2.PTC India Ltd., Represented by its Chairman, 2nd Floor, NBCC Tower, 15, Bikaji Cama Place, New Delhi 110 066. .. Garnishee A.No.4835 of 2009:
M/s.Sundaram Fasteners Ltd., Represented by its President Finance & Secretary, Registered Office at No.98-A, VII Floor, Dr.Radhakrishnan Salai, Mylapore, Chennai-600 004. .. Applicant vs.
1.M/s.ARKAY Energy (Rameswaram) Ltd., Represented by its Managing Director, New No.20(Old No.129) Chamiers Road, Nandanam, Chennai-600 035. .. Respondent
2.PTC India Ltd., (formerly Power Trading Corporation of India Ltd) Represented by its Chairman, 2nd Floor, NBCC Tower, 15, Bikaji Cama Place, New Delhi 110 066. .. Garnishee A.Nos.6316 and 6317 of 2009 Axis Bank Ltd., Represented by its Vice President, Mr.Ramasubramanian, Chennai-2. .. Applicant in both applications vs.
MADURA COATS Pvt. Ltd., Represented by its Vice President-Excise Legal, Mr.Sandeep Sharadchandra Thakur, New Jail Road, Madurai-625 001. .. Respondent in A.4782/2009 M/s.Sundaram Fasteners Ltd., Represented by its President Finance & Secretary, Registered Office at No.98-A, VII Floor, Dr.Radhakrishnan Salai, Mylapore, Chennai-600 004. .. Respondent in A.4835/2009 M/s.ARKAY Energy (Rameswaram) Ltd., Represented by its Managing Director, New No.20(Old No.129) Chamiers Road, Nandanam, Chennai-600 035. .. Respondent in both applications PTC India Ltd., (formerly Power Trading Corporation of India Ltd) Represented by its Chairman, 2nd Floor, NBCC Tower, 15, Bikaji Cama Place, New Delhi 110 066. .. Garnishee in both applications COMMON ORDER Applications A.Nos.4782 and 4835 of 2009 are for the grant of prohibitory orders, to restrain the second respondent-Garnishee from making payment of the amounts due from them to the first respondent. The other 2 applications A.Nos.6316 and 6317 of 2009 are by the Axis Bank to implead them as parties to the Garnishee applications.
2. Though the Garnishee applications are by different companies, the relief sought for by them, is against the very same respondents, on identical causes of action. The grounds on which relief is sought by the applicants and the grounds on which the applications are contested by the respondents, are common. Therefore the applications are taken up together and disposed of by this common order.
3. I have heard Mr.P.R.Raman, learned counsel for the applicant in A.No.4782 of 2009, Mr.M.S.Krishnan, learned Senior Counsel for the applicant in A.No.4835 of 2009, Mr.N.C.Ramesh, learned counsel for the first respondent in both the applications and Mr.M.Ravindran, learned Additional Solicitor General for the second respondent in both the applications. I have also heard Mr.V.T.Gopalan, learned Senior Counsel for Axis Bank which has come up with the impleading applications.
4. The applicants in both the garnishee applications are industries engaged in manufacturing activities, requiring enormous amount of power supply. Since the Tamil Nadu Electricity Board is unable to ensure uninterrupted supply of power, to the extent required by industrial consumers, Gas based power plants came to be set up in the State. The first respondent is a company which set up one such plant in Rameswaram, as a "Captive Power Plant".
5. Several consumers like the applicants herein became shareholders in the first respondent-company, by investing in the equity share capital of the first respondent, in consideration of the first respondent agreeing to supply a fixed quantity of power at a price mutually agreed. While the applicant in A.No.4782 of 2009 agreed to invest Rs.50 lakhs in the equity share capital of the first respondent company and entered into (i) a Memorandum of Understanding (ii) a Power Supply Agreement (known in short as PSA) and (iii) an Agreement for investment, on 24.1.2005, the applicant in A.No.4835 of 2009 agreed to invest Rs.60 lakhs in the equity share capital of the first respondent and entered into (i)a Memorandum of Understanding (ii) a Power Supply Agreement (known in short as PSA) and (iii) an Agreement for investment, on 9.3.2005.
6. Subsequently, supplementary agreements were entered into on 28.10.2005 and 9.1.2006 respectively by the applicants in A.Nos.4782 and 4835 of 2009, in pursuance of which, the applicant in A.No.4782 of 2009 actually invested a sum of Rs.227.5 lakhs, while the applicant in the other application invested Rs.105 lakhs in the share capital of the first respondent. Thereafter, the power plant of the first respondent was commissioned in March 2006.
7. Under the Power Supply Agreements, the first respondent was to supply 65 million KWH per year on firm commitment and 15 million KWH on non-firm commitment basis, to the applicant in A.No.4782 of 2009 and 30 million KWH per year on firm commitment and 10 million KWH on non-firm commitment basis, to the applicant in A.No.4835 of 2009. But unfortunately the first respondent did not make supply of power to the extent committed by them even on firm basis, in the year 2006-2007, 2007-2008 and 2008-2009.
8. To add to the woes of the applicants, Tamil Nadu Electricity Board also imposed a 40% cut on energy supply, apart from imposing a ban on usage of power during peak hours. On 5.11.2008, the first respondent sent letters to the applicants, informing them that the Wheeling Agreement entered into by them with the Tamil Nadu Electricity Board had become inoperative and ineffective. The first respondent also moved the Tamil Nadu Electricity Regulatory Commission, seeking a direction to the Tamil Nadu Electricity Board to vary the terms of the Wheeling Agreement, so that they could trade 40 MW out of the production of 65 MW to consumers outside the State. An order was passed by the Commission in DRP No.19 of 2008 and I.A.No.7 of 2008 dated 20.11.2008 and the same came to be challenged by the Electricity Board in a writ petition before this Court. But it appears that the Electricity Board agreed to pay to the first respondent Rs.6.70 p. per unit for 40 MW.
9. The first respondent issued a communication dated 7.3.2009, taking a curious stand that since the captive consumers were not able to consume the supply made during peak hour, they had decided to sell power to consumers outside the State. The first respondent also made an offer to buy back the shares of the applicants as an alternative. There were clear indications that the first respondent would lose the status of a captive power plant and would sell power in the open market, without supplying to the captive consumers.
