Arb.Appeal No. 48 of 2009

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 9TH DECEMBER 2009 / 18TH AGRAHAYANA 1931 Arb.A.No. 48 of 2009() ---------------------AGAINST THE ORDER DATED 19/09/2009 IN IA.634/2009 IN OP(ARB) No.48/2009 of ADDL.D.C. & ADDL.MACT,ALAPPUZHA. .................... APPELLANT/RESPONDENT ------------- K.SIRAJUDHEEN S/O.LATE KASIM, VALAYIL TAJ MANSION, KANNAMPALLI BHAGOM, KAYAMKULAM, ALAPPUZHA DISTRICT BY ADV. SRI.N.SUBRAMANIAM SRI.M.S.NARAYANAN RESPONDENT(S): --------------- SREEDHAR K KOTTARAM S/O.K.P.KUMARAN, KOTTARATHIL HOUSE, KUMARAMANGALAM PO, THODUPUZHA, IDUKKI DISTRICT. BY ADV. SRI.K.S.HARIHARAPUTHRAN FOR R1 SRI.M.D.SASIKUMARAN FOR R1 SRI.GEORGE MATHEW FOR R1 THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 09/12/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **P.R.RAMAN & P.R.RAMACHANDRA MENON, JJ.** ------------------------------- Arb.Appeal No.48 of 2009 ------------------------------- Dated this the 9[th] December, 2009 ## **J U D G M E N T** ## **Raman, J.** The respondent herein filed O.P.(Arb) No.48 of 2009 before the District Court, Allappuzha, for an interim order of attachment of the properties scheduled to the petition. There is a contract between the parties for construction of a Star Hotel, and towards the same, an amount of Rs.51 lakhs is said to have been paid by the respondent herein to the appellant. It is the contention of the respondent that the appellant did not perform his part of the contract. Therefore, he proceeded to initiate arbitration proceedings for realisation of the said amount of Rs.51 lakhs from the appellant, and alleging that hasty steps are taken by the appellant to alienate the property and to secure the claim, the respondent sought for an interim order of attachment and approached the District Court. Along with the main Original petition, I.A.No.634 of 2009, was also filed for ad-interim **Arb.Appeal. No.48 of 2009** 2 attachment. The court below ordered interim attachment of the petition scheduled properties. Thereafter, the appellant filed objection stating that the amount received by him has already been spent for construction and also denying other averments made in the petition. It was also stated that he had no intention to alienate the property. The encumbrance certificate in respect the properties in Kayamkulam Village along with the title deeds, and other documents to prove his possession were produced and he sought for lifting the attachment. It was the appellant's contention that the property offered as security will fetch more than Rs.51 lakhs. 2. The learned counsel appearing for the respondent, on the other hand, contended that the Court has no jurisdiction to lift the attachment, as it is not one issued under Order XXXVIII Rule 5 of Code of Civil Procedure. The question of lifting of attachment by furnishing security can be raised only if it is a conditional attachment. There is no provision in the Arbitration Act for such a procedure. They also disputed the **Arb.Appeal. No.48 of 2009** 3 value of the property offered as security. The court below, without going into the merits of the contention as to whether the property now offered as security is sufficient to secure the claim of the respondent, dismissed the petition seeking to lift the attachment, I.A.No.728 of 2009, on the sole ground that the lifting of attachment involves review of the order, in the absence of any specific provision enabling the court to review the order earlier passed, and placing reliance on the decision of this Court in Sanjay Gupta v. Kerala State Industrial Development Corporation Ltd. (2009 (4) KLT 147), dismissed the petition. Hence, this appeal. ## 3. Sanjay Gupta's case, stated above, on which reliance was placed by the court below, was a case where a petition was filed before this Court seeking review of an order issued by the nominee of the Chief Justice, in exercise of the power under Section 11 of the Arbitration and Conciliation Act, 1996. Taking the view that the Act being a comprehensive one and not one which confers power on the High Court to pass any **Arb.Appeal. No.48 of 2009** 4 order under Section 11, the request was not granted, since the power exercised under Section 11 as a nominee is a statutory power and unless the power of review is expressly conferred, general power of review that may be available to the High Court under other jurisdiction cannot be extended to review the order issued by the Chief Justice. So holding, the review application was dismissed. 4. Admittedly, going by the facts as stated in the said decision, petition seeking review of the order was made before this Court and was dismissed on the reasons as stated above. Here, the question is as to whether when an order of attachment was passed by the District Court in exercise of the power under Section 9 of the Arbitration and Conciliation Act, and subsequently when the respondent seeks to lift the attachment by offering security, does it really amount to seeking a review of the order? To our mind, the right of the respondent to lift the attachment after offering security by filing an application by itself cannot be said to be invoking a power of review. In this **Arb.Appeal. No.48 of 2009** 5 connection, we may refer to Section 9 of the Arbitration and Conciliation Act, as per which, the Court is clothed with the power to pass interim measures. A party may, before or during arbitral proceedings or at any time after the making of the arbitral award, but before it is enforced, in accordance with Section 36, apply to a Court, for reliefs, as enumerated under clause (i) and sub-clauses (a) to (e) under clause (ii). As per clause 9(ii)(e), the Court is empowered to pass orders as an interim measure for protection, as may appear to the Court to be just and convenient, in a proceedings before it. No rules are framed regarding the manner in which such powers are to be exercised. It is conceded that the Court is empowered to pass order on interim measure including the attachment of the immovable property, as a measure to protect the right of the parties and to secure debt, as may appear to be just and convenient , and the Court has in the present case passed an order of ad-interim attachment of the property scheduled to the petition. A copy of the order issued clearly shows that the same **Arb.Appeal. No.48 of 2009** 6 was issued in Appendix Form No.6 under Order XXXVIII Rule 5 of Code of Civil Procedure. The order reads as