Bhumika Enterprises Pvt. Ltd vs Atul Enterprises
2009 Latest Caselaw 2542 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         OMP No.328/2009

%                                       Date of decision: 09.07.2009

 BHUMIKA ENTERPRISES PVT. LTD. .......                           Petitioner
                   Through: Through: Mr. T.K. Ganju, Sr. Advocate
                            with Ms. Roopa Dayal and Ms. A Patra,
                            Advocates.


                                    Versus

 ATUL ENTERPRISES             .......                        Respondent
                   Through: Mr. S.K. Sharma with Mr. Mayank
                            Bansal, Advocates.


                          AND


                    OMP No.331/2009

MRS. SAROJ BALA,
PROPRIETOR ATUL ENTERPRISES ....... Petitioner

                   Through: Mr. S.K. Sharma with Mr. Mayank
                            Bansal, Advocates.

                                 Versus

BHUMIKA ENTERPRISES PVT. LTD.                      .......    Respondent

                   Through: Mr. T.K. Ganju, Sr. Advocate with Ms.
                            Roopa Dayal and Ms. A Patna,
                            Advocates.

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. The two petitions have been preferred by the two parties to the

agreement dated 5th March, 2009 containing an arbitration clause.

M/s. Bhumika Enterprises Pvt. Ltd. (BEPL) petitioner in OMP No.

328/2009 had put on sale certain machineries/buildings scrap etc. at

its works at Udaipur as detailed in Annexure 1 to the Agreement;

M/s. Atul Enterprises (AE) (through its proprietor Ms. Saroj Bala)

petitioner in OMP No. 331/2009 had agreed to buy the same for a

total sale consideration of Rs. 7 crores under the said Agreement

dated 5th March, 2009. The said consideration was agreed to be paid

in installments commencing from 20th March, 2009 till 5th

September, 2009 as mentioned therein and of which post dated

cheques were delivered by AE to BEPL. It was inter alia a term of the

said Agreement that, on receipt of each installment, BEPL in

consultation with AE would approve a lot from the list of machinery

in annexure 1 that AE can dismantle and remove from the premises

and the value of such machinery shall not exceed the installment

paid by AE; that if AE lifts more than the amount paid till then BEPL

shall forfeit all monies paid till then and put up the entire remaining

machinery for sale as per its discretion; that if AE did not pick up the

lot as approved on the due date, the payment of the next installment

shall still become due; that AE shall not be entitled to withdraw or

cancel and in case it does so, all monies paid till then shall be

forfeited by BEPL; time was the essence of the Agreement and it was

further provided that upon failure of AE to lift the entire machinery

within the agreed time and the grace time agreed, damages as

mentioned therein shall be levied for a further term of 30 days and

whereafter BEPL shall have the right to forfeit all the money paid till

then and to dispose of the entire machinery; the sale was to be on as

is where is basis.

2. Some of the cheques having been dishonoured, BEPL issued

notice of termination of the Agreement to AE and which has resulted

in the petitions being filed. In OMP No.; 328/2009 BEPL has claimed

the relief of restraining AE from interfering with BEPL selling,

transferring or creating third party rights in the machinery and

building scrap lying at the premises or from removal thereof. In OMP

No. 331/2009 AE has claimed the interim measures of staying the

operation of the letter dated 4th June, 2009 of BEPL of termination of

the Agreement and for directing BEPL to maintain status quo ante as

it existed on the date of execution of the Agreement. Vide ad interim

orders dated 15th June, 2009 the parties were directed to maintain

status quo in respect of machinery and building scrap lying at the

premises of BEPL. The said order was subsequently modified on 2nd

July, 2009 with the consent of the parties, to be with respect only to

the machinery subject matter of the Agreement and not with respect

to other machinery at the said premises of BEPL which did not form

part of the Agreement.

3. The dispute and controversy between the parties is as to the

amount paid by AE to BEPL till date; whether the machinery

admittedly removed till date was at the instance of AE and/or by its

nominees or by BEPL surreptitiously in breach of the Agreement.

