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TMI Blog2020 (9) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ervention, with arbitral proceedings, has necessarily to be reduced to a bare minimum, under the 1996 Act. Applying this salutary principle, it is opined that, were this Court to set aside, or even modify, the direction, of the learned Sole Arbitrator, to DGG, to furnish security for the amount in dispute in the arbitration - which, clearly, is within the province of the jurisdiction of the learned Sole Arbitrator, conferred by Section 17(1)(ii)(b) - it would do violence to the entire ethos of the 1996 Act, and would militate against the avowed objective of the legislation itself. Any interlocutory order, by the arbitrator, under Section 17, to furnish security, if preceded by adequate examination and appreciation of the facts, and the rival stands of the parties, should remain impervious to judicial interference. The Court is required to adopt a holistic, and comprehensive, view in such cases. Any attempt, by the Court, to vivisect, microscopically, the order of the arbitrator, to find flaws, would be entirely inappropriate. So long as the decision is informed by adequate application of mind, it should be allowed to prevail, especially as it is in the nature of an interlocutory d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, by the acronyms 'DGG', 'AGG' and 'RGG', respectively. A fourth group, namely the Bechu Singh Group ('BSG') was also a party before the learned Sole Arbitrator. For ease of reference, this judgement uses the same acronyms. 5. The appellants, in this appeal, are Dinesh Gupta, his wife Shivani Gupta and his son Shreyansh Gupta, as Appellants No. 1, 3 and 2, and the various Companies constituting part of DGG, as Appellants No. 4 to 19. Respondents No. 2, 3 and 4 are the son, wife and daughter of Respondent No. 1 Anand Gupta, Respondent No. 5 is the HUF of the respondents and Respondents Nos. 6 to 12 are Companies which, together with Respondents Nos. 1 to 5, constitute AGG. 6. Before the learned Sole Arbitrator, DGG was the claimant, and RGG, AGG and BSG were the respondents. 7. Dinesh Gupta, Anand Gupta and Rajesh Gupta were, at one point of time, doing construction and real estate business (hereinafter referred to as "the family business") together, under the name "M/s BDR Builders and Developers Pvt Ltd" (hereinafter referred to as "BDR"). In 1992, Anand Gupta and his family members separated from the family business which, thereafter, was continued by DGG and RGG. 8. Disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d B. 10. The parties agreed that the tax will be borne respectively by the respective parties as per Annexure- A & B. However, taxes pertaining to claims as per Annexure E & F as list as per Annexure H shall be borne by the respective beneficiary. 11. The parties shall cooperate with each other to implement the terms of this settlement. 12. That more than 100 Crores worth of actionable claims were held in excess by Dinesh Group which is to be reimbursed to Rajesh Group if received. Specific irrevocable resolutions of companies will be given to recover the actionable claims by Dinesh Group. (Sd/-) Rajesh Gupta (for self & on behalf of his associates and entities vested in him) (Sd/-) Dinesh Gupta (for self & on behalf of his associates and entities vested in him) Witnesses:- 1. Shashank Gupta 2. Shreyans Gupta" 9. In line with the aforesaid Family Settlements (as the petitioners would aver), AGG (i) resigned from M/s Renu Farms Pvt. Ltd. (hereinafter referred to as "Renu Farms"), which fell to the share of RGG, (ii) resigned from M/s Renu Promoters Pvt. Ltd. (hereinafter referred to as "Renu Promoters"), which fell to the share of DGG, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue were in the personal name of Dinesh Gupta, and that Rajesh Gupta was merely the second holder therein. It was further asserted that the investments, in the said Mutual Funds, had been made by Dinesh Gupta from his personal savings. DGG, therefore, denied any monetary liability towards RGG, but assented to the appointment of KPMG, to settle the disputes between RGG and DGG. 13.3 On 19th January, 2018, RGG sent requisitions, under Section 100 of the Companies Act, 2013 (hereinafter referred to as "the Companies Act") to the Board of Directors (hereinafter referred to as "BOD") of BDR, for removal of Dinesh Gupta and Shreyansh Gupta from the Board of Directors of BDR, alleging that, by their acts, they had forfeited the right to continue as Directors, by virtue of Section 169 of the Companies Act. The requisition requested that an Extra Ordinary General Meeting (EGM) of the BOD be called, for the said purpose. Similar requisitions, in respect of M/s. Able Management Consultants Pvt. Ltd., M/s. Verma Finvest Pvt. Ltd., and M/s. Nishit Capinvest Pvt. Ltd. (hereinafter referred to as "Nishit"), were issued by RGG on 24th January, 2018, 25th January, 2018 and 29th January, 2018. Adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Sanchit Gupta asserted his authority to issue the said requisition, as he held 50% of the total paid-up equity share capital in Renu Promoters. Alleging that Dinesh Gupta had mismanaged the affairs of Renu Promoters and had, thereby, rendered himself incapable of continuing as Director of the said Company and liable to be removed under Section 169 of the Companies Act, the requisition sought convening of an EGM for the said purpose. 