Sanghi Industries Limited Versus Ravin Cables Ltd., and Anr.

Sanghi Industries Limited  Versus Ravin Cables Ltd., and Anr.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  6908 OF 2022

Sanghi Industries Limited               ...Appellant(s)

Versus

Ravin Cables Ltd., and Anr.       …Respondent(s)

J U D G M E N T 

M.R. SHAH, J.

1. Feeling   aggrieved   and   dissatisfied   with   the   impugned

judgment and order dated 11.02.2022 passed by the High

Court of Gujarat at Ahmedabad in Regular First Appeal

No. 3253 of 2021, by which, the High Court has dismissed

the   said   appeal   confirming   the   order   passed   by   the

Commercial Court in an application under Section 9 of the

Arbitration and Conciliation Act, 1996 (hereinafter referred

to as the Arbitration Act, 1996), by which the Commercial

Court   directed   the   appellant   herein   –   original

opponent/respondent   No.   1   to   deposit   the   amount   of

1

performance bank guarantees pertaining to purchase order

Nos.   01,   02   and   03   invoked   by   it,   the   original

opponent/respondent   No.   1   has   preferred   the   present

appeal. 

2. We have heard Shri Vivek Chib, learned Senior Advocate

appearing   on   behalf   of   the   appellant   and   Shri   K.V.

Viswanathan, learned Senior Advocate appearing on behalf

of respondent No. 1 herein – the main contesting party. 

3. At the outset it is required to be noted that in the present

case the dispute is with respect to three purchase orders,

namely, purchase order Nos. 01, 02 and 03. It appears

that the appellant served a notice upon respondent No. 1

vide notice dated 11.06.2021 claiming a loss of INR 29.31

crores (approximately) owing to the defective quality of the

cables supplied. The said notice was replied by respondent

No.   1   vide   reply   dated   19.06.2021.   That   thereafter,

respondent No. 1 served a legal notice dated 13.07.2021

on the appellant claiming for outstanding payment of INR

1.30   crores   (approximately).   That   the   appellant   vide

communication/letter dated 21.07.2021 invoked the bank

guarantees   issued   by   respondent   No.   1   herein,   which

2

according to respondent No. 1 were by way of performance

bank guarantees. That thereafter, the appellant invoked

the arbitration on 22.07.2021. Immediately on the next

day i.e., 23.07.2021, respondent No. 1 herein filed two

applications/petitions under Section 9 of the Arbitration

Act,   1996,   being   application   No.   438/2021   before   the

Commercial Court at Ahmedabad and another application

No.   88/2021   before   the   Commercial   Court   at   Bhuj.

Application No. 88/2021 under Section 9 of the Arbitration

Act, 1996 filed by respondent No. 1 herein was regarding

three   bank   guarantees,   which   is   the   subject   matter   of

present case. At this stage, it is required to be noted that

by the time any further order could be passed the bank

realized the payments under the bank guarantees invoked

by the appellant. That the Commercial Court passed an

order   dated   13.10.2021   under   Section   9(ii)(e)   of   the

Arbitration Act, 1996 to secure the amount in dispute and

directed   the  appellant   herein  to  deposit   the  amount   of

respective performance bank guarantees, which as such

has   already  been  invoked  and   for  which  the  payments

were already made by the bank. The order passed by the

3

Commercial Court under Section 9 of the Arbitration Act,

1996, directing the appellant to deposit in the court the

amount   of   respective   bank   guarantees   pertaining   to

purchase order Nos. 01, 02 and 03 was the subject matter

of appeal before the High Court under Section 13 of the

Commercial Courts Act, 2015. By the impugned judgment

and order, the High Court has dismissed the said appeal

which has given rise to the present appeal. 

4. Having heard learned counsel appearing on behalf of the

respective parties and in the facts and circumstances of

the  case, more particularly, when  the bank guarantees

were   already   invoked   and   the   amounts   under   the

respective bank guarantees were already paid by the bank

much   prior  to   the   Commercial  Court   passed  the   order

under Section 9 of the Arbitration Act, 1996 and looking to

the tenor of the order passed by the Commercial Court, it

appears that the Commercial Court had passed the order

under Section 9(ii)(e) of the Arbitration Act, 1996 to secure

the amount in dispute, we are of the opinion that unless

and until the pre­conditions under Order XXXVIII Rule 5

of   the   CPC   are   satisfied   and   unless   there   are   specific

4

allegations with cogent material and unless prima­facie the

Court is satisfied that the appellant is likely to defeat the

decree/award that  may be passed by  the arbitrator by

disposing of the properties and/or in any other manner,

the   Commercial   Court   could   not   have   passed   such   an

order   in   exercise   of   powers   under   Section   9   of   the

Arbitration Act, 1996. At this stage, it is required to be

noted that even otherwise there are very serious disputes

on the amount claimed by the rival parties, which are to be

adjudicated upon in the proceedings before the arbitral

tribunal.

4.1 The   order(s)   which   may   be   passed   by   the   Commercial

Court in an application under Section 9 of the Arbitration

Act,   1996   is   basically   and   mainly   by   way   of   interim

measure. It may be true that in a given case if all the

conditions of Order XXXVIII Rule 5 of the CPC are satisfied

and the Commercial Court is satisfied on the conduct of

opposite/opponent party that the opponent party is trying

to   sell   its   properties   to   defeat   the   award   that   may   be

passed   and/or   any   other   conduct   on   the   part   of   the

opposite/opponent party which may tantamount to any

5

attempt   on   the   part   of   the   opponent/opposite   party   to

defeat   the   award   that   may   be   passed   in   the   arbitral

proceedings,   the   Commercial   Court   may   pass   an

appropriate order including the restrain order and/or any

other   appropriate   order   to   secure   the   interest   of   the

parties.   However,   unless   and   until   the   conditions

mentioned in Order XXXVIII Rule 5 of the CPC are satisfied

such   an   order   could   not   have   been   passed   by   the

Commercial   Court   which   has   been   passed   by   the

Commercial Court in the present case, which has been

affirmed by the High Court. 

5. In view of the above and for the reasons stated above, the

present   appeal   succeeds.   The   impugned   judgment   and

order passed by the High Court and that of the order dated

13.10.2021   passed   by   the   Commercial   Court   in   an

application under Section  9(ii)(e) of the  Arbitration  Act,

1996   directing   appellant   to   deposit   the   amount   of

performance bank guarantees pertaining to purchase order

Nos.   01,   02   and   03   already   invoked   by   the   appellant

herein, are hereby quashed and set aside. 

6

However, at the same time to protect the interest of the

parties, we direct that the appellant herein shall furnish

an undertaking backed by the Resolution of the appellant’s

company before the Commercial Court that in case any

award is passed by the learned Arbitrator in arbitration

proceedings,   the   same   shall   be   paid/honoured   by   the

appellant subject to the challenge before the higher forum.

Such   undertaking   backed   by   the   Resolution   of   the

appellant’s company shall be filed before the Commercial

Court within a period of four weeks from today, with this

the present appeal is allowed. No costs.     

………………………………….J.

 [M.R. SHAH]

NEW DELHI; ………………………………….J.

SEPTEMBER 30, 2022 [KRISHNA MURARI]

7