Arbp513.09 1 ssm/- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 513 OF 2009 1 (A) Mr. Amin Tharani S/o. A. Tharani Age 51 years., Occu. Business, residing at Tharani Mansion, M.A. Road, Station Road, Opposite Platform No.6, Andheri (West), Mumbai – 400 058. AND (B) Mr. Amin Tharani S/o. Tharani having address at Rohan Telecom, 26/A, Ground Floor, Laram Centre, Opposite Fidai Baug, S.V. Road, Andheri (West), Mumbai. ...Petitioner. Vs. M/s. Kotak Mahindra Prime Ltd. as Assignee of Tata Motors Ltd. Formerly Tata Finance Ltd., A public Limited Company, Incorporated under the provisions of the Companies Act, 1956, having its Registered Office at 36-38A, Nariman Bhavan, 227, Nariman Point, Mumbai-400 021, Arbp513.09 2 and BRANCH OFFICE at- Vinay Bhavya Complex, 6th Floor, 15G-A, C.S.T. Road, Kalina, Santacurz (East), Mumbai-400 098. ...Respondent. Mr. Rakesh Kumar i/by Mr. K.A. Singh for the Petitioner. Ms. Asha Nair i/by M/s. Mahesh Menon & Co. for the Respondents. AND ARBITRATION PETITION (LODGING) NO. 1037 OF 2009 Kotak Mahindra Bank Ltd. A Banking Company incorporated within the meaning of the Banking Regulation Act, having its registered Office at 36-38A, Nariman Bhavan, 227, Nariman Point, Mumbai -400 021. ....Petitioner Vs. Mr. Manish Shankarlal Bhatia, Proprietor of Manish Associates, Having address at Laxmi Hira Bhavan, Block No.A 799, R. No. 1597, 4th Floor, Behind Netaji High Court, Ulhasnagar, Mumbai – 421 004. AND also at: Shop No. 756, 1st Floor, Opp. Tilson Market, Sector – 17, Ulhasnagar, Thane – 421 003. ... Respondent. Ms. Disha Karambar for the Petitioner. None for the Respondent. Arbp513.09 3 AND ARBITRATION PETITION (LODGING) NO. 1038 OF 2009 Kotak Mahindra Bank Ltd. A Banking Company incorporated within the meaning of the Banking Regulation Act, having its registered Office at 36-38A, Nariman Bhavan, 227, Nariman Point, Mumbai -400 021. ....Petitioner Vs. Mr. Shankar Hiranand Bhatia, Proprietor of Hiranand & Co., Having address at Bhatia Building, Block No.A 749, Behind Netaji High Court, Ulhasnagar, Mumbai – 421 003. AND also at: House No.12, Mansi Parb Building, Plot No.6, Palasphatta, Panvel-412 06. And also at: Having Office address at, Shop No.756, 1st Floor, Opp. Tilson Market, Ulhasnagar, Thane – 421 003. ... Respondent. Ms. Disha Karambar for the Petitioner. None for the Respondent. CORAM :- ANOOP V. MOHTA, J. DATE OF RESERVING THE JUDGMENT :- 23rd NOVEMBER, 2009. Arbp513.09 4 DATE OF PRONOUNCING THE JUDGMENT:15th DECEMBER,2009 JUDGMENT :- 1 Heard finally, by consent of the parties. 2 The Petitioner has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act), and thereby challenged an award dated 22nd April, 2009 passed by the sole Arbitrator appointed by the parties based upon the loan agreement (Hire Purchase Agreement) (for short, HPA), clauses, and as the Arbitrator has awarded the claim against the Petitioner and in favour of Respondent, and thereby directed the Petitioner to pay a sum of Rs.10,18,380/- (Rupees ten lacs eighteen thousand three hundred eighty only) together with the interest thereon @ 18% p.a. from 4th July, 2007, as per the particulars of the claim, and thereby also directed the Petitioner to return the vehicle and permitted the Respondent to sell the said vehicle and to adjust the amount and also permitted to execute the award to the extent of balance amount, if any. 3 The basic clauses of loan agreement are- “1 (a) The Hirer shall pay to the Owners hire charges as specified in the Second Schedule hereto. (b) Punctual payment is and shall be of the essence of this Agreement and the Hire shall be deemed to have committed a default if any hire charges or part thereof or any other monies due and payable hereunder shall remain unpaid for more than fourteen days after becoming due. (c) All payments of hire charges hereunder shall be Arbp513.09 5 paid to the Owners by Demand Draft at their Office at Mumbai or at such other addresses as the Owners may from time to time specify and payments made by posts shall be at the risk of the Hiere and shall be deemed to have been paid on the date on which the demand draft therefor is realised. 