High Court of KeralaSingle JudgeOriginal petition dismissed

Manoj C.J., Saramma V.V., Joy @ Ulahannan M.C. v. Shriram Transport Finance Company Limited

Case / Petition Number:OP(C) No.312/2020

Case Details & Bench

Court
High Court of Kerala
Hon'ble Judges
  • R. Narayana Pisharadi
Judgment Date
2020-10-06
Court Decision / Holding
Consequently, the original petition is dismissed. The High Court held that Section 17(2) enforcement is limited to enforcement of the arbitral tribunal’s interim order and cannot be used to adjudicate the merits of the dispute or to modify the Section 17(1) order. The lower court’s Ext.P7 order was not interfered with, and the remedy lies in a Section 37 appeal.
Final Disposition
Original petition dismissed

Parties to the Case

Appellants / Petitioners

  • Manoj C.J
  • Saramma V.V
  • Joy @ Ulahannan M.C

Respondents

  • Shriram Transport Finance Company Limited

Legal Representation & Advocates

Counsels for Petitioners

  • • K.C. Eldho
  • • Mallenathan.M
  • • K. Sindhu Elias
  • • K. Krishna Santhosh
  • • Haritha Jayan

Counsels for Respondents

  • • C. Harikumar
  • • Renjith Rajappan
  • • Nova Sen Abraham

Case Synopsis & Summary

Manoj C.J., Saramma V.V. and Joy @ Ulahannan M.C., the petitioners, approached the Kerala High Court under Article 227 of the Constitution challenging Ext.P7, an order passed by the Additional District Judge, Thrissur, dismissing their prayer for restoration of status quo ante in a vehicle seizure dispute. The respondent, Shriram Transport Finance Company Limited, had advanced a vehicle loan to the petitioners, with the second and third petitioners as guarantors. After alleged default, the respondent recalled the loan and sought to enforce an arbitral tribunal’s interim order under the Arbitration and Conciliation Act, 1996 (the Act). The arbitral tribunal purportedly passed an interim order under Section 17(1) for taking possession of the vehicle IEMC 121819. Pursuant to an order in I.A.3511/2019, the District Court appointed an advocate commissioner who seized the vehicle and delivered it to the respondent. The petitioners sought a status quo ante via Ext.P3, contending that possession was taken by force and before consideration of Ext.P2, which sought to stay the order. The District Court, relying on the advocate’s report, found that possession was taken in accordance with due process, and rejected Ext.P3. The High Court held that Section 17(2) enforcement is for enforcement only and cannot adjudicate the underlying debt or modify the arbitral 17(1) order; it is subject to appeals under Section 37. Since the petitioners did not file a Section 37 appeal, the court declined interference, and the petition was dismissed. The decision clarifies the limits of 17(2) enforcement and confirms the lower court’s order.

Provisions of Law Cited

Section 17(1) of the Arbitration and Conciliation Act, 1996Section 17(2) of the Arbitration and Conciliation Act, 1996Section 37Section 37(2)(b)Code of Civil Procedure, 1908

Legal Doctrines & Maxims

  • Enforcement of arbitral tribunal orders under Section 17(2) is for enforcement and not an appeal; it does not allow modification of the Section 17(1) order.
  • The court is not empowered to adjudicate the merits or validity of the interim order passed under Section 17(1) while enforcing under Section 17(2).
  • Notice to the affected party is not mandatory before enforcing a Section 17(2) order when the vehicle is the only security to realize the debt.
  • Granting a status-quo ante would effectively nullify the arbitral tribunal’s interim order and amount to modification of the 17(1) order (not permissible under 17(2)).

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners sought to set aside Ext.P7 via Ext.P3 on grounds that possession of the vehicle was taken in violation of due process, and that the order for seizure was executed without notice during pendency of a stay petition (Ext.P2). They contended that Ext.P3 was necessary to restore the status quo ante and protect their rights pending resolution of disputes about the amount due. They argued that enforcing the arbitral tribunal’s interim order under Section 17(2) should not foreclose their claim or lead to automatic dispossession without due process, and that Section 37 remedies (appeal) were available but not pursued. They further argued that the court cannot adjudicate the debt disputed between the parties in a Section 17(2) enforcement proceeding.

