Telangana High Court
Megha Engineering And Infrastructures ... vs Srei Equipment Finance Limited on 25 August, 2022
Author: P. Naveen Rao
Bench: P. Naveen Rao
1
PNR, J. & JSR, J.
CRP.No. 1857 OF 2022
HONOURABLE SRI JUSTICE P. NAVEEN RAO
AND
HONOURABLE SRI JUSTICE J. SREENIVAS RAO
CIVIL REVISION PETITION No. 1857 OF 2022
ORDER:( Per the Hon'ble Sri Justice P. NAVEEN RAO ) Petitioners herein and respondents 1 and 2 entered into lease agreement called "Master Lease Agreement" (MLA) on 15-01-2020. Dispute arose interse parties to MLA. Petitioner/Plaintiff herein instituted commercial suit in COS.No.40 of 2021 on the file of Principal Special Court for Trial and Disposal of Commercial Disputes, City Civil Court, Hyderabad, for permanent injunction restraining the respondents/defendants from interfering with the business, corporate existence and reputation of the plaintiff company by classifying the plaintiff as a defaulting borrower and as SMA-O in RBI CIRCLE; and permanent injunction restraining the respondents/defendants in insisting the plaintiff to pay the EMIs for the equipment under the Master Service Agreement dated 15/01/2020.
2. In the said suit, defendants 2 and 3 have filed I.A.No.152 of 2022 under section 8 of Arbitration and Conciliation Act, 1996 (ACA) to refer the matter to the arbitration. On exhaustive consideration, the Commercial Court by order dated 21-04-2022 allowed the application referring the dispute to arbitration.
3. This Revision is preferred challenging the said order. 2
PNR, J. & JSR, J.
CRP.No. 1857 OF 2022
4. Heard Sri J.Prabhaker, learned Senior Counsel represents Sri A.V.S.Avadhani, counsel for the petitioner and Sri D.Srinivas represents Sri Rohit Pogula, counsel for the respondents 3 and 4.
5.1 The primary challenge against the reference to arbitration is that there is no dispute between the plaintiff and defendants 1 and
4. The arbitration clause is in the agreement entered into between the plaintiff and defendants 2 and 3 and the defendants 1 and 4 are no way concerned with the agreement; and therefore, arbitration clause is not applicable and thus, the Commercial Court erred in applying section 8 contrary to the said agreement. Incidentally it is also contended that the matter is ceased by Company Law Tribunal, Kolkata and case is admitted by the said Tribunal. When once case is admitted by the Company Law Tribunal, Kolkata, no other proceedings are maintainable.
5.2. Learned Senior Counsel, Sri J. Prabhaker appearing on behalf of the petitioner also placed reliance on the following decisions:
i) ATUL SINGH AND ORS., V/s. SUNIL KUMAR SINGH AND ORS. 1
ii) BOOZ ALLEN AND HAMILTON INC. V/s. SBI HOME FIN.LTD.& ORS.2
iii) INDUS BIOTECH PVT.LTD. V/s. KOTAK INDIA VENTURE (OFFSHORE) FUND (EARLIER KNOWN AS KOTAK INDIA VENTURE LTD) & ORS.3
6.1. Learned Senior Counsel, Sri Dammalapati Srinivas appearing for the defendants 3 and 4 submits that the bank is an assignee of respondents 1 and 2 and as an assignee, bank stepped 1 ) (2008) 2 SUPREME COURT CASES-602 2 ) (2011) 5 SUPREME COURT CASES-532 3 ) (2021) 6 SUPREME COURT CASES-436 3 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 into the shoes of the original lessor; and therefore, the terms of contract are equally applicable to the bank and the lessee.
6.2 He raised a preliminary objection on the maintainability of the suit before the Commercial Court at Hyderabad on the ground that in MLA the parties have agreed to the jurisdiction of the Courts in Kolkata only and therefore, the suit filed before Commercial Court at Hyderabad as well as this Civil Revision Petition are not maintainable. On the jurisdiction aspect, the learned Senior Counsel also contended that the agreement was entered into in Kolkata and the equipments are positioned in Polavaram worksite, which is in the State of Andhra Pradesh. Merely because the Head Office of the petitioner is located in Hyderabad, the Courts in the State of Telangana do not acquire jurisdiction and invariably aggrieved person has to avail the remedy in the Courts in Kolkata. Mere correspondence from Corporate Office located in Hyderabad does not give rise to cause of action at Hyderabad.
6.3 The learned Senior Counsel further contended that till November, 2021 the understanding was very clear that the bank stepped into the shoes of the lessor and the lease amounts were paid to the bank without raising any objection but only after November, 2021 the amounts are not credited.
6.4 Alternatively, the learned Senior Counsel submitted that in view of Clause-16, the defendants 1 and 4 stepped into the shoes 4 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 of defendants 2 and 3 and therefore, the Arbitration clause incorporated in clause 18 (n) is equally applicable to the defendants 1 and 4 and having regard to this clause the Commercial Court rightly referred the parties to the Arbitration.
