Attachment; Muthoot Leasing and Finance Ltd. Vs. N.P. Asiya [Kerala High Court, 07-02-2011]

Civil P.C. 1908 – O. 21 Rr. 54 & 58 – O. 38 Rr. 9, 10 & 11A – Order of Attachment – Quoting of a wrong provision – Application filed by third party – Vacating Interim Order – Quoting of a wrong provision will not invalidate an order if power is otherwise available.

2011 (1) KLT 858 : 2011 (1) KLJ 623 : ILR 2011 (1) Ker. 809 : 2011 (1) KHC 567

IN THE HIGH COURT OF KERALA AT ERNAKULAM

K.M. Joseph and M.C. Hari Rani, JJ.

Arb. A. No. 35 of 2009

Decided On: 07.02.2011

Muthoot Leasing and Finance Ltd. Vs. N.P. Asiya

For Appellant: C.S. Manilal, Adv.; For Respondents: P.K. Ravisankar & K. Pradeep, Adv.

J U D G M E N T

K.M. Joseph, J.

1. On the allegation that Respondents to 4 entered into an hypothecation agreement for purchase of a vehicle, under which the second Respondent is the borrower and Respondents 3 and 4 are the guarantors, and alleging that an amount of Rs. 4,40,921/= is due and further alleging the existence of an arbitration agreement, the Appellant moved the District Court under

Section 9 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as the Act), claiming attachment of the properties of the Respondent therein. The Court ordered attachment on 11.11.2008. The attachment was effected, however, only on 29.11.2008. The first Respondent thereupon filed a petition styled under Order 21 Rule 58 of the Code of Civil Procedure and Section 9 of the Act, praying that the attachment was effected only on 29.11.2008 and she had purchased the property on 22.11.2008 by way of registered Sale Deed and she prayed that the attachment may be lifted. The learned District Judge found that before effecting attachment, the property had been sold. The court below relied on the Pass Book and the evidence of PW2, who is the brother of the first Respondent who was examined as PW1 to find that the property was purchased by paying consideration and the court below found that there is nothing to prove that the sale is a fraudulent transfer.

2. Apparently, the Court took note of the contention, as it were, of the Appellant that there is no power to lift the attachment. The court found that the jurisdiction under Section 9 is only to grant an interim measure till the conclusion of the arbitral proceedings, and that all the provisions of the Code of Code of Civil Procedure including Order 21 Rule 58 are not made applicable to arbitral proceedings, particularly to the court dealing with the petition under Section 9 of the Act. It is found that since Order 21 Rule 58 is not specifically made applicable, the Court may have jurisdiction to pass an order which is having the force of a decree. It is further found that in a proceeding under Section 9 of the Act, the Court was competent to pass necessary ancillary orders, and that in the circumstances, the court is competent to lift the attachment as and when it is found that the property was alienated prior to the date of attachment.

3. We heard Shri C. S. Manilal, learned Counsel for the Appellant and Shri P. K. Ravi Sankar, learned Counsel appearing for the first Respondent.

4. Learned Counsel for the Appellant would submit that the court below has erred in granting relief to the first Respondent. He would submit that under Section 9, only a party to the agreement can approach the Court for relief. Sections 7(1) reads as follows:

7. Arbitration agreement

(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.”

He would further contend that what is contemplated under Section 9 of the Act is only the power of the Court to grant interim relief. Section 9 does not contemplate the entertaining of a third party claim under Order 21 Rule 58 CPC. He would contend that under Order 38 Rule 10 CPC, rights of persons who are having independent right as on the date of the attachment are not affected. Order 38 Rule 10 Code of Code of Civil Procedure reads as follows:

10. Attachment before judgment not to affect rights of strangers, nor bar decree-holder from applying for sale

Attachment before judgment shall not affect the rights, existing prior to the attachment, or persons not parties to the suit, not bar any person holding a decree against the Defendant from applying for the sale of the property under the attachment in execution of such decree.”

He would further contend that third parties can work out their remedies before the competent civil court. He would point out that if Order 21 Rule 58 is made applicable, then, the order that would be passed must be treated as a decree and such a contingency is not contemplated in proceedings under Section 9 of the Act. He would distinguish the judgment of this Court in

Sirajudheen K. Vs. Sreedhar K. Kottaram, 2010 (1) KHC 281

by pointing out that, that was a case where attachment was ordered and under the order of attachment, the Defendant had been called upon to furnish security. It was in such circumstances, this Court took the view that the Court shall lift the attachment, the moment the Defendant furnished sufficient security to the satisfaction of the Court. He would also rely on the judgment of the Apex Court in

Firm Ashok Traders And Anr. Vs. Gurumukh Das Saluja and Ors., 2004 (3) SCC 155

Therein, the Apex Court, inter alia, held as follows:

“The right conferred by Section 9 is on a party to an arbitration agreement. A person not party to an arbitration agreement cannot enter the court for protection under Section 9. This has relevance only to his locus standi as an applicant. This has nothing to do with the relief which is sought for from the court or the right which is sought to be canvassed in support of the relief.”

5. Learned Counsel for the Appellant would also rely on the decision in