Karnataka High Court
M/S Sundaram Finance vs Sri Manoj Padikkal on 14 June, 2022
Bench: B.M.Shyam Prasad
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF JUNE, 2022
BEFORE
THE HON'BLE MR.JUSTICE B.M.SHYAM PRASAD
MISCELLANEOUS FIRST APPEAL NO.3572/2022 (AA)
C/W
MISCELLANEOUS FIRST APPEAL NO.3573/2022 (CPC)
BETWEEN:
1. M/S SUNDARAM FINANCE
HAVING ITS OFFICE AT NO.258
FIRST FLOOR, III MAIN ROAD
CHAMARAJPET,
BANGALORE-560018
REPRESENTED BY ITS
AUTHORISED SINGATORY.
2. M/S SUNDARAM FINANCE LIMITED
REGISTERED HEAD OFFICE
AT NO.21, PATULLOS ROAD,
CHENNAI - 600 002
REPRESENTED BY ITS
AUTHORISED SINGATORY.
... APPELLANTS
(COMMON)
(BY SRI. AVINASH B C, ADVOCATE)
AND:
1. SRI MANOJ PADIKKAL
PROPRIETOR GLAD TOURS
AGED ABOUT 51 YEARS,
NO.87, ROYAL COMFORT PARK,
HOSUR MAIN ROAD, MADIWALA
BANGALORE - 560 068.
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2. SRI SRI RAVISHANKAR VIDYAMANDIR
NO.29, KACHAMARANAHALLI,
GANJUR POST
VARTHUR HOBLI,
BANGALORE - 560 087.
REPRESENTED BY ITS
AUTHORISED PERSON
SRI MANOJ PADIKKAL.
... RESPONDENTS
(COMMON)
(BY SRI.NATARAJ SHARMA S., ADVOCATE)
MISCELLANEOUS FIRST APPEAL NO. 3572/2022 IS
FILED UNDER ORDER 37 RULE (1)(a) OF ARBITRATION
AND CONCILIATION ACT AGAINST THE ORDER DATED
28.03.222 PASSED ON I.A. NO.4 IN OS.NO.6072/2021 ON
THE FILE OF THE XII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, CCH.NO.27, BENGALURU, DISMISSING
THE I.A.NO.4 FILED UNDER SECTION 8(1) OF
ARBITRATION AND CONCILIATION ACT.
MISCELLANEOUS FIRST APPEAL NO. 3573/2022 IS
FILED UNDER ORDER 43 RULE 1(r) OF CPC, AGAINST THE
ORDER DATED 28.03.2022 PASSED ON IA NO.1 IN
O.S.NO.6072/2021 ON THE FILE OF THE XII ADDITIONAL
CITY CIVIL AND SESSIONS JUDGE, BENGALURU, (CCH
NO.27), ALLOWING IA NO.1 FILED U/O.39 RULE 1 AND 2
OF CPC.
THESE MISCELLANEOUS FIRST APPEALS COMING
ON FOR ORDERS THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
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JUDGMENT
These appeals are by the defendants in O.S.
No.6072/2021 on the file of the XII Additional City Civil
and Sessions Judge, Bengaluru [for short, 'the civil
Court']. The appellants have impugned the civil Court's
orders dated 28.03.2022 whereby, the civil Court has
allowed the respondents-plaintiffs' application [I.A. No.1]
under Order XXXIX Rules 1 and 2 of the Code of Civil
Procedure, 1908 [for short, 'the CPC'] restraining the
appellants from repossessing the subject vehicles
without due process of law pending disposal of the suit
and rejecting the appellants' application [I.A. No.4]
under Section 8[1] of the Arbitration and Conciliation
Act, 1996 [for short, 'the Arbitration Act'].
2. The respondents, the borrowers from the
appellants, have purchased certain buses which are
used to ferry school children and are hypothecated with
the appellant. The appellants have filed this suit in O.S.
