Delhi High Court
Tarun Krishan Aggarwal & Anr. vs Sho, P.S. Hauz Qazi & Ors. on 19 February, 2021
Signature Not Verified
Digitally Signed By:DINESH
SINGH NAYAL
Signing Date:23.02.2021
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$~42
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 19th February, 2021
+ W.P.(C) 2282/2021 & CM APPL. 6623/2021
TARUN KRISHAN AGGARWAL & ANR. ..... Petitioners
Through: Mr. Arvind Sharma, Advocate. (M:
9811736977)
versus
SHO, P.S. HAUZ QAZI & ORS. ..... Respondents
Through: Mr. Sameer Vashisht, ASC for
GNCTD with Mr. Manashwy Jha,
Advocate for R-1 to 3.
Mr. Niraj Kumar, Advocate for R-4
and 5.
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J.(Oral)
1. This hearing has been done through hybrid mode (physical and virtual
hearing).
2. The Petitioners are stated to have availed of a loan facility with Kotak
Mahindra Bank (hereinafter, 'Bank'). The total loan disbursed to the
Petitioners was Rs.15,00,000/-. A total amount of Rs.12,88,555.20/- is
outstanding, though, the Petitioners have made several representations to the
Bank for restructuring of the loan.
3. Various emails were sent by the Petitioners to the Bank for
restructuring of the loan, which are annexed along with the petition.
However, on 21st November, 2020, the Petitioners received notice dated 4th
November, 2020, along with appointment letter dated 2nd November, 2020
by which an arbitrator was appointed by the Bank. The said arbitrator is an
advocate based in Chennai. Suddenly, on 21st December, 2020, i.e. within a
few weeks of the Petitioners receiving the notice, they received an order
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SINGH NAYAL
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dated 7th December, 2020, purportedly passed by the arbitrator.
4. There are two versions of this order dated 7th December, 2020 which
are placed on record. In the first version, one Mr. Shorya Verma, has been
appointed as the receiver to take possession and custody of the movable
properties of the Petitioners mentioned in the schedule. The operative
portion of the order reads as under:
"Accordingly, Order is passed directing the
appointment of Mr. Shorya Verma as the receiver for
taking possession and custody of the moveable properties
of respondent, mentioned in the schedule hereunder and
for which purpose the said receiver is hereby authorized
to take necessary aid from police, in whose jurisdiction
the properties are found.
And further the respondents are directed to disclose
their other assets as mentioned in para 2 above, to the
receiver appointed."
5. In the second version of the order, four persons have been appointed
as the receivers. The operative portion of the order is as under:
"Accordingly, Order is passed directing the
appointment of Mr. Sanjeev Jain or Ravi Bansal or Ashok
Kumar as the receiver for taking possession and custody
of the moveable properties of respondent, mentioned in
the schedule hereunder and for which purpose the said
receiver is hereby authorized to take necessary aid from
police, in whose jurisdiction the properties are found.
And further the respondents are directed to disclose
their other assets as mentioned in para 2 above, to the
receiver appointed."
