Hdb Financial Services Limited v. Kings Baker Private Limited

Sathish Ninan, J.:— While enforcing an interim measure ordered by the Arbitral Tribunal under section 17(1) of the Arbitration and Conciliation Act, 1996 (for short, “the Act”), is the District Court entitled to pass any independent directions restricting the rights granted under the order passed by the Tribunal, is the short question that arises for consideration in this original petition.

2. Respondents availed a vehicle loan from the petitioner. Consequent to default in repayment of the loan, the account turned NPA. The loan was recalled and arbitral proceedings were initiated by the petitioner against the respondent.

3. In the course of the arbitral proceedings, the petitioner moved an application under section 17 of the Act seeking permission to take possession of the vehicle. As per order dated 26.08.17, the Tribunal granted an order in favour of the petitioner permitting to take possession of the vehicle.

4. Seeking enforcement of the order, the petitioner approached the District Court under Section 17(2) of the Act. The learned District Judge appointed a commissioner to take possession of the vehicle and to hand over the same to the petitioner, in tune with the order passed by the arbitrator.

5. Pursuant thereto, the Commissioner took possession of the vehicle and handed over the same to the petitioner. Thereafter, the learned District Judge passed an order directing the petitioner to produce the vehicle before the court.

6. Aggrieved by the said direction, the petitioner filed an application as EA 115/18 seeking review of the same. As per the impugned order, the learned District Judge dismissed the application with the following directions:—

“The petitioner cannot take absolute custody of the vehicle during the proceedings of arbitration, but only interim custody for securing the debt. The petitioner can realise the amount only on sale of vehicle after the award.

Hence ordered to produce the vehicle for making interim arrangement of the vehicle on Kychit.

Issue notice to return the vehicle. For return of notice 26.05.2018”

7. The same is assailed in this original petition.

8. Heard Sri. P. Paulochan Antony, learned counsel appearing for the petitioner and Sri. V.N. Sasidharan, learned counsel appearing for the respondents.

9. Section 17 of the Act enables the Arbitral Tribunal to pass orders of interim measures including injunction, appointment of Receiver, custody or sale etc. By virtue of sub-section 2 of section 17, such orders are deemed to be orders of the court and are enforceable under the Code of Civil Procedure as orders of the court.

10. The court while exercising its jurisdiction under section 17(2) of the Act, is only enforcing the interim measure ordered by the Arbitral Tribunal under section 17(1) of the Act. While exercising the jurisdiction under section 17(2) of the Act, the court is not sitting in appeal over the correctness or otherwise of the interim measure ordered by the Tribunal under section 17(1) of the Act. The court is not entitled to modify or vary the directions given by the Arbitral Tribunal under Section 17(1) of the Act. The jurisdiction of the court under section 17(2) of the Act is limited to enforcement of the order passed by the Tribunal under Section 17(1) of the Act. The powers under section 17(2) of the Act is essentially different from the powers conferred on the court under section 37(2)(b) of the Act which provides an appellate jurisdiction on the court against an interim measure ordered by the Tribunal under section 17(1) of the Act. Suffice to notice that the jurisdiction and powers of the court being exercised under Section 17(2) of the Act and section 37(2)(b) of the Act are fundamentally different. The power of the court under section 17(2) of the Act is only to enforce the order of the Tribunal.

11. The court below while passing the impugned order has relied on the judgment of this court in Hari Kumar Krishna Nilayam v. Shriram Transport Finance Company Ltd. [2018 (1) KLT 652]. There, the Court was considering a proceeding under Section 9 of the Act. While exercising the powers under Section 9 of the Act, the orders regarding interim protection is made by the Arbitral court and hence the court is entitled to pass appropriate directions in relation to the subject matter in respect of which the orders are passed. The said powers cannot be invoked by the court while exercising its jurisdiction under section 17(2) of the Act where the jurisdiction of the court is limited to enforcement of the order of the Tribunal. The following observation of the Division Bench in Hari Kumar Krishna Nilayam v. Shriram Transport Finance Company Ltd. (supra), is of significance:—

“…..In the case at hand, the vehicle in question is definitely the subject matter of the hypothecation agreement, wherein the parties had agreed for an arbitration. Therefore, a question arises as to whether the 1 respondent is entitled to repossess the vehicle or to sell the same. Evidently it is a matter which need to be decided by the arbitral Tribunal, either in exercise of power vested under Section 17 of the Act or while passing the final award……”

12. In the instant case, as noticed supra, the District Court has traversed beyond the jurisdiction and powers conferred under section 17(2) of the Act by directing that the vehicle shall not be taken absolute custody by the petitioner and further directing the petitioner to produce the vehicle for making interim arrangement on executing kychit. All those are matters falling within the realm of the Arbitral Tribunal which passed the order under Section 17(1) of the Act. That apart, it is noticed from the order of the Arbitral Tribunal, produced as Ext.P2 in this original petition, that an officer of the petitioner is appointed as a Receiver, to maintain the vehicle in safe custody. Therefore, adequate safeguard has been made by the Arbitral Tribunal in its order. The order impugned, as noticed, is without jurisdiction and unsustainable.

13. Accordingly, the original petition is allowed. The impugned order is set aside and the execution petition will stand closed. The parties shall abide by the directions as may be issued by the Arbitral Tribunal.