No.6072/2021 for permanent injunction restraining the
appellants from taking forcible custody of the vehicles
hypothecated with the appellants. The respondents
contend that on 29.10.2021 certain goons, at the
instance of the appellants, have taken possession of five
buses hypothecated with the appellants and there is
threat of the appellants similarly taking possession of
the other vehicles as well. The respondents have
referred to the registration of the first information with
the jurisdictional Police at their instance.
3. The appellants, upon service of notice of the
suit and before filing their Written Statement, have filed
an application under Section 8 of the Arbitration Act for
referring the parties to arbitration relying upon Article
22 of the Hypothecation Agreement executed by the
respondents. The civil Court has rejected this
application under Section 8 of the Arbitration Act
primarily reasoning that the agreement would appear to
be a unilateral agreement in a cyclostyled format and as
such the parties cannot be relegated to arbitration. The
civil Court has relied upon a decision of the Kerala High
Court in 'M/s. Sundaram Finance Ltd., v. Biju Scaria' in
CRP No.145/2011 decided on 15.07.2014. The civil
Court in allowing the respondent's application has
restrained the appellants from taking forcible custody of
the other buses hypothecated primarily for the aforesaid
reason and opining that the appellants cannot resort to
taking law in their own hands.
4. The learned counsels for the parties submit
that during the pendency of the suit, the appellants
have initiated the process for appointment of an
Arbitrator as contemplated under the Hypothecation
Agreement, but the respondents has challenged such
appointment and necessary application in this regard is
pending before the Sole Arbitrator. In fact, the learned
counsel for the respondents submits that bias in the
Arbitrator appointed by the appellants is writ large with
the Arbitrator informing the respondents that there
shall be no personal hearing.
5. This Court would not opine on the
respondents' apprehension as that should be visited by
the Sole Arbitrator/Courts in accordance with law.
However, this Court must refer to the decision of the
Hon'ble Supreme Court in 'Hema Khattar and Another v.
Shiv Khera'1 where the Hon'ble Supreme Court has
reiterated that it would be obligatory on the Court to
refer the parties to arbitration in terms of the
Arbitration Agreement. The civil Court's order on
rejecting the appellants' application [I.A. No.4] under
Section 8 of the Arbitration Act cannot be sustained in
the light of this exposition, especially when the
respondents do not dispute the execution of the
Hypothecation Agreement containing the arbitration
clause.
1 [2017] 7 SCC 716
6. This Court must now consider the interim
arrangement that is provided for by the civil Court by
the impugned order in allowing the respondents'
application for temporary injunction. It is not in dispute
that the appellants have recovered the custody of five
hypothecated buses and the respondents continue to
have custody of the remaining twenty buses. If the
parties should work out their remedies in the
arbitration proceedings in accordance with the
procedure under the Arbitration Act, they must
necessarily work out their remedies even insofar as the
interim arrangement under the provisions of the said
enactment. As such, the respondents will have to avail
their remedy under Section 9 of the Arbitration Act and
in fact the decision referred to by the civil Court is
reiteration of the same.
7. In the facts and circumstances of the
present case, this Court is of the considered view that
there must be an interim order for a period of eight [8]
weeks restraining the appellants from taking possession
of the hypothecated twenty [20] vehicles with liberty to
the respondent to initiate appropriate proceedings
under Section 9 of the Arbitration Act for adjudication of
its right to interim protection. Hence the following:
ORDER
The appeals are disposed of modifying
the impugned order allowing the appellants'
application [I.A. No.4] under Section 8 of the
Arbitration Act with the observation that the
parties will work out their remedies in the
arbitration proceedings as contemplated in
the Arbitration Agreement and the
appellants are restrained for a period of eight
[8] weeks from today from taking forcible
custody of twenty buses with liberty to the
respondents to avail remedy under Section 9
of the Arbitration Act insofar as the rights to
retain custody of hypothecated twenty buses
beyond the said period of eight [8] weeks. All
questions on the respective merits are left
open to be considered in such proceedings.
The parties are at liberty to place a certified
copy of this order for a formal order in the
proceedings before the civil Court.
SD/-
JUDGE
AN/-
