Sagar Warehousing Corporation vs .Pawan Hans Helicopters Limited
2008 Latest Caselaw 1304 Del

*                           HIGH COURT OF DELHI

%                      Date of decision: August 11th, 2008


1. +                     FAO(OS) 258/2008

Sagar Warehousing Corporation                            ...Appellant
                                       through
                                       Mr.Valmiki Mehta, Sr.Adv with
                                       Ms.Lalita Kohli and Ms.Charu,
                                       Advocates

                            Versus

1.Pawan Hans Helicopters Limited          ...Respondent no.1
                               through
                               Ms.Ritu Bhalla & Mr.Dhruv
                               Dewan, Advocates

2. M/s AES Aerospace Limited                     ...Respondent no.2.
                                       through Nemo

3.M/s Fly Jac Forwarders                    ...Respondent no.3.
(now known as Fly Jac Logistic Pvt.Ltd)
                                Through
                                Mr.Rajendra Gupta & Mr.Naresh
                                Joshi, Advs.



2.                     FAO(OS) 259/2008

M/s Fly Jac Forwarders                         ...Appellant
(now known as Fly Jac Logistic Pvt.Ltd)
                                Through
                                Mr.Rajendra Gupta & Mr.Naresh
                                Joshi, Advs.


                            Versus

1.Pawan Hans Helicopters Limited            ...Respondent no.1
                               through
                               Ms.Ritu Bhalla & Mr.Dhruv
                               Dewan, Advocates


FAO(OS) No. 258/2008                                         Page 1 of 10
 2. M/s AES Aerospace Limited                ...Respondent no.2.
                                  Through Nemo

3. Sagar Warehousing Corporation           ...Respondent no.3.
                               Through
                               Mr.Valmiki Mehta, Sr.Adv with
                               Ms.Lalita Kohli and Ms.Charu,
                               Advocates

Coram :

Hon'ble Mr.Justice Manmohan Sarin
Hon'ble Mr.Justice Manmohan

(1)    Whether reporters of local paper may be
       allowed to see the judgment?

(2)    To be referred to the reporter or not?          Yes

(3)    Whether the judgment should be reported
       in the Digest ?                                 Yes


Manmohan Sarin, J.

1. By this common judgment, two appeals namely FAO(OS)

258/2008 filed by M/s Sagar Warehousing Corporation and

FAO(OS) 259/2008 filed by M/s Fly Jac Forwarders (now known

as Fly Jac Logistic Pvt.Ltd.) are being decided, as challenge in

both the appeals is to the common order and judgment dated

22nd April, 2008 by which IA No.7864/2003 preferred by

appellant Sagar Warehousing Corporation and IA No.7863/2003

preferred by appellant M/s Fly Jac Forwarders were decided,

assailed in the present appeals. Both the appellants by the

respective I.As had sought vacation of the ex parte ad interim

order passed by the learned Single Judge on 20th February,

2002. Directions had also been sought by the appellants for

removal of the goods by Pawan Hans Helicopters Ltd after

paying the dues of the appellants for transportation and

warehousing charges. Vacation of the restraint on the appellant

from alienating, encumbering and disposing of the goods was

also sought.

2. For facility of reference, Sagar Warehousing Corporation-

appellant in FAO (OS) 258/2008 is being referred to as `SWC',

M/s Fly Jac Forwarders-appellant in FAO(OS) 259/2008 as

`FJF', Pawan Hans Helicopters-respondent no.1 in both the

appeals as `Pawan Hans' and the foreign purchaser of the

goods M/s AES Aerospace Limited-respondent no.2 in both the

appeals is being referred to as `AES'.

The applications for interim relief, namely,

CM.7826/2008 in FAO(OS)258/2008 and CM.7828/2008 in FAO

(OS).259/2008 were dismissed vide order dated 26th May, 2008

while judgment in the appeals was reserved.

