Tata Motors Finance Limited v. Coastal Projects Limited And 2 ORS.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 821 OF 2015 WITH ARBITRATION PETITION NO. 822 OF 2015 Tata Motors Finance Ltd.
... Petitioner V/s.
Coastal Projects Limited & Anr.
... Respondents ---------- Mr. Cyrus Ardeshir, Mr. Kingshuk Banerjee & Mr. Dhruv Joshi i/b Wadia Gandhi & Co. for the Petitioner.
Mr. Bimal Rajasekhar for the Respondent Nos. 1 & 2. CORAM : K. K. TATED, J.
DATED : 03/02/2016 P.C.:
.
Heard learned Counsel for the parties.
By consent of both the parties, both the petitions are taken on board for hearing. The issues involved in both the petitions are identical. In both the petitions, Respondents borrowed the loan from the Petitioner for purchase of vehicles and executed loan-cumHypothetication-cum-guarantee agreements. In both the matters identical agreements were executed between the parties. Hence, both the petitions can be disposed of by a common order. Both the Petitions filed by the Petitioner under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter will be referred as 'the said Act.') for an order of appointment of Court Receiver of the Hypothecated Assets with all the powers under Order XL of Code of 1/18
Civil Procedure, 1908 including the power to seize the vehicles. As the respondents failed and neglected to pay the installment as per loan-cum-Hypothetication-cum-guarantee agreement(hereinafter will be referred as 'the said agreement') within time, the Petitioner filed these two petitions under Section 9 of the said Act for various reliefs. The Petitioner stated that they have to recover a sum of Rs.3,13,44,552/- in Arbitration Petition No. 821 of 2015, and sum of Rs. Rs.2,48,09,630/- in Arbitration Petition No. 822 of 2015 from the Respondents.
Initially, this Court by order dated 17.02.2015, restrained the Respondents by an order of injunction in any manner, either directly or indirectly, damaging, transferring, disposing of, alienating, encumbering and/or otherwise creating any third party rights of whatsoever nature in respect of purchased assets or any part thereof. The learned Counsel Mr. Ardeshir appearing on behalf of Petitioner submits that in both the matters, Respondents executed the said agreements and agreed to repay the loan amount on monthly installment. He submits that as the Respondents failed and neglected to pay the installment on time, they called upon the Respondents to clear their outstanding immediately.
The learned Counsel for the Petitioner submits that in Arbitration Petition No. 821 of 2015, the following amounts were due and payable by the Respondents as on 20.01.2015 in respect of several agreements, which read thus:
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"Statement setting out the amount due and payable by the Respondents as on 20 th January, 2015 to the Petitioner MASTER AGREEMENT NO. 5000455976 Amount due and payable [In Rs.] 1.
5000461271 22412 2.
5000461268 22412 3.
5000461266 22412 4.
5000461264 22412 5.
5000461263 22412 6.
5000461262 22412 7.
5000461259 22412 8.
5000461255 22412 9.
5000461251 22412 10.
5000461240 22412 11.
5000458017 22051 12.
5000458009 21885 13.
5000458006 21885 14.
5000458001 21885 15.
5000457999 18241 16.
5000457995 21885 17.
5000455056 17086 18.
5000455055 17145 19.
5000455054 17086 20.
5000455053 17086 21.
5000455051 17086 22.
5000455050 17086 23.
5000455049 17086 24.
5000455048 17086 25.
5000455047 16586 TOTAL 505285 Sr. No.
Drawdown Request [Agreement No.] MASTER AGREEMENT NO. 5000458004 Amount due and payable [In Rs.] 1.
5000458004 21885 Sr. No.
Drawdown Request [Agreement No.] 2.
5000458001 18259 3/18
3.
5000457999 24046 TOTAL 64189 MASTER AGREEMENT NO. 5000550582 Sr. No.
Drawdown Request [Agreement No.] Amount due and payable [In Rs.] 1.
5000550582 855503 2.
5000550603 1076027 3.
5000550602 805237 4.
5000550599 857028 5.
5000550598 805487 6.
5000550595 856931 7.
5000550594 855479 8.
5000550591 855479 9.
5000550590 856931 10.
5000550587 857100 11.
5000550586 856931 12.
5000550584 856931 13.
5000550581 850852 14.
5000550579 850852 15.
5000550578 850852 16.
5000550576 851018 17.
5000550573 71474 18.
5000550571 70338 19.
5000550570 852908 20.
