Delhi High Court
M/S Shin Satellite Public Company ... vs M/S Jain Studios Limited on 3 October, 2008
Author: Anil Kumar
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision : October 3, 2008
OMP NO. 182 of 2005
# M/s Shin Satellite Public Company Limited ......... PETITIONER
! Through: Mr. Sanjay Jain Sr. Advocate with
Mr.D.Singh Advocate for Petitioner
Versus
$ M/s Jain Studios Limited ......... RESPONDENT
Through: Mr. K.N.Bhatt Sr. Advocate with Mr. Vijay
Gupta,Mrs. Geeta Goel and Mr. Ashish Gupta
Advocates for the Respondent
OMP NO. 183 of 2005
# M/s Shin Satellite Public Company Limited ......... PETITIONER
! Through: Mr. Sanjay Jain Sr. Advocate with
Mr.D.Singh Advocate for Petitioner
Versus
$ M/s Jain Studios Limited ......... RESPONDENT
Through: Mr. K.N.Bhatt Sr. Advocate with Mr. Vijay
Gupta,Mrs. Geeta Goel and Mr. Ashish Gupta
Advocates for the Respondent
OMP NO. 184 of 2005
# M/s Shin Satellite Public Company Limited ......... PETITIONER
! Through: Mr. Sanjay Jain Sr. Advocate with
Mr.D.Singh Advocate for Petitioner
Versus
$ M/s Jain Studios Limited ......... RESPONDENT
Page 1 of 53
OMP No. 182/2005, 183/2005 & 184/2005
Through: Mr. K.N.Bhatt Sr. Advocate with Mr. Vijay
Gupta,Mrs. Geeta Goel and Mr. Ashish Gupta
Advocates for the Respondent
CORAM :-
* HON'BLE MR. JUSTICE ANIL KUMAR
1. Whether reporters of Local papers may be allowed YES
to see the judgment?
2. To be referred to the reporter or not ? NO
3. Whether the judgment should be reported NO
in the Digest?
ANIL KUMAR, J.
1. This order will dispose of three petitions filed by the petitioner
being OMP No. 182 of 2005, OMP No. 183 of 2005 and OMP No. 184
of 2005, under Section 9 of the Arbitration and Conciliation Act
seeking appointment of receiver in respect of the respondent‟s
moveable and immovable properties situated in New Delhi or
elsewhere in India and an injunction against the respondent from
selling, alienating, transferring possession, creating any third-party
right/claim/interest and/or creating charge or dealing with in any
manner whatsoever all the movable and immovable properties and in
case the respondent does not comply with the orders which may be
passed for appointment of receiver, to attach all the properties of the
respondent. The petitioner has also prayed for a direction to the
respondent to disclose his movable and immovable, tangible and
OMP No. 182/2005, 183/2005 & 184/2005
intangible assets including any encumbrance thereon and for a
direction to the respondent to deposit with the Court all such sums
received by the respondent from its businesses pending disposal of the
arbitral proceedings.
2. The petitioner is a company registered under the laws of
Thailand having its principal office in Thailand. The petitioner is
engaged in the business of providing transponder services under the
concessions granted by the Government of Thailand. The Petitioner
has a satellite, "THAICOM 3", which is operating in the Geo-Stationary
Orbit and the transponder services are provided particularly for the
purposes of broadcasting, internet and telecommunication to various
firms and companies worldwide. The Petitioner is also stated to have
a well-equipped teleport up-linking station to provide up-linking
services to the customers and a satellite station to monitor and
control its satellite in the Orbit.
3. The Respondent is a public limited company incorporated under
the Companies Act, 1956 having its registered office in New Delhi and
is in the business of broadcasting and other telecom services like
internet services. It also owns the cable TV known as "Jain TV".
OMP No. 182/2005, 183/2005 & 184/2005
4. The petitioner and the respondent entered into 3 agreements- (i)
Internet Service Agreement No. SA-INT/09509-2000-4 dated 12th
January, 2001 (IS Agreement) (ii) Transponder Service Agreement No.
SA-FC-09508-99-1 dated 10th August, 1999 which agreement was
amended vide Amendment Agreement No. A1-SA-FC/09508-99-1
dated 14th July, 2000 and again amended vide Amendment
Agreement No. A2-SA-FC/09508-99-1, dated 16th January, 2002 (TS
Agreement-I) (iii) Transponder Service Agreement No. SA-FC/09501-
2001-1 dated 5th January, 2001 which agreement was later on
amended, the amended agreement No. being A1-SA-FC/09501-2001-
1, dated 16th January, 2002 (TS Agreement-II).
5. Under the IS Agreement, which was valid up to 24th January,
2004, the respondent had hired the services of the petitioner for the
purpose of accessing the internet backbone by utilizing part of the
transponder capacity and connectivity to the Global Internet
Backbone of THAICOM-3 Satellite for a period of three years. As per
the clause 3 of the IS agreement service fee was payable @ US$
3900/Mbps and US$ 4200/Mbps with a minimum commitment of 20
Mbps per month and less than 20 Mbps respectively.
6. Under the TS Agreement-I, which was valid up to 18th
September, 2002, the respondent had availed the transponder
OMP No. 182/2005, 183/2005 & 184/2005
services of the petitioner for the purposes of television/broadcasting
application. As per clause 5.1.1 read with Appendix-A of the said
agreement service fee was payable on a monthly basis in advance
before the due date @ US$ 58,333 for using 18MHz.
7. Under the TS Agreement-II, which was valid up to 14th
January, 2004, the respondent had hired the services of the petitioner
for the purpose of transmitting one digital television channel through
non-preemptible unprotected extended C-Band regional Beam
Transponder of THAICOM-3 Satellite. As per clause 5 read with
Appendix-A of the said agreement the quarterly service fee payable
was US$ 196,875 and US$ 370 000 per annum for using 4.5 MHz and
9 MHz respectively.
8. The petitioner contended that despite using the services under
the agreements, the respondent never paid the service fee as had been
agreed and kept on promising to pay the amounts which became due
under the terms of the agreements time and again. The petitioner has
filed three different applications seeking appointment of receiver and
injunction in respect of the properties of the respondent as the
respondent failed to pay the amounts due to the petitioner in respect
of above mentioned three agreements.
OMP No. 182/2005, 183/2005 & 184/2005
9. It is averred by the petitioner that after repeated
communications regarding the non-payment of dues by the
respondent, a meeting was held at the office of the petitioner on 17th
September, 2001 where the President of the respondent company
lamented about his poor financial condition. The petitioner made a
proposal to the respondent during the meeting which the President of
the respondent company agreed to discuss with his associates and
revert by 21st September, 2001. However the President of the
respondent intimated the President of the Petitioner, by
communication dated 19th September, 2001, about the problems
confronting the respondent on account of non-availability of the
support of Banks and Financial Institutions and requested the
petitioner to restructure the payment schedule and proposed to review
the situation on 2nd October, 2001. Since the petitioner had already
extended several relaxations and could not suffer any further loss on
account of the respondent, by an e-mail dated 21st September, 2001,
the petitioner reminded the President of the respondent that he was to
revert by 21st September, 2001 on the proposal made by the petitioner
and warned that they may have to suspend its services to the
respondent in case no response is received from the respondent by
5.00 pm on 21st September, 2001.
OMP No. 182/2005, 183/2005 & 184/2005
10. The president of the Respondent vide his fax dated 21st
September, 2001 agreed that a monthly payment of US$ 58333 would
be made starting from the month of October 2001 till the month of
December 2001 which would be revised to US$ 100000 per month
thereafter. It was stated by the petitioner that the respondent again
sent an e-mail dated 23rd January, 2002 acknowledging the payment
scheduled agreed between them on 17th September, 2001. However in
the said e-mail the respondent also expressed its inability to make
payment of US$ 100000 per month with effect from January 2002. It
is asserted by the petitioner that the President of the respondent had
intimated to the Chief Financial Officer of the petitioner by
communication dated 9th July, 2002 that the petitioner was rightly
interested in recovery of all its outstanding dues and referring to the
last visit of the President of the respondent, it was reiterated that the
respondent would start clearing the dues on regular basis and would
also reduce its transponder utilization by going digital and efforts
would be made to increase the utilization of its teleport by up-linking
more THAICOM-3 customers and will use the proceeds to clear
backlog of petitioner‟s payment.
11. Since the respondent failed to make the payments, the
petitioner by a letter dated 11th July, 2002 communicated to the
respondent that the outstanding dues of the respondent in respect of
OMP No. 182/2005, 183/2005 & 184/2005
all the three agreements aggregated to US$ 571215.75 and that if the
same was not paid by 12.00 clock (Bangkok time) on Friday, 12th
July, 2002 the petitioner would be left with no alternative but to
suspend the services of the respondent. Since the payment was not
made within the stipulated time, the petitioner by a letter dated 17th
July, 2002 terminated all the three agreements entered with the
respondents and intimated that the outstanding dues on account of
all the three services amounted to US$ 729,870.25 on the said date.