2. The Hiere shall throughout the term of this Agreement (a) punctually pay all amount of hire charges payable in respect thereof;” “17. An even of default shall occur hereunder if the Hirer- a) fails to pay any of the hire charges or part thereof or other payment required hereunder when due and such failure in the opinion of the Owners, continues for a period of 14 days after notice is sent to the Hirer; “18 (1) Upon the occurrence of any event of default and at any time thereafter, the Owners shall be entitled to declare all sums due and to become due hereunder for the full term of the Agreement as immediately due and payable and upon the Hirer failing to make the said payment in full within 14 days thereof, the Owners may, at their sole discretion, do any one or more of the following. a) Upon notice to the Hirer terminate this Agreement; b) Demand that the Hirer return the Vehicle to the Owners at the risk and expense of the Hirer, in the same condition as delivered (ordinary wear and tear expected), at such location as the Owners may designate and upon failure of the Hirer to do so within 14 days from the date of demand, enter upon premises where the vehicle is located and take immediate possession of and remove the same without liability to the Owners or their Agents for such entry or for damage to property or otherwise. c) On such terms and conditions and for such consideration as the Owners may deem fit and Arbp513.09 6 with or without any notice to the Hirer sell the vehicle at a public or private sale, otherwise dispose of, hold, use, operate, lease to others or keep idle such vehicle, all free and clear of any rights to the Hirer and without any duty to account to the Hirer for such action or inaction or for any proceeds in respect thereof; d) By written notice to the Hirer, require the Hirer to pay to the Owners (as liquidated damages or loss of a bargain and not as a penalty) on the date specified in such notices an amount (plus interest at the rate of 36% per annum for the period until receipt of the said amount) equal to all unpaid hire charges payments and all other payments which, in the absence of a default, would have been payable by the Hirer hereunder for the full term hereof, or e) Exercise any other right or remedy which may be available to them under the applicable law. 2) In addition, and without prejudice, to what is stated above, the Hirer shall be liable for all legal and other costs and expenses resulting from the foregoing defaults and from exercise of the Owners’ remedies, including possession of any of the Vehicles; 4 The agreement provided first and second schedule of payment which commenced from 23/07/2001 and ended on 25/06/2004. 5 The Respondent had served demand notice dated 21/02/2002, because of defaults in terms of contract (HPA), and also demanded late payment, from the respective due dates of the monthly installments with interest and also demanded the return of the vehicle within 14 days to the nearest branch. It was clearly mentioned that, if the Petitioner failed to comply with the above within 14 days, they would take appropriate actions Arbp513.09 7 as per the agreement at the costs and consequences. Another notice dated 29/10/2002 of same nature was sent because of persistent defaults, but no action of any kind was initiated by the Respondent. 6 On 16/01/2006, i.e. after the last date of payment i.e. 26/06/2004 - 03/07/2007 as per HPA, dated 23/07/2001, the respondent demanded the balance whole payment of Rs.6,63,917/- along with the expenses and the interest again. 7 It was reminded by the Respondent on 21/08/2006 and thereby invoked Arbitration Clause also. The matter was referred to the Arbitrator and intimated accordingly by notice dated 18/06/2007. The statement so claimed was sent by letter dated 13/07/2007. The matter proceeded before the Arbitrator accordingly, as the Petitioner filed written statement to resist the claim on all counts, including of limitation. The parties led the evidence before the Arbitrator. 8 The Arbitrator ultimately has passed the award as referred above. 9 The learned counsel appearing for the Petitioner, basically submitted that the claim so raised is time barred. The agreement was dated 23/07/2001 and the cheques were issued for the period from 2001 to June, 2004. The claim filed on 03/07/2007. The Arbitrator held that the last maturity date of monthly hirer installments was 25/06/2004. The present arbitration proceedings was initiated on 18/06/2007, within three years from the last date of monthly Hirer installments. The last notice of demand Arbp513.09 8 was dated 21/08/2006 and the same was not complied. The vehicle is still in possession of the Respondent. 10 The learned counsel appearing for the Respondent has relied on Article 113 of the Limitation Act, 1963 and contended that the period of limitation of 3 years commences/begins when the right to sue accrues and as there is continued cause of action, as there were successful defaults in payment. Each default, therefore, was reduced existing and/or continuing cause of action. Therefore from the last defaults, the claim petition as filed, is within the limitation. 