Punjab & Sind Bank vs Corus Infrastructure Pvt. Ltd.
2009 Latest Caselaw 3380 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                    Arbitration Appeal No.13/2009

%                         Date of decision: 26th August, 2009

       Punjab & Sind Bank                            ....Appellant
                          Through: Mr. Pallav Saxena, Advocate

                                 Versus

       Corus Infrastructure Pvt. Ltd.               ... Respondent
                          Through: None.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.     Whether reporters of Local papers may
       be allowed to see the judgment?                 No

2.     To be referred to the reporter or not?          No

3.     Whether the judgment should be reported         No
       in the Digest?


RAJIV SAHAI ENDLAW, J.

1. Appeal is preferred against order dated 8th May, 2009 of the

Arbitrator directing the appellant bank to keep the sum of Rs.

5,18,92,578/- in a fixed deposit. This order was made on an

application of the respondent under Section 17 of the Act for

directions to the appellant bank to release the said monies to the

respondent immediately.

2. Disputes and differences arose out of an agreement entered

into by the appellant bank with the respondent for transferring of

Non-Performing Asset of M/s Tensile Steel Ltd. In terms of the said

agreement, the respondent deposited earnest money of Rs.10 lacs

with the appellant bank and was to pay the balance sale

consideration within 15 days. The respondent had a FDR of Rs.

5,18,92,578/- with the appellant bank and the respondent had also

instructed the appellant to adjust the amount of the said FDR

towards purchase money. The appellant bank claims to have

adjusted the amount of the said FDR even prior to the expiration of

15 days, in terms of the instructions of the respondent. The

respondent, however, did not pay the balance consideration within

15 days leading the appellant to terminate the agreement.

3. It is inter-alia the case of the respondent that even if it is the

case of the appellant that it has rightfully terminated the agreement,

the appellant in terms of the agreement was entitled to forfeit only

Rs.10 lacs and the appellant is liable to refund the aforesaid Rs.

5,18,92,578/- to the respondent. Ad interim relief for release of this

amount was sought.

4. The arbitrator instead of releasing the amount as claimed by

the respondent has directed the appellant bank to keep the same in

an FDR as was existing earlier in favour of the respondent and

subject to final adjudication of the disputes.

5. The appeal came up first before this court on 3rd August, 2009

when it was felt by this court that the appellant ought not to have

any grievance against the said order in as much as under the said

order also the monies remain in the pocket of the appellant bank

only. The counsel for the appellant had sought time to consider. In

the circumstances, the concerned Manager of the appellant bank

was also directed to be present in person.

6. Pursuant to the order dated 3rd August, 2009 Mr. H.S. Gujral,

Senior Manager of the appellant bank is present. On inquiry he

states that the FDR was for the maturity amount of

Rs.5,06,50,251.00 p. only. He further states that rate of interest on

the said FDR would be of approximately 7% per annum.

7. The counsel for the appellant also informs that a third party

has filed a writ petition before the High Court at Chandigarh

impleading the appellant as well as the respondent herein as parties;

it is informed that in the said writ petition such third party is

claiming that the amount of the FDR belongs to it and is claiming

direction for release thereof. It is urged that since now a third party

also has raised claims with respect to the amount, if the amount is to

be kept in the fixed deposit as directed by the arbitrator the same

may create problems. Besides the said plea, it is reiterated that the

direction of the arbitrator is creating accounting problems for the

appellant bank inasmuch as appellant bank having already

appropriated the said amount in the account of M/s. Tensile Steel

Limited, cannot now keep the same in the FDR in the name of the

respondent. The counsel for the appellant has also contended that

the respondent had no prima facie case for the order impugned to be

maintained.

8. As far as the prima facie case is concerned, as per the terms of

the bid document, upon default by the respondent to deposit the

further monies, the earnest money of the respondent alone was to be

forfeited. The counsel for the appellant is unable to explain as to

how the appellant could inspite of the said term of the contract

forfeit any amount other than the earnest money which alone was

agreed to be forfeited. Thus it cannot be said at this stage that the

respondent did not have a prima facie case.

9. As far as the argument of accounting difficulty is concerned, if

it is ultimately found that the appellant bank has wrongfully forfeited

the amount of the FDR, merely because the appellant bank has

appropriated the said amount, would not come in the way of the

appellant bank being directed to refund the same. Similarly, at the

interim stage also, the accounting difficulty even if any cannot defeat

the order or call for interference by this court in appeal.

10. I do not consider that merely because the FDR, if made as

directed by the arbitrator, would be in the name of the respondent

would also create any difficulty. The interim order has no finality.

The contention of the appellant bank of the monies thereof having

been forfeited and the respondent having no right to the same shall

remain alive and shall be for adjudication before the arbitrator. Thus

merely because the said monies would be held in the name of the

respondent would not create any rights in the respondent or in any

third party with respect thereto.

11. As already observed in the order dated 3rd August, 2009, the

order impugned appears to be in the interest of the appellant bank

and it is surprising that the appellant bank is challenging the same.

If the monies are kept in the FDR, the same even if held to be

payable to the respondent in the final award, would be along with

the interest accrued on the said FDR. Else the interest which may

be awarded on the said monies if awarded to be refunded to the

respondent may have been much higher.

12. The principle in appeals from the orders of the arbitral tribunal

are the same as in appeals from the interim orders of the court.

Merely because the appeal court may have exercised the discretion

otherwise is no ground for interfering with the order unless the same

is perverse. No such perversity is found in the impugned order. The

appellant being a bank, the respondent did not really need to secure

the amount. However, the arbitrator appears to have been swayed

by the factum of the appellant under the terms and conditions of the

bid being entitled to forfeit only the earnest money. The money

remains in the pocket of the appellant only whether as contended by

the appellant or if kept in a fixed deposit as ordered by the arbitral

tribunal. Needless to add that merely because the said fixed deposit

would be in the name of the respondent would not give any

additional rights to the respondent or to any other person therein.

13. I, therefore, do not find any merits in this appeal. The same is

dismissed. However, nothing contained herein shall be deemed to be

an expression on the merits of the respective claims.

IA No.9662/2009 (of the Appellant under Order 41 Rule 5 CPC)

On dismissal of this appeal, this application is infructuous and

is disposed of.

RAJIV SAHAI ENDLAW (JUDGE) August 26th, 2009 J/PP