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2012 (2) TMI 624 - HC - Indian LawsApplication for ad interim relief - arbitration petition u/s 9 - direction to furnish solvent security in the form of a bank guarantee of a nationalised bank - provisions of Order 38 Rule 5 CPC - In Present case Petitioner and the First Respondent enetered into an agreement later the First Respondent in turn entered into an agreement with the Second Respondent. The agreement stated that the First Respondent had been granted certain exclusive commercial and media rights by the Petitioner for all international cricket matches organised by the Petitioner in India under a Media Rights Agreement. By the agreement between the First and Second Respondents the First Respondent granted to the Second Respondent in consideration for a media rights free broadcast rights for the territory to the events taking place during the term subject to the conditions set out in the agreement. The broadcast rights granted to the Second Respondent comprised solely of the exclusive right to broadcast the event in the territory by means of television rights with a commentary in English. Clause 6 of the agreement sets out a Media Rights Fee payable to the First Respondent by the Second Respondent while clause 7 spells out the installments for making payment. HELD THAT - We are of the view that the learned Single Judge was justified in calling upon the First Respondent to furnish security in respect of the claim of the Petitioner in the amount of Rs. 305 Crores. Having regard to the provisions of Order 38 Rule 5 it would however be appropriate to direct the First Respondent to furnish security. Also for the ends of justice could be met by a direction to the effect that the First Respondent shall within a period of two weeks from today furnish solvent security in the form of a bank guarantee of a nationalised bank in the amount of Rs. 305 Crores to the satisfaction of the Prothonotary and Senior Master. Order 38 Rule 5 C.P.C. cannot be read into the said provision as it is nor can power of the Court in passing an order of interim measure under section 9(ii)(b) be made subject to the stringent provision of Order 38 Rule 5. The power of the Court in passing the protection order to secure the amount in dispute in the arbitration before or during arbitral proceedings or at any time of making of the arbitral award but before it is enforced cannot be restricted by importing the provisions set out in Order 38 of C.P.C. but has to be exercised ex debito justitiae and in the interest of justice. The Court while considering the application for interim protection under section 9(ii)(b) is guided by equitable consideration and each case has to be considered in the light of its facts and circumstances. The Appeals are accordingly disposed of.
Issues Involved:
1. Ad interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. 2. Amendment of the petition under Section 9. 3. Payment defaults and financial distress of the First Respondent. 4. Furnishing of security by the First Respondent. 5. Applicability of Order 38 Rule 5 of the Code of Civil Procedure, 1908. 6. Interim measures of protection. Issue-wise Detailed Analysis: 1. Ad Interim Relief under Section 9 of the Arbitration and Conciliation Act, 1996: The appeals arose from orders passed by a learned Single Judge concerning ad interim relief in a petition under Section 9 of the Arbitration and Conciliation Act, 1996. The Petitioner sought various reliefs, including the deposit of advertisement revenues, injunctions against the Respondents from calling upon advertisers for payments, and furnishing security by the First Respondent. The learned Single Judge issued directions for the deposit of advertisement revenues and furnishing security of Rs. 305 Crores by the First Respondent. 2. Amendment of the Petition under Section 9: A Chamber Summons was taken out for the amendment of the petition under Section 9. By consent, Chamber Summons 249 of 2012 for amendment was allowed, and the amendment was to be carried out within one week. The ad interim order passed on 27 January 2012 was extended for four weeks to enable the Petitioner to apply for appropriate relief before the learned Single Judge. 3. Payment Defaults and Financial Distress of the First Respondent: The First Respondent defaulted on payments due under the Media Rights Licensing Agreement, amounting to Rs. 305.06 Crores. The Petitioner argued that the First Respondent was in financial distress and unable to fulfill its obligations. The learned Single Judge noted that the First Respondent admitted to financial difficulties and that its main source of revenue was the exploitation of media rights under the agreement with the Petitioner. 4. Furnishing of Security by the First Respondent: The learned Single Judge directed the First Respondent to furnish security of Rs. 305 Crores by depositing the amount in Court. The Court modified this direction, requiring the First Respondent to furnish solvent security in the form of a bank guarantee of a nationalized bank for Rs. 305 Crores to the satisfaction of the Prothonotary and Senior Master within two weeks. 5. Applicability of Order 38 Rule 5 of the Code of Civil Procedure, 1908: The First Respondent argued that the power under Section 9(ii)(b) should be exercised subject to the conditions of Order 38 Rule 5 of the Code of Civil Procedure, 1908. The Court held that while the power under Section 9(ii)(b) is not completely independent of the provisions of the Code, it must be exercised judicially with regard to equitable considerations. The principles of Order 38 Rule 5 serve as a guiding framework but do not strictly control the exercise of power under Section 9(ii)(b). 6. Interim Measures of Protection: Section 9(ii)(b) allows the Court to grant interim measures of protection to secure the amount in dispute in arbitration. The Court emphasized that the power under Section 9(ii)(b) is to ensure that the fruits of an arbitral award are not lost due to the dissipation of property. The Court must balance the principles of procedural law with the need to promote the efficacy of arbitration. Conclusion: The appeals were disposed of with the following key directions: 1. Chamber Summons 249 of 2012 for amendment was allowed. 2. The ad interim order of 27 January 2012 was extended for four weeks. 3. The application for ad interim relief against the Second Respondent was not pressed at this stage. 4. The First Respondent was directed to furnish a bank guarantee of Rs. 305 Crores within two weeks. 5. All rights and contentions of the parties were kept open for further proceedings before the learned Single Judge. There was no order as to costs.
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