Essar Services India Pvt Ltd vs Arcelor Mittal Nippon Steel India ...
2021 Latest Caselaw 2012 Bom

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      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
         ORDINARY ORIGINAL CIVIL JURISDICTION

       COMM. ARBITRATION APPEAL (L) NO. 1022 OF 2021
                        WITH
         INTERIM APPLICATION (L) NO. 1446 OF 2021
                          IN
       COMM. ARBITRATION APPEAL (L) NO. 1022 OF 2021
                          IN
      COMM. ARBITRATION PETITION (L) NO. 6602 OF 2020

Essar House Private Limited,
Essar House, 11 Keshavrao Khadye Marg,
Opposite Race Course, Mahalaxmi,
Mumbai - 400 034.                                        .. Applicant/
                                                            Applicant
               Versus

Arcellor Mittal Nippon Steel India Limited,
(formerly Essar Steel India Limited)
27 Km, Surat-Hazira Road,
Hazira, Surat, Gujarat - 394270.                         .. Respondent


                     ALONG WITH
       COMM. ARBITRATION APPEAL (L) NO. 1023 OF 2021
                        WITH
         INTERIM APPLICATION (L) NO. 1497 OF 2021
                          IN
       COMM. ARBITRATION APPEAL (L) NO. 1023 OF 2021
                          IN
      COMM. ARBITRATION PETITION (L) NO. 6607 OF 2020

Essar Services India Private Limited,
Essar House, 11 Keshavrao Khadye Marg,
Opposite Race Course, Mahalaxmi,
Mumbai - 400 034.                                        .. Applicant/
                                                            Applicant
               Versus

Arcellor Mittal Nippon Steel India Limited,
(formerly Essar Steel India Limited)
27 Km, Surat-Hazira Road,
Hazira, Surat, Gujarat - 394270.                         .. Respondent




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                               ******
Mr. Navroz Seervai, Senior Counsel along with Mr. Abhishek Kale,
i/by M/s. Naik Naik and Co., for the Appellant in COMAPL/1023/2021
in CARBPL/6607/2020 and Applicant in IAL/1497/2021.

Mr. Ashish Kamat a/w Mr. Abhishek Kale i/by M/s. Naik Naik and Co.,
for the Appellant in COMAPL/1022/2021 in CARBPL/6602/2020 and
Applicant in IAL/1446/2021.

Dr. Birendra Saraf, Senior Advocate a/w Mr. Karl Tamboly, Mr. Sairam
Subramanian i/by M/s. Shardul Amarchand Mangaldas and Co., for the
Respondent in both Appeal.
                               ******
                                      CORAM: R. D. DHANUKA AND
                                             V. G. BISHT, JJ.

                                      DATE    : 1st FEBRUARY, 2021.
ORAL JUDGMENT (Per R. D. Dhanuka, J.) :-

.     By these two Appeals filed under Section 37 of the Arbitration

and Conciliation Act, 1996 (for short 'the Arbitration Act'), the appellants (original respondents) have impugned the order dated 10th December, 2020 passed by the learned Single Judge directing the appellants to deposit with the Prothonotary and Senior Master of this Court an amount of Rs.35.5 crores and Rs.47.41 crores respectively within eight weeks from the date of the said order or in the alternate to furnish a bank guarantee of any nationalized bank for the entire amount along with all interest earned thereon.

2. The learned Single Judge has also directed the appellants to make an affidavit of disclosure of movable and immovable assets including monthly receivable, without exception including financial investments, all liabilities including the nature of encumbrances, if any. The learned Single Judge has granted an injunction against the

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appellant from disposing of, alienating, transferring or parting with possession or creating any third party rights over any of its assets, except in the ordinary and usual course of its business.

3. By consent of parties, both these Appeals were heard together and are being disposed of by a common order. The facts in both the mattes are almost identical.

Brief facts in Comm. Arbitration Appeal (L) No. 1022 of 2021 filed by the Essar House Pvt. Ltd. :-

4. On 1st April, 2016, Essar Steel India Limited entered into a Rental Agreement with the appellant to occupy the ground floor, podium and twenty upper floors at 11 Keshavrao Khadye Marg, Opp. Race Course, Mahalaxmi, Mumbai - 400 034 on leave and license basis. The said Essar Steel India Limited paid the appellant an amount of Rs.25,80,00,000/- toward security deposit under the said Rental Agreement. On 2nd August, 2017, the Ahmedabad bench of the National Company Law Tribunal (NCLT) admitted the Company Petitions filed by Standard Chartered Bank and State Bank of India against Essar Steel India Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. 100% shareholding of Essar Steel India Limited was acquired by Arcelor Mittal India Pvt. Ltd. (AMIPL), the respondent no.1 herein.

