RANJEET BAFNA Vs. KOTAK MAHENDRA BANK LTD.

JUDGEMENT

(1.) This Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act of 1996') appeal challenges the order dated 09.05.2012, passed by the Additional District & Sessions Judge No.5, Jaipur Metropolitan, Jaipur. Thereby the objections filed by the objector-appellant and the guarantor (hereinafter 'the non-claimants') under Section 34 of the Act of 1996 were rejected qua the ex-parte award dated 05.12.2008, passed by the Sole Arbitrator.

(2.) The background facts of the case are that under a loan agreement dated 31.03.2007, the non-claimants availed a loan of Rs.12,54,847/- from the claimants-respondents, Kotak Mahendra Bank Ltd. (hereinafter 'the claimant-Bank'). The loan was for the purchase of a commercial vehicle i.e. Truck TATA 4018 bearing engine No.447207CSZ3037772 and chassis No.C62557040. The loan was to be repaid along with contracted interest in 46 monthly installments of which the first 34 were for an amount of Rs.36,000/- p.m. and the remaining 12 for a sum of Rs.34,200/- p.m. As routine the non-claimants undertook to abide by the terms of the loan agreement dated 31.03.2007. The commercial vehicle purchased from the loan advanced by the claimant-Bank was under hypothecation to the claimant-Bank which consequently had the first and exclusive charge over it. The agreement provided that in the event of breach of any of the terms and conditions of the agreement by the non-claimants, the claimant-Bank would had the right to repossess the commercial vehicle in issue, sell it by auction or private contract, appropriate amounts received and adjust the same with the outstandings due. Realisable outstanding amount due, if any, thereafter as per the terms and conditions of the agreement would then be recovered under a money decree.

(3.) The case of the claimant-Bank is that having obtained the loan facility from it under the loan agreement dated 31.03.2007, only two of the due installments were paid by the principal borrower. Breach was occasioned and the default event thus occurred. The aforesaid default entitled the claimant-Bank in terms of the loan agreement dated 31.03.2007 to repossess the commercial vehicle in question, recall the entire loan amount and recover the entire outstanding dues from the non-claimants. In the process, the claimant-Bank issued notices on or about 12.09.2008 to the non-claimants regarding the outstanding dues and also indicating its desire to inspect the hypothecated vehicle. But to no avail. The notice dated 12.09.2008 required the non-claimants to settle the disputes arising from the default event and deposit the entire amount outstanding and due under the loan agreement dated 31.03.2007. The non-claimants were notified that in the event the disputes with regard to the breach of the obligation by them under the loan agreement dated 31.03.2007 not being settled and outstanding entire amount as per the agreement not paid as required, the disputes would be referred for adjudication to the Sole Arbitrator as per Clause 10.16 of the loan agreement dated 31.03.2007. There was no response from the non-claimants. In these circumstances, the claimant-Bank resorted as a first step to an application under Section 9 of the Act of 1996 on or about 10.12.2007 before the Additional District and Sessions Judge, Jaipur Metropolitan, Jaipur seeking appointment of a receiver in respect of the hypothecated vehicle to ensure its security and protection. On the application being transferred to the Court of Additional District Judge No.4, Jaipur Metropolitan, Jaipur, it was pleased vide order dated 18.01.2008 to appoint a receiver to take possession of the hypothecated vehicle in issue. The application was finally disposed of on 22.08.2008 with a direction that the hypothecated vehicle would remain in the custody of the receiver pending the decision in the disputes with regard to non-payment of monthly installments by the non-claimants under the loan agreement dated 31.03.2007 and finally abide the award of the Sole Arbitrator on the disputes as per the agreement between the parties. Possession of the vehicle was taken by the claimant-Bank.