Tuesday, 12 July 2016

Whether rights over property of third party can be claimed invoking S 9 of Arbitration Act 1996?

The question in this appeal is, whether in an application under Section 9 of the 1996 Act for interim relief, orders can be obtained for appointment of a Receiver to take possession of a property of a third party, who is not a party to the arbitration agreement and has admittedly not obtained finance from the respondent financier, Varun Finance Corporation Limited.
 The answer to the aforesaid question has to be in the negative. Merely because the number of a motor vehicle belonging to a stranger is inserted in a hire purchase agreement, possession thereof cannot be taken by making an application under Section 9 of the 1996 Act.
 Even assuming, as argued by Mr. Amitesh Banerjee, there was some arrangement between the borrower and the appellant for transfer of the auto rickshaw in question, orders could not have been obtained by the respondent financier, Varun Finance Corporation Limited in an application under Section 9 of the 1996 Act, there being no arbitration agreement, or for that matter, any other agreement between the respondent financier Varun Finance Corporation Limited and the appellant.
IN THE HIGH COURT OF CALCUTTA
F.M.A.T. 1209 of 2014
Decided On: 09.03.2016
Appellants: Md. Ghufran
Vs.
Respondent: Varun Finance Corporation Limited and Ors.
Hon'ble Judges/Coram:Indira Banerjee and Sahidullah Munshi, JJ.
Citaion: AIR 2016 cal 197

