Research › Search › Judgment

Madras High Court · body

2013 DIGILAW 12 (MAD)

Mahaveer Finance India Ltd. v. K. Pandurangan

2013-01-02

R.S.RAMANATHAN

body2013
JUDGMENT 1. Defendant in O.S.No.3772 of 2011 on the file of the VII Assistant Judge, City Civil Court, Chennai is the revision petitioner. 2. Respondent/plaintiff filed the suit for declaration declaring that the seizure of the plaintiff's vehicle bearing registration number TN-22-A4260 by the defendant/revision petitioner is illegal, null and void and for mandatory injunction directing the revision petitioner to return the said vehicle in good running condition. In that suit, the revision petitioner filed application under section 8 of the Arbitration and Conciliation Act, 1996 to refer the dispute to arbitration in terms of arbitration agreement and that application was dismissed and aggrieved by the same, this revision is filed. 3. It is submitted by the learned counsel for the revision petitioner that the respondent/plaintiff entered into a hire purchase agreement with the revision petitioner for the purchase of the vehicle and executed a hire purchase agreement and as per the terms of the hire purchase agreement and as per the power given under the agreement, in the event of default committed by the borrower, the financier is entitled to take possession of the vehicle and exercising the said power, the revision petitioner took possession of the vehicle and that is challenged by the respondent by filing suit. He further submitted that as per Article 20.1 of the Hire Purchase agreement, all disputes and claims arising out of the agreement shall be referred to arbitration and therefore, by invoking the provision of section 8 of the Arbitration Act, the application was filed to refer the matter to arbitration and without appreciating the object of the Arbitration and Conciliation Act, 1996 and the provisions of sections 5 and 8 of the said Act, the court below dismissed the application and therefore, the order of the court below is liable to be set aside. He also relied upon the judgment reported in H.P.CORPORATION LIMITED v. M/S.PINKCITY MIDWAY PETROLEUMS ( AIR 2003 SC 2881 ) in support of his contention. 4. He also relied upon the judgment reported in H.P.CORPORATION LIMITED v. M/S.PINKCITY MIDWAY PETROLEUMS ( AIR 2003 SC 2881 ) in support of his contention. 4. On the other hand, the learned counsel for the respondent/plaintiff submitted that having regard to the relief prayed for in that suit, the dispute cannot be resolved by the arbitrator and the suit was filed challenging the illegal act of the revision petitioner in seizing the vehicle by taking the law into their hands and when the revision petitioner acted in illegal manner, contrary to the hire purchase agreement, the only remedy open to the respondent is to file a suit for declaration that the seizure of the vehicle by the revision petitioner is illegal and for consequential mandatory injunction and the arbitrary action of the revision petitioner now questioned of can be considered only by civil court and also relied upon the judgment reported in M/S.TML FINANCIAL SERVICES LTD. v. VINOD KUMAR, in support of his contention. 5. It is admitted that the respondent entered into a hire purchase agreement and it is also not in dispute that the respondent committed default in payment of dues as and when they became due. The grievance of the respondent is that even though the respondent has committed default in the payment of dues, the seizure of the vehicle by the revision petitioner by force is against the terms of the hire purchase agreement and when the revision petitioner acted in an illegal manner and seized the vehicle and the same is challenged by the respondent, only Civil Court can decide the issue as to whether the seizure is legal or illegal and hence, the Civil Court has got jurisdiction. 6. According to me, the court below, without appreciating the express provisions of sections 5 and 8 of the Arbitration and Conciliation Act and also without considering various clauses in the hire purchase agreement, erred in dismissing the application filed by the revision petitioner and ought to have allowed the application and directed the parties to refer the matter for arbitration. 7. It is seen from the hire purchase agreement that event of default is mentioned in Article 12, and 18 instances are mentioned in Article 12 which constitute events of default. 