6.5 The learned Senior Counsel also pointed out that the second defendant served letter of notification of assignment of rentals to the first defendant-bank and the plaintiff was aware of the fact as can be seen from paragraph IV of the plaint dealing with the cause of action.
7. Though several submissions are made on merits, we are not entering into merits, since in the suit instituted before the Commercial Court, the Commercial Court by order impugned herein referred the matter to the Arbitration and all the issues have to be raised and resolved before the Arbitrator.
8. To appreciate the issue in this revision, relevant clauses are as under :
(A reference to any party to this agreement or any other document or arrangement includes, unless excluded by context, that party's executors, administrators, substitutes, successors and permitted assignees and in case of a Successor Event, a successor entity;) Clause 18 (n), deals with resolution of disputes by arbitration.
16. ASSIGNMENT AND AGENCY :
16.1 Lessor may sell/or assign or transfer all or any Lessor's right and/or obligations under this Agreement and/or 5 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 to the Equipment or grant a security interest in the Equipment to a Secured Party or Assignee. Upon such assignment or creation of security interest, Lessor shall send a notice in the agreed format. Lessee agrees that Lessee shall abide by the terms of the assignment, that is to say, where the assignment relates to transfer of receivables under this Agreements, all amounts payable hereunder as have been assigned, shall, from the effective date of such assignment be payable to the assignee. In case, Lessor have transferred any right, title or interest in the Equipment, Lessee shall recognize the transferee as the owner. Where lessor have created any security interest in the Equipment or any receivables hereunder. Lessee shall recognize interest of such Secured Party. You acknowledge that Lessor shall be entitled to transfer all Lessee related information to such Secured Party and/or Assignee. No such assignment shall in any way affect the right of beneficial use of the Equipment granted hereunder.
16.2 Lessee shall not assign any of Lessee's obligations or rights hereunder to a third party.
(a) It is agreed that in case of change of control, Lessee shall ensure that all of Lessee's obligations hereunder shall become the obligations of the incoming entity, and obtain a confirmation to that effect from the incoming entity. It is agreed that Lessee must give Lessor written notice of Lessee's intention at least 60 Business Days prior to such Change of Control.
18. MISCELLANEOUS :
(n) Any disputes or differences arising out of or in connection with the agreement during its subsistence or thereafter between the parties including any disputes and differences relating to the interpretation of the agreement or any clause thereof shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and rules framed 6 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 thereunder and any amendment, modification, statutory enactment thereto from time to time and shall be referred to the sole Arbitration of an Arbitrator appointed by Lessor on its own or upon request of the Lessee and/or guarantor in writing upon intimation to all parties to this agreement.
It is made clear that the venue of Arbitration proceedings will be Kolkata and no objection shall be entertained from any parties in this regard. The cost of the Arbitration proceedings shall be borne by the parties to this agreement.
The award of the Arbitrator shall be final, conclusive and binding on all the parties.
9. A bare reading of Clause-16, it is apparent that the Lessor is entitled to assign or transfer all or any of Lessor's rights under the agreement and/or the Equipment or grant of security interest in the Equipment to the secured party or assignee. Upon such assignment or creation of secured interest, lessor shall send a notice in the agreed format. Lessee agreed that he would abide by the terms of assignment. In terms thereof the lessor assigned his interest to Karur Vysya Bank. As a consequence, Karur Vysya Bank stepped into the shoes of the lessee. Therefore, it is entitled to receive rents. As a corollary, the Arbitration clause is also equally applicable.
10. Having regard to these two clauses, the Commercial Court has rightly come to the conclusion that the parties are bound by the agreement to refer the dispute to Arbitration and in exercise of the 7 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 powers vested under section 8 of the Act, has rightly referred the matter to Arbitration.
11. We have gone through the decisions cited by the learned Senior Counsel for the petitioner. Having regard to the terms of contract in this case, the said decisions do not come to the aid of the petitioner.
12. We do not see any error committed by the Commercial Court warranting interference under Article 227 of the Constitution of India. The Civil Revision Petition is accordingly dismissed. No costs. As a sequel, miscellaneous applications pending if any, shall stand closed.
_____________________________ JUSTICE P. NAVEEN RAO ________________________________ JUSTICE J. SREENIVAS RAO 25-08-2022 ISL 8 PNR, J. & JSR, J.
CRP.No. 1857 OF 2022 HONOURABLE SRI JUSTICE P. NAVEEN RAO AND HONOURABLE SRI JUSTICE J. SREENIVAS RAO CIVIL REVISION PETITION No. 1857 OF 2022 O R D E R : { Per the Hon'ble Sri Justice P NAVEEN RAO } R E S U LT : CRP IS DISMISSED. NO COSTS Circulation No. 142 Date: 25-08-2022 PS/CM : ISL