REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2022

(Arising out of SLP (C) No. 3187 of 2021)

ESSAR HOUSE PRIVATE LIMITED ... Appellant

versus

ARCELLOR MITTAL NIPPON STEEL

INDIA LIMITED ... Respondent

WITH

CIVIL APPEAL NO. OF 2022

(Arising out of SLP (C) No. 3351 of 2021)

J U D G M E N T

Indira Banerjee , J.

Leave granted.

2.These appeals are against a common judgment and order dated

1

st

February 2021 passed by a Division Bench (Commercial Appellate

Division) of High Court of Judicature at Bombay, dismissing the appeal

being Commercial Arbitration Appeal (L) No. 1022 of 2021 filed by the

Appellant in the Civil Appeal arising out of SLP (C) No.3187 of 2021,

Essar House Private Limited, hereinafter referred to as “Essar House

1

Private”, under Section 37 of the Arbitration and Conciliation Act, 1996,

hereinafter referred to as the “Arbitration Act” and confirming an order

dated 10

th

December 2020 passed by the Commercial Division (Single

Bench) of the High Court allowing an application filed by the

Respondent-Arcellor Mittal Nippon Steel India Limited, hereinafter

referred to as the “Arcellor”, under Section 9 of the Arbitration Act and

directing Essar House Private to deposit an amount of Rs.35.5 crores

with the Prothonotary and Senior Master of the High Court or, in the

alternative, to furnish bank guarantee of any nationalised bank for the

entire amount along with interest thereon.

3.By the impugned judgment and order, the Division Bench has also

dismissed the appeal being Commercial Arbitration Appeal (L) No.1023

of 2021, filed by the Appellant in the Civil Appeal arising out of SLP (C)

No.3351 of 2021, Essar Services India Private Limited, hereinafter

referred to as “Essar Services”, and confirming an order dated 10

th

December 2020 passed by the Commercial Division (Single Bench) of

the High Court, allowing an application by Arcellor against Essar

Services and directing Essar Services to deposit Rs.47.41 crores with the

Prothonotary and Senior Master of the High Court or, in the alternative,

furnish Bank Guarantee of any nationalised bank for the entire amount

along with interest thereon.

4.Essar Services is engaged in providing services of accounting,

account related services, review, research etc. Essar Services is a part

of the Essar Group of Companies.

2

5.On or about 24

th

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 15

th

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 Private, a company registered under the Companies

Act, 1956, is engaged in the business of dealing in real estate. Essar

House Private is the owner of the building Essar House, situated at

Keshavrao Khadye Marg, Opposite Race Course, Mahalaxmi, Mumbai-

400034.

3

9.On or about 1

st

April 2016, Essar House Private entered into an

agreement styled as “Rental Agreement” with Essar Steel, under which

the ground floor, Podium and 20 upper floors in Essar House, was let out

to Essar Steel on leave and license basis, for a period of 36 months

commencing on 1

st

April 2016, at a monthly rent of Rs.78,40,000/-. In

terms of the aforesaid Rental Agreement, Essar Steel was to pay an

amount of Rs.25.80 crores to Essar House Private as interest free

refundable security deposit.

10.Essar House Private was a group company of Essar Steel until

2019. Many of the group companies have/had credit transactions with

HDFC Bank. It is submitted that the lenders of Essar Steel started

realising the dues of Essar Steel to lenders from the group companies.

Equinox is another group company of Essar Steel. Equinox on the

instructions of Essar Steel, made a payment of Rs.60.95 crores to HDFC

bank in discharge of the financial liabilities of Essar Steel to the bank. It

appears that HDFC Bank granted a loan of Rs.26,00,00,000/- (Rupees

twenty six crores only) to Marvel Mines and Minerals Private Limited,

hereinafter referred to as “Marvel Mines”. The said amount has

apparently been appropriated towards dues of the Essar Steel of HDFC

Bank.

