Calcutta High Court
M/S. Cosmic Ferro Alloys Limited vs M/S. Cosmic Crf Limited on 11 August, 2023
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IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
(Commercial Division)
Present :-
The Hon'ble Justice Moushumi Bhattacharya
AP 521 of 2023
M/s. Cosmic Ferro Alloys Limited
vs.
M/s. Cosmic CRF Limited
For the Petitioner : Mr. Priyankar Saha, Adv.
Mr. Kalyan Bhaumik, Adv.
Ms. Sampa Mitra, Adv.
Ms. Ankana Basu, Adv.
For the Respondent : Mr. Anirban Ray, Adv.
Mr. Pranit Bag, Adv.
Ms. Patrali Ganguly, Adv.
Ms. Joyshree Ghosh, Adv.
Last Heard on : 10.08.2023
Delivered on : 11.08.2023
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Moushumi Bhattacharya, J.
1. The petitioner seeks interim relief in the form of an injunction
restraining the respondent from operating two Bank accounts
mentioned with ICICI Bank Limited and Kotak Mahindra Bank without
leaving aside an amount of Rs. 10,33,34,340/-. The particulars of the
Bank accounts are mentioned in prayer (b) of the application.
2. The petitioner relies on Business Transfer Agreement (BTA)
dated 19th January, 2022 between the petitioner and the respondent by
which the respondent was to pay Rs. 49 crores to the petitioner in
exchange of the petitioner's transferring assets of the business in
question. The petitioner has been described as the "Seller" and the
respondent as the "Purchaser" in the said agreement. Learned counsel
appearing for the petitioner says that of the Rs. 49 crores, Rs. 10 crores
are outstanding from the respondent as on date. Counsel relies on a
statement in paragraph 21 of the application which contains the
particulars of the balance due of approximately Rs. 10.33 crores.
3. Counsel places three Addenda to the BTA of 29th January, 2022,
16th May, 2022 and 25th August, 2022 essentially for clarifying the
penalty clauses and extending the time for conclusion of BTA. Counsel
submits that all of these Addendum contained clauses preserving the
other terms of the BTA including the arbitration clause.
4. The parties entered into a tripartite agreement with Kotak
Mahindra Bank on 25th August, 2022 which also referred to BTA and
the consideration amount of Rs. 49 crores. The agreement notes among
others clauses that Kotak Mahindra Bank will pay Rs. 20 crores on
behalf of the Purchaser/respondent.
5. Learned counsel appearing for the respondent opposes any
interim relief on the ground of suppression and the petitioner's failure
to establish a prima facie case in the absence of requisite pleadings.
Counsel submits that there were two additional Addenda to the BTA
executed between the parties on 26th August, 2022 and 9th September,
2022. Counsel submits these two Addenda have not been disclosed in
the application. It is further submitted that the petitioner is required to
specifically plead a case of the respondent dealing with the subject
matter of the agreement in order to get the relief prayed for. Counsel
submits that the petitioner has also not made out a case of irreparable
loss and injury.
6. The undisputed fact with regard to the execution of the Business
Transfer Agreement of 19th January, 2022 for the consideration amount
of Rs. 49 crores has already been stated above. The BTA was followed by
three Addenda on the dates mentioned above. Countering the allegation
of suppression made on behalf of the respondent, counsel for the
petitioner makes a specific statement that the two further Addenda to
the BTA of 26th August, 2022 and 9th September, 2022 were not given
effect to by the parties. Hence, as the matter stands there is a BTA
followed by three Addenda Agreements and a Tripartite Agreement of
26th August, 2022 involving the Kotak Mahindra Bank which also
pitched in with payment of Rs. 20 crores on behalf of the respondent /
purchaser.
7. The petitioners allegation of Rs. 10 crores remaining
outstanding from the respondent has been disputed by the latter. The
respondent has relied on Addendum dated 9th September, 2022 to say
that the consideration amount in the BTA was modified from 49 to 39
crores. Since, the petitioner says that none of the two later Addenda
exists, the Court must proceed on the fact that the BTA was executed
for a consideration of Rs. 49 crores of which the petitioner has
recovered 39 crores and Rs. 10 crores remain outstanding.
8. The objection with regard to the petitioner failing in its
obligation to establish a prima facie case for interim relief is not
acceptable for the following reasons.
