Calcutta High Court
Prudent Arc Limited vs Rashi Enterprises And Anr on 4 September, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
ODC-28
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
[Commercial Division]
AP-COM/15/2024
IA NO: GA-COM/1/2024
PRUDENT ARC LIMITED
VS
RASHI ENTERPRISES AND ANR
BEFORE:
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
Date : 4th September, 2024
Appearance:
Mr. P. Sinha, Adv.
Mr. Ritoban Sarkar, Adv.
Mr. K.K. Pandey, Adv.
...for petitioner.
The Court:- Despite service, none appears for the respondents. The
affidavit of service filed today be kept on record.
The present challenge under Section 37 of the Arbitration and Conciliation
Act, 1996 has been preferred against an order dated March 16, 2024 passed by
the learned Arbitrator, thereby refusing the petitioner's prayer under Section 17
of the said Act.
The petitioner alleges that a loan was given by the petitioner to the
respondents, which was never repaid to the petitioner.
Accordingly, the petitioner initiated the arbitral proceeding and made an
application under Section 17 of the 1996 Act. In the said application, the
petitioner sought several reliefs, the first of which was a direction for the
respondent to furnish security to the tune of the claim of the petitioner, that is,
Rupees 1,35,66,420/-. The second relief sought was restraining the respondents
from operating the bank accounts as mentioned in Annexure 'J' to the Section
17 application.
The learned Arbitrator refused such relief on several grounds. The first
ground of refusal was that the claimant/ petitioner failed to show and satisfy the
Tribunal that the accounts mentioned in Annexure 'J' belong to the respondents.
The second ground was that the claimant had sought injunction regarding seven
bank accounts whereas the purpose could be served against only one account.
The learned Arbitrator went on to observe that in the affidavit portion of
the application under Section 17, the relevant paragraph mentioning the
claimant/petitioner's knowledge about the accounts belonging to the
respondents was not sworn to be true to the claimant's knowledge, but referred
to as submissions of the claimant. It was also recorded by the learned Arbitrator
that instead of clearly giving the name of the account holders against each
account, the claimant has mentioned the name Rashi Enterprises as the
borrower. Also, in the absence of any cogent evidence, it was held that mere
apprehension that there is every likelihood that the respondent firm may divest
off its assets was not sufficient to grant injunction regarding operation of any of
the bank accounts.
Learned Counsel appearing for the petitioner specifically points out to the
averments made in the application under Section 17 and the annexure thereto
and submits that the refusal impugned herein was based merely on
technicalities. Learned counsel cites Essar House Private Limited versus Arcellor
Mittal Nippon Steel India Limited reported at 2022 SCC Online SC 1219 in
support of the proposition that if strong prima facie case is made out and
balance of convenience is in favour of interim relief being granted, the Court
exercising power under Section 9 of the 1996 Act should not withhold relief on
the mere technicality of absence of averments, incorporating the grounds for
attachment before judgment under Order 38 Rule 5 of the Code of Civil
Procedure. Proof of actual attempts to deal with, remove or dispose of the
property with a view to defeat or delay the realization of an impending arbitral
award, it was held, is not imperative for grant of relief under Section 9 of the
1996 Act.
Learned Counsel for the claimant/petitioner argues that what is applicable
as a ratio to Section 9 applications is equally applicable to applications under
Section 17 of the 1996 Act.
Upon a perusal of the impugned order, it transpires that the Arbitrator
based his findings entirely on technicalities. In paragraph no. 17 of the
application under Section 17, the claimant had stated that the claimant is aware
of the following assets of the respondent which include certain bank accounts
more fully described in the schedule annexed to the said application and marked
with the letter 'J'.
Although the learned Arbitrator was right in observing that in the jurat of
the affidavit the said paragraphs were mentioned not to be true to the knowledge
of the petitioner but as submissions, fact remains that the claimant, on oath,
had stated that the accounts in question belong to the respondent.
