Bombay High Court
In The High Court Of Judicature At ... vs Formerly Tata Finance Ltd on 15 December, 2009
Bench: Anoop V.Mohta
Arbp513.09 1
ssm/-
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 513 OF 2009
1
(A) Mr. Amin Tharani S/o. A. Tharani
Age 51 years., Occu. Business,
residing at Tharani Mansion,
M.A. Road, Station Road,
Opposite Platform No.6,
Andheri (West),
Mumbai - 400 058.
AND
(B) Mr. Amin Tharani S/o. Tharani
having address at
Rohan Telecom, 26/A,
Ground Floor, Laram Centre,
Opposite Fidai Baug,
S.V. Road, Andheri (West),
Mumbai. ...Petitioner.
Vs.
M/s. Kotak Mahindra Prime Ltd.
as Assignee of Tata Motors Ltd.
Formerly Tata Finance Ltd.,
A public Limited Company,
Incorporated under the provisions
of the Companies Act, 1956,
having its Registered Office at
36-38A, Nariman Bhavan, 227,
Nariman Point, Mumbai-400 021,
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and BRANCH OFFICE at-
Vinay Bhavya Complex,
6th Floor, 15G-A, C.S.T. Road,
Kalina, Santacurz (East),
Mumbai-400 098. ...Respondent.
Mr. Rakesh Kumar i/by Mr. K.A. Singh for the Petitioner.
Ms. Asha Nair i/by M/s. Mahesh Menon & Co. for the Respondents.
AND
ARBITRATION PETITION (LODGING) NO. 1037 OF 2009
Kotak Mahindra Bank Ltd.
A Banking Company incorporated within
the meaning of the Banking Regulation
Act, having its registered Office at 36-38A,
Nariman Bhavan, 227,
Nariman Point, Mumbai -400 021. ....Petitioner
Vs.
Mr. Manish Shankarlal Bhatia,
Proprietor of Manish Associates,
Having address at Laxmi Hira Bhavan,
Block No.A 799, R. No. 1597,
4th Floor, Behind Netaji High Court,
Ulhasnagar, Mumbai - 421 004.
AND also at:
Shop No. 756, 1st Floor,
Opp. Tilson Market, Sector - 17,
Ulhasnagar, Thane - 421 003. ... Respondent.
Ms. Disha Karambar for the Petitioner.
None for the Respondent.
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AND
ARBITRATION PETITION (LODGING) NO. 1038 OF 2009
Kotak Mahindra Bank Ltd.
A Banking Company incorporated within
the meaning of the Banking Regulation
Act, having its registered Office at 36-38A,
Nariman Bhavan, 227,
Nariman Point, Mumbai -400 021. ....Petitioner
Vs.
Mr. Shankar Hiranand Bhatia,
Proprietor of Hiranand & Co.,
Having address at Bhatia Building,
Block No.A 749,
Behind Netaji High Court,
Ulhasnagar, Mumbai - 421 003.
AND also at:
House No.12, Mansi Parb Building,
Plot No.6, Palasphatta,
Panvel-412 06.
And also at:
Having Office address at,
Shop No.756, 1st Floor,
Opp. Tilson Market,
Ulhasnagar, Thane - 421 003. ... Respondent.
Ms. Disha Karambar for the Petitioner.
None for the Respondent.
CORAM :- ANOOP V. MOHTA, J.
DATE OF RESERVING THE JUDGMENT :- 23rd NOVEMBER, 2009.
DATE OF PRONOUNCING THE JUDGMENT:15th DECEMBER,2009
JUDGMENT :-
1 Heard finally, by consent of the parties.
2 The Petitioner has invoked Section 34 of the Arbitration and
Conciliation Act, 1996 (for short, the Arbitration Act), and thereby
challenged an award dated 22nd April, 2009 passed by the sole Arbitrator
appointed by the parties based upon the loan agreement (Hire Purchase
Agreement) (for short, HPA), clauses, and as the Arbitrator has awarded
the claim against the Petitioner and in favour of Respondent, and thereby
directed the Petitioner to pay a sum of Rs.10,18,380/- (Rupees ten lacs
eighteen thousand three hundred eighty only) together with the interest
thereon @ 18% p.a. from 4th July, 2007, as per the particulars of the claim,
and thereby also directed the Petitioner to return the vehicle and permitted
the Respondent to sell the said vehicle and to adjust the amount and also
permitted to execute the award to the extent of balance amount, if any.
3 The basic clauses of loan agreement are-
"1 (a) The Hirer shall pay to the Owners hire charges as
specified in the Second Schedule hereto.