Contentions of Respondents

The respondent argued that Section 17(2) enables enforcement of a tribunal’s interim order as if it were a court order, subject to Section 37 appeals, and that the petitioners did not pursue an appeal under Section 37. The respondent submitted that possession was taken in accordance with due process under the court’s order (I.A.3511/2019) and that allowing Ext.P3 would nullify the arbitral order by restoring possession. They contended that debate over the amount due is inappropriate in a Section 17(2) enforcement proceeding and that issuance of notice prior to enforcing such orders would undermine creditor security.

Cited Precedents (3)

Case NameCitationTreatmentExplanation
HDFC Bank Limited v. Manaf2018 (4) KHC 84PositiveCited to support the proposition that notice before taking possession may not be mandatory in certain enforcement actions.
Sakthi Finance Limited v. Shanavas2018 (5) KHC 739PositiveCited to support that the court cannot determine the validity of the arbitral interim order while enforcing under Section 17(2).
HDB Financial Services Limited v. Kings Baker Private Limited2019 (1) KHC 814 : 2019 (1) KLT 784PositiveCited to support that the court cannot modify or vary the 17(1) order while enforcing under 17(2).

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI** **TUESDAY, THE 06TH DAY OF OCTOBER 2020 / 14TH ASWINA, 1942** ## **OP(C).No.312 OF 2020** **IN THE MATTER OF ORDER DATED 13.01.2020 IN I.A.NO.4032 OF 2019 IN I.A.NO.3792 OF 2019 IN CMA ARB NO.389 OF 2019 ON THE FILES OF THE IIIRD ADDITIONAL DISTRICT COURT AT THRISSUR** ## **PETITIONERS:** |**1**|**MANOJ C.J**| |---|---| ||**AGED 31 YEARS**| ||**S/O JOY @ ULAHANNAN,CHALINGAL HOUSE,**| ||**PANNIPADAM,CHELAKKARA POST,THALAPPILLY**| ||**TALUK,CHELAKKARA VILLAGE,THRISSUR DISTRICT,**| ||**PIN CODE-680586.**| |**2**|**SARAMMA.V.V,**| ||**AGED 54 YEARS**| ||**W/O JOY,CHALINGAL HOUSE,PANNIPADAM,**| ||**CHELAKKARA POST,THALAPPILLY TALUK,**| ||**CHELAKKARA VILLAGE,THRISSUR DISTRICT,**| ||**PIN CODE-680586.**| |**3**|**JOY @ ULAHANNAN.M.C,**| ||**AGED 58 YEARS**| ||**CHALINGAL HOUSE,PANNIPADAM,**| ||**CHELAKKARA POST,THALAPPILLY TALUK,**| ||**CHELAKKARA VILLAGE,THRISSUR DISTRICT,**| ||**PIN CODE-680586.**| **BY ADVS. SRI.K.C.ELDHO SRI.MALLENATHAN.M. SMT.K.SINDHU ELIAS SMT.KRISHNA SANTHOSH SMT.HARITHA JAYAN** O.P.(C) No.312/2020 2 ## **RESPONDENT:** **SHRIRAM TRANSPORT FINANCE COMPANY LIMITED 2ND FLOOR,ARYA TOWERS,NEAR UNION BANK,WADAKKANCHERRY,THRISSUR-680582, REPRESENTED BY ITS P/A HOLDER,SRI VINEETH RAMARAGHAVAN.** **R1 BY ADV. SRI.C.HARIKUMAR R1 BY ADV. SRI.RENJITH RAJAPPAN R1 BY ADV. SMT.NOVA SEN ABRAHAM** **THIS OP (CIVIL) HAVING BEEN FINALLY HEARD ON 28-092020, THE COURT ON 06-10-2020 DELIVERED THE FOLLOWING:** O.P.(C) No.312/2020 3 ## **“CR”** **R. NARAYANA PISHARADI, J ----------------------------------------------------O.P (C) No. 312 of 2020** **-----------------------------------------------------** Dated this the 6[th] day of October, 2020 ## **JUDGMENT** The first petitioner availed a vehicle loan from the respondent, a finance company. The second and the third petitioners were the guarantors in the loan transaction. 2. Alleging that the petitioners committed default in repayment of the loan, the respondent recalled the loan and initiated arbitral proceedings against them. 3. The respondent filed application before the arbitral tribunal for taking possession of the vehicle IEMC 121819 involved in the loan transaction. The arbitral tribunal passed an order on 03.05.2019 for taking possession of the vehicle. 