The division judge bench of Justice Indira Banerjee and Justice A.S Bopanna of the supreme court of India in the case of Essar House Private Ltd Vs Arcellor Mittal Nippon Steel India Limited held that t 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 a manner, as would defeat justice.
BRIEF FACTS
The factual matrix of the case is that the Arcellor, as the resolution applicant, submitted a Resolution Plan for Essar Steel. The Adjudicating Authority approved the Resolution Plan (NCLT). The Appellate Tribunal (NCLAT) upheld the Adjudicating Authority's decision. Also, the resolution plan was approved by this court in the Committee of Creditors of Essar Steel India through Authorised Signatory v. Satish Kumar Gupta & Ors.
thereafter, the email was sent to the Arcellor by the Essar House Private stated that the Business Centre Agreement as extended was expiring on 30th November 2019 and called upon Arcellor to vacate Essar House and Arcellor vacated the house. Moreoever, Arcellor asked the Essar House Private to refund the amount of security deposits. Thereafter, Essar House Private Ltd conveyed through the mail that Essar House Private had taken over the 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 Commercial Division of the Bombay High Court, Single Bench, ordered Essar Services to deposit Rs.47.41 crores with the High Court's Prothonotary and Senior Master. The Essar Services filed an Arbitration Appeal in the Commercial Appellate Division of the High Court under Section 37 of the Arbitration Act and Section 13 of the Commercial Courts Act (Division Bench). The appeal was dismissed by the contested judgment and order.
The learned counsel appearing on behalf of the appellant has contended that the 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. It was further contended that to grant discretionary interim relief under Section 9 of the Arbitration Act, the Court must be satisfied that the applicant for interim relief, Arcellor, had a genuine and strong claim and that Essar House Private and/or Essar Services were about to remove or dispose of whole or part of its property with the intent to obstruct or delay the execution. The learned counsel further relied upon the judgement titled Raman Tech. & Process Engg. Co. & Anr. v. Solanki Traders.
The learned counsel appearing on behalf of the respondent has contended that the Essar House Private/Essar Services had not brought a single document on record to prove their assertions. It is also true that the novation of the agreement cannot be brought unilaterlally. The learned counsel further relied upon the judgements titled Citibank N.A. v. Standard Chartered Bank & Ors and Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd.
The learned counsel further argued that it is not possible in respect of a corporate entity to allow the novation of contract undergoing CIRP without the consent of the Resolution Professional.
COURT’S OBSERVATION
In the present case, the high court has taken note of the pleadings for invoking the principles of Order 38 Rule 5 CPC. The hon’ble court held that 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 rigors 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. 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.
The hon’ble court relied upon the judgements titled Ajay Singh & Ors. v. Kal Airways Private Limited and Ors, Jagdish Ahuja & Anr. v. Cupino Limited,Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. & Anr, and Srei Infrastructure Finance Limited v. M/s. Ravi Udyog Pvt. Ltd & Anr.
The apex court has held that all that the Court is required to see is, whether the applicant for the interim measure has a good prima facie case, whether the balance of convenience is in favor of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition. If a strong prima facie case is made out and the balance of convenience is in favor of interim relief granted, the Court exercising power under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of the absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 of the CPC.
In casu, 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 the liquidation of alleged dues of Essar Steel to third parties. At last, the hon’ble court said that there is no infirmity in the well-reasoned judgment and the appeal is accordingly dismissed.
CASE NAME- Essar House Private Ltd Vs Arcellor Mittal Nippon Steel India Limited
CITATION- CIVIL APPEAL NO. OF 2022
CORUM- Justice Indira Banerjee and Justice A.S Bopanna
DATED- 14.09.22
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