M/s. Mil Merin Gas Agencies v. M/s. TVS Finance & Services Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 13.02.2008CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR. JUSTICE M.VENUGOPALO.S.A. NO. 55 OF 20071. M/s. Mil Merin Gas Agencies rep. by its Proprietor, Mr.S.P.Rajan No.28/177-1, Co-operative Colony Post Box No.3, Valparai – 127 Coimbatore District.2. Mrs.Mercy Rajan No.28/177-1, Co-operative Colony Post Box No.3, Valparai – 127 Coimbatore District... Appellants- Vs -1. M/s.TVS Finance & Services Ltd. Formerly known as M/s.Harita Finance Ltd. rep. by its Authorised Signatory Mr.Sai Kumar, Jayalakshmi Estate No.8, Haddows Road, Chennai – 600 006.2. Mr. R.Muralikrishnan.. Respondents R2 impleaded as party respondent as perorder dated 14.12.2007 in MP.No.2/07Appeal filed against the order dated 6th March, 2007, passed bylearned single Judge in Application No.1569/04 in OA. No.800/03.For Appellant : Mr. AR.L.Sundaresan, SC, for Ms.AL.GandhimathiFor Respondents : Mr. T.V.Ramanujun, SC, for M/s. Anand Abdul & Vinod Associates for R-1 Mr. P.S.Raman, SC, for M/s.P.Vinoth Kumar for R-2 https://hcservices.ecourts.gov.in/hcservices/ JUDGMENTS.J.MUKHOPADHAYA, J.This appeal has been preferred by M/s.Mil Merin Gas Agencies(hereinafter referred to as 'M/s.Mil Merin') against the order dated 6thMarch, 2007, passed by learned Judge in Application No.1569/04 inApplication No.800/03. By the said order, Advocate Commissioner hasbeen allowed to sell the land measuring an extent of 12.22 acres in S.No.12/1A, 1C, 1A2 located at Valparai Village, Valparai Taluk, AnnamalaiHills, Coimbatore District to the 2nd respondent, R.Muralikrishnan.2. The appellant has raised the question of jurisdiction of learnedsingle Judge to pass such order u/s 9 of the Arbitration andConciliation Act, 1996 (hereinafter referred to as the 'Act').On the other hand, according to counsel for the respondents, theappeal is barred by principle of res judicata, the earlier orderappointing advocate commissioner for sale of property in question havingreached finality.3. For determination of the issues, it is necessary to discuss allthe facts, except the relevant ones as shown hereunder.Pursuant to an agreement reached on 9th Sept., 1999, the 1stappellant, M/s.Mil Merin, obtained a sum of Rs.25 lakhs from HaritaFinance Ltd., (HFL), the respondent in the present case with the changedname of M/s.TVS Finance & Services Ltd., (hereinafter referred to as'M/s.TVS Finance'). Demand promissory notes were executed; letters ofguarantee were executed by 2nd appellant Ms.Mercy Rajan and anothers.P.Rajan; the title deeds of immovable property belonging to S.P.Rajanand the 2nd appellant, Ms.Mercy Rajan were also deposited with the 1strespondent as security in the event of non-payment of loans. Letterswere sent by the 1st respondent from time to time showing the particularsof loan availed by the 1st appellant, M/s.Mil Merin, who agreed to extendthe security over the immovable property for receiving further amount ofRs.25 lakhs apart from the earlier loan. Further agreement was enteredinto on 2nd Nov., 1999 in that regard. Fresh demand promissory note wasexecuted in favour of M/s.Mil Merin; again letter of guarantee wasexecuted for such further loan amount of Rs.25 lakhs by S.P.Rajan andMercy Rajan in favour of the 1st respondent on 2nd Nov., 1999.On 4th Oct., 2000, the 1st respondent, M/s.TVS Finance asked the 1stappellant, M/s.Mil Merin to pay dues of Rs.44,36,716.67 immediately asfull and final settlement. In reply, M/s.Mil Merin forwarded letterpromising to liquidate the entire dues by 15th Sept., 2000, which wasfollowed by correspondence asking for more time. Pursuant to a letterof the 1st respondent dated 14th Sept., 2000, M/s.Mil Marine forwarded twopost-dated cheques total amounting to Rs.5 lakhs. In reply, the 1strespondent, by letter dated 23rd Oct., 2000, stated that the sum of https://hcservices.ecourts.gov.in/hcservices/ Rs.2.5 lakhs paid by M/s.Mil Merin for the month of Oct., 2000, was notsufficient and asked it to settle the matter by the end of the monthwith one time settlement for Rs.16,49,460/=. Inspite of undertakinggiven by M/s.Mil Merin to liquidate its outstanding amount by Jan.,2001, the 1st appellant having failed to repay the amount, executed aregistered power of attorney in March, 2001, for the immovable propertyin favour of the 1st respondent, possession of which was also handedover.The 1st respondent filed an application u/s of the Arbitration andConciliation Act, 1996, on 14th Dec., 2002, before this Court in O.A.No.842/02 for interim injunction and application No.5072/02 was filedfor appointment of advocate commissioner to ensure sale of property inquestion. Notice was issued on M/s.Mil Merin, the 1st appellant, whichhaving not