Gujarat High Court

Essar Oil Limited vs United India Insurance Company Limited on 20 November, 2014

Author:
M.R. Shah

Bench:
M.R. Shah
,
K.J.Thaker

C/FA/2861/2014 CAV JUDGMENT

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST APPEAL  NO. 2861 of 2014
With
CIVIL APPLICATION NO. 9131 of 2014
In
FIRST APPEAL NO. 2861 of 2014

For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/­
and
HONOURABLE MR.JUSTICE K.J.THAKER Sd/­
=============================================
1. Whether Reporters of Local Papers may be allowed to see  Yes
the judgment ?

2. To be referred to the Reporter or not ? Yes

3. Whether   their   Lordships   wish   to   see   the   fair   copy   of   the  No
judgment ?

4. Whether this case involves a substantial question of law as to  No
the interpretation of the constitution of India, 1950 or any
order made thereunder ?

5. Whether it is to be circulated to the civil judge ? No

=============================================
ESSAR OIL LIMITED....Appellant(s)
Versus
UNITED INDIA INSURANCE COMPANY LIMITED.....Defendant(s)
=============================================
Appearance:
MR MIHIR THAKORE, SR. ADVOCATE for NANAVATI ASSOCIATES, ADVOCATE for Appellant
MR KAMAL TRIVEDI, SR. ADVOCATE with MR AJAY R MEHTA, ADVOCATE for Defendant
=============================================
CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE K.J.THAKER

Date :  20/11/2014
CAV JUDGMENT

(PER : HONOURABLE MR.JUSTICE M.R. SHAH)

[1.0] Feeling aggrieved and dissatisfied with the impugned order passed
by the learned Additional District Judge, Vadodara in Civil Miscellaneous

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C/FA/2861/2014 CAV JUDGMENT

Application No.467/2013 by which in exercise of powers under
section 9

of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as
"
Arbitration Act
"], the learned Additional District Judge, Vadodara has
directed the appellant herein - original respondent to furnish the Bank
Guarantee for an amount of Rs.79,61,76,998.58 ps., within 3 months of
the   said   order,   the   appellant   has   preferred   the   present   appeal   under

section 37
of the Arbitration Act.

[2.0] Facts leading to the present First Appeal in nut­shell are as under:

[2.1] That in August 1996, the respondent United India Insurance Co.
Ltd.   issued   an   insurance   policy   to   the   appellant   in   respect   of   the
appellant's   refinery   which   was   under   construction   at   Wadinar,
Jamnagar. It appears that the said insurance policy,  inter alia,  covered
(1) the material damage [under section I of the insurance policy] i.e.
damage to the appellant's properties, machinery, equipment etc. and (2)
advance   loss   of   profit   i.e.  loss  of  future  profits  caused   on   account  of
delay in commissioning the refinery. That in the year 1998, a massive
cyclone   hit   the   coast   of   Gujarat   and   caused   severe   damage   to   the
appellant's property, machineries, equipments etc. at the refinery site.

Therefore,   the   appellant   made   claims   under   the   insurance   policy   i.e.
material damage claimed and advance loss of profit claimed. A dispute
arose between the parties and therefore, the dispute was referred to the
Arbitral   Tribunal   in   view   of   the   Arbitration   Agreement   dated
05.01.2008. The arbitration primarily related to two insurances against
the appellant herein - original refinery being (a) the claim of Rs.391.70
Crores   (approximately)   towards   material   damaged   at   the   refinery   on
account   of   the   cyclone,   (b)   the   claim   of   Rs.3306.28   Crores
(approximately)   towards   the   Advance   Loss   of   Profits   which   the
appellants suffered on account of the reason of delay in commissioning

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the refinery. That the Arbitral Tribunal passed an interim award dated
24.02.2012. Thereafter, on 25.04.2012, the Arbitral Tribunal passed the
corrected interim award under which the learned Tribunal rejected the
appellant's   claims   and   allowed   the   respondent's   counter   claim   and
directed   the   appellants   to   pay   Rs.6,74,04,740/­   to   the   respondent,
however without interest.