14.4 On 23rd February, 2018, AGG wrote to Dinesh Gupta and Shreyansh Gupta, with respect to the shareholding of AGG in BDR. It was asserted, in the said communication, that AGG had never transferred, of its own volition, its shares in BDR to DGG. Rather, the notice asserted that AGG had agreed to sell its shares in BDR to DGG @ ₹ 200/- per equity share and that, for this purpose, AGG had affixed signatures on Blank Delivery Instruction Slips, which were handed over, to Dinesh Gupta, with the understanding that the slips would be used to transfer the shares to DGG only after DGG paid, for such transfer, at the rate of ₹ 200/- per share. The slips, it was alleged, had been misused, by DGG, to fraudulently transfer the shares in its favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies vested in Dinesh Gupta Group be given in favour of Mr. Rajesh Gupta to contest/pursue the case of actionable claims pertaining to the said companies/actionable claims have been given to the Rajesh Gupta Group. This is subject to further orders the court may pass. (iii) Plaintiff will also pass a resolution of the Board of Directors in favour of Rajesh Gupta of Companies which have fallen to his share for the purpose of pursuing litigation with respect to immovable properties which are vested in the Rajesh Gupta Group. This is subject to further orders that the court may pass. (iv) Mr. Rajesh Gupta will place on record accounts of any amounts which are recovered by him in the course of adjudication of proceedings regarding actionable claims/immovable properties. (v) All the companies which are listed in the family settlement will ensure that the quarterly statement of accounts are regularly provided to the two main parties, namely, Mr. Dinesh Gupta and Mr. Rajesh Gupta respectively." 16. The above order, dated 16th November, 2018, was carried, in appeal, both by Dinesh Gupta and Anand Gupta, vide FAO (OS) 6/2019 (Dinesh Gupta & Ors. v. Rajesh Gupta & Ors.) and FAO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total of ₹ 19,55,00,000/-: 19.1 This counter claim (hereinafter referred to as "the Mutual Funds counter-claim", for the sake of convenience) was preferred by Anand Gupta (HUF) and Sanchit Gupta, representing, in essence, the interests of AGG. It was contended, in the counter-claim, that, on 30th November, 2017 and 4th December, 2017, the counter-claimants liquidated part of their investments in their Mutual Funds, and credited the amounts in their respective bank accounts. Thereafter, signed blank cheques were stated to have been handed over, to Shreyansh Gupta, for investing the amounts in appropriate equity Mutual Funds, which, purportedly, was a practice that had been adopted on earlier occasions as well. It was alleged that Shreyansh Gupta, taking advantage of the family relationship, and without the consent of the counter-claimants, fraudulently transferred, to his own account, ₹ 19,55,00,000/-, using the said blank cheques. Of the said amount, ₹ 15,25,00,000/- was stated to have been misappropriated from Anand Gupta (HUF), and ₹ 4,30,00,000/- from Sanchit Gupta. Emphasising the fact that the counter-claimants (being the respondents in the present p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were preferred by AGG. 22. Fresh application, under Section 17, preferred before the learned Sole Arbitrator by DGG, seeking implementation of the Family Settlements: 22.1 Alleging that, while it had itself implemented the covenants of the Family Settlements "to an extent of more than eighty percent", RGG had implemented the said covenants only to the extent of thirty percent, and that the acts of AGG, prejudicial to the interests of DGG, were provoked by RGG, an application, under Section 17 of the 1996 Act, was moved, before the learned Sole Arbitrator, by DGG. Reference was invited to the orders, passed by the learned Single Judge, as well as by the Division Bench, cited supra. DGG expressed discomfiture at the fact that the shares, transferred by DGG to RGG, were being used by RGG for, inter alia, issuing notices under Section 100 of the Companies Act and filing proceedings before the NCLT. It was further contended that Mutual Funds, held by Dinesh Gupta in his personal name, were being blocked by Rajesh Gupta on the ground that he was the nominee therein. Owing to these obstructions, it was pointed out that Dinesh Gupta had not been able to withdraw any of the Mutual Funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 Pointing out that AGG was not a party to the Family Settlements between DGG and RGG, and that the said Family Settlements had also been disputed by RGG on various grounds, the application asserted that, in issuing notices under Section 100 of the Companies Act, for convening of the EGM, Sanchit Gupta was merely exercising his statutory rights, in view of the fact that Dinesh Gupta was acting against the interests of Renu Promoters. In the circumstances, the application prayed that (i) Dinesh Gupta, Shreyansh Gupta and Renu Promoters be directed to maintain status quo, in relation to the immovable assets of Renu Promoters, as well as in relation to its shareholdings, and that (ii) Dinesh Gupta and Shreyansh Gupta be restrained from taking any decision in their capacity as Directors in Renu Promoters, or from utilising any money received on behalf of Renu Promoters. 