Case Note & Summary
The case involves two appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996, by Essar House Private Limited and Essar Services India Private Limited (appellants) against Arcellor Mittal Nippon Steel India Limited (respondent). The appeals challenge an order dated 10th December 2020 passed by a learned Single Judge of the Bombay High Court. The background is that on 1st April 2016, Essar Steel India Limited (now Arcellor Mittal Nippon Steel India Limited) entered into a Rental Agreement with Essar House Private Limited to occupy certain premises on leave and license basis, paying a security deposit of Rs.25,80,00,000/-. Subsequently, disputes arose between the parties, and the respondent filed arbitration petitions under Section 9 of the Arbitration Act seeking interim measures. The learned Single Judge directed the appellants to deposit Rs.35.5 crores and Rs.47.41 crores respectively with the Prothonotary and Senior Master of the court within eight weeks, or alternatively to furnish a bank guarantee for the entire amount along with interest. The Single Judge also directed the appellants to file an affidavit of disclosure of their movable and immovable assets, including monthly receivables and liabilities, and granted an injunction restraining them from disposing of, alienating, or creating third party rights over their assets except in the ordinary course of business. The appellants challenged this order, arguing that the Single Judge exceeded the scope of Section 9 by ordering a deposit of the security deposit amount and disclosure of assets. The court, after hearing both sides, upheld the Single Judge's order, finding that the respondent had made out a prima facie case and that the balance of convenience was in favour of granting interim relief to protect the subject matter of the arbitration. The court held that the directions for deposit, disclosure, and injunction were within the ambit of Section 9 and necessary to preserve the assets pending arbitration. The appeals were dismissed, and the interim applications were disposed of accordingly.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Security Deposit - The court upheld the order directing the appellant to deposit the security deposit amount of Rs.35.5 crores and Rs.47.41 crores with the Prothonotary and Senior Master or furnish a bank guarantee, along with disclosure of assets and an injunction against alienation, as the respondent had made out a prima facie case and the balance of convenience was in favour of granting such interim relief to protect the subject matter of the arbitration. (Paras 1-3)
B) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Disclosure of Assets - The court upheld the direction for the appellant to file an affidavit of disclosure of movable and immovable assets, including monthly receivables and liabilities, as such disclosure was necessary to ascertain the appellant's financial position and ensure that the interim order could be effectively enforced. (Para 2)
C) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Injunction - The court upheld the injunction restraining the appellant from disposing of, alienating, transferring, or creating third party rights over its assets except in the ordinary course of business, as such restraint was necessary to preserve the assets pending the arbitration proceedings. (Para 2)
Issue of Consideration
Whether the learned Single Judge was justified in directing the appellants to deposit the security deposit amounts and furnish disclosure of assets pending arbitration, and whether such order was within the scope of Section 9 of the Arbitration and Conciliation Act, 1996.
Final Decision
The appeals are dismissed. The order dated 10th December 2020 passed by the learned Single Judge is upheld. The interim applications are disposed of accordingly.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- interim measures
- security deposit
- deposit of amount
- bank guarantee
- disclosure of assets
- injunction against alienation
- prima facie case
- balance of convenience
- irreparable loss
Case Details
2021 LawText (BOM) (02) 42
Comm. Arbitration Appeal (L) No. 1022 of 2021 with Interim Application (L) No. 1446 of 2021 and Comm. Arbitration Appeal (L) No. 1023 of 2021 with Interim Application (L) No. 1497 of 2021
R. D. Dhanuka, V. G. Bisht
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; Mr. Ashish Kamat a/w Mr. Abhishek Kale i/by M/s. Naik Naik and Co., for the Appellant in COMAPL/1022/2021; 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 Appeals.
Essar House Private Limited and Essar Services India Private Limited
Arcellor Mittal Nippon Steel India Limited (formerly Essar Steel India Limited)
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Nature of Litigation
Appeals under Section 37 of the Arbitration and Conciliation Act, 1996 against an interim order under Section 9 directing deposit of security deposit and disclosure of assets.
Remedy Sought
The appellants sought to set aside the order dated 10th December 2020 passed by the learned Single Judge directing them to deposit amounts and disclose assets.
Filing Reason
The appellants challenged the Single Judge's order as being beyond the scope of Section 9 of the Arbitration Act.
Previous Decisions
The learned Single Judge passed an order on 10th December 2020 directing the appellants to deposit Rs.35.5 crores and Rs.47.41 crores respectively, or furnish a bank guarantee, and to disclose assets, and granted an injunction.
Issues
Whether the learned Single Judge was justified in directing the appellants to deposit the security deposit amounts and furnish disclosure of assets pending arbitration.
Whether such order was within the scope of Section 9 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The appellants argued that the Single Judge exceeded the scope of Section 9 by ordering a deposit of the security deposit amount and disclosure of assets.
The respondent argued that the interim relief was necessary to protect the subject matter of the arbitration and that the order was within the ambit of Section 9.
Ratio Decidendi
The court held that the directions for deposit of the security deposit amount, disclosure of assets, and injunction against alienation were within the scope of Section 9 of the Arbitration and Conciliation Act, 1996, as they were necessary to protect the subject matter of the arbitration and to ensure that the interim order could be effectively enforced. The respondent had made out a prima facie case and the balance of convenience was in favour of granting such interim relief.
Judgment Excerpts
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.
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.
By consent of parties, both these Appeals were heard together and are being disposed of by a common order. The facts in both the matters are almost identical.
Procedural History
The respondent filed arbitration petitions under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim measures. The learned Single Judge passed an order on 10th December 2020 directing the appellants to deposit amounts and disclose assets. The appellants filed appeals under Section 37 against that order. The appeals were heard together and disposed of by this common judgment.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 37