10. Since the intention of the first respondent not to supply power to the applicants, but to sell the power in the open market at a higher rate became quite clear, the applicant in A.No.4782 of 2009 filed applications in O.A.Nos.356 and 357 of 2009. Similar applications were filed by a few other captive consumers in O.A.Nos.324 and 325 of 2009, O.A.Nos.526 and 527 of 2009, O.A.Nos.551 and 552 of 2009 and O.A.Nos.573 and 574 of 2009 under
Section 9 of the Arbitration and Conciliation Act, 1996. The prayers in these applications were generally for (i) restraining the first respondent from supplying power to anyone without making a supply to the applicants and (ii) restraining the first respondent from stopping the supply.
11. In all the applications, interim orders of injunction were granted and were subsequently made absolute. These orders have also been confirmed by the Division Bench in O.S.A. Nos.363 of 2009 batch of cases by order dated 16.11.2009. As a matter of fact, during the pendency of the appeals, the first respondent did not have the benefit of interim suspension of the order of injunction granted by the learned Judge in the original applications. However, the first respondent has not complied with the interim orders of injunction till date.
12. Some of the captive consumers, apart from obtaining interim orders of injunction, also filed separate applications in A.Nos.3893 of 2009, 3434 of 2009, 3562 of 2009 and 3561 of 2009, seeking prohibitory orders against the garnishee viz., the Tamil Nadu Electricity Board, restraining them from making payments of their dues to the first respondent. In those applications, interim prohibitory orders were originally granted. A similar application for a prohibitory order was filed in A.No.3924 of 2009 by the applicant in A.No. 4782 of 2009. In that application also, a pro-order was granted against the Tamil Nadu Electricity Board. But after service of notice, the Tamil Nadu Electricity Board reported to this Court that no money is payable by them to the first respondent. Therefore, the garnishee applications of other captive consumers were dismissed on the short ground that Tamilnadu Electricity Board did not owe any money to the first respondent herein. However, upon enquiry, it was found out that the first respondent was routing its supply through the second respondent herein and hence it was the second respondent who was liable to make payments to the first respondent.
13. Therefore, the applicants herein have come up with the present applications, seeking a prohibitory order against the second respondent herein. The basis of the claim of the applicants is that on account of the failure of the first respondent to supply power, as per the Power Supply Agreements, the power drawn by them from Tamil Nadu Electricity Board increased, resulting in additional payment as well as imposition of penalty by the Electricity Board. Therefore, the applicants contend that they have a claim for liquidated as well as unliquidated damages against the first respondent. The claim is to be adjudicated in arbitration, since the Power Supply Agreement contains an Arbitration Clause. Pending arbitration, the claim of the applicants is to be safeguarded. Hence, the present applications.
14. In A.No.4782 of 2009, the applicant has claimed that there was a short supply of power to the tune of 54.16 lakhs units per month from March 2006. Since the rate at which the first respondent was to supply power to the applicant, under the Power Supply Agreement is Re.0.44 p., less than the rate payable to the Tamil Nadu Electricity Board per unit, the applicant has calculated liquidated damages to the tune of Rs.4.19 crores, on this count. Similarly, the applicant has also worked out the additional cost in the form of penalty as Rs.9.94 crores, at the rate of Rs.8.81 per unit for the non-supply against the committed quantity of 23.731 lakhs units per month. The applicant has worked out similar additional cost at Rs.12.54 crores for another period of 6 months, anticipating the arbitration proceedings to continue during the said period. Thus, the applicant in A.No.4782 of 2009 has quantified their monetary claim at Rs.26.67 crores and has sought a prohibitory order on the ground that the net assets of the first respondent would be far less than the claims that the first respondent may face in the arbitration, both from the applicant and from the other captive consumers.
15. Similarly, the applicant in A.No.4835 of 2009 has quantified their claim at Rs.183.37 lakhs, on the ground that they have suffered losses on account of non supply of power as agreed to by the first respondent. In the typed set of papers filed along with the application, the applicant has provided a detailed working sheet of the losses that they have suffered under several heads. Therefore, in order to protect their interest in the arbitration proceedings, they also seek prohibitory orders against the second respondent.
16. In the counter affidavits filed, the first respondent has raised the following contentions:-
(i) No notice of any default nor any demand for payment of any money has so far been served by the applicants. Therefore, no prohibitory order can be sought under
Section 9 of the Arbitration and Conciliation Act, 1996, since making a demand is a sine qua non for referring a dispute to arbitration.
(ii) The first respondent has lost the status of a captive power plant and consequently the Power Supply Agreements entered into with the parties, had worked themselves out. Therefore, the applicants are not entitled to the supply of power as per the Power Supply Agreements and hence no monetary claim can be made.
(iii) The essential requirements for the grant of prohibitory order are not satisfied. In A.No.4782 of 2009, the applicant had admitted that the first respondent is earning several crores of rupees by sale of power and that the net worth of the company is about Rs.205 crores as on 31.3.2009. In the other application, the applicant had made a bald averment that the first respondent is frittering away the income earned, without disclosing the source of such information. Therefore, on the basis of these averments, no interim prohibitory order could be granted.
(iv) Since, according to the applicant, a reference to arbitration has been made, the applicants should seek remedy only before the Arbitral Tribunal under
Section 17 of the Act.
17. In the light of the rival contentions, the question that arises for consideration is as to whether the applicants have made out a case for the grant of prohibitory orders.
18. There can be no doubt or dispute that to be entitled to a prohibitory order as prayed for, the applicants have to show (i) the existence of a prima facie case in their favour and (ii) that the first respondent is about to dispose of or remove the whole or any part of their property, with intent to obstruct or delay the execution of any decree that may be passed against them. Though a prohibitory order is also known in common parlance, to be an injunction issued by the Court, it is not one which is covered by Order XXXIX, Rule 1 or 2, CPC. It is in the nature of an attachment under Order XXXVIII, Rule 5, CPC, if it is before judgment and an attachment under Order XXI, Rules 46A to 46E of the Code, if it is in execution of a decree. This distinction was indicated by the Supreme Court in a recent decision in Food Corporation of India vs. Sukh Deo Prasad {2009 (5) SCC 665}. Therefore, let me see if the applicants have satisfied these criteria.
