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Judgment
S.J. Mukhopadhaya, J.—This appeal has been preferred by M/s.Mil Merin Gas Agencies (hereinafter referred to as ''M/s.Mil Merin'')
against the order dated 6th March, 2007, passed by learned Judge in Application No. 1569/04 in Application No. 800/03. By the said order,
Advocate Commissioner has been allowed to sell the land measuring an extent of 12.22 acres in S. No. 12/1A, 1C, 1A2 located at Valparai
Village, Valparai Taluk, Annamalai Hills, Coimbatore District to the 2nd respondent, R.Muralikrishnan.
The appellant has raised the question of jurisdiction of learned single Judge to pass such order u/s 9 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the ''Act'').
On the other hand, according to counsel for the respondents, the appeal is barred by principle of res judicata, the earlier order appointing advocate
commissioner for sale of property in question having reached finality.
For determination of the issues, it is necessary to discuss all the facts, except the relevant ones as shown hereunder.
Pursuant to an agreement reached on 9th Sept., 1999, the 1st appellant, M/s.Mil Merin, obtained a sum of Rs. 25 lakhs from Harita Finance Ltd.,
(HFL), the respondent in the present case with the changed name of M/s. TVS Finance & Services Ltd., (hereinafter referred to as ''M/s. TVS
Finance''). Demand promissory notes were executed; letters of guarantee were executed by 2nd appellant Ms. Mercy Rajan and another S.P.
Rajan; the title deeds of immovable property belonging to S.P. Rajan and the 2nd appellant, Ms. Mercy Rajan were also deposited with the 1st
respondent as security in the event of non-payment of loans. Letters were sent by the 1st respondent from time to time showing the particulars of
loan availed by the 1st appellant, M/s.Mil Merin, who agreed to extend the security over the immovable property for receiving further amount of
Rs. 25 lakhs apart from the earlier loan. Further agreement was entered into on 2nd Nov., 1999 in that regard. Fresh demand promissory note
was executed in favour of M/s.Mil Merin; again letter of guarantee was executed for such further loan amount of Rs. 25 lakhs by S.P. Rajan and
Mercy Rajan in favour of the 1st respondent on 2nd Nov., 1999.
On 4th Oct., 2000, the 1st respondent, M/s. TVS Finance asked the 1st appellant, M/s.Mil Merin to pay dues of Rs. 44,36,716.67 immediately
as full and final settlement. In reply, M/s. Mil Merin forwarded letter promising to liquidate the entire dues by 15th Sept., 2000, which was
followed by correspondence asking for more time. Pursuant to a letter of the 1st respondent dated 14th Sept., 2000, M/s.Mil Marine forwarded
two post-dated cheques total amounting to Rs. 5 lakhs. In reply, the 1st respondent, by letter dated 23rd Oct., 2000, stated that the sum of Rs.
2.5 lakhs paid by M/s.Mil Merin for the month of Oct., 2000, was not sufficient and asked it to settle the matter by the end of the month with one
time settlement for Rs. 16,49,460/=. Inspite of undertaking given by M/s.Mil Merin to liquidate its outstanding amount by Jan., 2001, the 1st
appellant having failed to repay the amount, executed a registered power of attorney in March, 2001, for the immovable property in favour of the
1st respondent, possession of which was also handed over.
The 1st respondent filed an application u/s of the Arbitration and Conciliation Act, 1996, on 14th Dec., 2002, before this Court in O.A. No.
842/02 for interim injunction and application No. 5072/02 was filed for appointment of advocate commissioner to ensure sale of property in
question. Notice was issued on M/s.Mil Merin, the 1st appellant, which having not appeared, the Court, vide order dated 27th Feb., 2003,
allowed the application and appointed one Mr. S.M. Sambath as advocate commissioner to call for offers and sell the immovable property on or
before 24th April, 2003 through the Court. Advertisement was published in the newspaper, Coimbatore edition on 26th April, 2003, calling for
offers for purchase of the immovable property in question. One, Mr. T.D. Polly, submitted highest offer for Rs. 14 lakhs. At that stage, the 1st
appellant, M/s.Mil Merin, filed application No. 1773/03 for setting aside the ex-parte order dated 27th Feb., 2003. It was allowed by the Court
on 17th April, 2003 subject to condition that M/s.Mil Merin deposit a sum of Rs. 10 lakhs to the credit of the said application on or before 29th
May, 2003. The 1st appellant failed to deposit the amount of Rs. 10 lakhs within time and sought for extension. The Court, initially, allowed four
weeks time, but it was not paid and further extension was sought for by the 1st appellant. The 1st respondent, subsequently, filed Application No.
3040/03 for grant of extension of time to advocate commissioner to sell the immovable property and it was allowed by the court.
In Oct., 2003, the 1st appellant, M/s.Mil Merin, filed another application, No. 800/03 for interim injunction restraining the 1st respondent and the
advocate commissioner from selling the immovable property on the question that the valuation of the land is more than Rs. 90 lakhs. It was
dismissed by learned Judge on 14th Oct., 2003, but the 1st appellant, M/s.Mil Merin was allowed to bring prospective purchasers to purchase the
immovable property and on failure the advocate commissioner was allowed to sell the immovable property. Extension was sought for, but the 1st
appellant did not bring any prospective purchaser.
