IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 01.10.2009 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.No.306 of 2009 and M.P.No.1 of 2009 M/s. United Breweries (Holdings) Ltd. Acting through its Division UB Global Having Registered Office at UB Towers, Level 12, UB City, No.24, Vittal Mallaya Road, Bangalore – 560 001 .. Appellant Vs. M/s. Prem Shoes Private Limited, Rep. By its Director Mr.P.Rajasekar, No.58/27, Karaneeswarar Koil Street, Saidapet,Chennai – 600 015 .. Respondent This appeal has been preferred under Order XXXVI Rule 1 of O.S. Rules r/w Clause 15 of Letters Patent as against the order passed by the learned single Judge in Application No.1903 of 2009 dated 1.9.2009 For Appellant : Mr.Sri Ram Panchu, Senior Counsel for Mr.S.Saravanan For Respondent : Mr.M.Venkatachalapathy, Senior Counsel for M.Sriram J U D G M E N T (The judgment of the Court was delivered by M.CHOCKALINGAM, J.) Challenge is made to an order of the learned single Judge of this Court made in Application No.1903 of 2009 which was made under section 9 of the Arbitration and Conciliation Act, 1996. 2. The Court heard the learned senior counsel for the appellant and the learned senior counsel for the respondent. 3. The appeal has arisen under the following circumstances. The appellant/applicant is an exporter and the respondent is a manufacturer of shoes. Both of them entered into an agreement on 19.6.2008 whereby it was agreed that the respondent should https://hcservices.ecourts.gov.in/hcservices/ manufacture and supply shoes to the appellant/applicant. Advances were made and there was also supply of machineries by the applicant to the respondent. When the applicant made a demand for increase of the quantity, the respondent did not supply the demand made by the applicant. At one point of time, there was grievance felt by the appellant/applicant that there was no proper supply of goods by the respondent. 4. On the contrary it is stated by the respondent/ manufacturer that when dispute arose between the parties, the matter was referred to arbitration. Under such circumstances, number of applications came to be filed by both the parties and Application No.334/2009 was filed by the respondent against the appellant/applicant not to place orders to third parties. Application No.335 of 2009 was filed not to interfere with the peaceful possession of the factory premises by enforcing hypothecated agreement Application No.336 of 2009 was filed to restrain the first respondent from in any way presenting the undated cheque and consequently return the undated cheque and promissory note given by the applicant. Application No.337 of 2009 was filed against the respondents not to interfere with the possession of the factory premises. While all these applications were filed by the respondent, the appellant/applicant also filed application No.1903/2009 in respect of A-Schedule properties, Application No.1904/2009 in respect of B-Schedule property, Application No.1905/2009 was filed in respect of C-Schedule property and Application No.2135 of 2009 in respect of D-Schedule properties. 5. Insofar as those applications were concerned, as could be seen from the available materials, Application No.335 of 2009 which was filed by the respondent not to interfere with the possession of the factory premises was ordered while the other applications filed by the respondents viz., Applications Nos. 334, 336, and 337 of 2009 are pending before the learned Single Judge. Insofar as application No.1904/2009 in respect of B-schedule properties was concerned, it was actually ordered for re-possession of items found therein and actually possession was taken by the appellant. Insofar as C-Schedule property was concerned, all the properties were in respect of the hypothecated properties and since there was an undertaking given by the respondent that they will not deal with the property, the application was closed. So far as Application No.2135/2009 was concerned, it was an application for return of the dies, lasts and moulds etc., which was actually ordered and the Commissioner of the Court was also appointed. Under such circumstances, the instant application No.1903/2009 was filed by the appellant seeking a direction to the respondent to delivery A-Schedule machineries including dies and lasts, sample developing machinery etc. The learned Single Judge, after looking into the available materials took a view that it was not a fit case where it could be ordered, accordingly, dismissed the same. Hence, this appeal has arisen before this Court. 6. Advancing the argument on behalf of the appellant the learned Senior counsel would urge that even the agreement entered into https://hcservices.ecourts.gov.in/hcservices/ between the parties originally has got annexure which would clearly indicate that all the machineries in respect of the relief now sought for belonged to the appellant company/exporter and there is also a specific clause that the respondent should hand over the machineries at the time of demand or at the time when the agreement comes to an end whichever is the earlier. Now, actually there was dispute between the parties and the matter has been referred to arbitration and it is also pending. Once there is a demand made by the appellant who is the owner of the property, there cannot be any impediment for the respondent to deliver the same. Added further learned counsel, the properties, according to the respondent, are the machineries and they are not put in use. Hence, no prejudice would be caused if the machineries are returned by the respondent and no useful purpose would be served if the machineries are with the respondent. Learned counsel pointing to the counter affidavit would further submit that without permission or knowledge of the applicant/appellant the machineries have been put in use by the respondent for manufacturing shoes for the third party. These circumstances also warrant for the return of the properties. 