PRIMA FACIE CASE:
19. The following are the admitted facts:-
(a) That the first respondent entered into 3 agreements, one in the form of Memorandum of Understanding, another in the form of a Power Supply Agreement and a third in the form of an Agreement for investment, all on 24-1-2005, with the applicant in A.No.4782 of 2009;
(b) That the first respondent entered into a similar Memorandum of Understanding, Power Supply Agreement and Agreement for investment on 9.3.2005 with the applicant in A.No.4835 of 2009;
(c) That a Supplementary Agreement dated 28.10.2005 was entered into with the applicant in A.No.4782 of 2009 and a Deed of Modification dated 9.1.2006 was entered into with the applicant in A.No.4835 of 2009;
(d) That in terms of all the aforesaid Agreements, both the applicants have made investments in the form of share capital in the first respondent-Company, to the tune of Rs.227.50 lakhs and Rs.105 lakhs respectively;
(e) That there is an obligation for the first respondent to supply power to the applicants to the extent of 65 MW and 30 MW respectively, on firm commitment basis and 15 MW and 10 MW on non-firm commitment basis;
(f) That the first respondent has not been complying with their obligations under the Power Supply Agreements for the past more than 6 months;
(g) That the failure of the first respondent to honour their commitments under the Power Supply Agreements, is despite interim orders of injunction granted in previous applications under
Section 9 of the Arbitration and Conciliation Act, 1996, originally granted by a learned Judge and now confirmed on appeal by the Division Bench in a batch of Original Side Appeals;
(h) That the Power Supply Agreements provide for compensation, in the event of default committed by the first respondent in supplying the agreed quantity of power;
(i) That since the rate fixed under the Power Supply Agreements, is 12.5% less than the energy charges normally levied by the Electricity Board, the non-supply of power as agreed, by the first respondent, would unquestionably result in at least a loss to that extent; and
(j) That the non-supply of the agreed quantity of power by the first respondent, would force the applicants to make alternative arrangements and would result in the Electricity Board levying penalty.
20. All the above admitted facts make it clear (i) that there were Agreements (ii) that there was a clear breach of the Agreements by the first respondent (iii) that the breach continues despite interim orders of injunction passed in previous applications (iv) that the breach resulted in monetary loss and (v) that therefore, the applicants have a valid claim for monetary compensation against the first respondent. I do not think that anything more is required for this Court to satisfy itself that there is a prima facie case in favour of the applicants.
21. The only explanation offered by the first respondent for the breach committed by them, is that they have lost the status of a "Captive Power Plant", since the shareholding of the captive consumers fell below 26% . But this appears to be only an apology of an explanation. There is no indication either in the Power Supply Agreements or in the statutory provisions, to the effect that the first respondent would be absolved of its liability to supply power, as per the terms of the Agreements, if it loses the status of a Captive Power Plant. Moreover, it appears that the first respondent has voluntarily brought upon itself, this loss of status, even if there is such loss of status, with the oblique motive of profiteering by selling the same power to others at more than twice the rate at which they agreed to sell it to the applicants. Therefore, the explanation, nay, excuse, now offered by the first respondent for committing a breach of the Agreements, can hardly be accepted.
22. Let me first see whether the explanation of the first respondent can be accepted in the light of the terms and conditions of the Agreements. Clause II.2 of the Power Supply Agreement dated 24.1.2005 between the applicant in A.No.4782 of 2009 and the first respondent, lists out the obligations and undertakings of the first respondent under the Agreement. Similarly, Clause 2.2 in the Power Supply Agreement dated 9.3.2005 entered into between the applicant in A.No.4835 of 2009 and the first respondent, contains the obligations of the first respondent. One of the obligations listed therein, is to supply the contracted quantum of energy during the currency of the Agreement at the inter connection point. Under Clause No.II.2.8 of the Agreement dated 24.1.2005 and under Clause 2.2.18 of the Agreement dated 9.3.2005, the first respondent is not required to deliver power only during a scheduled outage or an unscheduled outage of the facility. Under Clause II.2.15 of one Agreement and Clause 2.2.15 of the other Agreement, the first respondent had undertaken to pay liquidated damages to the applicants, to the extent of the loss of energy cost reduction, if there was any shut down or repair of the power plant, which could not be rectified in a period of 30 days. Clause III.1.5 of the Agreement dated 24.1.2005 reads as follows:-
"III.1.5 In case ARKAY is unable to supply electrical energy to the extent of contracted demand under firm basis, the CAPTIVE CONSUMER may request ARKAY to still effect the supply by suitably amending the delivery schedule. On the other hand, if ARKAY is still unable to meet its delivery commitment, then ARKAY shall continue to allow the CAPTIVE CONSUMER to avail the agreed DISCOUNT, viz., 12.5% of the TNEB Energy charges, as provided for in Article III.1.2 of this agreement for such quantity of electrical energy not supplied by ARKAY as against the contracted demand/revised schedule under firm basis during a contract year. The claim, if in order and payable, shall be settled by ARKAY within 30 days of receipt of the claim from the CAPTIVE CONSUMER."
A similar provision is found in Clause 3.1.5 of the Agreement dated 9.3.2005, which reads as follows:-
"3.1.5 In case of default by ARKAY in supplying power under Contracted Demand under firm basis, ARKAY shall pay the DISCOUNT per unit to the CAPTIVE CONSUMER for such quantity of power not supplied by ARKAY as against the Contracted Demand under firm basis during a Contract Year."
23.
Article 6 of one Agreement and Article VI of the other Agreement, contain Clauses relating to "Termination". These Clauses provide both for automatic termination and also for termination at the instance of one of the parties. Clauses VI.1.3 and VI.5 of the Agreement dated 24.1.2005 contemplate automatic termination (i) if the Wheeling Agreement with the Tamil Nadu Electricity Board is terminated, for reasons other than the failure or default on the part of the first respondent or (ii) if the delivery of electrical energy is stopped for a continuous period of 90 days by the first respondent or if the consumption of power is stopped by the applicant for a period of 90 days. Similarly, Clause 6.6 of the Agreement dated 9.3.2005 provide for automatic termination if there was non-delivery of power for 180 days or non-consumption of power for 90 days.
24. There are Clauses for termination of the Agreements by act of parties. The first respondent has a right to serve a notice of default on the applicants, for termination of the Agreements, under Clauses VI.2.1 and 6.2.1 of the respective Agreements. Since the wordings of these Clauses are almost similar, it is enough if one is extracted.
"ARKAY shall have a right to serve a notice of default on THE CAPTIVE CONSUMER if:
(a) THE CAPTIVE CONSUMER consistently defaults in payment of any admitted dues to ARKAY beyond 14 days (7 days in the other Agreement) from the due date of payment, provided ARKAY has complied with its obligations under this Agreement and has first made demand pursuant to the provisions of this agreement.
(b) THE CAPTIVE CONSUMER commits a material breach of provisions of this Agreement and does not remedy the breach within 30 days from the date of receipt of request from ARKAY for such remedy or such extended time as may be mutually agreed upon."