follows:- “Whereas the plaintiff has proved to the satisfaction of the court that the defendant in the above suit is going to dispose the scheduled property. Therefore to command you to call upon the said defendant on or before the 17[th] day of September 2009, either to furnish security for the said amount of Rs.51 lakhs or produce and place of the disposal of the court when required or the value there of or such portion of the value as may be sufficient to satisfy any decree that may be passed against him or to appear and show cause why he should not furnish security and you are further ordered to attach the said property described in the schedule and keep the same under safe and secure custody until the further order of this Court, and you are further commanded to return this warrant on or before the 17[th] day of September, 2009, with on endorsement certifying the date on which and the manner in which it had been executed, or the reason why it has not been executed.” 5. Therefore, the order itself commands the appellant herein to furnish security or to produce and place at the disposal of the court when required or the value thereof or such **Arb.Appeal. No.48 of 2009** 7 portion of the value as may be sufficient to satisfy any decree that may be passed against him or to show cause why he should not furnish the security. On receipt of the said order, the appellant filed I.A.No.728/2009 offering security and seeking to lift the attachment. Therefore, he only acted in accordance with order issued by the court below. The court below having given him an opportunity to offer security and when once he offers the security, necessarily, the Court will have to consider whether the security offered is sufficient or not to secure the debt. In this connection, as we have already noticed, the very order is issued as prescribed under Order XXXVIII Rule 5 of the Code of Civil Procedure. As per Order XXXVIII Rule 9, where an order is made for attachment before judgment, the court shall order the attachment to be withdrawn, when the defendant furnishes security required, together with the security for the costs of the attachment or when the suit is dismissed. Therefore, even in a case where an order is already made, whether sufficient cause is not shown or security not offered, still the Court shall order the **Arb.Appeal. No.48 of 2009** 8 attachment to be withdrawn, when subsequently the party approaches and furnishes security. In this case, even at the time when an order is contemplated under Order XXXVIII Rule 5 of Code of Civil Procedure, the appellant has offered to furnish security in terms of the order already issued. As per Order XXXVIII Rule 6(2), where the defendant shows such cause or furnishes the required security and the property specified or any portion of it has been attached, the Court shall order the attachment to be withdrawn, or make such other order as it thinks fit. Therefore, the whole object of an order of attachment is to secure the debt. Hence, when security is offered to the satisfaction of the court, the court shall lift the attachment. Therefore, if the principle contained under Order XXXVIII applies, there can be no doubt that the court shall lift the attachment, the moment the defendant furnishes security sufficient to cure the debt, to the satisfaction of the court. 6. The contention of the respondent is that since the District Court is exercising the power under the Arbitration **Arb.Appeal. No.48 of 2009** 9 and Conciliation Act, the provisions contained under Order XXXVIII as such is not applicable, and further that since an order is already passed, there is no power to review the said order. As we have already noticed, the very attachment order calls upon the defendant to furnish security and only till such time as he furnishes security, the property is attached as an ad-interim measure. Therefore, when he is offering security in terms of the order now passed, there is no question of reviewing the order. The court is only acting in compliance with the order already issued. Therefore, the fact that there is no power for review has no relevance or application to the factual situation here. Secondly, the very order issued by the court below is in the prescribed form under Order XXXVIII of Code of Civil Procedure. In the absence of any rules prescribed, the principles contained and in so far as it is admitted that the court has got the power to order attachment, necessarily, such power has to be exercised. 7. On the contrary, However, in the process of review, it actually relates back to the date of the order and **Arb.Appeal. No.48 of 2009** 10 hence the order of review is not one passed in terms of the earlier order. Whereas the party seeking to remove or lift the attachment by showing cause, as directed in the order, is only seeking for relief in tune with the order and thus not seeking review of the order itself. 8. We may in this connection refer to the decision of the Apex Court in **Adhunik Steels Ltd. v. Orissa Manganese** **and Minerals (P) Ltd.** (2007 (7) SCC 125), wherein it was held as follows:- “It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well-known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was dehors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the section **Arb.Appeal. No.48 of 2009** 11 itself brings in the concept of “ _just and convenient_ ” while speaking of passing any interim measure of protection. The concluding words of the section, “ _and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it_ ” also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act.” 9. The position is thus abundantly made clear that in the absence of any specific rules, the general principle that will apply to grant lifting of attachment as provided for in the Code of Civil Procedure will apply and accordingly, we hold that when security is offered, the court below is not only empowered, but even bound to consider whether the security offered is sufficient and if satisfied that the security offered is sufficient to secure the debt, the court shall lift the attachment. **Arb.Appeal. No.48 of 2009** 12 10. Accordingly, the impugned order is set aside. The matter is remanded to the court below for fresh consideration, in accordance with law and subject to what is stated above. 11. Parties shall appear before the court below on 1.2.2010. Appeal is allowed as above. ## **P.R.RAMAN, JUDGE** ## **P.R.RAMACHANDRA MENON, JUDGE.** ## **nj.**