Madras High Court
M/S.Pioneer Hydrothermal ... vs M/S.Techsharp Engineers Pvt. Ltd on 25 January, 2022
Arb.Appln.No.180 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 25.01.2022
Coram:
THE HONOURABLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY
Arbitration Application No.180 of 2021
M/s.Pioneer Hydrothermal Services Pvt. Ltd.
Pioneer House, 3-10-4/B/2,
Near St.Joseph's High School,
Ramanthapur, Hyderabad – 500 013
Represented by its Director and Authorised Signatory,
Konghot Krishna Prasad, Aged 34 years, S/o.Methil Gangadharan,
Residing at Flat No.E-304, 3rd Floor, Aparna Sarovar Granda, Kanchi
Gachibowli Nallagandla, Lingampally, K.V.Rangareedy,
Hyderabad – 500 013. ... Applicant
/versus/
1. M/s.Techsharp Engineers Pvt. Ltd.,
Represented by its Authorised Officer,
C-39, 2nd Avenue,
Anna Nagar, Chennai – 600 040,
presently having office at
No.10/17, 8th Street,
M-Block, Anna Nagar East,
Chennai – 600 102.
2. M/s.Bharath Petroleum Corporation Limited (BPCL),
Kochi Refinery,
Karimughal Road, Thrippunithura,
Ambalamugal, Kochi,
Kerala – 682 302 ... Respondents
Page 1 of 12
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Arb.Appln.No.180 of 2021
Prayer: This Arbitration Application is filed under order XIV Rules 8 of Original
Side Rules read with Section 9 of Arbitration and Conciliation Act, 1996 praying
this Court, pending the hearing and final adjudication of the dispute by an arbitral
tribunal, should not be pleased to pass an order of Interim Directions shall be
granted against the respondent and not to direct a prohibitory order against the 2 nd
respondent prohibiting them for praying any amount to the tune of
Rs.10,22,85,244/- (Rupees Ten Crores Twenty Two lakhs Eighty Five Thousand
and two forty four only) thereon to the 1st respondent and consequently direct the
2nd respondent to deposit the said amount with this Hon'ble Court.
For Applicant : Mr.Vipin Warrier
For R1 : Mr.R.V.Prabhat, for
Mr.Jayesh B.Dolia
For R2 : Mr.M.Vijayan, for
M/s.King & Partridge
ORDER
The applicant seeks a prohibitory order restraining the 2nd respondent
from making payments to the 1st respondent to the extent of Rs.10,22,85,244/- and
to direct the 2nd respondent to deposit the said amount before this Court.
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Arb.Appln.No.180 of 2021
2. A work order dated 30.04.2016 was issued to the applicant by the
1st respondent herein in relation to the supply and application of insulation of
piping system on back to back basis for the offsite of IREP project of BPCL, Kochi
Refinery (the 2nd respondent herein). Pursuant thereto, the applicant undertook
work. The terms and conditions annexed to the work order, include the terms of
payment as clause 10. As per the terms of payment, the applicant was entitled to
submit running account (RA) bills for payment on account or as advances. The
payment breakup, including the 10% retention amount, is specified in the said
clause 10. Upon execution of work, the applicant raised several RA bills. On
receipt of such bills, it appears that some payments were made by the 1st
respondent. According to the applicant, full payment was not made against these
RA bills; and a statement indicating the details of bills issued and payments
received in respect thereof is relied upon in this regard by the applicant. On such
basis, the applicant claims that the aggregate outstanding is a sum of about
Rs.10,22,85,243/-. On the contrary, the 1st respondent states that RA bills 1 to 11
were paid. As regards RA bill 11-A, it is stated that the said RA bill is the 2 nd RA
bill raised in the same month. Since the terms of payment do not provide for
raising more than one RA bill in the same month, RA bill 11-A was rejected. As
regards the bills raised subsequent thereto, it is stated that the said bills were not
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Arb.Appln.No.180 of 2021
processed because joint measurements were not taken in spite of the 1 st respondent
calling upon the applicant to come forward for measurements and reconciliation.
The 1st respondent relies upon the reply notice dated 01.03.2018 in this regard.