In the meantime, Mr. T.D. Polly, the highest bidder, being disinterested, withdrew himself from the bid. Mr. R. Muralikrishnan, 2nd respondent
herein, expressed interest to buy the immovable property for Rs. 17 lakhs, which was brought to the notice of the court by the 1st respondent,
M/s.TVS Finance, who filed Application No. 1569/04 on 2nd March, 2004 for direction on advocate commissioner to sell the immovable
property to the said R. Muralikrishnan for Rs. 17 lakhs.
An arbitration notice was issued by the 1st respondent, M/s. TVS Finance on 8th April, 2004, on the appellants, M/s.Mil Merin and others in
respect of the first agreement, which returned as not claimed. In regard to the 2nd agreement, similar arbitration notice issued to the appellants on
8th April, 2004, also returned as not claimed. On 16th April, 2004, a notice was issued by Arbitrator fixing the date of hearing, which was
returned unclaimed. Similar notice forwarded by the Arbitrator fixing the date of hearing on 26th June, 2005, also returned unclaimed. Notice was
published in the local daily, ''Malai Murasu'', Coimbatore edition on 26th June, 2004, giving intimation to appellant that 14th Aug., 2004 is the date
fixed for hearing by the Arbitrator. But in absence of any representation for the appellants on 14th Aug., 2004, the case was set ex-parte against
the 1st appellant, M/s.Mil Merin and others. On 22nd Dec., 2004, an award was passed by the Arbitrator against the appellants in Arbitration
Case Nos. 5 and 6 of 2004.
Before this Court, the 1st respondent, M/s. TVS Finance filed Application No. 1569/04 for appointment of another advocate commissioner,
pursuant to which Ms. C.N.G. Ezhilarasi was appointed as advocate commissioner in place of Mr. S.M. Sambath to sell the immovable property
for Rs. 17 lakhs on or before 5th Aug., 2005, to Mr. R. Muralikrishnan.
It appears that Mr. Muralikrishnan deposited a sum of Rs. 17 lakhs with M/s. TVS Finance, but no sale deed was executed by the advocate
commissioner inspite of extension of time granted by learned Judge vide order dated 6th March, 2007. The present appeal has been preferred
against the said order.
While counsel appearing on behalf of the appellants submitted that learned Judge had no jurisdiction to pass order u/s 9 of the Arbitration and
Conciliation Act, 1996, directing the advocate commissioner to sell the property, it was further contended that no sale deed could be executed in
favour of the 2nd respondent, Muralikrishnan, he having not applied pursuant to the auction notice. It was submitted that without a second auction
notice, the property cannot be sold in favour of the 2nd defendant, that too, for a meagre sum of Rs. 17 lakhs, though the valuation of the property
is now much more than Rs. 1 Crore. Learned Counsel for the appellant relied on one or other decision of this Court and Supreme Court.
On the other hand, according to learned Counsel for M/s. TVS Finance, the earlier order by which advocate commissioner was appointed and
direction was issued to sell the immovable property in question, including the order dated 15th July, 2005, passed in A. No. 1569/04, those orders
having not been challenged, the appellant cannot raise the question of jurisdiction, that too at the appellate stage, no objection having raised before
the first court. It was further submitted that the earlier order passed by this Court having reached finality, the challenge to the subsequent order of
extension of time will be barred by principle of res judicata.
We have heard the parties and noticed the rival contentions. We have also noticed the relevant provisions of the Arbitration and Conciliation
Act, 1996 and the judgments referred to by learned Counsel for the parties.
Section 9 of the Arbitration and Conciliation Act relates to interim measures, etc., by Court, as quoted hereunder:
Interim measures, etc. by court. - A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but
before it is enforced in accordance with Section 36, may apply to a Court:
(i) for the appointment of a guardian for a minor or a 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;
(e) such other interim measure of protection as may appear to the Court to be just and convenient,
and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
In the case of Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., , the Supreme Court, while noticed Section 9,
held that the purpose of enacting Section 9 is to provide ''interim measures of protection'' as distinguished from ''all-time or permanent protection''.
It formulates interim measures so as to protect the right in adjudication before the Arbitral Tribunal from being frustrated.
In the present case, the application u/s 9 filed by the 1st respondent did not relate to appointment of guardian for a minor or a person of
unsound mind to attract Sub-section (i) to Section 9. If such application was filed, it could be under Sub-section (ii) of Section 9, i.e., for interim
measures of protection in respect of matters as shown therein. It do not relate to preservation, interim custody or sale of any goods, which are
subject matter of the arbitration agreement and, thereby, Clause (a) to Sub-section (ii) of Section 9 is not attracted. It also do not relate to securing
an amount in dispute under arbitration or the detention, preservation or inspection of any property or thing, which are subject matter of the dispute
or for interim injunction or appointment of receiver and, thereby, Clauses (b), (c) and (d) of Sub-section (ii) to Section 9 is also not attracted in the
present case.
