IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 01.10.2010 C O R A M THE HONOURABLE Mrs.JUSTICE R.BANUMATHI and THE HONOURABLE Mr. JUSTICE B.RAJENDRAN O.S.A. No. 246 of 2010 and M.P. No. 1 of 2010 R. Joseph Miranda .. Petitioner/ Appellant Versus 1. Dhandapani Finance Private Limited rep. by its Authorised representative No.14, Ramakrishnan Street T.Nagar, Chennai – 600 017 2. A. Srinivasan .. Respondents/ Respondents Appeal filed under Order XXXVI Rule 1 of O.S. Rules read with Clause 15 of the Letters Patent against the Order and Decree dated 18.11.2009 passed in Application No. 6128 of 2009. For Appellant : Mr. A.L. Somayajee, Senior Counsel for Ms. Narmadha Sampath For Respondents: Mr. Alagirisamy, Senior Counsel for M/s. Pass Associates for R1 R2 No appearance (R2 given up) JUDGMENT B. Rajendran, J This appeal is filed by the borrower challenging the order dated 18.11.2009 in Application No. 6129 of 2009 passed by the learned single Judge appointing an advocate commissioner to seize the vehicle – Manitowac Truck Mounted Crame bearing Registration No. TN 59 AH 6711, with Engine No. 84261900 and Chasis No. T52937. 2. The learned senior counsel for the appellant would contend that the appellant has executed a loan agreement on 31.01.2008 for purchase of Manitowac Truck Mounted Crame – 1995 model telescopic mobile crane with the first respondent. Based on the said agreement, the first respondent has advanced a loan of Rs.30 lakhs to the appellant after securing a promisory note and irrecovable power of https://hcservices.ecourts.gov.in/hcservices/ attorney in favour of the first respondent. The second respondent stood as a guarantor for the due repayment of loan by the appellant. As per the agreement, the appellant has to pay the loan amount in equated monthly instalments for which the appellant has also issued post dated cheque in favour of the first respondent. According to the first respondent, even though the appellant has paid 12 instalments promptly upto January 2009 to the tune of Rs.12,61,000/-, he committed default in payment of the loan amount, therefore, the first respondent sent a lawyer notice on 09.11.2009 to foreclose the loan itself and demanded to pay the entire amount, after adjusting the amount already made. 3. The learned counsel for the appellant would further contend that the appellant had filed O.S. No. 257 of 2009 on the file of Principal District Munsif, Thoothukudi for a bare injunction by contending that a huge amount was demanded by the first respondent without giving credence to the substantial amount paid by the appellant. Pending suit, the appellant sought for interim injunction restraining the first respondent or his men from seizing the vehicle, but no interim order was granted. On notice, the first respondent merely filed a memo stating that as per the loan agreement, there is a clause for arbitration and they intend to invoke the arbitration clause and they did not participate in the enquiry in the suit. Thereafter, on 12.11.2009, the first respondent moved an application under Section 9 of the Arbitration and Conciliation Act before this Court for appointment of an advocate commissioner to seize the vehicle with necessary police aid to break open the premises, if any and also sought permission to sell the vehicle. In the affidavit filed in support of the application, it was stated that after payment of Rs.12,61,000/- the appellant failed to make any payment. Even though the last instalment was due and payable only on 10.01.2012, by a notice dated 09.01.2009, the first respondent foreclosed the loan itself and demanded payment of the entire loan amount. According to the first respondent, as on 07.11.2009, a sum of Rs.9,29,625/- had become over due. Since the appellant allegedly failed to pay the loan amount, they have invoked the arbitration clause and raised a dispute. It was only contended that in an earlier attempt when the first respondent made efforts to take possession of the vehicle, it was allegedly resisted by the appellant and that the vehicle is subjected to wear and tear, therefore, they sought for appointment of advocate commissioner to seize the vehicle. The affidavit was filed by the first respondent on 10th November 2009 i.e., the next day of issuance of the legal notice dated 9th November 2009 foreclosing the loan itself. A supporting affidavit was filed by another officer of the first respondent on the same day bringing forth the fact the filing of the suit in O.S. No. 257 of 2009 by the appellant for injunction. 