M/s. Sundaram Finance Limited vs Mr. M Shankar

Vinod K. Sharma, J.—This application has been filed for appointing Advocate Commissioner to seize and deliver 2011 Model Mahindra

XYLO, Registration No. TN-20-BE-6784, bearing Chassis No. MA1YA2JGKB2B20731 and Engine No. JGB4B51508 to the custody of the

applicant and also permit the Advocate Commissioner to obtain police aid and break open the premises. It is submitted, that in the course of

applicant''s business, the respondent entered into a loan agreement dated 26.03.2011 bearing Contract No. FZ305900 with the applicant for

purchase of the vehicle in dispute from M/s.MPL Automobiles Agency Private Limited. The vehicle is hypothecated as security for the loan

advanced by the applicant.

Ms. S. Sujatha stood as guarantor for the loan. The loan availed by the respondent was Rs. 4,50,000/- (Rupees Four Lakhs and Fifty

Thousand only) and repayable amount was Rs. 5,85,000/- (Rupees Five Lakhs and Eighty Five Thousand only). The respondent paid 12

installments in time and thereafter 13th to 21st installments were paid belatedly.

The case of applicant is that no payment has been made for several months, which resulted in issuance of legal notice dated 11.10.2012 and that

for defaulted amount, interest @ 30% p.a. has to be paid. According to the applicant, a sum of Rs. 3,75,455/- (Rupees Three Lakhs Seventy Five

Thousand Four Hundred and Fifty Five only) is outstanding and that Clause 14.1 (B) of the agreement, the applicant is entitled to repossess the

vehicle and it is therefore pleaded, that the Advocate Commissioner be appointed to repossess the vehicle.

This pleading itself shows, that the applicant is seeking final relief of seizing of vehicle under the agreement through Advocate Commissioner. It is

submitted, that the applicant would suffer irreparable loss, if the Advocate Commissioner is not appointed to seize the vehicle.

Clause 22 of the agreement is the arbitration clause. In Para-13 of the affidavit filed by the applicant, it is stated as under:

I submit that the Applicant is ready and willing to refer this dispute to Arbitration in accordance with the agreed Arbitration Procedure within a

reasonable time. In the meantime, the interest of the Applicant has to be saved. Hence this application.

Counter has been filed by the respondent by raising preliminary objection, that the applicant is using the jurisdiction of this Court to achieve its

illegal motives and to achieve its illegal attempts without following due process of law, i.e. invoking arbitration proceedings. It is also pleaded, that

the entire transaction was at Thiruvellore, though the loan agreement was executed at Chennai, therefore, the jurisdiction to entertain and try the

cases vests with the District Court of the District.

It is submitted, that purchase of vehicle, registration, insurance, domicile of the respondent and the applicant and complaint by the respondent,

were all at Thiruvellore.

On merit, it is admitted, that the loan of Rs. 4,50,000/- (Rupees Four Lakhs and Fifty Thousand only) was taken and to secure this loan, the

vehicle was hypothecated in favour of the applicant. The vehicle was insured with the insurance company recommended by the applicant.

The stand of the respondent is, that the reason for default was, that the vehicle, seized by the applicant, had met with an accident on 21.01.2013

at Marsarpatti near Tirunelveli and FIR dated 21.01.2012 was registered in this regard. The vehicle was repaired at SGJ Auto Care Pvt. Ltd.,

Tirunelveli. The applicant was informed about the accident and the vehicle after repair was returned only on 11.07.2012, therefore, the applicant is

guilty of misstatement, that the vehicle had not kept at secret place. The vehicle was seized from the residence of the respondent and that the

vehicle was inspected by the insurance company after delay, which resulted in delay in repair of the vehicle.

It is submitted, that it was on account of the fact, that the respondent has claimed compensation for the delay from the insurance company,

which belongs to the applicant, that this petition has been filed. The respondent has spent huge amount of money to get the vehicle repaired and the

respondent has placed on record the bills of repairs incurred by the respondent. It is also pleaded, that the 21st installment will fall on 03.06.2013

and it is admitted case in the affidavit, that the respondent made payment till December, 2012, therefore deliberate misstatement has been made to

secure the vehicle.

It is further pleaded, that the applicant, after filing application in January, got the order of this Court on 11.01.2013 and took possession of the

vehicle on 05.02.2013, but has failed to initiate Arbitration proceedings inspite of direction by this Court. This court had issued specific direction to

initiate arbitration proceedings by 08.02.2013, but no steps have been taken.

The reading of affidavit clearly shows, that the applicant has not come to the Court with clean hand and the application as framed is not even

competent, as it did not disclose the steps taken or intention of the applicant to initiate arbitration proceedings, which stand proved from the fact,

that inspite of order by this Court, the applicant did not take any step to invoke arbitration clause. The Hon''ble Supreme Court in Firm Ashok

Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., was pleased to lay down as under:

There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid ''down by this Court in

M/s. Sundaram Finance Ltd. an application u/s 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What

does that mean? In M/s. Sundaram Finance Ltd., itself the Court has said -- ""It is true that when an application u/s 9 is filed before the

commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral

proceedings"". Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does

not give any indication of how much before. The word ''before'' means, inter alia, ""ahead of; in presence or sight of; under the consideration or

cognizance of. The two events sought to be interconnected by use of the term ''before'' must have proximity of relationship by reference to

occurrence; the later event proximately following the preceding event as a foreseeable or ''within sight'' certainty. The party invoking Section 9 may

not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated

or manifestly intended (as M/s. Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a

reasonable time will depend on the facts and circumstances of each case and the nature of Interim relief sought for would itself give an indication

thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses.

The purpose of enacting Section 9, read in the light of the Model Law and UNCITRAL Rules is to provide ''interim measures of protection''. The

order passed by the Court should fall within the meaning of the expression ''an interim measure of protection'' as distinguished from an all-time or

permanent protection.

Under the A& C Act 1996, unlike the predecessor Act of 1940, the arbitral tribunal is empowered by Section 17 of the Act to make orders

amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during

the existence of the arbitral tribunal and its being functional. During that period, the power conferred on the arbitral tribunal u/s 17 and the power

conferred by the Court u/s 9 may overlap to some extent but so far as the period pre and post the arbitral proceedings is concerned the party

requiring an interim measure of protection shall have to approach only the Court. The party having succeeded in securing an interim measure of

protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the ''proximately contemplated or

''manifestly Intended'' arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order u/s 9, the

relationship between the order u/s 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an

order made ''before'', i.e. in contemplation of arbitral proceedings. The Court, approached by a party with an application u/s 9, is justified in asking

the party and being told how and when the party approaching the Court proposes to commence the arbitral proceedings. Rather, the scheme in

which Section 9 is placed obligates the Court to do so. The Court may also while passing an order u/s 9 put the party on terms and may recall the

order if the party commits breach of the terms.

The applicant further did not disclose the fact, that the vehicle had met with accident and was under repair, even though this fact was within the

knowledge of the applicant.

This application therefore was an attempt to pressurize and harass the respondent, which cannot be the intention of Section 9 of the Arbitration

and Conciliation Act. The amount of applicant is fully secured by hypothecation and guarantee, inspite of this, the process of this Court has been

misused.

Consequently, this application is dismissed and directions are issued to the applicant to hand back the possession of the vehicle 2011 Model

Mahindra XYLO, Registration No. TN-20-BE-6784, bearing Chassis No. MA1YA2JGKB2B20731 and Engine No. JGB4B51508 to the

respondent immediately, but not later than three days of the receipt of certified copy of this order. No Costs.