Madras High Court · 2011

THE HON'BLE MR. JUSTICE VINOD K.SHARMA Application Nos.1422 to 1424 of 2011 ORDER The applicant in all these three applications is a non-banking financial institution registered under Indian Companies Act, 1956, which deals with grant of loan to the intending borrowers, for Asset acquisition, improvement / construction of property, personal needs, investment, home purchase, home equity, refinance.

#2. The respondents in all these applications approached the applicant, for grant of loan. The loans granted to the respondents were secured by way of mortgage of immovable properties by deposit of title deeds.

#3. All the necessary documents to create the security in favour of the applicant were duly executed by the respondents.

#4. The case of the applicant is that the respondents are chronic and wilful defaulters. In all these cases, the respondents are in default of payment of principal as well as interest.

#5. The further case of the applicant is that in one of the cases, out of three cases referred to above, the mortgaged property has been leased out, to obstruct the award likely to be passed against the respondents.

#6. It is also the contention of the learned counsel for the applicant that after recalling of the loan, the applicant has approched the arbitrator.

#7. On the failure of the respondent to appear in one of the cases inspite of notice, exparte proceedings have been initiated. In other two cases, notice has been issued by the arbitrator.

#8. The learned counsel for the applicant, in view of the facts set out herein above, prays for direction to the respondents to furnish security for the amount claimed or in the alternative attach the immovable property described in the schedule to Judges Summons.

#9. The contention of the learned counsel for the applicant is that arbitration proceedings have commenced and therefore, in terms of Section 9 of the Arbitration and Conciliation Act, it is the legal right of the applicant to have the amount to be secured by an appropriate order of this Court. In the absence of the protection by this Court, the right of the applicant would be prejudiced, as it will be difficult for the applicant to execute the award / decree against the respondents.

#10. The learned counsel for the applicant contends that as this court can order attachment of the properties, to secure the unsecured loan pending arbitration proceedings, on the said principle the secured loan, should also be provided with similar protection.

#11. On the consideration, I find no force in the contentions raised by the learned counsel for the applicant. It is not disputed that the loan is secured by mortgage of the property. The provisions of Section 9 of the Arbitration and Conciliation Act, therefore, cannot be made applicable, as the amount involved in arbitration dispute is already secured by way of mortgage.

#12. The contention of the learned counsel for the applicant that the principle applied to unsecured loan could also be applied to secured loan, on the face of it is misconceived. In the case of the unsecured loan, it is open to the debtor to dispose of the property to defeat the execution of the decree, which is not possible in the case of the secured loan, as the mortgage goes with the property.

#13. All these applications are totally misconceived. No case is made out to exercise jurisdiction under Section 9 of the Arbitration and Conciliation Act.

#14. Consequently, all these applications are dismissed. No costs. Mra