25. The term of the Power Supply Agreements was fixed as 6 years under Clause VI.1.1 and 6.1.1 of the respective Agreements. The parties are also given the option under Clauses VI.3 and 6.3 of the respective Agreements, to terminate the Agreements, before the expiry of the term, on any grounds other than those mentioned in the Agreements. But if such a termination is effected by one of the parties, certain consequences are stipulated under the very same Clauses. Therefore, they are extracted as follows:-
"VI.3 of the Agreement dated 24.1.2005:
The parties to this agreement can also terminate this agreement before the end of the term of this agreement on any other grounds by giving adequate notice of such termination as provided for in this agreement. In the event of such termination, the CAPTIVE CONSUMER shall be at liberty to sell the equity shares, if any, held by it in ARKAY in its entirety to the party identified by ARKAY as the next Consumer who will replace the CAPTIVE CONSUMER at a price to be determined and mutually agreed to between such parties, but not less than the par value of the said shares. In case ARKAY could not identify the next Consumer within the period of 180 days from the date of termination, it shall make immediate alternate arrangements (including purchase of the said equity shares by other promoting companies and/or directors and/or employees of ARKAY at a price to be determined and mutually agreed to between parties, but, not less than the par value of the said shares, to enable disposal of the shares by the Captive Consumer. If even upon the expiry of the said period of 180 days from the date of termination of this agreement, the equity shares, if any, held by the Captive Consumer could not be disposed of, then the Captive Consumer shall have its nominee immediately appointed to the Board of Directors of ARKAY to protect the Captive Consumer's interest and ARKAY shall accept such nomination forthwith and induct the said nominee to its Board of Directors immediately thereafter. The nominee director so appointed shall be withdrawn by the Captive Consumer immediately upon the disposal of the equity shares, if any, held by the Captive Consumer in its entirety."
"6.3 and 6.4 of the Agreement dated 9.3.2005:
6.3 The parties to this agreement can also terminate this agreement before the end of the term of this agreement on any other grounds. In the event of such termination, the party terminating the agreement shall pay compensation to the other party. The amount of compensation payable shall be mutually agreed upon between the parties."
"6.4 In the event of the termination of the agreement under any of the foregoing circumstances, ARKAY agrees to identify another party as the next captive consumer, who will replace the CAPTIVE CONSUMER and the CAPTIVE CONSUMER agrees to transfer the shares held by him in the company in its entirety at par value to the party so identified by ARKAY."
26. Article VIII and
Article 8 of both the Power Supply Agreements, contain Clauses relating to "Force Majeure". Importantly, the loss of status as a Captive Power Plant, on account of the shareholding of the captive consumers falling below 26%, is not one of the contingencies listed in the Article relating to "Force Majeure". Moreover, under Clause VIII.4 and 8.4, a "Continuing obligation to perform" and "Continuing obligation to pay" are incorporated, so as to disable the parties from ducking from their obligation. At any rate, under Clause VIII.5 and 8.5, the party claiming Force Majeure is obliged to give notice to the other party with reasonable documentation, evidencing the occurrence of any event of Force Majeure, as reasonably as possible, but not later than 7 days after the date on which such party knew or could reasonably had known the occurrence of the event. No notice was ever served by the first respondent on the applicants, invoking Clauses VIII.5 and 8.5 respectively. Therefore, the first respondent cannot even take refuge under the Article relating to Force Majeure. Hence I hold that the excuse now offered by the first respondent for not fulfilling their obligations, does not fit into the scheme of the contract between the parties.
27. Now let me see if the excuse of the first respondent is acceptable in terms of the Electricity Act, 2003 and the rules framed thereunder. To examine this, the provisions of the Act, relied upon by Mr.N.C.Ramesh, learned counsel for the first respondent, shall first be looked into.
28. The Electricity Act, 2003, defines a "Captive Generating Plant" under
Section 2(8) as follows:-
"'Captive Generating Plant' means a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association"
Section 2(28) defines a "Generating Company" to mean -
"any company or body corporate or association or body of individuals, whether incorporated or not, or artificial juridical person, which owns or operates or maintains a generating station"
Under
Section 7, any generating company may establish, operate and maintain a generating station without obtaining a license under this Act, if it complies with the technical standards relating to connectivity with the grid referred to in Clause (b) of Section 73.
Section 9 of the Act, dealing with Captive Generation, reads as follows:-
"9. Captive generation (1) Notwithstanding anything contained in this Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines:
Provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company:
Provided further that no license shall be required under this Act for supply of electricity generated from a captive generating plant to any licensee in accordance with the provisions of this Act and the rules and regulations made thereunder and to any consumer subject to the regulations made under sub-section (2) of
section 42.(2) Every person, who has constructed a captive generating plant and maintains and operates such plant, shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use:
Provided that such open access shall be subject to availability of adequate transmission facility and such availability of transmission facility shall be determined by the Central Transmission Utility or the State Transmission Utility, as the case may be:
Provided further that any dispute regarding the availability of transmission facility shall be adjudicated upon by the Appropriate Commission."
Section 12 mandates that no person shall (a) transmit electricity or (b) distribute electricity or (c) undertake trading in electricity, unless he is authorised to do so by a license issued under
Section 14 or is exempt under
Section 13.Section 14 empowers the Appropriate Commission to grant a license to any person (a) to transmit electricity as a transmission licensee or (b) to distribute electricity as a distribution licensee or (c) to undertake trading in electricity as an electricity trader in any area specified in the license.
Section 42 lays down the duties of a distribution licensee.
29. In exercise of the powers conferred by Section 176 of the Electricity Act, 2003, the Central Government issued a set of rules known as "The Electricity Rules, 2005". Rule 3 of the said Rules, speaks of the requirements of a captive generating plant. The Rule reads as follows:-
"3. Requirements of captive generating plant (1) No power plant shall qualify as a "captive generating plant" under
section 9 read with clause (8) of
section 2 of the Act unless -
(a) in case of a power plant -
(i) not less than twenty six percent of the ownership is held by the captive user(s), and
(ii) not less than fifty one percent of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for the captive use:
Provided that in case of power plant set up by registered co-operative society, the conditions mentioned under paragraphs at (i) and (ii) above shall be satisfied collectively by the members of the co-operative society:
Provided further that in case of association of persons, the captive user(s) shall hold not less than twenty six percent of the ownership of the plant in aggregate and such captive user(s) shall consume not less than fifty one percent of the electricity generated, determined on an annual basis, in proportion to their shares in ownership of the power plant within a variation not exceeding ten percent;
(b) in case of a generating station owned by a company formed as special purpose vehicle for such generating station, a unit or units of such generating station identified for captive use and not the entire generating station satisfy(s) the conditions contained in paragraphs (i) and (ii) of sub-clause (a) above including -
Explanation (1) The electricity required to be consumed by captive users shall be determined with reference to such generating unit or units in aggregate identified for captive use and not with reference to generating station as a whole; and (2) the equity shares to be held by the captive user(s) in the generating station shall not be less than twenty six percent of the proportionate of the equity of the company related to the generating unit or units identified as the captive generating plant.
