Calcutta High Court
Kosc Industries Private Limited vs Lakhotia Infra Technologies Pvt. Ltd on 18 January, 2024
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
(Commercial Division)
Present :
Hon'ble Justice Moushumi Bhattacharya
AP 70 of 2023
with
AP 71 of 2023
KOSC Industries Private Limited
vs
Lakhotia Infra Technologies Pvt. Ltd.
For the petitioner : Mr. Shounak Mukhopadhyay, Adv.
Mr. Vishwarup Acharyya, Adv.
For the respondent : Mr. Siddhartha Chatterjee, Adv.
Mr. Abirlal Ghosh, Adv.
Last heard on : 10.01.2024
Delivered on : 18.01.2024
Moushumi Bhattacharya, J.
1. Both the applications have been filed under section 9 of the
Arbitration and Conciliation Act, 1996 for interim relief. In one of the
applications, the petitioner has prayed for a restraint on the respondent
from alienating or creating any third party rights in respect of the
equipments supplied by the petitioner to the respondent under four
Purchase Orders issued by the respondent. In that application, the
petitioner has also prayed for a direction on the respondent to furnish
security for Rs. 53,07,352/-. The relief sought for in the other application is
substantially the same except that the petitioner has claimed security of
Rs.7,93,268/- from the respondent.
2. The other difference is that the respondent in AP 71 of 2023 has taken
a point of pecuniary jurisdiction in that the Calcutta High Court lacks
jurisdiction to entertain the applications.
3. The Court proposes to dispose of the applications by way of this
judgment since both the applications involve the same facts and
substantially the same point of law.
AP 70 of 2023
4. The undisputed facts are that petitioner supplied 2200 units of MS
Props - construction scaffolding material - on rent to the respondent under
4 Purchase Orders. The rate of rent per piece on a monthly basis is an
admitted sum mentioned in the Purchase Orders. The figures mentioned in
the "Rental" column is a part of the Purchase Orders and has not been
disputed by the respondent.
5. The petitioner, through learned counsel, has also placed and relied on
a table which contains certain facts as per the affidavit-in-opposition of the
respondent. The table relates to "Duration of Use of Goods" from 12.9.2019
- 18.10.2019. A total of 2000 goods were supplied by the petitioner to the
respondent by October, 2019. The chart mentions the number of goods
returned by the respondent together with the dates of return and states that
the respondent admittedly withheld 600 units of goods. The dates of supply
and of return have reference to specific pages in the affidavit-in-opposition
filed by the respondent. Counsel has shared the chart with learned counsel
appearing for the respondent.
6. The chart also contains a calculation of admitted rent for the 600
units which the respondent has withheld. The petitioner describes the
figures as "admitted" on the basis of the calculation statement on the
duration of use of goods by the respondent. The total principal amount due
has been calculated at Rs. 22,29,120.00/- as the rent for the balance
withheld 600 goods from November, 2019 - July, 2023 + the rent for 900
goods used from November, 2019 - February, 2020 and for 500 goods used
from November, 2019 - June, 2020. The calculation also adjusts Rs.
4,90,880.00/- received by the petitioner from the respondent.
7. It is relevant to note that the petitioner's claim in the arbitration is in
excess of Rs. 70 lacs on account of the withholding of the petitioner's goods
by the respondent and the disposing of and alienating of the goods by the
latter.
8. Learned counsel appearing for the respondent has objected to the
maintainability of the application on the ground that the application was
made after constitution of the arbitral tribunal. However, the records show
that a Division Bench of this Court entertained the section 9 application by
its order dated 2nd March, 2023 and passed an injunction on the respondent
from transferring or alienating the material leased to the respondent for 3
months from the date of the order. The respondent, significantly did not
challenge this order.
9. Therefore, the objection made under section 9(3) of The Arbitration
and Conciliation Act, 1996 on the Court not having jurisdiction to entertain
an application under section 9(1) after constitution of arbitral tribunal, is no
longer acceptable : Arcelor Mittal Nippon Steel v. Essar Bulk Terminal Limited;
(2022) 1 SCC 712. It is also relevant that the respondent did not object to
the maintainability of the application before the Division Bench on 6th
September, 2023 when the Division Bench set aside the order dated 14th
July, 2023 and thought it fit to appoint a Receiver for taking inspection of
the units lying at the various sites of the respondent (appellant before the
Division Bench) and deliver the same to the petitioner. The Division Bench
was however pleased not to interfere with the interim order restraining the
respondent from dealing with the goods till the Receiver takes actual
physical position of the 800 units or lesser / greater number of units lying
with the respondent.
