Madras High Court
Ganesh Benzoplast Ltd., Mumbai, ... vs Sundaram Finance Ltd., Chennai And Oil ... on 2 April, 2002
Equivalent citations: (2002)2MLJ146
Author: P.D. Dinakaran
Bench: P.D. Dinakaran
JUDGMENT S. Jagadeesan, J.
1. The appeal has been filed by the appellants against the order of the learned Judge dated 1.3.2002 in Application No.334 of 2002, directing the garnishee, the second respondent herein, to retain a sum of Rs.1,18,31,000/- until further direction.
2.The admitted facts are:- The first respondent herein advanced money on hire purchase agreement to the first appellant herein. The second appellant is the guarantor. As per the terms of the hire purchase agreement, the parties have to go for arbitration, if any dispute arises between them. The application 334 of 2002 was filed by the first respondent, seeking a garnishee order on the ground that the first respondent do not want to exercise their right to repossess the machineries hired to the first appellant, since the value of the machineries will be considerably reduced by such repossession. As the appellants failed to discharge their obligation of repayment of the loan amount as per the schedule and the arrears had accrued, the first respondent sought the relief by way of garnishee order to protect their interest.
3.The said application was contested by the appellants.
4.The learned Judge, after considering the arguments advanced on behalf of the parties, passed the prohibitory order, which is being challenged in this appeal.
5.Mr. Habibullah Badsha, the learned senior counsel appearing on behalf of the appellants vehemently contended that the affidavit filed in support of the application seeking the garnishee order do not contain the requisite averments in compliance of Order 38, Rule 5 C.P.C and the learned Judge also failed to consider the same. When an order of attachment or a prohibitory order is sought for against the respondents, it is the duty of the applicant to satisfy the requirement of the provision of Order 38 Rule 5 C.P.C by making such averments. If the affidavit do not contain any averments in due compliance of the said provision, the court is not empowered to pass any interim order as prayed for. The affidavit filed by the first respondent in support of the application seeking the prohibitory order do not contain any of the averments as required under Order 38, Rule 5 C.P.C. and as such the order of the learned Judge cannot be sustained. The learned senior counsel also referred to number of judgments in support of his contention.
6.In view of the only question argued before us, it is unnecessary for us to deal with the facts elaborately.
7.The question for consideration is whether the application seeking the prohibitory order under the Arbitration Act, 1996, restraining the garnishee from making any payment, should contain the averments as contemplated under Order 38, Rule 5 C.P.C.
8.The hire purchase transaction between the parties is not disputed. The default committed by the first appellant in repayment of the loan is also not disputed. Even though the default has not been disputed, but still the learned senior counsel for the appellants contended that the quantum of the amount claimed is under dispute and as such when the quantum itself is under dispute, no garnishee order can be passed. In this aspect, the learned Judge has made a reference in paragraph 19 of the order, wherein it is stated as follows:
"On the facts of the case, the default is not in dispute. The applicant claims a substantial sum as due and except making half hearted denial the liability is not being challenged."
9.When admittedly some liability is there, we also suggested to the learned senior counsel to ascertain as to how much amount is due under the hire purchase agreement. The learned senior counsel replied stating that no amount is due and in fact there was over payment. In support of such contention, no material is available before the court , as the appellants totally failed to produce any statement of account with regard to their payment of instalments as scheduled under the hire purchase agreement and their claim of excess payment. In such circumstance, the said plea of excess payment by the appellant cannot be accepted.
10.Coming to the obligation of the applicant/first respondent herein to satisfy the requirement as contemplated under Order 38, Rule 5 C.P.C is concerned, at the outset, we have to point out that all the judgments cited by the learned senior counsel deals with the application filed either under Order 38 Rule 5 C.P.C or under Section 18 of the Arbitration Act, 1940. If we look at the provision of Section 18 of the Arbitration Act, 1940, it is analogous to Order 38, Rule 5 C.P.C. Further Section 41 of the Arbitration Act, 1940 provides the applicability of C.P.C in respect of the proceedings under the Arbitration Act.
11.The present application was filed under sub-clause (ii)(b)(e) of Section 9 of the Arbitration Act, 1996. This section do not contain such words as that of Section 18 of the Arbitration Act, 1940. Further there is no provision in the 1996 Act similar to Section 41 of 1940 Act. When that be so, it is for us to consider how far Order 38, Rule 5 C.P.C can be enforced in this proceedings. It is better to have a look at the relevant provision i.e., Order 38 Rule 5 C.P.C which is as follows:-
"5. Where defendant may be called upon to furnish security for production of property.--(1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him,--
(a) is about the dispose of the whole or any part of his property, or
(b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court, the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security. (2)The plaintiff shall, unless the Court otherwise directs, specify the property required to be attached and the estimated value thereof. (3)The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified. (4)If an order of attachment is made without complying with the provisions of sub-rule (1) of this rule, such attachment shall be void."
This provision specifically; mentions that the court is to satisfy by affidavit or otherwise that the defendant is about to dispose of the whole or any part of his property or is about to remove the whole or any part of his property from the local limits of the jurisdiction of court with an intention to obstruct or delay the execution of any decree that may be passed.