That being aggrieved and dissatisfied with the award declared by
the   Arbitral   Tribunal,   the   appellant   has   filed   Civil   Misc.   Application
No.295/2012 before the learned District Court, Vadodara under
section
of the Arbitration Act, which is pending.

It appears that thereafter on 02.07.2012, the respondent filed an
application before the learned Arbitral Tribunal seeking costs to the tune
of  Rs.29  Crores. It  appears that   subsequently  the   respondent filed  an
extended schedule of costs, claiming costs to the tune of Rs.94.5 Crores.
That   on   21.06.2013,   the   learned   Arbitral   Tribunal   passed   the   correct
final award awarding the cost to the tune of Rs.69,40,90,433.20 to the
respondent.

[2.2] Feeling   aggrieved   and   dissatisfied   with   the   aforesaid   corrected
final award awarding the cost to the tune of Rs. 69,40,90,433.20, the
appellant  herein  has filed Civil  Misc. Application  No.444/2013  before
the learned District Court, Vadodara under
section 34
of the Arbitration
Act, which is also pending.

That during the pendency of the aforesaid proceedings before the
learned District Court, Vadodara, on 23.08.2013, the respondent filed
the   Civil   Misc.   Application   No.467/2013   under
section   9
of   the
Arbitration Act, seeking an order directing the appellant to deposit an
amount   of   Rs.79,61,76,998.58   as   awarded   by   the   corrected   interim
award   and   corrected   final   award   and   interest   thereon   solely   on   the
ground   that   the   Arbitral   Tribunal's   awards   are   in   favour   of   the

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respondent and the appellant was making huge losses and was having
huge   debts   including   a   huge   tax   liability   of   Rs.6169   Crores
(approximately) and therefore, to secure the amount and so as to ensure
that the Arbitral awards should be enforced, it was requested to pass an
appropriate order directing the appellant to deposit an amount of Rs.
79,61,76,998.58   as   interim   measure.   That   the   said   application   was
opposed by the appellant by filing its reply. The appellant filed further
affidavit  on  13.03.2014,  inter alia,  placing on  record the  fact that,  in
financial   year   2012­13,   its   gross   turn   over   as   Rs.96797   Crores
(approximately) and it made a cash profit of about Rs.126 Crores and
that, in 9 months ended on 31.12.2013, its gross turn over was Rs.79498
Crores (approximately) and the respondent made a cash profit of about
Rs.126 Crores. It was also pointed out that it was servicing all its debts
and paying all its taxes and had not made a single default, and that it
had already paid a substantial part of its sales tax liability which was
paid in installments. It was submitted that it was not the allegation on
behalf of the respondent that the appellant was disposing of or removing
any properties or assets with intent to obstruct or delay execution of the
award.

Both   the   sides   filed   their   respective   written   submissions.   After
considering   the   rival   submissions,   by   impugned   order   the   learned
District Court, Vadodara - learned Additional District Judge, Vadodara
has partly allowed the said Civil Misc. Application No.467/2013 and in
exercise of powers under
section 9
of the Arbitration Act, has directed
the appellant to furnish a Bank Guarantee of Rs.79,61,76,998.58 within
a period of 3 months.

[2.3] Feeling aggrieved and dissatisfied with the impugned order passed
by the learned District Court, Vadodara by which in exercise of powers
under
section 9
of the Arbitration Act, the appellant is directed to furnish

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a   Bank   Guarantee   for   an   amount   of   Rs.79,61,76,998.58   ps.,   the
appellant  herein  - original respondent has  preferred  the  present First
Appeal under
section 37
of the Arbitration Act.

[3.0] Shri   Mihir   Thakore,   learned   Senior   Advocate   has   appeared   on
behalf   of   the   appellant   herein   -   original   respondent   and   Shri   Kamal
Trivedi, learned Senior Advocate has appeared on behalf with Shri Ajay
Mehta, learned advocate appearing on behalf of the respondent herein -
original applicant - United India Insurance Co. Ltd.

