Original Application No.396 of 2010 and Application Nos.2015 and 2016 of 2010 P.JYOTHIMANI,J. These applications are filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act") praying for an order of injunction against the respondents from dealing with the schedule mentioned properties, which are the machinery, from alienating and parting with possession; for appointment of an advocate commissioner to seize the said items of machinery lying in the custody of the first respondent with the aid of police and if necessary by breaking open of lock and to hand over the possession to the applicant till the disposal of the arbitration proceedings; and for a direction against the respondents to furnish security to an extent of claim of ` 1,36,30,538.19 as on 31.1.2010, failing which to attach the properties described in Schedules A and B of Application No.2016 of 2010, which are the various immovable properties and farm lands situated in various places in India. 2.1. The applicant is a Non Banking Financial Company registered under the Companies Act, 1956 and regulated by the Reserve Bank of India, started for carrying on business of leasing, financing and hire purchasing. The first respondent has availed a loan of ` 1,28,96,000/- under a loan agreement dated 16.3.2009, under which the first respondent has agreed to repay the said amount with interest at the rate of 16% per annum and the total amount worked out to ` 1,64,96,563.20 repayable in three years in 12 quarters of ` 13,74,713.60 per quarter. It is stated that for the said amount the first respondent has also executed a promissory note on 16.3.2009. It was also specifically agreed that in the event of any failure committed by the first respondent, on notice from the applicant, the entire amount with interest and other charges are due. 2.2. As a security for the repayment, the first respondent has also executed a Deed of Hypothecation on 16.3.2009, hypothecating the machinery for the said repayment and it is stated that the first respondent has in fact surrendered the original invoice relating to the machinery and has also agreed to keep all the assets subject matter of Deed of Hypothecation in their possession and the amount of instalments are liable to be paid whether demanded or not. The default interest in respect of non payment has been agreed at 33% per annum, with right of inspection to the applicant at any time and there was an undertaking not to sell, pledge, charge or under-let the hypothecated assets without prior consent of the applicant. The Deed of Hypothecation also contains a clause for arbitration, apart from the right of the applicant to sell the seized assets for default. In addition to that, the first respondent executed necessary form under the Companies Act creating charge over the assets, which reflects in entries of the Regulations of the Companies. 2.3. It is stated that after receipt of the loan amount, the first respondent has neglected to pay and in fact the two post dated cheques dated 30.6.2009 and 30.9.2009 each for an amount of ` 17,57,191/- and ` 17,66,508/- have been dishonoured and in respect of that instalments and loan arrears as on 11.1.2010, there was a due of ` 12,17,487.74. 2.4. It is stated that when the representatives of the applicant have visited the premises of the first respondent at Sri Kalahasti on 29.12.2009 for inspection, they were not allowed and after the efforts when inspection was made, the first respondent has paid an amount of ` 13,21,309.25 by a demand draft and another ` 2,00,000/- by another demand draft drawn on Citi Bank and a cheque for ` 13,21,309.25 and as on 11.1.2010, the total amount due was ` 1,36,14,044.08. A legal notice was sent on 13.1.2010 calling upon the respondents to pay the amount, which was not complied with, however a reply was given with untenable grounds. 2.5. It is stated that the second respondent has in his individual capacity also given a personal guarantee on 16.3.2009. Even though the applicant was entitled to the payment of the entire amount of ` 1,36,14,044.08 as per the agreement, a claim was made to the extent of ` 12,17,487.74 as on 11.1.2010 to give a chance for repayment of outstanding amount without foreclosing the same and that amount has also not been paid. Ultimately, when the amount was not paid, by invoking the clause in the Deed of Hypothecation, a termination notice was issued by the applicant on 13.2.2010 calling upon the respondents to hand over the hypothecated machinery at their cost and to settle the entire amount. It is stated that after receiving the termination notice, the second respondent has chosen to falsely state as if the personal guarantee given by him has been discharged and thereafter he has filed a suit in C.S.No.296 of 2010 on the file of Delhi High Court for a declaration that the two cheques dated 30.9.2009 each for a sum of ` 17,66,508/- is without consideration and that the applicant is not entitled to encash the same and for a mandatory injunction to repossess the machinery installed in the factory premises at Chittoor District, Andhra Pradesh and to sell the same at market price. The applicant has also taken out an application to reject the plaint and the same is pending. Therefore, under the Deed of Hypothecation as well as the personal guarantee by the second respondent, both the respondents are jointly and severally liable and the suit filed by the second respondent in the Delhi High Court will not stand in the way of the filing of these applications under Section 9 of the Act. 2.6. The applicant being a financial institution governed by the Reserve Bank of India Regulations is dealing with public money and it has responsibility towards the public depositors and it is stated that the first respondent is indebted to several creditors and the business is in the way of liquidation. 