IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 12-4-2010 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE T.RAJA O.S.A.Nos.27 and 28 of 2010 and M.P.No.1 of 2010 in OSA 27 of 2010 ECC Leasing Company Limited Rep. By its Power of Attorney Ajith C.R. 1st Floor, Fitzwilton House Wilton Place, Dublin 2, Ireland. .. Appellant in both appeals vs Paramount Airways Pvt. Ltd., Rep. By its Managing Director Alexander Square 35, Sardar Patel Road Guindy, Chennai 600 032. .. Respondent in both appeals Original side appeals preferred under Order XXXVI Rule 1 of O.S. Rules read with clause 15 of the Letters Patent against the order of this Court made in A.Nos.4806 and 4807 of 2009 dated 15.12.2009. For Appellant : Mr.P.S.Raman Senior Counsel for M/s.Kochaar & Co. For Respondent : Mr.T.V.Ramanujan Senior Counsel for Mr.T.K.Bhaskar COMMON JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) These two intracourt appeals have arisen from the common order of the learned Single Judge of this Court made in A.Nos.4806 and 4807 of 2009 filed under Sec.9 of the Arbitration and Conciliation Act, 1996. 2.For the sake of convenience, the parties hereinafter will be referred to as applicant and respondent respectively. 3.The said applications seeking appointment of Advocate Commissioner for seizure of two aircrafts, equipment and documentation wherever found and if necessary with police protection, https://hcservices.ecourts.gov.in/hcservices/ came to be filed under the following facts and circumstances: (a) The applicant company, the owner of two Embraer 170 LR aircrafts bearing Nos.ERJ170 MSN1700002 and ERJ170 MSNI700005 with Indian Registration Marks VT-PAB and VT-PAC, entered into two lease agreements with the respondent company for a period of five years from the date of delivery. Though the agreements were entered into on 5.5.2005, the first agreement was amended on 11.3.2006, 27.4.2006 and 13.2.2007 and the latter was amended on 12.9.2005, 27.4.2006 and 13.2.2007. Insofar as the first aircraft, the delivery date was 17.9.2005 while in the case of the second aircraft, it was 31.3.2006. It was agreed that the respondent could make use of those two aircrafts, the subject matter of lease, for a period of five years provided on the strict compliance of the terms and conditions of the lease agreements and the amendments referred to above. (b) On the events of default, the applicant issued notices on 17.6.2009 to the respondent. In the said notices, the applicant pointed out that the respondent was obliged to pay cash or furnish stand-by letter of credit issued by a First Line Bank payable in London at sight on first demand, for an amount equal to 3 monthly basic rent. The respondent though issued the stand-by letters of credit which came to an end on 17.12.2008, the same was not replenished by the respondent as required under Article 4.1.3.1.2 of the agreements. Apart from that, the respondent was liable to pay the basic rent and maintenance reserves every month. But the basic rent and maintenance reserves for the month of May 2009 were not paid in respect of the first aircraft, and for the month of May 2009, it was not paid in respect of the second aircraft. Following the said notices, there was exchange of correspondence. In a mail communication dated 31.7.2009, the respondent informed the applicant of a transfer of total amount of USS 1557183.14 under Swift Nos.1090 TT 090227 to 090232. Not satisfied with the same, the applicant issued notices of termination on 31.7.2009 alleging that the demand made in the notices of default referred to above was not met, and thus the respondent has failed to cure the default. (c) The applicant was informed by the Axis Bank through e-mail dated 5.8.2009, and also through telephonic conversation that the payments under the Swift transfers referred to above in the mail dated 31.7.2008, were not intended for the applicant. Four payments were made by the respondent and credited by the applicant on 5.8.2009. The same was also confirmed by a letter of the bank Banco Do Brasil dated 10.9.2009. Under the circumstances, the said applications were brought forth by the applicant/appellant under Sec.9 of the Act seeking repossession of the aircrafts since the trustworthiness was lost due to the false mail communication dated 31.7.2009, and on the ground of default in payment of maintenance reserve charges for more than six months. 4.On service of notice, the respondent appeared, filed its counter and also undertook to pay the arrears of two months rent in respect of the two aircrafts on or before 30.9.2009. https://hcservices.ecourts.gov.in/hcservices/ 5.When the matter was taken up on 1.10.2009, it was reported that the payment of one month rental arrears was made, and insofar as the second month was concerned, it would be paid on 6.10.2009, and the same was also made. On request by the applicant, the applicant was permitted to make inspection of one of the aircrafts which was grounded on technical reasons. Accordingly, the inspection was done, and pursuant to the inspection, the parties filed conflicting reports. The basic rent for the month of October and November 2009 was also paid by the respondent. 