appeared, the Court, vide order dated 27th Feb., 2003, allowedthe application and appointed one Mr.S.M.Sambath as advocatecommissioner to call for offers and sell the immovable property on orbefore 24th April, 2003 through the Court. Advertisement was publishedin the newspaper, Coimbatore edition on 26th April, 2003, calling foroffers for purchase of the immovable property in question. One,Mr.T.D.Polly, submitted highest offer for Rs.14 lakhs. At that stage,the 1st appellant, M/s.Mil Merin, filed application No.1773/03 forsetting aside the ex-parte order dated 27th Feb., 2003. It was allowedby the Court on 17th April, 2003 subject to condition that M/s.Mil Merindeposit a sum of Rs.10 lakhs to the credit of the said application on orbefore 29th May, 2003. The 1st appellant failed to deposit the amount ofRs.10 lakhs within time and sought for extension. The Court, initially,allowed four weeks time, but it was not paid and further extension wassought for by the 1st appellant. The 1st respondent, subsequently, filedApplication No.3040/03 for grant of extension of time to advocatecommissioner to sell the immovable property and it was allowed by thecourt.In Oct., 2003, the 1st appellant, M/s.Mil Merin, filed anotherapplication, No.800/03 for interim injunction restraining the 1strespondent and the advocate commissioner from selling the immovableproperty on the question that the valuation of the land is more thanRs.90 lakhs. It was dismissed by learned Judge on 14th Oct., 2003, butthe 1st appellant, M/s.Mil Merin was allowed to bring prospectivepurchasers to purchase the immovable property and on failure theadvocate commissioner was allowed to sell the immovable property.Extension was sought for, but the 1st appellant did not bring anyprospective purchaser.In the meantime, Mr.T.D.Polly, the highest bidder, beingdisinterested, withdrew himself from the bid. Mr.R.Muralikrishnan, 2ndrespondent herein, expressed interest to buy the immovable property forRs.17 lakhs, which was brought to the notice of the court by the 1strespondent, M/s.TVS Finance, who filed Application No.1569/04 on 2ndMarch, 2004 for direction on advocate commissioner to sell the immovableproperty to the said R.Muralikrishnan for Rs.17 lakhs. https://hcservices.ecourts.gov.in/hcservices/ An arbitration notice was issued by the 1st respondent, M/s.TVSFinance on 8th April, 2004, on the appellants, M/s.Mil Merin and othersin respect of the first agreement, which returned as not claimed. Inregard to the 2nd agreement, similar arbitration notice issued to theappellants on 8th April, 2004, also returned as not claimed. On 16thApril, 2004, a notice was issued by Arbitrator fixing the date ofhearing, which was returned unclaimed. Similar notice forwarded by theArbitrator fixing the date of hearing on 26th June, 2005, also returnedunclaimed. Notice was published in the local daily, 'Malai Murasu',Coimbatore edition on 26th June, 2004, giving intimation to appellantthat 14th Aug., 2004 is the date fixed for hearing by the Arbitrator.But in absence of any representation for the appellants on 14th Aug.,2004, the case was set ex-parte against the 1st appellant, M/s.Mil Merinand others. On 22nd Dec., 2004, an award was passed by the Arbitratoragainst the appellants in Arbitration Case Nos.5 and 6 of 2004.Before this Court, the 1st respondent, M/s.TVS Finance filedApplication No.1569/04 for appointment of another advocate commissioner,pursuant to which Ms.C.N.G.Ezhilarasi was appointed as advocatecommissioner in place of Mr.S.M.Sambath to sell the immovable propertyfor Rs.17 lakhs on or before 5th Aug., 2005, to Mr.R.Muralikrishnan.It appears that Mr.Muralikrishnan deposited a sum of Rs.17 lakhswith M/s.TVS Finance, but no sale deed was executed by the advocatecommissioner inspite of extension of time granted by learned Judge videorder dated 6th March, 2007. The present appeal has been preferredagainst the said order.4. While counsel appearing on behalf of the appellants submittedthat learned Judge had no jurisdiction to pass order u/s 9 of theArbitration and Conciliation Act, 1996, directing the advocatecommissioner to sell the property, it was further contended that no saledeed could be executed in favour of the 2nd respondent, Muralikrishnan,he having not applied pursuant to the auction notice. It was submittedthat without a second auction notice, the property cannot be sold infavour of the 2nd defendant, that too, for a meagre sum of Rs.17 lakhs,though the valuation of the property is now much more than Rs.1 Crore.Learned counsel for the appellant relied on one or other decision ofthis Court and Supreme Court.On the other hand, according to learned counsel for M/s.TVS Finance,the earlier order by which advocate commissioner was appointed anddirection was issued to sell the immovable property in question,including the order dated 15th July, 2005, passed in A. No.1569/04, thoseorders having not been challenged, the appellant cannot raise thequestion of jurisdiction, that too at the appellate stage, no objectionhaving raised before the first court. It was further submitted that theearlier order passed by this Court having reached finality, thechallenge to the subsequent order of extension of time will be barred byprinciple of res judicata. https://hcservices.ecourts.gov.in/hcservices/

