Case Note & Summary
The case arises from a loan agreement between JBF Industries Ltd (respondent/petitioner) and Suryachakra Power Corporation Ltd (appellant/respondent). The respondent lent money to the appellant, who failed to repay the principal and interest. The appellant issued cheques that were dishonoured with the remark 'payment stopped by drawer'. The respondent filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief, including an injunction and security for the amount due. The learned Single Judge, after considering the conduct of the appellant, found that the appellant had made false statements, failed to pledge shares as agreed, and had no unencumbered assets. The Single Judge prima facie concluded that Rs. 6,66,27,686/- was due and payable, and that the respondent was not adequately secured. Consequently, the Single Judge passed an order directing the appellant to deposit the amount or provide security, and also granted an injunction restraining the appellant from disposing of assets. The appellant appealed under Section 37 of the Act. The Division Bench of the Bombay High Court, after hearing both sides, found no merit in the appeal. The court noted that the Single Judge had correctly exercised discretion based on the material on record, including the appellant's dishonest conduct and the need to protect the respondent's interests pending arbitration. The appeal was dismissed, and the interim order was upheld.
Headnote
A) Arbitration - Interim Relief under Section 9 - Grant of Injunction/Security - Section 9 of the Arbitration and Conciliation Act, 1996 read with Order 38 Rule 5 of the Code of Civil Procedure, 1908 - The court upheld the interim order directing the appellant to deposit Rs. 6,66,27,686/- and to provide security, noting the appellant's dishonest conduct, failure to pay dues, and lack of unencumbered assets. Held that the Single Judge correctly exercised discretion based on prima facie satisfaction of the amount due and the need to protect the respondent's interest pending arbitration (Paras 1-3).
B) Arbitration - Appeal under Section 37 - Scope of Interference - Section 37 of the Arbitration and Conciliation Act, 1996 - The appellate court declined to interfere with the discretionary order under Section 9, as the Single Judge had considered all relevant factors and the appellant failed to show any perversity or error of law. Held that the appeal was devoid of merits and dismissed (Para 3).
Issue of Consideration
Whether the learned Single Judge was justified in granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, including an order of injunction and security, based on the conduct of the appellant and the merits of the case.
Final Decision
The appeal is dismissed. The order dated 3 December 2014 passed by the learned Single Judge is upheld. Rule is discharged. No order as to costs.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- Order 38 Rule 5 of the Code of Civil Procedure
- 1908
- Section 138 of the Negotiable Instruments Act
- 1881
Case Details
2016 LawText (BOM) (02) 56
Arbitration Appeal (L) No.463 of 2015 in Arbitration Petition No.342 of 2014 with Notice of Motion No.1073 of 2015
Anoop V. Mohta, G.S. Kulkarni
Mr. Tejas Deshpande i/b Raju R. Gupta for Appellant, Mr. Aditya Mehta a/w Ms. Aditi Bhansali i/b Bharucha & Partners for Respondents
Suryachakra Power Corporation Ltd
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against an order granting interim relief under Section 9 of the Act.
Remedy Sought
The appellant (original respondent) sought to set aside the order dated 3 December 2014 passed by the learned Single Judge in Arbitration Petition No.342 of 2014, which directed the appellant to deposit Rs. 6,66,27,686/- or provide security and restrained the appellant from disposing of assets.
Filing Reason
The appellant failed to repay loan amounts due under a loan agreement, issued cheques that were dishonoured, and made false statements regarding security and assets.
Previous Decisions
The learned Single Judge, by order dated 3 December 2014, granted interim relief under Section 9 of the Act, directing the appellant to deposit the amount or provide security and granting an injunction.
Issues
Whether the learned Single Judge was justified in granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, including an order of injunction and security, based on the conduct of the appellant and the merits of the case.
Submissions/Arguments
The appellant argued that the Single Judge erred in granting the interim order without proper consideration of the facts and that the respondent was already secured.
The respondent contended that the appellant had made false statements, failed to pay dues, and had no unencumbered assets, justifying the interim protection.
Ratio Decidendi
The court held that the Single Judge correctly exercised discretion under Section 9 of the Arbitration and Conciliation Act, 1996, based on the appellant's dishonest conduct, failure to pay dues, and lack of unencumbered assets. The appellate court declined to interfere as no perversity or error of law was shown.
Judgment Excerpts
I am satisfied that the Respondent is in the habit of making statements/submission which are false and incorrect to its knowledge.
I am prima facie satisfied that the amount of Rs. 6,66,27,686/ is due and payable to the Petitioner as of date.
The Respondent admittedly has no asset which is unencumbered.
Procedural History
The respondent filed Arbitration Petition No.342 of 2014 under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief. The learned Single Judge, by order dated 3 December 2014, granted the relief. The appellant filed the present appeal under Section 37 of the Act on 24 February 2016, which was heard and dismissed by the Division Bench.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 37
- Code of Civil Procedure, 1908: Order 38 Rule 5
- Negotiable Instruments Act, 1881: Section 138