2.7. It is stated that in an email communication received from one of the Managing Directors of Sudarshan Consolidated Limited, R.K.Sawhney, which is one of the group companies of the respondents, it is stated that the respondents have cheated them to the extent of ` 100 Crores and the respondents have also obtained a loan of ` 40 Crores from Global Trade Finance Limited, Mumbai and there is already a suit pending in the High Court of Mumbai in Suit No.1006 of 2009. It is also stated that in the email it is also informed that the respondents have swindled ` 36 Crores from Axis Bank and Standard Chartered Bank, New Delhi and ` 40 Crores from ICICI Bank, New Delhi. It is stated that even if the applicant succeeds in the arbitration proceedings, there may not be anything to recover, since the second respondent is trying to evade the legal clutches and therefore, the application is filed against the second respondent to furnish security for a sum of ` 1,36,30,538.19, failing which to attach the properties pending disposal of the arbitration proceedings. In the email communication, the respondents have admitted the liabilities and therefore, attachment has to be effected. 2.8. It is also stated that after termination notice, the applicant came to know on 26.2.2010 that the respondents have entered into an arrangement with one Manzoor Ali and Company, a scrap dealer, to sell the assets described in the schedule, which is the subject matter of the loan and Deed of Hypothecation. It is also stated that the visit of the applicant's representatives to the respondents proved futile. It is also stated that the assets are kept in a company premises called Origin Food Limited, which is also a company promoted by the second respondent, wherein the first respondent was originally having his factory. It is stated that by allowing to keep the machinery, there is a possibility of diminishing of the value and therefore, the application is filed for appointment of an advocate commissioner to seize the said machinery and also to restrain the respondents from alienating, as stated above. 3.1. In the counter affidavit filed by the first respondent, it is stated that there is no arbitration agreement and that the arbitration clause which is relied upon by the applicant, namely Clause XIV of the Deed of Hypothecation does not relate to the applicant and it is in respect of the third parties. It is stated that the arbitration is applicable only in cases where the applicant acts as a power agent of the first respondent and as a power agent he wants to enforce the right with regard to the hypothecated machinery with third parties and that will not confer any right on the applicant to move an application under Section 9 of the Act on a surmise that there is an arbitration agreement and it was based on that an ex parte order has been passed directing to initiate arbitration proceedings on or before 11.6.2010 and such arbitration proceeding has not been initiated at all. On merits also it is stated that the applications are liable to be dismissed. 3.2. It is stated that the first respondent company is engaged in the manufacturing of mango pulp and is a reputed exporter of their brand products in the overseas market and it was in the course of its business, the first respondent has borrowed a sum of ` 1.50 Crores from the applicant in the year 2005 to be repaid in three years and it is stated that in and around 2008/2009, the entire loan amount has been promptly repaid by the first respondent. 3.3. It is stated that thereafter the first respondent once again approached the applicant for further financial assistance by letter dated 9.3.2009 and the applicant has agreed to provide further loan of ` 1.83 Crores to be repaid in three years in quarterly instalments and it was in furtherance of the said loan amount twelve post dated cheques for a sum of approximately ` 17 Lakhs and odd were taken by the applicant. It is stated that in spite of it, the applicant has unilaterally reduced the loan amount to ` 1,28,96,000/- by obtaining the post dated cheques for a sum of ` 13,74,713.60. It is stated that it was for the said reduced amount the loan agreement and Deed of Hypothecation were executed by the first respondent on 16.3.2009. It is stated that at the time of issuing of the revised cheques, the applicant has agreed to return the cheques earlier issued for a higher value, but however the cheques were not returned and the applicant was trying to encash the two cheques and when a request was made by the first respondent to return the cheques, it was refused. In spite of it the first respondent has paid all quarterly instalments due until June, 2010 and the next instalment is due only in September, 2010 and it is stated that the applicant has not filed any statement of account to substantiate as to how the claim is sustainable. 3.4. As far as the allegations made by R.K.Sawhney are concerned, it is stated that the said individual is in inimical terms with the second respondent in his business activities and is spreading rumors and the second respondent has already filed a criminal complaint against him. It is stated that the first respondent being an exporter has availed loan from the applicant company even on earlier occasions and discharged the amount in full and it is only the applicant who has created a controversy and it is because of the retaining of two cheques illegally by the applicant, the respondents were compelled to approach the Delhi High Court for a declaration and it was in those circumstances, to cover up the said activity of the applicant, a termination notice has been issued on 13.2.2010 recalling the entire loan amount and therefore, the applicant has not approached this Court with clean hands and is not eligible for the relief claimed in these applications. 