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TMI Blog2013 (10) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... urity, for appointment of court receiver, injunction etc. Some of the relevant facts for the purpose of deciding both these petitions which emerge from the pleadings filed by both the parties are as under. 3. On 27th September 2011, the petitioner and respondent in arbitration petition (l) No.1603 of 2013, executed the facility agreement by which petitioner agreed to lend sum of ₹ 70,00,00,000/by way of term loan. The tenure of the agreement was 36 months. The respondent was liable to repay the said loan amount with interest in 30 equal instalments. The deed of hypothecation was executed in favour of the petitioner. The respondent also executed deed of pledge and letter of guarantee through Mr S. Surendra who is respondent in Arbitration Petition (lodging) No.1606 of 2013 Deed of pledge was executed by Mr S. Surendra and Mrs S. Shanti. On 18th November 2011, respondent executed escrow agreement in favour of the petitioner and agreed to deposit in an escrow account being current account with Axis Bank, Jubilee Hills branch, Hyderabad various amounts. On 7th December 2011, respondent addressed a letter to Bharat Heavy Electricals Ltd.(BHEL) instructing that all payments due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration clause and appointed Shri Justice Bhimrao Naik, former Judge of this Court as the sole arbitrator. 8. On 25th September 2012, the respondent issued an action plan to all banks and NBFCs disclosing its intent to dispose of its assets, dilute its stock and create further encumbrances on its assets. A meeting came to be held on 25th February 2013 by the respondent with the consortium of banks. It is the case of the petitioner that at the said meeting, respondent represented to the consortium of banks its intent to dilute its investments in its subsidiary viz. Jal Power and its intent to sell of its wind mill assets. The discussions held in the said meeting are recorded in the minutes of the consortium meeting which is part of record before this Court. According to the petitioner, the petitioner has to recover more than ₹ 58.68 crores from the respondent with further interest thereon. 9. Mr Tulzapurkar, learned senior counsel appearing for the petitioner submits that under clause12.1 of the facility agreement, the respondent had agreed to secure the loan amount by depositing escrow of receivables of EPC acceptable to the petitioner of the coverage of loan repayment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent were dishonoured with the remark 'funds insufficient'. Petitioner has issued notices under the provisions of Negotiable Instruments Act and has filed proceedings under section 138 against the respondent in the criminal court. Learned senior counsel submits that as far as shares of the respondent company which are pledged with the petitioner, in view of the prevailing condition of the respondent in the market, the said shares which are pledged in favour of the petitioner have now rendered worthless and does not secure the petitioner's dues. It is submitted that as far as receivables are concerned, respondent has diverted the same. No deposits have been made in escrow account since 30th April 2013. Learned senior counsel submits that in so far as current assets which are hypothecated in favour of the petitioner are concerned, the petitioner has subservient charge on such current assets. The said current assets would not be available to the petitioner for recovery of its dues. 12. Learned senior counsel pointed out that on 25th September 2012, respondent has issued a plan to all banks and NBFCs disclosing its intent to dispose of its assets, dilute its stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt either in any of these petitions. It is submitted that in view of large number of creditors of the respondent, if the relief as claimed in the petitions are not granted, petitioner would not be able to recover any amounts from the respondent even if petitioner succeeds in arbitration proceedings. It is submitted that even in the proposal submitted by the respondents for implementing Corporate Debt Restructuring Scheme, respondents have admitted the liability against the petitioners in the sum of ₹ 53.45 crores. Learned senior counsel submits that there is no dispute about the liability of the respondents. In view of the precarious financial condition of the respondent admittedly as is apparent from the reply itself, interim measures as prayed by the petitioner shall be granted. 15. Mr Shah, learned senior counsel appearing for the respondent on the other hand submits that no relief under Section 9 of the Arbitration and Conciliation Act can be granted against the respondents on the ground that both the agreements which are entered into between the petitioner and the respondent which the petitioner seeks to rely upon in these proceedings are not stamped sufficiently as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h person or by any public officer, unless such instrument is duly stamped: Provided that (a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. x x x x 19. Having regard to Section 35 of Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument. Section 35 of Stamp Act is distinct and different from Section 49 of Registration Act in regard to an unregistered document. Section 35 of Stamp Act, does not contain a proviso like to Section 49 of Registration Act enabling the instrument to be used to establish a collateral transaction. 20. The scheme for appointment of arbitrators by the Chief Justice of Guwahati High Court 1996 requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Act, Court has to see whether document which is sought to be relied upon is sufficiently stamped and if not stamped, the same shall be impounded by the Court under the provisions of Maharashtra Stamp Act. Mr Shah learned senior counsel submits that under the provisions of facility agreement, respondents were not under obligation to deposit the amount payable by BHEL in respect of that contract. It is submitted that there are separate escrow agreements in respect of various other contracts between the respondents and those parties under which respondent has to deposit the payment for work done receivables from such contracts in those specific escrow bank account to the knowledge of the petitioner. It is submitted that petitioner cannot seek any direction against the respondent for deposit of amount receivable by the respondents from other contracts in the escrow account maintained by the respondent with Axis Bank at Hyderabad. 