12. Petitioner has alleged that despite the termination of all the
agreements the respondent illegally continued up-linking its signal to
the petitioner‟s satellite forcing the petitioner to file a petition under
Section 9 of the Arbitration and Conciliation Act, 1996 being OMP
NO.102/2003 seeking restraint against the respondent from
transmitting any signal to any transponder of THAICOM-3 Satellite.
During the course of hearing of the said petition, the learned counsel
for the respondent made a statement on instructions from the General
Manager (Commercial) of the respondent that the respondent is no
longer using the transponders of the petitioner and shall not use the
same in future. In view of the above-said statement of the learned
counsel for the respondent, the petition was disposed of.
OMP No. 182/2005, 183/2005 & 184/2005
13. The petitioner has contended that the respondent has failed to
pay the amounts, which had become due from respondent, despite
several notices being sent by the petitioner to the respondent. In the
circumstances, the petitioner has also claimed late payment charges
on the outstanding dues from 17th July, 2002 @ 1.5% per month as
per clause 3 of all the three agreements. The petitioner has also
claimed that the respondent is also liable to pay 50% of the unpaid
service fees as per clause 14.2 of the TS Agreement-II. It is further
asserted by the petitioner that as per the terms of the three
agreements, since there is a breach on the part of the respondent, the
respondent is also liable to pay other damages incurred by the
petitioner.
14. On the failure of the respondent to pay the dues, a notice under
Section 434 of the Companies Act, 1956 was also given by the
petitioner, dated 7th June, 2004 calling upon the respondent to pay
US$ 213,182.30 due under the IS Agreement, US$ 443,382.50 due
under the TS agreement-I and US$ 71,640.62 under the TS
Agreement-II.
15. The petitioner has averred that a very cryptic reply was received
to the said notice stating that no amount is due from respondent to
the petitioner and therefore, the petitioner was forced to invoke the
OMP No. 182/2005, 183/2005 & 184/2005
arbitration clauses in the respective agreements (clause 14 of IS
Agreement, clause 23 of TS Agreement-I and clause 22 of the TS
Agreement-II) vide letters dated 9th September, 2004.
16. An Arbitral Tribunal comprising of the Former Chief Justice of
India, Mr. Justice R. S. Pathak (Retd.), Former Chief Justice Mr.
Justice M.L. Pandse (Retd.) and Hon‟ble Mr. Justice Sat Pal Arora
(Retd.) has been constituted to resolve the disputes between the
parties arising out of the IS Agreement and the preliminary hearing
took place on 30th April, 2005 in London. Another Arbitral Tribunal
comprising of Former Chief Justice of India Mr. Justice R.S. Pathak
(Rtd.), the Presiding Arbitrator/Chairman, Former Chief Justice Mr.
M.L.Pendse (Rtd.) and Mr. Justice Sat Pal Arora (Retd.) was
constituted to resolve the disputes arising out of the TS Agreement-II
and the hearing was fixed for the 5th and 6th February, 2005 in
Singapore.
17. The petitioner has further averred that the respondent admitted
his precarious financial position by their letter dated 2nd February,
2005 and showed unwillingness to attend the arbitration proceedings
in Singapore. It is further averred that during the preliminary meeting
on 5th February, 2005 the Tribunal had asked the petitioner to bear
the entire expenses of the said meeting and directed the respondent to
OMP No. 182/2005, 183/2005 & 184/2005
reimburse 50% of the total expenses incurred by the petitioner
towards the said meeting. Even though the petitioner had called upon
the respondent by letter dated 21st March, 2005 to pay a sum of Rs.
1, 26,369.66, being half of the amount of Rs. 2, 52,739.33, which is
the total expenses incurred by the petitioner in arranging the
preliminary meeting in Singapore, the respondent has failed to pay the
said amount.
18. As far as the TS Agreement-I is concerned it is averred that
though the petitioner had served upon the respondent a notice of
demand for arbitration vide letter dated 9th September, 2004 and
intimated the respondent about its intention to nominate the former
Judge, Bombay High Court and the former Chief Justice, Karnataka
High Court Mr. Justice M.L. Pendse as their arbitrator, the respondent
has refused to appoint an arbitrator. It is submitted that since the
respondent failed to appoint its arbitrator, the petitioner filed an
Arbitration Application No. 1/2005 in the Hon‟ble Supreme Court of
India under Section 11(6) of the Arbitration and Conciliation Act, 1996
and that the same was allowed by the Supreme Court of India on 31st
January, 2006.
19. Petitioner's plea is that the respondent never had any intention
whatsoever from the commencement of services under the three
OMP No. 182/2005, 183/2005 & 184/2005
agreements to pay the outstanding dues. The petitioner has further
contended that he has a claim of US$ 351831.77 under the IS
Agreement; US$1378141.40 under the TS Agreement-I and US$
243676.56 under the TS Agreement-II till 28th February, 2005 and
that the respondent is also liable to pay 18% interest per annum on
the outstanding bills from 1st March, 2005. The petitioner has
asserted that they seriously apprehend that the respondent in order to
defeat and defraud the petitioner will sell, transfer, dispose of or
create third-party rights in respect of its properties situated at New
Delhi or elsewhere in India thereby making the arbitration awards
which will be passed in favor of petitioner non-executable and they
will become paper decrees. The petitioner also contended that there
are serious disputes between the respondent and the other creditors
and in the circumstances the respondent may even go in liquidation.
20. In the circumstances, the petitioner has prayed for appointment
of court receiver since the respondent‟s financial position is precarious
and the respondent is likely to sell, dispose of its properties. The
petitioner has also prayed that the respondent be restrained from
selling, assigning and entering, transferring possession, letting out,
creating third-party rights or creating charge or dealing in any manner
with movable and immovable properties in New Delhi or elsewhere in
India.
OMP No. 182/2005, 183/2005 & 184/2005
21. The petitioner has also prayed that the respondent be directed
to deposit US$ 351831.77 in OMP No. 182 of 2005; US$1378141.40
in OMP No. 183 of 2005 and US$ 243676.56 in OMP No. 184 of 2005
along with interest @ 18% per annum from 1st March, 2005 till the
date of realization or to furnish security to the satisfaction of the
Court for the above said amounts. In the circumstances, petitioner
has also prayed that grave and irreparable loss, harm and injury will
be caused to the petitioner in case the reliefs as prayed by the
petitioner are not granted and the loss which will be caused to the
petitioner cannot be compensated in terms of money and therefore, it
is averred that the balance of convenience is in favor of petitioner.
22. The petitions are contested by the respondent contending, inter
alia, that the grant of an order of injunction, attachment or
appointment of a receiver is not justified on the basis of averments
made in the petition. Relying on Section 2 (2) of the Arbitration and
Conciliation Act, 1996, it was contended that the Courts at Delhi has
no jurisdiction to entertain the petitions - OMP No. 182 of 2005 and
OMP No. 184 of 2005, as the place of arbitration in the above
mentioned cases is at London and Singapore respectively and an
application under Section 9 of the Arbitration and Conciliation Act can
be made only if the place of arbitration is in India. The respondent
OMP No. 182/2005, 183/2005 & 184/2005
also pleaded that principle governing the grant of any interim
protection under the English Law has to be resorted to as the parties
agreed in the contract that the arbitration will be subject to English
Laws and, therefore, Indian Law has no applicability to the present
dispute. In OMP No. 183 of 2005 the respondent contended that the
arbitration clause contained in TS Agreement I is invalid as it ousts
the jurisdiction of Indian Courts to the challenge of any award. The
respondent has also contested the petitions on the ground that the
petitioner has not exhausted his remedy under Section 17 of the Act
and has wrongly and maliciously chosen to file the present petitions.
The respondent also contended that the disputes referred for
arbitration are without any merit and the respondent has filed a
counter claim and is hopeful of succeeding in its counter claim.
23. The respondent also pleaded that petitioner is trying to frame
the respondent for the second time as earlier also OMP No.102/2003
was filed and considering the facts and circumstances there are no
fresh circumstances warranting any petition under Section 9 of the
Act. It was contended on behalf of the respondent that it is a widely
held public listed company with over 10000 shareholders, listed in 7
stock exchanges including the National and Bombay Stock Exchanges
and it has over 150 employees and a dealer network of over 1000
entrepreneurs. Relying on its audited balance sheet, it is stated that
OMP No. 182/2005, 183/2005 & 184/2005
its sales are over 44 crores whereas the current liabilities of the
company are merely 9 crores and the company had declared operating
profits as on 31st March, 2005 of 1.26 crore and holds investments of
around 3.6 crore.
