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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
ARBITRATION APPEAL NO. 16 OF 2008
1. Ravindra Vithal Prabhu )
Adult, Occ: Business r/o )
Hotel Yatri Niwas, Tararani, )
Chowk, Kolhapur )
)
2. Smt. Laxmibai Ramchandra Pai)
Adult, Occ: Business, R/o at Hotel )
Yatri Niwas, Tararani Chowk,
ig )
Kolhapur. ) ..... Appellants.
V/s
1. Umesh Martappa Prabhu )
Adult, Occu: Business )
R/o. House No.249/A E-Ward )
Rajlaxmi, Nagala Park, )
Kolhapur. )
)
2. Deepak Rajaapa Prabhu )
Adult, Occu: Business, )
Flat No.6, Plot No.10, Kusumanjali)
Apartment, Datta Vidya Colony, )
Near Lisha Hotel, Kolhapur )
)
3. Annasaheb Sambhaji Patil )
Adult, Occu: Business, )
R/at Babubhai Parikh Bridge, )
E-Ward, Kolhapur. )
)
4. Kolhapur Janta Sahakari )
Bank Ltd. a co-operative bank )
having office at 511, C/2, "E" Ward)
Station Road, Kolhapur through )
its Authorized Officer. ) Respondents.
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Mr. Bhandari i/b Mrs Pranjal Bhandari for the appellants.
Mr. Ramchandra Yadav for respondent No.1.
Mr. R.S. Ghadge i/b Mr. A.S. Desai for respondent No.4.
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CORAM: V.M.KANADE, J.
DATE : 4TH JULY, 2008.
JUDGMENT:
1. Heard the learned Counsel for the appellants and the learned
Counsel for the respondents.
2. The appellants are challenging the judgment and order passed
by the District Judge, Kolhapur who, by his judgment and order dated
15/3/2008 was pleased to allow the application filed by the Kolhapur
Janta Sahakari Bank Ltd. below Exhibit 78 for rejecting the
application filed by the appellants below Exhibit-70 and dismiss the
application filed by the appellants herein below Exhibit-70 for
temporary injunction restraining the Bank from taking any steps in
pursuance of its notice dated 18/03/2005.
3. Brief facts in a nutshell are as under:-
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4. The appellants and respondent Nos.1 to 3 were partners in the
partnership firm in the name and style of M/s Ayodhya Hotel. They
were also carrying on business of giving on rent multi-purpose hall in
the name of Akshata Mangal Karyalaya and a hotel in the name of
Yatri Niwas by virtue of partnership deed dated 27/3/1989. There
was a dispute between the partners over the management of the
partnership firm. It is the case of the appellants that respondent No.1
obtained loan from Kolhapur Janta Sahakari Bank Ltd. on the basis of
forged and fabricated documents. Accordingly, police complaints
were also filed by the appellants herein against respondent No.1.
5. Kolhapur Janta Sahakari Bank Ltd., Kolhapur filed a dispute
against M/s Ayodhya Hotel & its partners for recovery of
an amount of Rs 1,74,95,872/- The appellants also filed a civil suit
No.144 of 2004 before the Civil Judge, Senior Division, Kolhapur,
seeking various reliefs. Since there was an arbitration clause in
partnership deed dated 27/03/1989, a Petition was filed by the
appellants under section 9 of the Arbitration & Conciliation Act, 1996.
An Arbitration Petition under section 11 of the Arbitration &
Conciliation Act, 1996 was also filed and the High Court appointed
Mrs Urmila Joshi as a sole proprietor. An order was passed on
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20/12/2004 appointing appellant No.1 as a Receiver and a direction
was given to him to take possession of the business from from the
Executive Magistrate, Karveer with further direction to pay Rs
1,50,000/- per month. In the meantime, the respondent – Bank issued
notice under section 13 of the SARFAESI Act dated 18/03/2005.
The appellant gave their reply to the said notice dated 11/06/2005.
In the meantime, the Bank made an application, seeking delivery of
possession of the suit property and deposits which were made in the
Court in favour of the Bank. The appellants therefore filed an
application for amendment of the Petition which was filed under
section 9, vide Exhibit-70 on 18/07/2005. Another application for
temporary injunction was also filed, seeking relief against the bank.
