Bombay High Court
Kotak Mahindra Bank Limited vs Ramjesh Jhajj And 2 Ors on 17 February, 2020
Author: G. S. Patel
Bench: G.S. Patel
26-ARBPL239-20.DOC
Arun
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 239 OF 2020
Kotak Mahindra Bank Ltd ...Petitioner
Versus
Ramjesh Jhajj & Ors ...Respondents
Ms SI Joshi, with Ms Nikita Pawar and Ms Jalpa Pithadia, i/b SI
Joshi & Co, for the Petitioner.
CORAM: G.S. PATEL, J.
DATED: 17th February 2020 PC:-
1. The Petition is under Section 9 of the Arbitration and Conciliation Act 1996. It has been served on the 1st Respondent, the only real contestant to this proceeding. The prayers in the Petition are these:
"(a) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with the Section 36 of the Arbitration and Conciliation Act 1996, Court Receiver, High Court, Bombay be appointed as a Receiver under Order XL Rule 1 of C.P.C. in respect of said Assets more particularly described in Exhibit "H" to the Petition hereto, with a direction to take possession of the said Assets without giving notice of their visit to the Page 1 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC Respondents and for that purpose, this Hon'ble Court be pleased to direct the concerned Police Station to render Police Assistance for the purpose of taking possession of the said Assets and hand it over to the Petitioner and Petitioner be allowed to sale the same by private treaty the said Assets;
(b) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996 the Court Receiver be allowed to take forcible possession of the said assets with te help of police assistance by braking open the seals and/or locks of whatsoever nature or by whomsoever put on the premises where the said assets are lying;
(c) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, this Hon'ble Court be pleased to direct the Respondent No.1 to disclose the location of the said Assets on oath to enable the Court Receiver to take possession of the said Assets;
(d) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondent No.1 and its respective servants and agents be restrained by an order and injunction of this Hon'ble Court in any manner parting with possession, creating third party rights, alienating and/or encumbering with Assets described in Exhibit "H" to the Petition;Page 2 of 10
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(e) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after the making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondents be directed to disclose its/their encumbered and unencumbered properties and upon disclosures thereof, the Court Receiver may be appointed on the said property under Order XL Rule 1 of C.P.C. 1908;
(f ) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondents be directed to deposit a sum of Rs. 46,76,383.56 (Rupees Forty Six Lacs Seventy Six Thousand Three Hundred Eighty Three and Paise Fifty Six Only) along with interest @ 18% p.a. has become due and payable as of 07.01.2020 with further overdue charges from 08.01.2020 with the Petitioner or in this Hon'ble Court to secure the Petitioner's claim as more particularly set out in Petitioner's particulars of claim being Exhibit "F" hereto;
(g) Pending the reference and hearing and fnal disposal of the Arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondents be directed to furnish the security of whatsoever nature to the sum of Rs. 46,76,383.56 (Rupees Forty Six Lacs Seventy Six Thousand Three Hundred Eighty Three and Paise Fifty Six Only);
(h) The Respondents be ordered and directed to deposit with this Hon'ble Court and/or to furnish solvent security by way of bank guarantee to the tune of Rs. 46,76,383.56 (Rupees Forty Six Lacs Seventy Six Thousand Three Page 3 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC Hundred Eighty Three and Paise Fifty Six Only) to secure the claim of the Petitioner under the present Petition;
(i) Ad-interim relief in terms of prayer (a) to (h) above."
2. The Petitioner is a banking company. The Petitioner is the assignee from Magma Fincorp Limited (previously known as Magma Leasing Limited) ("Magma Fincorp") of its chose in action / loan account and award debt under a Deed of Assignment dated 27th March 2017.
3. The 1st Respondent took over the liability of Respondents Nos. 2 and 3 under a Hire Purchase Agreement dated 23rd November 2011 that those two Respondents had previously with Magma Fincorp.
4. Respondents Nos. 2 and 3 were, respectively the original borrower and the original guarantor in respect of a loan from Magma Fincorp. The Hire Purchase Agreement was dated 23rd November 2011. The loan facility was in the amount of Rs. 1,45,84,000/- and was to purchase two Volvo Buses, being Registration No. DLIPC 4363 and DLIPC 4365. The loan was repayable in 47 monthly instalments.
5. Respondents Nos. 2 and 3 defaulted. Magma Fincorp invoked Arbitration. It obtained an Award dated 18th June 2013 in the amount of Rs. 1,10,36,310/-. Once that Award became enforceable as a decree of the Court, Magma Fincorp fled execution proceedings against Respondents Nos. 2 and 3 in New Delhi.
Page 4 of 1017th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC During the pendency of those execution proceedings, Magma Fincorp assigned this Award and its original claim to the Petitioner under the Deed of Assignment of 27th March 2017.
6. Respondents Nos. 2 and 3 pleaded an inability to repay the amount and to discharge their debt. They apparently delivered possession of the hypothecated assets, namely the two buses, to the 1st Respondent with an undertaking that the 1st Respondent would repay the loan due to Magma Fincorp/the Petitioner on behalf of Respondents Nos. 2 and 3. This did not remain in an informal condition because the 1st Respondent fled a Civil Writ Petition No. 9837 of 2014 in the Punjab and Haryana High Court in the course of which he accepted his liability to make payment of this debt on behalf of Respondents Nos. 2 and 3. These facts are specifcally pleaded in paragraph 8 of the Petition.
7. In fact the parties appeared before the executing Court for a settlement. There were discussions including with a Mediator. Terms of settlement were recorded under a Settlement Deed dated 21st December 2017 in Mediation Case No. 1712 of 2017. This was in the Patiala House Courts in New Delhi and a copy is Exhibit "B" to the Petition.
