Calcutta High Court
Srei Equipment Finance Ltd vs Marg Ltd on 20 June, 2017
Author: Arijit Banerjee
Bench: Arijit Banerjee
ORDER SHEET
T. No. 8 of 2017
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
IN THE MATTER OF:
SREI EQUIPMENT FINANCE LTD
Versus
MARG LTD
BEFORE:
The Hon'ble JUSTICE ARIJIT BANERJEE
Date : 20th June, 2017.
Appearance:
Mr. S. N. Mookherjee, Sr. Adv.
Mr. Ratnanko Banerjee, Sr. Adv.
Mr. Samik Kanti Chakraborty, Adv.
Ms. Nandini Khaitan, Adv.
Ms. Shreya Singh, Adv.
For the petitioner
The Court : The petitioner is a finance company. The respondent approached
the petitioner for financing the purchase of certain equipment. The petitioner agreed. The petitioner entered into a financial arrangement where under substantial sums of money were paid by the petitioner for purchase of the equipment by the respondent company. The amount was to be repaid by the respondent in 53 installments. After about 19 installments, the respondent company defaulted. The petitioner as per terms of the agreement, called back the entire amount. The respondent has not paid any portion of the balance outstanding.
In view of the arbitration clause in the agreement between the parties, the petitioner approached this Court by way of an application under Section 9 of the Arbitration and Conciliation Act, 1996 for interim relief. Orders were passed. Receiver was appointed over the equipment which were the security of the petitioner. When the receiver went to take possession of the equipment, he found nothing was there. Further, he was obstructed in discharging his duty. It further appears from the orders passed on the earlier application that after interim orders of injunction were passed by this Court, the respondent has dealt with some of the securities.
Mr. Mookherjee, learned senior advocate for the petitioner submits that the only other asset of the respondent which the petitioner has been able to ascertain is the shareholding of the respondent in a company by the name of Kariakal Port Pvt. Ltd. The shares are held by the respondent in dematerialized form as per direction of SEBI. The petitioner has come to learn that the respondent has made a request to the depository company being Geogit Financial Services Limited, for dematerialization of the shares. Mr. Mookherjee submits that this request could only be for the purpose of disposing of the shareholding surreptitiously. If the respondent tries to deal with its shareholding in dematerialized form, it will be known to the public at large. However, if the shares are rematerialized then the respondent would be in a position to deal with the shares without letting others know. Mr. Mookherjee submits that this step taken by the respondent is for the purpose of defeating the legitimate substantial claim of the petitioner against the respondent. Accordingly, Mr. Mookherjee prays for interim orders to protect the interest of the petitioner.
Having gone through the earlier orders of this Court and the papers on record and having heard Mr. Mookherjee, I am of the prima facie view that the conduct of the respondent is far from satisfactory and is suspicious and I am told that arbitration has been initiated by the petitioner. I am also told that in course of the earlier hearing of Section 9 application, the Managing Director of the respondent had been directed to appear in Court but he did not. All these factors indicate prima facie that the respondent has some unholy oblique motive which calls for some interim order as prayed for by the petitioner.
The only question is whether after the amendment of Sections 9 and 17 of the Arbitration and Conciliation Act, 1996, I should entertain this application. Section 9(3) of the 1996 Act reads as follows:
"Once the arbitral Tribunal has been constituted, the Court shall not entertain an application under sub-section(1), unless the Court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious."
In view of the conduct of the respondent as briefly indicated above I am of the prima facie opinion that the remedy provided under Section 17 of the 1996 Act will not be an efficacious remedy in the facts and circumstances of the case. It is true that the arbitral Tribunal has the power to pass interim orders and the same can be enforced as orders of Court. However, the party who has dealt with the security after appointment of receiver in respect thereof may well disobey and order of the arbitral Tribunal since no contempt proceedings lie for violation of an order of arbitral Tribunal. Hence in my considered opinion, the remedy under Section 17 of the 1996 Act is not an effective or efficacious remedy.
In view of the aforesaid, there will be an order in terms of prayers (a) and (d) of the petition. Mr. Debajyoti Datta, Advocate, Bar Library Club, High Court, Calcutta is appointed as receiver for the purpose of carrying out this order in terms of prayer (a) of the petition. The receiver shall immediately communicate this order to the depository company being Geojit Financial Services Limited. The address and e-mail of the depository company shall be provided by the petitioner to the receiver shall intimate to the depository company that he is taking symbolic possession of the shareholding of the respondent company in Kariakal Port Pvt. Ltd. The receiver shall be entitled to an initial remuneration of the 1000 gms to be paid by the petitioner to the receiver at the first instance.
This order shall continue for a period of fortnight from date or until further orders whichever is earlier. I make it clear that the views I have expressed in this order are prima facie and may be reconsidered at a later stage.
Liberty is granted to the learned advocate on record for the petitioner to communicate the gist of today's order to Geojit Financial Services Limited.
List the matter before the regular Bench one week hence.
(ARIJIT BANERJEE, J.) A Dey AR(CR)