11.By an email dated 26

th

April 2017, Essar Steel acknowledged that

HDFC Bank had disbursed a loan of Rs.26 crores to Marvel Mines, of

which Rs.26 crores had been appropriated towards term loan recoveries.

4

12.It is the case of the Appellant that on the instructions of Essar

Steel and on behalf of Essar Steel, Equinox made payments to HDFC

Bank from time to time in discharge of debts due from Essar Steel to

Equinox. As on 31

st

March 2018, the total dues payable by the Essar

Steel to Equinox was Rs.74,84,39,302/- (Rupees seventy four crores,

eighty four lacs, thirty nine thousand, three hundred and two only)

inclusive of interest.

13.On or about 2

nd

August 2017, the Standard Chartered Bank and

the State Bank of India jointly filed a petition under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of the

Corporate Insolvency Resolution Process (CIRP) against Essar Steel in

the Ahmedabad Bench of the National Company Law Tribunal (NCLT).

On 14

th

August 2017, Essar House Private filed its claim against Essar

Steel with the Resolution Professional appointed for Essar Steel.

14.On 17

th

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., 10

th

, 12

th

, 13

th

, 15

th

, 16

th

and 17

th

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 of

5

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 17

th

September 2018, Essar Infrastructure

Services Private Limited claimed that it had transferred the balance

security deposit of Rs.9,71,89,875/- (Rupees nine crores, seventy one

lacs, eighty nine thousand, eight hundred and seventy five only) to

Essar House Private.

17.In the meanwhile, on 16

th

August 2017, Essar Services filed a proof

of claim as an Operational Creditor in respect of unpaid invoices under

the Support Services Agreement, with the Resolution Professional of

Essar Steel.

18.Essar Services and Essar Steel mutually reconciled their accounts,

in March 2018, acknowledging that Rs.47,41,00,000/- was paid to Essar

Services as security deposit and sum of Rs.23,21,93,750/- was payable

by Essar Steel to Essar Services.

19.Sometime in 2018-19, Equinox allegedly assigned its receivable

from Essar Steel to one Edwell Infrastructure Hazira Limited, hereinafter

referred to as “Edwell”, to whom Essar Steel had owed an aggregate

amount of Rs.88,13,03,623/- inclusive of interest as on November 2019.

Later in 2019, the obligation of Essar Services to make payment of

Rs.47.41 crores to Essar Steel was novated to Edwell and it was agreed

that payment would be made to Edwell.

6

20.Arcellor as resolution applicant submitted a Resolution Plan in

respect of Essar Steel. The said Resolution Plan was approved by the

Adjudicating Authority (NCLT), Ahmedabad Bench by an order dated 8

th

March 2019. By an order dated 4

th

June 2019, the Appellate Tribunal

(NCLAT) confirmed the order dated 8

th

March 2019 of Adjudicating

Authority.

21.The Resolution Plan submitted by Arcellor in respect of Essar Steel

was approved by this Court in Committee of Creditors of Essar

Steel India through Authorised Signatory v. Satish Kumar

Gupta & Ors.

1

22.On 27

th

November 2019, Essar House Private sent an email to

Arcellor stating that the Business Centre Agreement as extended was

expiring on 30

th

November 2019 and called upon Arcellor to vacate

Essar House by 15

th

December 2019. On 15

th

December 2019, Arcellor

vacated Essar House. On 16

th

December 2019, Arcellor took over Essar

Steel pursuant to the judgment dated 15

th

November 2019 of this Court.

23.By an email dated 11

th

January 2020, Arcellor called upon the

Essar House Private to refund the interest free security deposit

amounting to Rs.35,51,89,875/-. The email was followed by a reminder

email dated 19

th

January 2020 and more emails.

1 (2020) 8 SCC 531

7

24.On 17

th

June 2020, Arcellor sent a legal notice to Essar House

Private calling upon the Essar House Private to refund the security

deposit to Arcellor within seven days along with interest.