5. We have heard the parties and noticed the rival contentions. Wehave also noticed the relevant provisions of the Arbitration andConciliation Act, 1996 and the judgments referred to by learned counselfor the parties.6. Section 9 of the Arbitration and Conciliation Act relates tointerim measures, etc., by Court, as quoted hereunder :-"9. Interim measures, etc. by court. - A party may,before or during arbitral proceedings or at any timeafter the making of the arbitral award but before it isenforced in accordance with section 36, may apply to aCourt:-(i) for the appointment of a guardian for a minor or aperson of unsound mind for the purposes of arbitralproceedings; or(ii) for an interim measure of protection in respect ofany of the following matters, namely:-(a) the preservation, interim custody or sale ofany goods which are the subject-matter of thearbitration agreement.(b) securing the amount in dispute in thearbitration;(c) the detention, preservation or inspection ofany property or thing which is the subject-matter ofthe dispute in arbitration, or as to which anyquestion may arise therein and authorising for anyof the aforesaid purposes any person to enter uponany land or building in the possession of any party,or authorising any samples to be taken or anyobservation to be made, or experiment to be tried,which may be necessary or expedient for the purposeof obtaining full information or evidence;(d) interim injunction or the appointment of areceiver;(e) such other interim measure of protection asmay appear to the Court to be just and convenient,and the Court shall have the same power for makingorders as it has for the purpose of, and in relation to,any proceedings before it."In the case of Firm Ashok Traders – Vs – Gurumukh Das Salujareported in 2004 (3) SCC 155, the Supreme Court, while noticed Section9, held that the purpose of enacting Section 9 is to provide 'interimmeasures of protection' as distinguished from 'all-time or permanentprotection'. It formulates interim measures so as to protect the rightin adjudication before the Arbitral Tribunal from being frustrated.7. In the present case, the application u/s 9 filed by the 1strespondent did not relate to appointment of guardian for a minor or aperson of unsound mind to attract sub-section (i) to Section 9. If suchapplication was filed, it could be under sub-section (ii) of Section 9, https://hcservices.ecourts.gov.in/hcservices/ i.e., for interim measures of protection in respect of matters as showntherein. It do not relate to preservation, interim custody or sale ofany goods, which are subject matter of the arbitration agreement and,thereby, clause (a) to sub-section (ii) of Section 9 is not attracted.It also do not relate to securing an amount in dispute under arbitrationor the detention, preservation or inspection of any property or thing,which are subject matter of the dispute or for interim injunction orappointment of receiver and, thereby, clauses (b), (c) and (d) of sub-section (ii) to Section 9 is also not attracted in the present case.The respondent could, at best, claim that the said application wasfiled for interim injunction under clause (e) to sub-section (ii) toSection 9, i.e., "such other interim measures of protection as mayappear to the court to be just and convenient". We are of the view thatthe said provision is also not attracted, as the sale of the immovableproperty cannot and do not amount to "interim measures of protection",but for all purposes amount to "all-time or permanent protection".Admittedly, when the initial order was passed in 2002, appointingadvocate commissioner to sell the immovable property in question, thearbitration proceeding was not started nor reached finality and,thereby, learned single Judge had no jurisdiction to pass such order tosell the property through the advocate commissioner, which amounts toall-time and permanent protection in favour of the 1st respondent,M/s.TVS Finance.8. We have also noticed that procedure of auction sale was initiallyfollowed when applications were called for by publication ofadvertisement in the newspaper. The 2nd respondent, Mr.Muralikrishnanhad not applied pursuant to the said advertisement. It is not known asto how he could come to know of the auction sale in