Bombay High Court
Dcb Bank Ltd vs Shree Shubham Logistics Ltd on 24 May, 2024
2024:BHC-OS:8346
28-ARBAP-7-2023 IAL-6870-2020.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 7 OF 2023
WITH
Digitally
INTERIM APPLICATION (LODG.) NO. 6870 OF 2020
signed by
SHRADDHA
SHRADDHA KAMLESH
IN
KAMLESH TALEKAR
TALEKAR Date: ARBITRATION APPLICATION NO. 7 OF 2023
2024.05.24
19:16:37
+0530
DCB Bank Ltd., a Banking Company
incorporated under the Companies Act,
1956, having its Corporate and
Registered Office at 6th floor, Tower "A",
Peninsula Business Park, Senapati Bapat
Marg, Lower Parel, Mumbai - 400 013. .. Applicant
Versus
Shree Shubham Logistics Ltd., Unit
No.72, 7th Floor, Kalpataru Square,
Kondivita Lane, Off. Andheri-Kurla Road,
Andheri (East), Mumbai - 400 059. ...Respondent
Mr.Nikhil Rajani i/b V. Deshpande & Co., Advocate for Applicant.
Mr.Venkat Rao a/w. Mr.Akash Gaonkar, Advocate for Respondent.
Coram : SOMASEKHAR SUNDARESAN, J.
Reserved on : May 10, 2024.
Pronounced on : May 24, 2024.
ORDER :
1. This Arbitration Application is filed under Section 11 of the Page 1 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc Arbitration and Conciliation Act, 1996 ('the Arbitration Act') seeking appointment of an Arbitral Tribunal to adjudicate disputes and differences arising out of the Collateral Management Agreement (" CMA") dated 13th August, 2009 between the Applicant and the Respondent.
2. The Applicant is a Commercial Bank which advances monies to various parties ("Borrowers") who would hold and hypothecate various commodities in favour of the Applicant to secure the indebtedness owed to the Applicant. The Applicant and the Respondent entered into the CMA to govern the terms and conditions on which the Respondent would act as a "Collateral Manager", which essentially meant that the Respondent would handle, oversee and monitor the storage of various goods and products in identified godowns and demarcated areas. The Respondent would also bring to bear its expertise in ascertaining the suitability of any storage area for the goods to be stored and verify quality and quantity of the goods stored, as also manage the receipt of goods from the Borrower, its proper storage, and ensure that the collateral is preserved. The Respondent was to also provide security at all the warehouses, report on the market price of the commodities stored, and present the outlook for the respective commodities along with a monthly stock statement of the commodities held as collateral. Page 2 of 10
May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc
3. Based on the storage receipts issued by the Respondent, the Applicant would disburse the loans sanctioned to the Borrowers from time to time. Disputes and differences have arisen between the parties in connection with the quality of services provided under the CMA. According to the Applicant, the loss in the sum of Rs.9,86,43,694/- was suffered owing to the alleged negligence on the part of the Respondent, as of 31st March, 2018. It is the Applicant's case that the Respondent has paid a mere sum of Rs.95,27,610/- and has defaulted in paying the balance. The Applicant claims the amounts due along with interest, with effect from 1st April, 2018.
4. Clause 27 of the CMA contains the arbitration agreement, which, for felicity, is extracted below :
27 ARBITRATION It is hereby agreed and understood that the parties hereto shall carry out this Agreement in the spirit of mutual co-operation and good faith and that any difference, dispute or controversies shall be resolved and settled amicably among the parties hereto. If, however, amicable settlement shall not be possible, the parties hereto agree that all disputes in connection with this Agreement or the execution thereof shall be settled by arbitration. The appointing authority shall be agreed by both the parties. The number of arbitrators shall be one. The language of the proceedings shall be English. In case of failure of the parties to agree on the arbitrator, the same shall be carried out as pr the Arbitration & Conciliation Act, 1996. The Arbitration shall always be held in Mumbai and the Courts of Mumbai shall alone have jurisdiction in the matter.Page 3 of 10
May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc
5. The Applicant seeks appointment of an Arbitrator to adjudicate the disputes and differences under the CMA in terms of the following prayer :
"26 a) that the Arbitration Clause being Clause 27 contained in the Collateral Management Agreement dated 13th August, 2009, being Exhibit 'A' hereto be taken on file of this Hon'ble Court and that this Hon'ble Court may be pleased to appoint such Sole Arbitrator as it may deem fit and proper and all disputes between the Applicant and Respondent, arising out of and/or in relation to any matters under the said Collateral Management Agreement dated 13th August, 2009 and/or relating to in respect of the said Agreement or in respect of any of the terms and conditions of the said Agreement, be referred to Arbitration as per the provisions of the Arbitration and Conciliation Act, 1996."
6. The Respondent strongly resists the appointment of an Arbitrator. According to the Respondent, the scope of the CMA would have to be examined on the basis of whether the warehouse in question is under the ownership and control of the Respondent; or whether the Respondent is only providing management services at someone else's warehouse. According to the Respondent, the warehouses in question were not owned by the Respondent, and therefore, such warehouses should not be considered on the same footing as warehouses under the complete control of the Respondent. Towards this end, the Respondent refers to Clause 3 of the CMA to insist that separate agreements would need to be executed by the Respondent with the Borrowers for exercise of control over such warehouses. In respect of such warehouses, according to the Page 4 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc Respondent, under Clause 11(e), the Applicant and the Respondent are supposed to execute a Tripartite Agreement detailing the duties and responsibilities of the respective parties on a case to case basis and it would be the provisions of such Tripartite Agreement that would determine the liability and indemnity in connection with the services provided at such warehouses.