23.4 The second Section 17 application, by Sanchit Gupta and Anand Gupta HUF, sought restraint, against Shreyansh Gupta, in respect of M/s. C. R. Farms Pvt Ltd (hereinafter referred to as "C.R. Farms"). The prayer was premised on the alleged entitlement, of AGG, to recover ₹ 19.55 crores from Shreyansh Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, under Section 17, by RGG and by Bechu Singh, with which we need not concern ourselves. The impugned Order 25. Though the grievance of the petitioner is with respect to a limited direction in the impugned Order, it is necessary to examine how the learned Sole Arbitrator has proceeded, while deciding the aforesaid applications, under Section 17, preferred by DGG and AGG/their respective members. 26. The learned Sole Arbitrator has observed, at the outset, that the execution of the Family Settlement dated 2nd December, 2017 and 9th December, 2017, was undisputed, and that it was also an admitted position that, even prior to the recording of the said Family Settlements, DGG, RGG and even AGG were taking actions to detangle their rights in various Companies, in terms thereof. Disputes, however, persisted, with respect to implementation of the Settlement Agreement qua actionable claims, to be pursued by one, or the other, faction, with respect to Companies which fell to the share of that faction, though they remained with the other. The learned Sole Arbitrator placed reliance on the decisions in Kale v Deputy Director of Consolidation [(1976) 3 SCC 119], S. Shanmugham Pillai v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le assets of BDR and Nishit would stifle their business. It was noticed that the said assets were the stock-in-trade of BDR and Nishit. Even so, DGG was directed to maintain status quo in respect of those immovable assets which constituted part of its capital assets, and were not part of its stock-in-trade. 31. Adverting to the second and third applications, under Section 17 of the 1996 Act, preferred by AGG/its members, the learned Sole Arbitrator held thus (in para 3.28 of the impugned Order, the concluding sentence of which constitutes the subject matter of challenge herein): "In the other two applications filed by members of AGG, they are seeking restitution of the amounts which they have remitted. For the reasons given above, such a relief cannot be granted at this stage as it needs determination as to whether the payments were made by AGG of (sic to?) DGG voluntarily pursuant to the Family Settlements or they are fraudulently secured by DGG as contended by AGG in these applications. At the same time, in order to secure the interest of AGG, in the event AGG ultimately succeeds, it would be appropriate to direct DGG to furnish suitable (security) equivalent to the sums invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within four weeks, to the satisfaction of the learned Sole Arbitrator. 34. The findings of the learned Sole Arbitrator, qua the clarifications sought by RGG, are not relevant for the purposes of the present petition, and are not, therefore, being adverted to. Rival Contentions 35. Mr. Rajiv Nayar, on behalf of the appellant, advances the following submissions, to assail the impugned direction, in para 3.28 of the order dated 18th February, 2020, of the learned Sole Arbitrator: (i) No prayer, for directing furnishing of security, by DGG, had been made by AGG, in any of its applications, under Section 17. The prayer was only for restraint, against DGG, from dealing with the shares held by DGG in C.R. Farms and with the shares of BDR. No prayer, for restitution of any amount, was contained in the applications. The impugned direction, for furnishing of security, proceeded on the premise that AGG had sought restitution/refund, of the amount of ₹ 19.55 crores. As such, the learned Sole Arbitrator had exceeded his jurisdiction in granting a relief, unclaimed by AGG. Reliance is placed, for this purpose, on the judgements of this Court in Tata Advanced Systems Ltd v. Texcell I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and irreparable loss, which, in conjunction with the existence of a prima facie case, constituted the troika for grant of interim relief. Mr. Nayar relied, in this context, on the judgement of this Court in Intertoll ICS Cecons O & M Co. Pvt Ltd v. N.H.A.I. [ILR (2013) II Del 1018]. (vi) AGG was acting with clear dishonesty, as it was challenging the actions, taken by it in favour of DGG, without challenging similar actions, taken by it in favour of RGG. (vii) The liability for security had entirely been fastened on DGG, whereas the liability of AGG, if any, would fall on the entire estate shared between DGG and RGG. 36. Responding to the submissions of Mr. Nayar, it was contended, by Mr. Sudhir Nandrajog, learned Senior Counsel for AGG, thus: (i) AGG was neither a party, nor a signatory, to the Family Settlement dated 2nd December, 2017 and 9 December, 2017. In fact, it had been conceded by DGG, in CS (OS) 51/2018, that "all objections, rights and obligations of the third branch i.e. Anand Gupta Group stood satisfied and settled prior to the execution of the Family Settlement", thus obviating the necessity of including the Anand Gupta Group in the Family Settlement. (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by DGG, was also restricted to its capital assets, and did not extend to its stock-in-trade. This direction was not assailed by DGG. AGG had, in fact, sought restitution. The learned Sole Arbitrator held that, while it was