The respondent could, at best, claim that the said application was filed for interim injunction under Clause (e) to Sub-section (ii) to Section 9, i.e.,
such other interim measures of protection as may appear to the court to be just and convenient"". We are of the view that the said provision is also
not attracted, as the sale of the immovable property cannot and do not amount to ""interim measures of protection"", but for all purposes amount to
all-time or permanent protection"".
Admittedly, when the initial order was passed in 2002, appointing advocate commissioner to sell the immovable property in question, the
arbitration proceeding was not started nor reached finality and, thereby, learned single Judge had no jurisdiction to pass such order to sell the
property through the advocate commissioner, which amounts to all-time and permanent protection in favour of the 1st respondent, M/s. TVS
Finance.
We have also noticed that procedure of auction sale was initially followed when applications were called for by publication of advertisement in
the newspaper. The 2nd respondent, Mr. Muralikrishnan had not applied pursuant to the said advertisement. It is not known as to how he could
come to know of the auction sale in question and 1st respondent, M/s. TVS Finance brought him on record before learned Judge to state that he is
interested to purchase the property for Rs. 17 lakhs.
In the case of Himadri Coke and Petro Limited v. Soneko Developers Pvt. Ltd. and Ors. reported in (2006) 132 Comp. Cases 696 (SC), the
Supreme Court having noticed that the appellant had not submitted any offer pursuant to earlier advertisement, held that the said applicant was not
entitled to enter into the arena by submitting a fresh offer. It was observed that offer received in response to the advertisement has to be
considered and if other offer is to be considered, then an opportunity must be granted to other offerors pursuant to a fresh advertisement.
From the aforesaid fact it will be evident that while learned Judge ordered to sell the property in favour of the 2nd respondent, Mr. Muralikrishnan
for Rs. 17 lakhs, the procedural law was not followed.
Thus, we are of the opinion that the interim orders u/s 9 of the Arbitration and Conciliation Act passed by learned Judge directing to sell the
immovable property in question through Advocate Commissioner, that too in favour of the 2nd respondent, who never applied pursuant to the
noticed published in the newspaper, is without jurisdiction and is a nullity in the eye of law.
Counsel for the respondent raised the question of res judicata on the ground that the earlier orders, which are similar, appointing advocate
commissioner to sell the immovable property in question and in favour of the 2nd respondent, Mr. Muralikrishnan, were not challenged by the
appellants.
The principle of res judicata fell for consideration before the Supreme Court in the case of Dwarka Prasad Agarwal (D) by LRs. and Another
Vs. B.D. Agarwal and Others, . The Supreme Court, while observed that an order passed by Court without jurisdiction is a nullity, made the
following observation:
It is now well settled that an order passed by a court without jurisdiction is a nullity. Any order passed or action taken pursuant thereto or in
furtherance thereof would also be nullities. In the instant case, as the High Court did not have any jurisdiction to record the compromise for the
reasons stated hereinbefore and in particular as no writ was required to be issued having regard to the fact that public law remedy could not have
been resorted to, the impugned orders must be held to be illegal and without jurisdiction and are liable to be set aside. All orders and actions taken
pursuant to or in furtherance thereof must also be declared wholly illegal and without jurisdiction and consequently are liable to be set aside. They
are declared as such.
In a subsequent case of Sri Ramnik Vallabhdas Madhvani and Others Vs. Taraben Pravinlal Madhvani, , while discussing the principle of res
judicata, having noticed the earlier decisions, Supreme Court held that principle of res judicata is not applicable where there is inherent lack of
jurisdiction.
Similar was the view of Supreme Court in Ashok Leyland Ltd. Vs. State of Tamil Nadu and Another, , wherein Supreme Court held that principle
of res judicata, estoppel or waiver are not applicable to an order pass without jurisdiction, which is a nullity.
Similar view was expressed by Supreme Court in Management of Sonepat Cooperative Sugar Mills Ltd. Vs. Ajit Singh, and in the case of
Shakuntla Devi Vs. Kamla and Others, , wherein Supreme Court observed that a decree delivered without jurisdiction or contrary to existing law
at the time the issue comes up for consideration cannot operate as res judicata in a subsequent case between the same parties, unless it is
protected by special enactment.
In view of the authoritative pronouncement of the Supreme Court and in view of our finding that the order passed by learned Judge is without
jurisdiction and is a nullity in the eye of law, we answer this question against the respondents and reject such objection.
We, accordingly, set aside the order dated 6th March, 2007, and declare all earlier orders passed by learned Judge for sale of the immovable
property in question as illegal. So far as the amount, if any, deposited by the 2nd respondent, Mr. Muralikrishnan is concerned, learned Judge may
pass appropriate order for refund of the same amount with interest, if admissible. The appeal is allowed. Consequently, connected miscellaneous
petition is closed. But there shall be no order as to costs.