3. As indicated earlier, the 2nd respondent is the employer, which
awarded the main contract to the 1st respondent. The 2nd respondent states, on
instructions, that all the RA bills raised by the 1st respondent on the 2nd respondent
were settled. The 1st respondent produced a copy of the final bill dated 21.03.2019
in compliance with directions issued by me earlier. The said final bill of the 1 st
respondent is for a sum of Rs.5,15,37,000/-. As regards the final bill, the 2nd
respondent states that such final bill was not received. The 2nd respondent further
submits, on instructions, that a sum of Rs.4,00,37,000/- may be payable by the 2nd
respondent to the 1st respondent. If a final bill of current date is raised by the 1 st
respondent in this regard, the 2nd respondent states that the said bill would be
processed, and, subject to the aforesaid, if directed by this Court, the 2nd
respondent is ready and willing to create a fixed deposit account in respect of the
above mentioned sum of Rs.4,00,37,000/- subject to the outcome of arbitration
proceedings.
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Arb.Appln.No.180 of 2021
4. A preliminary issue was raised by the 1st respondent that the
arbitral proceedings initiated by the applicant earlier were rejected by the Arbitral
Tribunal on the ground that such proceedings were premature. In view thereof, it is
contended that the present Section 9 application is not maintainable. On merits, the
1st respondent relies upon several judgments in support of the contention that the
present application is liable to be rejected. The said judgments are set out below:
(i). M/s.A-1 Biz Solutions Chennai v. M/s.Cascade Billing Center Inc,
judgment dated 27.07.2011, Madras High Court (DB).
(ii). Raman Tech and Process Engineering v. Solanki Traders, judgment
dated 20.11.2007 (SC)
(iii). Shinago Holdings v. M. Ethiraj, judgment dated 11.08.2017, Madras
High Court (DB).
(iii). BMW India v. Libra Automotives, order dated 09.07.2019, Delhi
High Court.
5. On the basis of the above judgments, the 1 st respondent contends
that an application under Section 9 of the Arbitration and Conciliation Act, 1996
(the Arbitration Act) seeking a prohibitory order should be tested against the
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Arb.Appln.No.180 of 2021
requirements of Order 38 Rule 5 of C.P.C. Consequently, the applicant is under an
obligation to establish a prima facie case that the amount claimed is due and
owing to the applicant from the 1st respondent. However, the establishment of a
prima facie case is insufficient. In addition, the applicant is under an obligation to
establish that the 1st respondent intends to defeat the fruits of a potential arbitral
award by alienating or moving its assets outside the jurisdiction of the Court.
According to the 1st respondent, in the case at hand, the applicant has failed to
establish even a prima facie case in as much as measurements have admittedly not
been taken and the bills have not been certified. As regards the 2nd requirement
under Order 38 Rule 5, the 1st respondent contends that the applicant has
completely failed to establish that the 1st respondent would refuse to make payment
if an arbitral award is pronounced in favour of the applicant.
6. At the outset, the preliminary objection of the 1st respondent
should be dealt with. As indicated above, such preliminary objection is that the
arbitral proceedings initiated by the applicant earlier were rejected on the ground
that such proceedings are premature and would have to await the final bill payment
by the 2nd respondent to the 1st respondent since it is a back-to-back contract. An
application may be filed under Section 9 of the Arbitration Act either prior to the
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Arb.Appln.No.180 of 2021
constitution of the arbitral tribunal or, subject to establishing that the remedy under
Section 17 is not efficacious, in course of arbitral proceedings, or after the award is
pronounced but before such award is enforceable. In the case at hand, the
applicant approached the Arbitral Tribunal, but an application under Section 16 of
the Arbitration Act was allowed. It is stated by learned counsel for the applicant
that the said order has been assailed before this Court. Therefore, the facts on
record disclose that the applicant has demonstrated the manifest intent to resolve
the dispute through arbitration. Accordingly, the preliminary objection is overruled.
7.Turning to the merits of the application, the principal objection of
the 1st respondent is that the requirements of Order 38 Rule 5 of C.P.C were not
satisfied by the applicant. Therefore, this objection should be subjected to close
scrutiny. In the affidavit in support of this application, the applicant has stated
that a principal sum of Rs.6,62,17,343/- is due and payable to the applicant by the
1st respondent towards work done pursuant to the work order. The applicant has
averred as follows in paragraph 11 of the affidavit in support of the application:
“The 1st Respondent had been evading and
avoiding making payments to this Applicant from
December, 2017 and will not release payments to this
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Applicant once the payments are received by the 1st
Respondent from the 2nd Respondent. The Applicant
owing to the conduct of the 1st Respondent reasonably
apprehends that the 1st Respondent will not make
payments to this Applicant once the payments are
received by 1st Respondent from 2nd Respondent”.
