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Judgment
B. Rajendran, J.—The above appeals have been filed by the Appellants aggrieved by the common order dated 23.12.2010 passed by the
learned Judge in Application Nos. 5628 and 5629 of 2010 in Application No. 4984 of 2010.
Application No. 5628 of 2010 has been filed by the Respondents 1 to 3 herein praying to direct the Appellant/bank to return the seized
generator to them.
Application No. 5629 of 2010 has been filed by the Respondents 1 to 3 herein praying to direct the Appellant/bank not to sell the generator
described in the Schedule till the finalisation of arbitration proceedings No. 129 of 2009.
The contention of the applicants/Respondents 1 to 3 herein in Application Nos. 5628 and 5629 of 2010 is as follows:
(i) The Respondents 1 to 3/borrower, have borrowed a sum of Rs. 3,70,000/- from the Appellant bank. The Respondents 1 to 3 herein also paid
a marginal amount of Rs. 1,65,000/- for purchase of the generator set at the rate of Rs. 5,30,400/-. The loan amount of Rs. 3,70,000/- is payable
by the borrowers in 35 equal monthly instalments commencing from 10.01.2008 to 10.11.2011. According to the Respondents 1 to 3, they have
paid 18 instalments out of 35 instalments. Thereafter, it was alleged by the Appellant/bank that the Respondents 1 to 3 have committed default in
the payment of instalment and therefore, the Appellant has seized the generator set. Thereafter, based on the order dated 06.07.2009 passed by
this Court in Application No. 1832 and 2873 of 2009, the generator set was re-delivered to the Respondents 1 to 3 on payment of a lumpsum
amount of Rs. 1,50,000/-.
(ii) According to the Respondents 1 to 3/borrowers, the Appellant/bank, alleging that they have committed further default in payment of
instalments, has once again re-possessed the generator set through an advocate commissioner appointed by this Court. Thereafter, they have filed
the present applications before this Court.
The applications were resisted by the Appellant/bank by contending that earlier, the property namely generator set was seized and re-delivered
to the Respondents 1 to 3/borrowers as per the directions issued by this Court. Even thereafter, the Respondents 1 to 3/borrowers have
committed default in payment of the instalment amount, hence, the Appellant approached this Court for appointment of an advocate commissioner
and re-possessed the generator set. Though the Respondents 1 to 3/borrowers have paid a sum of Rs. 1,50,000/- and another sum of Rs.
69,650/- as per the directions of this Court, still, there is a balance of Rs. 2,90,000/- payable by them with accrued interest. The Appellant would
further contend that the generator set was hypothicated with the bank by the Respondents 1 to 3 as a condition precedent for availing the loan
amount and therefore, they have every right to seize the generator set and also to sell the generator set to realise the loan amount. In any event, in
obedience to the order passed by this Court, after accepting the payment of Rs. 69,550/- paid by the respondents 1 to 3, they have re-delivered
the generator set to the Respondents 1 to 3, but even thereafter, the Respondents 1 to 3 are not regular in payment of the instalment amount.
The learned Judge, after hearing both sides, directed the Appellant/bank to re-deliver the generator seized from the Respondents 1 to 3 herein
on condition the Respondents 1 to 3 herein pays Rs. 69,550/- to the Appellant/bank without prejudice to the final decision in the arbitration
proceedings. The learned Judge also ordered that after delivering the generator set to the Respondents 1 to 3/borrowers, status-quo shall be
maintained by both sides and they have to await the order to be passed in the arbitration proceedings. The learned Judge also directed the
Respondents 1 to 3/borrower not to alienate the generator set till the finalisation of the arbitration proceedings.
The learned Counsel for the Appellants would contend that the order passed by the learned Judge is contrary to Section 9 of the Arbitration and
Conciliation Act, 1996 as well as the terms and conditions of the agreement entered into between the parties. The learned Counsel appearing for
the Appellant argued that the learned Judge failed to take into consideration that inspite of earlier seizure of the generator set and re-deliverance of
the generator set pursuant to the order passed by this Court on payment of a lumpsum amount of Rs. 1,50,000/-, the Respondents 1 to 3 once
again committed default in instalment amount. The Respondents 1 to 3 have not paid the monthly instalments properly. Further, the Appellant bank
has given loan to the Respondents 1 to 3 for purchase of generator set and in the event of default in payment of instalment amount, as an agreement
holder, the Appellant has every right to repossess the generator set and also to sell the generator set to realise the loan amount, which cannot be
thwarted by the borrowers, who have committed default in payment of the instalment amount by filing the present applications to restrain the
Appellant from selling the generator set.
We have heard the learned Counsel for the Appellant and perused the materials on record. The Respondents 1 to 3 borrowed a sum Rs.
3,70,000/- from the Appellant bank. Even according to the Appellant, the Respondents 1 to 3 have paid 18 instalments. The Respondents 1 to 3
have also paid a lumpsum of Rs. 1,50,000/- and another sum of Rs. 69,550/- as per the directions of this Court. According to the Respondents 1
to 3, since the property involved in the dispute being a generator set, which is vital for running their business, unless they run their business, it will be
very difficult for them to repay the loan amount to the Appellant bank. Moreover, since arbitration proceedings have already commenced and it is
in progress, pending arbitration proceedings, the learned Judge rightly ordered for re-delivering the generator set in favour of the Respondents 1 to
3.
The only argument of the learned Counsel for the Appellant is that the learned Judge failed to take into account the default committed by the
Respondents 1 to 3 continuously. It is to be mentioned that the learned Judge has made sufficient safeguards to the Appellant bank to protect their
interest by directing the Respondents 1 to 3 not to sell the generator set and to maintain the status-quo. Even otherwise, Section 9 of the
Arbitration and Conciliation Act, 1996 contemplate only to safeguard the interest of the parties pending disposal of arbitration proceedings, which
was rightly done in this case by the learned Judge by directing the parties to maintain status-quo till the disposal of the arbitral proceedings.
No. doubt, the learned Judge Court has given a direction to re-deliver the generator set to the Respondents 1 to 3 on payment of Rs. 69,550/-
, which was also duly paid by the Respondents 1 to 3. Even as per the earlier orders of this Court, it was clearly stated that the parties have agreed
that they have approached the arbitrator and the matter has to be agitated only before the arbitrator. The arbitration proceedings also has
commenced and it is pending. Pending arbitration proceedings, it is not open to the Appellant to seek to sell the generator set, which is being
utilised by the Respondents 1 to 3 for running their factory. According to the Respondents 1 to 3, only if they run the business, they will be able to
repay the loan amount to the Appellant bank. The learned Judge, taking into account this submission of the Respondents 1 to 3, has rightly ordered
the application filed by the Respondents 1 to 3. The learned Judge also thought it fit to safeguard the interest of both sides and directed them to
maintain status quo after delivering the generator set to the Respondents 1 to 3. The Respondents 1 to 3/borrowers were also directed not to
alienate the generator set. When this safeguard is made in favour of the Appellant, we do not see any reason to interfere with the order passed by
the learned Judge. Furthermore, the arbitration proceedings have commenced and it is in progress. Under those circumstances, the appeal is
devoid of merits and we are not inclined to entertain the same. However, we direct the parties to cooperate with the arbitration proceedings so that
the arbitration proceedings can be disposed of at an early date.
With this observation, both the original side appeals are dismissed. No. costs. Consequently, connected miscellaneous petitions are closed.