1. This appeal is against Order No. 39 dated 13th February, 2014 passed by the learned Judge, VIIIth Bench, City Civil Court at Calcutta refusing to vacate the interim order passed earlier in Miscellaneous Case No. 905 of 2012 being an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "1996 Act") filed by the respondent, Varun Finance Corporation Limited. The case is indeed interesting. There can be no dispute at all that the auto rickshaw, of which possession has been taken in an application under Section 9 of the 1996 Act is registered in the name of the appellant, Md. Ghufran.
2. It is not in dispute that there is no arbitration agreement between the respondent Varun Finance Corporation Limited and the appellant, Md. Ghufran.
3. It appears that there is a hire purchase agreement between Varun Finance Corporation Limited and one Md. Tajuddin in terms whereof the respondent Varun Finance Corporation Limited allegedly financed the hire purchase of a motor vehicle.
4. The agreement between the respondent Varun Finance Corporation Limited, hereinafter referred to as the 'financier' and Md. Tajuddin, hereinafter referred to as the 'borrower' provided that the borrower would pay to the financier 47 monthly instalments, the first of Rs. 17,900/- and the rest of Rs. 14,100/- within the time stipulated in the said agreement, for hire purchase of the motor vehicle. A copy of the agreement was annexed to the application filed under Section 9 in the Court below.
5. It appears that the borrower Md. Tajuddin paid the initial monthly hire charges but on and from 6th February, 2012 started making defaults in payment.
6. We are not really concerned, in this appeal, with the disputes between the respondent financier and the borrower Md. Tajuddin. If Md. Tajuddin has obtained finance from Varun Finance Corporation Limited, Md. Tajuddin has the obligation to make repayments in terms of the agreement between Varun Finance Corporation Limited and its borrower and/or hirer Md. Tajuddin.
7. There is admittedly no hire purchase agreement between the respondent financier Varun Finance Corporation Limited and the appellant. Significantly, in the impugned order itself, the learned Court observed:
"..It will not be out of the place to mention in this regard that though the hypothecation agreement was entered into by and between the petitioner and the OP, yet the certificate of registration of the vehicle all along stood and still now stands in favour of the applicant with the endorsement that the vehicle in question is really a hypothecated one.
8. In the above background, the applicant appears to have approached this court for the reliefs as made in his application intending to impress this court about the fact that he being the recorded lawful owner of the vehicle in question, the order for appointment of Receiver and seizure of the said vehicle has been obtained by misrepresenting this court as the said vehicle should never be the subject matter of the said hypothecation agreement.
9. From the factual scenario and the documents on record, though it may appear for a moment that the contention of the applicant may apparently sound merit."
10. The question in this appeal is, whether in an application under Section 9 of the 1996 Act for interim relief, orders can be obtained for appointment of a Receiver to take possession of a property of a third party, who is not a party to the arbitration agreement and has admittedly not obtained finance from the respondent financier, Varun Finance Corporation Limited.
11. The answer to the aforesaid question has to be in the negative. Merely because the number of a motor vehicle belonging to a stranger is inserted in a hire purchase agreement, possession thereof cannot be taken by making an application under Section 9 of the 1996 Act.
12. Even assuming, as argued by Mr. Amitesh Banerjee, there was some arrangement between the borrower and the appellant for transfer of the auto rickshaw in question, orders could not have been obtained by the respondent financier, Varun Finance Corporation Limited in an application under Section 9 of the 1996 Act, there being no arbitration agreement, or for that matter, any other agreement between the respondent financier Varun Finance Corporation Limited and the appellant.
13. From the order under appeal it is patently clear that the attention of the Court below was drawn to the fact that the appellant was not a party to the arbitration agreement and that the auto rickshaw over which Receiver had been appointed was registered in the name of the appellant. Permit to operate the auto rickshaw was issued to the appellant. It is nobody's case that the appellant obtained any finance from the financier Varun Finance Corporation Limited. Nor is it anyone's case that the appellant guaranteed repayment of any advance given by the respondent financier Varun Finance Corporation Limited to its borrower.
14. Our attention has been drawn by Mr. Amitesh Banerjee, learned Counsel for the respondent No. 1, to an unreported decision of a Division Bench of this High Court dated 6th March, 2006 in F.M.A.T. 681 of 2006 with C.A.N. 1628/06 (Mr. Sushil Paul v. HDFC Bank Limited & Ors.)
15. In the aforesaid case, the Division Bench held that the appeal filed by Mr. Sushil Paul against an order passed by the court below was not maintainable, as the said Sushil Paul was not a party to the arbitration agreement.
16. In the aforesaid case the respondent Bank had filed an application under Section 9 of the 1996 Act in the City Civil Court, claiming interim relief against its borrower with whom there was an arbitration agreement. The appellant in that case Mr. Sushil Paul made an application for being added as party to the proceedings under Section 9 on the ground that he had claims against the borrower. The Court declined Mr. Sushil Paul's application as he was not a party to the arbitration agreement.
17. In the case of Sushil Paul (supra) the applicant/appellant did not suffer orders in proceedings to which he was not party, whereby he was dispossessed of property belonging to him.
18. It is shocking that the learned Court below should have refused to vacate the interim order with the observation:
"Over and above the aforesaid facts and circumstances, the most important aspect is that the applicant is not at all a party to the hypothecation agreement containing the arbitration clause. Even the applicant is not a party to this proceeding. No step has also been taken by him for being impleaded as a party to this proceeding. In such position when the applicant is not at all a party to the agreement in question containing arbitration clause. It is obvious that he is debarred from invoking any of the provisions of the Arbitration and Conciliation Act, 1996 like his instant prayer in the present application."
19. It is not understood how any interim order could at all have been obtained by the respondent Varun Finance Corporation Limited in an application under Section 9 of the 1996 Act, in respect of the property of the appellant, who was neither party to the arbitration agreement nor to the proceedings in the Court below.
20. A third party, dispossessed of his property by an interim order in an application under Section 9 of the 1996 Act, would have no other option but to make an application in the nature of a pro interesse suo application in the Court which passed the order. This would be the only remedy available.
21. It is a cardinal principle of law that whenever there is a wrong there is a remedy. A person aggrieved by an erroneous order cannot be without a remedy. The appellant not being a party to the arbitration agreement, there could be no question of his getting himself impleaded as party in the application under Section 9 of the 1996 Act. The interim orders relating to the auto rickshaw registered in the name of the appellant should have been vacated, upon consideration of the appellant's application.
22. The appeal is allowed.
23. The order under appeal is set aside. Interim orders earlier passed by the Court below in relation to the auto rickshaw in question owned by the appellant are vacated.
24. The Receiver shall stand discharged.
25. The Receiver shall immediately make over possession of the auto rickshaw to the appellant and in any case within three working days from the date of receipt of a copy of this order. The possession of the vehicle shall be restored to the appellant in the same condition in which the vehicle had been taken i.e. in a roadworthy condition. The learned Receiver shall be entitled to final remuneration of 500 Gms. to be paid by the respondent financier Varun Finance Corporation Limited.
26. Mr. Amitesh Banerjee prays for stay of operation of this order. The prayer for stay is considered and refused.
27. The appellant shall however, not transfer the vehicle to any third party for a period of six months. It is expected that the suit filed by the appellant will be heard and disposed of expeditiously preferably within six months.
28. Needless to mention that it will be open to the appellant to initiate appropriate proceedings against Varun Finance Corporation Limited for damages for the loss caused to them.
29. In view of disposal of the appeal, the connected application being CAN 10882 of 2014 is disposed of. Urgent photostat certified copy of this order, if applied for, be supplied to the learned Advocates appearing for the parties, subject to compliance with all requisite formalities.

Print Page

No comments:

Post a Comment