5. On 17th September, 2018, Essar Steel India Limited entered into a Business Centre Agreement with the appellant for availing Business Centre Facilities on 6 floors of Essar House owned by the appellant situated at the same address. On 17th September, 2018, Essar House

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Pvt. Ltd. assigned Rs.9,71,89,875/- to the appellant on behalf of the Essar Steel India Limited towards part payment of the Security Deposit under the Business Centre Agreement. On 15th November, 2019, the Supreme Court of India approved the respondent as the successful resolution applicant for Essar Steel India Limited. As a result, the respondent assumed the right of Essar Steel India Limited under the Business Centre Agreement. On 27th November, 2019, the appellant vide its email requested the respondent to vacate the premises. On 15 th December, 2019, the respondent vacated the premises and handed over the peaceful possession to the appellant.

6. It is the case of the respondent that though the respondent sent several reminders by emails to the appellant to refund the security deposit under the said Business Centre Agreement during the period between 11th January, 2020 and 4th March, 2020, the appellant did not refund the said security deposit. On 17th June, 2020, the respondent issued a legal notice through its advocate to the appellant calling upon to refund the security deposit with interest. On 27 th June, 2020, the appellant replied to the said legal notice and contended that the security deposit made by the respondent was adjusted against dues owed to one Marvel Mineral Pvt. Ltd. On 14th July, 2020, the respondent through its advocate's reply letter to the said letter dated 27 th June, 2020 denied the allegations made by the appellant in the said reply to the legal notice sent by the respondent. The appellant through its advocate's letter dated 30th July, 2020 addressed a holding reply to the respondent's advocate letter dated 14th July, 2020. On 12th November, 2020, the appellant addressed a detail reply to the reply of the respondent's letter dated 14 th July, 2020.

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7. On 17th November, 2020, the respondent herein filed a Petition under Section 9 of the Arbitration Act (Commercial Arbitration Petition (L) No. 6602 of 2020) for various reliefs. The appellant filed a reply in the said Commercial Arbitration Petition. The learned Single Judge disposed of the said Commercial Arbitration Petition and granted various interim measures in favour of the respondent (original petitioner). The appellant filed an affidavit of disclosure.

Brief facts in Comm. Arbitration Appeal (L) No. 1023 of 2021 filed by the Essar Services India Pvt. Ltd. :-

8. On 24th January, 2012, the appellant entered into a Separate Services Agreement with Essel Steel India Limited (predecessor of the respondent) for providing managerial accounting and administrative services. On 15th May, 2014, the appellant entered into an Amended and Restated Support Services Agreement with the said Essel Steel India Limited thereby superseding all the earlier Support Services Agreements between the appellant and the said Essel Steel India Limited. Under the said agreement, the Essel Steel India Limited was required to pay an amount of Rs.73 crores as interest free refundable security deposit. The said Essel Steel India Limited was required to pay monthly fee of Rs.6,38,75,000/- to the appellant. The said Essel Steel India Limited disbursed an amount of Rs.47,41,00,000/- towards the security deposit to the appellant. On 18th December, 2015, Essel Steel India Limited addressed a letter to the appellant informing that it would not be availing the services between the period of January, 2016 and March, 2016. There was further correspondence exchanged between the parties. The said 2014 Agreement was further amended by Support Services Agreement dated 18th January, 2017.

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9. It is the case of the respondent that in the month of March, 2018, the parties mutually reconciled the accounts and it was agreed that a sum of Rs.47,41,00,000/- was due and payable by the appellant to the respondent towards the security deposit. On 8th March, 2019, the Resolution Plan came to be submitted by the respondent before the NCLT which was approved by the NCLT. The amended agreement came to an end on 1st May, 2019. The Hon'ble Supreme Court of India affirmed the corporate insolvency resolution process of Essel Steel India Limited. The respondent took over the said Essel Steel India Limited being a successful resolution applicant. The respondent assumed the rights of Essel Steel India Limited under the said amended agreement.

