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TMI Blog2022 (9) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an order dated 10th December 2020 passed by the Commercial Division (Single Bench) of the High Court allowing an application filed by the Respondent-Arcellor Mittal Nippon Steel India Limited, hereinafter referred to as the "Arcellor", under Section 9 of the Arbitration Act and directing Essar House Private to deposit an amount of Rs.35.5 crores with the Prothonotary and Senior Master of the High Court or, in the alternative, to furnish bank guarantee of any nationalised bank for the entire amount along with interest thereon. 3. By the impugned judgment and order, the Division Bench has also dismissed the appeal being Commercial Arbitration Appeal (L) No.1023 of 2021, filed by the Appellant in the Civil Appeal arising out of SLP (C) No.3351 of 2021, Essar Services India Private Limited, hereinafter referred to as "Essar Services", and confirming an order dated 10th December 2020 passed by the Commercial Division (Single Bench) of the High Court, allowing an application by Arcellor against Essar Services and directing Essar Services to deposit Rs.47.41 crores with the Prothonotary and Senior Master of the High Court or, in the alternative, furnish Bank Guarantee of any nationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs from the group companies. Equinox is another group company of Essar Steel. Equinox on the instructions of Essar Steel, made a payment of Rs.60.95 crores to HDFC bank in discharge of the financial liabilities of Essar Steel to the bank. It appears that HDFC Bank granted a loan of Rs.26,00,00,000/- (Rupees twenty six crores only) to Marvel Mines and Minerals Private Limited, hereinafter referred to as "Marvel Mines". The said amount has apparently been appropriated towards dues of the Essar Steel of HDFC Bank. 11. By an email dated 26th April 2017, Essar Steel acknowledged that HDFC Bank had disbursed a loan of Rs.26 crores to Marvel Mines, of which Rs.26 crores had been appropriated towards term loan recoveries. 12. It is the case of the Appellant that on the instructions of Essar Steel and on behalf of Essar Steel, Equinox made payments to HDFC Bank from time to time in discharge of debts due from Essar Steel to Equinox. As on 31st March 2018, the total dues payable by the Essar Steel to Equinox was Rs.74,84,39,302/- (Rupees seventy four crores, eighty four lacs, thirty nine thousand, three hundred and two only) inclusive of interest. 13. On or about 2nd August 2017, the Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll and it was agreed that payment would be made to Edwell. 20. Arcellor as resolution applicant submitted a Resolution Plan in respect of Essar Steel. The said Resolution Plan was approved by the Adjudicating Authority (NCLT), Ahmedabad Bench by an order dated 8th March 2019. By an order dated 4th June 2019, the Appellate Tribunal (NCLAT) confirmed the order dated 8th March 2019 of Adjudicating Authority. 21. The Resolution Plan submitted by Arcellor in respect of Essar Steel was approved by this Court in Committee of Creditors of Essar Steel India through Authorised Signatory v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531. 22. On 27th November 2019, Essar House Private sent an email to Arcellor stating that the Business Centre Agreement as extended was expiring on 30th November 2019 and called upon Arcellor to vacate Essar House by 15th December 2019. On 15th December 2019, Arcellor vacated Essar House. On 16th December 2019, Arcellor took over Essar Steel pursuant to the judgment dated 15th November 2019 of this Court. 23. By an email dated 11th January 2020, Arcellor called upon the Essar House Private to refund the interest free security deposit amounting to Rs.35,51,89,875/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.1023 of 2021 under Section 37 of the Arbitration Act read with Section 13 of the Commercial Courts Act in the Commercial Appellate Division of the High Court (Division Bench). The appeal has been dismissed by the judgment and order impugned. 29. Mr. Shyam Divan, learned Senior Counsel appearing on behalf of the Appellants emphatically argued that no amount was due from Essar House Private or from Essar Services to Arcellor. The security deposits of Essar Steel with Essar House Private and Essar Services had at the instructions of Essar Steel, been discharged to liquidate dues of Essar Steel to creditors. 