Mohan Meakin Ltd. vs International Breweries Pvt. ...
2008 Latest Caselaw 1361 Del

*          HIGH COURT OF DELHI AT NEW DELHI


+                       FAO (OS) 341/2008

Mohan Meakin Ltd.                            ..... Appellant
                        Through Mr. Dinesh Agnani, Advocate.

                  versus

1.     International Breweries Pvt. Ltd.
2.     Scotia Bank
3.     Bank of India
4.     HDFC Bank
5.     ICICI Bank Extension Counter          ..... Respondents
                        Through Mr. Pardeep Dhingra with Ms. Ritika
                        Sen, Advocates.

       CORAM:
       HON'BLE THE CHIEF JUSTICE
       HON'BLE DR. JUSTICE S.MURALIDHAR

     1. Whether reporters of the local papers be allowed to
        see the judgment ?
     2. To be referred to the Reporter or not ?
     3. Whether the judgment should be reported in the
        Digest ?

                              ORDER

18.08.2008

CM No. 11403/2008(exemption)

Allowed, subject to just all exceptions.

Caveat No. 164/2008

Caveator has put in appearance. Hence, caveat stands

disposed of.

FAO(OS) 341/2008 & CM No.11401/2008(stay) & CM No. 11402/2008(taking additional documents on record)

1. By consent of the parties, the appeal is taken up for final

hearing.

2. This appeal is directed against an order dated 23rd July, 2008

passed by the learned single Judge in OMP No.332/2008, a petition

under Section 9 of the Arbitration and Conciliation Act, 1996 (Act)

filed by the appellant Mohan Meakin Ltd. (MML) against the

respondents International Breweries Pvt. Ltd. (IBPL) and the

Respondents 2 to 5 banks for securing the Award amount of

Rs.1,42,82,463.87/-.

3. The background to the passing of the impugned order is that

an agreement was entered into between the appellant MML and

Respondent No. 1 IBPL on 14th June, 2001 which was extended by

a letter dated 26th July, 2006. A further brewing agreement was

executed on 01st May, 2007 between the parties. In terms of the

agreement, the disputes that arose between the parties were

referred to the arbitration of Shri N.K. Tyagi, a sole Arbitrator, who

passed an interim Award dated 22nd October, 2007 in an

application filed by MML under Section 17 of the Act. IBPL was

restrained from operating and transferring any funds from its

accounts with the Scotia Bank, Bank of India, HDFC Bank and ICICI

Bank. This interim Award was communicated to the respective

branches of the said banks. The applicant claims that the banks

honoured the interim Award.

4. It is further claimed by a letter dated 24th October, 2007 IBPL

admitted its liability and assured MML that the entire outstanding

of MML shall be cleared within a time bound schedule. According

to MML, IBPL reiterated the above assurance in a subsequent

letter dated 4th December, 2007 where it proposed to provide fix

deposit receipts in the sum of Rs. 81 lacs initially and thereafter

reconcile the accounts. However, IBPL chose not to appear before

the learned arbitrator and contest the claim of the appellant MML.

The appellant claims that the proposal made by IBPL vide its letter

dated 4th December, 2007 was not acceptable to it. Even earlier

by a communication dated 4th August, 2007 IBPL had admitted its

liability to the extent of Rs. 1,42,82,463.87 and it had proposed to

MML that it would settle the account by paying 50%. This proposal

was also not acceptable to MML.

5. A final Award was passed by the arbitrator on 23rd April, 2008

in which it was held that the MML had to recover from IBPL a sum

of Rs.1,42,82,463.87 together with interest @ 7% calculated with

effect from 31st July, 2007 till the date of recovery, an amount of

Rs.50,000/- towards arbitration fees, a sum of Rs.1,45,000/- on

account of stamp duty, a sum of Rs.4,000/- and Rs.2,000/- towards

administrative expenditure and costs respectively. It was further

stated in the final Award that the interim Award dated 22nd July,

2007 was being made absolute in that IBPL would be restrained

from operating or transferring funds from its accounts.

6. According to MML, after the passing of the final Award, IBPL

refused to honour it. The Respondents No. 2 to 5 banks also

refused to continue the restraint on IBPL from operating its

accounts with them. Faced this situation, the appellant MML took

steps to get a transfer certificate for execution of the Award from

the courts in Ghaziabad which in terms of the agreement would

alone have jurisdiction in relation to the disputes between the

parties. According to MML since the Respondents No. 2 to 5 banks

were within the territorial jurisdiction of this court, MML filed a

transfer application before the Ghaziabad court for a transfer

certificate to enable the MML to execute the award through this

court. It is claimed that the transfer certificate thus issued was

sent to this Court and received by the Registry vide Diary No. 9894

dated 28th May, 2008. However, the counsel for the appellant was

informed by the Registry that the said certificate was not

traceable.