not possible to grant restitution as claimed, it was equitable to direct furnishing of security by DGG. In so directing, the learned Sole Arbitrator clearly acted within the confines of the jurisdiction, vested in him by clauses (b) and (e) of Section 17 (2) of the 1996 Act. (ix) The direction for furnishing of securities effectively balanced the equities between the parties. No occasion, for interference therewith, therefore, existed. In this context, my attention was invited to the fact that the learned Sole Arbitrator had stayed all the recovery notices, issued by AGG. (x) The reliance, by the appellant, on Order XXXVIII Rule 5 of the CPC, was misplaced. Section 17 of the 1996 Act was a complete code in itself. In view of Section 19 of the 1996 Act, the CPC did not apply. The restrictions, which influenced exercise of jurisdiction under Order XXXVIII Rule 5 of the CPC, were not incorporated, either expressly or by necessary implication, into Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xvii) The impugned Order had been passed at a preliminary stage, and could not be said to suffer from any such perversity, as would justify interference, by this Court. 37. Arguing in rejoinder, Mr. Nayar re-emphasised the fact that, having held, in para 3.28 of the impugned Order dated 18th February, 2020, that no relief, for restitution of the amounts, as claimed by AGG, could be granted, the learned Sole Arbitrator signally erred in directing furnishing of security by the appellant. Mr. Nayar emphasised, further, that the contentions, advanced by Mr. Nandrajog, did not constitute the basis for the impugned direction, of the learned Sole Arbitrator. He submitted that the direction to furnish security, if issued under Section 17 of the 1996 Act, had necessarily to conform to the discipline of Order XXXVIII Rule 5, sub-rule (4) whereof rendered void any order for attachment, passed in violation of sub-rule (1). Mr. Nayar submitted that the emphasis, by Mr. Nandrajog, on the impugned direction being equitable in nature, was misguided, as the learned Sole Arbitrator was not empowered to act on the basis of equity. There was, Mr. Nayar re-emphasised, no prayer, for furnishing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate, unlike Section 34. Appellate jurisdiction, by its very nature, Mr. Nayar had sought to submit, is wider than the jurisdiction which applies to consideration of objections against an arbitral award. Appellate jurisdiction encompasses, within its fold, the power to review findings of fact and, in fact, the appellate court is, jurisprudentially, an extension of the original court, the appeal being a continuation of the original proceedings. As such, Mr. Nayar had sought to submit, the High Court, exercising appellate jurisdiction under Section 37, should not feel restricted by the constraints which govern its jurisdiction under Section 34. 41. Empirically viewed, Mr. Nayar's submissions appear attractive. There is, undoubtedly, qualitatively, a distinction between appellate jurisdiction and "judicial review jurisdiction". Appellate jurisdiction, equally, is classically regarded as an extension of original jurisdiction, the appellate proceedings being an extension of the original proceedings. The appellate court is, therefore, ordinarily, empowered to re-appreciate findings of fact entered by the original court. That the jurisdiction of the appellate court is much wider than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitral award, that accompanies objections under Section 34, is required to be examined in the light of the provisions, in the CPC, governing stay of original decrees, in exercise of appellate jurisdiction. Though, for the purposes of this judgement, it is not necessary to psychoanalyse the legislative intent in providing for such a peculiar dispensation, the fact that applications for stay of final arbitral awards, are required to be considered on the basis of the principles governing stay, by appellate courts, under Order 41 Rule 5 of the CPC, indicate, to an extent, that the principles of Order 41 are also required to be borne in mind, while exercising appellate jurisdiction, under Section 37. 45. The 1996 Act is, preambularly, a fallout of the United Nation's Commission on International Trade Law (UNCITRAL), adopted in 1995 as the Model Law on International Commercial Arbitration. The Statement of Objects and Reasons, preceding the 1996 Act, stipulates, in paras 2 to 5 thereof, as under, in this respect: " 2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitral tribunal; and i. to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign awards. 5. The Bill seeks to achieve the above objects." 46. The Supreme Court has, in Chloro Controls (I) Ltd v. Severn Trent Water Purification Inc. [(2013) 1 SCC 641], held that the legislative intent and essence of the 1996 Act "is to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and Geneva Convention". The afore-extracted passages, from the Statements of Object and Reasons of the 1996 Act has, necessarily, to guide the Court, while interpreting the provisions thereof. While on the point, it may be noted that, in Bharat Sewa Sansthan v. U. P. Electronics Corporation Ltd [AIR 2007 SC 2961 : (2007) 7 SCC 737], the Supreme Court has clearly held the "main objective of the (1996) Act" as being "to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not, can, of course, always be questioned. While examining such a challenge, however, the Court has to be mindful of its limitations, in interfering with the decision of the arbitrator, especially a decision taken at the discretionary level, and at an interlocutory stage. 