24. The respondent further contended that the petitioner has not
been able to make out a prima facie case against respondent and the
alleged apprehension shown by the petitioner about the respondent‟s
selling or disposing of all properties are baseless and irresponsible. It
was stated that the allegation made by the petitioner are factually
incorrect and no basis for the allegations have been disclosed. In the
circumstances the respondent stated that the balance of convenience
is in favor of respondent. It was also contended that the respondent
has not used the service as envisaged under TS Agreement-II and that
the petitioner had failed to deliver the commercially acceptable quality
of service as promised under the IS Agreement and TS Agreement-I
and that the petitioner has failed to adduce any evidence to
substantiate their claims under the said agreements. It is also
contended that the petitioner has claimed US$ 343676 as outstanding
dues under the TS Agreement-II in the arbitral proceedings in
Singapore, whereas, in OMP No.184 of 2005 the amount claimed is
US$ 243676 and that the inconsistency reflects lack of bona fide on
behalf of the petitioner.
OMP No. 182/2005, 183/2005 & 184/2005
25. The respondent has further averred that as per the terms of the
agreements, the place for arbitration in respect of disputes arising out
of IS Agreement is London; in respect of TS Agreement-I, it is New
Delhi and in respect of TS Agreement-II it is Singapore. The
respondent has pleaded that it has all along been requesting the
petitioner to have all the disputes arising out of the three agreements
to be settled by the same set of arbitrators in India, as the three
agreements relate to identical transactions with no major difference as
far as dispute resolution is concerned. In the circumstances it is
alleged that due to the unreasonable attitude adopted by the
petitioner, the same arbitrators and their lawyers travel to Singapore
and come back and then again travel to London and this involves
enormous expenditure which is avoidable and unnecessary. It is
contended that this unreasonable attitude of the petitioner is a
relevant consideration for refusing any assistance in the form of
injunction to the petitioner.
26. The petitions were filed by the petitioner in May, 2005 and by
an ex-parte order dated 23rd May, 2005 the respondent was restrained
from selling, alienating or parting with possession of his moveable as
well as immoveable properties. The petitioner filed rejoinder denying
the allegations made by the respondent and contended that the ex
OMP No. 182/2005, 183/2005 & 184/2005
parte order dated 23rd May, 2005 restraining the respondent from
selling, alienating or parting with possession of the moveable and
immovable properties belonging the respondent is liable to be
confirmed. Relying on Section 9, it was contended that it is applicable
to international arbitrations and the arbitrations held outside India
and therefore, it has been contended that the Court in India has
jurisdiction. Refuting the alleged counter claim, it is contended that
counter claim is being raised for the first time in the present
proceedings and the respondent has not acted in the letter and spirit
of the agreement and has even failed to pay the arbitration expenses.
27. I have heard the learned counsel for the parties in detail on two
occasions. The counsel for the petitioner had also sought time once to
take instructions regarding giving up the prayers regarding
appointment of receiver and attachment of all the properties of the
respondent. Thereafter an additional affidavit of the authorized
representative of the respondent company dated 6th September, 2005
was filed deposing that the TDS liability of the respondent company as
on 20.12.2004 was Rs.16,07,887/- as per the Income Tax department
and part of the dues had been cleared and after adjustment of the
amount to be refunded the liability is Rs.8,21,224/- only. It was also
stated that the market capitalization of the respondent company is
Rs.32.53 crores as on 5th August, 2005. A copy of the certificate of the
OMP No. 182/2005, 183/2005 & 184/2005
Chartered Accountant has also been filed showing the status of assets
and liabilities.
28. During the arguments by the parties, another additional
affidavit was filed by the authorized representative of the respondent
dated 2nd November, 2007 contending that the respondent company
has made payments of not less than US$ 1.4 million (Rs.6.5 crores at
the prevailing currency exchange rates) to the petitioner in the course
of its business for using his services. A certificate of Chartered
Accountant in this regard was also filed by the respondent. The
respondent disclosed its networth at Rs.36.40 crores as on 31st
March, 2007 and its assets as per the audited balance sheet of
Rs.63.72 crores on the said date. The respondent also disclosed that it
is listed on National Stock Exchange and Bombay Stock Exchange
and five other stock exchanges in India and its market capitalization
as on 9th October, 2007 was Rs.30.28 crores. The respondent also
disclosed its profit for financial year ended on 2006-07 as Rs. 2.61
crores before tax and net profit of Rs.2.1 crores. The respondent also
filed its 17th Annual Report, 2006-2007. Yet another additional
affidavit dated 11th December, 2007 was filed by the authorized
representative of the respondent detailing the payments made by the
respondent to the petitioner.
OMP No. 182/2005, 183/2005 & 184/2005
29. The petitioner filed an affidavit of its authorized signatory dated
2nd January, 2008 in reply to the affidavit of the respondent detailing
the payments made to the petitioner and gave the details of payments
received from the respondent under TS Agreement-1 dated 10th
August, 1999 amended on 14th July, 2000 and again amended on 16th
January, 2001. It was deposed that said payments have been
accounted for and are not the subject matter of the claim of the
petitioner. According to the petitioner the outstanding under the TS
Agreement I as set out in the petition are US$ 1,378,141.70
amounting to Rs.5,99,49,163.55. It was specifically averred that the
invoices which have been settled and paid have not been included in
the claim of US$ 1,378,141.70. The petitioner also filed another
statement giving the total payment received from the respondent. The
petitioner had claimed termination fees of 149,722.21under clause
13.6 (a) and late payment fees of 210,583.54 and Cost of Arbitration
fees of 100,000 in Annexure P which was filed with the petition.
30. The plea of the respondent is that the Courts at Delhi do not
have jurisdiction to entertain the petitions, OMP No.182/2005 (IS
Agreement) and OMP No.184/2005 (TS II Agreement) as the place of
arbitration in the above cases is at London and Singapore respectively.
According to the respondent an application under Section 9 of the
OMP No. 182/2005, 183/2005 & 184/2005
Arbitration & Conciliation Act, 1996 can be made only if the place of
arbitration is in India.
31. It has been held in a number of cases that the power of the
Court to grant injunctions under Section 9 of the Arbitration &
Conciliation Act, 1996 would also extend to international arbitrations.
Reliance for this can be placed on Kitechnology NV & Another v. Union
Gmbh Rahn Plastmaschinen and Another, 77(1999) DLT 813; Suzuki
Motor Corporation v. Union of India and Another, 68(1997) DLT 827;
Dominant Offset Pvt. Ltd. v. Adamovske Strojirny A.S, 68(1997) DLT
157 and Marriott International Inc. and Ors. v. Ansal Hotels Ltd. and
Anr., 82 (1999) DLT 137. On perusal of the provisions of the
Arbitration & Conciliation Act, 1996, it is apparent that there is no
justification to restrict the application of Part I only to domestic
arbitrations. So long as the territorial jurisdiction of the Court is
present on account of properties of the respondent within the
jurisdiction of the Court, relief cannot be denied on technicalities. The
Supreme Court in Bhatia International Vs Bulk Trading S.A & Anr.,
(2002) 4 SCC 105 had held that a party could apply to the Court
under Section 9 before, during arbitral proceeding or after making of
the arbitral award. An application for interim measures can be made
to the Courts in India, whether or not the arbitration takes place in
India, before or during arbitral proceedings. This cannot be disputed
OMP No. 182/2005, 183/2005 & 184/2005
that awards covered by Part II are deemed to be decrees. Section 9
does not suggest that once an award is made, an application for
interim measure can only be made if the award is a domestic award as
defined in Section 2(7) of the said Act. In Bhatia International (Supra)
at page 123 in para 32, the Apex Court held that provisions of Part I
would apply to all arbitrations and to all proceedings relating thereto
and that in the case of international commercial arbitrations held out
of India, provisions of Part I would apply unless the parties by
agreement, express or implied exclude all or any of its provisions. The
said paragraph 32 is as below:-
32. To conclude, we hold that the provisions of Part I
would apply to all arbitrations and to all proceedings
relating thereto. Where such arbitration is held in India
the provisions of Part I would compulsorily apply and
parties are free to deviate only to the extent permitted by
the derogable provisions of Part I. In cases of international
commercial arbitrations held out of India provisions of
Part I would apply unless the parties by agreement,
express or implied, exclude all or any of its provisions. In
that case the laws or rules chosen by the parties would
prevail. Any provision, in Part I, which is contrary to or
excluded by that law or rules will not apply.
32. Though the IS Agreement dated 12th January, 2001 and TS
Agreement II dated 5th January, 2001 and their amendments
contemplate place of arbitration at London and Singapore respectively,
however, neither the agreements nor their amendments incorporate
express or implied exclusion of the provisions of Part I of the
OMP No. 182/2005, 183/2005 & 184/2005
Arbitration & Conciliation Act, 1996 or any other provision. The
respondent is working for gain at Delhi and this fact that the
immovable and movable properties of the respondent are at Delhi has
not been denied. In the circumstances it cannot be denied that the
cause of action against the respondent has arisen at Delhi. Thus the
plea of the respondent that the petitions, under Section 9 of the
Arbitration & Conciliation Act, 1996 being OMP No.182/2005 and
OMP No.184/2005 are not maintainable at Delhi is not sustainable
and is rejected.