[3.1] Shri   Mihir   Thakore,   learned   Counsel   has   vehemently   submitted
that as such the corrected interim order as well as corrected final award
are challenged under
section 34
of the Arbitration Act and are, therefore,
not enforceable in view of
section 36
of the Arbitration Act.
In support of
his above submissions, he has relied upon the decision of the Hon'ble
Supreme   Court   in   the   case   of
National   Aluminium   v.   Pressteel   &
Fabrications
reported in (2004)1 SCC 540. It is submitted that in view
of  the  above, no  inter­locutory order  sought by the  respondent  could
have been granted. It is submitted that inter­locutory relief sought by the
respondent  seeking deposit  of  the  amounts awarded  by the  corrected
interim   order   and   corrected   final   award   amounts   to   execution   of   the
awards, which is not permissible in law. It is submitted that what cannot
be done directly in view of
section 36
of the Arbitration Act cannot be
done indirectly under
section 9
of the Arbitration Act.

[3.2] It   is   further   submitted   by   Shri   Mihir   Thakore,   learned   Counsel
appearing   on   behalf   of   the   appellant   that   the   principles   of   grant   of
interim relief under
Code of Civil Procedure
, 1908 [hereinafter referred
to as "
CPC
"] would apply even when the Court is exercising jurisdiction
under
section 9
of the Arbitration Act. It is submitted that this is because

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the Arbitration Act is negated as a means for adjudication on disputes
which would otherwise have to be adjudicated by the trial Court in a
suit. It is submitted that arbitration is, therefore, a substitute to a suit
and the powers of passing interim orders by the Court in a suit are also
given to the Court under
section 9
of the Arbitration Act. It is submitted
that therefore the Court is required to follow the principles which govern
the   grant   of   any   interim   relief.   It   is   submitted   that   the   fact   that
arbitration   is   being   promoted   as   a   means   for   quick   disposal   of   civil
litigation or that the object of
Arbitration Act
could be to promote the
efficacy of arbitration does not have any bearing on the principles to be
followed by the Court while granting the orders under
section 9
of the
Arbitration Act and cannot mean that the Court is not required to adhere
to settled principles for grant of an interim order. It is submitted that the
grant of such a relief is necessarily required to be based on accepted
principles   and   not   in   an   unguided   manner.   In   support   of   his   above
submission, Shri Thakore, learned Counsel appearing on behalf of the
appellant   has   relied   upon   the   following   decisions   of   the   Hon'ble
Supreme Court and other High Courts.

1.
Adhunik Steels v. Orissa Manganese & Mineral

AIR 2007 SC 2563 (Para 10­18)

2.
Arvind Construction v. Kalinga Mining Corp

(2007)6 SCC 793 (Paras 9, 10, 15)

3.
Goel Associates v. Jivan Bima Rashtriya Avas Samiti

2004(3) Arb LR 289 (Del) [Para 2]

4.
Mala Kumar Engineers v. B. Seenaiah

2005(1) Arb LR 264 (Del) [Para 21­22]

5.
Shin Satellite Public Co. v. Jain Studios

2008(2) Arb LR 242 (Del) [Para 34­36]

6.
ICICI Securities v. O.P. Roongta

2010(Supp) BCR 405 (Bom)

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7.
Brand Value Communications Ltd. v. Eskay Video Private Limited

AIR 2010 Cal 166

[3.3] It   is   further   submitted   by   Shri   Mihir   Thakore,   learned   Counsel
appearing   on   behalf   of   the   appellant   that   as   such   the   prayer   of   the
respondent seeking the deposit of the awarded amount is under
section
9(ii)(b)
of the Arbitration Act i.e. for "securing the amount in dispute in
the arbitration". It is submitted that therefore the said prayer seeking a
relief which is provided only under
Order 38 Rule 5 of the CPC
and is
not   a   prayer   seeking   injunction   under   Order   39   Rule   1   thereof.   It   is
submitted that the principles governing grant of relief under
Order 38
Rule 5 of the CPC
would therefore be applicable to the present case. It is
submitted that a relief under Order 38 Rule 5 can only be granted if the
defendant "with intent to obstruct or delay the execution of any decree
that may be passed against him - (a) is about to dispose of the whole or
any part of his property, or (b) is about to remove the whole or any part
of his property from the local limits of the jurisdiction of this Court...". It
is submitted that the aforesaid requirement is  sine qua non for grant of
such a relief and no such relief can be granted if the said requirement is
not fulfilled. In support of his above submissions, he has relied upon the
following decisions.

