Madras High Court

Mrs. Tamilarasi.P vs M/S.Dimco Finance Private ... on 21 August, 2023

                                                                           CMA Nos. 1390 & 1391 / 2023

                              IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                   DATED: 21.08.2023

                                                        CORAM :

                                  THE HONOURABLE MR. JUSTICE SUNDER MOHAN

                                    Civil Miscellaneous Appeal Nos. 1390 & 1391 of 2023
                                                            and
                                     C.M.P. Nos. 13867, 13871, 13872 & 13875 of 2023

                     1.Mrs. Tamilarasi.P
                     2.Mr. Umapathy                         ... Appellants in both the appeals
                                                          Versus

                     M/s.DIMCO Finance Private Limited,
                     Gaurav vara,
                     #32, New Avadi Road,
                     Kilpauk Garden, Kilpauk,
                     Chennai – 600010.            ... Respondent in both the appeals

COMMON PRAYER : Civil Miscellaneous Appeal filed under Section 37(2)(b) of the Arbitration & Conciliation Act, 1996 praying to set aside the orders passed by the learned sole arbitrator in M.P. No. 1 of 2023 in A.C.P.(CNICA DFL) No.13886/6 of 2022 dated 07.06.2023 and in M.P. No. 1 of 2022 in A.C.P.(CNICA DFL) No.13886/6 of 2022 dated 04.04.2023

For Appellants : Mr. S.I. Sharukumar (in both appeals).

For Respondent : Mr. T.R. Ravi (in both appeals).

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CMA Nos. 1390 & 1391 / 2023

COMMON JUDGMENT The above appeals have been filed challenging the orders passed

by the learned Arbitrator permitting the respondent herein to repossess

the vehicle and for granting police protection to do so.

2.The first appellant had borrowed a sum of Rs.58,00,000/- for

purchase of a Mercedes Benz 220D bearing Registration No. TN 10 BP

1233. Admittedly, she had defaulted in repayment of loan. The second

appellant is the guarantor for the said loan. The learned Arbitrator has

passed the impugned orders after holding that the appellants had

defaulted in making payments.

3.This Court while admitting the instant appeal in C.M.A. No.

1390 of 2023 and granting stay in C.M.P. No. 13867 of 2023 had

directed the appellants / petitioners to pay a sum of Rs.20,00,000/- to the

respondent within a period of four weeks from the date of receipt of a

copy of this order. The appellants had not complied with the said order.

4.The learned counsel for the appellants submitted that the orders https://www.mhc.tn.gov.in/judis

CMA Nos. 1390 & 1391 / 2023

impugned are not sustainable since it is in violation of the direction

issued by the Division Bench of this Court in Cholamandalam DBS

Finance Limited Vs. Sudheesh Kumar [(2010) 1 LW 951], wherein the

Division Bench had issued guidelines for seizure of hypothecated

vehicles. One of the guide lines is that an Advocate Commissioner must

be appointed to seize the hypothecated vehicles.

5.This Court on perusal of the impugned orders finds that in view

of the default committed by the appellants, the learned Arbitrator was

justified in allowing the applications for repossession and for police

protection. Therefore, no interference is called for. However, this Court

in Flywheel Logistics Solutions Pvt. Ltd., Rep., by its Authorized

Representative Vs. Hinduja Leyland Finance Ltd., Rep., by its

Authorized Representative and another reported in (2020) 4 LW 729

had observed as follows;

“34. iv. It would also be necessary that the disposal of these vehicles be done through public auction. Though most of the companies, nowadays, resort to this method there appears to be no uniform procedure adopted for this purpose. Invitation for participation in public auction ensures transparency and it would ensure that the entire

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CMA Nos. 1390 & 1391 / 2023

sale process is free from bias or discrimination andbeyond reproach. A public auction ensures fair price and maximum return and would ensure that the vehicles are not collusively disposed off for paltry sums thus causing legal injury to the debtor.” Further, in Cholamandalam DBS Finance Limited's case (cited supra),

this Court has observed as follows;

“The guidelines are:

a) If the pleadings in the affidavit make out that it is just and convenient to grant interimorders, and if, prima facie, the balance of convenience is in favour of the applicant, then an ex parte order appointing an advocate commissioner may be passed, but simultaneously notice shall be ordered to go to the respondent indicating the date of hearing of the application. It is open to the learned counsel for the appellant to get permission of the Court to also serve private notice on the respondents personally at the time when the vehicle is seized. But, an affidavit must be sworn to by the Advocate Commissioner that the person who received the notice was authorised to do so and that it was not given to some third party who was not responsible or who was not authorised to acknowledge any court notice on behalf of the respondents;

b) After the advocate commissioner reports to the Court

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CMA Nos. 1390 & 1391 / 2023

that the vehicle has been seized, it shall be in the custody of the applicant. This custody is on behalf of the Court, i.e., the applicant will be holding it in custodia legis.

c) Of course, if even after notice, the borrower does not appear or if it appears to the Court that the borrower is deliberately evading notice, then it is open to the applicant to pray for such reliefs as are necessary, which may even include the sale of vehicle and the matter may be heard ex parte and orders passed in exercise of discretion of Court.

d) The application shall not be closed without hearing the other side after notice is served. Before closing the application, the Court shall also ascertain whether the applicant has taken steps to initiate the arbitral proceedings. If the applicant has not done so, then orders shall be passed putting the applicant on terms as laid down in Sundaram Finance's case (cited supra), because section 9 depends on a close nexus with the initiation of arbitral proceedings;

e) As regards the expenditure incurred for keeping the vehicle in custody, the applicant shall bear it until the respondent is served and appears. After that, the Court shall hear the parties and pass orders.

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CMA Nos. 1390 & 1391 / 2023

f) The remuneration for advocate commissioners appointed by this Court shall be commensurate with the work done, since the financiers will shift this burden only on the already beleaguered borrower.

One other advantage in hearing the respondent before the closing of application is the clue that we get from Firm Ashok Traders' case [(2004) 3 SCC 155], cited supra, where the Supreme Court encouraged the parties to suggest a solution. If that is really possible, then even at the initial stage, the entire matter will come to a happy resolution. Therefore, it is not only in the interest of natural justice and fairness, but also as a pragmatic measure that we have laid down these guidelines.”

From the above observations, it is clear that whenever repossession is

ordered, an Advocate Commissioner has to be appointed to seize the

hypothecated asset. The learned Arbitrator has to follow the guidelines

issued in the aforesaid two decisions for seizure of the hypothecated

vehicles. Therefore, while this Court finds that the order directing seizure

of the hypothecated vehicle is justified, is of the view that it is subject to

the adherence to the guidelines in the above two decisions. It is open to

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CMA Nos. 1390 & 1391 / 2023

the learned Arbitrator to pass fresh orders in terms of the guidelines

issued in the two decisions. Further, the order of the learned Arbitrator

granting police protection to the respondent is justified and no