The division judge bench of Justice M.R. Shah and Justice Krishna Murari of the apex court in the case of Sanghi Industries Limited v. Ravin Cables Ltd., and Anr. held that until the preconditions under Order XXXVIII Rule 5 of the CPC are satisfied and unless there are specific 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.
BRIEF FACTS
The factual matrix of the case is that the dispute was with respect to the three purchasers’ orders. The appellant served respondent no. 1 with the legal notice of claiming a loss of INR 29.31 crores (approximately) owing to the defective quality of the cables supplied. Thereafter, respondent No. 1 served a legal notice on the appellant claiming for outstanding payment of INR 1.30 crores (approximately). The appellant invoked the bank guarantees issued by the Respondent No. 1. Thereafter, the appellant invoked the arbitration, and respondent no. 1 immediately filed the application under Section 9 of the Arbitration Act,1996 before the Commercial Court at Ahmedabad and another application before the Commercial Court at Bhuj 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 the present case.
COURT’S OBSERVATION
The hon’ble court held that unless and until the preconditions under Order XXXVIII Rule 5 of the CPC are satisfied and unless there are specific 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.
The impugned judgment and order passed by the High Court and that of the order passed by the Commercial Court in an application under Section 9(ii)(e) of the Arbitration Act, 1996 directing the 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.
CASE NAME- Sanghi Industries Limited v. Ravin Cables Ltd., and Anr
CITATION- CIVIL APPEAL NO. 6908 OF 2022
CORUM- Justice M.R. Shah and Justice Krishna Murari
DATE- 30.09.22
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