Delhi High Court
Mohan Meakin Ltd. vs International Breweries Pvt. Ltd. & ... on 18 August, 2008
Author: Ajit Prakash Shah
Bench: Chief Justice, S.Muralidhar
* HIGH COURT OF DELHI AT NEW DELHI
+ FAO (OS) 341/2008
Mohan Meakin Ltd. ..... Appellant
Through Mr. Dinesh Agnani, Advocate.
versus
1. International Breweries Pvt. Ltd.
2. Scotia Bank
3. Bank of India
4. HDFC Bank
5. ICICI Bank Extension Counter ..... Respondents
Through Mr. Pardeep Dhingra with Ms. Ritika
Sen, Advocates.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE DR. JUSTICE S.MURALIDHAR
1. Whether reporters of the local papers be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in the
Digest ?
ORDER
18.08.2008 CM No. 11403/2008(exemption) Allowed, subject to just all exceptions.
Caveat No. 164/2008 Caveator has put in appearance. Hence, caveat stands disposed of.
FAO(OS) 341/2008 & CM No.11401/2008(stay) & CM No. 11402/2008(taking additional documents on record)
1. By consent of the parties, the appeal is taken up for final hearing.
FAO(OS) 341/2008 Page 1 of 8
2. This appeal is directed against an order dated 23rd July, 2008 passed by the learned single Judge in OMP No.332/2008, a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (Act) filed by the appellant Mohan Meakin Ltd. (MML) against the respondents International Breweries Pvt. Ltd. (IBPL) and the Respondents 2 to 5 banks for securing the Award amount of Rs.1,42,82,463.87/-.
3. The background to the passing of the impugned order is that an agreement was entered into between the appellant MML and Respondent No. 1 IBPL on 14th June, 2001 which was extended by a letter dated 26th July, 2006. A further brewing agreement was executed on 01st May, 2007 between the parties. In terms of the agreement, the disputes that arose between the parties were referred to the arbitration of Shri N.K. Tyagi, a sole Arbitrator, who passed an interim Award dated 22nd October, 2007 in an application filed by MML under Section 17 of the Act. IBPL was restrained from operating and transferring any funds from its accounts with the Scotia Bank, Bank of India, HDFC Bank and ICICI Bank. This interim Award was communicated to the respective branches of the said banks. The applicant claims that the banks honoured the interim Award.
4. It is further claimed by a letter dated 24th October, 2007 IBPL admitted its liability and assured MML that the entire outstanding of MML shall be cleared within a time bound schedule. According FAO(OS) 341/2008 Page 2 of 8 to MML, IBPL reiterated the above assurance in a subsequent letter dated 4th December, 2007 where it proposed to provide fix deposit receipts in the sum of Rs. 81 lacs initially and thereafter reconcile the accounts. However, IBPL chose not to appear before the learned arbitrator and contest the claim of the appellant MML. The appellant claims that the proposal made by IBPL vide its letter dated 4th December, 2007 was not acceptable to it. Even earlier by a communication dated 4th August, 2007 IBPL had admitted its liability to the extent of Rs. 1,42,82,463.87 and it had proposed to MML that it would settle the account by paying 50%. This proposal was also not acceptable to MML.
5. A final Award was passed by the arbitrator on 23rd April, 2008 in which it was held that the MML had to recover from IBPL a sum of Rs.1,42,82,463.87 together with interest @ 7% calculated with effect from 31st July, 2007 till the date of recovery, an amount of Rs.50,000/- towards arbitration fees, a sum of Rs.1,45,000/- on account of stamp duty, a sum of Rs.4,000/- and Rs.2,000/- towards administrative expenditure and costs respectively. It was further stated in the final Award that the interim Award dated 22nd July, 2007 was being made absolute in that IBPL would be restrained from operating or transferring funds from its accounts.
6. According to MML, after the passing of the final Award, IBPL refused to honour it. The Respondents No. 2 to 5 banks also refused to continue the restraint on IBPL from operating its FAO(OS) 341/2008 Page 3 of 8 accounts with them. Faced this situation, the appellant MML took steps to get a transfer certificate for execution of the Award from the courts in Ghaziabad which in terms of the agreement would alone have jurisdiction in relation to the disputes between the parties. According to MML since the Respondents No. 2 to 5 banks were within the territorial jurisdiction of this court, MML filed a transfer application before the Ghaziabad court for a transfer certificate to enable the MML to execute the award through this court. It is claimed that the transfer certificate thus issued was sent to this Court and received by the Registry vide Diary No. 9894 dated 28th May, 2008. However, the counsel for the appellant was informed by the Registry that the said certificate was not traceable.
