IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.06.2011 CORAM THE HON'BLE MR. JUSTICE VINOD K.SHARMA A.No.615 of 2011 ORDER
This application under Section 9 of the Arbitration and Conciliation Act, 1996, has been moved for directing the respondent to furnish security for a sum of Rs.4,38,943/- (Rupees Four Lakhs Thirty Eight Thousand Nine Hundred and Forty Three only) and in absence, to attach moveable properties mentioned in the schedule to the Judge’s summon.
2. In support of the prayer made, an affidavit has been filed, wherein, it has been pleaded that the respondent had applied for personal loan and had submitted necessary documents. The loan was guaranteed by the respondent no.2 as co-borrower and guarantor. The respondent also executed demand promissory note etc. in favour of the applicant.
3. It is the case of the applicant that the respondent violated the terms of agreement and failed to pay the instalments regularly, which forced the applicant to recall the total loan amount.
4. In spite of notice calling the respondent to clear the outstanding dues, he has failed to make the payment.
5. In the affidavit, it is not mentioned as to when the arbitration proceedings were initiated nor it discloses the intention and the steps are taken to initiate the arbitration proceedings. At the time of hearing, the learned counsel for the applicant submitted that arbitration proceedings have been initiated.
6. The only ground, on which, the applicant prays for furnishing of security, reads as under:
” 9. I submit that the Applicant is an institution/organisation functioning under the guidelines and license issued by the Reserve Bank of India having the social responsibility to serve the masses. Further the Applicant have issued the loans out of the funds available with them by way of deposits, investments, share money etc., and have the duty to repay the interest, etc., to the depositors and investors. If the Respondent is allowed to default and take shelter by avoiding payments, the Applicant would suffer financial loss which would ultimately result in hampering the payments to the depositors and the investors. The default of one person viz., the Respondent cannot be allowed to take the institution for ransom. In the instant case the Applicant having exhausted all the means, now left with no other option except to approach this Hon’ble Court under Section 9 of the Arbitration and Conciliation Act, 1996.
10. I submit that in the above circumstances, it has become necessary that this Hon’ble Court orders for attachment of the Schedule mentioned property by way of interim measure during initiation and pending disposal of Arbitration Proceedings before the Arbitrator to be appointed by the Applicant. Also, it has become necessary that this Hon’ble Court to pass an orders of furnishing the security by the respondent as against the defaulted amount of Rs.4,38,943/- as an interim measure.”
7. The reading of the ground taken does not make out a case for directing the respondent to furnish security. In order to succeed in application for directing the furnishing of security, it is required that case is to be brought under provisions of Order 38 of Code of Civil Procedure, with some material evidence in support of the averments.
8. In this case, the amount is secured by the guarantee of the respondent no.2. It is well settled law that the provisions of Section 9 of the Arbitration and Conciliation Act can only be invoked in exceptional cases and is not a substitute for arbitration proceedings or to the right vested with Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act.
9. The scheme of Arbitration and Conciliation Act shows that there should be minimum judicial intervention with the arbitration proceedings. The respondent cannot be directed to furnish security or attach property on vague allegations and mere apprehension.
Consequently, finding no merit in this application, it is ordered to be dismissed. No costs.
ar