10. The respondent's resistance to the figures mentioned in the chart
relied on by the petitioner is without basis since the statement on the
duration of use of goods clearly refers to specific pages in the affidavit-in-
opposition of the respondent and the fact that 2000 units were admittedly
supplied by the petitioner to the respondent from 12.9.2019 - 18.10.2019
and that 600 units were admittedly withheld by the respondent. It is also
significant that the only reason apparent from the order of the Division
Bench dated 6th September, 2023 for remanding matter to the First Court
was that the respondent failed to indicate its stand on the contents of the
chart before the First Court.
11. Moreover, the Purchase Orders mention the admitted rate of rent
payable by the respondent to the petitioner with individual rates of rent for
the MS Props on a monthly basis. Hence, this sum cannot be disputed by
the respondent. The calculation of the admitted rent due to the petitioner at
the agreed rate mentioned in the Purchase Orders is hence merely a matter
of arithmetical calculation. The petitioner has simply calculated the agreed
rate of rent on the number of units used by the respondent from November,
2019 to July, 2023 including for the withheld 600 units.
12. The contention of the petitioner that the petitioner would have
received a much higher rent on the goods if the respondent had returned the
units to the petitioner within the stipulated time under the Purchase Order
cannot be ignored. In the present case, the petitioner has restricted its claim
of security to the aggregate sum payable by the respondent for continued
use of goods till July, 2023 together with the fact that a portion of the goods
has also been disposed of by the respondent despite the order of injunction
passed by the Division Bench on 2nd March, 2023.
13. The Court is also not in agreement with the respondent on the issue of
delay. In making such objection, the respondent has to first cross the hurdle
of giving a satisfactory explanation as to why the respondent held on to 600
units from July, 2020. This is the admitted case and would be reflected from
the respondent's affidavit-in-opposition. Further, the petitioner initiated to
proceed under the Micro, Small and Medium Enterprises Development Act,
2006 (MSMED) on 15th July, 2020. The records show that proceedings
initiated under the MSMED Act were prolonged due to the dilatory tactics of
the respondent and the conciliation proceedings were ultimately terminated
on 5th January, 2023. The application under section 9 was filed immediately
thereafter on 7th February, 2023.
14. Significantly, the respondent withheld 600 units of the petitioner
throughout this period which means that the cause of action continued on a
day to day basis and aggravated the petitioner's claim against the
respondent.
15. The powers conferred on a Court under section 9 of the 1996 Act
includes the power to make an order for securing the amount in dispute in
arbitration. It is also substantially settled that the Court can make such
orders as may appear to be just and convenient without being fettered by
the regime of Order XXXVIII Rule 5 of The Code of Civil Procedure, 1908
where the sum is admitted and the defence is prima facie untenable; Essar
House Private Limited v. Arcellor Mittal Nippon Steel India Limited; 2022 SCC
OnLine SC 1219 and Abheya Realtors Private Limited v. SSIPL Retail Limited;
(2010) 2 CHN 203.
16. Considering the relevant facts and circumstances and the admitted
amounts pertaining to the rent payable by the respondent for use of the
petitioner's goods from November, 2019 to July, 2023 including withholding
of 600 units of the petitioner's goods, the court accepts that the petitioner is
entitled to claim compensation and damages for the retention of the goods.
The respondent should accordingly secure the amount in aid of the interim
measure under section 9 of the Act.
17. AP 70 of 2023 is accordingly allowed and disposed of by directing the
respondent to furnish security for a sum of Rs. 53,07,352/- on the basis of
the tabulated calculation which is a part of the petition inclusive of the sum
received by the petitioner as advance from the respondent. The respondent
should furnish the amount, 50% by way of cash deposit and the remaining
50% by way of a bank guarantee, to be deposited to the Registrar, Original
Side of this Court within two weeks from date.
AP 71 of 2023
18. The petitioner has sought for a direction on the respondent to furnish
security for Rs. 7,93,268/- on the same ground and on the same facts as in
AP 70 of 2023. The undisputed facts which are relevant for the adjudication
has already been stated above in the first section of the judgment and are
not being repeated. The claim of the petitioner arises out of the MS Props
unit supplied by the petitioner to the respondent. The respondent used the
goods from July, 2019 - February, 2020 and also removed the units/goods
from its custody which would be evident from the Receiver's Report. The
Receiver was appointed by the Division Bench by its order dated 6th
September, 2023 in an appeal filed by the respondent from the order of the
First Court.
19. The first section of the judgment also refers to a chart handed up by
learned counsel appearing for the petitioner as per facts admitted in the
affidavit-in-opposition of the respondent with regard to the respondent's use
of the goods and duration thereof. A statement of the admitted rent due
from the respondent to the petitioner is also part of the chart. The petitioner
claims a total amount of Rs. 22,29,120.00/- in the other arbitration petition
being AP 70 of 2023.
20. As stated above the facts are not being repeated.
21. The only point which learned counsel appearing for the respondent
has raised in the present application is the lack of the pecuniary jurisdiction
for the Court to entertain the present matter. Counsel has argued that the
mail from the petitioner to the respondent dated 14th July, 2020 reflects the
value of the withheld goods to be lesser than Rs. 10 lacs which divests the
High Court of jurisdiction to entertain the matter.
