TMI Blog2022 (9) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... s approached the court with reasonable expedition. 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. Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9 of the Arbitration Act. A strong possibility of diminution of assets would suffice. To assess the balance of convenience, the Court is required to examine and weigh the consequences of refusal of interim relief to the applicant for interim relief in case of success in the proceedings, against the consequence of grant of the interim relief to the opponent in case the proceedings should ultimately fail. There are no infirmity in the well-reasoned judgment and order of the Division Bench. The appeals are, accordingly, dismissed. - CIVIL APPEAL NO…. OF 2022 (Arising out of SLP ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Essar Group of Companies. 5. On or about 24th January 2012, Essar Services and Essar Steel India Limited, hereinafter referred to as Essar Steel entered into a Support Services Agreement, whereby Essar Services was to provide accounting and other services to Essar Steel. 6. On 15th May 2014, Essar Services entered into an Amended and Restated Support Services Agreement with Essar Steel. Under Clause 3.2 of the said Amended and Restated Support Services Agreement, Essar Steel was required to deposit a sum of Rs.73 crores as security deposit. Essar Steel deposited a total sum of Rs.47.41 crores with Essar Services as security deposit in terms of the Support Services Agreement. Further, Essar Steel had to pay a sum of Rs.6,38,75,000/- per month to Essar Services on account of charges for the services rendered by Essar Services to Essar Steel. 7. The Support Services were discontinued for the period from January 2016 to March 2016, but restored after some adjustments/variations in charges, and an inter-corporate arrangement between Essar Steel, Essar Services and Equinox Business Park Private Limited, hereinafter referred to as the Equinox . 8. Essar House Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Process (CIRP) against Essar Steel in the Ahmedabad Bench of the National Company Law Tribunal (NCLT). On 14th August 2017, Essar House Private filed its claim against Essar Steel with the Resolution Professional appointed for Essar Steel. 14. On 17th September 2018, Essar Steel entered into an agreement, hereinafter referred to as the Business Centre Agreement in terms whereof Essar Steel was allowed to use six floors of the Essar House, i.e., 10th, 12th, 13th, 15th, 16th and 17th floor at a monthly rent of Rs.1,78,80,000/- (Rupees one crore seventy eight lacs and eighty thousand only). 15. Under the said agreement, Essar Steel was required to make a security deposit of Rs.35,51,89,875/- (Rupees thirty five crores, fifty one lacs, eighty nine thousand, eight hundred and seventy five only). However, out of Rs.35,51,89,875/-, the security deposit of5 Rs.25,80,00,000/- paid by the Essar Steel under the Rental Agreement was adjusted towards the security deposit payable to Essar House Private under the Business Centre Agreement. 16. By a letter dated 17th September 2018, Essar Infrastructure Services Private Limited claimed that it had transferred the balance sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate calling upon the Essar House Private to refund the security deposit to Arcellor within seven days along with interest. 25. By an email dated 27th June 2020, Essar House Private acknowledged that Essar House Private had received security deposit of Rs.25,80,00,000/- from Essar Steel, but contended that Essar House Private had taken over loan of Rs.26 crores due from Essar Steel to Marvel Mines and had adjusted the same against the security deposit kept by Essar Steel with Essar House Private. The balance amount of Rs.9,71,89,875/- had allegedly been paid by the Essar House Private to Edwell Infrastructure in discharge of debt owed by Essar Steel to Edwell Infrastructure. There was, therefore, no security deposit left to be refunded by the Essar House Private to the Arcellor. 26. On 17th November 2020, Arcellor filed an application under Section 9 of the Arbitration Act being Commercial Arbitration Petition (L) No. 6602 of 2020 in the Commercial Division of the High Court of Judicature at Bombay seeking orders directing the Essar House Private to deposit Rs.35,51,89,875/- with the Prothonotary and Senior Master of the High Court. The said application has been allowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt.. 31. Mr. Neeraj Kishan Kaul, learned Senior Counsel appearing on behalf of the Respondent in the two appeals argued that the defence of the Essar House Private/Essar Services of set off was a sham defence. He argued that Essar House Private/Essar Services had not brought a single document on record to support the assertions made by them. It is well settled that novation of an agreement cannot be brought about by the unilateral action of a party to an agreement. Consent of Arcellor was necessary. 