Illustration In a generating station with two units of 50 MW each, namely, Units A and B, one unit of 50 MW, namely, Unit A may be identified as the Captive Generating Plant. The captive users shall hold not less than thirteen percent of the equity shares in the company (being the twenty six percent proportionate to Unit A of 50 MW) and not less than fifty one percent of the electricity generated in Unit A determined on an annual basis is to be consumed by the captive users.
(2) It shall be the obligation of the captive users to ensure that the consumption by the captive users at the percentages mentioned in sub-clauses (a) and (b) of sub-rule (1) above is maintained and in case the minimum percentage of captive use is not complied with in any year, the entire electricity generated shall be treated as if it is a supply of electricity by a generating company.
Explanation (1) For the purpose of this rule, -
(a) "annual basis" shall be determined based on a financial year;
(b) "captive user" shall mean the end user of the electricity generated in a Captive Generating Plant and the term "captive use" shall be construed accordingly;
(c) "ownership" in relation to a generating station or power plant set up by a company or any other body corporate shall mean the equity share capital with voting rights. In other cases ownership shall mean proprietary interest and control over the generating station or power plant;
(d) "Special Purpose Vehicle" shall mean a legal entity owning, operating and maintaining a generating station and with no other business or activity to be engaged in by the legal entity."
30. It is seen from the relevant provisions of the Electricity Act, 2003 and the Electricity Rules, 2005, extracted above, that the Act by itself does not contain a prescription, either in the definition in Section 2(8) or under Section
9, about the pattern of shareholding in a company establishing a captive generating plant. The definition under Section 2(8) lays emphasis only on the generation of electricity "primarily for own use" or "primarily for the use of the members of the co-operative society or association", for a person to come within the definition of Section 2(8). Section
9 merely speaks about the rights of a person setting up a captive generating plant. All other provisions of the Act relied upon by Mr.N.C.Ramesh, learned counsel for the first respondent, have nothing to do with a captive generating plant. Those provisions speak of the rights and obligations of persons other than captive generators, with regard to transmission, distribution or trading in electricity. The provisions other than
Sections 2(8) and
9 are relied upon by the learned counsel for the first respondent, for the purpose of showing that once the first respondent ceased to be a captive generating plant, the other provisions of the Act would come into play, leading to a host of obligations to be complied with, before effecting supply to the applicants in terms of the Power Supply Agreements.
31. To show that the first respondent ceased to be a captive generating plant, the learned counsel for the first respondent could rely only upon Rule 3 quoted above and a claim made in their letter dated 18.4.2009 to the effect that 3 captive consumers by name Balaganapathy Mills Ltd, Kamatchi Steels Ltd and Meenakshi Udyog (India) Pvt Ltd, had sold their shares to the promoters of the first respondent.
32. At the outset, it is seen that Rule 3 prescribes two requirements. There is no dispute about the fact that the shareholders of the first respondent fulfilled both the requirements, in the initial stages. The captive consumers including the applicants herein, held equity shares in the first respondent-company to the extent of not less than 26% of the proportionate equity capital of the first respondent-company. The captive users also consumed not less than 51% of the electricity generated in the plant on an annual basis, thereby fulfilling both the requirements of Rule 3. It is not stated anywhere, either in Rule 3 or in any other Rule that the moment the shareholding of the captive consumers falls below 26%, the plant would lose the status of a captive generating plant.
33. As a matter of fact, it is actually a misconception to equate the two requirements prescribed in Rule 3 to qualifications. While what is prescribed in Rule 3(1) is a qualification, what is prescribed in Rule 3(2) is an obligation. The prescription that the ownership or shareholding of the captive consumers should be not less than 26%, is actually a qualification to be fulfilled, before a plant could be termed as a captive generating plant. In other words, it is a condition precedent. But the prescription that at least 51% of the energy generated should be consumed by the captive users, is not and cannot be a condition precedent, but a condition subsequent. It comes into operation only after the plant commences production. This is why, Rule 3(2) speaks of it as an "obligation", while Rule 3(1) speaks of "qualification". A reading of Rule 3(2) would show that the obligation imposed upon the captive users to consume at least 51% of the energy generated, is a "continuing obligation". Rule 3(2) makes it clear that the captive users are obliged to ensure that the quantity of consumption is maintained every year at a minimum of 51%.
34. Interestingly, the consequences of the captive consumers not complying with the continuing obligation under Rule 3(2) is also spelt out by the later part of the Rule itself. It says that if in any year, the minimum quantity of consumption for captive use is not maintained, the entire electricity generated would be treated as if it is a supply by a generating company. Two things follow as a corollary, viz.,
(a) The Rule spells out the consequence of the consumption for captive use, falling below 51%. But it does not spell out, at the same breadth, the consequence of the percentage of shareholding falling below 26%.
(b) Even in a case where the consumption for captive use falls below 51% in a particular year, the only consequence stipulated in the rule is that the energy generated in that year will be treated as if it is a supply by a generating company. The Rule is silent whether in the next year, the energy will be treated as one generated by a captive generating plant, if the captive consumption again goes up to 51% and more. The Rule is also silent about the status of such a company, when the consumption for captive use falls below 51%.
35. At any rate, the Rule does not say that such a power plant, should stop supplying power to its own shareholders, the moment shareholding of captive users fall below 26%. The reason for this is too obvious to state. When a group of persons, who wish to be captive consumers, come together and float a company, for the purpose of setting up a captive generating plant, it may be possible for them at the time of inception, to ensure that at least 26% of the share capital is owned by such captive consumers. But after the formation of the company, it would not be within their province to ensure at all times that the shares are not transferred or that even if transferred, the percentage is maintained. In other words, where the promoters choose to tamper with the percentage of holding, there is hardly anything that the captive consumers could do about it. This is why, Rule 3 does not impose a continuing obligation upon the captive consumers to ensure their shareholding at 26% at all times to come, though it imposes a continuing obligation upon them to maintain the consumption of electricity at 51%. In such circumstances, the argument that the first respondent had lost the status of a captive generating plant and consequently they would not be able to supply power to the applicants, is not founded upon the provisions of either the Act or the Rules.