25.By an email dated 27

th

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 17

th

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 Single Bench of the

High Court. An appeal being Arbitration Appeal (L) No.1022 of 2021

filed against the order of the Single Bench has been dismissed by the

Commercial Appellate Division of the High Court (Division Bench), by the

judgment and order impugned.

8

27.Arcellor paid Rs.4,75,06,260 to Essar Services on behalf of Essar

Steel in settlement of its claims/dues. However, on 14

th

July 2020

Arcellor addressed a legal notice to Essar Services for refund of Rs.47.41

crores. Arcellor filed an application under Section 9 of the Arbitration

Act being Commercial Arbitration Petition (L) No.6607 of 2020 in the

Commercial Division of Bombay High Court seeking orders directing

Essar Services to deposit Rs.47,41,00,000/- with the Prothonotary and

Senior Master of the High Court.

28.By an order dated 10

th

December 2020, the Commercial Division

of the Bombay High Court, Single Bench directed Essar Services to

deposit Rs.47.41 crores with the Prothonotary and Senior Master of the

High Court. The Essar Services filed Arbitration Appeal No.1023 of 2021

under Section 37 of the Arbitration Act read with Section 13 of the

Commercial Courts Act in the Commercial Appellate Division of the High

Court (Division Bench). The appeal has been dismissed by the judgment

and order impugned.

29.Mr. Shyam Divan, learned Senior Counsel appearing on behalf of

the Appellants emphatically argued that no amount was due from Essar

House Private or from Essar Services to Arcellor. The security deposits

of Essar Steel with Essar House Private and Essar Services had at the

instructions of Essar Steel, been discharged to liquidate dues of Essar

Steel to creditors.

30.Mr. Shyam Divan further argued that, to grant discretionary

interim relief under Section 9 of the Arbitration Act, the Court would

9

have to satisfy itself that the applicant for interim relief, i.e., Arcellor had

a bona fide and strong claim and that Essar House Private and/or Essar

Services was about to remove or dispose of whole or part of its property

with intent to obstruct or delay the execution. Mr. Divan argued that the

Court erred in not considering the requisites of Order XXXVIII, Rule 5 of

the Code of Civil Procedure, 1908 (CPC) for grant of interim relief. In

support of his submissions, Mr. Divan cited Raman Tech. & Process

Engg. Co. & Anr. v. Solanki Traders

2

where this Court held :-

“5. 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.

3

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

2(2008) 2 SCC 302

3(2004) 1 SCC 12

10

contract. Both the parties have to agree to substitute the

original contract with a new contract or rescind or alter. It

cannot be done unilaterally...”

33.In any case, obligations under a contract cannot be assigned,

without consent of the counterparty, as laid down by this Court in

Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd.

4

:-

“... An assignment of a contract might result by transfer

either of the rights or of the obligations thereunder. But

there is a well-recognised distinction between these two

classes of assignments. As a rule obligations under a

contract cannot be assigned except with the consent

of the promisee, and when such consent is given, it is

really a novation resulting in substitution of

liabilities...”

34.In any case, novation of contract or set off is not allowed in

respect of a corporate entity undergoing CIRP without the consent of the

Resolution Professional. Section 14 of the IBC bars action to foreclose,

recover or enforce any security interest created by a Corporate Debtor

undergoing CIRP.

35.Admittedly, the CIRP of Essar Steel commenced on 2

nd

August

2017 when the Resolution Professional took over the management of

the affairs of Essar Steel under the IBC.

36.Even if any prior inter se arrangement existed between the

parties, Essar Services could not have adjusted the security deposit

payable to Essar Steel under the amended agreement against the

alleged dues of Essar Steel to a third party during the CIRP.

4(1963) 3 SCR 183

11

37.Mr. Shyam Divan argued that while deciding a Section 9

application filed under the provisions of the Arbitration Act, the

principles of the CPC are to be strictly followed. The principles

enunciated by this Court in Raman Tech. & Process Engg. Co. & Anr.

(supra) were required to be followed in letter and spirit.