6. Ld. counsel for the Petitioners submits that Respondent No. 4, i.e.,
Mr. Ramashankar, an officer of the Bank, along with the Delhi Police,
reached the residence of the Petitioners at about 1:00 pm on 30th December,
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2020 and forcibly entered the premises. There are allegations that an amount
of Rs. 20,000/- was taken by the constable, however, this is disputed by the
police. It is further alleged that the Petitioners were forced to make an NEFT
transfer of Rs.59,205/- to the Bank and also give the Bank a cheque of
Rs.1,18,410/-. Further, on 1st January, 2021, Respondent No.4 is stated to
have visited the Petitioners and threatened them into depositing a further
sum of Rs.59,205/- into the account of the Bank. Subsequently, Petitioner
No.1 visited Respondent No.3 in the police station. Attempts are stated to
have been made to meet Respondent No.1, however, Respondent No.1
refused to meet Petitioner No.1. On 6th January, 2021, a complaint was filed
by the Petitioners with Respondent No.1 against police officials who had
accompanied Respondent No.4 to threaten the Petitioners. A further
complaint was made against Respondent No.3 being appointed as the
Investigation Officer, on the ground that the Petitioners' complaint was also
against him. The Investigating Officer was subsequently changed, however,
the Petitioners' submission is that they continue to be harassed by the
Respondents. Accordingly, the Petitioners pray for the following:
"(a) direct the respondent No.2 to take appropriate
action on the complaint of the petitioners and be further
pleased to direct respondent No.3 to issue receipt of
having received Rs.20,000/- in cash which till date has
not been given by him towards his expenses in giving
police protection to respondent No.4;
(b) direct respondent No.2 to take appropriate
action against respondent No.4 for misusing the police
as representative of respondent No.5 to extract money
without following due process of law;
(c) restrain the Respondent No.6 from proceeding
further as his appointment is contrary to the law settled
by the Hon'ble Apex Court and is not in accordance
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with due procedures of law as laid down under
Arbitration and Conciliation Act, 1996;
(d) pass any other writ, order and direction that
this Hon'ble Court may deem fit and proper in the facts
and circumstances of the case and in the larger public
interest."
7. After perusal of the record, this Court is of the opinion that the
manner in which the order under Section 17 of the Arbitration &
Conciliation Act, 1996 (hereinafter, 'Act') is sought to be enforced through
the police and the receiver would be contrary to law. Section 17 of the Act
reads as under:
17. Interim measures ordered by arbitral tribunal. -- (1)
A party may, during the arbitral proceedings, apply to the
arbitral tribunal--
(i) for the appointment of a guardian for a minor or
person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of any
of the following matters, namely: -
(a) the preservation, interim custody or sale of any
goods which are the subject-matter of the arbitration
agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any
property or thing which is the subject-matter of the
dispute in arbitration, or as to which any question may
arise therein and authorising for any of the aforesaid
purposes any person to enter upon any land or
building in the possession of any party, or authorising
any samples to be taken, or any observation to be
made, or experiment to be tried, which may be
necessary or expedient for the purpose of obtaining
full information or evidence;
(d) interim injunction or the appointment of a receiver;
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(e) such other interim measure of protection as may
appear to the arbitral tribunal to be just and
convenient, and the arbitral tribunal shall have the
same power for making orders, as the court has for the
purpose of, and in relation to, any proceedings before
it.
(2) Subject to any orders passed in an appeal under
section 37, any order issued by the arbitral tribunal
under this section shall be deemed to be an order of the
Court for all purposes and shall be enforceable under the
Code of Civil Procedure, 1908 (5 of 1908), in the same
manner as if it were an order of the Court.]"
8. A perusal of Section 17 shows that any order passed under Section 17
can only be enforced in accordance with law. Thus the party in whose
favour an order under Section 17 is passed ought to approach the executing
court in the concerned area for appropriate orders. The manner in which the
ld. Arbitrator has directed appointment of a receiver and passed an order
permitting the bank to take police aid is prima facie not tenable.
9. In Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.,
(2007) 7 SCC 125, the Supreme Court has held that the underlying
principles of the CPC would be applicable for grant of interim measures
under Section 9 of the Act. Extending the rationale of Adhunik Steels
(supra) to orders passed under Section 17 of the Act, the Madras High
Court, in Flywheel Logistics Solutions Pvt. Ltd. v. Hinduja Leyland
Finance Ltd. & Ors., (2020) 7 MLJ 475, has held as follows:
"28. It may be noticed that the concluding words
of Section 17(1) is now identical with Section 9(1) and
runs "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". A fortiori, there can,
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therefore, be no quarrel that the Tribunal, like a Court
under Section 9(1) is, therefore, legally mandated to
test the case of the applicant with reference to the well-
known parameters of a) prima facie case b) balance of
convenience and c) irreparable loss before granting an
order of injunction.
...
40. In such view of the matter, this Court is of the
view that while appointing a receiver as an interim
measure under section 17 of the Arbitration
and Conciliation Act, the tribunal has to follow the
procedure well established as indicated above in
various judgments.