33. The learned counsel for the respondent contended that in none
of the petitions, the petitioner has given the details and full account of
how the amounts paid were adjusted and did not disclose facts
correctly before seeking an equitable relief from this Court. Mr. Bhatt,
learned Senior Counsel for the respondent, asserted that the failure to
disclose the particulars of payments received in the petition was an
attempt to project that no payments at all had been made by the
respondent and this action on the part of the petitioner disentitles him
to benefit of injunction. According to him, the petitioner first time
admitted that some payments were made only in its affidavit dated 2nd
January, 2008. The justification given for not disclosing earlier the
payments made is that those payments related to other bills which
should not be accepted. It was further contended on behalf of the
OMP No. 182/2005, 183/2005 & 184/2005
respondent that the entry regarding the receipt of US$ 1.75 lakhs has
also not been disclosed in the petition and therefore, the injunction
already granted should be vacated on this ground also.
34. It is no more res integra that the principles applicable to the
exercise of the general power to grant interim relief, including specific
injunctive relief, under Order XXXIX of Code of Civil Procedure and
the Specific Relief Act would be applicable while exercising the powers
under Section 9 of Arbitration & Conciliation Act, 1996. Though the
arbitration proceedings are pending, the powers under Section 9
available to the Court and the powers under Section 17 available to
the Arbitral Tribunal to make interim measures are independent
despite some degree of overlap between the two provisions. The court
is empowered to appoint a receiver in respect of property which is the
subject matter of arbitration and take such interim measures or
protections as may be just and convenient. Reliance can be placed on
Adhunik Steels Limited v. Orissa Manganese and Minerals Pvt.
Limited, (2007) 7 SCC 125; Escorts Finance Limited v. Mohd. Hanif D.
Khan, 2001(1) RAJ 546; Atul Limited v. Prakash Industries Limited,
2003 (2) RAJ 409; National Highways Authority of India v. China Coal
Construction Group Corporation, 2006(1) RAJ 621 and Modi Rubber
Limited v. Guardian International Corporation, 2007(2) RAJ 556.
OMP No. 182/2005, 183/2005 & 184/2005
35. The Supreme Court in Adhunik Steels Limited (supra) had
considered the scope of power of court to pass interim orders and had
held that the well recognized principles applicable to the exercise of
general power to grant interim relief including specific injunctive relief
under Order XXXIX of Code of Civil Procedure and the Specific Relief
Act would be applicable to exercise of power under Section 9 of
Arbitration & Conciliation Act. The Apex Court had held that at the
initial stage mere consideration of existence of arbitration clause is
not justified as no special condition is contained in Section 9 of the
Act and no special procedure is indicated. It was held that the grant of
relief by way of injunction is, in general, governed by the Specific
Relief Act and, therefore, the provisions of Specific Relief Act cannot be
kept out of consideration. In para 11 at pages 132-133 of the
judgment, the Apex Court had held as under:-
11. It is true that Section 9 of the Act speaks of the court
by way of an interim measure passing an order for
protection, for the preservation, interim custody or sale of
any goods, which are the subject-matter of the arbitration
agreement and such interim measure of protection as may
appear to the court to be just and convenient. The grant
of an interim prohibitory injunction or an interim
mandatory injunction are governed by well-known rules
and it is difficult to imagine that the legislature while
enacting Section 9 of the Act intended to make a provision
which was dehors the accepted principles that governed
the grant of an interim injunction. Same is the position
regarding the appointment of a receiver since the section
itself brings in the concept of "just and convenient" while
speaking of passing any interim measure of protection.
The concluding words of the section, "and the court shall
have the same power for making orders as it has for the
purpose and in relation to any proceedings before it" also
OMP No. 182/2005, 183/2005 & 184/2005
suggest that the normal rules that govern the court in the
grant of interim orders is not sought to be jettisoned by
the provision. Moreover, when a party is given a right to
approach an ordinary court of the country without
providing a special procedure or a special set of rules in
that behalf, the ordinary rules followed by that court
would govern the exercise of power conferred by the Act.
On that basis also, it is not possible to keep out the
concept of balance of convenience, prima facie case,
irreparable injury and the concept of just and convenient
while passing interim measures under Section 9 of the
Act.
36. In Escorts Finance Limited (supra) a Division Bench of this
Court had held that the mere fact that the arbitrators had been
appointed who also could exercise power to appoint a receiver could
not be a ground to dismiss the petition under Section 9 of Arbitration
& Conciliation Act summarily. Another single Judge of this Court in
Atul Limited (supra) had held that recourse under Section 17 of
Arbitration & Conciliation Act, 1996 is an enabling additional recourse
and is not in substitution of Section 9 and, therefore, Section 17
cannot operate as an ouster of jurisdiction of court granted under
Section 9 of the Act and, therefore, the court would have powers to
pass appropriate orders under Section 9 of the Act notwithstanding
the pendency of the arbitral proceedings. Similarly, in National
Highways Authority of India (supra), it was held that despite the
overlap between the powers under Section 17 and Section 9 of the
Arbitration & Conciliation Act, 1996, it is apparent that the powers
under Section 9 of the Act are much wider inasmuch as they extend to
OMP No. 182/2005, 183/2005 & 184/2005
period - pre and post the award - as well as with regard to subject
matter and nature of orders and, therefore, pendency of application
under Section17 does not oust the jurisdiction of the court under
Section 9 of the Arbitration & Conciliation Act, 1996 to pass interim
orders. Another Learned single Judge of this Court in Modi Rubber
Limited v. Guardian International Corp, 141 (2007) DLT 822 had held
that the proceedings under Section 9 are concerned only with
preservation of property and to prevent violation of claimed rights of
the parties so that no irreparable loss and damage inures to the
parties till the arbitration results in a dispute redressal. It was also
held that the issues which are to be decided in the substantive
arbitration proceedings cannot be gone into in a petition under
Section 9 of the Arbitration & Conciliation Act, 1996. In the said
judgment relying on various other judgments, the principle, manner
and limitation of exercise of discretion while appointing a receiver or
an injunction has been culled out in paragraph 209, as also the effect
of suppression of material facts and delay. The relevant paras 209
and 210 enumerating the principle for exercise of discretion are as
under:-
"209. It is also necessary to examine the parameters
within which the Court shall exercise such power. The
manner and limits of exercise of such discretion have
fallen for consideration in several judicial
OMP No. 182/2005, 183/2005 & 184/2005
pronouncements and the principles laid down can be
usefully called out thus:
(i) Even though Section 9 does not embody the
ingredients of Order 38 Rule 5 of the Code of Civil
Procedure, 1908 nor the conditions of the Order 38 Rule 5
can be read into it, however for the exercise of discretion
thereunder, the Court can take guidance from the
provisions of Order 39 as well as Order 38 of the Code of
Civil Procedure, 1908 [Ref. 2004 (111) DLT 816 : 2004 (4)
AD (Delhi) 618 : 2004 (75) DRJ 104, Rite Approach Group
Ltd. v. Rosoboron Export].
(ii) The scope of Section 9 of the Arbitration and
Conciliation Act, 1996 is in pari meteria with the
provisions of Order 39 of the Code of Civil Procedure,
1908. The power vested in the Court by virtue of Section 9
must be exercised in consonance with equity which
tempers the grant of discretionary relief as the relief of
interim injunction is wholly equitable in nature. [Ref.
(1995) 5 SCC 545, Gujarat Bottling Co. Ltd. v. Coca Cola
& Ors.; 2004 (115) DLT 219=2004 (8) AD (Delhi) 361,
Reliance Infocomm Ltd. v. Bharat Sanchar Nigam Ltd.]
(iii) The intention of the defendant is a sine qua non for
invoking Section 9 where the claim is to secure the
amount in dispute in arbitration. The Court can take
guidance from Order 38 Rule 5 of the CPC and Sections
18 and 41 of the Arbitration Act, 1940 for considering
whether such a relief as has been prayed for in the
petition under Section 9 deserves to be granted [Ref. AIR
1998 Delhi 397=1998 (3) RAJ, M/s. Global Co. v. M/s.
National Fertilisers Ltd.; 2005 (117) DLT 183 : 2005 (2)
AD (Delhi) 592, Mala Kumar Engineers Pvt. Ltd. (MKE) v.