That apart, in the affidavit, paragraph numbers 1 to 3 and 5(ix-xii) have
been stated to be true to the knowledge of the person swearing the affidavit on
behalf of the claimant. In the said paragraphs and sub-paragraphs, the claimant
has clearly set out that in course of transactions an amount of Rupees
78,02,091/- had been lent and advanced to the respondent, which the
respondent has failed to repay to the claimant. The repeated failures of the
respondent and the attending circumstances have also been stated in the
concerned sub-paragraphs of paragraph 5 of the Section 17 application, which
have been marked as true to the knowledge of the claimant in the affidavit
portion.
Since the basic facts and the fundamental rudiments of the allegations
have been described to be true to the knowledge of the person swearing the
affidavit on behalf of the claimant, further details furnished in paragraph 17 and
the Annexure 'J' to the said application cannot be said to be divorced from the
said rudimentary pleadings. As such, sufficient material was available before the
arbitral tribunal for passing an order under Section 17. In fact, in the absence of
any controversy at this stage, since no objection/opposition to the Section 17
application is yet on record, the averments made in the Section 17 application
ought to have been taken as sacrosanct for the purpose of considering grant of
interim orders.
The other grounds on which the prayer of the claimant was refused cannot
also find favour with this Court. Insofar as the claimant seeking relief regarding
seven bank accounts is concerned, it is not possible for the claimant to know as
to what amount is lying in each of the seven accounts individually, for which
injunction was sought in respect of all the seven accounts of the respondents
which have come to the knowledge of the claimant. In fact, the injunction sought
only restricts itself up to the amount claimed, that is Rs. 1,35,66,420/-, and
only seeks that the said sum be directed to be set apart across all the seven
accounts.
There was perfect justification in such prayer being made, since without
specific knowledge as to what amount was lying in each of the accounts, the
remedy sought was the only remedy which could be sought by the claimant.
Insofar as the requirement of cogent evidence is concerned, following the
principle as laid down by the Supreme Court in Essar House Private Limited
(supra), in an application supported by affidavit, for the purpose of injunction
and/or even attachment, allegations to the effect that attempts are being made
to deal with or remove or dispose of the subject property are sufficient. No proof
is required to be given in support thereof at the preliminary interim stage.
The above would hold true even in a regular application under Order 38,
Rule 5 of the Code of Civil Procedure before a Civil Court, more so in an
application under Section 9 of the 1996 Act preferred before a Court of law.
Hence, the said principle is applicable all the more in case of a Section 17
application, since section 19 of the 1996 Act specifically provides that the
arbitral tribunals shall not be bound by the Code of Civil Procedure.
Read in conjunction with Section 5 of the 1996 Act, Court intervention
shall also be circumscribed by the parameters as provided in the statute itself.
Hence, the present adjudication under Section 37 of the 1996 Act has to be
governed by the parameters of Section 19 of the 1996 Act as well as Section 17
thereof.
Is such view of the matter, I do not find that there was any plausible
reason for which the prayer of the petitioner in the Section 17 application could
be refused.
All the germane averments have duly been made in the application under
Section 17 relating to the factum of the loan advanced to the respondent and the
same not being repaid to the petitioner. The rudiments and basis of the
calculation of the claims also find place in the Section 17 application. At this
stage, it is well settled that the learned Arbitrator has to proceed on the premise
that the averments made in the Section 17 application, in the absence of any
controversy, are to be proceeded on as sacrosanct. Seen from such perspective,
the petitioner was entitled to injunction as sought in the application under
Section 17.
In view of the above observations, I find that the impugned order was
tainted by patent illegality and perversity inasmuch as the same does not take
into account the true purport of the annexures and pleadings of the Section 17
application.
Accordingly, AP-COM 15 of 2024 is allowed, thereby granting injunction
restraining the respondents from operating the bank accounts as enumerated in
Annexure 'J' to the application under Section 17 without setting apart a sum of
Rs.1,35,66,420/-. It is made clear that there would be no fetter on the
respondents from operating the said bank accounts in respect of the balance
amount in the said accounts, if any available after setting aside the sum as
indicated above. This order shall operate till disposal of the arbitral proceedings
but shall be subject to the final award passed therein.
GA-COM/1/2024 is disposed of as well accordingly in the light of the
above observations.
(SABYASACHI BHATTACHARYYA, J.)
SK.
