There is no prohibition for a decree-holder to seek an order of arrest of the judgment-debtor from the execution Court before seeking attachment of his properties, holds the Madras High Court

The Madras High Court Bench at Madurai has held that there is no prohibition under Code of Civil Procedure (C.P.C.) for a creditor bank to seek a court order for arresting loan defaulters even before exercising the option of filing an application in the court concerned to seek attachment of their properties.

Madras High Court

Justice M. Duraiswamy passed the judgment in a civil revision petition filed by noted television personality Mr. N.S.S. Nellai Kannan challenging the order of arrest passed by the lower Court in an Execution Petition filed by his creditor-bank. 

The judgment of the Court will clea the decks for the arrest of Mr. N.S.S. Nellai Kannan and his son N.K. Arumugam for failing to repay a personal loan of Rs 5 lakhs obtained from the Tamilnad Mercantile Bank in the year 2003.

Observing that the third Additional District Sessions Court in Tirunelveli had rightly ordered the arrest of the loan defaulter and his son, the guarantor, on April 30, 2012, the Court directed the lower court to complete the execution proceedings within three months. The bank’s counsel, V. Karthikeyan, said the orator had taken the loan on December 13, 2003, and agreed to repay it in 60 equated monthly instalments of Rs 11,784, including 14.5 per cent interest per annum. His wife and son were the guarantors.

When he defaulted, the bank filed a civil suit before the District Court in Tirunelveli in December 2006 for recovering the principal and interest totalling Rs 6.52 lakh. Mr. N.S.S. Nellai Kannan contested the suit by accusing the bank of charging an exorbitant interest rate.

The District Court on July 1, 2010, decreed the suit in favour of the bank and directed the noted television personality Mr. N.S.S. Nellai Kannan to repay the amount along with 17.75 per cent interest per annum from the date of filing of the suit. It also ordered him to pay Rs 58,061 towards litigation expenses.

When Mr. Nellai Kannan did not comply with the order, the bank filed an execution petition in 2012 and sought direction to arrest him and his son and lodge them in a civil prison for recovery of the loan amount which had risen to over Rs 10.62 lakh due to non-payment for years.

The District Court in an order passed in the said execution petition ordered their arrest and production before it on June 8, 2012. 

Immediately, the father-son duo filed a civil revision petition in the High Court Bench here in 2012 and obtained an order of stay of the impugned order thereby managing to keep the arrest order in abeyance until disposal of the civil revision petition.

 

Justice Duraiswamy before whom the revision came up, found the same to be devoid of merits and accordingly dismissed it by his judgment. 

Once the decision taken by a judicial authority under Section 8(1) of the Arbitration & Conciliation Act declining to refer the dispute to arbitration has become final, jurisdiction of the Chief Justice under Section 11(6) of the Act cannot be invoked

The Supreme Court of India has held¹ that either party to the proceedings cannot invoke the jurisdiction of the Chief Justice under Section 11(6) of the Arbitration and Conciliation Act, 1996 after the decision taken by a judicial authority under Section 8(1) of the Act declining to refer the dispute pending before it to arbitration and the said decision has become final.

The case involved a suit filed by a partnership firm, viz., M/s. Rana Sahebram Mannulal and three others before the Court of the Civil Judge Senior Division at Aurangabad, Maharashtra. The appellants before the Supreme Court were defendants 1 to 3 in the said suit. The dispute mainly pertained to the partnership business.

Upon entering appearance, the defendants/appellants had filed an application under Section 9A of the Code of Civil Procedure, 1908 to dismiss the suit for want of jurisdiction since the partnership deed contained a provision for arbitration and hence the disputes were liable to be resolved in terms of the Act. In other words, the application filed by defendants, in essence, was to be treated as an application under Section 8(1) of the Act. The same was opposed by the plaintiff. The trial court upheld the objection and held that it was within the jurisdiction of the court to try the dispute and, therefore, it was not required under law to refer the same to arbitration.