3. The facts relevant for the disposal of two appeals may be

briefly noted:-

(i) Pawan Hans had entered into an agreement with AES on

16th June, 1999 for the sale of 19 Westland Helicopters and

spares and accessories for a sum of £ 9,00,000. The

agreement to sell was followed by two addendums dated 24th

September, 1999 and 31st May, 2000 making a provision for

shipment of the helicopters and goods in not more than two

consignments. Consideration of £ 9,00,000 was also split up

corresponding to the value of the consignment shipped. The

first consignment of six helicopters with spares was shipped to

AES with a sum of £ 4,50,000 being 50% of the total sale

consideration being remitted to Pawan Hans. The agreement

ran into rough weather when the second consignment of 13

helicopters with spares were to be delivered.

(ii) In terms of the agreement, AES, the buyer was to take

delivery from New Delhi and Bombay by deputing an authorized

transporter. The term "authorized transporter" was defined in

the contract to mean any transporter having demonstrated the

capacity to transport part of the package from Safdarjung

Airport, New Delhi to Mumbai and from Juhu Airport, Mumbai to

Mumbai Customs Port as approved by the purchaser (emphasis

supplied). In the instant case, it is common ground that AES

had appointed FJF as the authorized transporter. This becomes

apparent from the letter dated 30th September, 1999 written by

Pawan Hans to FJF which is reproduced for facility of reference:-

"We have been advised by M/s AES Aerospace Ltd, England that Fly Jac Forwarders, New Delhi has been appointed by them for inland transportation of Westland 30 helicopters and related package in India. Earlier the Govt of India

had approved the disposal of Westland 30 package in favour of AES Aerospace Ltd., UK.

You are requested to contact the undersigned for arranging inland transportation of the package from Safdarjung Airport, New Delhi to Juhu Airport, Bombay and Mumbai/New Mumbai Port. Please note that the entire job should be completed before end of Nov 1999."

(iii) AES issued further instructions regarding movement

of cargo vide its letter of November 4, 1999. AES again vide its

letter of November 9, 1999 instructed FJF to arrange godown

facilities in Mumbai in case the full cargo cannot catch the

planned vessel. The cost of warehousing was to be paid by AES

through Pawan Hans on presentation of the bill. In the event,

the second consignment of 13 helicopters with spares was

delivered to FJF, who in turn appointed SWC as the

warehousing agents and the goods are presently stored with

SWC. This happened not in the recent past but as far back as

on 26th December, 1999.

(iv) AES is stated to have gone into liquidation. Hence

the agreement of purchase is not being performed and the

delivery of the goods has not been taken by them. The

helicopters and spares continue to be stored in the warehouse of

SWC. FJF and SWC have been demanding the payment of

transportation and warehousing charges. Pawan Hans has not

cleared or paid any of these amounts on the basis that liability

for transportation as also the allied charges was to be borne by

AES.

(v) Pawan Hans in the circumstances filed a petition

under section 9 of the Arbitration and Conciliation Act, 1996 for

restraining AES or its agents from alienating or disposing the

shipment of helicopters and spares lying with SWC. The learned

Single Judge vide orders dated 20th December, 2002 granted

an ex parte ad interim injunction restraining FJF and SWC from

alienating, encumbering or otherwise disposing of the goods.

Direction was also sought that Pawan Hans be permitted to lift

helicopters and spares only upon payment of the warehousing

and transportation charges of SWC and FJF.

4. The learned Single Judge by the impugned order

dismissed the two applications filed by the appellants. He

further permitted Pawan Hans to lift goods without payment of

warehousing or transportation charges vide impugned order

dated 22nd April, 2008. Aggrieved by the said order, appellant-

SWC filed FAO(OS) 258/2008 and appellant-FJF filed FAO(OS)

259/2008.