7. Upon a careful review of various clauses of the CMA that Learned Counsel for both sides have explained, it is noteworthy that the Respondent's stance does not, prima-facie, appear to be justified in connection with the jurisdiction of the Arbitral Tribunal. That, would have to be adjudicated as a dispute under the CMA. The term "field warehouses" is defined in Clause 3(c) of the CMA, which provides that warehouses owned by the Borrowers would be considered to be "field warehouses". Clause 3(b) of the CMA deals with warehouses owned by the Respondent or leased by the Respondent (with appropriate arrangements for exercise of control over such warehouses) in order to fulfill the Respondent's obligations under the CMA. On the other hand, where the warehouses are owned by the Borrowers themselves, it would be obvious that the degree and nature of control that the Respondent may exercise over such warehouses would be of a different order. It is in this context, that Clause 11(e) provides that "in case of field warehousing Page 5 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc services" a Tripartite Agreement would need to be executed between the Borrower, the Applicant and the Respondent.
8. On a query from the Court as to how many warehouses were owned by the Borrowers, as opposed to how many warehouses were owned or leased by the Respondent, the Learned Counsel for both parties, point out that the minute detail of such a break-up is not presently available. Learned Counsel for the Applicant would argue that the Respondent has given a go-by to the separate distinct liability regime in connection with field warehousing services. He would also submit that the question of differentiation depends on a Borrower owing a warehouse and not whether the Respondent owes a warehouse. The Learned Counsel for the Respondent is not sure as to whether any Tripartite Agreement has at all being executed. These differences need not detain the attention of this Court at all, inasmuch as, prima-facie, unless a godown is under the ownership (and thereby, control) of the Borrower, there appears to be no distinction drawn in the CMA. In any case, these are all facts that are eminently amenable to determination in the course of adjudication by the Arbitral Tribunal. What is evident is that the CMA is admittedly executed, and that it contains a valid and binding arbitration agreement. Whether any component of a claim is covered by "field warehousing services" is a question that can be dealt with as a question of fact to be adjudicated Page 6 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc upon by the Arbitral Tribunal. A prima-facie review of the record suggests that a list of 31 warehouses situated at Kadi, Gujarat, in respect of which claims have been made, does not contain any warehouse owned by a Borrower who is also providing the underlying collateral. All these are questions for the Arbitral Tribunal to determine, and consequently, the objections from the Respondent to the appointment of an Arbitral Tribunal are, in my opinion, not sustainable. Needless to say, in the arbitral proceedings, the parties are free to agitate all these issues and the Arbitral Tribunal shall adjudicate the same.
9. Consequently the Application in allowed in terms of the following order :
(a) Ms. Manjari Shah, an Advocate of this Court, is hereby appointed as the Sole Arbitrator to decide the disputes and differences between the parties arising out of and/or in connection with and/or in relation to the Collateral Management Agreement ("CMA") dated 13th August, 2009, referred to above.
(b) A copy of this order will be communicated to the Learned Sole Arbitrator by the Advocates for the Applicant within a period of one week from this order becoming Page 7 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc available. The contact particulars of the Learned Sole Arbitrator are as follows :
Ms. Manjari Shah, (Phone No. 22 22871128) Email id : [email protected] Office Add.: (i) No.10, 4 th Floor, National House, 27, R.D. Street, Fort, Mumbai 400 001
(ii) Rajendra Chambers, 19, Nanabhai Lane, 101, 1 st floor, Fort, Mumbai 400 001.
(c) The Learned Sole Arbitrator is requested to forward her Statement of Disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the parties.
(d) The parties shall appear before the Learned Sole Arbitrator on such date and at such place as she nominates, to obtain appropriate directions with regard to fixing a schedule for completing pleadings, conducting hearings etc. The Arbitral Tribunal shall give all further directions with reference to the arbitration and also as to how it is to proceed.
(e) Contact and communication particulars shall be provided by all sides to the Learned Sole Arbitrator within a period of one week from today. This information shall include a valid and functional email address as well as mobile Page 8 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc numbers of the respective Advocates.
(f) The Applicant has agreed that the Learned Sole Arbitrator shall be free to fix her own fees and shall not be bound by the Fourth Schedule of the Arbitration Act or the Bombay High Court (Fee payable to Arbitrators) Rules, 2018.
(g) The parties have agreed that all Arbitral costs and fees of the Arbitrator will be borne by the parties equally and will be subject to any final Award that may be passed by the Tribunal.
(h) The parties have agreed that the venue and seat of the arbitration will be in Mumbai. It shall be open to the Arbitral Tribunal to conduct the proceedings through online mode.
10. The above Section 11 Application is accordingly disposed of.
11. In view of disposal of the above Application, nothing survives in the pending Interim Application, and the same is also disposed of. Page 9 of 10
May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 ::: 28-ARBAP-7-2023 IAL-6870-2020.doc
12. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
[ SOMASEKHAR SUNDARESAN, J. ] Page 10 of 10 May 24, 2024 Shraddha Talekar, PS ::: Uploaded on - 24/05/2024 ::: Downloaded on - 06/06/2024 00:51:14 :::