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TMI Blog2018 (3) TMI 2002X X X X Extracts X X X X X X X X Extracts X X X X ..... tribunal was not exercising jurisdiction to bring an unsecured creditor into the list of secured creditors and its affiliates as also not to delete and adversely impact rights of the secured creditors particularly when it was an admitted case that the proceedings before the Insolvency and Bankruptcy Board under the Court were stated to be pending. The arbitral tribunal has also clarified in paragraph 37 of the impugned order that the said interim order was without prejudice to any order that may be passed by the Board/Courts of competent jurisdiction. The arbitral tribunal has also taken a cognizance of the admitted fact that the proceedings under the Insolvency and Bankruptcy Code has been initiated against the Reliance Group, however the said application is yet to be admitted by the National Company Law Tribunal. The arbitral tribunal ultimately held that the respondent No. 1 has made out an arguable case and thus the arbitral tribunal was of the opinion that in the event, the respondent No. 1 is denied any relief, it would be an irretrievable injury to the respondent No. 1. The balance of convenience is also in favour of the respondent No. 1 and not in favour of the Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch interim measures restraining the Reliance Group from transferring, alienating, encumbrance or disposing off any of its assets without prior permission/leave of the arbitral tribunal. The commercial arbitration petitions are dismissed. - Commercial Arbitration Petition (L) No. 253, 252 and 254 of 2018 - - - Dated:- 8-3-2018 - R.D. DHANUKA, J. For the Appellant : Virag Tulzapurkar, Senior Advocate, Alpana Ghone, Ameet Naik, Abhishek Kale and Aditya Khandeparkar i/by Naik Naik Co. For the Respondent : Anil Kher, Senior Advocate, Ashwin Ankhad, Nikita Shah and Naresh Ratnani i/by Ashwin Ankhad Associates JUDGMENT R.D. Dhanuka, J. 1. By this petition filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short the said Act), each of the petitioners has impugned the order dated 5th March 2018 passed by the arbitral tribunal thereby restraining each of the petitioners and its affiliates from transferring, alienating, encumbrance or disposing off any of its assets without specific permission/leave of the arbitral tribunal. The arbitral tribunal has also made it clear that the said impugned order is without prejudice to any order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be constituted. On 10th February 2018, the arbitral tribunal held a preliminary meeting. 6. The respondent No. 1 filed an application under Section 17 of the said Act before the arbitral tribunal inter alia praying for various interim measures. The respondent No. 1 thereafter filed a counter claim on 17th February 2018 before the arbitral tribunal claiming substantial amount from each of the petitioners. On 13th February 2018, the Reliance Group through their lawyers addressed a letter to the lawyer representing the respondent No. 1 stating that each of the petitioners no longer seek redressal of the dispute referred to in the order dated 1st November 2017 and cancelled the invocation of the arbitration. Similar letter was also addressed by the Reliance Group to the arbitral tribunal inter alia requesting for an order of termination of the arbitral proceedings. The Reliance Group also filed an affidavit-in-reply to the application filed by the respondent No. 1 under Section 17 of the said Act and resisted the said application on various grounds. 7. The arbitral tribunal thereafter heard the application under Section 17 filed by the respondent No. 1. The arbitral trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remove the properties from the local limits of the jurisdiction of this Court, with the intention to delay or defeat the claim of the respondent No. 1 nor the arbitral tribunal rendered any such prima facie finding before granting an injunction against each of the petitioners. Learned senior counsel submits that the principles of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 (CPC) apply to the application under Section 17 of the said Act. The principles of Order XXXVIII Rule 5 of CPC are not at all satisfied in this case. The impugned order passed by the arbitral tribunal is thus contrary to the principles of Order XXXVIII Rule 5 of CPC. In support of this submission, learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Raman Tech Process Engg. Co. Anr. v. Solanki Traders, (2008) 2 SCC 302, the judgment of this Court in the case of Saraswat Co-operative Bank Ltd., Mumbai Vs. Chandrakant Manganlal Shah Ors., 2002(1) Mh.L.J. 581 and the judgment of this Court in the case of Tata Capital Financial Services Ltd. v. Unity Infraprojects Ltd. Ors., 2015 SCC OnLine Bom 3597. 