7. Thereafter MML filed OMP No. 332 of 2008 under Section 9 of the Act praying that Respondent No. 1 IBPL be restrained from operating and transferring funds from its accounts with the Respondents No. 2 to 5 banks. MML claimed that if the interim protection as prayed for by it was not granted it would be very difficult for it to get the Award executed. It accordingly prayed that the interests of MML should be secured to the extent of the principal amount awarded by the learned Arbitrator.
8. In the said application OMP 332 of 2008 an ex parte order dated 16th June, 2008 was passed by a learned Single Judge of this Court restraining the Respondents No. 2 to 5 banks from releasing FAO(OS) 341/2008 Page 4 of 8 an amount of Rs. 1,42,82,464/- from the accounts held with them by Respondent No. 1 IBPL.
9. While the above application was pending, Respondent No. 1 IBPL filed OMP No. 337 of 2008 under Section 34 of the Act raising objections to the award. The appellant MML resisted the said application on the ground that the territorial jurisdiction was only with the courts at Ghaziabad and that the objection should have been filed in that court. It is stated that the learned Single Judge negatived the objection by an order which is being separately challenged by the appellant.
10. Before the learned Single Judge, in OMP 332 of 2008, MML contended that Respondent No. 1 IBPL had no business or assets in India. If the Award amount was not secured, MML would be unable to recover it in the event of IBPL's objections being rejected. On the other hand it was contended by IBPL that the Award as of date was not executable and therefore there was no justification for depriving IBPL of the use of the monies in its accounts with Respondents No. 2 to 5 banks. The learned Single Judge was informed IBPL held over Rs. 2 crores in the said accounts.
11. The learned Single Judge passed the following order which is under challenge in this appeal :
"In the facts and circumstances of the case, the FAO(OS) 341/2008 Page 5 of 8 equities will be balanced if the Respondent No. 1 secures about 50 per cent of the Award amount. The Respondent is accordingly directed to furnish the bank guarantee for Rs. 75 lacs in favour of the Registrar of this court for payment of the said amount, if the objections of the Respondent to the Award are dismissed. The Respondent No. 1 to also file the undertaking before the court for payment of the balance amount, if any, found due from the Respondent upon the Award. Upon furnishing of the bank guarantee and filing of the undertaking, the order dated 16th June, 2008 with respect to operation of the bank accounts shall stand discharged. The advance copy of the bank guarantee and the undertaking in the form of affidavit of the authorized person on behalf of the Respondent No. 1 be furnished to the counsel for the Petitioner.
The counsel for the Respondent No. 1 states that it intends to furnish the bank guarantee of Respondents No. 2 to 5 banks. The Respondents No. 2 to 5 banks may allow the accounts of the Respondent No. 1 to be operated only to enable the Respondent No. 1 to arrange the bank guarantee.
The petition is disposed of in above terms."
12. Learned counsel for the appellant submits that there was no occasion for the learned Single Judge to have modified the ex parte interim order dated 16th June, 2008 and permitted Respondent No. 1 IBPL to secure only 50% of the Award amount by furnishing a bank guarantee while leaving it open to the IBPL to operate its accounts. It is submitted that when admittedly IBPL has no business or assets in India, it would in all probability withdraw the entire amount lying in its accounts, in which case recovery of the entire Award amount would not be possible in the event of IBPL's objections being dismissed by the Court. On the other hand it is contended by learned counsel for the respondent FAO(OS) 341/2008 Page 6 of 8 that since its petition under Section 34 is yet to be decided, the Award was not executable as such and therefore no interference is called for with the equitable order passed by the learned Single Judge.
13. Having heard the learned counsel for the parties and having perused documents on record, we are of the view that the learned Single Judge ought to have ensured that the Award amount is available for being recovered by the Appellant MML in the event of IBPL's objections being ultimately dismissed. In the circumstances, the appropriate order would be to require the Respondent No. 1 IBPL to deposit the entire Award amount in this court failing which the interim order passed on 16th June, 2008 would continue till the disposal of IBPL's objections under Section 34.
14. Accordingly the impugned order is set aside. It is directed that Respondent No. 1 IBPL will deposit in this court the entire Award amount in the sum of Rs. 1,42,82,463.87 within a period of four weeks and upon such amount being deposited, the interim order dated 16th June, 2008 passed by the learned Single Judge would stand vacated. However if the amount is not so deposited, the order dated 16th June, 2008 would continue to the extent of restraining Respondent No. 1 IBPL from removing the said amount from its accounts with Respondents No. 2 to 5 banks till the disposal of its objection under Section 34 of the Act. FAO(OS) 341/2008 Page 7 of 8
15. The appeal and the applications are accordingly disposed of with no order as to costs.
CHIEF JUSTICE
S.MURALIDHAR
AUGUST 18, 2008 (JUDGE)
dk
FAO(OS) 341/2008 Page 8 of 8