7. It is seen from the hire purchase agreement that event of default is mentioned in Article 12, and 18 instances are mentioned in Article 12 which constitute events of default. As per Article 12.1, when the borrower fails to repay the loan or any fee, charges or costs in the manner contained therein and any one of the instalments or amount due thereunder remains unpaid after the date on which it is due, constitute event of default. As stated supra, admittedly, the respondent/plaintiff committed default in payment of dues and therefore, as per Article 12.1, an event of default had occurred. Article 13 deals with lender's rights and as per Article 13.2, upon an occurrence of event of default, the borrower shall be bound to return the asset to the lender at such location as the lender may designate in the same condition in which it was originally delivered to the borrower and the borrower shall not prevent or obstruct the lender from taking the possession of the asset. It is further stated that to exercise the right of taking possession of the asset, the lender is entitled to enter upon the premises or garage or godown where the vehicle is kept and the lender, if necessary, can also break open any such place. Therefore, the power is given to the lender, in the event of default committed by the borrower, to take possession of the vehicle when the borrower failed to return the asset. 8. It is the contention of the learned counsel for the respondent/plaintiff that as per Article 13.1, notice of intimation has to be sent to the borrower about the default committed by him and the borrower must be called upon to pay the entire amount and other charges. He, therefore, submitted that without giving notice, the financier has no right to take forcible possession of the vehicle and therefore, the seizure of the vehicle by the financier is illegal and the court has got jurisdiction. 9. According to me, the contention of the learned counsel for the respondent cannot be accepted as the arbitration clause contained in Article 20 covers all circumstances. 9. According to me, the contention of the learned counsel for the respondent cannot be accepted as the arbitration clause contained in Article 20 covers all circumstances. Article 20.1 is as follows:- "All disputes, differences and/or claim arising out of this Agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1956, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the Lender. The award given by such an Arbitrator shall be final and binding on the Borrower to this agreement. It is a term of this agreement that in the events of such an arbitrator to whom the matter has been originally referred dying or being unable to act for any reason, the Lender, at the time of such death of the arbitrator or of his inability to act as arbitrator, shall appoint another person to act as arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor." 10. Therefore, all disputes, differences and claim arising out of agreement whether during its subsistence or thereafter shall be settled by the arbitrator. As stated supra, the default committed by the respondent/plaintiff is not in dispute and the vehicle was taken by the financier as the respondent/plaintiff has committed default in payment of rent. Therefore, the question to be decided is whether the revision petitioner has got a right to take possession of the vehicle in the event of default committed by the borrower and according to me, such dispute has to be decided only by the arbitrator as Article 20.1 covers such disputes. 11. In the judgment reported in AIR 2003 SC 2881 , it has been clearly held that of section 8 of the Arbitration and Conciliation Act, 1996, is peremptory in nature and when there is an arbitration clause in the agreement, it is obligatory to refer the party to the arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action if such application is made except to refer the dispute to arbitrator. 12. 12. In the judgment, the Kerala High Court has held that even though there is a clause in the agreement to refer the matter to arbitration, the vehicle cannot be seized illegally but only under due process of law and arbitration clause in the agreement cannot be put forward as a shied when one of the parties committed an act opposed to public policy and cause injury to other party. 13. According to me, the revision petitioner has not done any illegal act in seizing the vehicle and as stated supra, Article 13.2 gives power to the financier to take possession of the vehicle in the case of default in payment of dues and as a matter of fact, the borrower is expected to surrender the vehicle as soon as he has committed default and when the borrower has committed default as per the provisions of Article 12 of the hire purchase agreement, it cannot be contended that the seizure is illegal and therefore, the civil court has got jurisdiction to entertain the suit irrespective of the arbitration clause in the agreement. Therefore, the judgment cannot be applied to the facts and circumstances of the case. 14. Further, as per the judgment of the Honourable Supreme Court, when there is an arbitration clause and the dispute is covered under the arbitration clause, the civil court has no jurisdiction and the matter has to be referred to arbitration. Hence, the order of the court below is set aside and the revision is allowed and the VII Assistant Judge, City Civil Court, Chennai is directed to refer the matter to the arbitration. No costs. The connected miscellaneous petition is closed.