11 The learned counsel appearing for the Respondent unable to point out any other authority/ citation to the effect that in HPA, every default in every installments creates fresh cause of action and till the last installments, cause of action always continuing, except the Judgment in Bhagwantrao Deorao Patil Vs. Mohammad Khan Asgar Khan, AIR 1977, Madhya Pradesh, 270, whereby referring to Article 37 of the Arbitration Act, it was contended that the suit for recovery of whole amount in case of monthly installment, cause of action accrues after expiry of 10 months. In that case, there was no provision that on default of one or more installments, whole amount would became due. In the present case, as per the clauses so referred above, and in view of the fact that the Respondent had issued notices in the year 2002 and thereafter again in 2006, itself shows that because of existence of such clauses, such notices Arbp513.09 9 were issued and demanded the whole amount and even threatened to take action apart from forcible possession of the vehicle. This judgment, therefore, is not applicable on facts itself. 12 The submission, therefore, even based upon Article 113 of the Limitation Act, 1963 as referred above is also inapplicable in view of the specific clauses and the notices issued by the Respondent. The parties are bound by the terms and conditions, and therefore, I am declined to observe that there is no continuing cause of action. The right to sue, in view of the agreement referred above, it self accrues on default of initial one or more installments, as the whole amount became due and payable. The Respondent accordingly acted upon also. 13 In Arbitration Petition (Lodging) Nos. 1037/2009, another such financial institutions like the Respondent, the Petitioner who is also a financial institution has invoked Section 9 of the Arbitration Act as the Respondents failed to pay a monthly installments regularly commencing from 10/10/2007. There was also an agreement clause. It was specifically agreed that, in case of defaults or delay in payment/repayment of any installments, the loan, interest or any other amount, the respondent shall pay overdue interest and compound interest, collection charges. The parties have entered into/executed the Demand Promissory Note dated 21/09/2007. The Respondent failed to make the payment due dates, in spite of demand and as defaults occur, and therefore, the notice was sent Arbp513.09 10 on 20th October, 2008 and thereby called upon the Respondent to pay the outstanding dues along with the amount payable to the sum of Rs.7,97,089 as on 20th October, 2008 with interest. The notice of legal proceedings including referring the matters to the Arbitrator was also given. As there was no response, the matter was referred to the Arbitrator. In the meanwhile they invoked Section 9 of the Arbitration Act for interim protection/ measure till the enforcement of the final award. Here the contention was that the Petitioners are entitled to initiate proceedings immediately after one or 2 defaults as per the similar clause in the events of defaults. The similar is the case and the clause in other Arbitration Petition (Lodging) No. 1038 of 2009. 14 The whole purpose will be rendered ineffective and remedy-less, if the financial institutions failed to take action immediately after one or two defaults, as agreed. It will be too late for them to recover and/or to wait till last installments became due. If the case of Financial Institution’s is accepted as submitted in the present case in the first petition i.e. Arbitration Petition No.513 of 2009, that the cause of action accrued after expiry of last months installment then, it will be difficult for them to take any action immediately after 1 or 2 defaults. It will frustrate the whole object of the financial institution to provide loans and to recover immediately in case of default. Even otherwise, the clauses of agreement itself, if read with their demand notices, in my view, in Arbitration Petition Arbp513.09 11 No. 513 of 2009, the submission on behalf of the Petitioner that the award so passed based upon the claim beyond the limitation period is bad in law and unsustainable. 15 Resultantly, the Arbitration Petition No. 513 of 2009 is allowed. The impugned award dated 22nd April, 2009, is quashed and set aside. 16 The Arbitration Petition (Lodging) No. 1037 of 2009 read with Arbitration Petition (Lodging) No. 1038 of 2009, in view of undisputed position on record of defaults in payment and the averments remained uncontroverted, and as the prayer clause (b) as already been granted while admitting both the matters on 05/10/2009, is confirmed the same. 17 In view of this, the Arbitration Petition (Lodging) Nos. 1037 of 2009 and 1038 of 2009, are made absolute, in terms of prayer clause (b). 28 This order shall remain in force till the Arbitration Proceedings attains finality. Liberty is granted to the parties to settle the matter and or apply for appropriate order. 19 No costs. (ANOOP V. MOHTA, J.)