The suit proceeded. The parties have examined all their witnesses.

While so, the respondents herein approached the Chief Justice of the High Court of Judicature at Bombay by filing an application under Section 11(6) of the Act seeking appointment of an arbitrator as per the terms of the partnership deed. The appellants opposed the prayer.

The High Court, as per the impugned order, ignored the objection and held that Section 8(3) of the Act does not preclude appointment of arbitration during course of the litigation pursuant to an agreement

“4. Sub-section (3) of Section 8 of the Act does not preclude appointment of arbitration during course of litigation pursuant to agreement. Taking into account sub-section (3) of Section 8 and Section 11 of the Arbitration and Conciliation Act, 1996, it would be expedient that pursuant to clause 6 of the partnership deed, a proper person be appointed as arbitrator to entertain dispute between the parties,” so held the High Court.

The defendants in the suit, aggrieved by the order of the High Court carried the matter in appeal to the Supreme Court.

The Apex Court Court was thus essentially confronted with the issue as to whether either party to the proceedings can invoke the jurisdiction of the Chief Justice under Section 11(6) of the Act after the decision taken by a judicial authority under Section 8(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) declining to refer the dispute pending before it to arbitration and the said decision has become final. The scope of Section 8(3) of the Act was also an ancillary issue before the Court.

The Court held that the facts of the case would show that the application filed by the respondents before it under Section 11 of the Act was nothing but an abuse of process. “The partnership firm itself is the first plaintiff in the suit. The dispute between the parties is the subject of the suit. Precisely for that reason, the appellants sought the matter to be referred to the arbitrator. That was opposed by the respondents. When the suit is at the final stage, the respondents have sought appointment of an arbitrator under Section 11(6) of the Act. Having approached the civil court and having opposed the reference to arbitration under Section 8(1) of the Act and the decision of the court in that regard having become final, the respondents cannot invoke jurisdiction under Section 11(6) of the Act; it is hit by the principle of issue estoppel.”

The Court explained further: “Under Section 8(1) of the Act, either party is free to apply to the judicial authority within the prescribed time to refer the parties to arbitration, in case the matter pending before it is the subject matter of an arbitration agreement. Section 8(3) of the Act however makes it clear that notwithstanding the application under Section 8(1) of the Act and the issue pending before the judicial authority, arbitration may be commenced or continued and an arbitral award can also be made. In other words, despite the pendency of an application under Section 8(1) of the Act before the judicial authority, Section 8(3) of the Act permits the parties to commence and continue the arbitration and the arbitral tribunal is free to pass an award. That alone is what is contemplated under Section 8(3) of the Act.

Writing the judgment for the Bench, Justice Kurian Joseph opined that the principle of res judicata would also come into play once the decision of the Civil Court under Section 8(1) of the Act had become final. He said: “In the suit instituted by the firm and some of the respondents, the order passed by the civil court that it was well within its jurisdiction to try the suit, despite the objection regarding the existence of a clause for arbitration, has become final. Thereafter, Section 11(6) jurisdiction of the Chief Justice cannot be invoked by either party. The principle of res judicata will also be attracted in such a case.”

The Bench of Kurian Joseph and Anil.R. Dave, JJ. thus held : “once the judicial authority takes a decision not to refer the parties to arbitration, and the said decision having become final, thereafter Section 11(6) route before the Chief Justice is not available to either party.”

The Apex Court accordingly set aside the impugned order and allowed the appeal with costs of Rs.25,000/-.

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1. Anil @ v. Rajendra, Civil Appeal No. 11604 /2014 [Arising out of S.L.P. (Civil) No. 15314 of 2014, decided on 18.12.2014

Jessica Lal murder case: Manu Sharma granted parole by the Delhi High Court

Jessica Lal

Siddharth Vashisht alias Manu Sharma, undergoing life term for killing model Jessica Lall in 1999, was on Friday granted parole for 30 days by the Delhi High Court to enable him appear for his final year post-graduation exams, which are scheduled to commence on January 1, 2015. 