10. On 14th July, 2020, the respondent issued a notice to the appellant seeking a refund of balance security deposit in the sum of Rs.47,41,00,000/- within seven days from the date of receipt of the said notice. The said notice of demand was denied by the appellant vide letter dated 30th July, 2020. On 12th November, 2020, the appellant issued a letter stating that it has novated its obligation to pay the respondent in favour of a group company. On 17 th November, 2020, the respondent filed Commercial Arbitration Petition (L) No. 6602 of 2020 in this Court under Section 9 of the Arbitration Act for various interim measures. The appellant filed affidavit in reply in the said Commercial Arbitration Petition and also affidavit of disclosure in the said Commercial Arbitration Petition before the learned Single Judge. The learned Single Judge disposed of the said Commercial Arbitration Petition and granted various interim measures already referred to aforesaid. Both these impugned orders passed by the learned Single

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Judge have been impugned by the appellants (original respondents) in their respective appeals under Section 37 of the Arbitration Act.

11. Mr. Seervai, learned senior counsel for the appellant in Commercial Arbitration Appeal (L) No. 1023 of 2021 invited our attention to some of the paragraphs from the impugned order passed by the learned Single Judge and more particularly paragraphs 29 to 31 and would submit that no prima facie finding is rendered by the learned Single Judge as to whether the respondent herein (original petitioner) had satisfied the conditions for attracting the principles of the provisions of Order 38 Rule 5 of the Code of Civil Procedure, 1908. He submits that there were no averments made in the petition filed under section 9 by the respondent for making out a case for invoking the principles of Order 38 Rule 5 of the Code of Civil Procedure, 1908. In support of this submission, learned senior counsel invited our attention to the averments made in paragraphs 37 to 44 and would submit that it was not the case of the respondent in the said petition filed under section 9 of the Arbitration Act that the appellant was selling its asset so as to deprive the respondent fraudulently to recover the claim if awarded by the Arbitral Tribunal in future.

12. This court invited the attention of the learned counsel appearing for both the parties to a recent judgment delivered by this Bench on 22nd January, 2021 in case of Valentine Maritime Ltd. vs. Kreuz Subsea Pte Limited and another in Commercial Appeal (L) No.7013 of 2020 dealing with the power of Court under section 9 of the Arbitration Act and also on the issue whether the provisions of Order 38 Rule 5 of the Code of Civil Procedure, 1908 strictly applies when the petition filed under section 9 of the Arbitration Act is considered by

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the Court and more particularly considering the prayer for securing the claim in arbitration made by the applicant.

13. Learned senior counsel for the appellant invited our attention to paragraphs 92 and 95 of the said judgment and would submit that there were sufficient averments made in the petition filed by the applicant before the learned Single Judge under section 9 of the Arbitration Act attracting principles of Order 38 Rule 5 of the Code of Civil Procedure in the facts of that matter on the basis of which the learned Single Judge passed an order of deposit and was upheld by the Division Bench of this court in the said judgment in case of Valentine Maritime Ltd. (supra).

14. It is submitted that since in this case there was no averment at all made by the respondent in the petition filed under section 9 of the Arbitration Act attracting principles of Order 38 Rule 5 of the Code of Civil Procedure, the said judgment of this Court in case of Valentine Maritime Ltd. (supra) would support the case of the appellant and not the respondent. Learned senior counsel distinguished the judgment of the Division Bench also on the ground that in that case the appellant (original respondent) was admittedly a foreign company and did not have any asset in India. There is no such finding rendered by the learned Single Judge in this case.

15. Learned senior counsel invited our attention to the prima facie findings of the learned Single Judge in paragraphs 28 and 29 of the impugned order and would submit that no reasons are recorded by the learned Single Judge while arriving at such prima facie findings. He submits that since the appellant had categorically disclosed that except one immovable property which was also mortgaged, there was no other

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asset in the hands of the appellant, the learned Single Judge passed a drastic order of deposit of the entire amount against the appellant thereby almost passing a decree in favour of the respondent and against the appellant at the stage of deciding the application under section 9 of the Arbitration Act. It is submitted that the learned Single Judge had already passed an order of disclosure of the assets of the appellant and had already granted injunction in respect of those assets and thus could not have passed an order of deposit of the entire amount or to submit a bank guarantee in lieu of such deposit.