4. The learned senior counsel for the appellant brought to the notice of this Court that on 18.11.2009, this Court passed an exparte order appointing an advocate commissioner and direction was issued to seize the vehicle and submit a report on or before 02.12.2009. Pursuant to such an order, according to the appellant, https://hcservices.ecourts.gov.in/hcservices/ no notice was issued to the appellant at any point of time regarding the appointment of an advocate commissioner by this Court nor the advocate commissioner issued any pre-notice before seizure of the vehicle, but straightaway, on 01.12.2009, seized the vehicle. Even on the date of seizure, no notice was issued to the appellant, but only a copy of the order was given to the representative of the appellant. Thereafter, it transpires that on 07.12.2009, the first respondent issued a notice for having seized the vehicle and also their intention to sell the vehicle. For the above notice dated 07.12.2009, the appellant issued a reply notice on 15.12.2009 wherein a detailed explanation was given as to why there was delay in remitting the payment. According to the appellant, as the office of the first respondent was closed in Tuticorin for a period of six months, which is also admitted in the notice issued by the first respondent, the delay had occurred. It was also pointed out in the reply regarding the discrepancy in the amount payable by the appellant. It was further stated in the reply that the appellant is ready and willing to pay a sum of Rs.20 lakhs towards full and final settlement of the loan amount as per their earlier letter. On the same day, the appellant also intimated the Regional Transport Officer, by a registered letter sent through their advocate, that the first respondent is preparing to sell the vehicle without raising a dispute, as required, in the proper forum and requested to desist from transferring the ownership of the vehicle. Even though the notice was issued on 15.12.2009, without any further notice, it now transpires that the first respondent sold the vehicle on 18.12.2009 itself without any intimation to the Court or without getting permission from the Court or without a report being filed by the advocate commissioner. Further, in the notice dated 23.12.2009 sent by the first respondent, the first respondent only denied that they are not ready to receive the sum of Rs.20 lakhs, but never ever mentioned that they have sold the vehicle on 18.12.2009 itself. Even in the memo filed by the first respondent before the Principal District Munsif Court in O.S. No. 257 of 2009, it was never stated that the vehicle was seized by the Court appointed advocate commissioner or the vehicle was sold. Subsequently, the advocate commissioner filed a report on 24.12.2009 and thereafter, the application itself was closed by this Court on 21.01.2010 without hearing the appellant. Even on the day when the application was closed by this Court, the first respondent did not inform this Court that the vehicle was already sold on 18.12.2009, nor till date, it was disclosed by filing an affidavit that the vehicle was sold. Only when the appellant went for a compromise, after the vehicle was seized, it was informed by the advocate for the first respondent that the vehicle was sold on 18.12.2009. Now, in the typed set of papers filed on 19.07.2010, for the first time, a voucher has been produced which would only indicate that a sum of Rs.28 lakhs was received by the first respondent from one Sakthivel in the account of Joseph Miranda, but nowhere it was stated that the vehicle was sold or vehicle number is mentioned or any other document produced to show that they sold the vehicle. According to the appellant, inasmuch as the very order of seizure of the vehicle itself was passed without notice and subsequent seizure by the advocate commissioner and sale of the vehicle by the first respondent are all https://hcservices.ecourts.gov.in/hcservices/ unauthorised and illegal, the appellant is entitled to seek for revocation of the order and also for re-possession of the vehicle. The learned senior counsel for the appellant would further contend that the act of the first respondent is totally illegal and it is against the decision rendered by the Division Bench of this Court reported in (Cholamandalam DBS Finance Limited, rep. by its Assistant Manager Legal K. Venkateswaran vs. Sudheesh Kumar) 2010 (1) CTC 481. 5. The learned senior counsel for the first respondent would contend that the appellant/borrower is bound to pay the monthly instalemnts but he committed default and paid only Rs.12,61,000/- out of Rs.30 lakhs. As there was an over due, under law, the first respondent has got a legal right to re-possess the vehicle. Therefore, to safeguard the loan amount, the first respondent sought permission from this Court to recover the vehicle and there is no need for any notice to the appellant. As per the order passed by this Court, the vehicle was seized with the assistance of the Advocate Commissioner. Thereafter, since there is already an irrevocable power of attorney executed by the appellant in favour of the first respondent, the vehicle was sold. Inasmuch as the arbitration