B. Seenaiah & Co. (Projects) Ltd.].
(iv) Protection under Section 9 can be granted only when
a prima facie case is made out and balance of convenience
and possibility of irreparable loss and injury to the
petitioner is made out. Section 23 of the Specific Relief
Act, 1963 provides that the provision of liquidated
damages is not a bar to the specific performance of the
contract. The general rule of equity is also that if a thing
is agreed to be done, though there is a penalty attached
thereto to secure its performance, yet the Court in its
OMP No. 182/2005, 183/2005 & 184/2005
discretion enforces specific performance thereof. The
jurisdiction of the Court is discretionary and must be
exercised on such judicial principles when balance of
convenience and possibility of irreparable loss and injury
is shown to the plaintiff [Ref. 2005 (120) DLT 387, Geep
Batteries (India) Pvt. Ltd. v. Gillette India Ltd.; 2005 (118)
DLT 591 : 2005 (81) DRJ 233, Techno Construction v.
Kunj Vihar Co-operative Group Housing Society].
(v) The discretionary power of the Court under Section 9
has to be exercised by the Court sparingly and cautiously,
bearing in mind that the objective of the Court is to create
an alternative dispute redressal mechanism and,
consequently, the interference by the Court is not
required at every stage [Ref. 2006 (128) DLT 694 DB,
Sanrachna (India) Inc. v. AB Hotels Ltd.].
Whenever the powers of the Courts are invoked under
Section 9 with the objective of supporting the arbitration,
the Court must act with alacrity. However, this would not
justify grant of interim orders and relief on the mere
asking [Ref. 2000 (87) DLT 449 : 2000 (6) AD (Delhi) 509 :
2000 (55) DRJ 750, CREF Finance Ltd. v. Puri
Construction Ltd.; 2006 (91) DRJ 83, Sea Transport
Contractors Ltd. v. Indian Farmers Fertilizers Co-
operative Ltd.].
(vi) The scope and object of Section 9 of the statute is to
grant such relief by way of interlocutory injunction so as
to mitigate the risk or injustice to the petitioner during
the period before that uncertainty can be resolved. Its
object is to protect the plaintiff against injury by violation
of his right for which he could not be adequately
compensated in damages which would be recoverable in
the action if the uncertainty were resolved in his favour at
the trial [Ref. AIR 1995 SC 2372, Gujarat Bottling Co. v.
Coca Cola & Co.; 2006 (4) AD (Delhi) 38, Country
Development & Management Services Pvt. Ltd. v.
Brookeside Resorts Pvt. Ltd.]. In 2006 133 DLT 153, Shaw
v. Him Neel Breweries Ltd., learned Single Judge of this
Court held that the interim orders are calculated to
ensure that the assets of the party are not dissipated or
frittered away and that such orders do not fall within the
moratorium of Section 22.
OMP No. 182/2005, 183/2005 & 184/2005
(vii) The application seeking interim measures of
protection under Section 9 of the Arbitration and
Conciliation Act, 1996 pertaining to the preservation,
interim custody or sale of equipment which is the subject
matter of the agreement would be covered under Section
9(ii)(a) as also under Sections 9(ii)(c), 9(ii)(d) and 9(ii)(e) of
the Act [Ref. 2006 (3) AD (Delhi) 168 : 2006 (87) DRJ 225
: 2006 (127) DLT 776 : AIR 2006 Delhi 134, National
Highways Authority of India (NHAI) v. China Coal
Construction Group Co.].
(viii) The Court has the power to pass an order under
Section 9 during the pendency of the arbitration or even
after the arbitral award but before the award is enforced
in accordance with Section 36. Such order can be passed
for preservation, interim custody or sale of any goods
which are the subject matter of the arbitration agreement
or securing the amount in the dispute and the like [Ref.
2006 (128) DLT 694, Sanrachna (India) Inc. v. AB Hotels
Ltd.; 2000 (87) DLT 449, CREF Finance Ltd. v. Puri
Construction & Ors.].
(ix) The power under Section 9 to grant interim relief is
available to the Court while under Section 17, such
powers to make interim measures are made available to
the Arbitral Tribunal. Even though there may be some
degree of overlap between the two provisions, however, the
powers under Section 9 are much wider inasmuch as they
extend to the pre and post award period as well as with
regard to the subject matter and the nature of the orders
which the Court is empowered to pass. Therefore,
pendency of an application under Section 17 before the
Arbitral Tribunal does not denude the Court of its power
to make an order for interim measures under Section 9 of
the statute [Ref. 2006 (3) AD (Delhi) 168 : 2006 (87) DRJ
225 : AIR 2006 Delhi 134 : 2006 (127) DLT 766, National
Highways Authority of India (NHAI) v. China Coal
Construction Group Co.].
(x) It has been held that though Section 9 enables a
party, before or during arbitral proceedings or at any time
after the making of the arbitral award but before it is
enforced under Section 36 of the Act, may apply to the
Court for an interim order under Section 9, however,
without a substantive move for reference or declaration on
the petitioner‟s stand on the substantive relief by an
OMP No. 182/2005, 183/2005 & 184/2005
appropriate forum, Section 9 cannot be invoked for grant
of interim relief [Ref. 2004 (3) SCC 155, Firm Ashok
Tralers & Another v. Gurmukh Das; AIR 1999 SC 565,
Sudarshan Finance Ltd. v. NEPC; 1998 (1) AD (Delhi) 513
: 1998 (44) DRJ 399, National Building Construction
Corporation Ltd. (NBCC) v. Ircon International Ltd.].
(xi) So far as the questions which can be considered in a
petition under Section 9 of the Arbitration and
Conciliation Act, 1996 are concerned, certainly issues
which are to be decided in the substantive arbitration
proceedings cannot be gone into in a petition under
Section 9 of the statute. Thus, a question as to whether
the agreement between the parties was validly entered
into or whether it was validly terminated has to be
determined only in the arbitration proceedings and cannot
be determined in a petition under Section 9 of the statute
[Ref. 2002 (8) AD (Delhi) 617 : 2003 (66) DRJ 239, S.
Raminder Singh v. NCT of Delhi].
A similar question had arisen before this Court in
MANU/Del./1524/2001, D.R. Sondhi v. Hella K.G. Hueck
& Co. In para 14 of the judgment, it was held by this
Court that the question as to whether the material breach
has been committed or not or if there is any breach at all
was agitated but it was not gone into for the reason that it
is not the question for determination at present.
210. This Court while considering the petition under
Section 9 of the Arbitration and Conciliation Act, 1996,
does not have the jurisdiction to return a finding on the
merits of a claim made or a dispute raised by the parties
before the arbitrator. However, there can be no dispute
OMP No. 182/2005, 183/2005 & 184/2005
that this Court is required to examine the existence of a
prima facie case on the assertions of the petitioner with
regard to the termination of the agreement in the facts
and law applicable and as to strength in the petitioner‟s
case as to the bindingness and subsistence of the SHA. "
37. For appointment of a receiver, a person seeking appointment is
to make out a case of waste or damage to the property. A receiver
cannot be appointed merely because it is expedient or convenient to
one of the parties to do so or because it will do no harm to do so.
Though the appointment of receiver is discretionary, exercise of such a
discretion is to be based on sound judicial principles. A receiver can
be appointed in case no other adequate remedy or means of
accomplishing the desired object of the judicial proceeding is
available. It is to be based on a very good prima facie case of plaintiff
succeeding in the legal proceeding. In order to have a receiver
appointed plaintiff not only has to show a conflicting claim to the
property but must also show some emergency or damage or loss
demanding immediate action. It is also no more res integra that
normally receiver is not to be appointed where it has an effect of
depriving a defendant of a de facto possession which may cause
irreparable loss to the defendant. The conduct of the parties is also
very relevant. In Rajeshwar Nath Gupta v. Administrator General &
OMP No. 182/2005, 183/2005 & 184/2005
Ors, AIR 1989 Delhi 179 it was held that where the defense set up is
bona fide and the proposition of law is arguable, it is not advisable for
the Court to appoint a receiver to take possession of immovable
property from the defendants unless and until the Court is of the
opinion that there is well founded fear that the property in question
will be dissipated or that other irreparable mischief may be done
unless the Court gives a protection. It is only if more than a prima
facie case is made out by the plaintiff of the likelihood of the suit being
decreed and if there is no tangible defense raised by the defendants
and if it will lead to manifest injustice, then in exceptional
circumstances the Court would be justified in appointing a receiver
and granting interim injunction. The Court has enunciated five
principles which can be described as the „panch sadachar‟ of our
Courts exercising equity jurisdiction in appointing receivers as:
"(1) The appointment of a receiver pending a suit is a
mater resting in the discretion of the Court. The discretion
is not arbitrary or absolute. It is a sound and judicial
discretion, taking into account all the circumstances of
the case, exercised for the purpose of permitting the ends
of justice, and protecting the rights of all parties
interested in the controversy and the subject matter and
based upon the fact that there is no other adequate
remedy or means of accomplishing the desired objects of
the judicial proceeding.