4.1. It is the contention of Mr.P.Wilson, learned Senior Counsel appearing for the applicant that on the facts of the present case there has been default committed by the first respondent, who has admittedly borrowed the amount, and therefore pending initiation of arbitration by the applicant, the applicant's interest must be protected under Section 9 of the Act. It is contended that in the light of the unassailable fact that a sum of ` 1,28,96,000/- has been received by the first respondent by way of loan, it cannot be said that the first respondent should be allowed to deal with the hypothecated machinery. 4.2. He would also contend that the arbitration clause can be presumed on the facts and circumstances of the case as per Section 7(4)(c) of the Act. It is submitted by the learned Senior Counsel that when by invoking the arbitration clause a communication was made, there was no reply by the first respondent and therefore, by the conduct of not replying there should be a presumption of arbitration clause as per Section 7(4)(c) of the Act. 5.1. On the other hand, Mr.M.Ganesan, learned counsel for the respondents would vehemently contend that as per the clause in the Deed of Hypothecation it cannot be construed as an arbitration agreement between the applicant and the first respondent. It is contended that only in cases where the applicant acts as an agent of the first respondent in relation to the third parties, an authorization has been given by the first respondent to raise dispute by way of arbitration relating to third parties and that clause cannot be treated as an arbitration agreement in relation to the applicant and the first respondent. 5.2. It is his submission that if a notice is given about arbitration and that has not been replied, there cannot be presumption of arbitration at all and the consent must be an active consent to invoke Section 7(4)(c) of the Act. In this regard, he would rely upon the judgments in Tata Elxsi Limited, Bangalore v. Anand Joshi, 2003 [4] R.A.J. 602 (Kerala) and 2003 [4] R.A.J. 171 (Mumbai). It is also his submission that in such circumstances it cannot be said that there is a binding arbitration agreement and inasmuch as the arbitration clause has never been accepted by the first respondent, these applications under Section 9 of the Act are not maintainable. In this regard, he would rely upon the judgments in Rickmers Verwaltung GMBH v. Indian Oil Corporation Ltd., [1999] 1 SCC 1 and Indowind Energy Ltd. v. Wescare (I) Ltd., AIR 2010 SC 1793. 5.3. It is his submission that even otherwise the applicant has not taken any steps for the purpose of invoking the arbitration so far and therefore, the conduct of the applicant should be taken into consideration. He would rely upon the judgment in Firm Ashok Traders and another etc. v. Gurumukh Das Saluja and others, etc. 2004 [2] CTC 208 and submit that the claim of the applicant should be rejected. 6. This Court, by order dated 15.4.2010 in Application No.2015 of 2010, has appointed an Advocate Commissioner, apart from passing an order of injunction in O.A.No.396 of 2010. Further, in Application No.2016 of 2010, there was a direction to the respondents to furnish security for a sum of ` 1,36,30,538.19. The order dated 15.4.2010 passed in Application No.2015 of 2010 and the warrant issued for the Advocate Commissioner came to be extended by this Court by an order dated 8.6.2010. It was against the said order, the first respondent has filed O.S.A.No.229 of 2010. It was in the said appeal, a Division Bench in the order dated 11.6.2010, by taking note of the submissions made on either side, passed the following order: "3. Learned senior counsel appearing for the appellant submits that without an Arbitration Clause, this application under Section 9 is not maintainable and according to his instructions, there is no default. On the other hand, the learned senior counsel for the respondents would submit that there is a huge default and the respondent would suffer huge financial loss if the appellant is not asked to make atleast substantial deposit. We will go into this issues by next week. But for the time being, we modify the order as follows. 4. Learned Advocate Commissioner, Mr.A.S.Muthuswamy, shall go to the factory premises and take symbolic possession alone. He will take inventory and give a report to us regarding the condition of the machineries etc., The Advocate Commissioner shall not remove the machineries physically. The appellant shall co-operate and shall not prevent the Advocate Commissioner from executing the warrant. Post on 18.6.2010." 7. Ultimately, the said appeal came to be disposed by the Division Bench in the judgment dated 21.7.2010 with the following directions: "6. We think, in the interest of justice, the parties should go before the learned Single Judge and the matter should be hear by the learned Single Judge. The learned Senior Counsel appearing for the first respondent submitted that the advocate commissioner's report indicates that the machinery is in the custody of a third party and the same requires explanation from the appellant and this is the reason why interim measure of protection under section 9 was sought for. This fact also shall be placed before the learned Single Judge and all the issues are left open. It is open to both the parties to raise their objection regarding all issues including the issue relating to maintainability of the application under section 9. 