12.Section 18 of the Arbitration Act, 1940 is the provision governing the interim orders, which reads as follows:
"18.Power of Court to pass interim orders.--(1)Notwithstanding anything contained in Section 17, at any time after the filing of the award, whether notice of the filing has been served or not, upon being satisfied by affidavit or otherwise that a party has taken or is about to take steps to defeat, delay or obstruct the execution of any decree that may be passed upon the award, or that speedy execution of the award is just and necessary, the Court may pass such interim orders as it deems necessary.
(2)Any person against whom such interim orders have been passed may show cause against such orders, and the Court, after hearing the parties, may pass such further orders as it deems necessary, and just."
13.Here again what the above provision contemplates is that the court has to satisfy by affidavit or otherwise that a party has taken or is about to take steps to defeat, delay or obstruct the execution of any decree that may be passed upon the award or that speedy execution of the award is just and necessary. Both the provisions Order 38, Rule 5 C.P.C as well as Section 18 of the Arbitration Act, 1940 contemplates the satisfaction of the court by the affidavit or otherwise.
14.When those provisions have been considered by this court and various other courts as well as the Apex Court, the courts have held that the mandatory requirements of the provision have to be strictly complied with. In order to satisfy the said requirement, it is for the party who claims interim order of attachment or any garnishee order to aver in the affidavit filed in support of such application that the debtor is aiming to delay or defraud the creditor. The non compliance would disentitle the party who seeks prohibitory order against the garnishee or attachment order from seeking such relief.
15. When Section 9 of the Arbitration and Conciliation Act, 1996, is applicable for the case on hand for the grant of the interim relief, it is for this court to consider what is the requirement of the said provision. The relevant provision is as follows:
"9.Interim measures, etc. by Court:-A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court,--
(i)....
(ii)for an interim measure of protection in respect of any of the following matters, namely,--
(a)....
(b)securing the amount in dispute in the arbitration;
(c).....
(d)...
(e) such other interim measure of protection as may appear to the Court to be just and convenient;
and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."
16.A perusal of Section 9 would make it clear that it is neither similar to Order 38 Rule 5 nor Section 18 of the Arbitration Act, 1940. When that be so, the bulk of the judgments relied upon by the learned senior counsel for the appellants is of no assistance to decide the issue in this appeal.
17.It may be worth to mention the Apex Court judgment by three Judges Bench with regard to the plea of readiness and willingness, in SYED DASTAGIR v. T.R. GOPALAKRISHNA SETTY wherein it was held that in construing a plea in any pleading, Courts must keep in mind that a plea is not an expression of art and science but an expression through words to place fact and law of one's case for a relief. It is pointed out that in India most of the pleas are drafted by counsel and hence they inevitably differ from one to the other; thus, to gather true spirit behind a plea it should be read as a whole and to test whether the plaintiff has performed his obligations, one has to see the pith and substance of the plea. It was observed, "Unless a statute specifically requires a plea to be in any particular form, it can be in any form. No specific phraseology or language is required to take such a plea. The language in Section 16(c) of the Specific Relief Act, 1963 does not require any specific phraseology but only that the plaintiff must aver that he has performed or has always been and is willing to perform his part of the contract." So the compliance of "readiness and willingness" has to be in spirit and substance and not in letter and form."
18.From the above ratio decidendi of the Apex Court, it is clear that if only the statue requires a plea should be in a particular form, then such requirement is strictly to be complied with. If we have a look at Section 9 of the Arbitration and Conciliation Act, 1996 to find out whether it requires any averment in the affidavit filed by the party, seeking the interim relief, as contemplated under either Order 38 Rule 5 C.P.C or under Section 18 of the Arbitration Act, 1940, in our view, it is not so. When Section 9 of the Arbitration and Conciliation Act, 1996 do not specifically require any averment in any particular form, as contemplated either under Order 38 Rule 5 C.P.C or under Section 18 of the Arbitration Act, 1940 there is no need for the first respondent herein to make such averment in the affidavit filed in support of the application seeking a prohibitory order.
19.As pointed out by the learned Judge, the first respondent did not seek for the repossession of the mortgaged machineries, giving out the reasons. They are very reasonable when they said that by resorting to such mode, not only the value of the machinery will be deteriorated but also the first appellant has to close down the business and they are not interested in closing down the business. When such is the attitude of the first respondent who seeks the security to recover the amount from the appellants, the court must also be reasonable. When the appellant has stated in their counter filed to the application that they are worth much more than the money claimed by the first respondent and their business profit is on the higher side, at least in the interest of justice and to satisfy the court, the appellants ought to have come forward to offer some security to show their bonafide. What all stated on behalf of the appellants is that they will give an undertaking that they will not alienate the machineries. When the machineries are working day in and day out, there cannot be any doubt or second opinion that there will be depreciation in the value of the machineries, however properly it may be maintained. The learned Judge also referred this attitude of the appellant in paragraph 27 of the order which was repeated before us also. When the appellant do not come forward with any offer to satisfy the claim of the first respondent, except stating that they are willing to furnish an undertaking not to alienate the machineries, we are of the view that the intention of the appellant is only to prolong and protract the proceedings.
20.Apart from the above reason, as already pointed out, Section 41 of the Arbitration Act, 1940 which contemplates the applicability of the provisions of C.P.C for the arbitral proceeding has been deleted in the New Act i.e., The Arbitration and Conciliation Act, 1996. In such circumstance, we are unable to appreciate the contentions raised by the learned senior counsel for the appellant and consequently no interference is called for in the orders of the learned Judge.
21.Accordingly the appeal is dismissed. However, there will be no order as to cost.