6.Both the applications were taken up for enquiry. The learned Single Judge after hearing the contentions put forth on either side and also on scrutiny of the materials available has made the following order: "37.Therefore, both the applications are disposed of on the following terms:- (a) For the present, the prayer of the applicant for repossession of the 2 Air-crafts is rejected. (b) The respondent is directed, within 15 days from the date of receipt of a copy of this order, either to replenish the Stand-by Letter of Credit, or to furnish a fresh Letter of Credit, in terms of Clause 4.1.3 of the Air-craft Lease Agreements dated 5.5.2005 for an amount equivalent to US$ 1,110,000, and ensure that the same is kept alive during the entire term of the lease as stipulated in the Agreements. (c) The respondent is directed to pay to the applicant, within 30 days from the date of receipt of a copy of this order, an amount of US$ 757,200, representing the admitted arrears of maintenance reserves, without prejudice to their claim for any appropriation or adjustment. (d) The respondent is directed to deposit into Court, within 30 days from the date of receipt of a copy of this order, to the credit of the above application, an amount equivalent to US$ 308,929.52 (US$ 1,066,129.52 minus US$ 757,200) to enable the applicant to withdraw the same, in the event of their success in the arbitral proceedings. The amount so deposited by the respondent, to the credit of the above application, can be kept in Fixed Deposit, till the conclusion of the arbitral proceedings before the London Court of International Arbitration. (e) The respondent shall continue to pay the basic rent, supplemental rent and maintenance reserves, without fail, till the terms of both the leases expire and the possession of the Air-crafts is handed over back to the applicant. (f) If the respondent fails to comply with any of the above conditions, the applicant will be entitled to seek an order for repossession of both the Air-crafts. (g) In order to enable the applicant to ensure that the Air- crafts and its parts and accessories are in tact and well maintained, it is open to the applicant, to make periodical inspections of the Air-crafts. As and when the applicant serves a letter on the respondent, seeking to carryout an inspection of the Air-crafts, the respondent shall arrange for such inspection, within a period of 24 hours from the time of service of such notice. The inspection shall be so arranged that it takes place at a time when a meaningful inspection could be carried out." https://hcservices.ecourts.gov.in/hcservices/ 7.Challenging the said order, both the appeals have been brought forth by the applicant. 8.Advancing arguments on behalf of the appellant, the learned Senior Counsel Mr.P.S.Raman would submit that the Courts in Chennai has jurisdiction to entertain Sec.9 application in international commercial arbitration; that in the instant case, Article 24.2 of the lease agreement is the arbitration clause between the appellant and the respondent; that by that clause, the respondent has agreed that for the purpose of seeking interim relief of repossession of aircraft, the appellant can move Court of appropriate jurisdiction and the respondent waives its right to object that the Court so moved for interim relief is not appropriate; and that the Apex Court has held that even in International Arbitration, the Courts in India can be moved for interim relief under Sec.9 of the Act unless the agreement itself bars the party from seeking such a relief. In support of his contention, the learned Senior Counsel relied on the decisions of the Apex Court reported in AIR 2002 SC 1432 (BHATIA INTERNATIONAL VS. BULK TRADING S.A. AND ANOTHER) and AIR 2008 SC 1061 (VENTURE GLOBAL ENGINEERING V. SATYAM COMPUTER SERVICES LTD. AND ANOTHER) and also a decision of this Court reported in 2009 (4) CTC 728 (TEBMA SHIPYARDS LIMITED VS. TRICO SUBSEA AS). 