proceedings already commenced, this Court cannot pass any order for re-delivering the vehicle, especially, in the absence of a third party purchaser being impleaded in this case. If at all, it is open to the appellant to agitate his grievance before the arbitrator and not before this Court. Therefore, the learned senior counsel for the first respondent would contend that the appellant, being a defaulter in payment of amount, cannot seek any remedy before this Court. Even otherwise, after the seizure of the vehicle, a pre-sale notice dated 07.12.2009 was issued, but the same was returned as 'refused'. Therefore, the asset was sold to one Sakthivel. Further, the matter was referred to an arbitrator as early as on 10.02.2010. Subsequently, the application seeking interim stay was wrongly filed in Application No. 6128 of 2009 instead of Application No. 6126 of 2009. Thereafter the appellant has now appealled against the order of the seizure of the vehicle. Therefore, there is no merit in the appeal and the appeal is liable to be rejected in limine. 6. We have heard the learned senior counsel appearing for both sides. The points for consideration in this appeal are (i) Whether the first respondent, under the loan agreement, is entitled to seize the vehicle and dispose of the same without notice to the appellant/borrower (ii) Whether the application filed by the first respondent under Section 9 of the Arbitration and Conciliation Act, 1996 can be closed without hearing the appellant (iii) Whether the appellate Court can direct re-delivery of the vehicle to the https://hcservices.ecourts.gov.in/hcservices/ appellant without the third party purchaser being impleaded as a respondent in this appeal. 7. The dates and events in this case will give a clear and vivid picture regarding the intention of the first respondent herein. The loan agreement was entered into on 31.01.2008. The appellant has not only entered into a loan agreement, but also executed an irrevocable power of attorney in favour of the first respondent with right to sell the vehicle. The second respondent stood as a guarantor for prompt repayment of the loan amount by the appellant. As per the loan agreement, the appellant has to repay the amount in 48 instalments upto 31.01.2012 for which the appellant also issued post dated cheques. It is also admitted by the first respondent that the appellant has paid Rs.12,61,000/-. 8. During the month of August 2009, the appellant herein filed O.S. No. 257 of 2009 on the file of the Principal District Munsif, Tuticorin alleging that the first respondent has closed its branch office at Tuticorin from February 2009 and thereafter, it was re- opned only in the month of July 2009, therefore the instalment amount could not be remitted as the appellant did not know where the amount has to be remitted. In the meanwhile, on 30.04.2009, the first respondent sent a letter demanding payment of Rs.26,20,164.69 from the appellant, which according to the appellant is exorbitant, excessive and against the repayment schedule. It was further contended that the said demand was made by the first respondent without giving credence to the substantial payment made by him and therefore the suit was filed for bare injunction. Pending suit, interim injunction sought for by the appellant was refused. Thereafter, the first respondent filed a memo before the civil court stating that as per the agreement entered into between the appellant and the first respondent, the matter was referred to the Arbitrator under Section 8 (1) of the Arbitration and Conciliation Act, 1996. Thereafter, on 09.11.2009, the first respondent issued a notice to the appellant stating that the payment has not been properly made in accordance with the agreement and called upon the appellant to pay the sum of Rs.29,37,009.48, the break up of which is given below:- Due as on 07.11.2009 Rs.17,24,527.09 Late payment penalty Rs. 1,51,823.00 Interest Rs. 29,750.00 Other charges Rs. 15,057.49 Foreclosure charges Rs. 86,226.35 ---------------------- Rs.29,37,009.48 ---------------------- 9. In the said notice dated 09.11.2009, the first respondent would state that the loan is foreclosed. This notice was received by the appellant only on 14.11.2009 as per the acknowledgment card produced by the first respondent himself in the typed set of papers. Before this notice was received, as early as on 10.11.2009, it appears that the affidavit and Application, which was later numbered https://hcservices.ecourts.gov.in/hcservices/ as Application No. 6128 of 2009, has been prepared and filed for appointment of an advocate commissioner under Section 9 of the Arbitration and Conciliation Act. Though in the original affidavit, the first respondent did not say anything about the suit filed by the appellant before the civil court or the application filed under Section 8 of the Arbitration and Conciliation Act, subsequently, another supporting affidavit has been filed and only in that supporting affidavit, the pendency of the suit filed by the appellant was mentioned. Even in the supporting affidavit, it was not mentioned that it will form part and parcel of the affidavit originally filed. Ultimately, on 18.11.2009 itself, this Court passed an order appointing an advocate commissioner exparte. 