50. One may also refer, in this context, to Section 5 of the 1996 Act, which reads as under: "5. Extent of judicial intervention. - Notwithstanding anything contained in any other law for the time being in force, in matters covered by this Part, no judicial authority shall intervene except where so provided in this Part." It is, no doubt, possible to argue that the intent, of Section 5, is to restrict judicial intervention, with arbitral proceedings, and orders passed therein, to the avenues for such interference, as provided by Part I of the 1996 Act, and not to restrict the scope of the Sections and the provisions contained in Part I. Perhaps. Section 5 remains, however, a clear pointer to the legislative intent, permeating the 1996 Act, that judicial interference, with arbitral proceedings, is to be kept at a minimum. Significantly, in Venture Global Engineering v. Satyam Computer Services Ltd [(2008) 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense, a somewhat peculiar provision as, against the decision of the arbitrator, it provides for a first appeal, as well as a second appeal, to the High Court. Sub-section (1) provides for an appeal, to the High Court, from the decision of the Section 34 Court, before which the final award has, in the first instance, been tested. Sub-section (2), on the other hand, provides for a first appeal, against interlocutory orders of the arbitral tribunal under Section 16 or Section 17. There is, necessarily, a qualitative difference between these two challenges, though both would lie to the High Court. The challenge under Section 37(1), which is directed against a final award of the arbitrator/arbitral tribunal, is akin to a second appeal, as was observed by this Court in M.T.N.L. v. Fujitshu India Pvt Ltd [2015 (2) Arb LR 332 (Delhi)]. The challenge under Section 37(2), on the other hand, is directed against the decision of the arbitral tribunal and has therefore, in my opinion, necessarily to conform to the discipline enforced by Section 5. It would, therefore, be improper for a Court to treat an appeal, under Section 37 (2) of the 1996 Act, as akin to an appeal under the CPC, or as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing orders, as the court has for the purpose of, and in relation to, any proceedings before it." 55. The concluding caveat, in Section 17 (1), makes it abundantly clear that the power of an arbitrator, to grant interim measures, under Section 17(1), is analogous and equivalent to the power of a Court, to pass such orders. Section 9 of the 1996 Act grants co-equal jurisdiction, worded in identical terms, on the Court, to pass interim orders, concluding with a parallel caveat, to the effect that "the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it". 56. The scope and ambit of Section 9, especially in the light of this concluding caveat, was examined by the Supreme Court in Arvind Constructions Co. (P) Ltd v. Kalinga Mining Corporation [2007) 6 SCC 798] and Adhunik Steels Ltd v. Orissa Manganese and Minerals (P) Ltd [(2007) 7 SCC 125]. In Arvind Constructions Co. (P) Ltd [2007) 6 SCC 798], it was held thus (in para 15 of the report): "The argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Order XXXVIII Rule 5, CPC, to Section 9(1)(ii)(b), and Section 17(1)(ii)(b) of the 1996 Act 58.1 On the applicability, to Section 9(1)(ii)(b), or Section 17(1)(ii)(b), of Order XXXVIII Rule 5, CPC, reliance was placed, by Mr. Nandrajog, on the judgement of a learned Single Judge of this Court in Steel Authority of India Ltd v. AMCI PTY Ltd31, to contend that Order XXXVIII Rule 5 of the CPC has no applicability to proceedings under the 1996 Act, specifically to the exercise of jurisdiction under Section 17. 58.2 Undoubtedly, Steel Authority of India Ltd [(2011) 3 Arb LR 502] says so. That position has, however, altered, subsequently, with the judgement, of a Division Bench of this Court in Ajay Singh v. Kal Airways Pvt Ltd [(2018) 209 Comp Cas 154], paras 25 to 28 of which read thus: "25. The first question which the court addresses is the one adverted to by the appellant, that principles underlying Order XXXVIII, Rule 5 CPC have to be kept in mind, while making an interim order, in a given case, directing security by one party. Indian Telephone Industries v. Siemens Public Communication, (2002) 5 SCC 510 is an authority of the Supreme Court, which tells the courts that thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onferred by the Partnership Act is being enforced in the Arbitral Tribunal; the court under Section 9 is only formulating interim measures so as to protect the right under adjudication before the Arbitral Tribunal from being frustrated....." 27. Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the weight to be given to the materials on record, a fact dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be principled, premised on some known guidelines - therefore, the analogy of Orders 38 and 39. Equally, the court should not find itself unduly bound by the text of those provisions rather it is to follow the underlying principles. In this regard, the observations of Lord Hoffman in Films Rover International Ltd. v. Cannon Film Sales Ltd. (1986) 3 All ER 772 are fitting: "But I think it is important in this area to distinguish between fundamental principles and what are sometimes described a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996 Act, after its amendment with effect from 23rd October, 2015. The controversy, in that case, arose under the pre-amended Section 17, and paras 12, 14 and 35 of the report are of stellar significance, in the context of the issue of applicability of Order XXXVIII Rule 5 of the CPC. They read thus: "12. The above submissions have been considered. The submissions revolve around the scope of the powers under Section 17 of the Act as it stood prior to the amendment by the Arbitration and Conciliation (Amendment) Act, 2015 with effect from 23rd October 2015. The unamended Section 17 reads thus: "17. Interim measures ordered by arbitral tribunal. - (1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject- matter of the dispute. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1)." ***** 14. It will straightway be seen that while under the unamended Section 17 of the Act, there was no specific power for the AT to order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17(1)(ii)(b), the arbitrator is not strictly bound by the confines of Order XXXVIII Rule 5 of the CPC, but is also proscribed from acting in a manner completely opposed thereto. A middling approach is, therefore, required, without treating Order XXXVIII Rule 5 as entirely inapplicable to Section 17(1)(ii)(b) (as Mr. Nandrajog would contend), or as applicable with all its vigour and vitality (as Mr. Nayar would contend). 59. Having said that, it is indisputable that the exercise of jurisdiction, by the arbitrator, under Section 17, is fundamentally discretionary in nature - as contrasted with Section 16(2) and (3). Judicial interference, with the exercise of discretionary power, is, classically, limited, and is even more circumscribed, where the authority exercising discretion is itself a judicial authority - as opposed to a purely administrative or executive functionary. (One uses the expression "judicial authority", here, to denote the nature - rather than the status - of the jurisdiction exercised by the Arbitrator, it having been settled, by the Supreme Court, in M.D., Army Welfare Housing Organisation v. Sumangal Services (P) Ltd [(2004) 9 SCC 619], that an arbitrator is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph, (1960) 3 SCR 713 : AIR 1960 SC 1156: "... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jhanaton, 1942 AC 130 '...the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case'." The appellate judgment does not seem to defer to this principle." That this principle applies to exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Respondent No. 12) in pursuance of and as contemplated in the notice/communication dated February 16, 2018 in accordance with the provisions of the Companies Act, 2013." The First Section 17 application "It is, therefore, most respectfully prayed that Ld. Arbitrator may kindly be pleased to allow the present Application and: - i. Direct Claimant Nos. 1, 2 and 12 to maintain status quo in relation to its immovable assets and not to create any charge, encumbrance and/or third-party rights in relation to the said immovable assets. ii. Direct Claimant No 1, 2 and 12 to maintain status quo in relation to the shareholding of Claimant No. 12. iii. Restrained the Claimant Nos. 1 and 2 from taking any decision in the capacity of being the Director during the pendency of the present proceedings and further, restrained the Claimant No. 1 and 2 from interfering in the day to day operations and working of the Claimant No. 12. iv. Direct the Claimant Nos. 1 and 2 not to utilize any money received on behalf of the Claimant No. 12." (Claimant No. 1 and Claimant No. 2 were Dinesh Gupta and Shreyansh Gupta, and Claimant No. 12 was Renu Promoters.) The Second Section 17 application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge, encumbrance or any other third-party rights over the above mentioned 26,86,190 (Twenty-Six Lakh Eighty-Six Thousand One Hundred And Ninety) equity shares of BDR, until the consideration of Rs. 53,72,38,000/- (Rupees Fifty-Three Crores Seventy Two Lakhs Thirty Eight Thousand only), for transfer of the said shares has been paid by the Claimant Nos. 1 and 2 to the Counter-Claimants/Respondents Nos. 1 to 4." 62.4 On these three applications, the learned Sole Arbitrator has ruled, thus (in para 3.27 and 3.28 of the impugned Order): "3.27 Having regard to the aforesaid, and when the companies have gone to DGG, it may not be appropriate to restrain Claimants 1, 2 and 12 from dealing with the properties of BDR and Nishit. The two companies are in the business of real estate and directing the companies to maintain status quo in respect of immovable assets would amount to stifling their business. Therefore, these immovable properties which are stock-in-trade of the two companies, cannot be subject to such restrictions. At the same time, Claimants 1, 2 and 12 are directed to maintain status quo in respect of those immovable assets which are the capital assets of the two companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsoever, relinquish such huge amounts on investments, in favor of DGG. He also pointed out that AGG was, in fact, not even a party to the Family Settlements. 