(b) Punctual payment is and shall be of the essence of
this Agreement and the Hire shall be deemed to have
committed a default if any hire charges or part thereof or
any other monies due and payable hereunder shall
remain unpaid for more than fourteen days after
becoming due.
(c) All payments of hire charges hereunder shall be
paid to the Owners by Demand Draft at their Office at
Mumbai or at such other addresses as the Owners may
from time to time specify and payments made by posts
shall be at the risk of the Hiere and shall be deemed to
have been paid on the date on which the demand draft
therefor is realised.
2. The Hiere shall throughout the term of this Agreement
(a) punctually pay all amount of hire charges payable in
respect thereof;"
"17. An even of default shall occur hereunder if the Hirer-
a) fails to pay any of the hire charges or part thereof
or other payment required hereunder when due
and such failure in the opinion of the Owners,
continues for a period of 14 days after notice is
sent to the Hirer;
"18 (1) Upon the occurrence of any event of default and at
any time thereafter, the Owners shall be entitled to
declare all sums due and to become due hereunder for the
full term of the Agreement as immediately due and
payable and upon the Hirer failing to make the said
payment in full within 14 days thereof, the Owners may,
at their sole discretion, do any one or more of the
following.
a) Upon notice to the Hirer terminate this
Agreement;
b) Demand that the Hirer return the Vehicle to the
Owners at the risk and expense of the Hirer, in the
same condition as delivered (ordinary wear and
tear expected), at such location as the Owners may
designate and upon failure of the Hirer to do so
within 14 days from the date of demand, enter
upon premises where the vehicle is located and
take immediate possession of and remove the same
without liability to the Owners or their Agents for
such entry or for damage to property or otherwise.
c) On such terms and conditions and for such
consideration as the Owners may deem fit and
with or without any notice to the Hirer sell the
vehicle at a public or private sale, otherwise
dispose of, hold, use, operate, lease to others or
keep idle such vehicle, all free and clear of any
rights to the Hirer and without any duty to
account to the Hirer for such action or inaction or
for any proceeds in respect thereof;
d) By written notice to the Hirer, require the Hirer to
pay to the Owners (as liquidated damages or loss
of a bargain and not as a penalty) on the date
specified in such notices an amount (plus interest
at the rate of 36% per annum for the period until
receipt of the said amount) equal to all unpaid
hire charges payments and all other payments
which, in the absence of a default, would have
been payable by the Hirer hereunder for the full
term hereof, or
e) Exercise any other right or remedy which may be
available to them under the applicable law.
2) In addition, and without prejudice, to what is
stated above, the Hirer shall be liable for all legal and
other costs and expenses resulting from the foregoing
defaults and from exercise of the Owners' remedies,
including possession of any of the Vehicles;
4 The agreement provided first and second schedule of payment which
commenced from 23/07/2001 and ended on 25/06/2004.
5 The Respondent had served demand notice dated 21/02/2002,
because of defaults in terms of contract (HPA), and also demanded late
payment, from the respective due dates of the monthly installments with
interest and also demanded the return of the vehicle within 14 days to the
nearest branch. It was clearly mentioned that, if the Petitioner failed to
comply with the above within 14 days, they would take appropriate actions
as per the agreement at the costs and consequences. Another notice dated
29/10/2002 of same nature was sent because of persistent defaults, but no
action of any kind was initiated by the Respondent.
6 On 16/01/2006, i.e. after the last date of payment i.e. 26/06/2004 -
03/07/2007 as per HPA, dated 23/07/2001, the respondent demanded the
balance whole payment of Rs.6,63,917/- along with the expenses and the
interest again.
7 It was reminded by the Respondent on 21/08/2006 and thereby
invoked Arbitration Clause also. The matter was referred to the Arbitrator
and intimated accordingly by notice dated 18/06/2007. The statement so
claimed was sent by letter dated 13/07/2007. The matter proceeded before
the Arbitrator accordingly, as the Petitioner filed written statement to resist
the claim on all counts, including of limitation. The parties led the
evidence before the Arbitrator.
8 The Arbitrator ultimately has passed the award as referred above.
9 The learned counsel appearing for the Petitioner, basically submitted
that the claim so raised is time barred. The agreement was dated
23/07/2001 and the cheques were issued for the period from 2001 to June,
2004. The claim filed on 03/07/2007. The Arbitrator held that the last
maturity date of monthly hirer installments was 25/06/2004. The present
arbitration proceedings was initiated on 18/06/2007, within three years
from the last date of monthly Hirer installments. The last notice of demand
was dated 21/08/2006 and the same was not complied. The vehicle is still
in possession of the Respondent.