9.As regards the maintainability of relief claimed under Sec.9 of the Act, the learned Senior Counsel would submit that a reading of the provisions of Sec.9 would clearly indicate that the Court can be moved for interim custody of any goods which are the subject matter of arbitration agreement; that in the case on hand, the admitted fact is that the aircrafts are the subject matter of arbitration agreements; that it is pertinent to note that the appellant remains the owner of the aircrafts; but, the respondent never becomes owner of the same; that under the agreement, the respondent can only operate the aircraft; that admittedly the respondent is now in breach of the agreements by not paying the basic rent, maintenance reserve and not renewing the stand-by letter of credit; that under the circumstances, the respondent cannot be permitted to retain custody of the aircrafts; that the appellant is merely seeking repossession of its own asset; that at present, the aircraft loses value since it is kept idle; that the relief of repossession is only an interim relief and by no means a final or permanent relief in context of the agreement between the parties; that the agreement imposes an obligation on the respondent to return the aircraft immediately to the appellant on termination of the lease agreement; that assuming for a moment that the respondent were to set up a counter claim that termination is invalid, even then, they would be entitled to seek only a monetary claim and not specific performance of the agreement; that the learned Single Judge has rejected the prayer for repossession for the present; and that the learned Single Judge has observed that if the respondent does not comply with any of the conditions imposed, the appellant can apply for repossession. In support of his contentions, the learned Senior Counsel relied on the decisions of the Apex Court reported in 1991 (1) SCC 533 (INDIAN OIL CORPORATION VS. AMRISTAR GAS SERVICE AND OTHERS) and also a decision of this Court reported in 2010 (1) CTC 481 (CHOLAMANDALAM DBS FINANCE PVT. LTD. VS. SUDHEESH KUMAR). https://hcservices.ecourts.gov.in/hcservices/ 10.Added further the learned Senior Counsel that in the instant case, Article 20.2 of the agreement lists out the events of default; that admittedly, the respondent has committed all these events of default; that the appellant has issued notices of default on 17.6.2009; that the respondent did not send any reply; that as a result, the appellant issued notices of termination dated 31.7.2009; that despite receipt of the notice of termination, till date, the respondent has not even replied to the same; that the rights of the appellant under the agreement on breach by the respondent are set out in Article 20.3; that the learned Single Judge has found that the respondent has committed breach of the terms of the agreement and that the respondent has admitted to such breach; that the respondent has accepted these findings and has not even preferred any appeal; that under the circumstances, the breach by the respondent has become an established breach; that despite express order of the Court, the respondent did not make payments as directed by the learned Single Judge in paragraph 37 of the order; that the respondent is acting in complete violation of the orders passed by the learned Single Judge; that the story of RBI clearance, sending US Dollar cheques, etc., are all malafide and deliberate acts of the respondent to defeat the contractual terms and even the order of the Court; that under the circumstances, the respondent cannot be permitted to continue using the assets of the appellant, and hence the order of the learned Single Judge has got to be set aside and repossession be ordered. 11.In answer to the above, it is contended by the learned Senior Counsel Mr.T.V.Ramanujan for the respondent that the request for repossession was rightly denied by the learned Single Judge; that the respondent has every intention of honouring its commitment to the appellant subject to any counter claim it may have for payments due to it from the appellant which would have to be adjudicated in the arbitration; that the authorized dealer has now communicated to the respondent that the Reserve Bank of India has permitted the respondent to make remittance in foreign currency vide letter dated 8.4.2010; that the respondent has submitted a proposal to make payments of the amounts due; that the applications filed by the appellant are not at all maintainable; that in the instant case, the aircraft lease agreement contemplates that the agreement be governed by English law and arbitration would be before the London Court of International Arbitration and the seat of arbitration to be London; that the order of the learned Single Judge cannot be termed perverse or arbitrary; that the Apex Court has held in Wander Limited Vs. Antox India Private Limited (1996 (Supp) SCC 727) that the Court will not interfere with the exercise of discretion of the Court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, capriciously or perversely or where the Court has neglected the principles of law regulating the grant or refusal of interlocutory injunction; that the order of the learned Single Judge is a well reasoned one; that the appellant's interest was also duly addressed both in terms of the monetary aspect as well as the property; that the appellant can complain about non-compliance of the conditions only before the learned Single Judge and instead the appellant has filed the instant appeals; that the appeals are not at all maintainable; that it is pertinent to note that the balance of convenience is in favour of the respondent; that the appellant is https://hcservices.ecourts.gov.in/hcservices/ holding substantial monies; that the respondent has given the best payment schedule possible in the current circumstances and would fully comply with the order of the Court, and hence the appeals have got to be dismissed. 