16. Mr. Kamat, learned counsel appearing for the appellant in Commercial Arbitration Appeal (L) No. 1022 of 2021 adopted the submissions made Mr.Seervai, learned senior counsel for the appellant in Commercial Arbitration Appeal (L) No. 1023 of 2021 and would submit that the power of Court under section 9 of the Arbitration Act are not completely dehors the power of Court under Order 38 Rule 5 of the Code of Civil Procedure, 1908. The respondent totally failed to make out a case for invoking the provisions of Order 38 Rule 5 in the petition filed under section 9 of the Arbitration Act. The respondent did not make out a case of any dishonest alienation or of creating any third party rights in any of the assets of the appellant before the learned Single Judge. Even if the respondent would have made out a strong case on merits that could not be the basis for invoking the power of Court under Order 38 Rule 5 of the Code of Civil Procedure.

17. Learned counsel submits that even if the appellant had not urged before the learned Single Judge that there were no sufficient pleadings in the arbitration petition attracting the provisions of Order 38 Rule 5 of the Code of Civil Procedure or even if such contention was not

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urged before the learned Single Judge by the appellant, it was the duty of the respondent to demonstrate that there were sufficient pleadings and also the duty of the Court to ascertain whether any such case was made out under Order 38 Rule 5 of the Code of Civil Procedure or not before granting any relief for interim measures in favour of the respondent.

18. Learned counsel appearing for the appellant submits that the unsecured claim of the respondent could not be converted into a secured claim by the learned Single Judge in the impugned order. He also made an attempt to distinguish the said judgment of this court in case of Valentine Maritime Ltd. (supra) on the ground that there were neither any pleadings to attract the provisions of Order 38 Rule 5 of the Code of Civil Procedure, 1908 nor any such case was made out by the respondent before the learned Single Judge.

19. Dr. Saraf, learned senior counsel for the respondent (original petitioner) on the other hand submits that the respondent had deposited security deposit under the agreement entered into between the appellant and the respondent which was liable to be refunded by the appellant to the respondent upon the respondent vacating the said premises. The respondent has admittedly vacated the said premises. The appellant had admitted the claim of the respondent before National Company Law Tribunal. The claim made by Marvel Mineral before the National Company Law Tribunal was admittedly rejected. The case of the appellant before the learned Single Judge was that the claim made by the respondent was adjusted by pleading novation of the agreement unilaterally.

20. Learned senior counsel for the respondent invited our attention

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to the averments made by the respondent in paragraphs 25, 26 and 37 to 44 made by his client in the said petition filed under section 9 of the Arbitration Petition. He submits that the appellant neither raised any plea in the affidavit in reply filed before the learned Single Judge that there were no sufficient averments made in the petition filed by the respondent under section 9 attracting the provisions of Order 38 Rule 5 of the Code of Civil Procedure, 1908 nor advanced such argument before the learned Single Judge by the appellant.

21. It is submitted by the learned senior counsel that even in the appeal memo in both these appeals, it is not the case of the appellant that such plea to the effect that though there were no averments alleged to have been made by the respondent attracting the provisions of the Order 38 Rule 5 or that though the appellant had raised this objection before the learned Single Judge, such argument has not been dealt with by the learned Single Judge.

22. Learned senior counsel submits that the learned counsel appearing for the appellant in both these matters have admittedly not advanced any arguments on the merits of the matter in these two appeals but only urged that there were neither any averments in the petition filed under section 9 nor any case was made out for invoking power of court under Order 38 Rule 5 of the Code of Civil Procedure.

23. Learned senior counsel placed reliance on the judgment of this Court in case of Valentine Maritime Ltd. (supra) and would submit that the defence raised by the appellant for withholding the admitted amount of refund towards the security deposit on return of the possession of the premises to the appellant was dishonest and ex-facie not maintainable. He submits that the learned Single Judge was thus

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right in securing the claim of the respondent.

REASONS AND CONCLUSIONS :-

24. It is an admitted position that the respondent had already handed over vacant possession of the premises to the appellant. On handing over possession by the respondent to the appellant, the appellant was liable to refund the security deposit made by the respondent. Admittedly the appellant did not refund the said amount. None of the learned counsel for the appellant made any submission on the merits of the matter and more particularly as to why the admitted refundable amount of deposit was not made by the appellant and as to how such amount could be adjusted by the appellant under an alleged unilateral novated contract.

