M/S National Agricultural ... vs M/S Virat Exports Pvt. Ltd. & Anr.
2009 Latest Caselaw 3464 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                    Date of Reserve: August 12, 2009
                                                       Date of Order: August 31, 2009

+OMP 651/2008
%                                                            31.08.2009
    M/s National Agricultural Cooperative
    Marketing Federation of India Ltd.                ...Petitioner
    Through: Mr. Anil Grover and Mr. Rahul Khurana, Advocates

        Versus

        M/s Virat Exports Pvt. Ltd. & Anr.                               ...Respondents
        Through: Mr. Rahul Kodyan, Advocate


        JUSTICE SHIV NARAYAN DHINGRA

1.      Whether reporters of local papers may be allowed to see the judgment?

2.      To be referred to the reporter or not?

3.      Whether judgment should be reported in Digest?


        JUDGMENT

1. The petitioner entered into two agreements with respondent, the first

dated 20th September 2004 and the second dated 2nd February 2005, for

financing agricultural commodities like Black Pepper, Pudina Ka Tel and Tulsi

Oil (Basil Oil), Piperita Old, Mentha Oil, Spearmint Oil, Clove, Ajwoin etc. for

the purpose of export and domestic sale. Under the agreements, petitioner

furnished finances to the respondent to the tune of Rs.8.64 crore. This

amount was to be utilized by respondent for procurement of above

mentioned commodities/ articles and to be paid back by respondent on

sale/export of these commodities. Respondent failed to pay part of the

amount back to the petitioner under the agreements and in order to meet this

liability of unpaid amount of Rs.3.5 crore, respondent issued 7 post-dated

cheques of Rs.50 lac each. However, these cheques got dishonoured. It is

OMP 651/08 National Agricultural Coop. Marketing Fed. Of India Ltd. v. Virat Exports Pvt. Ltd.& Anr.

Page 1 Of 5 stated that the amount recoverable from respondent was around Rs.4 crore

inclusive of accrued interest thereon as per the agreements. Since the

cheques issued by respondent, when presented got dishonoured, the

petitioner informed respondent about dishonoring of the cheques and also

sought to invoke the arbitration clause contained in the agreements for

settlement of disputes.

3. It is submitted by counsel for respondent that since respondent had

failed to discharge its liability, the petitioner has a right to sell the stocks of

goods procured from the funds of petitioner by respondent and recover this

amount in terms of the agreement. The petitioner also submitted that the

articles /commodities involved were agricultural products and had an expiry

period and are perishable in nature and if the good are not immediately

disposed of in the open market, chances of their loosing strength and

crossing expiry limit would be more. The petitioner also sought to protect its

interest by seeking security for the amount due from respondent.

4. In reply to this petition, it is submitted by counsel for respondent that

an arbitrator in this matter has already been appointed and he was hearing

the claims and counter-claims of the parties and thus the petition filed by

petitioner was not maintainable. It is also submitted that the petitioner vide

letter dated 25th March 2009 asked respondent to give their concrete

proposals for settlement of the matter under one-time-settlement-policy

adopted by NAFED and respondent vide their letter dated NIL had given their

proposal and showed willingness in the matter and there was likelihood of the

matter being settled between the parties. It is further submitted that it was

the petitioner who failed to honour the terms as contained in the agreements

OMP 651/08 National Agricultural Coop. Marketing Fed. Of India Ltd. v. Virat Exports Pvt. Ltd.& Anr.

Page 2 Of 5 and the petitioner failed to release further finances of Rs.122.70 lac as agreed

between the parties against stocks lying in the godown of the petitioner. The

claim of the petitioner that it was to recover Rs.4 crore was also not

supported by any statement of accounts or evidence. The petitioner had filed

a claim before the arbitrator to the tune of Rs.4.41 crore while respondent

had filed counter-claim to the tune of Rs.6,29,62,600/-. It is submitted that

under the agreement dated 2nd February 2005, the petitioner had agreed to

make available the finances to respondent to the tune of Rs.25 crore for

purchase and stock of the mint products and spices. However, petitioner

failed to provide the finances as requested by respondent with the result that

respondent could not meet out its supply/ export commitments and in the

meantime there was steep hike in the prices resulting into heavy losses

incurred by respondent.