11. It is submitted by the learned senior counsel th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though the petitioner has not disputed the liability of the respondent No. 1, merely on that ground, the principles of Order XXXVIII Rule 5 of CPC cannot be extended to the facts of this case. He also invited my attention to some of the averments made in the affidavit-in-reply filed by the petitioners before the arbitral tribunal to the application under Section 17 of the said Act filed by the respondent No. 1. He submits that the proposed sale of the assets by the Reliance Group cannot be considered as clandestine sale only for the purpose of payment to the lenders who are the secured creditors. He submits that as on today, the lenders' claims is about Rs. 44,000 crore against the Reliance Group whereas the claim of the respondent No. 1 is a smaller claim and that also as an unsecured creditor. 15. Mr. Chinoy, learned senior counsel for the petitioner in Commercial Arbitration Petition (L) No. 254 of 2018 adopted the submissions made by Mr. Tulzapurkar, learned senior counsel in Commercial Arbitration Petition (L) No. 253 of 2018. In addition to those submissions, it is submitted by the learned senior counsel that all the assets of the Reliance Group are either hypothecat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Arbitration Petition (L) No. 252 of 2018 and would submit that the Reliance Group had been all throughout making promises to release the dues of the respondent No. 1 and had furnished several payments schedule from time to time with promises and undertakings to make such payments to the respondent No. 1. The respondent No. 1 relied upon the said promises and undertakings rendered by the Reliance Group and based thereon continued to provide services to the Reliance Group from time to time. The Reliance Group however did not make any payment inspite of such promises and undertakings and providing payment schedule from time to time. 19. Learned senior counsel invited my attention to paragraph 25 of the affidavit-in-reply dated 16th February 2018 filed by the Reliance Group before the arbitral tribunal contending that it was not the case of the respondent No. 1 that the sale/monetization of a part of the assets of the petitioner and its group companies will make these companies a shell without any material assets. It is contended by the petitioner in the said paragraph that even after the asset monetization, the petitioner and its group companies will have sufficient assets to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, alienating, encumbrance or disposing off any of its assets without specific permission/leave of the arbitral tribunal. It is submitted that there is thus no blanket injunction granted in favour of the respondent No. 1. If any assets of the Reliance Group are required to be sold, the same would be subject to the specific permission or leave of the arbitral tribunal. It is submitted by the learned senior counsel that the assets of the petitioners' companies which are being controlled by one of the member of the Ambani family are being sold to the company owned by another member of the Ambani family. It is submitted by the learned senior counsel that after invoking the arbitration agreements by the Reliance Group and after constitution of the arbitral tribunal and after the respondent No. 1 filing an application under Section 17 of the said Act, the Reliance Group purported to address a letter to the arbitral tribunal deliberately withdrawing their notice invoking arbitration agreements and prayed for termination of mandate of the arbitral tribunal. The respondent No. 1 has filed substantial counter claim against the Reliance Group. 23. It is submitted by the learned senio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er after considering the facts and law and thus this Court shall not interfere with such prima facie findings in these petitions filed under Section 37 of the said Act. 26. Mr. Tulzapurkar, learned senior counsel for the petitioners in Commercial Arbitration Petition (L) No. 253 of 2018 in rejoinder submits that though the arbitral tribunal has correctly laid down the test under Order XXXVIII Rule 5 of CPC, however has totally overlooked the said principles while actually applying the test in the impugned order. He distinguishes the judgments relied upon by Mr. Kher, learned senior counsel for the respondent No. 1 on the ground that the facts before this Court in those judgments were totally different and the view have been taken by the Courts in the facts of those cases. It is submitted by the learned senior counsel that though the arbitral tribunal in the impugned order has granted injunction without leave or permission of the arbitral tribunal, the said condition imposed by the arbitral tribunal is a fetter on the sale of assets proposed by the Reliance Group. 