R.K. Durai Kannan vs Shriram Transport Finance Company Limited

R. Subbiah, J.—The present appeal has been filed as against the order dated 12.02.2013 in Ar.O.P. No. 12 of 2012 passed by the learned Principal District Judge, Tiruppur, dismissing the petition filed by the appellants herein under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award of the 2nd respondent dated 02.09.2008.

Brief facts of the case of the appellants, in nutshell, are as follows:-

The appellants herein had purchased a Ashok Leyland goods carrier vehicle bearing Registration No. K.A.19-B-0112 (2002 model) from M/s. Shriram Transport Finance Company Limited, the 1st respondent herein, under hire purchase agreement. The total cost of the vehicle was Rs. 9,36,670/-. Out of the total cost of Rs. 9,36,670/-, an initial payment of Rs. 1,50,000/- was paid and the balance amount was to be paid in 47 instalments and the said vehicle was hypothecated with the 1st respondent and each instalment would comprise a sum of Rs. 19,940/-. While so, the 1st respondent, by taking advantage of the hypothecation, had taken the possession of the vehicle on 13.03.2006 without due notice to the appellants and thereafter, the 1st respondent sold the vehicle to some other person. It is the case of the appellants that the 1st respondent has deliberately sold the vehicle, even without issuing any prior notice to the appellants or giving any opportunity to make good the payment; further, the 1st respondent is duty bound to handover the said vehicle, which has been seized illegally and forcefully without the consent and concurrence of the appellants herein; the vehicle in question has been sold for a very low price, though the cost of the vehicle would fetch more than Rs. 7 lakhs being an high hand model. Subsequently, the 1st respondent filed a claim petition by appointing a sole Arbitrator according to their own convenience and the Arbitrator had acted unilaterally without even going through the question of law and facts, and passed an award dated 02.09.2008 against the appellants herein. Aggrieved over the same, the appellants have filed Ar.O.P. No. 12 of 2012 before the Principal District Judge, Tiruppur. But, the said appeal was dismissed by the learned Principal District Judge, Tiruppur, by order dated 12.02.2013. Aggrieved over the same, the present appeal has been filed by the appellants for the relief as stated supra.

The learned counsel for the appellants submitted that no sufficient opportunity was given by the Arbitrator to the appellants to participate in the arbitration proceedings and that the possession of the vehicle was taken by the 1st respondent on 13.03.2006 without due notice to the appellants, by virtue of Clause 6.1(iii) of the hypothecation agreement. The said Clause 6.1(iii) of the hypothecation agreement is opposed to the public policy. Hence, the seizure of the vehicle itself is illegal. But, without considering all these aspects, the award has been passed by the Arbitrator.

It is the reply of the learned counsel for the respondents that it is incorrect to state that the appellants have not participated in the arbitration proceedings. In fact, the appellants have received notice and their advocate filed vakalat on 14.06.2008 and as such, they made a representation through their advocate. Moreover, the appellants have not objected for the appointment of the 2nd respondent as sole Arbitrator. Thus, the appellants participated in the entire arbitration proceedings.

Keeping the submissions made on either side, I have gone through the entire materials available on record and I find that the submission made by the learned counsel for the appellants that they have not been given sufficient opportunity to participate in the arbitration proceedings is not correct. Having been appeared in the proceedings through their counsel, the appellants cannot contend that they were not given sufficient opportunity.

The next contention of the learned counsel for the appellants is that the appellants were not issued with any notice before seizure of the vehicle. In this regard, it would be appropriate to refer the judgments reported in Sri Rama Machinery Corporation Limited Vs. Standard Chartered Bank and Another, and State Bank of India Vs. S.B. Shah Ali (Died) and others, .