4. The respondent filed C.M.A(Arb.) No.389/2019 in the District Court, Thrissur under Section 17(2) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') for enforcing the O.P.(C) No.312/2020 4 aforesaid interim order passed by the arbitral tribunal. 5. As per the order in I.A No. 3511/2019, the District Court appointed an advocate commissioner to take possession of the vehicle and to hand over it to the respondent. The Commissioner took possession of the vehicle and handed over the same to the respondent. 6. The petitioners filed an application as I.A.No.4032/2019 (Ext.P3) before the District Court for an order granting status quo ante with regard to the vehicle. 7. As per Ext.P7 order, the learned Additional District Judge dismissed Ext.P3 application. 8. This original petition under Article 227 of the Constitution of India is filed by the petitioners challenging the legality and propriety of Ext.P7 order. 9. Heard the learned counsel for the petitioners and also the respondent. 10. Section 17(1) of the Act empowers the arbitral tribunal to pass interim orders of the nature mentioned thereunder. Section 17(2) of the Act provides that, subject to any orders O.P.(C) No.312/2020 5 passed in an appeal under Section 37, any order issued by the arbitral tribunal under Section 17 shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court. 11. Admittedly, the arbitral tribunal had passed an order for taking possession of the vehicle which was involved in the loan transaction. There can be no doubt with regard to the fact that it was an order passed by the arbitral tribunal under Section 17(1) of the Act. 12. As per the order in I.A.No.3511/2019, the District Court appointed an advocate commissioner to take possession of the vehicle and to hand over it to the respondent. Pursuant to that order, the advocate commissioner took possession of the vehicle and handed over the same to the respondent. 13. Ext.P3 application for passing an order granting status quo ante in respect of the vehicle was filed by the petitioners on two grounds, (i) possession of the vehicle was taken by using force and (ii) possession of the vehicle was taken before O.P.(C) No.312/2020 6 considering Ext.P2 application filed by the petitioners for keeping in abeyance the order passed by the court in that regard. 14. The District Court, in the light of the report of the advocate commissioner, has rightly found that possession of the vehicle was taken over pursuant to the order passed by the Court, by due process of law. 15. Pendency of Ext.P2 application filed by the petitioners did not render the act of taking possession of the vehicle illegal. There was no order passed by the Court to keep in abeyance the execution of the warrant issued to the advocate commissioner for taking possession of the vehicle. 16. Ext.P2 application was filed by the petitioners raising dispute with regard to the amount due from them to the respondent and also contending that the order passed by the Court for seizure of the vehicle was passed without notice to them. 17. Before passing an order under Section 17(2) of the Act for enforcement of the interim order of the arbitral tribunal to take possession of a vehicle, it is not mandatory or necessary to O.P.