Global Worldwide Leasing vs Jejuplast Limited
2004 Latest Caselaw 782 Del

JUDGMENT

R.C. Jain, J.

1. The applicant-Global Worlwide Leasing, an unlimited company organized under the laws of Bermuda has filed an application under Section 9 of the Arbitration and Conciliation Act 1996 (hereinafter to be referred to as the ''Act'') seeking interim measure s viz. ad-interim injunction order in its favor restraining the respondent and its management, employees, agents, representatives and attorneys from selling, mortgaging creating any charge, sub-letting or otherwise disposing of the machinery, equipment detailed in Schedule A; for a direction on the respondent to handover the machinery, equipment to the applicant; appoint a Receiver to take possession and control of the said machinery and to direct the respondent to furnish security in the sum of Euro 04,515, equivalent to Rs.3,00,82,790/-.

2. The application has been made with the averments and allegations that the applicant-company is engaged, inter-alia in the business of leasing equipment and machinery etc. to the companies. Vide an off show lease Agreement dated 26.3.1997, the applicant-company agreed to lease out equipment and low molding machinery for industrial purpose as detailed in Schedule A to the respondent on the terms and conditions detailed out in the said agreement. The said machinery and equipment is presently in the po session and control of the respondent. The respondent paid only the first two Installments of the leased machinery under the Agreement and failed to pay the subsequent Installments despite reminders and demands. The Agreement between the parties contains and Arbitration Agreement in Clause 10.9 for settlement of the disputes/differences arising out of or in connection with the Agreement to be settled through the mode of Arbitrator. It was one of the stipulations that the courts at New Delhi shall alone h ve the jurisdiction in relation to the Arbitration Agreement and any Award arising there from. The plaintiff case is that the lease Agreement of the equipment and machinery was terminated on the failure of the respondent to pay the lease money and a sum f DM 1373804-i.e Euro704,515 (equivalent to Indian Rupees 3,00,82,790/-) had become due and payable by the respondent. The plaintiff had invoked the Arbitration Agreement at the time of filing the main OMP No.87/2002.

3. Vide an order dated 5.4.2002, on a request made on behalf of the petitioner, this Court passed an ad-interim ex-parte order restraining the respondent from selling, mortgaging, creating any charge or encumbrance or otherwise dispose of the machinery/e quipment as detailed in Schedule ''A'' of the application.

4. During the pendency of the OMP No.87/2002, the sole Arbitrator Mr. Justice Jaspal (Retd.) made and published his award dated 6.12.2003. The respondent has challenged the said Award through an application (OMP No.53/2004) under Section 34 of the Act s eeking to set aside the Award of the sole Arbitrator.

5. The present application also under Section 9 of the Act has been made after the publication of the Award by the sole Arbitrator thereby making the following prayers:

'' (a) Directing the respondent to hand-over the machinery/equipment detailed in Schedule ''A'' annexed to the OMP No.87 of 2002, to the representative/s of the applicant in terms of the Agreement dated 26th March, 1997, appoint a Receiver to take possess on and control of the machinery/equipment detailed in Schedule ''A'' to the OMP No.87 of 2002, make an inventory of the machinery/equipment taken into his custody and to keep such machinery/equipment in his custody till the time the same is returned to the applicant in terms of the Award dated 6th December, 2003.

(b) direct the respondent to furnish security, in the sum of Euro 705035, equivalent to approx. Rs.3,94,81,960, being the amount of the award, with interest in terms of the Award, passed by the learned Arbitrator till the time the award amount is paid t the applicant, in terms of the Award.

(c ) till such time the respondent furnishes the security in terms of prayer

(d) above, to restrain the respondent, its management, employees, servants, agents, representatives and attorneys from selling, mortgaging, creating any charge, sub-letting or therwise dispose of the immovable properties located at A-10 MIDC, Jejuri, Taluka Purandar, District Pune, Maharashtra-412 303 and the moveable assets located in the said premises.''

6. The application is opposed on behalf of the respondent. During the pendency of the application, with a view to secure the interest of the petitioner in the leased machinery and the amount awarded by the arbitrator in favor of the petitioner, court thought it proper to give an opportunity to the respondent to express their willingness or otherwise if the respondent was prepared to furnish a bank guarantee or security in that behalf. However, it appears that the respondent is not willing to either furnish a bank guarantee or security qua the awarded amount or the machinery. Learned counsel for the respondent made only a half-hearted offer about paying a sum of Rs.46,000/- per month as the lease money, hire charges of the machinery and equipment and that too from a future date which is not acceptable to the petitioner on the ground that it is far more less than the agreed lease money.

7. I have heard Mr. Anil K. Kher, learned counsel for the applicant and Mr. Ajay Majithia, learned counsel representing the respondent and have given my anxious consideration to their respective submissions. In terms of the lease Agreement dated 2 6.3.1997, the equipment and machinery as listed in Annexure A was let out by the petitioner to the respondent and the respondent was to pay to the petitioner ten Installments of DM155479.97 each as rental. The first two Installments were paid, though bel tedly but the remaining ten Installments were not paid and its payment was rescheduled vide amendment dated 1.4.2001 and as per the said amendment the payment of 3rd, 4th, 5th, 6th, 7th, and 8th Installment of DM155480 each was to be made on 01.04.2001, 01 07.01, 01.10.01, 01.01.02, 01.04.02, and 01.07.02. The payment of 10th Installment together with interest for DM 310960 was to be made on 1.10.2002. The respondent failed to make the payment of any of these Installments and interest accrued thereon. The petitioner accordingly made a claim for the said amount before the Arbitrator. The respondent also raised a counter-claim amounting to Rs.3,70,51,765/-, purpetedly on the basis of an alleged Tripartite Agreement entered between the petitioner, respon ent and M/s Amway. The Arbitrator arejected the said counter claim on the ground that no such agreement was proved on record. The sole Arbitrator made his award dated 6.12.2003 as follows.