In Sri Rama Machinery Corporation Limited Vs. Standard Chartered Bank and Another, it has been held by this Court as follows-

"In this case, the court is not dealing with any statutory authority or administrative authority where the principles of natural justice will have to be read into every action of the authorities. Here is a case of contract signed by both the parties and admitted by both of them. In such cases, principles of natural justice or prior notice before seizure have no application. There is no necessity to issue notice even in the case of certain administrative actions. If this is the position even in the case of administrative orders, in the case of contracts, it can be said that there is no need for prior notice. If prior notice is issued before the seizure of the vehicle, naturally the vehicle will be taken away from the jurisdiction of the State and the very purpose of exercising the powers of seizure will be taken away. In this case, one more reason why no notice is required is, petitioner himself executed an irrevocable power of attorney in favour of the first respondent and one of the powers given in the power of attorney is to take possession of the vehicle. If first respondent exercises the power of attorney and if that, power creates an agency with interest, it cannot be said that the first respondent is legally and morally bound to issue any notice before seizure."

In State Bank of India Vs. S.B. Shah Ali (Died) and others, it has been held as follows:-

"Where there is a mere charge in hypothecation agreement, the hypothecatee has to approach the Court and seek intervention of the Court for obtaining money decree and for bringing the hypothecated goods for sale through the Court. When there is any specific clause in the hypothecation agreement empowering the hypothecatee to take possession of the goods and sell the same, in the event of default in payment, as per the said terms the hypothecatee can proceed ahead without intervention of the Court.

Intervention of the Court is not necessary and compulsory for enjoyment of a right, and the intervention of Court arises only when there is an infringement of right, and when there is no infringement, there is no lis and no suit. In the hypothecation agreement, the rights of the hypothecatee are governed by the terms of the agreement. Where the agreement provides for taking of possession of the goods hypothecated, the hypothecatee can take possession of the said goods without intervention of the Court. Where the goods are hypothecated only by creating a charge, then the hypothecatee has to take action to enforce the said charge according to law. Therefore, it cannot be said that the hypothecatee has to approach the Court even though the deed provides for taking of possession in case of default of the hypothecator. If there is any violation of the terms of the deed it will not, however, bar the hypothecator to approach the Court and seek proper relief."

The dictum laid down in the above said judgments would show that when a vehicle is hypothecated, the hypothecatee can take possession of the vehicle without intervention of the Court.

It is another submission of the learned counsel for the appellants that Clause 6.1(iii) of the Hypothecation Agreement, which empowers the 1st respondent to take possession of the vehicle without issuing notice to the appellants, is opposed to the public policy. But, the judgment of the Hon''ble Supreme Court, relied on by the learned counsel for the respondents reported in The Managing Director, Orix Auto Finance (India) Ltd. Vs. Shri Jagmander Singh and Another, , gives a fitting answer to this issue. In the said judgment it has been held as follows_

"If agreements permit the financier to take possession of the financed vehicles, there is no legal impediment on such possession being taken. Of course, the hirer can avail such statutory remedy as may be available. But, mere fact that possession has been taken cannot be a ground to contend that the hirer is prejudiced. Stand of learned counsel for the respondent that convenience of the hirer cannot be overlooked and improper seizure cannot be made. There cannot be any generalisation in such matters. It would depend upon facts of each case. It would not be, therefore, proper for the High Courts to lay down any guideline which would in essence amount to variation of the agreed terms of the agreement. If any such order has been passed effect of the same shall be considered by the High Court concerned in the light of this judgment and appropriate orders shall be passed."

A reading for the above dictum laid down by the Hon''ble Supreme Court would show that the a clause found in the hypothecation agreement is purely contractual in nature and having signed the hypothecation agreement, the appellants cannot say it is opposed to public policy.

Irrespective of the above discussion, I am of the opinion, to set aside the award passed by the Arbitration, the appellants have to make out a case within the purview of Section 34 of the Arbitration and Conciliation Act and the scope of setting aside the award of the Arbitrator by the Court is very limited. In the instant case, the appellants have not made out any case within the purview of Section 34 of the Arbitration and Conciliation Act to set aside the award passed by the Arbitrator before the Court below. Hence, I do not find any infirmity in the impugned order passed by the Court below and the appeal is devoid of any merit.

For the foregoing reasons, the Civil Miscellaneous Appeal is liable to be dismissed and the same is dismissed accordingly. Consequently, connected Miscellaneous Petition is closed. No costs.