Manu Sharma was granted parole subject to certain conditions imposed by the Delhi High Court. The Court took into account the argument advanced by Manu Sharma’s Counsel that his client’s conduct had always been good while in prison and the same has been appreciated by the Tihar jail superintendents concerned, for which he was even awarded. His counsel also claimed that Manu Sharma, through his NGO, Siddharth Vashisht Charitable Trust, has done work for the education of the children of jailed inmates and his efforts have been appreciated by the Lieutenant Governor. The Court was also influenced by the fact that the only objection raised by the Delhi Police to granting Manu Sharma parole was his unsatisfactory conduct back in 2009 when he was granted a similar relief.

 

 Justice S Muralidhar granted parole to 37-year-old Sharma on the condition that he shall furnish a personal bond of Rs 50,000 with one surety, for the like amount, who shall be a family member. 

The Court also directed that Sharma will not leave the National Capital Territory of Delhi for the duration of the parole which shall be effective from the date of his release. 

The Court also directed that Manu Sharma keep away from the area around the residence of the deceased and her family members.

Siddharth Vashisht alias Manu Sharma is pursuing his post-graduate course from the Indian Institute of Human Rights in New Delhi. 

"Cases which are substantially civil disputes though with criminal facets can be quashed" if disputes are settled and there is no chance of conviction, holds Justice Alexander Thomas of the Kerala High Court relying on Gold Quest International Pvt. Ltd. v. State of Tamil Nadu and Others reported in 2014(2) KLD 738 (SC)

The High Court of Kerala while quashing prosecution proceedings in a case¹ filed under Section 482 Cr.P.C, has followed and applied the dictum laid down in Gold Quest International Pvt. Ltd. v. State of Tamil Nadu and Others reported in 2014(2) KLD 738 (SC), that in cases which are substantially of civil disputes though with criminal facets, if the parties had entered into settlement and it has become clear that there are no chance of conviction, there is no illegality in quashing the proceedings under Section 482 of the Code of Criminal Procedure r/w Article 226 of the Constitution of India. But that however such an approach may not apply where the nature of the offence is very serious like those involving offences like rape murder robbery dacoity and cases under the Prevention of Corruption Act, under the NDPS Act etc. in which punishment of life imprisonment or death can be awarded.

 

These observations were made by Justice Alexander Thomas while His Lordship was considering a Criminal Miscellaneous Case filed seeking invocation of the High Court’s inherent powers conferred as per Sec. 482 of the Cr.P.C to quash all further proceedings in Calendar Case, C.C.No.1095/2009 pending on the file of the Judicial First Class Magistrate's Court-I, Ernakulam. The said Calendar Case arose out of the Crime No.108/2007 of Ernakulam Town Police Station which was one registered under Sections 406, 420 read with Sec. 34 of the IPC against the petitioners who were the two accused therein. 

The allegations against the accused (petitioners) in a nutshell was that the accused had auctioned chitty from Kizhakkemudom Chits and Finance Investments and later did not remit the subscription and the 2^nd accused stood as guarantor and cheated the de-facto complainant's chit company and thereby committed the above said offences. The complaint was filed by the 2^nd respondent in his in his capacity as the power-of-attorney holder of the chit company. It was submitted by the petitioners that after investigation, the Police filed final report/charge sheet, which has led to the institution of C.C.No. 1095/2009 on the file of the Judicial First Class Magistrate's Court- I, Ernakulam. The petitioners also stated that now the entire disputes between the petitioners (accused) and the 2nd respondent (de-facto complainant) have been settled out of court. Therefore, it was submitted that even if the prosecution is allowed to proceed, it would not serve any purpose. It was in the conspectus of these facts and circumstances that the petitioners had approached the High Court of Kerala under Section 482, Cr.P.C.