(2) The Court should not appoint a receiver except upon
proof by the plaintiff that prima facie he has very excellent
chance of succeeding in the suit.
(3) Not only must the plaintiff show a case of adverse and
conflicting claims to property, but, he must show some
emergency or danger or loss demanding immediate action
OMP No. 182/2005, 183/2005 & 184/2005
and of his own right he must be reasonably clear and free
from doubt. The element of danger is an important
consideration. A Court will not act on possible danger
only, the danger must be great and imminent demanding
immediate relief. It has been truly said that a Court will
never appoint a receiver merely on the ground that it will
do no harm.
(4) An order appointing a receiver will not be made when
it has the effect of depriving a defendant of a „de facto‟
possession since that might cause irreparable wrong. If
the dispute is as to title only, the Court very reluctantly
disturbs possession by receiver, but if the property is
exposed to danger and loss and the person in possession
has obtained it through fraud or force the Court will
interpose by receiver for the security of the property. It
would be different where the property is shown to be „in
medio‟ that is to say, in the enjoyment of no one, as the
Court can hardly do wrong in taking possession: it will
then be the common interest of all the parties that the
Court should prevent a scramble as no one seems to be in
actual lawful enjoyment of the property and no harm can
be done to anyone by taking it and preserving it for the
benefit of the legitimate who may prove successful.
Therefore, even if there is no allegation of waste and
mismanagement the fact that the property is more or less
„in medio‟ is sufficient to vest a Court with jurisdiction to
appoint a receiver. Otherwise a receiver should not be
appointed in supersession of a bona fide possessor of
property in controversy and bona fides have to be
presumed until the contrary is established or can be
indubitably inferred.
(5) The Court, on the application of a receiver, looks to the
conduct of the party who makes the application and will
usually refuse to interfere unless his conduct has been
free from blame. He must come to the Court with clean
hands and should not have disentitled himself to the
equitable relief by laches, delay, acquiescence, etc."
38. Regarding appointment of a receiver a Single Judge of the
Bombay High Court in Syed Khuwaja Syed Ahmed v. The Maharashtra
OMP No. 182/2005, 183/2005 & 184/2005
Housing and Area Development Authority, AIR 1983 Bombay 73 had
held that it must be determined not only on the facts of a particular
case but also in the context of a social situation. A Division Bench of
this Court in Ravi Kumar v. Misha Vadhera & Ors. AIR 1995 Delhi
175 had held that the discretion to appoint a receiver is not arbitrary
or unregulated but has to be exercised cautiously, judicially and
according to the legal principles after consideration of the whole of the
circumstances of the case. A receiver cannot be appointed merely
because it is expedient or convenient to one of the parties to do so or
because it will do no harm. A bonafide possessor of property should
not be dispossessed pending suit unless there is substantial reason
such as, well founded fear that the property in question being
dissipated or that some other irreparable mischief may occur unless
the Court gives its protection. Before appointing a receiver the matter
should be considered judicially in all aspects including prima facie
case that is either a good title to the property or special equity in his
favor requiring immediate dispossession of the defendant or that the
property in the hands of the defendant is in the danger of being
wasted.
39. The learned senior counsel for the respondent, Mr.Bhatt, has
relied on Mahadeo Savlaram Shelke and Others v. Pune Municipal
Corporation and Another, (1995) 3 SCC 33; Gujarat Bottling Co. Ltd.
OMP No. 182/2005, 183/2005 & 184/2005
and Others v. Coca Cola Co. and Others, (1995) 5 SCC 545 and Firm
Ashok Traders and another v. Gurmukh Das Saluja and Others,
(2004) 3 SCC 155 to contend that in the facts and circumstances as
alleged by the petitioner, he is not entitled to claim appointment of
the receiver for running the business of the respondent. In Firm
Ashok Traders and Another (supra), Supreme Court had considered
appointment of a receiver of a running business. It was held that the
appointment of a receiver on a running business is a serious matter
and on the basis of bald and general allegations of mis-management
and siphoning of funds, it will not be just and convenient to appoint a
receiver. In this case, a group of persons `B' were running a business.
On the basis of bald and general allegations of mis-management and
siphoning of funds, the High Court had appointed the persons of
Group `A' as the Captain of the Ship. The Supreme Court had held
that there was no logic behind such a change as appointment of a
receiver on a running business is a serious matter. The apex Court
held that High Court erred in appointment of a receiver as the retail
liquor trade has its own intricate parameters and is a tricky trade and
could not be entrusted to a third party.
40. The respondent business has its own typical parameters. The
annual report for 2006-2007 filed on behalf of respondent reflects that
the respondent is in the business of broadcasting and related
OMP No. 182/2005, 183/2005 & 184/2005
activities; training and education; third party video production;
annual distribution of digital contents; digitization of all intellectual
properties owned by company and setting up of an international
distribution channel and setting up of online version of Jain TV. The
audited balance sheet filed on behalf of the respondent for the
financial year ended on 31st March, 2007 reflects the net worth as
Rs.36.40 crores and the assets at Rs.63.72 crores. The petitioner had
alleged that ever since commencement of service, the respondent did
not pay any service fee in respect of TS Agreement II and claimed an
outstanding aggregated to US$ 571215.75. While terminating TS
Agreement I, TS Agreement II and IS Agreement by letter dated 17th
July, 2002, the petitioner demanded payment of outstanding dues
aggregating to US$ 712870.25 as due under TS Agreement II.
Similarly in other petitions also it has been alleged that the petitioner
has never paid the service fees as per terms of the other agreements.
But it has not been disclosed as to what amounts have been paid and
how those amounts have not been paid in terms of the agreements
executed between the petitioner and the respondent.
41. The petitioner has also claimed late payment charges and has
claimed US$ 243676.56 under the TS Agreement - II. In OMP No.182
of 2005, the petitioner has claimed US$ 351831.77 till 28th February,
OMP No. 182/2005, 183/2005 & 184/2005
2005 and the invoices not paid are detailed in para 17 which are as
under:
Sl.No. Invoice No. Due Date Amount (US$)
1. 229001014 13.03.2001 27,022.4. (Balance)
2. 229001021 05.04.2001 27,300.00
3. 229001455 09.07.2001 23,660.00
4. 229001456 09.07.2001 31,200.00
5. 229001772 01.10.2001 31,200.00
6. 229001781 06.10.2001 7,800.00
7. 229001773 01.10.2001 31,200.00
8. 229001782 06.10.2001 7,800.00
9. 229001774 01.10.2001 20,800.00 (Balance)
10. 229001783 06.10.2001 5,200.00 (Balance)
42. Though in respect of some of the invoices, it has been contended
that the amount due is the balance amount, however, the petition is
apparently silent as to how much amount has been paid by the
petitioner. Considering the entire petitions, it appears that the
allegation made by the petitioner is that practically no amount has
been paid by the respondent.
43. In respect of TS Agreement - I, the petitioner has claimed the
amounts in respect of invoices as disclosed in para 17 which is as
OMP No. 182/2005, 183/2005 & 184/2005
under and has claimed a total amount of US$ 1378,141.70 till 28th
February, 2005.
Sl.No. Invoice No. Due Date Amount (US$)
1. 229000554 19.10.2000 25001.99 (Balance)
2. 229000767 31.01.2001 58,333.00
3. 229000858 01.03.2001 58,333.00
4. 229000963 31.03.2001 58,333.00
5. 229001052 01.05.2001 58,333.00
6. 229001252 01.07.2001 51105.94 (Balance)
7. 229001392 31.07.2001 58,333.00
8. 229002078 14.12.2001 5,833.00
9. 229002703 13.03.2002 15635.95 (Balance)
10. 229002727 03.04.2002 16,406.25
11. 229002736 03.05.2005 16,406.25
12. 229002887 03.06.2002 16,406.25
13. 229003071 03.07.2002 4,921.87
44. Though the petitioner has contended that in view of past
experience with the respondent it is inferable that with a view to
defraud and defeat the rights of petitioner, respondent will sell,
transfer, dispose of or create third party rights in respect of its
properties situated at New Delhi and other places. However, no such
facts, particulars or details have been disclosed by the petitioner
which will show that the respondent has sold, transferred or disposed
OMP No. 182/2005, 183/2005 & 184/2005
of or created third party rights in respect of his properties with a view
to defeat the rights of the petitioner. Mere non-payment of dues of the
petitioner will not reflect conflicting claims in respect of the
immoveable and moveable properties of the respondent. The alleged
fear of the petitioner is also not founded on any material facts except
that the respondent has not paid the amount despite agreeing to do so
and has not paid the statutory dues and expenses for the Arbitration
proceedings at Singapore. There are no such facts disclosed by the
petitioner that the properties of the respondent are in danger of being
wasted. In absence of any particulars or details about any transaction
done by the respondent with a view to sell, transfer, dispose of or
create third party rights in respect of its properties with a view to
defeat the alleged claims of the petitioner, the allegations by the
respondent can only be termed as bald.