8. It is this document that is the Tripartite Agreement of Settlement Deed of 21st December 2017 that is the centre of the present Petition. In view of that document the Execution Petition was withdrawn. Under that document the 1st Respondent agreed to make a payment of a total of Rs. 60 lakhs over 18 months in 19 Page 5 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC instalments commencing from 20th December 2017. The 1st Respondent made payment of the frst two instalments of Rs. 4 lakhs by demand drafts. He then issued 17 post-dated cheques to ensure payments of the balance instalments.
9. Only a few further payments were made and as of the date of the Petition an amount of Rs. 42 lakhs remained due and payable. On 28th June 2019, the 1st Respondent said that he was unable to make the payment of the balance amount of Rs. 42 lakhs and requested a further reduction of the overall debt from Rs. 60 lakhs to Rs. 43 lakhs. The Petitioner seems to have accepted this on condition that the 1st Respondent would make a payment of Rs. 25 lakhs immediately i.e. before 29th June 2019 and no later.
10. Despite this downward revision, the 1st Respondent did not make payment. Therefore the Petitioner issued a demand and cancellation notice of 17th September 2019 demanding the payment of the balance amount of Rs. 42 lakhs outstanding under the original sanction of Rs. 60 lakhs. A copy of that document is at Exhibit "E".
11. Now the Settlement Deed of 21st December 2017 and the Petitioner's confrmation letter of 28th June 2019 contain an Arbitration Clause which is set out at page 57 in subparagraph (f ) which reads thus:
"(f ) Any and all claims and disputes arising out of or in connection with this Settlement deed dated 21.12.2017 and Confrmation Letter dated 26.06.2019 shall be settled by arbitration by a Single Arbitrator to be appointed by the Bank. The arbitration shall be held in Mumbai in Page 6 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC accordance with the provisions of the Arbitration and Conciliation Act, 2015 (as amended)."
12. This is a curious state of afairs. It is one arbitration being mounted on an earlier one. The Petitioner's assignor had an agreement. That had an arbitration clause. That arbitration was invoked. That assignor, Magma Fincorp, obtained an award. That award was put into enforcement. Magma Fincorp then assigned its debt to the present Petitioner. In the execution proceedings and in related proceedings the Petitioner, Respondents Nos. 2 and 3 and the 1st Respondent entered into a further mediation or settlement. That had another arbitration clause. The entire amount of the debt was restructured. In short, from the original loan of about Rs. 1.45 crores, even after accounting for amounts received the Petitioner agreed to accept to much lower fgure of Rs. 60 lakhs. Even this has not been paid and even this is now required to be taken to a second arbitration.
13. It is in these circumstances that I have no hesitation in saying that a more than sufcient prima facie case is made out, that the balance of convenience is clearly with the Petitioner and irretrievable prejudice will be caused to it if reliefs are denied.
14. There can be no manner of doubt that the two vehicles are indeed assets that are available to the Petitioner and against which it can proceed. Clause 4 of the Settlement Deed at page 50 indicates that the 1st Respondent had undertaken to get the hypothecation of the two buses transferred in the name of the Petitioner.
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15. I will therefore make an ad-interim order in terms of prayer clause (a) and (d) which read thus:
"(a) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with the Section 36 of the Arbitration and Conciliation Act 1996, Court Receiver, High Court, Bombay be appointed as a Receiver under Order XL Rule 1 of C.P.C. in respect of said Assets more particularly described in Exhibit "H" to the Petition hereto, with a direction to take possession of the said Assets without giving notice of their visit to the Respondents and for that purpose, this Hon'ble Court be pleased to direct the concerned Police Station to render Police Assistance for the purpose of taking possession of the said Assets and hand it over to the Petitioner and Petitioner be allowed to sale the same by private treaty the said Assets;
(d) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondent No.1 and its respective servants and agents be restrained by an order and injunction of this Hon'ble Court in any manner parting with possession, creating third party rights, alienating and/or encumbering with Assets described in Exhibit "H" to the Petition."
16. So far as prayer clause (a) is concerned, the reason to make an order of an ad-interim Receiver is the entire history and trajectory of this matter where the Respondents have between them literally got away without making payment of the debt due and which debt was incurred for the acquisition of these two assets. However the Page 8 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 ::: 26-ARBPL239-20.DOC Receiver is at present not to take physical possession of the two vehicles. He will only take symbolic possession. He is also not to proceed to sell the vehicles. This ad-interim order will continue until further orders. The Respondents will be served with a copy of this order. Should they not make the necessary disclosures of assets as required by prayer clause (c) and (e) on or before 9th March 2020, they are put to notice that I will proceed to make an order for forcible possession of the two vehicles and their sale. Thus, there will also be an order in terms of prayer clauses (c) and (e), viz., "(c) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, this Hon'ble Court be pleased to direct the Respondent No.1 to disclose the location of the said Assets on oath to enable the Court Receiver to take possession of the said Assets;
(e) Pending the reference and hearing and fnal disposal of the arbitration proceedings or at any time after the making of the Arbitral Award but before it is enforced in accordance with Section 36 of the Arbitration and Conciliation Act 1996, the Respondents be directed to disclose its/their encumbered and unencumbered properties and upon disclosures thereof, the Court Receiver may be appointed on the said property under Order XL Rule 1 of C.P.C. 1908."
17. The Afdavit of Disclosure with a Reply, if any, by the 1st Respondent is to be fled and served on or before 9th March 2020. No Rejoinder without the leave of the Court.
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18. List the matter on 17th March 2020.
(G. S. PATEL, J) Page 10 of 10 17th February 2020 ::: Uploaded on - 18/02/2020 ::: Downloaded on - 19/02/2020 06:17:03 :::