7. Thereafter MML filed OMP No. 332 of 2008 under Section 9

of the Act praying that Respondent No. 1 IBPL be restrained from

operating and transferring funds from its accounts with the

Respondents No. 2 to 5 banks. MML claimed that if the interim

protection as prayed for by it was not granted it would be very

difficult for it to get the Award executed. It accordingly prayed

that the interests of MML should be secured to the extent of the

principal amount awarded by the learned Arbitrator.

8. In the said application OMP 332 of 2008 an ex parte order

dated 16th June, 2008 was passed by a learned Single Judge of this

Court restraining the Respondents No. 2 to 5 banks from releasing

an amount of Rs. 1,42,82,464/- from the accounts held with them

by Respondent No. 1 IBPL.

9. While the above application was pending, Respondent No. 1

IBPL filed OMP No. 337 of 2008 under Section 34 of the Act raising

objections to the award. The appellant MML resisted the said

application on the ground that the territorial jurisdiction was only

with the courts at Ghaziabad and that the objection should have

been filed in that court. It is stated that the learned Single Judge

negatived the objection by an order which is being separately

challenged by the appellant.

10. Before the learned Single Judge, in OMP 332 of 2008, MML

contended that Respondent No. 1 IBPL had no business or assets

in India. If the Award amount was not secured, MML would be

unable to recover it in the event of IBPL's objections being

rejected. On the other hand it was contended by IBPL that the

Award as of date was not executable and therefore there was no

justification for depriving IBPL of the use of the monies in its

accounts with Respondents No. 2 to 5 banks. The learned Single

Judge was informed IBPL held over Rs. 2 crores in the said

accounts.

11. The learned Single Judge passed the following order which is

under challenge in this appeal :

"In the facts and circumstances of the case, the

equities will be balanced if the Respondent No. 1 secures about 50 per cent of the Award amount. The Respondent is accordingly directed to furnish the bank guarantee for Rs. 75 lacs in favour of the Registrar of this court for payment of the said amount, if the objections of the Respondent to the Award are dismissed. The Respondent No. 1 to also file the undertaking before the court for payment of the balance amount, if any, found due from the Respondent upon the Award. Upon furnishing of the bank guarantee and filing of the undertaking, the order dated 16th June, 2008 with respect to operation of the bank accounts shall stand discharged. The advance copy of the bank guarantee and the undertaking in the form of affidavit of the authorized person on behalf of the Respondent No. 1 be furnished to the counsel for the Petitioner.

The counsel for the Respondent No. 1 states that it intends to furnish the bank guarantee of Respondents No. 2 to 5 banks. The Respondents No. 2 to 5 banks may allow the accounts of the Respondent No. 1 to be operated only to enable the Respondent No. 1 to arrange the bank guarantee.

The petition is disposed of in above terms."

12. Learned counsel for the appellant submits that there was no

occasion for the learned Single Judge to have modified the ex

parte interim order dated 16th June, 2008 and permitted

Respondent No. 1 IBPL to secure only 50% of the Award amount

by furnishing a bank guarantee while leaving it open to the IBPL to

operate its accounts. It is submitted that when admittedly IBPL

has no business or assets in India, it would in all probability

withdraw the entire amount lying in its accounts, in which case

recovery of the entire Award amount would not be possible in the

event of IBPL's objections being dismissed by the Court. On the

other hand it is contended by learned counsel for the respondent

that since its petition under Section 34 is yet to be decided, the

Award was not executable as such and therefore no interference is

called for with the equitable order passed by the learned Single

Judge.

13. Having heard the learned counsel for the parties and having

perused documents on record, we are of the view that the learned

Single Judge ought to have ensured that the Award amount is

available for being recovered by the Appellant MML in the event of

IBPL's objections being ultimately dismissed. In the circumstances,

the appropriate order would be to require the Respondent No. 1

IBPL to deposit the entire Award amount in this court failing which

the interim order passed on 16th June, 2008 would continue till the

disposal of IBPL's objections under Section 34.

14. Accordingly the impugned order is set aside. It is directed

that Respondent No. 1 IBPL will deposit in this court the entire

Award amount in the sum of Rs. 1,42,82,463.87 within a period of

four weeks and upon such amount being deposited, the interim

order dated 16th June, 2008 passed by the learned Single Judge

would stand vacated. However if the amount is not so deposited,

the order dated 16th June, 2008 would continue to the extent of

restraining Respondent No. 1 IBPL from removing the said amount

from its accounts with Respondents No. 2 to 5 banks till the

disposal of its objection under Section 34 of the Act.

15. The appeal and the applications are accordingly disposed of

with no order as to costs.

                                     CHIEF JUSTICE


                                     S.MURALIDHAR
AUGUST 18, 2008                            (JUDGE)
dk