5000550568 852919 TOTAL 15646276 MASTER AGREEMENT NO. 5000687696 Amount due and payable [In Rs.] 1.
5000687696 1614507 2.
5000687699 1697174 3.
5000687698 1663169 Drawdown Request [Agreement No.] Sr.
No.
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4.
5000687697 1680035 TOTAL 6654885 MASTER AGREEMENT NO. 5000735017 Amount due and payable [In Rs.] 1.
5000735017 2510146 2.
5000735096 2508126 3.
5000735091 1727921 4.
5000735027 1727725 TOTAL 8473917 Sr.
No.
Drawdown Request [Agreement No.] The learned Counsel for the petitioner submits that in similar way in Arbitration Petition No. 822 of 2015, the following amounts were due and payable by the Respondent as on 20.01.2015 in respect of several agreements, which read thus:
"Statement setting out the amount due and payable by the Respondents as on 20th January, 2015 to the Petitioner Sr. No.
Agreement No.
Amount due and payable [In Rs.] 5000549286 305558 5000549289 305429 5000549290 305549 5000549292 305531 5000556872 1004598 5000556870 1004598 5000556869 1004598 5000556868 1004418 5000556867 1004766 5000556866 1004598 5000556864 1004598 5000556861 1004418 5000556860 1004886 5/18
5000556859 1004598 5000556857 1003169 5000556855 1004790 5000556854 1003146 5000556852 1003146 5000556851 1004598 5000556847 1003146 5000556845 1004741 5000556841 1003146 5000556840 1004766 5000549281 224238 5000549280 224200 5000549279 224215 5000549278 224215 5000549262 342378 5000549260 342387 5000549242 320057 5000549240 320066 5000549236 320057 5000549234 320066 5000549231 320066 5000549229 320057 5000556862 1004837 TOTAL 24809630 The learned Counsel for the Petitioner submits that the following are some of the relevant clauses of the said Agreement, which read thus:
"7.
METHOD OF APPROPRIATION:
Unless otherwise agreed to or decided by the Lender, any payment due and payable under this Loan Agreement and when received by the Lender shall be appropriated towards the dues in the following order viz;
(a) Cost, charges, expenses and other monies;
(b) Interest on cost, charges expenses and other monies; (c) Delayed Payment Charges, If any, (d) interest payable in terms of this Loan Agreement; and (e) Repayment of installment of principal amount as due 6/18
and payable under this Loan Agreement The Borrower shall continue to be liable for any deficiency m the amount due to the Lender by the Borrower after adjustment of the net proceeds of sale, realization, recovery and/or insurance claim as above. The Borrower agrees, that notwithstanding any specific instructions issued by the Borrower, the Lender shall have absolute discretion to appropriate any payments received from the Borrower/ net proceeds of sale, realizations; insurance claim proceeds relating to the Bald Asset herein, towards the dues of the Borrower/ Guarantor under any other agreements with the Lender. 17.
EVENTS OF DEFAULT:
17.1 At the option of the Lender, and without necessity of any demand upon or notice to the Obligors, all of which are hereby expressly waived by the Obligors, and notwithstanding anything contained herein or in any security documents executed by/ to be executed by the Obligors lathe Lender's favour pursuant to this Agreement, all amounts due and payable by the Obligors to the Lender under this Agreement and all of the obligations of the Obligors to the Lender hereunder, shall Immediately become due and payable. Irrespective of any agreed maturity upon the happening of any of the following events, hereinafter referred to as the 'Events of Default'.
(a) the Obligors shall commit default in., i) Payment of installments on the respective due date whether in respect of the Purchased 'Assets or, as the case maybe, Body Building Assets, ii) Payment of any other amount(s) due and payable by the Obligors to the Lender in terms of this Loan Agreement;
iii) The performance of any of the terms and conditions of this Loan Agreement, on the terms and conditions applicable to any of the Loan Facilities or iv) If, any, attachment or restraint has been levied on 7/18
the Asset or the Asset are confiscated by any authority and/or the properties hereby agreed to be charged and/or any proceedings have been taken or commenced for recovery of any dues from the Borrower by any person or persons including the Lender; or v) If the Assets are not hypothecated in favour of the Lender in the manner and within the period specified in this Agreement.
vi) Taking delivery of the Asset.
