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Judgment
S. Manikumar, J.—Material on record discloses that for the purchase of a car, the revision petitioner has availed loan from Vijay Hemant
Finance and Estate Limited. A sum of Rs. 10,00,000/-, has been borrowed, agreeing to pay in 36 equal monthly instalments of Rs. 34,222/- The
car has also been hypothecated to the Finance Company. According to the revision petitioner though, he was regularly paying the monthly
instalments, with the help of rowdy elements, the Finance Company has attempted to seize the car. It is also the contention of the revision petitioner
that the car, was in a mechanic shop. On the above pleadings, the revision petitioner has filed a suit in O.S. No. 2403 of 2012, for a permanent
injunction restraining the defendants, their men, agents, servants or any one on their behalf or under them from seizing the car bearing Registration
No. TN 01 AV 1111. In the suit, the borrower/revision petitioner has also filed I.A. No. 6353 of 2012, for an interim injunction. Upon
considering the pleadings and documents, the Court below, by order dated 26.04.2012, has granted interim injunction, pending disposal of the
suit.
Referring to clause 22 of the Loan Agreement which contains an Arbitration clause, wherein it is specifically mentioned that ""all disputes,
differences and or claims arising out of this agreement whether during its subsistence or thereafter, shall be settled by arbitration, in accordance
with Provisions of the Arbitration and Conciliation Act 1996 or any statutory amendments thereof and shall be refer to the sole arbitration of an
Arbitrator nominated by the lender and that the Award given by such an Arbitrator shall be final and binding on the borrower to the agreement"",
the Finance Company has filed an application in I.A. No. 12257 of 2012, to dismiss the suit by directing the revision petitioner/plaintiff to refer the
subject matter of the suit to arbitration.
On the merits of the case, the Finance Company has also submitted that from the 4th instalment onwards, the plaintiff/revision petitioner had
committed default in payment of monthly instalments and neglected to pay, inspite of several reminders. The Finance Company has also submitted
that the revision petitioner/plaintiff had shifted his residence without any intimation to them and that the whereabouts of the vehicle is not known.
According to the Company, the revision petitioner/plaintiff has to pay 20 installments of Rs. 8,05,560/- as arrears and also interest of Rs.
1,61,480/-.
The Finance Company, has also submitted that from the date of first instalment i.e., 25.01.2010 till July 2012, the revision petitioner/plaintiff has
paid only 9 full instalments and some portion in the 10th instalment. According to them, the revision petitioner/plaintiff is liable to pay 21 equal
instalments as arrears, as on 31.07.2012, totalling a sum of Rs. 8,45,838/-. It is also their submission that the notice sent by them on 04.04.2011
has been returned with the endorsement ''left''. Thereafter, on 10.04.2011, the revision petitioner/plaintiff, came to the office of the Finance
Company and given a letter stating that he would pay the entire dues on or before 30.06.2011. But no amount has been paid. As the whereabouts
of the vehicle was also not known, the Finance Company lodged a complaint before the Commissioner of Police, Egmore, Chennai on 04.04.2012
and that the same has been forwarded to the Inspector of Police, Nungambakkam. The revision petitioner/plaintiff, appeared before the Inspector
of Police, Nungambakkam and requested time to pay the dues. But, immediately thereafter, the revision petitioner/plaintiff has filed a suit for
injunction suppressing all the above said materials and obtained an order of interim injunction in I.A. No. 6353 of 2012 on condition to pay a sum
of Rs. 5,00,000/- on or before 15.06.2012. Even after obtaining an exparte order of injunction, the revision petitioner/plaintiff has not complied
with the condition imposed by the court and paid only a sum of Rs. 2,50,000/- on 15.06.2012.
In these circumstances, the Finance Company has submitted that in view of Arbitration and Conciliation Act, 1996, the suit filed by the revision
petitioner/plaintiff, suppressing the existence of an arbitration clause in the agreement is not maintainable and hence, liable to be rejected.
On the above pleadings and upon perusal of the Clause 22 of the loan agreement, the Court below has framed the following point for
consideration.