18. Mr Shah learned senior counsel submits that as far as letters addressed by the respondent to BHEL which are relied upon by the petitioner are concerned, the two letters addressed by the respondent to BHEL to pay the amount directly to the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such scheme and have given their consent. Learned senior counsel submits that if the respondent is not allowed to finalize and/or implement such scheme, thousands of workers who are employed by the respondent in various projects in hand would be seriously affected. Large number of contracts which are in hand and which respondent is likely to get also would be seriously prejudiced. Learned senior counsel submits that not only the respondents but several such companies who are carrying out such projects are in serious difficulties in view of the government policy and thus no drastic order shall be passed by this Court against the respondent. It is submitted that respondent intends to clear all the dues of the petitioner and if respondent is allowed to finalize and/or implement the Corporate Debt Restructuring scheme, no prejudice would be caused to the petitioner. In so far as order passed by the Delhi High Court, copy whereof is furnished by Mr Tulzapurkar, Mr Shah learned senior counsel for the respondent, fairly admits that respondent ought to have brought to the notice of this Court subsequent order by which earlier interim order passed by Delhi High Court is lifted. Mr Shah, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differential amount from the date on which such document is received in this state. In view of clause 14.1, it is the responsibility of the respondents to pay the differential amount and since respondent have not paid such differential amount, respondent cannot be allowed to raise such objection. Mr Tulzapurkar placed reliance on the Judgment of this case in case of Marine Container Services (I) Pvt. Ltd. v. Rajesh Dhirajlal Vora (2001(4) Mh.L.J.) 353 and in particular paragraph 6 which reads thus : 6. So far as the objection of the learned Counsel regarding admissibility of the document of guarantee in evidence is concerned, in my opinion at the interim stage the document of guarantee can be relied on by the plaintiffs for seeking interim reliefs from the Court. If the document is found to be insufficiently stamped, when the document is produced for being admitted in evidence, the Court can impound the document and recover the required stamp duty. At this stage, however, as the document is on stamp paper, it cannot be brushed aside on the ground that it is insufficiently stamped and the Court cannot decline interim relief or Court cannot at the stage of considering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares of respondent company are not listed at the stock exchange. It is submitted that value of those pledged shares today is very negligible and would not protect the claim of the petitioner. 24. As far as submission of Mr Shah that the respondent is a profit making company is concerned, it is submitted that if the respondent was making profit, respondent at the same time ought to have cleared its liability to the petitioner. It is submitted that on perusal of affidavit in reply, it is clear beyond reasonable doubt that each and every asset of the respondent is fully encumbered. Even the current assets which are hyphothecated in favour of the petitioner are not available to the petitioner, petitioner having subservient charge on such assets. Learned senior counsel submits that from the perusal of the scheme submitted by the respondent, it is clear that there are large number of creditors. It is submitted that it is clear that respondents have proposed to dilute the securities which are given in favour of the petitioner. It is submitted that even if there is no dilution of those securities, such securities are not sufficient to protect the claim of the petitioner. 25. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a petition under Section 9, the Court was of the view that the power under Section 9 is not totally independent of those principles. In other words, the power which is exercised by this Court under Section 9 is guided by the underlying principles which govern the exercise of an analogous power in the Code of Civil Procedure 908. The exercise of the power under Section 9 cannot be totally independent of those principles. At the same time, the Court when it decides a petition under Section 9 must have due regard to the underlying purpose of the conferment of the power upon the Court which is to promote the efficacy of arbitration as a form of dispute resolution. Just as on the one hand the exercise of the power under Section 9 cannot be carried out in an uncharted territory ignoring the basic principles of procedural law contained in the Code of Civil Procedure 1908, the rigors of every procedural provision in the Code of Civil Procedure 1908 cannot be put into place to defeat the grant of relief which would subserve the paramount interests of justice. A balance has to be drawn between the two considerations in the fact of each case. The principles laid down in the Code of Civil Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 28. As far as shares of the respondent company which are pledged with the petitioner is concerned, it is not in dispute that such pledged shares are not listed with any stock exchange. It is the case of the petitioner that in view of financial condition of the respondent company and in view of large claim of various creditors, such shares of the respondent company would not fetch any amount. In my view, Mr Tulzapurkar, learned senior counsel is right in his submission that any agreement between the respondent and L T (Infra) Finance Co. Ltd. agreeing to adjust the dues of the respondent towards such company at a particular rate would not be binding on the petitioner. Even if the valuation of such shares are considered at the rate mentioned in such letter addressed by the said party is concerned, it would not be sufficient to protect the claim of the petitioner. 29. As far as current assets are concerned, all such current assets are fully encumbered. All the immovable properties of the respondent are fully encumbered. Five cheques issued by the respondent were dishonoured with remark 'insufficient funds'. In my view merely because various other contractors in va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner. 32. In my view petitioner has made out a case for interim measures under section 9 of the Arbitration and Conciliation Act. In my prima facie view respondent has committed default in making payment of term loan advanced by the petitioner. There are large number of creditors of the respondent who have made claims against the respondent. Respondent has admitted the claim of the petitioner. Claim of the petitioner as well as securities in favour of the petitioner are thus required to be protected. Apprehension of the petitioner that the respondent would create further third party rights in respect of such securities and would dilute such securities is justified. In my view, under Section 9 of the Act, Court is empowered to order interim measures so as to secure the claim of the applicant. I, therefore pass the following order : a) Respondent in ARBPL No.1603 of 2013 is directed to furnish bank guarantee in the sum of Rs.Sixty crores of a nationalized bank in favour of the Prothonotary Senior Master which shall be valid for a period of two years initially and for like period after obtaining further orders from this Court within three weeks from today. b) Till the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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