10. It is pertinent to point out that in the affidavit, no where it is stated by the first respondent that the property in question namely vehicle will be taken away by the appellant or it will not be in any way made available by the appellant. The first respondent, without assigning any specific reason for seizing of the vehicle or even before the foreclosure notice being served on the appellant, approached this Court seeking seizure of the vehicle. On such an order being passed by this Court on 18.11.2009, the first respondent issued a notice dated 27.11.2009 informing the date of hearing of the case on 02.12.2009 and also intimation regarding the appointment of the advocate commissioner to seize the vehicle. The said notice was served on the guarantor namely second respondent herein on 02.12.2009. According to the endorsement, it was returned as 'refused' by the first respondent on 02.12.2009. In the meanwhile, as per the report of the advocate commissioner on 24.12.2009, the advocate commissioner had gone to Madurai and from there to Aruppukottai to seize the vehicle and ultimately on 24.12.2009, she seized the vehicle with the assistance of the police. The report of the advocate commissioner is extracted below:- "In pursuant of warrant dated 18.11.2009, I hae been appointed as an Advocate Commissioner by this Hon'ble Court to seize and deliver the vehicle of MANITOWAC TRUCK MOUNTED CRANE bearing Regn.No.TN-59-AH-6711: Engine No.84261900 and Chasis No.T52937. I submit that I left Chennai on 30.11.2009 for Madurai and I reached on 01.12.2009. On information the above vehicle was not in Tuticorin and it was in Kariyapatti Village, Virudhunagar District I went to the office of the Superintendent of Police, Virudhunagar and provided the xerox copy of the order and sought for police protection to assist me. I went to Kariyapatti Village to seize the vehicle and it was seized by me at Pandalgudi, near Aruppukottai town which was 35 km far away from Kariyapatti with the assistance of police authority. I submit that I have noted the inventories before handing over the vehicle to the https://hcservices.ecourts.gov.in/hcservices/ applicant.The vehicle was found that the stepny tyres were removed by the respondents and the battery was very weak. The vehicle was fitted with battery by the applicant. I submit that I have verified the Chasis, Engine and Registration Number of the Vehicle. After my seizure, I handed over it to the applicant's authorities. I have duly executed the warrant in accordance with law and filing this report. I have executed the warrant and returning the warrant with this report. I have enclosed the photographs along with my report. Dated at Madras on this the 24th Day of December 2009." 11. As per the advocate commissioner's report, no notice was given to the appellant. The advocate commissioner did not say in the report as to whether the appellant was present at the time of seizure of the vehicle or any notice given to him. Whereas, in the affidavit of the appellant, he would contend that no document or pleadings served on him, but only on demand, a copy of the order appointing the advocate commissioner was handed over to him and no notice was given to him at the time of seizure of the vehicle. After the seizure of the vehicle on 07.12.2009, the first respondent issued a notice to the appellant calling upon him to pay Rs.30,93,549.80 within seven days from the date of receipt of the notice failing which they will resort to sell the vehicle in as is where is condition. According to the first respondent, even this notice was refused by the appellant and returned back on 10.12.2009. After expiry of one week from the date of return of the notice namely 10.12.2009, on 18.12.2009, the first respondent sold the vehicle to one Sakthivel. The sale of the vehicle was brought to the notice of this Court by the first respondent only in the list of dates and events in the typed set filed by the first respondent. 