7. The learned counsel would further add, in the instant case, the learned Single Judge though found that the machineries would fall within the subject matter of arbitration, the learned single Judge should have exercised power under section 9 of the Arbitration and Conciliation Act for the purpose of preserving the machineries and should have ordered for return of the machineries but the learned single Judge has not done so. The learned Single Judge has pointed out that there was no complaint as against the respondent and the machineries have not been used but that is not so. Learned counsel would further submit that when the Commissioner of the Court was appointed for making inventory of the properties, certain machineries were found missing and the Commissioner has also filed his report. All these circumstances would indicate that it is fit case where Section 9 of the Arbitration and Conciliation Act would be invoked to preserve the machineries and the order of the learned single Judge has got to be set aside and an order has got to be passed in favour of the appellant. 8. Contrary to the above, it is contended by the learned Senior counsel appearing for the respondent, it is true there was dispute between the parties and the matter was referred to arbitration. Now, the return of the machineries was asked for, which is outside the scope of section 9 of the Arbitration and Conciliation Act for the reasons that the respondent was actually a manufacturer of shoes and dispute has arisen between the appellant and the respondent and now the subject matter is before arbitration. Section 9 of the Arbitration and Conciliation Act could be invoked so far as it relates to the subject matter but the machineries fall outside the scope of the arbitration proceedings. Apart from that, in the instant case, the learned counsel would comment that the agreement entered into between the parties though relied on by the appellant for the purpose that the machineries belongs to the appellant, it is not correct. A perusal of the annexure to the agreement would clearly https://hcservices.ecourts.gov.in/hcservices/ indicate that the macheries actually owned by both the appellant or its subsidiary company but the subsidiary company is not a party before the court or before the arbitral proceedings. 9. Added further learned counsel in the instant case even the annexure did not have any list of machineries. Further, the machineries are actually outside the scope of agreement. Originally when application No.2135/2009 was filed, it was categorically mentioned in paragraph 24 of the affidavit filed in support of the application that the items found in schedule-D were to be handed over, while the respondent retained possession of the A Schedule macheries. Even at the time of passing the order, the Court made a condition that the appellant should deposit a sum of Rs.3,00,000/- for taking those items stipulating that those items should be returned to the respondent on or before 30.09.2009 but it has not been done so. On the contrary, they have filed an application for relaxation of the condition. At this juncture, it has to be pointed out that even after making an application to the effect that the macheries found in A-Schedule could be retained by the respondent, for taking possession of the items in D-Schedule, now, they have come forward with such an application. Under such circumstances, the learned Single Judge on appreciation of the circumstances, found that it is not a fit case where application under section 9 of the Arbitration and Conciliation Act could be maintained and hence, dismissed the same. Therefore, the said order has got to be sustained. 10. The Court paid its anxious consideration on the submissions made and looked into the materials available. 11. It is not in controversy that both the parties have entered into agreement on 19.6.2008 whereby it was agreed that the respondent is to manufacture shoes as per the demand made by the appellant/exporter and at one point of time, there arose a controversy between the parties and the matter was referred to arbitration and pending the same, all the above said applications have come before the Court. Among the said applications, application Nos. 334, 335, 336 of 2009 were filed by the respondent against the appellant not to deal with the hypothecated items, not to interfere with the possession and also not to place orders in favour of the third parties by the respondent. Out of these three applications, two applications were pending and application No.335 has been ordered in favour of the respondent