5. On merits, the facts as stated by petitioner about execution of

agreement and advancement of money under the agreements was not

denied and issuance of post-dated cheques of Rs.3.5 crore was also not

denied. It was denied that the articles namely mint oil and other products had

expiry limit or were of perishable nature. It was submitted that since claim

and counterclaim of the parties were pending adjudication against each

other, the plea of petitioner of sale of the products and securing the amount

by attachment of properties should be turned down.

6. The documents filed by the parties show that the petitioner had written

to the respondent about the policy adopted by the petitioner for realization of

the overdue by NAFED by entering into one-time-settlement. The petitioner

made it clear that one-time-settlement would mean that respondent was

OMP 651/08 National Agricultural Coop. Marketing Fed. Of India Ltd. v. Virat Exports Pvt. Ltd.& Anr.

Page 3 Of 5 prepared to pay entire balance principal amount in one go and respondent

gives an undertaking of paying the entire principal amount in one go with

proof of capacity of respondent to pay the amount in one go. In response to

this letter, respondent wrote to the petitioner that irrespective of its

counterclaim filed before the arbitrator, the respondent was prepared to take

benefit of 'one time settlement policy' and was prepared to pay the entire

balance amount. It is also stated by respondent that it had sufficient

resources/ means to pay the entire principal amount in one go. Vide another

letter dated 9th April 2009, respondent informed the petitioner that it was

prepared to make the payment of principal amount within four months by

means of sale receipts in equal installments and left the materials/ goods

lying with the petitioner against payment proportionately made from May

onwards as the mint season was going to start. It is apparent that this

proposal did not seem to have gone through as we are now in August 2009

and till 12th August 2009, when the matter was heard, parties had not arrived

at onetime settlement.

7. The agreement entered into between the parties would show that it

was the petitioner who financed respondent for purchase of stocks of mint

products like Black Pepper, Pudina Ka Tel and Tulsi Oil (Basil Oil), Piperita Old,

Mentha Oil, Spearmint Oil, Clove, Ajwoin etc and spices. It is specifically

provided that the respondent was to purchase the raw-materials from farmers

and other suppliers in the name of the petitioner and keep them at the

warehouses recommended by the petitioner. The respondent was to withdraw

the raw materials in small lots for processing. The respondent was to submit

copies of bills of the supply, purchase-vouchers and the delivery of stocks by

the petitioner to respondent was to take place against DD/Pay Orders/local

OMP 651/08 National Agricultural Coop. Marketing Fed. Of India Ltd. v. Virat Exports Pvt. Ltd.& Anr.

Page 4 Of 5 cheques clearance. From the agreement, it is obvious that the ownership over

the stocks was that of the petitioner and the petitioner had financed the

entire agricultural stock. Under these circumstances, I consider that the

petitioner being the owner of the stock has all rights to sell the stocks and

make up for the amount already invested by it for purchase of the stock.

Disputes between the parties regarding claim and counterclaim would not be

affected in any manner because of the sale of the stock belongs to petitioner.

8. In view of my foregoing discussion, I allow this petition under Section 9

of Arbitration & Conciliation Act, 1996, and the petitioner is given liberty to

sell the stocks through open tender process or by way of auction in the open

market and realize the amount and adjust the amount towards dues payable

by respondent.

9. The petition stands disposed of in terms of above order.

August 31, 2009                                          SHIV NARAYAN DHINGRA J.
rd

OMP 651/08 National Agricultural Coop. Marketing Fed. Of India Ltd. v. Virat Exports Pvt. Ltd.& Anr.

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