8. In support of the application, the applicant has filed all the bills
raised by the applicant on the 1st respondent. In addition, a statement setting out
the details of bills, amounts received in respect thereof and amounts outstanding
has been filed.
9. The contention of the 1st respondent that a prima facie case should
be made out is unexceptionable. The work order provides for the processing of RA
bills subject to retention. All the RA bills are on record. There is no
communication on record from the 1st respondent setting out reasons for rejecting
these bills. The main objection is that the outstanding bills were not certified and
that measurements were not taken. Nevertheless, in the absence of an express
communication stating that the work was not done or that the amounts claimed in
these bills are not payable, the applicant has made out a prima facie case. This
leads to the next issue whether the requirement under Order 38 Rule 5 that the 1 st
respondent would remove the assets from the jurisdiction of the Court and thereby
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defeat the fruits of the potential arbitral award has been satisfied by the applicant.
On this issue, it should be noticed that the applicant is not seeking to attach a
movable or immovable property of the 1st respondent. Instead, the asset is in the
form of a receivable from the 2nd respondent to the 1st respondent. The said
receivable is money. Given the nature of the asset, the test of removal of assets
from the jurisdiction of the Court cannot be applied without tweaking such test to
suit the nature of the asset. In response to the submission of the 2nd respondent that
it is ready and willing to place Rs.4,00,00,037 in a fixed deposit account, the
contention of the 1st respondent is that this money would be put to use by the 1 st
respondent. Moreover, as stated above, in the affidavit in support of the
application, the applicant has stated that the 1st respondent has evaded and avoided
payments from December 2017. The admitted position, as on date, is that no
payments were made pursuant to any bills subsequent to RA bill 11. About 4 years
have elapsed in the meantime. In these facts and circumstances, in my view, the
requirements of Order 38 Rule 5 of C.P.C., as applicable to a garnishee application
in respect of a receivable, stand satisfied.
10.Although the applicant makes a principal claim for a sum of
Rs.6,62,17,343/- and has submitted a statement which seems to indicate that the
principal receivable is about Rs.7,62,00,000/-, the contract envisages retention
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until measurements are taken and the completion certificate is issued. Therefore, a
prohibitory order for the full amount claimed is not appropriate. In any event,
learned counsel for the 2nd respondent indicated that a sum of about
Rs.4,00,37,000/- may be payable by the 2nd respondent to the 1st respondent.
Therefore, the prohibitory order should be limited to that extent. Accordingly,
Arbitration Application No.180 of 2021 is disposed of with the following
directions:
(i). The applicant is permitted to raise an invoice of current date
towards the final bill. Such invoice may be issued without prejudice to the 1 st
respondent's contention in respect of the previously issued invoice, whether for
purposes of limitation or otherwise.
(ii). Upon receipt of such invoice, the 2nd respondent is directed to
create a fixed deposit account for a sum of Rs.4,00,37,000/- to the credit of
Arbitration Application No.180 of 2021 in an interest bearing account in any
nationalised bank. Such fixed deposit shall be for an initial period of one year.
Upon establishing such fixed deposit account, the 2nd respondent is directed to
hand over a copy of the fixed deposit receipt to the applicant and the 1st respondent
herein.
(iii). The applicant may approach the arbitral tribunal if extensions of
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Arb.Appln.No.180 of 2021
the fixed deposit are required after the initial period of one year. The fixed deposit
shall abide by the outcome of arbitral proceedings between the applicant and the 1st
respondent.
(iv) The 2nd respondent is restrained from making the final bill
payment to the 1st respondent except by way of creating the fixed deposit as
directed above.
(v) It is needless to say that the observations contained in this order
are tentative and for interlocutory purposes only, and that the arbitral tribunal may
examine these issues without being influenced by such observations, be it in the
dispute between the applicant and the 1st respondent or the dispute between the 1st
respondent and the 2nd respondent.
25.01.2022
Index : Yes/No.
Internet : Yes/No.
Bsm
SENTHILKUMAR RAMAMOORTHY J,
bsm
https://www.mhc.tn.gov.in/judis
Arb.Appln.No.180 of 2021
Arb.Appln.No.180 of 2021
25.01.2022
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