of plaintiff/applicant to seek injunction. In support of this petition, learned Senior Counsel referred to the Deed of Hypothecation and agreement entered into between the parties.
19. Learned Senior Counsel for the plaintiff/applicant also vehemently contended, that arbitration proceedings have been initiated against defendant no.2 in which defendant no.1 has been made party being a necessary party, but there is no arbitration agreement between the plaintiff/applicant and defendant no.1.
20. It is not understood if that is the case, how arbitration proceedings have been initiated for passing an award against defendant no.1 as well as defendant no.2.
21. It is well settled law, that if a party actively pursues the proceedings in respect of the claim both in the Court and in arbitration, then such proceedings can be regarded as vexatious and an abuse of the process of the Court. In such case, the Court in exercise of its inherent power can require the party to elect any one forum which the party may choose to pursue the claim.
22. It was in view of the settled law, that the applicant was given an opportunity either to withdraw the suit or arbitration proceedings. Inspite of adjournment taken to seek instruction in this regard on 19.11.2012, learned Senior Counsel contended, that plaintiff/applicant will continue with both the proceedings.
23. In the suit filed in this Court, the plaintiff/applicant has claimed mandatory injunction for possession of machinery. Whereas before the Arbitrator, the claim is for recovery of balance outstanding from defendant nos.1 & 2. It is interesting to note, that in the suit defendant no.2 has been impleaded as party, being guarantor without any relief having been claimed against him, as the relief claimed is for possession of machinery, whereas in the arbitration proceedings, though relief claimed is against both the defendants, the stand of learned Senior Counsel is that there is no arbitration agreement with defendant no.1.
24. That inspite of giving of opportunity, the plaintiff/applicant has not chosen to pursue one remedy, therefore, in view of the settled law, the proceedings in the suit can safely be regarded as vexatious and an abuse of process of the Court. The plaintiff/applicant therefore also cannot be said to have come to Court with clean hand, therefore, is not entitled to the discretionary relief of injunction as prayed. Otherwise also, the main relief is for mandatory injunction and the petitioner in garb of interim injunction, cannot claim final relief. The plaintiff/applicant is also not going to suffer any irreparable loss, as admittedly the plaintiff/applicant can be compensated by money. In this case, the plaintiff/applicant has filed claim before the Arbitrator. The plaintiff/applicant therefore is not entitled to injunction as prayed for, as the plaintiff/applicant will not suffer any irreparable loss or injury in case injunction is not granted.
25. The application for appointment of Advocate Commissioner under Order XXVI Rule 9 of the Code of Civil Procedure is also totally misconceived. Order XXVI Rule 9 of the CPC reads as under:
"9. Commissions to make local investigations In any suit in which the Court deems a local investigation to be requisite or proper for the purpose of elecidating any matter in dispute, or of ascertaining the market-value of any property, or the amount of any mesne profits or damages or annual net profits, the Court may issue a commission to such person as it thinks fit directing him to make such investigation and to report thereon to the Court:
Provided that, where the State Government has made rules as to the persons to whom such commission shall be issued, the Court shall be bound by such rules."
26. The pleading in the suit is not with regard to asserting the market value of the property for which local investigation is necessary. Rather under the loan agreement, the plaintiff/applicant advanced determined sum, which is recoverable with interest. The amount claimed is the determined amount, and the plaintiff/applicant has filed a claim before the Arbitrator for recovery.
27. It is also not case where mesne profit or damages are claimed for this Court to seek any report.
28. The prayer in the application is to direct the Advocate Commissioner to take possession and hand over the machinery to the plaintiff/applicant thereby the plaintiff/applicant is seeking the main relief without matter being adjudicated.
29. It may also be noticed here, that the plaintiff has the rights to inspect the machinery by giving notice as per the terms of the loan agreement between the parties.
VINOD K.SHARMA,J., ar
30. The plaintiff/applicant has not placed on record any notice showing its intention to inspect the machinery hypothecated to the plaintiff/applicant or refusal by defendants to allow such inspection. Therefore, this application is nothing but misuse of the process of the Court. The Order XXVI Rule 9 can be invoked only when parties are leading evidence, and not at initial stage of proceedings.
31. In this case, even issues have not been framed so far. Therefore, it can be safely said, that this application is nothing, but misuse of the process of Court, and has been filed to harass the defendants/respondents.
32. For the reasons stated, both the applications, being devoid of any merit, are ordered to be dismissed. No costs.
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