4. It is not disputed that prior to the Agreement dated 5th March,

2009 (supra) Agreements dated 14th February, 2009 and 25th

February, 2009 with respect to same subject matter were also

executed by the parties. The said Agreements are identical to the

agreement dated 5th March, 2009 save that the consideration

mentioned in the Agreement dated 14th February, 2009 is Rs. 8.51

crores and in the Agreement dated 25th February, 2009 is Rs. 7.51

crores. The documents show that the consideration was so reduced

on the request of AE and for the reason of the fall in the prices of

scrap at that time. The counsel for AE has on the contrary contended

that in fact the sale consideration was Rs. 8.51 crores only and on

the insistence of BEPL, payments were made in cash by AE to BEPL

and on successive payments being made in cash agreements

reducing the sale consideration were executed and the cheques

which were given under the said two earlier agreements, were

returned by BEPL to AE agasint cash. It is further contended that the

documents containing the request of AE for reduction in sale

consideration were obtained by BEPL at the time of signing of the

Agreement of 5th March, 2009. The counsel for AE, in this regard

also relied upon the stamp papers used for the three agreements and

contended that the same were purchased by BEPL on the same date

and bear consecutive numbers. It is the submission of AE that

besides the sum of Rs. 1.51 crores paid in cash, a further sum of

Rs.2.07 crores has been paid till 20th April, 2009 making a total

payment of Rs. 3.58 crores to BEPL.

5. The senior counsel for BEPL controverts the aforesaid position

and has relied upon the documents of reduction of sale consideration

and denied having received Rs. 1.51 crores in cash. It is contended

that a total sum of Rs. 1.48 crores has been received from AE till

date as shown in the statement filed by BEPL along with its

documents and leaving a balance of Rs. 5.52 crores out of total

agreed sale consideration of Rs. 7 crores.

6. The counsel for the AE contends that in spite of AE having

made the aforesaid payment of Rs.3.58 crores till date AE has not

removed any machinery or scrap from premises of BEPL, till date. At

the time of hearing on 2nd July, 2009, it was contended by the counsel

for AE that BEPL has surreptitiously removed machinery worth Rs. 3

crores from the premises. Invoices raised by BEPL on other parties

with respect to sale of the machinery forming subject matter of the

Agreement have been filed by AE along with its petition.

7. Per contrary the senior counsel for BEPL has contended that

the machinery which is alleged to have been surreptitiously removed

by BEPL in fact was removed and invoices aforesaid were drawn at

the instance of AE; that AE did not have sales tax number of its own

in Rajasthan from where machinery was to be removed and AE being

a scrap dealer himself had after entering into the Agreement with

BEPL identified the actual buyers of the material and asked BEPL to

effect sale directly in favour of the said purchasers leading to the

invoices aforesaid. BEPL has also filed letters received from the said

purchasers to the effect that they had lifted the said goods from

premises of BEPL after striking a deal with AE and that their

negotiations were with AE. The senior counsel for BEPL has also

drawn attention to the statement of payments received, filed by

BEPL in which all the said payments have been accounted for

besides certain other payments also received in cash from other

parties brought by AE and to whom the goods were delivered at the

instance of AE.

8. It is further the contention of BEPL supported by documents,

that BEPL was desirous of dismantling the machinery and factory

premises aforesaid for purposes of another project on the said

premises and if the said machinery is ordered to remain at site as

contended by AE, the same will lead to the project of the BEPL being

delayed, leading to incalculable damages to BEPL. The senior

counsel has further contended that the time was made the essence of

the Agreement for this reason only. It is further contended by the

senior counsel for BEPL that considering the nature of the

Agreement, the same is not specifically enforceable under the

provisions of the Specific Relief Act. Several judgments have been

cited in this regard. It is conte nded that even if AE succeeds in

establishing the averments aforesaid, the claim of AE against BEPL

shall at best be a monetary claim and for which the proposed project

aforesaid of BEPL cannot be jeopardized. It is informed that BEPL

has in terms of the agreement already appointed the arbitrator. On

enquiry as to whether the order of status quo could not be granted

for securing the amount, if any, ultimately found due to AE, the

senior counsel has drawn attention to the petition of AE and

contended that that is not the case with which AE has came before

the Court; the petition of AE is on the premise of AE being entitled to

status quo ipso facto during the pendency of the arbitration

proceedings.

9. On 2nd July, 2009 during hearing, it was put to the counsel for

AE whether AE was willing to lift the plant, machinery and goods in

terms of the Agreement lying at site, since according to it, as on that

date goods worth Rs. 3 crores had been removed and the goods

worth balance value of Rs. 5.51 crores were still lying in the factory

premises of BEPL. The counsel for AE at conclusion of hearing had

stated that since the statement that goods worth Rs. 3 crores had

been removed was made on the basis of the status existing as on the

date of filing of OMP No. 331/2009 i.e. 12th June, 209, AE before

accepting or rejecting the other would like to inspect the premises

again. As such the matter was adjourned to today only for the

purposes AE responding to the said offer of the Court. On suggestion

of the counsel for the parties on that date and to avoid any further

delays, a Court Commissioner was also appointed to draw up an

inventory of the machinery, building's scrap subject matter of

Agreement lying at site. The commission has been executed and the

Court Commissioner has filed the report.