27. Mr. Chinoy, learned senior counsel in Commercial Arbitration Petition (L) No. 254 of 2018 in rejoinder submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group was now trying to transfer the assets. I am thus not inclined to accept the submission of the learned senior counsel for the Reliance Group that neither there was any pleadings in the application filed by the respondent No. 1 under Section 17 of the Act to this effect nor was any prima facie finding rendered by the arbitral tribunal that the Reliance Group was trying to transfer the assets with the intention to defeat the decree, if any, passed in favour of the respondent No. 1. 31. A perusal of the reply filed by the Reliance Group in the application filed under Section 17 of the said Act by the respondent No. 1 clearly indicates that in reply itself, the Reliance Group has admitted the fact that the Reliance Group is in precarious and/or insolvent circumstances or in acute financial embarrassment though contended that though the same is a relevant circumstance, but not by itself sufficient to grant interim measures. In paragraph 16 of the said affidavit, it is averred that due to significant loans from financial creditors comprising of both domestic and foreign banks and financial institution as also bond holders of the Reliance Group, amounting to Rs. 38,000 crore, cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar by the arbitral tribunal that the arbitral tribunal is neither altering the financial status of the respondent No. 1 nor the inter se relationship of the parties in that regard directly, or even impliedly. It is made clear in the impugned order that the respondent No. 1 shall continue to maintain its status as a creditor. 35. The arbitral tribunal has adverted to the principles of the law laid down in the case of Raman Tech Process Engg. Co. Anr. v. Solanki Traders (supra) in the impugned order. It is held by the arbitral tribunal that where the plaintiff satisfies the Court that he has a prima facie case and that the defendant is attempting to remove or dispose off his assets with the intention of defeating the decree that may be passed, the plaintiff would be entitled to an order under the provisions of Order XXXVIII Rule 5 of CPC. The applicant should satisfy the Court or tribunal that it has a bona-fide claim and there is a fair chance of the applicant succeeding in the proceedings finally. The arbitral tribunal has rightly rendered a prima facie finding that the emails and correspondence placed on record clearly show that the Reliance Group has failed to discharge it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave even right to pursue its remedy of recovering its legitimate dues and to seek interim protection on the ground that even if such unsecured creditor succeeds in the arbitral tribunal, such unsecured creditor will not be able to recover to any amount. In my view, merely on the basis of such presumption that though such unsecured creditor succeeds, such unsecured creditor will not be able to recover any amount, no relief of interim measures can be refused to such unsecured creditor. In my view, that is not the legislative purpose and intent of Order XXXVIII Rule 5 of CPC. If such an argument as advanced by the learned senior counsel for the petitioners is accepted, no unsecured creditor will be entitled to even file any proceedings for recovery of its legitimate dues and pray for interim measures by way of injunction or otherwise against such debtors to secure its claims. Such debtors cannot be allowed to deal with its properties with such intention of depriving the unsecured creditors of the fruits of success in the arbitral proceedings. 38. Supreme Court in the case of Raman Tech Process Engg. Co. Anr. v. Solanki Traders (supra) has held that where the defendant is removi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally different. The respondent No. 1 admittedly is not being a part of JLF and thus cannot be deprived of protecting its claim once having made out a prima facie case and balance of convenience being in favour of such creditor. The judgment of this Court in the case of Tata Capital Financial Services Ltd. v. Unity Infraprojects Ltd. Ors. (supra) would not assist the case of the petitioners. 42. This Court in the case of Baker Hughes Singapore Pte. v. Shiv-Vani Oil and Gas Exploration Services Ltd. (supra) has adverted to various judgments of the Supreme Court and also the judgment of the Division Bench of this Court in the case of Nimbus Communications Ltd. v. Board of Control for Cricket in India Anr., 2012(5) Bom.C.R. 114 and has laid down the principles on which the arbitral tribunal is empowered to grant interim measures even to an unsecured creditor. The principles laid down by this Court in the said judgment would squarely apply to the facts of this case. In paragraph 51 of the said judgment, it is held by this Court that since the arbitral tribunal is also empowered to make an interim award and to grant money claim on the basis of admitted claim and/or acknowledged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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