7. The learned Senior Counsel for the first respondent voiced an apprehension that a suit has been filed before the Delhi High Court collusively and if some orders are obtained there, then, the security of the first respondent will be lost. So, we record that the advocate commissioner took symbolic possession of the machinery on 16.6.2010. The status quo relating to the machinery shall be maintained. That is, the machinery shall not be physically removed until the matter is finally decided by the learned Single Judge or suitable orders are obtained from the learned Single Judge. .. " and accordingly, the applications have been argued before this Court. 8. Since a crucial point has been raised on behalf of the respondents that there is no arbitration clause in the Deed of Hypothecation, it is relevant to deal with the said aspect at first. 9. The loan agreement dated 16.3.2009, by which the first respondent being the borrower has borrowed an amount of ` 1,28,96,000/-, contains various clauses, including the first schedule wherein the assets description is stated as the plant and machinery by deposit of Invoice No.55, dated 13.3.2009 from Nazeer Industries, Andhra Pradesh to the value of ` 1,61,20,000/- and the amount of instalment payable per quarter has been mentioned in the second schedule stating that for the first quarter 01-04, an amount of ` 13,74,713.60 is payable; for the second quarter 05-08, an amount of ` 13,74,713.60 is payable; and for the third quarter 09-12, an amount of ` 13,74,713.60 is payable. 10. On the same day, a Deed of Hypothecation came to be entered between the applicant as the party of the First Part and the first respondent as the party of the Second Part. The Deed of Hypothecation is in respect of the amount of loan of ` 1,28,96,000/- and in fact, in the recitals of the Deed of Hypothecation, the particulars about the loan agreement have also been explained. The clause which is stated to be relating to arbitration under the Deed of Hypothecation is Clause XIV, which is as follows: "Clause XIV: That in the event of one or more of the events mentioned in Clause XIII herein above occurring, without prejudice to the exercise of the rights by the Party of the First part as mentioned in Clause XIII supra and in addition thereto the Party of the First Part shall be entitled at the Party of the Second Part's risk and expense as Attorney for and in the name of the Party of the Second Part or otherwise to take possession of and/or appoint receivers of any debts or assets under this security; give notices and demands to debtors and third parties liable therefor, sue form, recover, receive and give receipts for the same and sell or realise by public auction or private contract or otherwise dispose of or deal with all or any part of such debts or assets and enforce, settle, compromise, submit to arbitration or deal with in any manner with any debts or claims under this security or without being bound to exercise any of these powers or liable for any loss in the exercise thereof and without prejudice to the Party of the First Part's rights and remedies of suit against the Party of the Second Part and/or any Guarantor or otherwise and notwithstandings there may be any pending suit or other proceedings and out of the net proceeds thereof to reimburse the Party of the First Part the balance of the said account or so much thereof as shall remain unpaid with interest thereon at the rate aforesaid from the closing of the said account until payment together with all costs, charges (between Attorney and client) and expenses payable by the Party of the First Part in relation to the said account and/or the debts and assets charged as aforesaid with interest thereon at the rate aforesaid and all other moneys, if any, owing to the Party of the First Part or any other accounts, the Party of the Second Part agreeing to give notices to debtors and third parties as and when required by the Party of the First part and to transfer and deliver to the Party of the First Part all relative documents securities and papers and agreeing to accept the Party of the First Part's accounts of receipts from realisations as sufficient proof of amounts realised and relative expenses and to pay any shortfall or deficiency thereby shown." 11. The said Clause XIV, which gives a positive right on the part of the applicant to take possession of the assets, etc. in furtherance of recovery of the amount, itself depends upon the happening of events mentioned in Clause XIII. The events mentioned and procedure to be followed on the happening of the events are explained in Clause XIII of the Deed of Hypothecation, which is as follows: "Clause XIII. In the event of one or more of the following events occurring namely: a) If the Party of the Second Part shall make default in payment on demand of any moneys the payment whereof is hereby secured and specified in the attached schedule or in the performance or observance of any terms or undertaking contained in this Agreement and on the part of Party of the Second Parts to be observed or performed; b) If the Party of the Second Part shall commit any act of insolvency or if any petition for adjudication or order of adjudication on borrower as insolvent be presented or made; c) If an order is made or a resolution passed for the winding up of the Party of the Second Part or a petition for such winding up is filed or notice of a meeting to pass a resolution issued; d) If a Receiver is appointed of the Party of the Second Part of all or any part of Party of the Second Part's property; e) If the Party of the Second Part ceases or threatens to cease to carry on business; f) If any execution or other similar process shall be levied or issued against the Party of the Second Part; g) If in the opinion of the Party of the First Part, the security hereby created is for any other reason in jeopardy but so that this clause shall not read sui generis WITH SUB-CLAUSE (A) TO (F) HEREOF; then and in such cases the rights of the Party of the Second Part under