(C) No.312/2020 7 issue notice to the affected party (See **HDFC Bank Limited v. Manaf : 2018 (4) KHC 84** ). The vehicle may be the only security and asset available to the creditor for realisation of the debt. Issuance of notice prior to taking possession would enable the debtor to remove the vehicle out of the process of law. 18. The dispute raised by the debtor with regard to the amount due to the creditor cannot be adjudicated by the Court before or while passing an order under Section 17(2) of the Act. The Court has also no power under Section 17(2) of the Act to determine the validity or otherwise of the interim order passed under Section 17(1) of the Act by the arbitral tribunal (See **Sakthi Finance Limited v. Shanavas : 2018 (5) KHC 739** ). 19. What is contemplated under Section 17(2) of the Act is only enforcement of the interim orders passed by the arbitral tribunal under Section 17(1) of the Act. While exercising the jurisdiction under Section 17(2) of the Act, the court is not sitting in appeal over the correctness or otherwise of the interim order passed by the arbitral tribunal under Section 17(1) of the Act. In exercise of the power under Section 17(2) of the Act, the court O.P.(C) No.312/2020 8 is not entitled to modify or vary the orders passed or directions given under Section 17(1) of the Act by the arbitral tribunal (See **HDB Financial Services Limited v. Kings Baker Private Limited : 2019 (1) KHC 814 : 2019 (1) KLT 784** ). 20. The prayer made by the petitioners in Ext.P3 application was to pass an order restoring status quo ante in respect of the vehicle, which would amount to restoration of the possession of the vehicle to the petitioners. Granting such an order would have the effect of not merely varying or altering the order passed by the arbitral tribunal under Section 17(1) of the Act but really nullifying it. Therefore, learned Additional District Judge has rightly dismissed Ext.P3 application. 21. An order passed under Section 17(1) of the Act by the arbitral tribunal is appealable under Section 37(2)(b) of the Act. Enforcement of an order of the arbitarl tribunal by the Court under Section 17(2) of the Act is subject to any orders passed in an appeal under Section 37 of the Act. 22. In the instant case, the petitioners did not file any appeal against the order passed by the arbitral tribunal and it O.P.(C) No.312/2020 9 remained unchallenged. The order was enforceable under Section 17(2) of the Act. The lower court rightly refused to restore possession of the vehicle to the petitioners. There is no jurisdictional error committed by the lower court. In such circumstances, there is no sufficient ground to invoke the supervisory jurisdiction of this Court under Article 227 of the Constitution and to interfere with Ext.P7 order order passed by the lower court. Consequently, the original petition is dismissed. (sd/-) ## **R. NARAYANA PISHARADI JUDGE** **lsn** O.P.(C) No.312/2020 10 ## **APPENDIX** **PETITIONERS' EXHIBITS:** **EXHIBIT P1** **A TRUE COPY OF THE CMA NO.389 OF 2019 BEFORE THE DISTRICT COURT,THRISSUR.** **EXHIBIT P2 A TRUE COPY OF I.A.NO.3792 OF 2019 IN CMA ARB.NO.389 OF 2019.** **EXHIBIT P3 A TRUE COPY OF I.A.NO.4032 OF 2019 IN EXHIBIT P2 I.A. IN EXHIBIT P1 CMA ARBITRATION** - **EXHIBIT P4 A TRUE COPY OF THE COUNTER AFFIDAVIT FILED BY THE RESPONDENTS IN EXHIBIT P2** **EXHIBIT P5 A TRUE COPY OF THE ORDER ALLEGED IN EXHIBIT P4 CLAIMING TO BE ONE OF THE ORDER ISSUED BY THE ARBITRATOR** - **EXHIBIT P6 A TRUE COPY OF THE COUNTER AFFIDAVIT FILED BY THE RESPONDENT IN EXHIBIT P3** - **EXHIBIT P7 THE TRUE COPY OF THE ORDER IN I.A.NO.4032/2019 IN I.A.NO.3792 OF 2019 IN CMA ARB NO.389 OF 2019** - **EXHIBIT P8 A TRUE COPY OF THE NOTICE BEARING THE SEAL AND SIGNATURE OF THE ARBITRATOR.** **EXHIBIT P9 A TRUE COPY OF THE UNSIGNED PETITION DATED 02.01.2020 PURPORTEDLY PREPARED BY THE RESPONDENT.** ## **RESPONDENT'S EXHIBITS : NIL** TRUE COPY PS TO JUDGE