38.In this case, however, the High Court has taken note of the

pleadings for invoking the principles of Order 38 Rule 5 CPC and

observed :-

“31. In our view, the paragraphs of the aforesaid

pleadings of the respondent in arbitration petition filed

under section 9 filed by the respondent were sufficient to

secure the claim of the respondent under section 9 of the

Arbitration Act and to invoke the principles of Order 38

Rule 5 of the Code of Civil Procedure even if it is strictly

made applicable to the facts of this case.”

39. In deciding a petition under Section 9 of the Arbitration Act, the

Court cannot ignore the basic principles of the CPC. At the same time,

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.

12

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 Courts have been empowered to pass any

interim measure of protection, keeping in view the purpose of the

proceedings before it. The said provision confers a residuary power on

the Court to pass such other interim measures of protection as may

appear to be just and convenient.

43.Many High Courts have also proceeded on the principle that the

powers of a Court under Section 9 of the Arbitration Act are wider than

the powers under the provisions of the CPC.

44.In Ajay Singh & Ors. v. Kal Airways Private Limited and

Ors.

5

the Delhi High Court correctly held :

“...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...”

5(2017) SCC Online Del 8934

13

45.In Jagdish Ahuja & Anr. v. Cupino Limited

6

, the Bombay High

Court correctly summarised the law in Paragraph 6 extracted

hereinbelow :-

“6. As far as Section 9 of the Act is concerned, it cannot be

said that this court, while considering a relief thereunder, is

strictly bound by the provisions of Order 38 Rule 5. As held by

our Courts, the scope of Section 9 of the Act is very broad; the

court has a discretion to grant thereunder a wide range of

interim measures of protection “as may appear to the court to

be just and convenient”, though such discretion has to be

exercised judiciously and not arbitrarily. The court is, no doubt,

guided by the principles which civil courts ordinarily employ for

considering interim relief, particularly, Order 39 Rules 1 and 2

and Order 38 Rule 5; the court, however, is not unduly bound

by their texts. As this court held in Nimbus Communications

Limited v. Board of Control for Cricket in India (Per D.Y.

Chandrachud J, as the learned Judge then was), the court,

whilst exercising power under Section 9, “must have due

regard to the underlying purpose of the conferment of the

power under the court which is to promote the efficacy of

arbitration as a form of dispute resolution.” The learned Judge

further observed as follows:

“Just as on the one hand the exercise of the power

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.

7

,

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...”

62020 SCC Online Bom 849

7 2021 SCC Online Bom 75

14

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 just or valid claim or a prima facie case,

will not entitle the plaintiff to an order of attachment

before judgment, unless he also establishes that the

defendant is attempting to remove or dispose of his

assets with the intention of defeating the decree that

may be passed. The Hon'ble Supreme Court has further

held that the purpose of Order 38 Rule 5 is not to

convert an unsecured debt into a secured debt. The said

judgment of the Hon'ble Supreme Court was not in

respect of the powers of court under section 9 of the

Arbitration and Conciliation Act, 1996 but was in respect

of power under Order 38 Rule 5 of the Code of Civil

Procedure, 1908 in a suit. Even otherwise, the said

judgment is distinguishable in the facts of this case.

xxx xxx xxx

95. Insofar as judgment of this Court delivered by the

Division Bench of this court in case of Nimbus

Communications Limited v. Board of Control for Cricket

in India (supra) relied upon by the learned senior

counsel for the VML is concerned, this Court adverted to

the judgment of Hon'ble Supreme Court in case of

Adhunik Steels Ltd. v. Orissa Manganese and Minerals

(P) Ltd., (2007) 7 SCC 125 and held that in view of the

decision of the Supreme Court in case of Adhunik Steels

Ltd., (supra) the view of the Division Bench in case of

National Shipping Company of Saudi Arabia (supra) that

the exercise of power under section 9(ii)(b) is not

controlled by the provisions of the Code of Civil

Procedure, 1908 cannot stand. This court in the said

judgment of Nimbus Communications Limited (supra)

held that the exercise of the power under section 9 of

the Arbitration Act cannot be totally independent of the

basic principles governing grant of interim injunction by

the civil Court, at the same time, the Court when it

decides the petition under section 9, must have due

regard to the underlying purpose of the conferment of

the power upon the Court which is to promote the

efficacy of arbitration as a form of dispute resolution.

