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Terry Gold (India) Limited, represented by its Managing Director S.S.R. Kishen & Others v/s TVS Finance & Services Ltd., Chennai & Others

    Original Side Appeal Nos. 107 to 111 of 2009

    Decided On, 30 August 2013

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE M. JAICHANDREN & THE HONOURABLE MR. JUSTICE M.M. SUNDRESH

    For the Appellants: M.K. Kabir, Senior Advocate for A. Dhiraviyanathan, Ms. M. Padmavathy, Advocates. For the Respondents: R1, A. Abdul Hameed, Advocate.



Judgment Text

(Prayer: Original Side Appeals filed under Order XXXVI Rule 1 of the Original Side Rules, 1956, read with Clause 15 of the Letters Patent against the common order dated 24.06.2008 passed in O.P.Nos.621,622, 623 of 2003, 218 of 2004 and 616 of 2007.)

Common Judgment:

M.M. Sundresh, J.

1. Original Side Appeal Nos.107, 108 and 111 of 2009 have been filed by the appellants, who were the petitioners in O.P.Nos.621, 622 and 616 of 2007. O.S.A.Nos.109 and 110 of 2009 have been filed by the petitioners in O.P.Nos.623 of 2003 and 218 of 2004.

2. The appellants in all these appeals are run by the same group of persons and the contesting respondent is one and the same. The issues involved both on fact and law are also the same. Therefore, they are disposed of by way of a common order.

3. The facts in brief:

3.1 M/s Harita Finance Limited entered into two lease agreements with the appellants in the year 1995 and 1996 respectively. As per the lease deeds certain machineries were let on lease to the appellants. The Directors of the appellants stood as guarantors.

3.2. By two deeds of Assignment dated 17.07.1998, M/s Harita Finance Limited assigned all its rights in favour of the first respondent. These deeds of assignment were also signed by the appellants and its guarantors. It was agreed that the outstanding amounts would be paid as per the revised payment schedule mentioned therein.

3.3. The appellants committed default. The first respondent entered into two separate loan agreements with the appellants on 31.12.2000. According to the said agreements, the loan amounts were adjusted towards part of the outstanding amounts payable by the appellants. The appellants in O.S.A.No.107 of 2009 filed an application before the BIFR. On 16.08.2001, a Memorandum of Understanding was entered into between the M/s Harita Finance Limited and the first appellant in all appeals viz., Terry Gold (India) Limited (O.S.A.Nos.107, 108 and 111 of 2009) and Goldwon Textiles Limited, (O.S.A.Nos.109 and 110 of 2009), by which, an one time settlement was arrived at and it was agreed that the specified amount would be payable by the first appellant. As per the same, the first appellant in O.S.A.No.107 of 2009 was to allot 19,00,000 equity shares of Rs.10/- each, with the understanding that they could be bought back after due discharge of the payment due. It was also agreed between the parties that in case of breach, the first respondent would be entitled to revert back to the original status and make a claim for the entire amount due.

3.4. As there was a failure on the part of the appellants, the first respondent terminated the Memorandum of Understanding and claimed the money due in terms of the Deeds of Assignment. As the appellants did not make the payments, the first respondent invoked the arbitration clause contained in the Deeds of Assignment.

3.5. The learned Arbitrator, by a well reasoned order, rejected the issue of maintainability raised by the appellants. It was raised on the ground that the money due can only be claimed by the first respondent under the Memorandum of Understanding alone and not the Deeds of Assignment. A further contention was raised that the only issue to be decided is as to whether the first respondent can claim for allotment of shares or not and therefore, the question of payment of money can never be raised.

3.6. Challenging the arbitration awards, the appellants filed Original petitions before this Court invoking the power under Section 34 of the Arbitration and Conciliation Act, 1996. The learned single Judge dismissed the petitions. O.P.No.616 of 2007 has been filed by the appellant in O.S.A.No.111 of 2009 challenging the Arbitration Case No.5 of 2003, by which, the Arbitrator was appointed as per the Memorandum of Understanding dated 16.08.2001. The subject matter of the said case is as to whether the termination of Memorandum of Understanding is valid or not. Challenging the orders passed by the learned single Judge, the appellants have filed these appeals before us.

4. Heard the learned Senior Counsel appearing for the appellants and the learned counsel appearing for the first respondent. We have also perused the documents filed as well as the written submissions of the appellants.

5. Submissions of the Appellants:-

The learned Senior counsel appearing for the appellants submitted that as per the lease agreement, two Arbitrators ought to have been appointed. It is further submitted that the unilateral appointment of an Arbitrator, at the instance of the first respondent, cannot be sustained in the eye of law. The first respondent being an assignee, cannot seek for the amount more than that is due to the assignor. The Memorandum of Understanding was entered into between the parties and the further loan was paid after initiation of the proceedings before the BIFR and therefore, the same is not sustainable in law. In support of his contention, the learned counsel has made reliance upon the judgment in NARAYAN PRASAD LOHIA V. NIKUNJ KUMAR LOHIA (AIR 2002 Supreme Court 1139) etc.

