JUDGMENT
K. Ramamoorthy, J.
(1) The Petitioner has filed two suits under Section 20 of the Arbitration Act, 1940 for appointment of arbitrator and for referring disputes for arbitration mentioned in the petition. Learned counsel appearing for the respondents represented that the Respondents have no objection to the appointment of the Arbitrator. Accordingly, I appoint Hon’ble Ms. Justice Santosh Duggal a retired Judge of this Court, AB/13, Tilak Marg, New Delhi – (Tele: 3386460) as an Arbitrator. It shall open to the Hon’ble Arbitrator to fix her fees and other expenses for arbitration proceedings to be paid by the plaintiff. The Learned Arbitrator shall publish her Award within four month from the date of entering upon the reference.
(2) The question arises whether the claim of the Escorts Finance Limited for the seizure of the machinery should be allowed or the claim of the respondents that they should be permitted to retain the machinery pending the disposal of the arbitration should be entertained.
(3) Mr. Maniktala, learned counsel for the petitioner’s Company submitted that the respondents had admitted the claim of the Applicant and if the machineries are not taken possession of by the Applicant as the owner, the Applicant will be put to irreparable loss and damages. The respondents, according to Mr. Maniktala, are trying to dispose of the machineries with a view to causing loss to the Applicant. He relied upon the annexure P-21 (letter dated 15.12.1993) wherein the respondents had admitted the liability to the Applicant. The letter reads as under: “WE refer to your outstanding of Hire Purchase instalments. At the onset, we would like to offer our sincere apologies for the delays in payments. We would like you to consider the following:…..”
(4) On 15.12,1994 Respondent wrote another letter (P-24) exactly one year after the earlier letter. The respondents had again written to the petitioner in the following terms: "OUT of total instalments due amounting to Rs. 32.79 lakhs upto December 1994 we have been able to make payments of approx. 14.3 lakhs leaving an outstanding position of approx. Rs. 18.5 lakh" In the last para respondents written: "WE propose to pay you the overdue interest on your instalments accruing upto 31.12.94 during this month and the balance outstanding by way of 10 (ten) instalments starting from 10.01.1995 to 15.03.1995".
(5) On 02.06.1995 the Respondents wrote a letter (P-26) to the petitioner in the following terms: “WE refer to the discussions the undersigned had with Mr. Mundkar and Mr. Sheopuri on the above subject. We take this opportunity to thank you once again for the understanding shown by you on the problems faced by us in recoveries. As explained to you, during the current year, we have totally revamped our marketing thrust as a result of which we will be selling our products mainly to large multinationals. This will drastically improve our funds flow. We understand there is an overdue of Rs. 23 lacs payable by us. We assure you that we will make payments of Rs.2-3 lakhs every month. These payments will be released by way of Pay Orders of Rs. I lac each. As a security we are enclosing herewith 23 cheques of Rs. I lac each in your favour under Cheque Nos 319205 to 319227. We look forward to your continued support.”
(6) Cheques issued by respondents were dishonoured and it is stated that petitioner has initiated proceedings under Section-138-A of the Negotiable Instrument Act, 1882. The learned counsel for the Petitioner also referred to Annexure P-29 (letter dated 13.07.1995 in the following terms: “NOW since the rains have started, we are expecting payments from the market and we assure you that our repayments confirmed to your client Escorts Financial Services Limited will be paid with little re-structuring. However, we assure you of our every intention to pay your client’s dues alongwith interest moneys dues/overdue to them. In the meantime, we request you not to proceed ahead on the legal fronts and give us a respite of 8 to 10 days time by which we will be in a position to confirm you repayments”.
(7) In the application No. 3026/96 filed by the defendants in Suit No. 2926/95 under Order 39 Rule 4 Cpc, the Defendants have filed the annexures. In Annexure R-1, is a letter dated 6.2.1996 written by Managing Director of the first defendant to the plaintiff wherein it is stated that “we hope to arrange for required funds within a period of four weeks as our request for promoter funds is at an advance stage with Mr. Jairaj Mehta, Atlanta, USA. We request that we be accommodated for the above period and no precipitate legal action be taken for the sale of equipment as per the terms of the Hp agreement. In the meantime we are enclosing a post dated cheque dated 6/3/96 for Rs. 4957338 bearing cheque No. 304424 drawn on Bank of Bahrain and Kuwait in your favour towards full and final settlement subject to its encashment on the due date”. Learned counsel for the plaintiff while referring to this document, at that time learned counsel for the defendant rose up and said this was issued under coercion and duress and, therefore, that cannot be relied upon.