Whether the Finance Company is entitled to the relief sought for
Going through the pleadings and Clause 22 of Ex. P1, copy of the loan cum hypothecation agreement dated 16.12.2009, the Court below has
noticed that the above said clause provides for an arbitration. Clause 22 extracted in Paragraph No. 4 of the supporting affidavit to I.A. 12257 of
2012 filed by the Finance Company, reads as follows:
all disputes, differences and or claims arising out of this agreement whether during its subsistence or thereafter shall be settled by arbitration in
accordance with Provisions of the Arbitration and Conciliation Act 1996 or any statutory amendments thereof and shall be refer to the sole
arbitration of an Arbitrator nominated by the lender. The Award given by such and Arbitrator shall be final and binding on the borrower to this
agreement
Though, an objection has been raised by the revision petitioner/plaintiff that the arbitration clause 22 in the loan agreement is not valid, by
observing that the revision petitioner/plaintiff had not challenged Ex. P1 and being a party to Ex. P1, it would bind the revision petitioner, the said
objections have been overruled.
Going through the pleadings in this revision petition and also, the plaint averments, wherein, the revision petitioner/plaintiff has admitted that equal
monthly instalments have not been paid, regularly and in the light of the specific clause in the loan agreement, which provides for arbitration, the
Court below has come to the conclusion that the revision petitioner/plaintiff, cannot maintain a suit and accordingly by order dated 18.09.2012,
allowed I.A. No. 12257 of 2012.
Though, Mr. C. Venkatesan, learned counsel for the revision petitioner/plaintiff, assailed the impugned order and also placed reliance on a
decision of this Court in D.V. Nagusah Vs. M/s. Sriram Transport Finance Company Ltd., Chennai reported in 2012 (3) C.L.T. 577 and
contended that the Court below ought not to have allowed the application I.A. No. 12257 of 2012 and further contended that the Finance
Company has not appointed any Arbitrator to adjudicate the disputes, this Court is not inclined to accept the said submission for the reason that
clause 22 of the loan agreement provides for an arbitration.
As rightly contended by the Finance Company/respondent before the Court below, the plaintiff/borrower has conveniently suppressed the
conditions of the loan agreement regarding repayment and Clause 22, which states that ""all disputes, differences and or claims arising out of this
agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with Provisions of the Arbitration and
Conciliation Act 1996 or any statutory amendments thereof and shall be refer 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"". The plaint averments do not disclose the existence
of an arbitration clause.
In so far as the contention that by engaging rowdy elements, the Finance Company has attempted to forcibly remove the car from the custody
of the revision petitioner/plaintiff, it is the contention of the respondent/Finance Company that since the whereabouts of the vehicle was not known,
the Company was constrained to prefer a police complaint on 04.04.2012, before the Commissioner of Police, Egmore, Chennai, which was
forwarded to the Inspector of Police, Nungambakkam for enquiry and that the revision petitioner/plaintiff has requested the Inspector of Police,
Nungambakkam to grant time for payment of dues. It is the further contention of the respondent/Finance Company that suppressing of all these
facts, the suit has been instituted for an injunction.
As regards, the recovery of the vehicle, this Court in D.V. Nagusah''s case stated supra at Paragraph No. 10, has observed as follows:
It is explicitly clear that the Hon''ble Apex Court mandated that financiers like D2 are not expected to forcibly seize the vehicle concerned from
the defaulting debtor of their own accord. They should resort to the process of law. Law enables such creditors to approach the Court and get an
Advocate Commissioner appointed for seizing the vehicle and that is being followed day in and day out by various financial institutions. In such a
case, I do not thing that D2 could carve out an exception. As such, with this above direction and observation, this Civil Revision Petition is
disposed of.
The said observation has been made, following a decision of the Supreme Court in Citicorp. Maruti Finance Ltd. Vs. S. Vijayalaxmi,
Paragraph Nos. 21 and 26 of the said judgment considered in D.V. Nagusah''s case, are reproduced hereunder.
It was submitted that Reserve Bank of India had formulated operational guidelines for adoption by all commercial banks. Pursuant to the
guidelines of July 2009, relating to debt collection standards in India, Citibank had updated its code for collection of dues and repossession of
security. It was submitted that the said guidelines were detailed and expansive and attempted to cover all the shortcomings in the earlier guidelines
in order to ensure that no force was used for the purpose of effecting recovery of the dues.