12.In support of his contentions, the learned Senior Counsel relied on the following decisions: (i)2010 (1) CTC 481 (CHOLAMANDALAM DBS FINANCE LIMITED V. SUDESH KUMAR); (ii)MANU/DE/1212/2009 (MAX INDIA LIMITED V. GENERAL BINDING CORPORATION); (iii)AIR 2007 SC 2563 (ADHUNIK STEELS LTD. V. ORISSA MANGANESE AND MINERALS PRIVATE LIMITED); (iv)AIR 2002 BOM 284 (EAGLE COPTERS LIMITED V. AZAL AZER PARJII AVIATION LIMITED); (v)AIR 2002 SC 2308 (ITI LTD. V. SIEMENS PUBLIC COMMUNICATIONS NETWORK LTD.) and (vi)AIR 1962 MAD 163 (RAMIAH NADAR V. AMIRTHARAJ). 13.The Court paid its anxious consideration on the submissions made and looked into all the materials available. 14.As could be seen above, pursuant to the lease agreements, the two aircrafts in question were leased out to the respondent for a term of five years from the date of delivery. Complaining of instances of default, the appellant after exchange of notices made the applications under Sec.9 of the Arbitration and Conciliation Act, 1996, for repossession of the aircrafts along with documents through an Advocate Commissioner appointed by the Court. 15.Attacking the applications filed by the appellant under Sec.9 of the Arbitration and Conciliation Act, the learned Senior Counsel for the respondent would submit that it was not maintainable and therefore the question of granting any relief to the appellant did not arise. Though the said proposal was raised by the respondent at the appellate stage since it was a question of law, it could be considered. Relying on a decision of the Delhi High Court in Max India Limited Vs. General Binding Corporation (MANU/DE/1212/2009), the learned Senior Counsel would submit that an application filed under Sec.9 in respect of the disputes arising between the Indian and a foreign party where a contract was subject to a foreign law and mode of dispute resolution was arbitration governed by the foreign procedural law and the venue of the arbitration was outside India. This contention put forth by the learned Senior Counsel for the respondent cannot be countenanced. Articles 24.2 of the lease agreement is the arbitration clause between the petitioner and the respondent. Article 24.2(2) reads as follows: "The Lessee agrees and acknowledges that nothing in this clause shall prejudice or limit the rights of the Lessor to institute proceedings before any court of appropriate jurisdiction for interim orders or other protective orders exclusively in connection with the repossession of the Aircraft, or to enforce any right, which the Lessor may have exclusively in connection with the repossession of the Aircraft under the Lease. The Lessor agrees and acknowledges that nothing in this clause shall equally https://hcservices.ecourts.gov.in/hcservices/ prejudice or limit the rights of defence of Lessee against the referenced proceedings instituted by Lessor, including the obtaining of interim orders of relief." Clause 24.3 reads as follows: "Waiver of Objections: Lessee irrevocably agrees to waive any objection to the arbitration or court specified in this Clause 24, whether on the grounds of venue, or on the grounds that the forum is not appropriate or is inconvenient forum. Lessee further irrevocably agrees that a judgment of any arbitration court or court specified in this Clause 24 shall be conclusive and binding upon Lessee and may be enforced in the courts of any other jurisdiction." 16.From the very reading of the above, it would be quite clear that the respondent has agreed for the parties to seek the relief of repossession of the aircraft and the appellant could move the court of proper jurisdiction and the respondent has to waive its right to object that the court so moved for interim relief was not proper. It is not in controversy that the respondent is voluntarily carrying on its business at Chennai within the jurisdiction of this Court, and hence this Court has got jurisdiction to entertain the applications for interim relief under Sec.9 of the Arbitration and Conciliation Act, 1996. 