5. We have heard Mr.Valmiki Mehta, learned senior

counsel on behalf of SWC and Mr.Rajinder Gupta on behalf of

FJF. FJF have adopted the arguments made by the learned

senior counsel Mr.Valmiki Mehta. In addition, Mr.Gupta

submitted that there was no justification whatsoever for the

court to permit Pawan Hans to take possession of the goods

without payment of the dues of the transporter. Mr.Valmiki

Mehta, learned senior counsel assailed the impugned order by

urging that FJF and SWC were not parties to the arbitration

agreement and yet the learned Single Judge while deciding

Section 9 petition filed by Pawan Hans as also the applications

moved by the appellants allowed Pawan Hans to take possession

of the helicopters without making the payment i.e either to

appellant-SWC or appellant-FJF. This virtually amounted to

decree of possession being passed against the appellants

without the Pawan Hans ever filing a suit for possession.

Learned senior counsel further submits that the appropriate

remedy for the Pawan Hans was to file a suit for possession in

which the appellant could have filed its counter claims and

defended or opposed the prayer for possession. Counsel

submitted that discretionary powers under section 9 of the

Arbitration and Conciliation Act are intended for preservation of

the property which is subject matter of arbitration. It cannot be

used as a camouflage or a ruse to seek possession and that too

with the appellant being deprived of the payment of their

legitimate dues.

6. Let us consider the above submissions in the light of the

findings and the view taken by the learned Single Judge. The

learned Single Judge on a consideration of the agreement terms

between Pawan Hans and AES reached the conclusion that the

property in the good was to pass only upon entire sale

consideration being paid. This is a common ground that entire

sale consideration has not been paid and only £ 4,50,000 has

been paid. Under Section 9 of Sales of Goods Act, 1930

property in goods pass when intended to be passed. Section

19(1) of Sales of Goods Act, 1930, clearly provides that where

there is a contract for the sale of specific or ascertained goods,

the property in them is transferred to the buyer at such time as

the parties to the contract intend it to be transferred. In terms

of the agreement between Pawan Hans and AES, property was

to pass only upon payment of the sale consideration. Since only

a sum of £ 4,50,000 has been paid, the property in goods has

not passed on to AES and continues to vest in Pawan Hans.

7. Perusal of the agreement clearly shows that

transporter was to be appointed and nominated by AES and the

goods were to be transported by the "appointed transporter" so

nominated. In the instant case, FJF had been nominated and

appointed by the AES. Accordinlgy, FJF could only be the agent

of AES and not that of Pawan Hans. There was no privity of

contract between Pawan Hans and FJF or SWC. There is no

merit in the contention of appellant-FJF that it dealt with Pawan

Hans on a principal to principal basis or appointment of FJF was

under the agreement by Pawan Hans. FJF had been appointed

by the AES as the approved transporter. Correspondence

exchanged also reveals that the liability for charges of FJF or

that of SWC was to be borne by AES, even if payment was

contemplated to be made through Pawan Hans upon bills being

presented. In the instant case, payment of sale consideration

not having been made to Pawan Hans, the question of payment

by Pawan Hans of the bills presented by FJF would not arise

since the same was the liability of AES. We are of the view that

the order passed by the learned Single Judge subserves the

ends of justice and is fair and equitable. Besides the same

would clearly fall within the ambit of Section 9(2) (a) and (e) of

the Arbitration and Conciliation Act, 1996 as the order is in

respect of goods which are the subject matter of an arbitration

agreement and the order of restraint on appellants, who are not

parties to the arbitration agreement is intended to preserve and

protect the goods. The plea of the learned Single Judge having

exceeded his jurisdiction is mis-conceived. The helicopters in

question had been lying at the ware house since December,

1999 with no prospect of AES taking delivery of the same,

having gone into liquidation. The goods because of lying unused

would be subjected to attrition and it would be a national waste.

In these circumstances, it was just and proper that

pending the arbitration proceedings, Pawan Hans be permitted

to take possession of the goods and retain the same. Pawan

Hans as the owner of the goods and complete sale consideration

having not been paid to it was entitled to its possession and

these could not be retained by FJF and SWC on the ground that

their charges had not been paid. There was no fetter on FJF and

SWC to recover the transportation and warehousing charges

from AEC.

We find no merit in the appeals. Both the appeals are

dismissed.

Manmohan Sarin, J.

Manmohan, J.

August 11th, 2008 ssb