ESSAR HOUSE PRIVATE LIMITED versus ARCELLOR MITTAL NIPPON STEEL INDIA LIMITED

ESSAR HOUSE PRIVATE LIMITED versus ARCELLOR MITTAL NIPPON STEEL INDIA LIMITED

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


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 10th 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 10th
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 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 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, Mumbai400034.
3
9. On or about 1st 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 1st 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 26th 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 31st 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 2nd 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 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 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 17th 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 16th 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 8th
March 2019. By an order dated 4th June 2019, the Appellate Tribunal
(NCLAT) confirmed the order dated 8th 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 27th November 2019, Essar House Private sent an email to
Arcellor stating that the Business Centre Agreement as extended was
expiring on 30th November 2019 and called upon Arcellor to vacate
Essar House by 15th December 2019. On 15th December 2019, Arcellor
vacated Essar House. On 16th December 2019, Arcellor took over Essar
Steel pursuant to the judgment dated 15th November 2019 of this Court.
23. By an email dated 11th 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 19th January 2020 and more emails.
1 (2020) 8 SCC 531
7
24. On 17th 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 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 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 14th 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 10th 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 2nd 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.
19

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