96. This court held that just as on the one hand the

exercise of the power 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

sub-serve the paramount interests of justice. A balance

15

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 deciding an application

under Section 9, the Court would while bearing in mind

the fundamental principles underlying the provisions of

the Code of Civil Procedure, at the same time, have the

discretion to mould the relief in appropriate cases to

secure the ends of justice and to preserve the sanctity

of the arbitral process. The Division Bench of this Court

in the said judgment did not interfere with the order

passed by the learned Single Judge directing the parties

to furnish security so as to secure the claim of the

original petitioner in arbitration by applying principles of

Order 38 Rule 5 of the Code of Civil Procedure. …”

47.In Srei Infrastructure Finance Limited v. M/s. Ravi Udyog

Pvt. Ltd & Anr.

8

, the Calcutta High Court, speaking through one of us

(Indira Banerjee, J.), as Judge of that Court, said :-

“An application under section 9 of the Arbitration &

Conciliation Act, 1996 for interim relief is not to be

judged as per the standards of a plaint in a suit. If the

relevant facts pleaded, read with the documents

annexed to the petition, warrant the grant of interim

relief, interim relief ought not to be refused by recourse

to technicalities...”

8A.P. No. 522 of 2008

16

48.Section 9 of the Arbitration Act confers wide power on the Court to

pass orders securing the amount in dispute in arbitration, whether

before the commencement of the arbitral proceedings, during the

arbitral proceedings or at any time after making of the arbitral award,

but before its enforcement in accordance with Section 36 of the

Arbitration Act. All that the Court is required to see is, whether the

applicant for interim measure has a good prima facie case, whether the

balance of convenience is in favour of interim relief as prayed for being

granted and whether the applicant has approached the court with

reasonable expedition.

49.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.

50.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

17

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

21

st

January, 2021 annexed at Ex.B also clearly indicates

that the appellant was heavily indebted and did not have

asset other than the asset disclosed in the affidavit in

reply.

xxx xxx xxx

39. There is no substance in the submission made by

the learned counsel for the appellant that since the

appellant had already disclosed in the reply to the

petition under section 9 that there was only one asset in

the hands of the appellant and the same was also

mortgaged, learned single Judge could not have passed

an order of deposit or to furnish a bank guarantee in lieu

of the order of deposit under section 9 of the Arbitration

Act. In our view, the Court has ample power under

Section 9 to secure the claim of the applicant in

arbitration. Merely because the appellant has disclosed

before the learned Single Judge that it does not have

any asset other than one asset and that also is fully

encumbered, that does not preclude the Court under

Section 9 of the Arbitration Act to pass an equitable

order by securing the claim of the applicant in

arbitration by directing the opponent to deposit such

amount to furnish a bank guarantee once having

rendered a prima-facie finding that the applicant would

18

have good chances of succeeding in the arbitration and

if the claim made by the applicant is not secured, he

would not be able to enjoy fruits of the arbitral award on

its execution.

xxx xxx xxx

43. If the Court is required to dismiss the petition under

section 9 of the Arbitration Act on the ground that the

opponent has no assets at all or the assets of the

opponent are fully encumbered, it will be against the

principles of equitable justice required to be exercised

by the Court while exercising powers under section 9 of

the Arbitration Act so as to secure the claim of the

applicant in the arbitral proceedings though he may

have prima-facie good chances of succeeding in

arbitration.”

53.We find no infirmity in the well-reasoned judgment and order of

the Division Bench. The appeals are, accordingly, dismissed.

...................................,J.

[INDIRA BANERJEE]

...................................,J.

[A.S. BOPANNA]

NEW DELHI;

SEPTEMBER 14, 2022.

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