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
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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
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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
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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
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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
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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. 
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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]
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