25. We shall now deal with the submissions made by the learned senior counsel for the appellant on the sufficiency of the averments in the arbitration petition filed by the respondent under section 9 for seeking interim measures for securing the claim of the respondent in arbitration.

26. A perusal of the averments and more particularly in paragraphs 25, 26, 37 to 44 makes it clear that after pointing out the precarious financial condition of the appellant and the entitlement of the respondent to recover the security deposit upon handing over vacant possession of the premises to the appellant, the respondent pleaded that the defence of the set off against amounts payable to Marvel Minerals was illusory and sham.

27. In paragraph 37 of the petition, it was averred that the conduct of

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the appellant since March 2019 had been hostile, and the same has severally affected the business of the respondent especially in the severe financial crunch faced by the respondent due to the prevailing pandemic. It is averred that it is well known in the public domain that the promoters of the appellant had vehemently opposed the resolution plan of the respondent herein.

28. In paragraph 41 of the petition, it was averred by the respondent that there was accumulated losses of Rs.299.21 crores as per audited financial statements of the appellant for the period 1 st April, 2018 to 31st March, 2019. The appellant had incurred net loss of Rs.30,30,09,051/- during the financial year 2018-2019. The Audited Financial Statements discloses that the appellant had total indebtedness of Rs.224,17,11,358/-.

29. In paragraph 42, it was averred by the respondent that for the financial year ended on 31st March, 2019, the respondent defaulted in repayment of loans to a bank to the tune of default in repayment of loan to a bank amounting to Rs.68,73,613/- in the month of March 2019. The respondent had annexed a copy of the audited financial statement of the appellant, downloaded from the website of the Ministry of Corporate Affairs.

30. In paragraphs 43 and 44, it was averred by the respondent that as discernible from website of Ministry of Corporate Affairs, the appellant had created charge on its immoveable properties and moveable properties for an amount of Rs.138,38,00,00,000/-. It was averred that due to the precarious financial condition of the appellant, the respondent herein apprehends that the appellant was arranging its affairs to defeat the legitimate rights of the respondent and escape its

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obligations under the business centre agreement. This has become evident from the fact that the appellant purportedly paid Marvel Minerals on behalf of the respondent without any authorization to do so, and is now attempting to fraudulently misrepresent the actual quantum of security deposit paid by the respondent to the appellant.

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.

32. In the affidavit in reply filed by the appellant in Commercial Arbitration Petition (L) No. 6602 of 2020, the appellant has admitted that the only asset of the appellant building known as Essar House comprising of 22 floors situated at Keshavrao Khadye Marg, Opp. Race Course, Mahalaxmi, Mumbai 400 034. The said building is mortgaged with Indiabulls Housing Finance Limited, IDBI Trusteeship Services Ltd., Indiabulls Financial Services Ltd. for Rs.138,38,00,00,000/-. The appellant itself had annexed a copy of the index of charges of the appellant.

33. The affidavit of disclosure filed by the appellant on 21st 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.

34. This Court in case of Valentine Maritime Ltd. (supra) after adverting to the judgment of the Hon'ble Supreme Court in case of

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Raman Tech. & Process Engg. Co. & Anr. vs. Solanki Traders (2008) 2 SCC 302, a judgment of the Division Bench in case in case of National Shipping Company of Saudi Arabia vs. Sentrans Industries Limited, Mumbai, 2004 (2) Mh.L.J. 696, a judgment of the Division Bench of this Court Nimbus Communications Ltd. vs. Board of Control for Cricket in India 2013(1) Mh.L.J. 39, a judgment of the Hon'ble Supreme Court in the case of Adhunik Steels Ltd. vs. Orissa Manganese & Minerals (P) Ltd. (2007) 7 SCC 125, a judgment delivered by the learned single Judge of this Court in case of Baker Huge Singapore Pte vs. Shiv Vani Oil and Gas Exploration, 2014 SCC Online Bom. 1663 has held that under section 9(i) (ii) (b) of the Arbitration Act, the Court is empowered to pass interim measure to secure the amount in dispute in arbitration which may be in the form of bank guarantee or deposit of money in Court. Such powers of Court can be exercised not only in the hands of the parties to arbitration but also in the hands of third party who has to admittedly pay any amount to the party to the arbitration agreement by directing such third party to deposit the amount on behalf of a party to arbitration agreement in Court.

