Nafed vs Women Development Organization
2009 Latest Caselaw 1839 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI


                                            Date of Reserve: April 29, 2009
                                               Date of Order: May 04, 2009

+ OMP 551/2008
%                                                                 04.05.2009
    National Agricultural Cooperation
    Marketing Federation of India
    Ltd. (NAFED)                                           ...Petitioner
    Through: Mr. Anshu Dhingra, Advocate

      Versus

      Women Development Organization
      (WDO)                                           ...Respondent
      Through: Mr. Shiv Khorana and Mr. Ashish Khorana, Advocates


      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 has preferred this application under Section 9 of the

Arbitration & Conciliation Act, 1996 (for short, "the Act") with a prayer that

respondent be restrained from selling, disposing of and creating any third

party rights in any manner as far as balance goods/ salvage lying in its

godown No.5, Khasra No.39/9, Jai Hind Gram, Tekri Kalan, New Delhi-41 and

the respondent be also restrained from transferring, alienating its rights, title

and interest in property No.313, DDA, MS Tower -1, Mount Kailash, East of

Kailash, New Delhi-110015 and Khasra No.23/14 and 23/17, Village and Post

Office Rani Khera, Madanpur Dabas, Delhi-81.

2. The petitioner had entered into an agreement with the respondent on

OMP 551/2008 NAFED v. WDO Page 1 Of 6 20th May 2004. This agreement contained an arbitration clause for reference

of a dispute between the parties to an Arbitrator. The agreement, as entered

into between the parties provided that though all products were to be

purchased by WDO in its own name, but on behalf of Nafed and Nafed was to

release funds in respect of these purchases made by WDO on showing proof

of purchases. Nafed also advanced funds to WDO (respondent) to meet all

other incidental expenses relating to transactions of supply to the indentors.

Thus, the goods were being purchased by the respondent in its own name but

all financing was being done by the petitioner on showing the proof of

purchase and indentors and the goods so purchased were being supplied on

behalf of petitioner to APO. Nafed was to be paid service charges on gross

value of the transaction made on behalf of Nafed by WDO at the rate of 1.5%

for business turnover of one thousand lac annually and one percent for

business turnover exceeding one thousand lac annually.

3. On perusal of documents, it is apparent that the respondent was

maintaining stock and was informing the petitioner from time to time about

the stock maintained by it and was sending intends of the stock. The stock

was being kept in the godown of the respondent. Clause 2.6 provides that

respondent was responsible to make good the entire investment made by

petitioner in the purchase made in the indentors. This contract was going on

when the respondent informed the petitioner on 1st January 2008 through fax

message that their godown being Godown No.5, Khasra N.39/9, Jai Hind

Gram, Tekri Kalan, New Delhi-41 where the goods were stored had caught fire

in the early morning of 1st January 2008 and respondent requested the

petitioner to take necessary action as required. Pleadings further reveal that

the godown was duly insured with the Insurance Company by respondent.

OMP 551/2008 NAFED v. WDO Page 2 Of 6 Respondent lodged claim with the insurance company for claiming damages

due to fire. The insurance claim was received by the respondent.

4. The petitioner has made this petition praying that the goods lying in

godown practically were financed by the petitioner and belonged to it and the

losses due to fire were suffered by the petitioner as it was the petitioner who

procured the orders from APO and these goods were to be supplied to APO in

terms of the order procured by the petitioner. The respondent received a

claim of Rs.3 crore from the insurance company against the policy and further

claim of respondent was also to be settled by the insurance company. The

petitioner, therefore, made a prayer that this Court should secure the interest

of the petitioner during pendency of the arbitration proceeding and the

amount paid by the insurance company to the petitioner should be directed

to be kept in a fixed deposit and since the funds of the petitioner worth crores

of rupees were involved, the Court should issue an interim injunction against

the property of respondent restraining respondent from alienating or selling

the properties.

5. It is argued by counsel for the respondent that the goods lying in the

godown before its catching fire belonged to the respondent. The petitioner

had also approached the insurance company during the period when claim of

respondent was pending with insurance company and the insurance company

had come to conclusion that the goods in the godown belonged to the

respondent, so the claim of the respondent under the insurance policy was

paid. It is submitted that the petitioner had no ownerships of the stock that

got bulged in fire, nor the petitioner has shown that there was any

apprehension that the respondent was likely to flee away with the property

OMP 551/2008 NAFED v. WDO Page 3 Of 6 warranting an injunction order to be passed by this Court. It is submitted that

the respondent was an organization working since 1996 and has an overall

turnover of Rs.10 crore per annum and it was not an individual that will run

way. The respondent owned number of properties in Delhi worth more than

Rs.15 crore and the application of the petitioner had no merits.