45. From the perusal of petitions filed by the petitioner the
impression which one gets is that no amount had been paid by the
respondent under the three agreements executed between the
petitioner and the respondent. From the details of invoices whose
balance price is claimed, it is not apparent as to how much amount
had been received by the petitioner. The petitioner has very deftly
avoided to disclose as to how much amount had already been paid
under agreements. This information was material to infer the conduct
OMP No. 182/2005, 183/2005 & 184/2005
of the respondent. After an additional affidavit was filed by the
respondent contending that about US$ 13 lakhs has already been
paid, it was admitted by the petitioner that it had received the said
amount. The details of the amount received and its appropriation was,
however, not given. The justification given by the petitioner for non
disclosure of the amounts received by the petitioner in the petitions is
that they related to other bills. Thereafter, petitioner filed details of the
amounts adjusted, however, again the petitioner has not disclosed
about the security deposit of US $ 1.75 lakh which was given by the
respondent. In case the petitioner is entitled for the amounts as
claimed and the respondent has paid a security deposit of US$ 1.75
lakh, the petitioner ought to have disclosed as to how much amounts
the petitioner would be entitled for from the security deposit and after
adjusting the amount of the security deposit, what would be the
balance amount due from the respondent. Another relevant fact is
that on behalf of respondent, Dr.J.K. Jain had agreed to the
conditions and the payment schedule which was to be put in effect
from January 2002 onwards and the disagreement, as per letter dated
19th September, 2001 was limited to the period from September 2001
to the year 2002. The petitioner wanted that the respondent should
pay US$ 53000 per month and US$ 100,000 from January, 2002 and
the respondent was not agreeable for the same. It is not that the
respondent did not pay any amount. Perusal of the statement of
OMP No. 182/2005, 183/2005 & 184/2005
payments made by the respondent reveals that the payments were
made from September, 2001 till 9th July, 2002. In most of the months
payments were made on more than one occasion except in April and
May, 2002. After July, 2002 no payments have been made and the
petitioner also terminated all the agreements with the respondent. The
petitioner has also not disclosed whether the petitioner is liable to pay
interest to the respondent on the security deposit.
46. The amounts claimed by the petitioner in the notice which was
given under Section 434 of the Companies Act, the amounts claimed
in the petitions and the amounts claimed before the arbitrator are also
different. The explanation given is that the difference in the amounts
is on account of the amounts becoming due at different points of time
and on account crystallizing of other amounts in the meantime to
which the petitioner became entitled. The amounts claimed include
the penal interest and the damages. Merely on the basis of the alleged
agreements between the parties and the pleas raised by the petitioner,
the amounts which the petitioner is entitled for cannot be decided
conclusively. From the consideration of the pleas of the respondent it
is apparent that some of the amounts as claimed by the petitioner
may not be due to him. What exact balance amount the petitioner is
entitled to in respect of three agreements is to be decided by the
Learned arbitrators. Exact liability of the respondent in the facts and
OMP No. 182/2005, 183/2005 & 184/2005
circumstances is a substantive issue which is to be decided in the
Arbitration proceedings. The respondent has also taken the plea that
the petitioner failed to deliver the commercial acceptable quality of
service as had been promised under the agreements. The respondent
has also filed a counter claim which is also pending adjudication
before the Learned Arbitrators.
47. In the facts and circumstances it is also apparent that for
securing the alleged amount in dispute, the power under section 9
should not be exercised to enable the petitioner to recover the sums
on account of damages in advance of the hearing even if a part of the
liability is undisputed and monetary award for some amount may be
made. The learned senior counsel, Mr.Bhatt has relied on, The Law
and Practice of Commercial Arbitration in England, Second Edition by
Sir Michael J.Mustill and Stewart C.Boyd regarding securing the sum
in dispute. It has been held that the expression `Amount in dispute‟ is
not equivalent to the claim in arbitration as the expression ` amount
in dispute‟ has a totally different connotation. Relevant para (iv)
regarding securing the sum in dispute at page 332 is as under:-
32. (iv) Securing the sum in dispute:- Where the right of
a party to a specific fund is in dispute in a reference, the
Court has power to order the fund to be paid into Court or
otherwise secured. The forms of security most likely to be
ordered are the provision of a bank guarantee or the
payment of the fund into a bank account in the joint
names of the parties or their advisers. It is probable that
OMP No. 182/2005, 183/2005 & 184/2005
the Court alone, and not the arbitrator, has power to
make such an order.
It will be noted that this power does not enable a
party to recover sums on account of damages in advance
of the hearing, even if liability is undisputed and it is clear
that some monetary award will be made. The power exists
only where an identified fund is in dispute-as where, for
example, it is alleged that the respondent is trustee for
the claimant in respect of a specific sum of money."
48. This also cannot be disputed by the petitioner that a notice
under Section 434 of the Companies Act was given on 7th June, 2004
calling upon the respondent to pay US $ 213,182.30 under IS
Agreement; US $ 443,382.50 under TS-II Agreement and US $
71,640.62 under TS-II Agreement. Despite the notice under Section
434 of the Companies Act the respondent allegedly did not pay the
amounts claimed. Under said section a presumption is raised if the
debtor company does not pay the amount within the stipulated time
that it is unable to pay its debits unless company is able to show
some bonafide disputes. No proceedings have been initiated against
the respondent for its winding up. In the circumstances it would be
unreasonable to draw any inference prima facie that the respondent
company is unable to pay its debts or the defense raised by the
respondent is such that it can be ignored and does not require
consideration. The respondent has also filed a counter claim and the
plea of the petitioner is that the counter claim is not sustainable.
OMP No. 182/2005, 183/2005 & 184/2005
However, prima facie nothing has been shown that the counter claim
of the respondent is not sustainable or that the entire claim of the
petitioner prima facie has excellent chance of succeeding despite
counter claim of the respondent. Applying the principles for
appointment of receiver as enunciated by this Court also known as
„Panch Sadachar‟ it is apparent that the Court does not act on
possible danger only. Rather the danger must be great and imminent
demanding immediate relief. The petitioner has alleged the case of
imminent danger mainly on account of respondent not paying the
amounts as had been agreed, non-payment of the statutory dues,
dues of other creditors and non-payment of arbitration fees and
expenses. The learned Senior counsel for the petitioner, Mr.Jain had
laid great emphasis on the fact that the arbitration fees was not paid
and the petitioner is unable to pay its due to other creditors and has
not been able to meet its statutory demands. According to the
respondent its TDS liability as on 20th December, 2004 was
Rs.16,07,887/- as per Income Tax Department demand note. Later
this demand had been met and the liability was cleared. The
respondent has also produced the payment challans to show that the
payments were made by the respondent. It is also contended that
whatever is left unpaid could be paid before 30th September, 2005.
According to the respondent after adjusting the amount which is liable
to be refunded, its liability is only Rs.8,21,224/-. The plea of the
OMP No. 182/2005, 183/2005 & 184/2005
respondent that since all the three arbitration are between the same
parties and therefore, in order to minimize the expenses they be held
at one place and on that ground not paying the arbitration fee in the
first instance, cannot be termed malafide or such an act which will
entail appointment of a receiver of running business of the
respondent. In any case it is contended that the part of the expenses
have since been paid. Therefore on this ground the petitioner shall not
be entitled for appointment of a receiver of the business of the
respondent. The pleas as raised by the petitioner do not show such
damage or loss to him which will entail appointment of receiver. It is
stated that respondent is a widely held public listed company with
over 10000 shareholders, listed in 7 stock exchanges including the
National and Bombay Stock Exchanges and it has over 150 employees
and a dealer network of over 1000 entrepreneurs. It is also stated that
its sales are over 44 crores whereas the current liabilities of the
company are merely 9 crores and the company had declared operating
profits as on 31st March, 2005 of 1.26 crore and holds investments of
around 3.6 crore. The market capitalization of the respondent
company is alleged to be Rs.32.35 crores as on 5th August, 2005. The
respondent also disclosed its networth at Rs.36.40 crores as on 31st
March, 2007 and its assets as per the audited balance sheet of
Rs.63.72 crores on the said date. The respondent also disclosed that it
is listed on National Stock Exchange and Bombay Stock Exchange
OMP No. 182/2005, 183/2005 & 184/2005
and five other stock exchanges in India and its market capitalization
as on 9th October, 2007 was Rs.30.28 crores. The respondent also
disclosed its profit for financial year ended on 2006-07 as Rs. 2.61
crores before tax and net profit of Rs.2.1 crores. In Rajeshwar Nath
Gupta (supra) the Court had held that it is only if more than prima
facie case is made out, then in exceptional circumstances the Court
will be justified in appointing a receiver. The business of the
respondent is a running business is apparent from these facts as
detailed hereinabove. It has been held that a Court should not appoint
a receiver on the ground that it will not do any harm. It has also been
held that an order appointing a receiver is not to be made when it has
an effect of depriving a defendant of „de facto‟ possession. From the
facts alleged by the petitioner it cannot be inferred that the properties
in the hands of the respondent is in danger of being wasted,
dissipated or frittered away. The properties of the respondent are also
not the subject matter of arbitration. In the circumstances for the
foregoing reasons there are no such facts and pleas disclosed by the
petitioner which will entitle him for appointment of a receiver of the
running business of the respondent. Therefore the prayer of the
petitioner to appoint a Court receiver in respect of all the properties,
moveable and immoveable of the respondent in New Delhi or
elsewhere in India is declined.
