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2019 (10) TMI 1607 - HC - Indian LawsPower of Tribunal to direct a party to furnish security at the interlocutory stage as an interim measure of protection under Section 17 of the Act 1996 - Claimant has established a Prima Facie case in its favour or not - HELD THAT - The Tribunal came to a conclusion that even in the case of claims involving monetary reliefs the Tribunal is vested with powers to secure the claim of the party subject to the party establishing a prima facie case and the opposite party can be directed to furnish adequate security. The Tribunal observed that the paramount consideration in granting an interim relief should be that the party having its claims adjudicated should be in a position to reap the benefits of the Award by being able to execute it. Principles of Order XXXVIII Rule 5 CPC were also considered by the Tribunal and it came to a finding that power under Section 17 of the Act cannot be restricted to the powers conferred under CPC. As is evident from the reading of the impugned order the Tribunal perused the Bank Account statement furnished by the appellant and noticed that the appellant had transferred huge amounts to Weblink Trading Co. Ltd. and on the same day another sum of Rs. 5 Crores was transferred to New Term Deposits. The Tribunal noted that neither the appellant denied the transactions nor explained the true nature of such transactions. It is in this background that the Tribunal was of the opinion that a restraint order was required to be passed against the appellant so that the amounts claimed by the respondent are secured. It is thus a settled law that once the party makes out a prima facie case in its favour the Arbitral Tribunal can grant an interim relief under Section 17 of the Act so as to ensure that the successful party is assured that the Award in its favour would be executable. There is thus no merit in the contention of the appellant that powers of Arbitral Tribunal are very restricted and it had no powers to pass the impugned order. Tribunal in the present case has looked into the alleged claims of the respondent as well as the transactions made by the appellant transferring Rs. 13 Crores into other accounts coupled with its financial status. Having examined the matter in depth the Arbitral Tribunal has passed the impugned order securing the alleged claims of the respondent. A perusal of the impugned order shows that the view taken by the Tribunal is certainly a plausible view and does not suffer from any perversity requiring interference by this Court under Section 37 of the Act. It is well settled that the Act of 1996 contemplates very little or no interference in the orders passed by the Arbitral Tribunal. Conclusion - The view taken by the Tribunal is a plausible view and there is no perversity calling for any interference. The impugned order of the Tribunal has balanced the equities between the parties. Transferring of huge amounts on a single day prima facie does create an impression that the transfers were made with an intent to defeat the claims of the respondent. Securing the respondent was thus required so that on his succeeding in the proceedings the Award is not rendered unexecutable. There is no infirmity in the order of the Tribunal impugned herein. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents Section 17 of the Arbitration & Conciliation Act, 1996 empowers the Arbitral Tribunal to order interim measures of protection concerning the subject matter of the dispute. The Tribunal's powers under Section 17 have been compared to those under Section 9 of the Act, which allows courts to grant interim measures. The judgment references several precedents, including Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corpn. and Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd., which discuss the application of principles akin to Order XXXVIII Rule 5 and Order XXXIX Rules 1 and 2 of the CPC to arbitration proceedings. Court's interpretation and reasoning The Tribunal interpreted its powers under Section 17 as sufficiently broad to include ordering security for monetary claims, provided a prima facie case is established. The Tribunal emphasized that the primary consideration is ensuring that any eventual award can be executed effectively. The Tribunal also noted that its powers under Section 17 are not restricted by the CPC's limitations. Key evidence and findings The Tribunal considered the Auditor's report, which indicated significant amounts owed by the appellant to the respondent. However, it acknowledged that the report's reliability could only be fully assessed after evidence was led. The Tribunal also examined the appellant's bank transactions, particularly the transfer of Rs. 13 Crores to other accounts, which the appellant did not adequately explain. This lack of explanation contributed to the Tribunal's decision to secure the respondent's claims. Application of law to facts The Tribunal applied the principles of interim protection to the facts, concluding that the respondent had established a prima facie case. The unexplained financial transactions by the appellant created a reasonable apprehension that the respondent's claims might be jeopardized. Therefore, the Tribunal ordered the appellant to maintain a balance of Rs. 30 Crores in its bank accounts to secure the respondent's potential award. Treatment of competing arguments The appellant argued that the Tribunal's order was without jurisdiction and lacked a reasonable basis, particularly criticizing the reliance on the Auditor's report and the imposition of a Rs. 30 Crore security. The respondent countered that the appellant had admitted outstanding payments and that the Auditor's report was valid. The Tribunal found the respondent's arguments more compelling, given the unexplained financial transactions by the appellant. Conclusions The Tribunal concluded that it had the authority to order interim measures under Section 17 and that the respondent had established a prima facie case. The order to maintain a minimum balance in the appellant's bank accounts was justified to secure the respondent's claims. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning The judgment emphasized that "the Tribunal is vested with powers to secure the claim of the party subject to the party establishing a prima facie case," and that "the paramount consideration in granting an interim relief should be that the party having its claims adjudicated should be in a position to reap the benefits of the Award by being able to execute it." Core principles established The Tribunal's powers under Section 17 are broad and can include ordering security for monetary claims. The Tribunal must ensure that interim measures protect the ability to execute any eventual award. The Tribunal's order should balance the equities between the parties and not convert unsecured debts into secured ones without justification. Final determinations on each issue The Tribunal's order was upheld, as it was found to be within its jurisdiction and based on a plausible view of the facts and applicable law. The appellant's appeal was dismissed, and the Tribunal's interim order was deemed necessary to secure the respondent's claims.
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