Case Note & Summary
The present appeal impugned an order dated 31st August 2023 passed by the Learned Single Judge in a Commercial Arbitration Petition filed by Respondent No.1 under Section 9 of the Arbitration and Conciliation Act, 1996. The Appellants, Satiate Engineering (India) Pvt. Ltd. and its directors/personal guarantors, had availed financial facilities from Respondent No.1, Siemens Financial Services Pvt. Ltd., secured by a mortgage over their factory premises. Disputes arose, and Respondent No.1 initiated arbitration and filed a Section 9 petition seeking appointment of a Court Receiver to take possession of the secured assets. The Learned Single Judge allowed the petition and appointed a Court Receiver. The Appellants appealed, arguing that the appointment of a Receiver was a drastic remedy and that the balance of convenience was in their favor. The Division Bench held that the Learned Single Judge had erred in appointing a Receiver without considering the balance of convenience and irreparable loss. The court noted that Respondent No.1 had already taken symbolic possession under the SARFAESI Act, and the Appellants were in actual possession. The court set aside the impugned order and allowed the appeal.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Appointment of Court Receiver - The court held that appointment of a Court Receiver to take possession of secured assets is a drastic remedy and should not be granted unless the balance of convenience is in favor of the applicant and the applicant would suffer irreparable loss if not granted. The Learned Single Judge erred in appointing a Receiver without such consideration. (Paras 1-17)
B) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Balance of Convenience - The court held that while considering an application under Section 9, the court must weigh the balance of convenience and irreparable loss. In the present case, the Respondent No.1 had already taken symbolic possession of the secured assets under the SARFAESI Act, and the Appellants were in actual possession. The appointment of a Receiver would disturb the status quo and cause irreparable loss to the Appellants. (Paras 10-17)
Issue of Consideration
Whether the Learned Single Judge was justified in appointing a Court Receiver to take possession of the secured assets of the Appellants pending arbitration, without considering the balance of convenience and irreparable loss.
Final Decision
The Division Bench allowed the appeal and set aside the order dated 31st August 2023 passed by the Learned Single Judge appointing a Court Receiver.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- interim measures
- appointment of Court Receiver
- balance of convenience
- irreparable loss
- secured assets
- possession
- arbitration petition
Case Details
2023 LawText (BOM) (09) 58
Comm. Arbitration Appeal (L) No.25189 of 2023 in Comm. Arbitration (L) No.20143 of 2023
Devendra Kumar Upadhyaya, CJ., Arif S. Doctor, J.
Mr. Mathews J. Nedumpara with Ms. Hemali Kurne and Advocate Shameem Fayiz for the Appellants; Mr. Anoshak Davar with Advocate Aaushi Doshi, Mr. Siddhesh Rajput i/by Indiallaw LLP for Respondent No.1
Satiate Engineering (India) Pvt. Ltd. & Ors.
Siemens Financial Services Pvt. Ltd. & Anr.
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Nature of Litigation
Appeal against an order appointing a Court Receiver under Section 9 of the Arbitration and Conciliation Act, 1996 in a commercial arbitration dispute.
Remedy Sought
The Appellants sought to set aside the order dated 31st August 2023 appointing a Court Receiver to take possession of their secured assets.
Filing Reason
The Appellants challenged the appointment of a Court Receiver by the Learned Single Judge, arguing that it was a drastic remedy and that the balance of convenience was in their favor.
Previous Decisions
The Learned Single Judge had allowed Respondent No.1's Section 9 petition and appointed a Court Receiver to take possession of the secured assets.
Issues
Whether the Learned Single Judge was justified in appointing a Court Receiver to take possession of the secured assets of the Appellants pending arbitration, without considering the balance of convenience and irreparable loss.
Submissions/Arguments
The Appellants argued that the appointment of a Court Receiver was a drastic remedy and that the balance of convenience was in their favor as they were in actual possession and Respondent No.1 had already taken symbolic possession under the SARFAESI Act.
Respondent No.1 argued that the appointment of a Receiver was necessary to protect its security interest and that the Learned Single Judge had correctly exercised discretion.
Ratio Decidendi
The court held that appointment of a Court Receiver under Section 9 of the Arbitration and Conciliation Act, 1996 is a drastic remedy and should not be granted unless the balance of convenience is in favor of the applicant and the applicant would suffer irreparable loss if not granted. The Learned Single Judge erred in appointing a Receiver without such consideration.
Judgment Excerpts
The present Appeal impugns an order dated 31st August 2023 by which the Learned Single Judge has, in the captioned Commercial Arbitration Petition filed by Respondent No.1 under Section 9 of the Arbitration and Conciliation Act, 1996, appointed a Court Receiver to take possession of the secured assets of the Appellants.
The court held that appointment of a Court Receiver to take possession of secured assets is a drastic remedy and should not be granted unless the balance of convenience is in favor of the applicant and the applicant would suffer irreparable loss if not granted.
Procedural History
Respondent No.1 filed a Commercial Arbitration Petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking appointment of a Court Receiver. The Learned Single Judge allowed the petition and appointed a Court Receiver on 31st August 2023. The Appellants filed the present appeal against that order. The appeal was reserved on 12th September 2023 and pronounced on 26th September 2023.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