OMP No. 182/2005, 183/2005 & 184/2005
49. The petitioner has also sought a direction to the respondent to
deposit with the Courts all such sums received by him from its
business and attachment of all the amounts. The petitioner has
claimed different amounts, in notices, in petitions before this Court
and in Arbitration proceedings which are pending. The amounts
claimed by the petitioner are yet to be adjudicated. Though the
respondent in September, 2001 had admitted a part of the amount to
be paid in installment, but later on even those amounts have been
denied. Rather a counter claim for the substantial amount has been
filed. The apprehension of the petitioner is only that the respondent
shall dispose of its properties. However, no instances have been given
where the immovable properties or substantial movable properties
have been disposed of or transferred by the respondent in order to
defeat the alleged amounts which the petitioner may be entitled to
recover. Merely on account of an arbitration clause between the
parties and merely because the respondent refused to pay the
arbitration fees and expenses in the first instance, as the respondent
wanted that all the arbitration proceedings be conducted at one place
in order to minimize the expenses, it cannot be inferred that the
respondent is unable to pay its debts and is striving to dispose of its
properties. Before the principles of Rule 5 of order 38 of the Code of
Civil Procedure can be invoked it must inter alia, be shown by the
OMP No. 182/2005, 183/2005 & 184/2005
petitioner that respondent has acted or is about to act with intent to
obstruct or delay the execution of any decree that may be passed
against him. The Court must be satisfied that all the ingredients of the
rule exist. Mere fact that no harm would be caused to defendant or
that defendant would not be prejudiced by such an order could be no
ground to pass order under Order 38 Rule 5 of the Code for
attachment before judgment. It must be shown by the petitioner that
the respondent is about to dispose of the whole or any part of his
property or is about to remove the whole or any part of his property
from the local limits of the jurisdiction of the Court. It is only on the
satisfaction of all these conditions that the petitioner can be said to be
entitled to an order of attachment before judgment in terms of Order
XXXVIII Rule 5 of the Code. From the allegations made by the
petitioner it cannot be inferred that the respondent is trying to dispose
of its properties and is unable to pay the alleged amounts due from
him or that the plea raised by the respondent are not bona fide. Any
disposal of the moveable properties in the usual course of business
cannot be termed as defrauding the petitioner and other creditors. The
plea of the petitioner that the three agreements are similar and are
between the same parties and in the circumstances Arbitration
proceedings be conducted at one place, cannot be termed ex-facie not
bonafide or such a plea that on account of it petitioner should be
granted attachment of the properties of the respondent on the
OMP No. 182/2005, 183/2005 & 184/2005
principles of Order 38 rule 5 of the Code of Civil Procedure. The other
pleas raised by the petitioner are also not sufficient to grant
attachment to the petitioner in the facts and circumstances. In the
circumstances, it will not be appropriate to attach the properties of
the respondent on the principles of Order 38 Rule 5 of the Code of
Civil Procedure nor the petitioner is entitled for a direction to the
respondent to deposit with the Court all such sums which are received
by the respondent from the business. Consequently the prayer of the
petitioner to attach the properties of the respondent is declined.
50. It has already been held that the petitioner is not entitled for
appointment of receiver of the business and properties of the
respondent nor for attachment of its properties. It has been held that
for appointment of receiver something more than the prima facie case
is required and there should have been substantive reasons as well as
well-founded fear that the properties are being dissipated or some
other irreparable mischief may occur. Nevertheless, it cannot be held
that there is no case in favor of the petitioner and the petitioner does
not require any protection. This cannot be disputed that on behalf of
respondent, Dr.J.K. Jain had agreed to the conditions and the
payment schedule which was to be put in effect from January 2002
onwards and the disagreement, as per letter dated 19th September,
2001 was limited to the period from September 2001 to the new year.
OMP No. 182/2005, 183/2005 & 184/2005
The petitioner wanted that the respondent should pay US$ 53000 per
month and US$ 100,000 from January, 2002 and the respondent was
not agreeable for the same. It is not that the respondent did not pay
any amount. Perusal of the statement of payments made by the
respondent reveals that the payments were made from September,
2001 till 9th July, 2002. In most of the months payments were made
on more than one occasions except in April and May, 2002. After July,
2002 no payments have been made and the petitioner also terminated
all the agreements with the respondent. In these circumstances it was
contended by communication dated 9th July, 2002 that the
respondent is clearing the dues regularly and that the respondent has
been able to implement its decisions of going digital.
51. Learned senior counsel for the respondent has painstakingly
compared Annexure P with the petition and the Annexure A to the
affidavit dated 2nd January, 2008 filed by the respondent and the
discrepancies between the two. However, despite the alleged
discrepancies between the two statements, it cannot be denied that as
per the payment statement filed by the respondent along with the
affidavit dated 11th December, 2007, the last payment was made on
9th July, 2002 of Rs.3,00,930/- and a total sum of about
Rs.6,25,83,092.47 has been paid by the respondent to the petitioner.
In the circumstances, it is apparent that after the determination of the
OMP No. 182/2005, 183/2005 & 184/2005
agreements by communication dated 17th July, 2002 no payments
have been made by the respondent though till July 2002 the
payments were made by the respondent which may not be in
accordance with the representations made on behalf of the respondent
in September, 2001. In the circumstances, it cannot be held that there
is no case in favor of the petitioner. The petitioner also has grievance
about non-payment of his dues. The petitioner is also entitled for
some protection in the present facts and circumstances and for the
reasons above noted. This is also noticed from the various documents
filed on record that the respondent has a running business. By an ex
parte interim order dated 23rd May, 2005, the respondent was
restrained from selling, alienating or parting with the possession of
movable as well as immovable properties belonging to the
respondents. Since the respondent has a running business, it will not
be appropriate to continue the order of restrain against the movable
properties of the respondent in the present facts and circumstances
and for the above noted reasons. Learned counsel for the petitioner
has also made a grievance about the fact that on the appointment of
the Local Commissioner at the first instance he was not allowed to
prepare the inventories. From the record of the petitions it is apparent
that there are no details of the immovable properties of the
respondent. In case the respondent does not make available the
details of his immovable properties and some or any of the properties
OMP No. 182/2005, 183/2005 & 184/2005
are disposed of by the respondent, it may cause irreparable loss to the
petitioner as amounts admittedly are due to the petitioner and after
sale or transfer of properties, the petitioner may not be able to recover
the amounts awarded to him. In the circumstances, considering the
prima face case, balance of convenience and irreparable loss, it will be
just and appropriate to direct the respondent to give complete details
of its immovable properties and to restrain the respondents from
selling, alienating or encumbering his immovable properties without
the prior permission of the court or of the learned Arbitrators before
whom the arbitration proceedings in respect of the three agreements
are pending. However, the order regarding the restrain from selling,
alienating or parting with the possession of the movable properties of
the respondent is vacated as the respondent is carrying on its
business and such a restrain may hamper its business activities
which will be detrimental to the interest of the respondent and in a
way be also detrimental to the interest of the petitioner who has
allegedly to recover substantial amounts from the respondent
according to his own allegations.
52. Therefore, it the totality of facts and circumstances, the prayer
of the petitioner to appoint a receiver is declined and the prayer for
attachment of all the properties and assets of the respondent is also
declined. The prayer for direction to the respondent to deposit all the
OMP No. 182/2005, 183/2005 & 184/2005
amounts received by the respondent in his business is also declined.
The respondent is, however, directed to give the details of all its
immovable properties to the petitioner within four weeks and is also
restrained from selling, alienating or encumbering its immovable
properties without the prior permission of this court or the learned
Arbitrators before whom the Arbitration proceedings are pending
pertaining to three agreements. The order dated 23rd May, 2005
regarding restrain from selling, alienating or parting with possession
with the movable properties of the respondent is, however, vacated.
The respondent shall be entitled to deal with his moveable properties
and can sell, transfer or alienate the moveable properties in due
course of his business. With these directions the ex-parte order dated
23rd May, 2005 is partly modified and the petitions are disposed of.
However, considering the facts and circumstances, the parties are left
to bear their own costs.
October 3, 2008 ANIL KUMAR J.
'Dev/k'
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