30. Mr. Shyam Divan further argued that, to grant discretionary interim relief under Section 9 of the Arbitration Act, the Court would have to satisfy itself that the applicant for interim relief, i.e., Arcellor had a bona fide and strong claim and that Essar House Private and/or Essar Services was about to remove or dispose of whole or part of its property with intent to obstruct or delay the execution. Mr. Divan argued that the Court erred in not considering the requisites of Order XXXVIII, Rule 5 of the Code of Civil Procedure, 1908 (CPC) for grant of interim relief. In supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the management of the affairs of Essar Steel under the IBC. 36. Even if any prior inter se arrangement existed between the parties, Essar Services could not have adjusted the security deposit payable to Essar Steel under the amended agreement against the alleged dues of Essar Steel to a third party during the CIRP. 37. Mr. Shyam Divan argued that while deciding a Section 9 application filed under the provisions of the Arbitration Act, the principles of the CPC are to be strictly followed. The principles enunciated by this Court in Raman Tech. & Process Engg. Co. & Anr. (supra) were required to be followed in letter and spirit. 38. In this case, however, the High Court has taken note of the pleadings for invoking the principles of Order 38 Rule 5 CPC and observed :- "31. In our view, the paragraphs of the aforesaid pleadings of the respondent in arbitration petition filed under section 9 filed by the respondent were sufficient to secure the claim of the respondent under section 9 of the Arbitration Act and to invoke the principles of Order 38 Rule 5 of the Code of Civil Procedure even if it is strictly made applicable to the facts of this case." 39. In deciding a petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nline Bom 849, the Bombay High Court correctly summarised the law in Paragraph 6 extracted hereinbelow :- "6. As far as Section 9 of the Act is concerned, it cannot be said that this court, while considering a relief thereunder, is strictly bound by the provisions of Order 38 Rule 5. As held by our Courts, the scope of Section 9 of the Act is very broad; the court has a discretion to grant thereunder a wide range of interim measures of protection "as may appear to the court to be just and convenient", though such discretion has to be exercised judiciously and not arbitrarily. The court is, no doubt, guided by the principles which civil courts ordinarily employ for considering interim relief, particularly, Order 39 Rules 1 and 2 and Order 38 Rule 5; the court, however, is not unduly bound by their texts. As this court held in Nimbus Communications Limited v. Board of Control for Cricket in India (Per D.Y. Chandrachud J, as the learned Judge then was), the court, whilst exercising power under Section 9, "must have due regard to the underlying purpose of the conferment of the power under the court which is to promote the efficacy of arbitration as a form of dispute resolution." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nganese and Minerals (P) Ltd., (2007) 7 SCC 125 and held that in view of the decision of the Supreme Court in case of Adhunik Steels Ltd., (supra) the view of the Division Bench in case of National Shipping Company of Saudi Arabia (supra) that the exercise of power under section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure, 1908 cannot stand. This court in the said judgment of Nimbus Communications Limited (supra) held that the exercise of the power under section 9 of the Arbitration Act cannot be totally independent of the basic principles governing grant of interim injunction by the civil Court, at the same time, the Court when it decides the petition under section 9, must have due regard to the underlying purpose of the conferment of the power upon the Court which is to promote the efficacy of arbitration as a form of dispute resolution. 96. This court held that just as on the one hand the exercise of the power under Section 9 cannot be carried out in an uncharted territory ignoring the basic principles of procedural law contained in the Code of Civil Procedure, 1908, the rigors of every procedural provision in the Code of Civil Procedure, 1908 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief ought not to be refused by recourse to technicalities..." 48. Section 9 of the Arbitration Act confers wide power on the Court to pass orders securing the amount in dispute in arbitration, whether before the commencement of the arbitral proceedings, during the arbitral proceedings or at any time after making of the arbitral award, but before its enforcement in accordance with Section 36 of the Arbitration Act. All that the Court is required to see is, whether the applicant for interim measure has a good prima facie case, whether the balance of convenience is in favour of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition. 49. If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 of the CPC. 50. Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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