...
44. This Court has also come across mechanical
Orders passed for appointment of receiver to seize the
vehicle. Though the contract for hire purchase
provides for repossession of vehicles by appointing a
receiver, the tribunal has to follow the procedures as
contemplated under law. When the properties are
movables, running machineries, receiver cannot be
mechanically appointed to seize the movables out of
which the respondent is earning his livelihood. Merely
because the contract provides for repossession of
machineries, Order directing repossess the vehicle
cannot be passed mechanically without the tribunal
satisfying well settled position of law. If really, the
appointment of receiver is required, to secure the
amount, receiver can be appointed to oversee the
business and collect the income and not to seize
machineries to keep them in idle condition. When such
Orders are passed and machineries are kept in idle, it
will in fact diminish not only the value of the
machineries but also lead to loss of livelihood of the
other side. Such circumstances has to be foreseen by
the tribunal while passing the Orders.
45. As per Order 40 of Civil Procedure Code, the
purpose of appointing a receiver as contemplated
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under Order 40 has to oversee the property in respect
of which the receiver is to be appointed. The receiver,
in fact, would be given a power to manage, protect and
preserve and improve the property, besides collection
of rents thereon. Even the Court has no power to
remove from possession or custody of the property, any
person whom any party to suit has not a present right
so to remove. Whenever the receiver is appointed in
respect of the property, he has to furnish security as
the court thinks fit, duly to account for what he shall
receive in respect of the property and submit his
accounts at such periods and in such form as the Court
directs and pay the amount due from him as the Court
directs and be responsible for any loss occasioned to
the property by his wilful default or gross negligence.
As far as management of the property is concerned, he
has responsibility over the property and he cannot
commit gross negligence. Sub Clause 4 of Order 40
CPC deals with enforcement of receiver duties. High
Court Amendment (Madras) Act that in the event, the
receiver failed to submit the accounts, the Court can
even attach his property.
46. A reading of the above provision makes it
clear that mechanically receiver cannot be appointed
to deal with the property. His appointment is coupled
with the responsibilities and duties. Whereas, in the
pretext of power granted in the contract, the receivers
have been mechanically appointed under section 17 of
the Arbitration and Conciliation Act, particularly in
the dispute arising out of the hire purchase agreement.
Therefore, the Order of the tribunal is capable of
execution as a decree of a civil Court, the arbitral
tribunal has to follow the procedures as contemplated
under law."
10. The authority allegedly exercised by the police for enforcement of the
order passed by the arbitrator is clearly questionable. Under such
circumstances, it is deemed appropriate to call for a status report from the
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ACP of the concerned area, as to the facts pleaded in the present case. In
addition, a report shall be placed on record by Mr. Sameer Vashisht, ld.
counsel appearing for the Delhi Police, after obtaining instructions from the
Commissioner of Police, as to whether it is commonplace for the police to
accompany receivers who are officers of the respective Banks, for enforcing
orders passed by arbitrators, without approaching an executing court, as
alleged in the present case. If so, how many such actions have been taken in
the last two months, i.e. December, 2020 and January, 2021. Let the data be
placed on record before this Court. The report shall be filed within four
weeks.
11. The Bank is permitted to file a reply to the petition within four weeks.
In its reply, the Bank shall confirm the contents of the petition and as to
whether it is common for the Bank and its receivers to take police help
straightaway without an order passed by the executing court, by visiting the
residences/premises of borrowers along with the police. If so, how many
such actions have been taken by the Bank in the last two months i.e.,
December 2020 and January 2021.
12. Considering the nature of this matter, the proceedings before the ld.
Arbitrator shall remain stayed, subject to the Petitioners depositing a sum
Rs. 5,00,000/- before this Court within four weeks. The said amount shall be
deposited in the name of the Registrar General of this Court and kept in an
FDR on auto-renewal mode.
13. List on 23rd April, 2021.
PRATHIBA M. SINGH, J
FEBRUARY 19, 2021/dj/T
(corrected & released on 23rd February, 2021)
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Signing Date:23.02.2021 21:42