36. In any case, the promoters of the first respondent in this case, have obviously tinkered with the percentage of shareholding. By a clever manipulation, the promoters have made the percentage of shareholding of the captive users to fall below 26%, so as to enable them to sell the very same power to the second respondent at a rate twice at which it was agreed to be sold to the applicants. It is a fundamental principle of law that no one can take advantage of his own wrong. The Power Supply Agreements provide for the purchase of the shares of one captive consumer by another captive consumer. Therefore, it was possible for the first respondent to have notified the applicants that the shares of 3 captive consumers are offered for sale and that their failure to take it, would result in the first respondent losing the status of a captive power plant. The first respondent obviously did not choose to do so, as it was not beneficial to them. Therefore, I do not accept either the theory that the first respondent had lost the status of a captive generating plant or the theory that as a consequence, they cannot anymore supply electricity to the applicants.
37. The first respondent is now shedding crocodile tears that they had lost the status of a captive generating plant. But the first respondent did not even put the applicants on notice, when 3 shareholders by name Balaganapathy Mills Ltd., Kamatchi Steels Ltd and Meenakshi Udyog (India) Pvt. Ltd., offered to sell their shares to the promoters of the first respondent themselves. In order to avert the danger of the shareholding of the captive users falling below 26%, the first respondent could have put the applicants on notice of the offer made by those 3 shareholders. If despite such a notice, the applicants had kept quite, it may be open to the first respondent to take refuge under this defence.
38. As a matter of fact, Clause VI.3 of the Power Supply Agreement dated 24.1.2005 and Clause 6.4 of the Power Supply Agreement dated 9.3.2005 contain a stipulation that whenever the agreement of a captive consumer is terminated, the first respondent should identify another captive consumer to replace them and to such a consumer, the equity shares are to be sold. These clauses are actually intended to retain the shareholding of the captive users at least at 26%. But the first respondent failed miserably to honour this commitment and hence they cannot be now allowed to take advantage of their own wrong.
39. In Mrutunjay Pani vs. Narmada Bala Sasmal {AIR 1961 SC 1353(1)}, the Supreme Court quoted a famous latin maxim and held that a person cannot be allowed to retain a benefit that accrued to him on account of his own wrong, The relevant passage reads as follows:-:-
"The same principle is comprised in the latin maxim commodum ex injuria sua memo habere debet, that is, convenience cannot accrue to a party from his own wrong. To put it in other words, no one can be allowed to benefit from his own wrongful act."
40. In Union of India vs. Major General Madan Lal Yadav {AIR 1996 SC 1340}, the Supreme Court held as follows:-
"In this behalf, the maxim nullus commodum capere potest de injuria sua propria-meaning no man can take advantage of his own wrong squarely stands in the way of avoidance by the respondent and he is estopped to plead bar."
"In Broom's Legal Maxims (10th Edn.) at page 191 it is stated "it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in Courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure. The reasonableness of the rule being manifest, we proceed at once to show its application by reference to decided cases. It was noted therein that a man shall not take advantage of his own wrong to gain the favourable interpretation of the law, in support thereof, the author has placed reliance on another maxim frustra legis auxilium quoerit qui in legem committit. He relies on Perry vs. Fitzhowe, (1846) 8 QB 757. At page 192, it is stated that if a man be bound to appear on certain day, and before that day the obligee put him in prison, the bond is void. At page 193, it is stated that "it is moreover a sound principle that he who prevents a thing from done shall not avail himself of non-performance he has occasioned". At page 195, it is further stated that "a wrong doer ought not to be permitted to make a profit out of his own wrong". At page 199, it is observed that "the rule applies to the extent of undoing the advantage gained where that can be done and not to the extent of taking away a right previously possessed"
41. In order to wriggle out of the obligations cast under the above clauses, the first respondent has filed a set of about 24 similar Power Supply Agreements that they had with other captive consumers. Drawing my attention to the relevant clauses relating to termination and force majeure, Mr.N.C.Ramesh, learned counsel for the first respondent contended that different types of obligations were cast upon the first respondent under different Power Supply Agreements and that therefore, it was not possible for the first respondent to make the equity shares of one captive consumer purchased by another captive consumer.
42. But it is hardly an acceptable explanation. A person who never made even a feeble attempt to offer the equity shares held by the outgoing captive consumers, to the continuing captive consumers, with a view to retain the status of a captive generating plant, cannot be heard to contend that there were different obligations under different agreements. All the Power Supply Agreements of the first respondent with all the captive consumers, are the brain child of the promoters of the first respondent. If they have cleverly drafted the agreements in such a manner as to outwit the captive consumers, it cannot now be taken advantage of. In any case, none of the 24 Power Supply Agreements filed by the first respondent, contain a clause prohibiting the first respondent from offering for sale, the equity shares of the outgoing consumer to the continuing captive consumer. The existing shareholders-captive consumers, would have been too willing to purchase those shares at any cost, so that the status of the company floated as a captive generating plant, is not lost. But the first respondent failed miserably to provide this opportunity to the applicants. Therefore, the excuse offered by the first respondent, cannot hold good and the applicants have a very clear prima facie case, to seek an interim protective order.
CIRCUMSTANCES WARRANTING A PRO-ORDER:
43. As observed earlier, a person seeking an order of attachment under Order 38, Rule 5, CPC, or an order of similar nature, has to show not only a prima facie case, but also an attempt on the part of the other party to dispose of or secret his properties with a view to delay and defeat the rights of the claimant in the event of a decree being passed in his favour. Since the applicants have established a prima facie case, let me now see if the second requirement is satisfied.
44. In the affidavit in support of O.A.No.4782 of 2009, the applicant therein has highlighted three things viz., (i) that the first respondent has disobeyed and continue to disobey the earlier orders of injunction, which has led to the applicant losing a sum of Rs.2.09 crores every month (ii) that their earlier attempt to seek a pro-order against Electricity Board failed, not on merits, but on the short ground that Electricity Board did not owe any money to the first respondent and (iii) that the net assets of the first respondent would be far less than the claims that many of the captive consumers have already initiated against the first respondent.
45. Similarly, the applicant in A.No.4835 of 2009 has stated in their affidavit that the amount generated by the first respondent is being fraudulently frittered away, thereby keeping it out of the reach of all the creditors and that the first respondent does not own any major assets and hence it would be impossible for them to realise any money even if they succeed in the arbitration.