62.6 The learned Single Judge had, vide his order dated 16th November, 2018, stayed the operation of the aforesaid notices, dated 12th February, 2018, 16th February, 2018, 22nd February, 2018 and 23rd February, 2018, issued by AGG. AGG had, in FAO (OS) 18/2019, challenged the said order of stay. FAO (OS) 18/2019 was converted into an application under Section 17 of the 1996 Act, to be decided by the learned Sole Arbitrator. The learned Sole Arbitrator was, therefore, seized the of the issue of whether to continue the interim order, dated 16th November, 2018, of the learned Single Judge, thereby continuing the injunction against operation of the notices dated 12th February, 2018, 16 February, 2018, 22nd February, 2018 and 23rd February, 2018, or vacate the injunctions, as sought by AGG. The learned Sole Arbitrator chose to continue the said orders, thereby rendering the notices, as well as the actions proposed therein, by AGG, inoperative during the currency of the arbitral proceedings. 62.7 AGG, in its first Section 17 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the decision of the learned Sole Arbitrator has, therefore, to be discerned by a holistic appreciation of the impugned Order, and not by an isolated, or insulated, reading of the last sentence in para 3.28, with which DGG claims to be aggrieved. It is clear that the learned Sole Arbitrator has not directed furnishing of security, equivalent to the disputed amount, as his mere ipse dixit, but has arrived at the said decision by a careful process of ratiocination, keeping the competing interests of the claims of the claimants and the respondents, as well as their legitimate business concerns and considerations, in mind. 62.10 The discussion, hereinabove, has already made it apparent that the principles behind Orders XXXVIII and XXXIX of the CPC are required to guide the exercise of jurisdiction under Section 9, or Section 17 of the 1996 Act, though the provisions themselves are not to be regarded as having been bodily incorporated into Sections 9 or 17. Ultimately, the prevailing consideration, applying the law laid down in Ajay Singh [(2018) 209 Comp Cas 154] is the doing of complete and substantial justice between the parties. Where it appears, on the face of it, that the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of that sought by AGG, do not really advance his case. Tata Advanced Systems Ltd [MANU/DE/1061/2020] did not notice the judgement of the Division Bench of this Court in Ajay Singh [(2018) 209 Comp Cas 154]; besides, there was no application, under Section 17, before the arbitrator in that case, and there is a specific finding, by the learned Single Judge, to the effect that the direction, for furnishing of Bank Guarantee, was not preceded by any reasoning. Captain Guman Singh [2016 SCC Online Del 983], too, does not help Mr. Nayar, as it merely reiterates the principle that a Court cannot grant relief, not sought by the parties before it. In the present case, as I have observed, the learned Sole Arbitrator was well within his jurisdiction in directing DGG to furnish security, of the amount in dispute. Besides, the direction to furnish security was an attempt to balance the equities, rejecting the greater relief, sought by AGG. The facts in the present case, therefore, are peculiar to that extent, and cannot be analogised to those in Captain Guman Singh [2016 SCC Online Del 983]. NHPC Ltd [2018 IX AD (Delhi) 1] involved a situation in which the Arbitral Tribunal was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely inappropriate, for the learned Sole Arbitrator, at that stage, to opine, one way or the other, thereon, with any modicum of finality. The learned Sole Arbitrator, therefore, correctly observes that it needed determination "as to whether the payments were made by AGG (to) DGG voluntarily pursuant to the Family Settlements or they are fraudulently secured by DGG as contended by AGG in these applications". Even so, while rejecting the relief sought by AGG, the learned Sole Arbitrator has, acting within the confines of the jurisdiction vested in him by Section 17(1)(ii)(b), deemed it appropriate to secure the amount in dispute. 63.2 Even on facts, the learned Sole Arbitrator was justified in so directing. The impugned Order does contain factual justification for the direction. The allegation, of AGG, was that their shares, are held by it in BDR, and the monies realised by liquidation of the Mutual Funds, which undisputedly belongs to AGG, had fraudulently been appropriated, by DGG, into its accounts. DGG does not contend, either before the learned Sole Arbitrator, or before this Court, that there existed any written document, evidencing intention, on the part of AGG, to relinquis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been refused. This, even by itself, renders the said decision entirely inapplicable to the facts of this case. It is further observed, in the said order, that the Arbitral Tribunal merely cited balance of convenience and irreparable injury, as a ground for the injunction. Further, the Supreme Court observes that "the Arbitral Tribunal has no jurisdiction to affect the rights and remedies of the third party secured creditors in the course of determining disputes pending before it", as the claim of the appellants, before the Supreme Court, was that they were not even parties before the arbitrator. The order does not disclose that any direction, furnishing security, had been passed by the Arbitral Tribunal in that case. As such, the reliance, by Mr. Nayar, on the observation, in the concluding para 5 of the order, that the decision of the Arbitral Tribunal "does not comply with the mandate of Rules 5 and 10 of Order XXXVIII CPC", torn out of context, is completely misplaced. 