...
Since during the pendency of the special leave petitions before this Court, the appellant had complied with the orders of the District Forum and
the National Commission had already set aside the punitive damages imposed by the State Commission, the relief''s prayed for on behalf of the
appellant had been rendered ineffective and the submissions were, therefore, channelled towards the question of whether the for a below were
right in holding that the vehicles had been illegally and/or wrongfully recovered by the use of force from the loanees. The aforesaid question has
since been settled by several decisions of this Court and in particular in the decision rendered in Manager, ICICI Bank Ltd. Vs. Prakash Kaur and
Others, . It is not, therefore, necessary for us to go into the said question all over again and we reiterate the earlier view taken that even in case of
mortgaged goods subject to hire-purchase agreements, the recovery process has to be in accordance with law and the recovery process referred
to in the agreements also contemplates such recovery to be effected by due process of law and not by use of force.
No doubt, that the abovesaid observation has been made on the basis of a decision in Citicorp. Maruti Finance Ltd. Vs. S. Vijayalaxmi,
regarding the seizure of a vehicle, in view of the arbitration clause 22, which provides for resolution of the disputes between the parties, in the loan
agreement, the revision petitioner/plaintiff cannot harp on the interim order.
The observations of this Court made in Paragraph No. 10 of D.V. Nagusah''s case can certainly, be applied to the Finance
Company/respondent, in so far as seizure of the vehicle is concerned. But at the same time, the revision petitioner/plaintiff, cannot avoid Clause 22
of the loan agreement and make a request to the Finance Company to appoint an Arbitrator to settle the disputes. If the Finance
Company/respondent fails to appoint any arbitrator, as per clause 22 of the loan agreement, it is always open to the revision petitioner/plaintiff, to
approach the Court of law, for appointment of an Arbitrator and in such Arbitration proceedings, the revision petitioner can always, seek for an
interim order protecting the custody of the vehicle. Apparently, the revision petitioner/plaintiff, has not taken any steps, in that direction. Even as
per the averments in the supporting affidavit to the application No. I.A. No. 12257 of 2012, filed u/s 8 of the Arbitration and Conciliation Act,
1996, the whereabouts of the vehicle is not known to the Finance Company. When the parties have contracted to adjudicate the disputes, by an
arbitration clause, the same shall be adhered to, by them, otherwise, the very agreement would be set at naught.
It is useful to refer to a decision of the Hon''ble Supreme Court in Ravi Prakash Goel Vs. Chandra Prakash Goel and Another, wherein Their
Lordships have held at paragraph 29 as follows:
29.... Moreover, the dispute referable to arbitration had already arisen during the life time of Dulari Devi which is also well settled that where a
dispute is referable to arbitration, the parties cannot be compelled to take recourse to in the civil Courts.
Further, in another decision of the Hon''ble Supreme Court in Ardy International (P) Ltd. and Another Vs. Inspiration Clothes and U and
Another, , Their Lordships at paragraph 4, have held as follows:
We have extensively heard the learned counsel for both the sides and at the end of the day we are satisfied that the whole proceedings were
started, continued and concluded under misconception of law. In the first place, Section 8 is not intended to restrain arbitration proceedings before
an Arbitral Tribunal. The situation contemplated by Section 8 can arise only at the first instance of an opponent and Defendant in a judicial
proceedings, or, at the highest, suo motu at the instance of the judicial authority, when the judicial authority comes to know of the existence of an
arbitration agreement. In either event, there is no question of the Court u/s 8 of the 1996, Act restraining the arbitral proceedings from commencing
or continuing. Infact, Section 8 is intended to achieve, so to say, the converse result....
(emphasis supplied)
In the light of the discussion when the existence of an arbitration clause is pointed out at the first instance, in the suit, the Court below was right in
directing the parties to take recourse to arbitral proceedings. It is for the revision petitioner/plaintiff to work out his remedy under the provisions of
the Arbitration Act. There is no manifest illegality in the impugned order warranting intervention and hence, the Civil Revision Petition is dismissed.
No costs. Consequently, the connected Miscellaneous Petition is closed.