(8) In Annexure R-2, which is also a letter dated 15.2.1996, written by the Managing Director to the plaintiff Company, reads asunder: “PLEASE refer to the visit of your people with Court order to our Valsad office on 6.2.1996. You agreed to our request to refrain from legal action or taking charge of the equipments and machinery on the conditions that we issue for Rs. 49,57,338.00 . We have issued the post- dated cheque of 6th March 1996 in your favour. As per the Hire Purchase agreement the principal amount of loan was Rs. 35,58,100.00 with 12.75% flat interest for a period of 36 months, .the total of Principal amount + Interest comes to Rs .49,19,073.00 , out of which we have already paid an amount of Rs. 15,29,769.00 , leaving a net outstanding of Rs. 33,89,304.00 . You are also holding a security deposit of 5% of the amount financed which is interest free and should be adjusted from the amount payable to you. We have been assured that you would be providing us a total working of how you have arrived at a sum of Rs. 49,57,338.00 inspite of the payments made to you. -We have yet to receive your statement eventhough 10 days have already passed. We request you to kindly send us this statement immediately.”
(9) Mr. Maniktala, learned counsel for the plaintiff also brought to my notice Annexure R-3 which is letter dated 24.2.1996 from the plaintiff to the defendants wherein the details as to how the plaintiff has arrived at the figures are given. The statement of account of Solar Farmachem Ltd. as on February 06, 1996 is as follows: A. Total amount financed Rs.35,58,100.00 B. Date of interest (@ 12.75% P.A. for three years) Rs.13,60,973.00 C. Amount (A + B ) Rs.49,19,073.00 D. Amount received from Sfl Rs.15,29,776.00 E. Balance instalment amount die (C – D) Rs.33,89,297.00 F. Add. a. Overdue penal interest Rs.15,23,856.00 at the rate of 30% p.a. as pm 8/2/96. b. Legal expenses. Rs. 29,185.00 c. Fee paid to Local Commissioner. Rs. 5,000.00 d. Amount incurred on travelling Rs. 10,000.00 Lodging & boarding of Local Commissioner Total Rs.49,57,338.00
Note : Security deposit of Rs. l,75,000.00 (interest free) shall be refunded on the encashment of the post dated Cheque for Rs. 49,57,338.00 issued by Solar Farmachem Ltd.
(10) Mr. Maniktala, learned counsel for the plaintiff brought to my notice Annexure R-4 which is a letter dated 2.3.1996 in response to the letter from the plaintiff, the defendants had stated that a sum of Rs. 39,98,879.00 would be due with overdue interest and the cheque issued by the defendants for Rs. 49,57,338.00 dated 6.3.1996 should not be encashed as it was taken under duress.
(11) Learned counsel for the plaintiff submits that when the defendants had admitted the claims, they have no right under the provision of the agreement to retain the machinery. He also pointed out that in the agreement the defendants have specifically agreed to pay liquidated damages @ 2.5% per month on all overdue installments, therefore the plaintiff had calculated the amounts due as per the terms of the agreement.
(12) In the light of these facts, the defendants cannot be heard to contend that they could retain the machinery. Accordingly, the orders passed for seizure of equipment and machinery are confirmed and Mr. Y.R. Sharma, Advocate, appointed as Local Commissioner, shall seize the machinery and hand over to the plaintiff against proper receipt. After the seizure of the equipment and machinery the plaintiff can apply for the sale of the equipment and machinery.
(13) Mr. Y.R. Sharma, the Local Commissioner, shall be paid an additional remuneration of Rs. 2500.00 in each case by the plaintiff. The Local Commissioner shall file his report before the next date of hearing on which date the appropriate directions would be issued for the sale of the equipment and machinery. Post the matter for directions on 15.11.1996.