question and 1strespondent, M/s.TVS Finance brought him on record before learned Judgeto state that he is interested to purchase the property for Rs.17 lakhs.9. In the case of Himadri Coke and Petro Limited - Vs – SonekoDevelopers Pvt. Ltd. & Ors. reported in (2006) 132 Comp. Cases 696 (SC),the Supreme Court having noticed that the appellant had not submittedany offer pursuant to earlier advertisement, held that the saidapplicant was not entitled to enter into the arena by submitting a freshoffer. It was observed that offer received in response to theadvertisement has to be considered and if other offer is to beconsidered, then an opportunity must be granted to other offerorspursuant to a fresh advertisement.From the aforesaid fact it will be evident that while learned Judgeordered to sell the property in favour of the 2nd respondent,Mr.Muralikrishnan for Rs.17 lakhs, the procedural law was not followed.Thus, we are of the opinion that the interim orders u/s 9 of theArbitration and Conciliation Act passed by learned Judge directing tosell the immovable property in question through Advocate Commissioner, https://hcservices.ecourts.gov.in/hcservices/ that too in favour of the 2nd respondent, who never applied pursuant tothe noticed published in the newspaper, is without jurisdiction and is anullity in the eye of law.10. Counsel for the respondent raised the question of res judicataon the ground that the earlier orders, which are similar, appointingadvocate commissioner to sell the immovable property in question and infavour of the 2nd respondent, Mr.Muralikrishnan, were not challenged bythe appellants.11. The principle of res judicata fell for consideration before theSupreme Court in the case of Dwarka Prasad Agarwal – Vs – B.D.Agarwalreported in 2003 (6) SCC 230. The Supreme Court, while observed thatan order passed by Court without jurisdiction is a nullity, made thefollowing observation :-"37. It is now well settled that an order passed by acourt without jurisdiction is a nullity. Any orderpassed or action taken pursuant thereto or infurtherance thereof would also be nullities. In theinstant case, as the High Court did not have anyjurisdiction to record the compromise for the reasonsstated hereinbefore and in particular as no writ wasrequired to be issued having regard to the fact thatpublic law remedy could not have been resorted to, theimpugned orders must be held to be illegal and withoutjurisdiction and are liable to be set aside. All ordersand actions taken pursuant to or in furtherance thereofmust also be declared wholly illegal and withoutjurisdiction and consequently are liable to be setaside. They are declared as such."In a subsequent case of Ramnik Vallabhdas Madhvani & Ors. - Vs –Taraben Pravinlal Madhvani reported in 2004 (1) SCC 497, whilediscussing the principle of res judicata, having noticed the earlierdecisions, Supreme Court held that principle of res judicata is notapplicable where there is inherent lack of jurisdiction.Similar was the view of Supreme Court in Ashok Leyland Ltd. - Vs –State of T.N. & Anr. reported in 2004 (3) SCC 1,wherein Supreme Courtheld that principle of res judicata, estoppel or waiver are notapplicable to an order pass without jurisdiction, which is a nullity.Similar view was expressed by Supreme Court in Sonepat Co-operativeSugar Mills Ltd. - Vs – Ajit Singh reported in 2005 (3) SCC 232 and inthe case of Shakuntla Devi - Vs – Kamla & Ors. reported in 2005 (5) SCC390, wherein Supreme Court observed that a decree delivered withoutjurisdiction or contrary to existing law at the time the issue comes upfor consideration cannot operate as res judicata in a subsequent casebetween the same parties, unless it is protected by special enactment. https://hcservices.ecourts.gov.in/hcservices/ In view of the authoritative pronouncement of the Supreme Court andin view of our finding that the order passed by learned Judge is withoutjurisdiction and is a nullity in the eye of law, we answer this questionagainst the respondents and reject such objection.12. We, accordingly, set aside the order dated 6th March, 2007, anddeclare all earlier orders passed by learned Judge for sale of theimmovable property in question as illegal. So far as the amount, ifany, deposited by the 2nd respondent, Mr.Muralikrishnan is concerned,learned Judge may pass appropriate order for refund of the same amountwith interest, if admissible. The appeal is allowed. Consequently,connected miscellaneous petition is closed. But there shall be no orderas to costs.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarGLNTo1. The Sub Assistant Registrar,Original Side, High Court, Madras.1 cc To Mr.AL.Gandhimathi, Advocate, SR.7770.1 cc To Mr.P.H.Manoj Pandian, Advocate, SR.7754. O.S.A. NO. 55 OF 2007MDR(CO)RVL 19.02.2008