22. However, the fact remains that the present application for interim
protection has already been entertained by the Court and was carried to the
Division Bench which proceeded to pass orders on 2nd March, 2023 and 6th
September, 2023 restraining the respondent from relying on the mail dated
14th July, 2020. Significantly, the Division Bench in its order dated 2nd
March, 2023, refused to accept the stand taken by the respondent on the
mail dated 14th July, 2020. The respondent has not challenged any of the
orders passed by the Division Bench.
23. Learned Counsel appearing for the petitioners has also relied on a
chart with a calculation of admitted rent due from the respondent as per the
purchase orders. The total rent of all goods per month is Rs. 35,297/- and
the outstanding principal sum of rent from July, 2019 to February, 2020 is
Rs. 2,02,376.00/-. The chart contains particularised statements of claim for
the goods withheld by the respondent from March, 2020 to July, 2023 which
is Rs. 40,000/- and also calculates the total amount due for the withheld
goods at Rs. 1,69,480.00/-. A sum of all these figures comes to
Rs.3,71,856.00/-. The chart was shared with learned counsel appearing for
the respondent.
24. On the point of law, the Court finds the contention made on behalf of
the petitioner to be of substance, namely, that the application has been filed
on the basis of the principles under section 12 of the Commercial Courts
Act, 2015 under which the relief sought in the arbitration are relevant for
determining the satisfied value. The petitioner has prayed for security in the
application for approximately an amount of Rs. 7.93 lacs along with
injuctive relief for withholding of the goods. The aggregate value of rent
hence comes to above Rs. 10 lacs. Reference in this context may be made to
section 12(a), (b) and (d) of The Commercial Courts Act, 2015 which takes
into account the money sought to be recovered being inclusive of interest
computed up to the date of filing of the application as well as the market
value of the immovable property on the date of the filing of the application.
Section 12(2) refers to the aggregate value of the claim and counter-claim as
set out therein in a commercial dispute which is to form the basis for
determining the jurisdictional Court.
25. Hence, the consideration which is germane to the argument of
pecuniary jurisdiction, or the lack thereof, is the correctness of the
petitioner's valuation of the reliefs sought in the application and in the
respondent's construction of the mail dated 14.7.2020.
26. Even if the specific contents of the mail are taken into consideration,
the relevant column pertaining to amounts pending from the respondent on
account of the materials lying at Naihati reflects the "cost" and not the value
of the balance goods. The cost referred to is that of refurbishment of goods
after their return to the petitioner so that the goods can be let out to other
clients. The fact that "cost" is not equivalent to the value of the goods would
also be evident from the respondent's purchase orders which provides for
the agreed monthly rental to be paid by the respondent for these goods. The
figure is slightly less than ½ of the alleged total value of the goods. Hence,
the construction given by the respondent to this mail and to the figures
contained therein is untenable and reflects an erroneous understanding of
the petitioner's mail. The object appears to be divesting the Court of
jurisdiction on a ground which is non-existent.
27. The pecuniary jurisdiction argument is hence answered against the
respondent.
28. The particulars of the basis of the petitioner's claim for security is
tabulated in the petition. The petitioner has claimed the amounts due
against the bills and invoices raised by the petitioner on the respondent for
the respondent's use of the petitioner's equipment on a compoundable-
interest basis. The petitioner has also claimed compensation and damages
for the respondent retaining 600 units / balance material and has adjusted
the sum of Rs. 80 lakhs received as advance from the respondent.
28. The Court, under section 9 of The Arbitration and Conciliation Act,
1996, has plenary powers - including the power to make an order for
securing the amount in dispute in the arbitration. The petitioner, as the
claimant in the arbitration and as a party to the arbitration agreement has a
statutory right to approach the Court for interim relief. The respondent's
action of withholding a substantial quantity of the petitioner's goods till
date, contrary to the agreement between the parties and alienating the
goods in the face of the order of injunction passed by the Division Bench,
are additional factors for the Court to pass interim measures of protection in
favour of the petitioner.
29. The Court finds no basis to refuse interim protection in view of the
above reasons. AP 71 of 2023 is accordingly allowed and disposed of by
directing the respondent to furnish security for the sum of Rs. 7,93,268/-,
50% of which shall be in the form of cash deposit and remaining 50% by
way of bank guarantee. Both the components should be furnished with the
Registrar Original Side within 2 weeks from date. The petitioner shall be
permitted to approach the Court for further and other injunctive reliefs
against the respondent in default of these directions.
30. Connected applications, if any, are also disposed of along with the two
arbitration petitions.
Urgent Photostat certified copies of this judgment, if any, be supplied
to the parties upon fulfillment of requisite formalities.
(Moushumi Bhattacharya, J.)