64.3 In C. V. Rao [218 (2015) DLT 200 (DB)], the Division Bench of this Court was, again, dealing with an injunctive direction, by the learned Single Judge, under Section 9, restraining the appellant from dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, may not be of much relevance, while examining a challenge to an order directing furnishing of security by way of Bank Guarantee. 65. Lanco Infratech [234 (2016) DLT 175] is completely inapplicable, as it did with the pre-amended Section 17. In fact, the learned Single Judge of this Court, while deciding the petition, has clarified, or more than one point, that he was adjudicating the matter in the context of the pre- amended Section 17, and that "the underlying principle" behind Order XXXVIII Rule 5 of the CPC "apply to Section 17 of the Act as it stood prior to the amendment with effect from 23rd October, 2015". It has also been observed, in the said decision, that "while under the unamended Section 17 of the Act, there was no specific power for the AT to order interim measures to secure the amount in dispute, that power has been expressly provided under the amended Section 17(1)(ii)(b) of the Act". The amendment of Section 17, w.e.f. 23rd October, 2015, it was observed, was intended "to bring the powers of the AT under Section 17 of the Act on par with that of the Court under Section 9 of the Act". This change, held the learned Single Judge, was "significant", and not merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts which presented themselves before this Court in Goodwill Non-Woven (P) Ltd [2020 SCC Online Del 631]. Here, the precise case of AGG was that DGG had, in a fraudulent manner, misappropriated, to its own unjust advantage, ₹ 19.55 crores, resulting from liquidation of the Mutual Funds of AGG, as well as 26,86,190 with the shares of BDR, valued at ₹ 53,72,38,000/-. As such, the allegation of AGG was that DGG had not only failed to abide by the oral agreement between AGG and DVD, on the basis whereof blank Delivery Instruction Slips, qua the 26,86,190 shares of BDR, and blank cheques, qua the amount of ₹ 19.55 crores, realised by liquidation of the Mutual Funds, had been provided by AGG to DGG, but that it had used the said blank Delivery Instruction Slips and blank cheques to misappropriate, to its own advantage, the shares of BDR, as well as the amount of ₹ 19.55 crores. It was further alleged that, using the said monies, DGG had invested in other corporate concerns as well. These allegations have been noticed by the learned Sole Arbitrator, and taken into account, before issuing the impugned direction. Once that is so, it no longer lies within the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated under Section 9. This sole ground, therefore, held the learned Single Judge, was insufficient to sustain a prayer for directing furnishing of security, by the opposite party. In the present case, the learned Sole Arbitrator was exercising jurisdiction, not under Section 9, but under Section 17. That apart, as the discussion hereinabove amply reveals, the learned Sole Arbitrator as set out, in detail, the facts of the case, which disclosed that the amount of ₹ 19.55 crores, realised by liquidation of the Mutual Funds of the AGG, as well as the 26,86,190 shares of BDR, held by AGG, had been appropriated, by DGG, to its bank account, and to its DEMAT Account, respectively, without any consideration having been paid to AGG therefor. Further, AGG had alleged that part of the said amount had also been invested in certain other corporate enterprises. This, therefore, is clearly not the case in which the prayer, for furnishing of security, was made, solely on the ground of financial distress of the opposite party. The learned Sole Arbitrator has, keeping all these facts in mind, felt that it was necessary to secure the claim of AGG, by directing furnishing of security, and, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. In my view, any interlocutory order, by the arbitrator, under Section 17, to furnish security, if preceded by adequate examination and appreciation of the facts, and the rival stands of the parties, should remain impervious to judicial interference. The Court is required to adopt a holistic, and comprehensive, view in such cases. Any attempt, by the Court, to vivisect, microscopically, the order of the arbitrator, to find flaws, would be entirely inappropriate. So long as the decision is informed by adequate application of mind, it should be allowed to prevail, especially as it is in the nature of an interlocutory direction, and is always subject to the final award, to be passed in the arbitral proceedings. 74. For all these reasons, I am of the opinion that no occasion arises, for this Court to interfere with the impugned direction, in para 3.28 of the Order supra, dated 18th February, 2020, of the learned Sole Arbitrator to DGG, to furnish suitable security, equivalent to the amount involved in the dispute. This Court, therefore, upholds the said direction. 75. It is clarified that observations in this judgement are prima facie in nature, and do not intend to represent any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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