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2021 (9) TMI 1572 - HC - Indian LawsApplicability of Order XXXVIII Rule 5 of the CPC in the context of the Arbitral Tribunal s powers under Section 17 of the Arbitration and Conciliation Act 1996 - Applicability of Order XXXIX Rule 10 CPC - Scope of Section 37(2). Applicability of Order XXXVIII Rule 5 of the CPC in the context of the Arbitral Tribunal s powers under Section 17 of the Arbitration and Conciliation Act 1996 - HELD THAT - It is by now settled that the power of the Arbitral Tribunal under Section 17 and the power of the Court under Section 9 of the 1996 Act are co-extensive and co-equal in character. The concluding clause in Section 17(1)(ii) makes it clear that the power of the Arbitral Tribunal for making an order under Section 17 would be the same as the power of a Court in relation to proceedings before it. On the basis of this statutory clarification it has been held in various decisions that the Arbitral Tribunal exercising jurisdiction under Section 17 is required to bear in mind the provisions of Orders XXXVIII and XXXIX of the CPC. The power to direct furnishing of security in connection with the subject matter of the arbitral dispute therefore vested in the Arbitral Tribunal even under the pre-amended Section 17 by virtue of sub-section (2) thereof. The law relating to the power to direct furnishing of security as a measure of interim protection as enunciated in the pre-amended regime would therefore continue to apply to that extent even after Section 17 was amended w.e.f. 23rd October 2015 - In a case arising under the pre-amended Section 9 the Supreme Court in Arvind Constructions v. Kalinga Mining Corporation 2007 (5) TMI 642 - SUPREME COURT while noting the view expressed by the High Court of Bombay that exercise of jurisdiction under Section 9 of the 1996 Act was not controlled by Order XXXVIII Rule 5 of the CPC observed that the extent to which the said view was correct requires to be considered in an appropriate case but that it was not inclined to answer the question finally in the case before it. Even so the Supreme Court observed that it was prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on the well- recognised principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver . A bare reading of Order XXXVIII Rule 5 CPC reveals that the statutory sine qua non for a direction by the Court to furnish security under the said provision is the satisfaction of the Court that the defendant with intent to obstruct or delay the execution of any decree that may be passed against him (a) is about to dispose of the whole or any part of his property or (b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court. Applicability of Order XXXIX Rule 10 CPC - HELD THAT - In Sanjeev Sarin v. Rita Wadhwa 2018 (1) TMI 1758 - DELHI HIGH COURT this Court has held that the exercise of jurisdiction under Order XXXIX Rule 10 of the CPC has to be on principles analogous to those which apply to Order XII Rule 6 of the CPC. A Court or an Arbitral Tribunal which directs deposit of an amount by defendant which in its view is admitted to be payable by the defendant to the plaintiff is not acting without jurisdiction or even in an illegal manner if such admission is found to exist in a document executed by the defendant even if it is not reflected in the pleadings before the court - An arbitral order which arrives at such a conclusion would not therefore merit interference in exercise of the appellate jurisdiction vested by Section 37 of the 1996 Act. Scope of Section 37(2) - HELD THAT - The difference between orders passed under sub-sections (2) and (3) of Section 16 and an order passed under Section 17 is starkly apparent. Orders passed under sub-section (2) and (3) of Section 16 rule on the jurisdiction and authority of the Arbitral Tribunal to deal with the arbitral proceedings. Any orders accepting the objection to the jurisdiction of the Arbitral Tribunal would therefore in that sense be final as a decision thereon would conclude the issue of whether the Arbitral Tribunal possesses jurisdiction and authority to arbitrate. As against this an order of interim protection under Section 17 - especially an order under Section 17(1)(ii)(b) such as the order under challenge - is fundamentally discretionary in nature and does not put an end to the lis. Such orders would abide by the final award to be passed later in the arbitral proceedings. It is only in rare and extreme cases therefore that in exercise of its appellate jurisdiction under Section 37 a Court would interfere with a discretionary order passed under Section 17. An order for deposit under Section 17(1)(ii)(b) is fundamentally and at all times an order passed in exercise of its jurisdiction. Discretionary orders by their very nature are amenable to judicial interference to a far lesser degree than others. The agreement does appear to be somewhat ambiguous regarding the status of the residual gold which was neither redeemed nor purchased by Augmont nor transferred to any alternate GAP account during the period of four months. How such gold would have to be treated is however a conundrum which this Court in exercise of its Section 37 jurisdiction is mercifully not called upon to unravel. This aspect is however of significance in the present case given the fact that the learned Arbitral Tribunal has directed Augmont to secure the full value of the residual gold. Such a direction viewed any which way could sustain only if there was at least prima facie material on the basis of which it could be held that Augmont would be liable ultimately to disgorge the full value of the residual gold to One97. The impugned order is upheld to the extent it directs securing by Augmont of Rs. 2 61 22 319/- with the modification that the said amount would not be paid to One97 but would be deposited with the learned Registrar General of this Court and would abide by the outcome of the arbitral proceedings. The direction to Augmont to furnish a bank guarantee of Rs. 3 30 57 992/- representing the value of the residual gold is set aside. Conclusion - i) The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. ii) The Arbitral Tribunal s discretion under Section 17 is guided by principles underlying Orders XXXVIII and XXXIX of the CPC but not constrained by their express terms. iii) Admissions of liability can justify interim measures without strict adherence to Order XXXVIII Rule 5. Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Interim Order for Payment of 2,61,22,319/-
Direction to Furnish Bank Guarantee for Residual Gold
Applicability of Order XXXVIII Rule 5, CPC
3. SIGNIFICANT HOLDINGS
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