(b) Any of the Obligors dies or any action or other steps are taken or legal proceedings are initiated for winding up, insolvency, dissolution, or reconstitution of any of the Obligors or for the appointment of a liquidator, receiver, and trustee or similar officer on Its properties or assets (including the Asset) of the Obligors or any of the Obligors otherwise becomes incapacitated to enter into a contract under the applicable Laws;
(c) Any of the Post Dated Cheques and/or cheques delivered by ft Borrower to the Lender in terms and conditions hereof are dishonoured for any reason whatsoever on presentation including. due to instructions given by the Borrower for stop payment;
(d) Any of the Assets is confiscated, attached, taken into custody by any authority or subject to any execution proceeding;
(e) Any of the Assets is endangered or badly damaged due to accident or any other reason whatever causing the same to be a total loss in the opinion of the Lander or caused bodily Injury to any. person due to any accident or otherwise;
(f) any distraint or seizure order is levied on the Assets; (g) the Borrower fails to pay any tax impost, duty or other imposition or comply with any other formalities required 8/18
for the Assets under law from time to time;
(h) any of the Assets is stolen or untraceable for a period of 30 days for any reason whatever, (i) the Borrower fails to adhere to the timeframes specified in this Agreement (including timeframes as to "supply of a copy of the Registration Certificate and Insurance Certificate);
(j) any of the Assets is destroyed for any reason whatsoever and/or is incapable of being used for any permissible use under any law or regulation or is used or alleged to be used for any illegal purpose;
(k) Any information or representation or warranty given by the Borrower under this loan Agreement is found to be misleading or incorrect in any respect;
(1) Any circumstances arises which gives reasonable grounds in the sole opinion of the Lender that it is likely to prejudice or endanger the Asset or the ability of the Obligors to fully discharge any of their obligations under this Loan Facilities or (m) Death of the Borrower.
18. CONSEQUENCES OF EVENT OF DEFAULT:
a) If one or more of the events specified in Clause 17 above occurs ("Event of Default"), the Lender by notice in writing to the Obligors, declare the Loan to be Immediately du e and payable (whereupon the same shall become due and payable together) and forthwith recall the Loan together with all interests and other monies payable by the Obligors pursuant to this Loan Agreement, and in default of such payment enforce the charge created In terms of this Loan Agreement. Further, the Lender shall be entitled to, at all times to, take possession, seize, recover, appoint a receiver/ manager, remove the Asset from its place of standing, and, also be 9/18
entitled, on such terms as may be deemed fit by the Lender, without the intervention of court or authority, to sell the Asset by public auction or by private contract at the best available prices according to the prevailing market condition including as regards repossessed vehicles / assets, realise Its claims in respect of the Loan, without being bound or being liable for any loss l losses that the Obligors may suffer due to such action and without prejudice to the Lenders other rights and remedies as stated, herein or otherwise in law entitled to. b) The Lender may further deal with all or any part of the Asset, to enforce, realise, settle, and compromise with any rights or claims relating thereto. It shall not be bound to exercise any of these powers or be liable for any losses arising therefrom.
Without prejudice to the Lender's rights and remedies of legal action or otherwise and notwithstanding any pending proceedings, the Obligors undertake to give immediate possession to the nominee/s of the Lender on demand of the Asset, and transfer and deliver all relative bills, contracts, securities and documents (including all registrations, policies, certificates and documents relating to the said Asset) to the Lender.
The Obligor hereby also agree, to accept the Lender's account of sales and realisation as sufficient proof of amounts realised and relative expenses incurred, and to pay on demand by the Lender, any deficiency shown in the accounts, provided however, that the Lender shall not be liable or responsible for any loss, damage or depreciation that the Asset may suffer or sustain in the course of seeking repossession and/or while the same is. in possession of the Lender or its nominees or by reason of exercise or non-exercise of rights and remedies available to the Lender as aforesaid.
c) In case the net sale proceeds, after deducting all costs. charges, and expenses incurred by the Lander are not sufficient to meet In full, the dues payable to the Lender under this Loan Agreement, the Obligors shall make good and pay such deficiency to the Lender.
d) The Lender may, in the event of death, lunacy or 10/18
insolvency of any of the Obligors or any of the Obligors having received an order from any adjudicating authority or insolvency notice served upon it/ him or an attachment levied on any of it/his property or the Obligors having allowed the Asset to be seized in distress or execution or under any other process of law, also forthwith recall the Loan together with all interest and other monies payable by the Obligors and retake the possession of the Assets.
