9911796707
TMI Blog2013 (12) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... Guarantee dated 20th January, 2012, guaranteeing repayment of the liability of Defendant No. 1 to the Plaintiffs. 3. According to the Plaintiffs, in or about January, 2012, Defendant No. 1 approached the Plaintiff No. 1 and requested for loan facilities to fund Defendant No.1's financial need to capitalize on certain new opportunities available to Defendant No.1 at the relevant time. Pursuant to the discussions and negotiations in that behalf, the Plaintiff No. 1 and Defendant No. 1 executed a Convertible Loan Agreement dated 20th January, 2012 ("the Loan Agreement") by which the Plaintiff agreed to lend upto Rs. 1,00,00,000/( Rupees One Crore only) to Defendant No. 1 for the consideration and on the terms and conditions set out in the Loan Agreement. Clause 2.1 (vi) (a) of the Loan Agreement provided that Defendant No. 1 would mortgage all present and future movable and immovable properties of the Defendant No.1 including all plant, machinery, furniture, fittings, equipment, book debts, stocks, computer hardware and software and IP rights therein (defined therein as the Mortgaged Assets) in favour of Plaintiff No.1. Clause 2.1 (vi) (b) provided that Defendant No. 2 shall execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Plaintiff No.1; (d) that, for the aforesaid purpose, Defendant No. 1 be ordered and decreed to do all acts, deeds, matters and things, procure all consents, agreements, permissions and sanctions and execute all documents as may be required for effectively performing the Loan Agreement in favour of the Plaintiff No. 1; (e) that, on such mortgage of the said Assets being created in favour of the Plaintiff No.1, this Hon'ble Court be pleased to declare that the amount payable by the Defendant to the Plaintiff No.1, as set out in the Particulars of Claim at Exhibit M hereto is secured by a valid and subsisting mortgage of the said Assets; (f) That this Hon'ble Court be pleased to order and direct the Defendant to pay the amounts due and payable to the Plaintiffs as set out in the Particulars of Claim, Exhibit M hereto by such a date as may be fixed by this Hon'ble Court for redemption of the mortgage, failing which the mortgage of the said assets be enforced by and under the orders of this Hon'ble Court by sale thereof and further orders that the sale proceeds be paid over to the Plaintiffs in satisfaction of its claim against the Defendants; (g) That, in the event that of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific performance will be arbitral..." Relying on the decision of the Hon'ble Madras High Court in the Chief Controller, Revenue Authority vs. Madras Fertilizers Ltd. AIR 1975 Madras 360 it is submitted on behalf of Defendant No.1 that the essential characteristics of a mortgage are transfer of interest in present and in specific immovable property. It is submitted that in the present case admittedly there is no transfer of interest and there is no mention in the Loan Agreement as to on which assets the mortgage is specifically created. It is submitted that therefore the requirement of "transfer of interest" in specific assets is absent in the Loan Agreement and therefore a mortgage suit is not maintainable. It is further submitted on behalf of the Defendant No. 1 that since there is a reference of a Guarantee Agreement in the Convertible Loan Agreement and also a mention of the Loan Agreement in the Guarantee Agreement and both the documents having been executed on the same day i.e. 20th January, 2012, then it has to be construed that both form one agreement or the clauses of one agreement have to be read into the other agreement by implication. It is therefore submitted on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific performance will be arbitrable. However, a mortgage is a transfer of right in rem. A mortgage suit for sale of mortgaged property is an action in rem for enforcement of a right in rem. A suit on mortgage is not a mere suit for money. A suit for enforcement of a mortgage being the enforcement of a right in rem, will have to be decided by the courts of law and not by the Arbitral Tribunal. Hence the present Suit filed by the Plaintiffs seeking both specific performance and enforcement of the mortgage, being a right in rem, will have to be decided by this Court and not by an Arbitral Tribunal. Therefore, as held by the Hon'ble Supreme Court, the subject matter of the present Suit (also being enforcement of the mortgage) is not arbitrable and Reference under Section 8 of the Arbitration Act cannot be directed. 14. The Defendants have relied on the decision of the Hon'ble Madras High Court in the case of the Chief Controller, Revenue Authority (supra). In the said case it was observed that a floating charge does not involve any transfer of an interest in any specific property or creation of a right in any specified property. The Defendants have contended that the plaint or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties have agreed to refer and which comes within the ambit of Arbitration Agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the Arbitration Agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of S. 8. The words "a matter" indicates entire subject matter of the suit should be subject to Arbitration Agreement. 18. The next question which requires consideration is even if there is no provision for partly referring the dispute to arbitration, whether such a course if possible under Section 8 of the Act? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between the parties who are parties to the arbitration agreement and others are possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such course. Since there is no such indication in the languag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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