1. That the respondent shall pay to the claimant a sum of DM 1373804 or its equivalent in Euro 705035 by way of lease rentals in terms of OLA dated 26.3.1997 as amended by the Amendment to the OLA dated 1.4.2001. .

2. That the respondent shall pay to the claimant interest on DM 1373804 or its equivalent in Euro 705035 at 2% over the then current London Interbank offered rate compounded monthly from 1.4.2001 till date of actual payment. .

3. That the respondent shall also return to the claimant the machinery and equipment mentioned in para 2 of the this award which was provided to the respondent by the claimant in terms of the OLA dated 26.3.1997.

4. That the respondent shall also pay to the claimant a sum of Rs.1,00,000/- as cost of the proceedings.

5. Since the counter-claims raised on behalf of the respondent have been rejected, the claimant is not liable to pay to the respondent any amount towards the counter claims of the respondent.

6. Since, the award in the main case has been rendered, the application filed by the claimant under Section 17 of the Arbitration and Conciliation Act, 1996 stands disposed of.

8. Mr. Anil Kher, learned counsel for the petitioner has urged that the total claim of the petitioner as against item No.1 and 2 would be to the tune of Rupees seven crores approximately in Indian currency and, therefore, the petitioner is entitled to rec over the same from the respondent. He also submitted that at least the interest of the petitioner to the extent of the above awarded amount may be secured by this Court. He also urged that the respondent be directed to return the machinery and equipm nt of the petitioner as directed by the learned Arbitrator. On the other hand Mr. Ajay Majithia, learned counsel for the respondent has vehemently urged that the petitioner is not entitled to any of these reliefs because the Award of the sole Arbitrator is under challenge through an application under Section 34 of the Act and, therefore, the Award is not yet final and enforceable within the meaning of the Act. In any case his submission is that the Arbitrator has wrongly and unjustifiably allowed th claims of the petitioner and rejected the counter claim of the respondent without any cogent basis. According to him the Award is liable to be set aside and the counter-claim made by the respondent is likely to succeed.

9. It is true that a petition under Section 34 of the Act for setting aside the Award of the sole Arbitrator is pending and will be answered in due course, and, therefore, strictly speaking the award of the sole arbitrator dated 6.12.2003 has not become enforceable within the meaning of Section 36 of the Act but this Court cannot loose sight of the important facts and circumstances of this case for the disposal of the present application and a party may before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 may apply to a court for interim measure of protection in respect of any for granting the interim measures. Section 9 of the Act cl arly provides that of the following matters namely:

(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement; .

(b) securing the amount in dispute in the arbitration.

(c ) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon an land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence.

(d) interim injunction or the appointment of a receiver.

(e) Such other interim measure of protection as may appear to the court to be just and convenient.''

The court has the power to make orders as it may be necessary for the above purpose. .

10. In the case in hand as already noticed, the lease agreement of the respondent stands terminated by the petitioner on the respondent's failure to pay major part of the lease money and did not adhere to the schedule of payment of the balance Installments as per the amendment dated 1.4.2001. It is not the case of the respondent that he has paid this amount or part thereof or he has even any willingness to pay the same. Rather the payment of the balance lease money is sought to be withheld on the gr und that the respondent has a counter claim against the petitioner arising out of a Tripartite Agreement between the parties and M/s Amway of which the petitioner is stated to be subsidiary. Learned counsel for the respondent states that there is no written Tripartite Agreement but it was the oral understanding between the parties that the printing work executed by the respondent shall be supplied to Amway but said agreement was breached by the petitioner. At this moment it would not be proper to comment on the entertainability or otherwise of the respondents counter-claim based on an oral Tripartite Agreement as the same may likely to prejudice the case of the respondent in the application under Section 34 of the Act but only a prima facie vi w is to be taken.

11. Admittedly the respondent is in possession of the machinery and equipment worth several crore of rupees for about seven years and is using the same without paying the stipulated hire charges. In the opinion of this Court, the respondent is not entit led to use the machinery and equipment of the petitioner unless he pays to the petitioner unpaid hire charges of the machine and equipment which has accrued by now or at least secures its payment to the petitioner. Therefore, strictly speaking the petit oner is fully justified in asking for the return of the machinery and equipment from the respondent. .

12. Having regard to the entirety of the facts and circumstances of the case and material brought in record, this Court is of the considered opinion that it is a fit case where the order of interim measure is pre-eminently justified. Accordingly the application is allowed with the following directions:

(i) The respondent must return the machinery and equipment as detailed in Schedule A to the petitioner within a period of two weeks from the date of this order; or .

(ii)In case the respondent wants to retain the machinery and equipment for the present, it must furnish a bank guarantee or property security for the sum of Euro704,515, equivalent to Rs.3,00,82,790/- to the satisfaction of the Registrar General of this Court within a period of two weeks; and .

(iii)In addition he should also give an undertaking to the Court that the payment of the hire charges in terms of OLA 26.3.1997 at least from the date of the Award shall be made within one month and he will continue to pay the future hire charges at the agreed rate.

13. Observations made hereinabove are for the purpose of disposal of this application and will not tantamount to expression of opinion on the merits of the respondents application under Section 34 of the Act. List on 15th September, 2004.