9. The present application has been filed under section 9 of The
Arbitration and Conciliation Act, 1996 which entitles a party to an
arbitration agreement to apply to a Court for interim measures before,
during or even at any time after making of the arbitral award subject to
the application being made before the award is enforced. Section 9(1)
offers a wide bouquet of measure available to the applicant including for
preservation of the subject matter of the arbitration agreement and
securing the amount in dispute in the arbitration. The Court is also
conferred with the power to grant such interim measure of protection as
the Court may deem just and convenient. Section 9(1) is intended to be
a swift-measure order so that the subject matter of the dispute in
arbitration or of the arbitration agreement is preserved during the
pendency of the arbitration. The rationale is to protect the applicant so
that the applicant is in a position to approach the Tribunal with a
dispute with substance or enjoy the fruits of the award if and when the
award is passed. Section 9(1) measures do not call for a lengthy or
detailed inquiry. The Court arrives at a prima facie view of the case
made out and the urgency involved and exercises its discretion to pass
suitable orders.
10. The aforesaid view is supported by sections 9(2) and (3) which
mandate that the arbitral proceedings shall be commenced within 90
days from the date of the interim order and the dispute shall be carried
to the arbitration for final resolution. The Division Bench of the Bombay
High Court in Deccan Chronicle Holdings Limited vs. L&T Finance
Limited; 2013 SCC OnLine Bom 1005 relied on Adhunik Steel Ltd. vs.
Orissa Manganese and Minerals (P) Ltd.; (2007) 7 SCC 125 and held that
the rigours of every procedural provision of the CPC cannot be pressed
into service since that would defeat the paramount interests of justice
which is to preserve the efficacy of arbitration as an effective form of
dispute resolution. This Court came to a similar view in Bridge Track
and Tower Private Limited vs. Simplex Infrastructures Limited in AP 291
of 2021 where the petitioner had sought for a similar relief.
11. The decision cited on behalf of the respondent namely Sunil
Kakrania vs. M/s. Saltee Indrastructure Ltd.; AIR 2009 Cal 260 and
Kohinoor Steel Private Limited vs. Pravesh Chandra Kapoor; AIR 2011
Cal 29 were concerned with the necessity of making out a clear case for
an order in the nature of Order XXXIX Rule 1(b) which involves the
defendant intending to remove / dispose of the property with a view to
defrauding its creditors. In both the decisions the Division Bench found
the pleadings / allegations to be insufficient for grant of an order of
attachment or an order of similar nature. These decisions however do
not assist the respondent since the petition contains specific allegations
of the respondent trying to withdraw amounts from its bank accounts
as well as alienate the properties which form the subject matter of the
arbitration agreement / BTA.
12. Further, the respondent's reply to the petitioner's letter dated
10th June, 2023 (notice under section 21 of the 1996 Act) reinforces the
apprehension of the petitioner. The respondent has made allegations
which are not in tune with the agreed terms of the BTA / arbitration
agreement.
13. It may not be possible for a party who comes to Court through
an application under section 9 of the Act to make full disclosures and
place evidence substantiating the apprehension pleaded. Holding a
party to this kind of rigour would discourage the kind of relief which is
contemplated under section 9(1) of the Act. The Court is simply to see
whether the applicant has made out a case which would warrant the
exercise of discretion and a consequent order preserving the subject
matter of the dispute or the arbitration agreement or whether the
apprehension is totally unfounded. Hence, the argument that the
petitioner being required to subject itself to the drill of the amended
provisions of The Code of Civil Procedure, 1908 relating to pleadings is
not commensurate to the legislative objective of enacting section 9(1) of
the Act.
14. The petitioner has also not prayed for a direction on the
respondent to pay Rs. 10 crores to the petitioner. The petitioner has
simply asked for the respondent for this sum of money to be kept aside
until the disputes are decided in arbitration. The Court deems this to be
in consonance with the powers conferred on the Court under section
9(1) of the Act which empowers the Court to grant any other interim
measure of protection which appears to be just in the circumstances
brought before it.
15. Therefore, until the parties approach an arbitral tribunal for
giving effect to the arbitration clause contained in the BTA, the
respondent shall keep aside a sum of Rs. 10,33,34,340/- before
operating the bank accounts maintained with the ICICI Bank and Kotak
Mahindra Bank.
16. Since the parties have been heard at length and will carry the
rest of the disputes to arbitration, nothing further remains to be
decided in the application. AP 521 of 2023 is accordingly disposed of.
The interim order will remain in place till 2 weeks after constitution of
the arbitral tribunal. The parties shall act within the timeframes of
section 9(2) of the 1996 Act with regard to commencement of the
arbitral proceedings.
Urgent photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfillment of requisite formalities.
(Moushumi Bhattacharya, J.)