10. The counsel for AE has today further contended that on

inspection it has been found that today goods/building's scrap of

value of Rs. 2.5 crores only are lying at site and valuable items are

missing. It is also contended that a list of plant and machinery

forming part of the agreement was prepared by parties while

negotiating the contract. The same does not form part of any of the

agreements. A copy thereof has been handed over in court. Several

items as mentioned in the said list are averred to have been removed

by BEPL. The counsel has on query also stated that AE is not

interested in specific performance of the Agreement and in any case

the agreement is now incapable of specific performance.

11. The counsel for AE has however contended that BEPL has

acted fraudulently not only in matter of receiving the huge sum of

RS. 1.51 crores in cash and also in removing the machinery

surreptitiously not only prior to the filing of the petition but also

thereafter and in preparing successive agreements and also taking

all the documents including letter dated 5th May, 2009 filed by BEPL,

from AE in advance and thus equities are not in favour of BEPL and

thus AE is entitled to the order of status quo. It is now orally

contended that the said order be also made to secure the monetary

award, if any, in favour of AE. He contends that BEPL has obtained

the letters aforesaid from its purchasers and that though AE does not

have a sales tax number in Rajasthan but the temporary sales tax

could have been obtained within hours in case of such transactions.

12. It being the admitted position that the agreement is not

specifically enforceable, no case of restraining BEPL from removing

the machinery or of maintaining status quo of the property is made

out. If AE is not interested in purchasing goods at site and/or if BEPL

cannot be compelled to sell the same to AE, no purpose will be

served by retaining the same. An inventory has already been

prepared. The photographs filed by court commissioner also show

that if the goods are ordered to remain as they are, there may be

pilferages and deterioration. While the claim of AE is monetary only,

and yet to be established if the said machinery/building's scrap are

not permitted to be removed immediately, the property of BEPL shall

be wasted and cannot possibly be put to use for the new project as

claimed. In fact during the hearing on 2nd July, 2009 an offer was

given to the counsel for AE to furnish security for such losses which

will be suffered by BEPL if the order of status quo is to be continued

but the same was declined.

13. As far as the prima facie of the case is concerned at this stage,

though the stamp papers suggest that same were bought at the same

time but in view of the documents bearing the admitted signatures of

AE, it cannot be said that actual sale consideration is 8.51 crores or

was reduced against payments in cash. Moreover in my view, AE

being itself a party to the illegality alleged, cannot take the said

stand before the Court.

14. As far as the averments of BEPL having surreptitiously

removed the goods to detriment of AE and of AE in-spite of paying

the huge amount of Rs.3.58 crores having not removed single

machinery from the premises is concerned, the same is also prima

facie unbelievable. It was a term of the Agreement that the

machinery shall be permitted to be removed in proportion to the

payments made. AE is not a novice in the business. During the

course of hearing, the counsel for AE on instructions had stated that

AE has annual turnover of over 25 crores. I find it hard to believe

that AE, in spite of having paid the said monies would not have

removed the proportionate machinery. Similarly the reliance by AE

on the invoices by BEPL in favour of third parties is at this stage

prima facie met by the letters of such third parties of having dealt

with AE. It is not disputed that cheques given by AE have bounced.

BEPL in terms of the agreement is entitled to forfeit monies paid till

now and to sell to machinery to others.

15. In the circumstances aforesaid AE on the basis of the

averments in its petition is not found entitled to the interim

measures claimed.

16. As aforesaid, AE neither has prima facie case in its favour nor

will suffer irreparable injury if the machineries are removed and sold

by BEPL. The balance of convenience is also not in favour of AE.

While claims of AE are for monies allegedly paid and damages, if the

machinery is not allowed to be removed, the new project of BEPL

will be held up causing incalculable loss to BEPL.

17. Though AE has not made out a case of securing monies if any

ultimately found due, the senior counsel for BEPL has contended

that the factory premises itself are worth 50 crores and are

unencumbered.

18. OMP No.331/2009 in the circumstances is dismissed and OMP

No. 328/2009 is allowed. AE shall not interfere in the dismantling

and removal of the machinery by BEPL from the premises aforesaid.

19. Needless to add that any observation made herein shall not

affect the determination of the matter on merits during the

arbitration proceedings. Parties are however left to bear their own

costs.

20. The counsel for BEPL states that the expenses incurred in the

commission besides the fee of the commissioner were born by BEPL

and in accordance with the order of the Court AE shall reimburse its

share within 15 days.

IA No. 7884/2009 in 328/2009 and IA NO. 7903/2009 in 331/2009

The petitions having been disposed of, these applications have

become infructuous and are dismissed.

RAJIV SAHAI ENDLAW,J July 09, 2009 rb