6. A perusal of agreement between the petitioner and the respondent

makes it clear that the goods were to be purchased by respondent in its own

name and the petitioner was to provide finances. The petitioner was to get an

assured return on the finances provided by the petitioner. The risk involved in

storage of the goods was therefore entirely of the respondent and not of the

petitioner. The insurance company after considering the purchase indents

and documents pertaining to goods rightly came to conclusion that the goods

were purchased by the respondent in its own name and the ownership vested

in respondent. The insurance company was in fact not required to go into the

aspect as to who provided the finances but the fact remains that under the

agreement the entire finances for the goods stocked for supply to APO was

provided by Nafed i.e the petitioner. It is not the case of the respondent that

the Nafed had not provided finance to respondent on confirmation of the

stocks and on confirmation of purchase of goods. The correspondence

between the parties shows that the respondent had informed the petitioner

about the purchase of goods and also confirmed the stock from time to time.

Thus, the stake involved of the petitioner is much higher than that of the

respondent. As far as turnover of the respondent is concerned, the agreement

entered into between the parties itself provides turnover of Rs.10 crores or

more annually from the contract between petitioner and APO for which the

services of the respondent were being taken. The respondent had failed to

OMP 551/2008 NAFED v. WDO Page 4 Of 6 show any other business being done by it except the business being provided

by the petitioner. Looking into the huge investment made by the petitioner

into the stock of the respondent and the fact that the respondent had claimed

the entire insurance money received from the insurance company after

burning of stock in the godown, the petitioner getting scared was obvious as

huge funds of the petitioner running into crores of rupees were involved.

7. It is argued by counsel for the respondent that the prayer made by the

petitioner was akin to seeking relief before judgment in terms of Order 38

Rule 2 of Civil Procedure Code. The Court should not entertain this prayer

since the petitioner has failed to show that the respondent has any intention

of obstructing or delaying the execution of award that may be passed against

the respondent. Nor the petitioner has shown that the respondent was about

to dispose of whole or part of its properties. He relied upon Rite Approach

Group Ltd. v. M/s Rosoboronexport 2004(2) RAJ 484 (Del) and submitted that

no good ground was made out by the petitioner for issuance of a restrain

order against the properties of respondent.

8. The petitioner has filed statement of claim before the Arbitrator and

this statement of claim shows that the petitioner had to recover an amount of

Rs.21,46,30,039.76 from the respondent. The petitioner alleged in the claim

that it suffered heavy losses because of non fulfillment of the commitments

by respondent on its behalf with APO. A performance bank guarantee was

furnished by the petitioner to APO and because of non fulfillment of the

contract, APO has invoked the Bank Guarantee. The respondent, after fire in

the godown has not acted in conformity with the agreement and did not even

made an effort to refurbish the stock for fulfillment/ of commitments with

OMP 551/2008 NAFED v. WDO Page 5 Of 6 APO which resulted into heavy losses to the petitioner.

9. In view of the facts stated above, the petitioner has been able to show

that due to irresponsible conduct of the respondent, the petitioner had to

undergo a heavy liability towards APO. Looking into the fact that the

petitioner was the main source of business for the respondent, there is every

likelihood that the respondent, despite being an organization and working

since 1996, may try to sell off its properties in order to frustrate the award

that may be passed. There is a good prima facie case in favour of petitioner.

Equity and balance of convenience also lie in favour of petitioner. Under the

circumstances, I consider that it is a fit case where the respondent should be

restrained from alienating its properties till pendency of the arbitral

proceedings.

10. This petition under Section 9 is allowed and the respondent is hereby

restrained from alienating, transferring, selling or creating any third party

interest in the properties at 313, DDA, MS Tower -1, Mount Kailash, East of

Kailash, New Delhi-110015 and Khasra No.23/14 and 23/17, Village and Post

Office Rani Khera, Madanpur Dabas, Delhi-81 during pendency of the arbitral

proceedings before the Arbitrator. No orders as to costs.

May 04, 2009                                 SHIV NARAYAN DHINGRA J.
rd




OMP 551/2008             NAFED v. WDO                          Page 6 Of 6