6. Submissions of the first Respondent:-

Per contra, the learned counsel appearing for the first respondent, would submit that the appellants seek to raise new grounds for the first time before this Court. Neither in the proceedings before the arbitration nor before the learned single Judge such a contention has been raised. Even in the grounds of Appeal no such contention has been raised. The first respondent is not claiming any amount higher than what is due. The Assignment Deeds have taken note of the interest and the subsequent amount payable. The appellants have admitted the dues to be payable by signing the Deeds of Assignment and the Memorandum of Understanding. The appellants cannot take conflicting stands. They cannot approbate and re-probate. There is no law which prohibits the payment of loan pending an application before the BIFR. The conduct of the appellants also do not warrant any interference as notwithstanding the loan agreement dated 31.12.2000 and the Memorandum of Understanding, they did not make any payment. The jurisdiction of the arbitrator has to be raised at the earliest point of time as per Section 16 of the Act and therefore, the same cannot be raised at this stage of the hearing. Considering the scope and ambit of Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, the appeals will have to be dismissed. In support of his contention, the learned counsel has relied upon the judgments in M/S LLOYD INSULATIONS (INDIA) LTD., V. CEMENT CORPORATION OF INDIA LTD., (1 (2001) BC 674) and NARAYAN PRASAD LOHIA V. NIKUNJ KUMAR LOHIA (AIR 2002 Supreme Court 1139) etc.

7. DISCUSSION:-

7.1. It is seen that the appellants had raised the question of maintainability before the Arbitrator on the ground that it is only the Memorandum of Understanding which is binding the parties and not the lease agreement. It is only in that context, the appellants had raised the question of maintainability. Therefore, it was also contended incidentally by them before the Arbitrator that the first respondent cannot make any claim for money but only for the shares as per the Memorandum of Understanding. Hence, as rightly contended by the learned counsel appearing for the first respondent, it is not open to the appellant to raise the new plea at this stage of the hearing. The stand taken by them is contrary to their stand taken earlier. We also reject the said submission by taking into consideration of the scope and ambit of Sections 34 and 37 of the Arbitration and Conciliation Act. When the appellants raised the contention based on the Memorandum of Association, it is not open to them now to contend that the arbitral proceedings must have been conducted by appointing the Arbitrator as per the Lease Agreements. The appellants have not questioned the jurisdiction of the Arbitrator in that sense except by stating that the claim made before the Arbitrator for recovery of money cannot be sustained, as the Memorandum of Understanding would govern the parties. It is also to be noted that the Assignment Deed has been signed by the appellants. The appellants have been made as the confirming party in the Deeds of Assignment. The Deeds of Assignment speak about the appointment of the Arbitrator by mutual consent of the assignor and the assignee, the first respondent herein. In other words, they do not deal with the consent of the appellants. However, it is specifically stated that all parties agreed to refer any dispute touching upon the agreement of lease/HP/Loan/Hypothecation, supplementary agreement, deed of guarantee or the deed of assignment. The appellants, as noted earlier, did not question the appointment of the Arbitrator. Therefore, we do not find any substance in the submissions made by the learned Senior counsel appearing for the appellants in this regard.

7.2. The contention regarding the higher amount claimed by the first respondent is factually incorrect. It is the appellants, who signed the relevant documents. They accepted their liabilities. The said liability was modified subsequently by consent. Therefore, it is not open to them to contend that the first respondent cannot claim more than what has been mentioned in the lease agreements. We are of the view that the said submission is only a belated attempt on the part of the appellants. We also find force in the submission made by the learned counsel appearing for the first respondent that the interest component and the subsequent payments due have been taken into consideration to the knowledge of the appellants. In any case, the appellants are estopped from raising such a contention after willingly signed all the documents accepting their liability. In so far as the proceedings be

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fore the BIFR are concerned, as rightly contended by the learned counsel for the respondent, there is no bar in law to have any transaction with a concern, which has filed an application under the Sick Industrial Companies (Special Provisions) Act, 1985. We are also not concerned with the executability of the award in these proceedings. 7.3. In view of the abovesaid discussion, we do not find any merit in the appeals. Consequently, we do not find any merit in O.S.A.No.111 of 2009 as there is absolutely no material to hold that the termination of the Memorandum of Understanding is illegal, arbitrary and contrary to the powers conferred therein. We have also taken note of the fact that the appellants has successfully dragging on the payments for number of years. We also do not wish to consider the judgments relied upon by the learned counsels as they are not required for deciding these Original Side Appeals. Therefore, either on facts or on law, these Appeals are not deserved to be allowed. Accordingly, these Original Side Appeals are dismissed. However no order as to costs.
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