IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 05.02.2010 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE T.RAJA O.S.A.No.20 of 2010 M/s. ETK Exports Consultants, No.2, 7th Floor (A-Wing) Parsn Manere, Chennai-6 rep. By 1. Mrs.P.Dwatha 2. Dr.N.M.Sudharshan Legal Representative of the deceased Proprietor Dr.N.M.Parthasarathy. ..Appellant/4th Respondent Vs. 1. M/s. Sundaram Finance Limited, No.21, Patullos Road, Chennai – 600 002 rep. By its Deputy General Manager (Legal) Mr.v.Srinivasan. 2. M/s. ETK Softech Private Limited, 87-A, 4th Street, Abhiramapuram, Chennai – 18. 3. M/s. ICICI Bank Ltd., Mount Road Branch, 192, Anna Salai, Chennai – 2. 4. M/s. ETKIF America Inc. No.2, 7th Floor, A-Wing, Parsn Manere, Chennai- 6. ..Respondents/Applicant Respondents 1 to 3 Appeal filed under clause 15 of the Letters Patent read with Order 36 Rule 2 of O.S. Rules against the order dated 29.8.2007 made in Application No.2035 of 2007 passed by the learned single Judge of this Court. https://hcservices.ecourts.gov.in/hcservices/ For Appellant : Mr.AR.L.Sundaresan, Senior counsel for Mrs.AL.Ganthimathi For Respondents : Mr.K.Krishnaswamy for Caveator-R1 J U D G M E N T (Judgment of the Court was made by M.CHOCKALINGAM, J.) This intra-court appeal challenges the prohibitory order made in favour of the first respondent by the learned single Judge of this Court in Application No.2035/2007. 2. The appeal came to be filed under the following circumstances. (i) The first respondent in the said application entered into an agreement, pursuant to which, the first respondent company was financed by the applicant. The sanction was to extend lease finance upto the limit of Rs.30 crores and the same was also the purpose of purchase of the capital goods from the foreign country and the lease agreement was also entered into between the parties on 29.12.1998. Apart from that, indemnity was also executed. Pursuant to the default in payment of the lease amount, a notice was served upon the first respondent company by the appellant to get its option either for the foreclosure or for continuance of the agreement. In the absence of any reply, there arose a necessity for invoking the arbitrary clause as found in the agreement and the name of the arbitrator was also mentioned which brought forth no reply. On the contrary, they filed an application under section 9 of the Arbitration and Conciliation Act 1996 whereby Justice K.Sampath, Retired Judge of this Court was appointed as Arbitrator. The arbitral proceedings ended in an arbitral award on 10.1.2007 whereby the first respondent company were to pay Rs.18,44,35,911/- jointly and severally along with interest. On coming to know that it was all actually an act of collusion of the first, second and fourth respondents, the appellant was compelled to file an application in O.A.No.182 of 2004 before the Court for pro- order against the second respondent bank with reference to the responsibility held by him in the name of the third respondent therein. On enquiry, the prohibitory order came to be passed by the Court on 23.1.2004 in Application No.182 of 2004 prohibiting the second respondent from making any payment either to the first or the third respondent. (ii) After the arbitrary proceedings were over, an award came to be passed. The instant application came to be filed. The proceedings have been initiated on the criminal side by Central Bureau of Investigation whereby all the respondents were shown as parties. Apart from that, the applicant/ finance company was attached and it https://hcservices.ecourts.gov.in/hcservices/ got in its favour, arbitral award also and originally, there was a prohibitory order in its favour and the second and fourth respondents have acted only as garnishees. The fourth respondent was also in collusion with them in the earlier acts of getting finance. Under such circumstances, it became necessary for making prohibitory order under section 9 of the Arbitration and Conciliation Act, 1996. (iii) The first and the second respondent have putforth their respective counters and they were also heard. The third and the fourth respondents filed counter but there was no representation on their side on the date when the matter was called. The learned single Judge, after looking into the materials available, thought it was a fit case where prohibitory order was to be granted and accordingly, made. Under such circumstances, this appeal has arisen. 3. Advancing the arguments on behalf of the appellant, the learned senior counsel pointing to Section 9 of the Arbitration and Conciliation Act and also the relevant provision of Civil Procedure Code on garnishee would submit that in the instant case, admittedly, the appellant was not a party to the arbitral proceedings. The entire transaction of finance was between the first respondent/ finance company and the second respondent herein/first respondent in the application, in which, the fourth respondent had nothing to do. The monies in the hands of the second respondent were actually the monies of the fourth respondent in its name. Insofar as the fourth respondent is concerned, it is the sole proprietory concern. Therefore, neither the arbitral proceedings nor the award would bind the fourth respondent. Under such circumstances, no prohibitory order could be passed. 