35. This Court has distinguished the judgment of the Hon'ble Supreme Court Raman Tech. & Process Engg. Co. & Anr. (supra) on the ground that the Supreme Court had dealt the powers of Court under Order 38 Rule 5 of the Code of Civil Procedure, 1908 in a suit and not in a petition filed under section 9 of the Arbitration Act.

36. This Court has already held in the aforesaid judgments that exercise of the power under section 9 of the Arbitration Act cannot be totally independent of the basic principles governing grant of interim

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injunction by the Civil Court, at the same time the Court that had decided 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. 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 has to be drawn between the two considerations in the facts of each case.

37. In our view since the Arbitral Tribunal is also empowered to make interim injunction and grant money claim on the basis of the admitted claim or in case there being no valid defence at all of the claim made by the claimant, the Court has to grant interim measure so as to secure the claim which would be subject matter of the dispute before the Arbitral Tribunal. The provisions under sections 9 and 17of the Arbitration Act are meant for the purpose of protecting the subject matter of the dispute till the arbitration proceedings culminates into an award. The obstructive conduct of the party against whom such a direction is sought is also regarded as a material consideration.

38. Since none of the counsel for the appellant have advanced any arguments on the merits of the case and about the so called adjustment of the alleged entitlement of their clients against the security deposit refund demanded by the respondent, it is prima-facie clear that the appellant has no defence on the merits of the claim made by the respondent for refund of the security deposit . Even otherwise in the facts of this case, we are inclined to accept prima-facie findings rendered by the learned single Judge in the impugned order to the

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effect that the defence raised by the appellant to the claim for refund of the security deposit is totally moonshine and untenable.

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 to furnish a bank guarantee once having rendered a prima-facie finding that the applicant would 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.

40. In the facts of this case, we are satisfied that the respondent (original petitioner) has good chances of succeeding in the arbitral proceedings and thus we do not find any reason to interfere with the impugned order passed by the learned Single Judge granting equitable reliefs. The learned Single Judge has dealt with the pleadings and documents and also various judgments relied upon by both the parties in the impugned order and has rightly passed the order of deposit or in alternative to furnish a bank guarantee of the equivalent amount

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against the appellant. The powers exercised by the learned single Judge are in accordance with the provisions of Section 9 of the Arbitration Act and not dehors it. There is no substance in the submissions made by the learned counsel for the appellant that the respondent did not make out a case for invoking the principles of Order 38 Rule 5 of the Code of Civil Procedure, 1908 or that there was any lack of pleadings in this regard in the arbitration petition filed by the respondent before the learned single Judge.

41. In our view, there is no substance in the submission made by the learned Counsel for the appellant that even if there was no objection raised by the appellant in the affidavit-in-reply filed in the proceedings under Section 9 of the Arbitration Act raising an issue of insufficiency of pleadings in the petition attracting the principles of Order 38 Rule 5 of the Code of Civil Procedure, 1908 or even if such objection was not raised before the learned Single Judge at the time of arguments, it was duty of the petitioner to demonstrate at the threshold whether there were sufficient pleadings invoking principles of Order 38 Rule 5 of the Code of Civil Procedure or not. There is no substance in the submission of the learned Counsel for the appellant that even in such circumstances, the Court suo moto ought to have refused to grant interim measures.

42. Insofar as the submission of the learned counsel for the appellant that the learned single Judge has not only directed the appellant to deposit the amount or in the alternative to furnish a bank guarantee but has also granted injunction against the assets of the appellant is concerned, even according to the appellant there is an isolated asset and that also is heavily encumbered. The appellant has not disputed the

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averments made by the respondent (original petitioner) about precarious financial condition of the appellant reflected in the said affidavit and also in the financial documents of the appellant brought on record by the respondent in the arbitration petition. There is thus no merit in this submission of the learned counsel for the appellant.

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.

44. In our view, both the Appeal are devoid of merits. We accordingly pass the following order :-

a) Commercial Arbitration Appeal (L) Nos.1022 of 2021 and 1023 of 2021 are dismissed.

b) In view of dismissal of the Commercial Arbitration Appeal (L) Nos.1022 of 2021 and 1023 of 2021, Interim Application (L) Nos.1446 of 2021 and 1497 of 2021 do not survive and are accordingly dismissed.

c) The time granted by the learned single Judge to deposit the amount or to furnish a bank guarantee is extended by four weeks from today.

      d)      There shall be no order as to costs.


  (V.G. BISHT, J.)                                   (R.D. DHANUKA, J.)