46. I am of the considered view that the above averments are sufficient to satisfy the requirements of Order 38, Rule 5 read with Section 151 CPC. The fact that the applicants have interim orders of injunction in their favour, the fact that those orders are yet to be obeyed by the first respondent, the fact that more than half a dozen captive consumers have already filed applications under
Section 9, the fact that the total value of all their monetary claims run to several crores of rupees, are all not denied by the first respondent. They are all matters of record and hence cannot also be denied by the first respondent. Except that the applicants have not repeated the ingredients of Order 38, Rule 5 CPC, like parrots, in the affidavits filed in support of these applications, the applicants have certainly satisfied the essential requirements. It is needless to point out that a mere repetition of the phraseology contained in Order 38, Rule 5, CPC, like hymns in annual ceremonies, would not enable a plaintiff to secure an order of attachment, if such repetition has no factual foundation. At the same time, the non-repetition of the phraseology in the affidavit, would not also disable a plaintiff from succeeding, if the factual details provided are sufficient to grant an order.
47. The applicant in A.No.4782 of 2009 has filed the fourth Annual Report relating to the year 2007-2008 of the first respondent. Though the picture painted there is very rosy, showing a net profit before tax, of Rs.22.35 crores, as on 31.3.2008, the fixed assets of the company listed in Schedule-6, which comprise of several items, show the value of land and buildings only at about Rs.35.57 crores as on 31.3.2008 (net block). The highest valued fixed assets are the plant and machinery, which are valued at about Rs.180 crores. But the claim of the applicant in A.No.4782 of 2009 itself, is for Rs.26.67 crores and the claim of the applicant in the other application is about Rs.183 lakhs. There are at least 6 more captive consumers who have obtained interim orders of injunction against the first respondent for the very same reasons. There were also Garnishee orders passed against the first respondent at the instance of other captive consumers, in A.Nos.3893 of 2009, 3434 of 2009, 3562 of 2009 and 3561 of 2009. All those orders were against Tamil Nadu Electricity Board and those applications were closed, after the Electricity Board reported that they do not owe any money to the first respondent. Therefore, the picture painted in the balance sheet of the first respondent, may not continue to have sun shine, since a low pressure area is already in formation, over the financial horizon of the first respondent, at the instance of several captive consumers who are shareholders of the first respondent. In such circumstances, the apprehension of the applicants that the success that they may achieve in the arbitration, would ultimately turn out to be a paper success, cannot lightly be brushed aside. Therefore, I am of the view that the applicants are entitled to the pro-orders sought for.
48. Mr.N.C.Ramesh, learned counsel for the first respondent, relied upon a decision of the Supreme Court in State of Bombay vs. Purushottam Jog Naik {AIR 1952 SC 317}, to contend that the affidavit of the applicant in A.No.4835 of 2009 contains an averment to the effect that they have information to show that the first respondent has fraudulently frittered away the funds. But the source of information is not disclosed and hence the affidavit, according to the learned counsel, cannot be accepted in terms of the law laid down by the Supreme Court. But the said decision is of no assistance to the first respondent since the ratio laid down therein, is in terms of Order 19, Rule 3, CPC, as it stood before the 1976 amendment. Now Order 19, Rule 3, CPC, states that affidavits should be confined to such facts as the deponent is able of his own knowledge to prove, except on interlocutory applications, on which statements of his belief may be admitted, provided that the grounds thereof are stated. Therefore, the first respondent cannot make much ado about it.
49. Mr.N.C.Ramesh, learned counsel for the first respondent, next relied upon a decision in Renox Commercials Ltd vs. Inventa Technologies Pvt. Ltd {AIR 2000 Mad. 213}. In that case, after referring to the following decisions:-
1. AIR 1982 SC 989 (Govindarao Mahadik vs. Devi Sahai).
2. AIR 1961 SC 218 (Padam Sen vs. State of U.P.).
3. AIR 1991 Madh Pra 373 (Manohar Singh vs. Hindu Kumar Kohli).
4. AIR 1951 Cal 156 (Premraj vs. Md. Maneck Gazi).
5. AIR 1965 Madras 212 (Nataraja vs. Bangaru).
6. AIR 1982 Madras 49 (G.Kuppathi Mudaliar vs. Murugesan).
7. (1984) I Mad LJ 148 (Pappammal vs. Chidambaram).
8. AIR 1985 Madras 269 (T.Srinivasan vs. V.Srinivasan) the learned Judge, extracted the guiding principles enunciated in those decisions, as follows:-
"(1) That an order under Order 38, Rule 5 can be issued only if circumstances exist as are stated therein to the satisfaction of the Court.
(2) That the Court would not be justified in issuing an order for attachment before judgment, or for security merely because it thinks that no harm would be done thereby or that the defendants would not be prejudiced.
(3) That the affidavit in support of the contentions of the applicant, should not be vague and it must be properly verified. Where it is affirmed true to knowledge or information, it must be stated as to which portion is true to knowledge and the source of information should be disclosed and the grounds for belief should be stated.
(4) That a mere allegation that the defendant is selling off his properties is not sufficient. Particulars must be stated.
(5) An order of attachment before judgment is a drastic remedy and the power has to be exercised with utmost care and caution, as it may be likely to ruin the reputation of the party against whom the power is exercised. As the Court must act with the utmost circumspection before issuing an order of attachment, the affidavit filed by the applicant should clearly establish that the defendant, with intent to obstruct or delay the execution of the decree that may be passed against him is about to dispose of the whole or any part of his property.
(6) A merely mechanical repetition of the provisions in the Code or the language therein without any basic strata of truth underlying the allegation or vague and general allegations that the defendant is about to dispose of the property or to remove it beyond the jurisdiction of the Court, totally unsupported by particulars, would not be sufficient compliance with Order 38, Rule 5 of CPC.
(7) An attachment before judgment is not a process to be adopted as a matter of course. The suit is yet to be tried and the defence of the defendant is yet to be tried and the defence of the defendant is yet to be tested. At the nebulous juncture, the relief which is extraordinary could be granted only if the conditions for its grant, as per the provisions of the Code, stand satisfied. This process is never meant as a lever for the plaintiff to coerce the defendant to come to terms. Hence utmost caution and circumspection should guide the Court."
50. I have carefully scanned the pleadings, the documents, the admitted case of the parties and the area of dispute. I am satisfied that all the above principles are satisfied in the applications on hand, for the grant of an interim prohibitory order. Therefore, on facts, the above decision does not go to the rescue of the first respondent.