23. ARBITRATION:
All disputes, differences and / or claims arising out of this Loan Agreement or as to the construction, meaning or effect hereof or as to the rights and liabilities of the parties hereunder" be settled by arbitration to be held in Mumbai in accordance with the Arbitration. and Conciliation Act 1996, or any statutory amendments thereof and shall be referred to a person to be appointed by the Lender. In the event of death, refusal, neglect, Inability, or Incapability of the person so appointed to act as an Arbitrator, the Lender may appoint a new arbitrator. The award of the arbitrator shall be final and binding on all parties concerned."
The learned Counsel for the petitioner submits that it is specifically stated in the said agreements that in case there is default on the part of the Respondents in payment of monthly installments, the petitioner has right to take possession of the purchased assets and recover their dues by disposing of the same. He submits that as the Respondents failed and neglected to clear the dues in both the matters, which were more than Rs.5 crores, the Petitioner invoked the Arbitration Clause and filed the present petitions under Section 9 of the said Act for interim protection pending the hearing and disposal of the Arbitration Proceeding between the parties.
The learned Counsel for the Petitioner submits that as of today 11/18
the vehicles are in possession of the Respondents. They are using the same for their commercial activities. He submits that in the interest of justice, this Hon'ble Court be pleased to appoint the Court Receiver with full powers under Order XL of Code of Civil Procedure, 1908 to take forcible possession of the purchased assets and handover the same to the Petitioner. He submits that if possession is not taken of the purchased assets from the Respondents, Petitioner will suffer irreparable loss and injury. He submits that Court Receiver may be permitted to take help of police if required for taking forcible possession from the Respondents.
On the other hand, the learned Counsel Mr. Bimal Rajasekhar appearing on behalf of the Respondents vehemently opposed the present Petitions. He submits that Petitioner has not made out any case for allowing the present petitions under Section 9 of the said Act. The Respondents filed their affidavit-in-reply in both the matters. It is the contentions of the Respondent that in Arbitration Petition No. 821 of 2015 as per their record, only small amount is due and payable in respect of approximately 8 vehicles. In Arbitration Petition No. 822 of 2015 small amount in respect of 20 vehicles is due and payable. Hence, there is no question of allowing the present petitions in respect of more than 80 vehicles which are in possession of the Respondents.
He submits that from December 2009 Respondents have been paying consolidated amount of EMI's for all vehicles to the Petitioner. These payments were made from December 2009 to June 2012 without any default.
but not in accordance with the due dates of EMI. Thereafter, the Respondents have been making the payment until the CDR process came in and thereafter, the Respondents have made payment from July 2013 on the basis of moneys received under their project till September 2014. He further submits that even in other matter i.e. Arbitration Petition No. 1200 of 2013 as per minutes of order dated 06.01.2015, the Respondents are making the payment of Rs.45 lacs to the Petitioner by way of monthly royalty on/or before 10th of each month in respect of 86 vehicles which were subject matters of the those agreements. He submits that as per their record, the EMI of some vehicles are fully paid by them and inspite of that the Petitioner is seeking the relief under Section 9 of the said Act.
The learned Counsel for the Respondents submits that the present petitions are not maintainable because, earlier, the Petitioner appointed the sole Arbitrator. Before the sole Arbitrator the Respondent Company appeared and filed application under Section 12. Thereafter, the Petitioner filed an application before the sole Arbitrator for withdrawal of the proceeding, which was allowed with liberty to file a fresh proceeding. Hence, the present Petitions under Section 9 of the said Act are not maintainable.
The learned Counsel for the Respondents submits that Respondent No.1 Company has still to receive a sum in excess of Rs.800 crores from the Central and State Governments for work already done for their infrastructure project. He submits that the said non payment of Rs.800 crores by the Government and/or it's departments is a fact and/or cause that is well beyond the control of 13/18
Respondent No.1 Company. He submits that those facts were in knowledge of the Petitioner and inspite of that they filed the present petitions.
The learned Counsel for the Respondents, in support of his contentions, relies on the judgment of this Court in the matter of Ashapura Minechem Ltd. V/s. Pacific Basin IHX (UK) Ltd. reported in 2013(4) Mh.L.J. 103 particularly in paragraph 12. On the basis of these submissions, the learned Counsel for the Respondents submits that there is no substance in the present petitions and both the petitions required to be dismissed with costs. I heard both the sides at length. There is no dispute between the parties that as per the said agreement, the Respondents borrowed amount for purchase of vehicles and agreed to repay the said borrowed amount by installment as per terms and conditions of the said agreement.