The 2^nd respondent (defacto complainant) had sworn to affidavit dated 4^th September, 2014 (produced as Annexure-III in the Crl.M.C. filed by the petitioners), wherein it was stated that the chit company/firm has no further grievances in the matter and the money owed to him has been fully settled and that the power-of-attorney has authorized the 2^nd respondent to collect the amount for and on behalf of the chit company from the petitioners (accused) and that the 2^nd respondent has received the said money due from the petitioners (accused) and that there exists no grievance as far as the 2^nd respondent or his chit company is concerned. Accordingly, it was submitted that the 2^nd respondent does not want to continue the criminal proceedings against the petitioners in the instant crime as the entire disputes have been settled between them and they are now in cordial relationship and the pendency of the case would adversely affect their relationship, etc. 

It was in this factual context that the prosecution proceedings were quashed by Justice Alexander Thomas after referring to, and relying on the dictum laid down by the Apex Court in the case of Gold Quest International Pvt. Ltd. V State of Tamil Nadu and Others (supra). 

In the said decision, the appellant company therein had over 60,000 members as consumers in and around Chennai city alone and a complaint was made in 2003 by the private respondent therein against the appellant company alleging non-compliance of the issuance of numismatic gold coin on receipt of Rs.16,800/- from the wife of that party respondent and as per the promise made by the appellant company. Some other customers also had complaints on the basis of which the police registered a case under Section 420 of the Indian Penal Code r/w Secs. 4, 5 and 6 of the Prize Chits and Money Circulation (Banning) Act, 1978 and the appellant company filed a Writ Petition before the Madras High Court for quashing of the impugned FIR therein and since all the claimants including the complainant settled the dispute with the appellant company and entered into an agreement, the learned Single Judge of the High Court had quashed the FIR and allowed the Writ Petition. However the state challenged the order of the learned Single Judge which quashed the impugned FIR and the Division Bench allowed the writ appeal filed by the State and directed the police authority to investigate the crime. Aggrieved by this, the company had taken upthe mat ter in Supreme Court in Appeal. After referring to a catena of rulings of the Apex Court as in B.S Joshi and Others v. State of Haryana and Another reported in 2003(4) SCC 675, Nikhil Merchant v. Central Bureau of Investigation and Another reported in 2008(9) SCC 677, Gian Singh v. State of Punjab reported in 2012(10) SCC 603 and other cases, the Apex Court came to the conclusion that in cases which are substantially of civil disputes though with criminal facets, if the parties had entered into settlement and it has become clear that there are no chance of conviction, there is no illegality quashing the proceedings under Section 482 of the Code of Criminal Procedure r/w Article 226 of the Constitution of India. But that however such an approach may not apply where the nature of the offence is very serious like those involving offences like rape murder robbery dacoity and cases under the Prevention of Corruption Act, under the NDPS Act etc. in which punishment of life imprisonment or death can be awarded. In this view of the matter, the Supreme Court set aside the judgment of the Division Bench of the Madras High Court and restored the judgment of the learned Single Judge and upheld the quashment of the FIR for offences under Sec. 420 of the Indian Penal Code.

Applying the law laid down in the case of Gold Quest International Pvt. Ltd. V State of Tamil Nadu and Others (supra) to the facts and circumstances of the case at hand, Justice Alexander Thomas held : “This Court is of the considered opinion that the continuance of the prosecution is unwarranted and that the prayer of the petitioners could be allowed in the light of the aforementioned rulings in the Supreme Court as in Gold Quest International Pvt. Ltd. v. State of Tamil Nadu and Others reported in 2014 (2) KLD 738 (SC). In the result, the Crl.M.C. is allowed.” Accordingly, the Court quashed the charge sheet filed by the Police and all further proceedings in C.C. No. 1095/2009 on the file of the Judicial First Class Magistrate's Court- I, Ernakulam.

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1. Crl. M.C. No. 5164 of 2014 decided on 28.11.2014