10 The learned counsel appearing for the Respondent has relied on
Article 113 of the Limitation Act, 1963 and contended that the period of
limitation of 3 years commences/begins when the right to sue accrues and
as there is continued cause of action, as there were successful defaults in
payment. Each default, therefore, was reduced existing and/or continuing
cause of action. Therefore from the last defaults, the claim petition as filed,
is within the limitation.
11 The learned counsel appearing for the Respondent unable to point
out any other authority/ citation to the effect that in HPA, every default in
every installments creates fresh cause of action and till the last
installments, cause of action always continuing, except the Judgment in
Bhagwantrao Deorao Patil Vs. Mohammad Khan Asgar Khan, AIR
1977, Madhya Pradesh, 270, whereby referring to Article 37 of the
Arbitration Act, it was contended that the suit for recovery of whole
amount in case of monthly installment, cause of action accrues after expiry
of 10 months. In that case, there was no provision that on default of one or
more installments, whole amount would became due. In the present case,
as per the clauses so referred above, and in view of the fact that the
Respondent had issued notices in the year 2002 and thereafter again in
2006, itself shows that because of existence of such clauses, such notices
were issued and demanded the whole amount and even threatened to take
action apart from forcible possession of the vehicle. This judgment,
therefore, is not applicable on facts itself.
12 The submission, therefore, even based upon Article 113 of the
Limitation Act, 1963 as referred above is also inapplicable in view of the
specific clauses and the notices issued by the Respondent. The parties are
bound by the terms and conditions, and therefore, I am declined to observe
that there is no continuing cause of action. The right to sue, in view of the
agreement referred above, it self accrues on default of initial one or more
installments, as the whole amount became due and payable. The
Respondent accordingly acted upon also.
13 In Arbitration Petition (Lodging) Nos. 1037/2009, another such
financial institutions like the Respondent, the Petitioner who is also a
financial institution has invoked Section 9 of the Arbitration Act as the
Respondents failed to pay a monthly installments regularly commencing
from 10/10/2007. There was also an agreement clause. It was specifically
agreed that, in case of defaults or delay in payment/repayment of any
installments, the loan, interest or any other amount, the respondent shall
pay overdue interest and compound interest, collection charges. The
parties have entered into/executed the Demand Promissory Note dated
21/09/2007. The Respondent failed to make the payment due dates, in
spite of demand and as defaults occur, and therefore, the notice was sent
on 20th October, 2008 and thereby called upon the Respondent to pay the
outstanding dues along with the amount payable to the sum of Rs.7,97,089
as on 20th October, 2008 with interest. The notice of legal proceedings
including referring the matters to the Arbitrator was also given. As there
was no response, the matter was referred to the Arbitrator. In the
meanwhile they invoked Section 9 of the Arbitration Act for interim
protection/ measure till the enforcement of the final award. Here the
contention was that the Petitioners are entitled to initiate proceedings
immediately after one or 2 defaults as per the similar clause in the events
of defaults. The similar is the case and the clause in other Arbitration
Petition (Lodging) No. 1038 of 2009.
14 The whole purpose will be rendered ineffective and remedy-less, if
the financial institutions failed to take action immediately after one or two
defaults, as agreed. It will be too late for them to recover and/or to wait
till last installments became due. If the case of Financial Institution's is
accepted as submitted in the present case in the first petition i.e.
Arbitration Petition No.513 of 2009, that the cause of action accrued after
expiry of last months installment then, it will be difficult for them to take
any action immediately after 1 or 2 defaults. It will frustrate the whole
object of the financial institution to provide loans and to recover
immediately in case of default. Even otherwise, the clauses of agreement
itself, if read with their demand notices, in my view, in Arbitration Petition
No. 513 of 2009, the submission on behalf of the Petitioner that the award
so passed based upon the claim beyond the limitation period is bad in law
and unsustainable.
15 Resultantly, the Arbitration Petition No. 513 of 2009 is allowed. The
impugned award dated 22nd April, 2009, is quashed and set aside.
16 The Arbitration Petition (Lodging) No. 1037 of 2009 read with
Arbitration Petition (Lodging) No. 1038 of 2009, in view of undisputed
position on record of defaults in payment and the averments remained
uncontroverted, and as the prayer clause (b) as already been granted while
admitting both the matters on 05/10/2009, is confirmed the same.
17 In view of this, the Arbitration Petition (Lodging) Nos. 1037 of 2009
and 1038 of 2009, are made absolute, in terms of prayer clause (b).
28 This order shall remain in force till the Arbitration Proceedings
attains finality. Liberty is granted to the parties to settle the matter and or
apply for appropriate order.
19 No costs.
(ANOOP V. MOHTA, J.)
