Delhi High Court
Leela Hotels Limited vs Housing And Urban Development ... on 5 September, 2006
Author: Rekha Sharma
Bench: Rekha Sharma
JUDGMENT Rekha Sharma, J.
1. On the basis of an arbitration award which was affirmed by a learned Single Judge and then by a Division Bench of this Court, a decree was passed in favor of Leela Hotels Limited. Consequently, it became entitled to recover the awarded amount along with interest thereon from Housing and Urban Development Corporation Limited (in short called 'HUDCO'). The award and the judgments so rendered were obviously not palatable to HUDCO. Therefore, aggrieved by the same, it has preferred Special Leave Petition to the Supreme Court, in which, as an interim measure, the following order was passed on 10.2.2006.
Our attention has been drawn to the interim order dated 1st April, 2005 passed by this Court. It is ordered that the appellant shall further pay or deposit with the Executing Court fifty percent of the balance decreetal amount within six weeks. The respondent will be entitled to withdraw the same subject to furnishing security to the satisfaction of the Executing Court. Subject to the above condition, the execution of decree shall remain stayed.
2. Armed with the above order, Leela Hotels has filed an execution petition in this Court seeking release of 50% of the decreetal amount which, according to it works out to Rs.150,56,36,685/- while, as per HUDCO it comes to Rs.59,61,23,606.50 paise. Since the two figures are so vastly discrepent, vide order dated 3.4.2006, the parties were directed to reconcile the same by providing their respective calculations to each other and in the meanwhile Leela Hotels was permitted to withdraw the amount of Rs.59,61,23,606.50 paise subject to its furnishing security to the satisfaction of the Registrar General of this Court. However, before the Registrar General Leela Hotels instead of furnishing security filed an application being EA No.218/06 praying for release of the amount on its furnishing a 'Corporate Undertaking'. The Registrar General by its order dated 26.4.2006 sent the case back to this Court stating therein that the prayer of Leela Hotels seeking to substitute 'Corporate Guarantee' in place of security is asking for modification of order of this Court dated 3.4.2006 which was outside the realm of his authority.
3. Should Leela Hotels Ltd. be allowed to withdraw the amount of Rs. 59,61,23,606.50 paise by furnishing a Corporate Undertaking instead of security, and if so, would that not be in violation of the order of the Supreme Court? This thus is the question before me.
4. Needless to say, HUDCO has opposed the release of the amount on the basis of a 'Corporate Undertaking'. It was submitted by its counsel that according to the own understanding of Leela Hotels a 'Corporate Undertaking' is different from security, for otherwise, there was no occasion for it to have filed the application seeking acceptance of a 'Corporate Undertaking' instead of a security.
5. What is a security ? It is not defined in the Code of Civil Procedure. However, this Court in Standard Chartered Bank v. Mr. M.S. Handa and Ors. reported in 1994 IV AD (Delhi) 43 had the occasion to deal with this term in the context of whether a party which is seeking release of X amount in its favor on the basis of security could furnish its own security or did it require a third person to furnish security on its behalf.
6. The party which was seeking release of money in the said case was a Bank and it was offering its own bank guarantee as security. The court has held that the use of the term security does not necessarily mean someone standing as surety or a security furnished by a third person. The basic idea is to offer a protection or assurance and make the enforcement of a right or obligation more secure, more certain and more safe.
7. Taking cue from the aforesaid judgment with which I am in respectful agreement, I am of the view that a security has to be such that in the event the party in whose favor the amount has been released does not succeed, the other party on the basis of that security is able to get the amount restituted which it was asked to release. The 'Corporate Guarantee' as is being sought to be given in the present case is a mere promise to pay. What, if there is a deliberate breach of the undertaking, or the company goes into liquidation or suffers loss? Would then the other party be able to secure the amount back from the promisor on the basis of such an undertaking. Even if the answer is in the negative, it would positively be an uphill task to make recovery. Therefore, a 'Corporate Undertaking' without pledge or mortgage or deposit or creating of a lien in any property cannot be equated with a security. It does not answer the description of security on the basis of which promisewill be able to seek restitution of the amount from the promisor. The present is a case where crores of rupees of both the parties are at stake. Such a colossal amount cannot be permitted to be released on a bare undertaking.
8. It was pointed out by learned Counsel appearing for Leela Hotels that the learned Single Judge of this Court in this very case had accepted 'Corporate Undertaking' and had released a sum of Rs.89,78,84930/- which was far more a sum than what is now sought to be got released and, therefore, the undertaking should be accepted. This did happen. But when that undertaking was accepted no opposition to its acceptance appears to have been raised by the other side. At least the order accepting the undertaking does not reflect any such opposition though, I am now informed that HUDCO has gone in appeal against it. Not only this what is even more important is the order of the Supreme Court wherein Leela
9. Hotels has been asked to furnish security. When the earlier order of this Court releasing the amount on furnishing of 'Corporate Undertaking' was made there was no order of the Supreme Court. This Court then was not straddled with any limitation. I am. And, that makes the difference.
10. For the foregoing reasons the application of the Leela Hotels Ltd. for furnishing 'Corporate Undertaking' is rejected. Leela Hotels is at liberty to furnish security to the satisfaction of the Registrar General as has been ordered by the Supreme Court.
11. List before the Registrar General on 11-9-2006.