4. Added further learned counsel, at no stretch of imagination, the fourth respondent could be called as a garnishee. Even if it is considered as garnishee, independent proceedings have got to be taken and evidence has got to be adduced. Even as per the provisions of the civil procedure code the decree holder must satisfy. In order to invoke the garnishee proceedings, the money of the judgment debtor must be in the hands of the third party. But in the instant case, the money is in the hands of the second respondent which actually belongs to the fourth respondent. It was not a garnishee. Under such circumstances, the order of the learned single Judge has got to be set aside. 5. The court heard the learned counsel appearing for the first respondent/finance company. He putforth his submission in his earnest attempt to sustain the order of the learned single Judge. The Court paid its anxious consideration on the submissions made on either side and looked into the materials available on record. 6. It is not in controversy that there was an arbitral award which came to be passed as against the first respondent company in https://hcservices.ecourts.gov.in/hcservices/ the application, in which, the finance company who was the applicant therein was a party thereto. At this juncture, it is pertinent to point out that when the application for prohibitory order was made before the learned single Judge on the earlier occasion in O.A.No.182/2004, it was specifically stated that insofar as the first respondent is concerned, he was in collusion, out of which, the finance was actually obtained and thereby, a fraud has been committed by the finance company. Though the amount of the fourth respondent is in the hands of the second respondent bank, a part of the amount financed was converted and hence, it should be considered only as a garnishee. Under such circumstances, the prohibitory order should be given. 7. Now, the learned counsel for the first respondent brought to the notice of the court that a case has been registered by the Central Bureau of Investigation, in which, not only the first respondent company but also the fourth respondent/appellant herein have been shown as parties including the second respondent bank who was shown as the accused and they are facing criminal proceedings. Needless to say, an order of attachment or interim order like attachment or injunction or prohibitory order could be made not only pending arbitral proceedings but also after the arbitral award was passed in order to protect the situation. 8. In the instant case, already the Court had an occasion to consider whether the prohibitory order was to be granted. The learned single Judge thought it fit that it was a case were prohibitory order was to be granted. Now it is pertinent to point out that the subject matter of the earlier prohibitory order and the present prohibitory order is exactly the same. What are all contended by the learned counsel for the appellant is that so far as the arbitral proceedings are concerned, the fourth respondent/appellant herein was not a party. Hence the arbitral award would not bind him and under such circumstances, no prohibitory order could be passed. This contention cannot be countenanced for the simple reason that it was the specific case of the first respondent before the learned single Judge that the fourth respondent who is the appellant herein was actually a garnishee and a part of the amount financed had been converted and forgery has been committed. Hence, he should be considered as a garnishee. Apart from that, in the instant case, it is also brought to the notice of the court that the proceedings have been initiated against all the persons including the second respondent and fourth respondent etc. Hence, the contention putforth by the learned counsel for the appellant that he was not a party to the arbitral proceedings and under such circumstances, no prohibitory order could be passed against the fourth respondent, cannot be countenanced. 9. Apart from the above, the Court is able to see that originally the prohibitory order was given in respect of a particular subject matter and now, the present prohibitory order is also https://hcservices.ecourts.gov.in/hcservices/ pertaining to the same subject matter. The last contention putforth by the learned counsel that insofar as the prohibitory order originally granted is concerned, he was not a party, cannot be a reason, not to extend the prohibitory order at present. Under the circumstances, the Court is of the considered opinion that it is not a fit case where Section 9 of the Arbitration and Conciliation Act can be invoked to proceed in view of the specific averment made that the fourth respondent /appellant herein and the second respondent bank were also garnishees in the face of the proceedings thereafter initiated and now, pending before the other forum. Under such circumstances, the Court is unable to see any merits in the contentions putforth by the learned counsel for the appellant. Accordingly, the appeal is dismissed. No costs. 10. The observations made above will not prevail upon the Appellate Authority/ Enforcement Directorate. It is also made clear, since only prohibitory order is passed, it is always open to the appellant to putforth his contention, factually and legally, at the time of execution of the proceedings, if lie. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar vsi To The Sub Assistant Registrar, Original Side, High Court, Madras. + 1 c.c. to Mr. S. Vasudevan, Advocate. S.R.No.7292. + 1 c.c. to Mrs. AL. Ganthimathi, Advocate. S.R.No.7576. O.S.A.No.20 of 2010 GV (CO) GSK 19.02.2010. https://hcservices.ecourts.gov.in/hcservices/