12. It is seen from the records that the first respondent has not filed any affidavit intimating the sale of the vehicle or any document evidencing such sale or any other piece of material has been produced before this Court. The first respondent has also not obtained any permission from this Court to sell the vehicle. In fact, the advocate commissioner also did not file her report into the Court. The moment the vehicle was seized through the court appointed advocate commissioner, it was sold by the first respondent. To prove the sale of the vehicle, the first respondent has merely produced a voucher dated 18.12.2009, in which it is only stated "received from Mr. Sakthivel, account of Joseph Miranda, sum of Rs.28 lakhs only". The receipt Number is mentioned as "384251 dated 18.12.2009". The amount column is completely blank, draft or cheque number has not been mentioned, date of drawal of cheque or demand draft is blank. We also find that the signature of the remittor is also blank and only a signature 'For Dhandapani Finance Limited' is found. Apart from this, nothing could be culled out from the challan produced by the first respondent. https://hcservices.ecourts.gov.in/hcservices/ 13. The advocate commissioner herself filed the report in this Court on 24.12.2009. As stated above, the first respondent sold the vehicle on 18.12.2009 even before a report filed by the advocate commissioner. Thereafter, the application itself was closed by this Court on 21.01.2010 and on that day, an order was passed as follows:- "It is reported by the learned counsel for the applicant as well as Advocate Commissioner that the vehicle concerned was seized and handed over to the applicant. Despite notice having been served on the respondents, there is no response. In view of the above, this application is closed. The applicant is directed to pay a sum of Rs.7,000/- (Rupees Seven Thousand Only) towards additional remuneration to the advocate commissioner taking into consideration the work undertaken by the advocate commissioner." 14. Therefore, it is clear that this is a sinister method utilised by the first respondent to seize the vehicle with the aid of the Court and thereafter, even without seeking permission from the Court, or without any authority and even without giving any opportunity to the appellant to pay the amount, clandestinely sold the vehicle for a meagre sum of Rs.28 lakhs, whereas, according to the appellant, the vehicle is worth Rs.40 lakhs. It is also now questioned by the learned senior counsel for the appellant that without permission or orders from this Court, why the first respondent has hastily sold the vehicle inasmuch as the appellant has categorically stated in the reply notice dated 15.12.2009 that he is ready and willing to pay Rs.20 lakhs as per the original demand made by the first respondent. For that notice, the first respondent has issued a reply notice dated 22.12.2009 and even in that reply notice, it was not stated by the first respondent that the vehicle was sold on 18.12.2009 nor when the application was closed by this Court on 21.01.2010, the Court was informed about the sale of the vehicle on 18.12.2009. 15. It is pertinent to point out here that till the application was closed, the arbitration proceedings have not been commenced or the first respondent has initiated the arbitration proceedings. Whereas, before even initiating arbitration proceedings, the first respondent sold the vehicle on 18.12.2009. Therefore, it is abundantly clear that the first respondent has come to this Court by filing an application under Section 9 of the Arbitration and Conciliation Act only to seize and sell the vehicle on their own without making any paper publication and by circumventing the due process of law. This kind of attitude of the first respondent, to seize and sell the vehicle from the hands of the appellant is highly deprecated. https://hcservices.ecourts.gov.in/hcservices/ 16. In the decision of the Division Bench of this Court, relied on by the learned senior counsel for the appellant, reported in (Cholamandalam DBS Finance Limited, rep. by its Assistant Manager Legal K. Venkateswaran vs. Sudheesh Kumar) 2010 (1) CTC 481, the Division Bench of this Court had issued detailed guidelines to be followed in respect of seizure of vehicles by invoking the Arbitration and conciliation Act. In Para No.22, it was held as follows:- "22. What disturbed us in this case is that the Application was closed even without hearing the respondent. If before the Application was closed the respondent had been heard, he would have been brought to the notice of the Court that an order of attachment had been obtained in the District Court of Erunaukulam, in which case, the learned Judge might have modified or varied the order of injunction. We are not, for one minute, saying that an exparte orderof appointment of advocate commissioner, shall not be granted. If the averments in the affidavit make out for such an order, then an exparte order of appointment of advocate commissioner to go and seize the vehicle may be granted. But, on the same day, notice shall be ordered to go to the respondent so that after the vehicle is seized by the advocate commissioner, the respondent, on receipt of notice, will appear before the Court. Then, after hearing both the parties, the Court can pass such orders as