17.Interpreting the meaning and scope of the various provisions of the Act, the Apex Court has held in AIR 2002 SC 1432 (BHATIA INTERNATIONAL V. BULK TRADING S.A. & ANOTHER) as follows: "20...... A court is one which would otherwise have jurisdiction in respect of the subject-matter. The definition does not provide that the courts in India will not have jurisdiction if an international commercial arbitration takes place outside India. Courts in India would have jurisdiction even in respect of an international commercial arbitration. As stated above, an ouster of jurisdiction cannot be implied. An ouster of jurisdiction has to be express. 24.Section 5 provides that a judicial authority shall not intervene except where so provided in Part I. Section 8 of the said Act permits a judicial authority before whom an action is brought in a matter to refer parties to arbitration. If the matters were to be taken before a judicial authority in India it would be a court as defined in Section 2(1)(e). Thus if Part I was to only apply to arbitrations which take place in India the term “court” would have been used in Sections 5 and 8 of the said Act. The legislature was aware that, in international commercial arbitrations, a matter may be taken before a judicial authority outside India. As Part I was also to apply to international commercial arbitrations held outside India the term “judicial authority” has been used in Sections 5 and 8. 28..... Thus it is clear that an application for interim measure can be made to the courts in India, whether or not the arbitration takes place in India, before or during arbitral proceedings. Once an award is passed, then that award itself can be executed. Sections 49 and 58 provide that awards covered by Part II are deemed to be a decree of https://hcservices.ecourts.gov.in/hcservices/ the court. Thus “foreign awards” which are enforceable in India are deemed to be decrees. A domestic award has to be enforced under the provisions of the Civil Procedure Code. All that Section 36 provides is that an enforcement of a domestic award is to take place after the time to make an application to set aside the award has expired or such an application has been refused. Section 9 does suggest that once an award is made, an application for interim measure can only be made if the award is a “domestic award” as defined in Section 2(7) of the said Act. Thus where the legislature wanted to restrict the applicability of Section 9 it has done so specifically." 18.The above ratio was followed by the Apex Court in a decision reported in AIR 2008 SC 1061 (VENTURE GLOBAL ENGINEERING V. SATYAM COMPUTER SERVICES LTD. & ANOTHER) and by this Court in 2009 (4) CTC 728 (TEBMA SHIPYARDS LIMITED V. TRICO SUBSEA AS). 19.It is pertinent to point out that the said plea of jurisdiction was not urged before the learned Single Judge nor the respondent has filed any appeal against the orders passed by the learned Single Judge. Having submitted to the jurisdiction and having been a party to the entire proceedings, the respondent cannot be permitted to urge the question as to the jurisdiction at this stage and that too in the face of the clause referred to above in the agreement and also the decisions cited supra. 20.According to the appellant, firstly, the respondent lessee has not paid the basic rent in respect of both the aircrafts as against the invoices raised. Secondly, the standby letter of credit representing the deposit for the aircraft though lapsed, was not renewed nor was cash deposit made as stipulated under the agreement. Thirdly, the maintenance reserves remained unpaid. It was also urged that those events of defaults despite the demand made in the notices, were neither cured despite the grant of sufficient time, and under such circumstances, the lease agreements were also terminated, and hence the appellant is entitled for repossession of the aircrafts. 21.The respondent while filing the counter before the learned Single Judge has undertaken to pay the arrears of two months' basic rent in respect of both the aircrafts on or before 30.9.2009. In view of the request made, the learned Single Judge has posted the applications on 1.10.2009. Even on 1.10.2009, one month rental arrears was paid and in respect of the arrears of the second month, time was granted and the same was paid on 6.10.2009. The learned Single Judge has pointed out in his order that the respondent has admittedly rectified the defect relating to the basic rent. At this juncture, it is pertinent to point out that admittedly the basic rent for the subsequent period has not been paid. Pending the proceedings in these appeals also, though sufficient time was granted, the respondent has not complied with the same. Hence it can be well stated that there was a default in payment of basic rent. 22.Insofar as the stand-by letter of credit representing the deposit for the aircraft, admittedly, the same has not been renewed. It is true that the respondent has raised dispute with regard to the https://hcservices.ecourts.gov.in/hcservices/ quantum of maintenance reserves. But it is not the case of the respondent that they