32. In Citibank N.A. v. Standard Chartered Bank Ors. (2004) 1 SCC 12 cited by Mr. Kaul, this Court held :- 47. Novatio, rescission or alteration of a contract under Section 62 of the Indian Contract Act can only be done with the agreement of both the parties of a contract. Both the parties have to agree to substitute the original contract with a new contract or rescind or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power Court to grant relief is not curtailed by the rigours of every procedural provision in the CPC. In exercise of its powers to grant interim relief under Section 9 of the Arbitration Act, the Court is not strictly bound by the provisions of the CPC. 40. While it is true that the power under Section 9 of the Arbitration Act should not ordinarily be exercised ignoring the basic principles of procedural law as laid down in the CPC, the technicalities of CPC cannot prevent the Court from securing the ends of justice. It is well settled that procedural safeguards, meant to advance the cause of justice cannot be interpreted in such manner, as would defeat justice. 41. Section 9 of the Arbitration Act provides that a party may apply to a Court for an interim measure or protection inter alia to (i) secure the amount in dispute in the arbitration; or (ii) such other interim measure of protection as may appear to the Court to be just and convenient, and 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. 42. As argued by Mr. Kaul, besides the specific power of securing the amount in dispute, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cannot be put into place to defeat the grant of relief which would subserve the paramount interests of justice. A balance has to be drawn between the two considerations in the facts of each case. 46. In Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. Anr. 2021 SCC Online Bom 75, the High Court held :- 88. ...It is now a well settled legal position, that at least with respect to Chartered High Courts, the power to grant temporary injunctions are not confined to the statutory provisions alone. The Chartered High Courts had an inherent power under the general equity jurisdiction to grant temporary injunctions independently of the provisions of the Code of Civil Procedure, 1908... xxx xxx xxx 93. Insofar as judgment of Supreme Court in case of Raman Tech. Process Engg. Co.(supra) relied upon by Mr. Narichania, learned senior counsel for the VML is concerned, it is held by the Hon'ble Supreme Court that merely having a ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paramount interests of justice. A balance has to be drawn between the two considerations in the facts of each case. The principles laid down in the Code of Civil Procedure, 1908 for the grant of interlocutory remedies must furnish a guide to the Court when it determines an application under Section 9 of the Arbitration and Conciliation Act, 1996. The underlying basis of Order 38 Rule 5 therefore has to be borne in mind while deciding an application under Section 9(ii) (b) of the Arbitration Act. xxx xxx xxx 104. The Division Bench of this court in case of Deccan Chronicle Holdings Limited v. L T Finance Ltd., 2013 SCC OnLine Bom 1005 after adverting to the judgment of Supreme Court in case of Adhunik Steel Ltd. (supra), judgment of the Division Bench of this court in case of Nimbus Communications Ltd. (supra) held that the rigors of every procedural provision of the Code of Civil Procedure cannot be put into place to defeat the grant of relief which would sub-serve the paramount interests of the justice. The object of preserving the efficacy of arbitration as an effective form of dispute resolution must be duly fulfilled. This would necessarily mean that in decidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 9 of the Arbitration Act. A strong possibility of diminution of assets would suffice. To assess the balance of convenience, the Court is required to examine and weigh the consequences of refusal of interim relief to the applicant for interim relief in case of success in the proceedings, against the consequence of grant of the interim relief to the opponent in case the proceedings should ultimately fail. 51. It is not in dispute that a sum of about Rs.35 crores odd was paid by Essar Steel to Essar House Private and Rs.47 crores odd to Essar Services, being the appellants in the respective appeals, by way of security deposit which is a refundable security deposit. Prima facie, the refundable security deposit is not being released to Arcellor on the purported ground of a convoluted series of internal arrangements between group companies for diversion of the security deposits towards liquidation of alleged dues of Essar Steel to third parties. 52. The Division Bench considered this contention of the Appellant and rightly held :- 33. The affidavit of disclosure filed by the appellant on 21st January, 2021 annexed at Ex.B also clearly indicates that the appellant wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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