51. Mr.N.C.Ramesh, learned counsel for the first respondent, next relied upon a decision of the Division Bench of this Court in Om Sakthi Renergies Ltd vs. Megatech Control Ltd {2006 (2) RAJ 364 (Mad.)}, to contend that the requirements of Order 38, Rule 5, are to be satisfied for the grant of an order against the Garnishee. There can be no two opinions on this aspect. Following the decision of the Supreme Court in I.T.I. Ltd vs. Siemens Public Communications Network Ltd {AIR 2002 SC 2308}, the Division Bench held in that case that for want of specific exclusion of CPC in the 1996 Act, the Code cannot be taken to be inapplicable, but that the provisions of the Code have to be read into the 1996 Act. I have actually tested the entitlement of the applicants to the relief prayed for, only in terms of these aspects. Therefore, that decision of the Division Bench is also of no assistance to the first respondent.
52. The learned counsel for the first respondent also relied upon two decisions of the Division Benches of this Court in TECHMO CAR SPA vs. THE MADRAS ALUMINIUM COMPANY LTD {2004 (2) R.A.J. 642 (Mad)} and M/s.Quickjet Cargo Airlines (P) Ltd vs. M/s.Bharat Aviation Private Ltd {2009 (3) TLNJ 642 (Civil)}. But these two decisions deal with the parameters to be satisfied for an order of injunction under Order 39, Rule 1 read with
Section 9 of the Arbitration Act. Therefore, they do not apply to applications seeking Garnishee orders, as these applications would normally fall under Order 38, Rule 5, CPC, though the word "injunction" is used. This aspect of the matter has already been considered in paragraph 18, in the light of the recent decision of the Supreme Court in Food Corporation of India case.
53. It is next contended by Mr.N.C.Ramesh, learned counsel for the first respondent, that the applicants should work out their remedies only under
Section 17, before the Arbitrators, since one of the applicants had already obtained a relief under
Section 9. In support of this contention, the learned counsel relied upon the decision of the Supreme Court in Gail (I) Ltd vs. Bal Kishan Agarwal Glass Industries Ltd {2008 (3) Arb. L.R. 228 (SC)}. But in that case, the Supreme Court did not hold that there was any bar to seek an interim relief under
Section 9, once the arbitral proceedings are initiated.
54. Coming to the stand taken by the Garnishee viz., the second respondent, it is interesting to see that they filed a counter after arguments were heard and orders reserved in both the applications. However, I have taken the counter affidavits of the second respondent on file. In the counter affidavits, the only stand taken by the second respondent is that in pursuance of an agreement dated 21.10.2009, the second respondent was supplying power to the Tamil Nadu Electricity Board and that if that supply is disrupted, on account of non-payment to the first respondent, the Electricity Board would make a huge claim for compensation on them.
55. The above stand taken by the second respondent is stated, only to be rejected, for the following reasons:-
(i) The very agreement that the second respondent has entered into with the Tamil Nadu Electricity Board on 21.10.2009, is obviously with a view to complicate matters and help the first respondent to get away with the breach of the Power Supply Agreements entered into by the first respondent with the captive consumers like the applicants. The applicants as well as many other captive consumers have already obtained interim orders of injunction against the first respondent and those orders have also been confirmed by the Division Bench. Some of the captive consumers obtained Garnishee orders against the Electricity Board in the first instance, but those orders were vacated after the Electricity Board reported that they do not owe any money to the first respondent. The Electricity Board had entered into the agreement dated 21.10.2009, only after being a party to those Garnishee applications. Therefore, the second respondent cannot take refuge under their agreement with Tamil Nadu Electricity Board.
(ii) The applications on hand are only Garnishee applications. The role of the second respondent, as a Garnishee, is very very limited. All that they can be heard in these applications to say, is whether they owe any money to the first respondent or not. The matter ends there in so far as Garnishees are concerned.
(iii) The second respondent-Garnishee need not fear that as a consequence of non-payment to the first respondent, they would stop power supply. The first respondent was already duty bound to stop power supply to the second respondent, on account of the interim orders of injunction granted in previous applications under
Section 9, which have also been confirmed by the Division Bench. Therefore no new consequence would flow out of a Garnishee order, when the first respondent has no inclination to stop supply to the second respondent even on the basis of interim orders of injunction.
(iv) In any case, it is a fundamental principle that the payment by a Garnishee would act as a valid discharge, in terms of Order 21, Rule 46F, CPC. The payment made by the second respondent to the applicants, under orders of Court, would actually be construed as payments to the first respondent. Therefore if the first respondent stops supply to the second respondent on this ground, the second respondent can also come and stand along with the applicants herein as well as various other captive consumers, who have been taken for a ride by the first respondent.
56. In an interesting twist, after orders were reserved in these applications on 20.11.2009, the Axis Bank Ltd filed two applications in Application Nos.6316 and 6317 of 2009, seeking to implead them as parties to both the applications. The applications were filed on 23.11.2009 and a mention was made, since the bank wanted to oppose the applications seeking Garnishee orders.
57. The ground on which Axis Bank has come up with impleading applications is that they had advanced Rs.62 crores to the first respondent and that they have a charge over the amounts received by the first respondent. The bank claims that by virtue of a Composite Hypothecation Deed dated 1.6.2005 and a Trust and Retention Account Agreement dated 19.8.2005, a charge is created over all the amounts deposited into the Trust and Retention Account opened by them, both on their own behalf and also on behalf of other lenders viz., Infrastructure Development Finance Company Ltd., UTI Bank Ltd., and Union Bank of India. Therefore, the contention of the bank is that their rights will be jeopardised by ordering the Garnishee applications.
58. However, the apprehension of the applicant bank is not only misconceived, but also appears to have been triggered by the first respondent, in a last bid attempt to keep the applicants at bay. The answer to the claim of the bank is two fold viz., (i) The bank is not concerned about the source from which funds flow into the account of the first respondent. If the first respondent obeys the interim orders of injunction passed in the previous applications, at least henceforth, the applicants would be making payments into the very same account, into which the payments of the second respondent are now made. Therefore, the fund flow is ensured for the Bank. (ii) Even otherwise, the prayer made in these applications is only to direct the second respondent to deposit any monies due to the first respondent, into Court. The applicants are not seeking a direct payment to them. The present applications are not in execution of any decree. Therefore, the amounts would only be kept in deposit, without disbursement to the applicants and hence, the rights of the bank would not be jeopardised at this juncture. In such circumstances, their prayer for impleading them as a party, cannot be entertained.
59. Therefore, in the result, the applications A.No.4782 and 4835 of 2009 are allowed. The impleading applications filed by the Axis Bank, A.Nos.6316 and 6317 of 2009 are dismissed. There shall be no order as to costs.
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