that the appellant should not interfere with the possession of the factory premises of the respondent. While the matter stood thus, the appellant filed number of applications and there are four schedule of properties. A-Schedule speaks about machineries, B-Schedule deals with the raw materials, C-Schedule relates to the properties which were hypothecated and D-Schedule relates to dies, last and moulds etc. which would form part of A-schedule. A Commissioner of the Court was appointed who inspected the properties. It is contended by the appellant side that all the raw materials were not actually handed over and certain properties were found missing & the matter should not be dealt with https://hcservices.ecourts.gov.in/hcservices/ by this forum since it is a subject matter of arbitral proceedings. Insofar as C-Schedule property i.e., hypothecated properties are concerned, the respondent has given an undertaking that they will not to deal with the same. Hence, C-Schedule property does not arise for consideration. So far as D-Schedule property is concerned, an application was filed in application No.2135 of 2009 for handing over possession of D-Schedule properties viz., dyes, lasts and moulds etc. 12. It is pertinent to point out that in the affidavit filed in support of that application at paragraph 24 it is stated as follows. " The Respondent has no use of Schedule D material except to force the applicant to commit breach of contract with its foreign buyers. The rest of the items, including machinery, in Schedule A, leaving Schedule D, may therefore be allowed to be retained by the Respondent pending disposal of the disputes, even though the Respondent has not prayed for retention of the same in their Application." From the very reading of that part of the affidavit, it is quite clear that at the time when the appellant came forward to return D-Schedule property, he has mentioned that A-Schedule machineries could be retained by the respondent pending disposal of the disputes. 13. Admittedly, the disputes are now pending before the arbitral proceedings. Further, even at the time when the order was passed by the Court in Application No.2135/2009 it was also made clear that the appellant should make a deposit of Rs.3,00,000/- for taking delivery of the property on condition that it must return to the respondent on or before 30.9.2009. Admittedly, those materials which were taken delivery by the appellant through the Commissioner as found in D-schedule but the same has not been actually given back. Contrary to the above, the appellant has made an application for relaxation of the condition. At this juncture, it is pertinent to point out, even for the return of the D-Schedule, the Court was not inclined to give an order of delivery by the respondent to the appellant without imposing a condition. Having made an affidavit that D-Schedule property would be returned while the respondent could be allowed to retain A-Schedule, now the appellant has come forward for getting possession of A schedule machineries also. 14. According to the appellant counsel, all the A-schedule machineries belongs to the appellant. It is apt and appropriate to reproduce clause 1 found in the annexure to the agreement which reads as follows: " To enable the manufacturer to create additional manufacturing capacity in terms of Recital E of the Preamble to the Agreement dated 19-6-2008, the https://hcservices.ecourts.gov.in/hcservices/ Exporter has agreed to provide on a need basis, machines and equipments. These machines and equipments will be owned by either the Exporter or its wholly owned subsidiary, UB International Trading Limited." This would clearly indicate that the property in respect of which the relief sought for would be owned by the exporter or its subsidiary. But the subsidiary is not a party before the Court. Further the annexure did not contain the list of machineries . All would go to show that such a relief now sought for is to strengthen the evidence putforth before the arbitrator. 15. As pointed out by the learned counsel for the respondent, the Court is of the considered opinion that all the machineries in respect of which the relief was sought for possession does not fall within the arbitration proceedings. The learned counsel for the appellant placed much reliance on Section 9 of the Arbitration and Conciliation Act 1996 for the preservation of the subject matter. As could be seen from the agreement, it is actually not the subject matter of arbitral proceedings. So long as it stands outside the scope of arbitral proceedings, the appellant cannot have a remedy invoking Section 9 of the Arbitration and Conciliation Act. 16. The Court is of the considered opinion that for all the reasons stated above, it is not a fit case where the Court could grant the relief of return of the machineries. Therefore, the appeal is liable to be dismissed, accordingly, the appeal is dismissed. No costs. Consequently, M.P.No.1 of 2009 is closed. Sd/- Asst. Registrar /True Copy/ Sub Asst.Registrar vsi To The Sub-Assistant Registrar, Original Side, High Court, Madras. + One cc to Mr.G.Duraichamy, Advocate, SR 49863 + One cc to Mr.C.Saravanan, Advocate, SR 50013 OSA.No.306 of 2009 PUR (CO) RH (13.10.09) https://hcservices.ecourts.gov.in/hcservices/