It is specifically stated in clauses 17 and 18 of the said agreement that in the event of default, the petitioner has right to take possession of the purchased assets. As per clause 7 of the said agreement, the method of appropriation of the EMI is given. Therefore, the contentions raised by the Respondents that they have made the full payment of some of the vehicles cannot be considered at this stage. The Respondents have not placed on record any documents to show that at the time of making the payment of EMI, they had written any letter to the Petitioner stating that they were making the payment in respect of specific agreement and/or vehicle. Apart from that, there is no dispute that as on today more than Rs.4 crores is due and payable by the Respondents to the Petitioner.
the Respondents in their affidavit-in-reply that they have not received the amount from the Central Government, State Government and the Departments cannot be considered while passing the order in the present petitions. It is to be noted that though more than Rs.4 crores are due and payable by the Respondents to the petitioner, the Respondents are using the vehicles/purchased assets without paying any EMI. Hence, if Court Receiver is not appointed at this stage, irreparable loss and injury will be caused to the Petitioner. The authority cited by the learned Counsel for the Respondents in the matter of Ashapura Minechem Ltd. (Supra) is not applicable to the facts and circumstances of the present cases.
During the course of the arguments, the learned Counsel for the Petitioner pointed out that if the Respondents are ready and willing to sign the minutes of order as they have already signed in Arbitration Petition No. 1200 of 2013, they have no objection to allow the Respondents to use the vehicles. But the said proposal is not accepted by the Respondents.
The object of appointment of Court Receiver is to protect the property during the pendency of the litigation. In the present matter, the property involved is movable i.e. several vehicles. If those vehicles remained in the possession of the Respondents during the pendency of the present litigation, Respondents may or may not take proper care. By the time of final decision in the present proceeding, the value of suit property may become zero. Hence, it is necessary in the interest of justice that Court Receiver to be appointed to take physical possession of the same and if the Respondents agree that they are ready and 15/18
willing to maintain suit property during the pendency of the litigation as a agent of the Court Receiver, then Court Receiver may be permitted to appoint the Respondents as a agent on usual terms and conditions including payment of royalty and deposit of the security amount. This can be done in view of Section 9 of the said Act. Section 9 specifically state that Court has power to pass interim measure to protect the property during the pendency and decision of the Arbitral Tribunal. Considering the facts and circumstances of the present cases that Petitioner has to recover more than Rs.4 crores from the Respondents and vehicles/purchased assets are in possession of the Respondents, I am of the opinion that Petitioner has made out the case for allowing both the Petitions in following terms:
a) The Court Receiver of the High Court, Bombay at Bombay is appointed as a Receiver of the purchased assets/vehicles with all the powers under Order XL of the Code of Civil Procedure, 1908 including the power to seize the purchased assets with aid of the local police and handover the possession of the same to the Petitioner. b) The Respondents are directed to disclose the whereabouts of the purchased assets to the Receiver within two weeks from the receipt of the letter to that effect from the office of the Court Receiver.
c) After taking possession, the Court Receiver shall give an option to the Respondents to act as agent of the Court Receiver of the said vehicles/purchased assets. 16/18
d) The Respondents shall be given two weeks time by the Court Receiver from the receipt of the Court Receiver's communication letter to exercise such option. e) In the event of the Respondents desire to act as agent of the Court Receiver, they shall be appointed as agents of the Court Receiver subject to deposit of security and payment of royalty amount.
f) The Court Receiver shall determine the amounts of security and royalty on the basis of the terms and conditions contained in loan-cum- Hypothetication-cumguarantee agreement. g) In the event, the Respondents do not communicate their willingness to the Court Receiver to act as agents within the period of two weeks from the date of receipt of the communication from the office of Court Receiver, the Court Receiver to take forcible possession of the vehicles/purchased assets and if necessary with the assistance of the local police from the Respondents and/or anybody whosoever in possession/custody and hand over the same to the Petitioners.
h) It would be open to the petitioner to apply to the Court for further orders including the sale of the vehicles/purchased assets.
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i) Until the Court Receiver takes possession, there shall be an interim injunction restraining the Respondents from alienating, parting with possession or creating any third party rights in respect of vehicles/purchased vehicles. j) If the Petitioner does not take steps for appointment of the Court Receiver within six weeks from the date of this order, interim order passed by this Court for appointment of Court Receiver except injunction order shall stands vacated without further reference to the Court. k) Both the Arbitration Petitions are accordingly disposed of. l) No order as to costs.
m) Parties as well as Court Receiver to act on an authenticated copy of this order.
At the request of Advocate for the Respondent Court Receiver is directed not to take possession of the vehicles/purchased assets till 29.02.2016.
(K.K.TATED, J.) 18/18