The Bank also filed an application for rejection of the appellants’
application for adding them as party-respondent. The Bank gave an
undertaking that it would only take symbolic possession and,
accordingly, symbolic possession was taken by the Bank on
20/07/2005. The appellants further filed an application at Exhibit-87
to quash the Bank’
s notice dated 20/07/2005 and further application
at Exhibit-132 was filed for restraining the Bank from taking further
steps and another application at Exhibit-187 was filed for a
declaration that the notices issued by the Bank were illegal. In the
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meantime, the appellants also filed a suit against the Bank for
injunction vide Regular Civil Suit No.165 of 2008.
6. By the impugned judgment and order, the District Court was
pleased to reject the application filed by the appellants at Exhibit-70
and allow the application of the Bank at Exhibit-78. The applications
filed by the appellants at Exhibits 71, 132, 187 and 224 were rejected.
The other applications were also disposed of.
7. Mr. Bhandari, the learned Counsel appearing on behalf of the
appellants submitted that District District Court had erred in rejecting
the application filed by the appellants. He submitted that the
respondent had obtained loan from the Bank on the basis of forged
and fabricated documents and if the Bank was permitted to proceed
with the proceedings under the SARFAESI Act, the arbitration
proceedings would be rendered infuctuous. He submitted that it was
always open for any party to the arbitration proceedings to seek
appropriate orders from the Court under section 9 of the said Act for
the purpose of securing/preserving any property which was a subject
matter of the dispute in arbitration. He submitted that since
partnership assets were specifically the subject matter of the
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arbitration and if the Bank was not restrained from proceeding with
the proceedings which were initiated by them under SARFAESI Act,
the proceedings would become infrucutous.
8. The learned Counsel appearing on behalf of the appellants
relied upon two judgments of this Court in the case of Percept D’
Mark (India) Pvt. Limited Vs. Zaheer Khan reported in 2004
(2) BCR 47 and in the case of Global Aviation Services Pvt.
Ltd. Vs. Malaysian Airline System Berhad reported in 2007
(5) BCR 121.
9. It is not possible to accept the submissions made by the learned
Counsel appearing on behalf of the appellants. In the present case,
the Bank has instituted proceedings under the SARFAESI Act. There
is a specific provision in section 35 of the said Act which lays down
that the provisions of the Act would have overriding effect over other
laws. The validity of the said provision has been upheld by the Apex
Court in Maradia Chemical’
s case reported in AIR 2004 S.C. 2371. It
is the case of the Bank that the partners of the firm had taken loan
from the Bank and had committed default in repayment of the loan
and, therefore, recovery proceedings were initiated under the
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SARFAESI Act. On the other hand, it is the case of the appellants that
the respondent Nos. 1 to 3 had obtained loan on forged or fabricated
documents and, therefore, they are not liable to pay the said amount
to the Bank and, secondly, the property of the partnership firm also
could not be sold for the purpose of repayment of the said loan
amount.
10. In my view, it is open for the appellants to oppose the
application and proceedings which are initiated by the Bank under the
SARFAESI Act and seek discharge of their personal liability as also the
liability of the firm to repay the said bank loan. The subject matter of
the arbitration proceedings, essentially, is the statement of accounts
between the partners, whereas the subject matter of the proceedings
which are initiated by the Bank are in respect of recovery of loan
which was taken by the partnership firm from the Bank. These
proceedings being distinct and separate, the subject matter of both
these proceedings, therefore, is different and, therefore, the learned
District Judge was justified in rejecting the application filed by the
appellants for impleading the Bank as party in section 9 Petition and
also other applications which were taken out by the appellants herein.
The learned Counsel appearing on behalf of the appellants has relied
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upon two judgments of this court in the case of Percept D. Mark
(India) Private Limited (supra) and in the case of Global Aviation
Services Pvt. Ltd. (supra). Perusal of the facts in the said cases
clearly discloses that the ratio of the said judgments will not apply to
the facts of the present case.
11. Hence, there is no merit in the submissions made by the learned
Counsel appearing on behalf of the appellants. Appeal is accordingly
dismissed. Under the circumstances, there shall be no order as to
costs.
(V.M. KANADE, J)
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