1.
Raman Tech v. Solanki Traders

(2008)2 SCC 302 (Para 5­6)

2. Rajasthan Cylinder and Container Ltd. v. Essar Steel Ltd.
AIR 2009 Guj 116 (Para 7)

3.
Premraj Mundra v. Md. Maneck Gazi

AIR 1951 Cal 156 (Para 10­11)

4.
Saraswat Coop. Bank v. Chandrakant Maganlal Shah

AIR 2002 Bom 203 (Para 24)

[3.4] It is further submitted that in the present case the respondent's

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case is entirely based on the losses incurred by the appellant and debts
of the appellant in the last few years. It is submitted that it is not the
case of the respondent at all that the appellant has closed down or not
functioning or is disposing of his properties etc. It is submitted that even
otherwise   the   respondent   was   required   to   aver   and   prove   that   the
appellant "with intent to obstruct or delay the execution of any decree
that may be passed against him - (a) is about to dispose of the whole or
any part of his property, or (b) is about to remove the whole or any part
of his property from the local limits of the jurisdiction of this Court...". It
is   submitted   that   such   averments   and   proof   thereof   were   absolutely
essential requirements of
Order 38 Rule 5 of the CPC
failing which no
relief could have been granted. It is submitted that in the present case,
there was no averment or allegation whatsoever that the appellant has
disposed  of any property or is  about to dispose  of any property with
intent to obstruct or delay the execution of the award. It is submitted
that only ground on which the respondent sought such a drastic relief
was  that  the   appellant is  suffering from   financial   difficulties,  a  factor
which is wholly irrelevant especially in light of the principles governing
grant of such relief and in light of the fact that the purpose and object of
grant of such relief is not to convert an unsecured debt into a secured
debt. It is submitted that therefore, the respondent having failed to aver
and prove that the appellant had disposed of any property or is about to
dispose of any property with intent to obstruct or delay the execution of
the award, the application was required to be rejected.

[3.5] It is further submitted by Shri Thakore, learned Counsel appearing
on behalf of the appellant that the contention  of the  respondent that
since this is a case where award has already been passed, the principles
governing grant of relief under
Order 38 Rule 5 of the CPC
would not
apply and only the principles governing grant of relief under Order 39

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Rule 1 of the CPC
would apply is not tenable. It is submitted that what is
sought is a relief securing an amount and not a temporary injunction
and   hence,   Order   39   Rule   1   has   absolutely   no   applicability.   It   is
submitted that Order 37 Rule 1 is also a provision for certain interim
measures and hence, it cannot be said that while Order 38 Rule 5 does
not apply, Order 31 Rule 1 applies. It is submitted that even assuming
without admitting that the relief sought is under Order 39 Rule 1, the
said provision also contemplates similar averments and proof before any
relief and injunction can be granted and therefore also, the respondent
has   not   made   out   any   case   for   passing   of   such   a   drastic   order.   It   is
submitted that as such in view of
section 36
of the Arbitration Act, the
award has not become enforceable decree and therefore, the case cannot
be   treated   as   one   where   there   is   an   executable   decree   to   which   the
provisions of attachment post, that is, attachment in execution can be
applied. It is submitted that therefore, the contention on behalf of the
respondent that this has to be treated at par with judgment post decree
cannot   be   accepted   more   particularly   in   view   of
section   36
of   the
Arbitration  Act and pending
section  36
proceedings, the  award is not
enforceable. It is submitted that infact the  Bombay High Court in the
case of
ICICI Securities
(Supra) has applied the principles of
Order 38
Rule 5 of the CPC
in context of an application under
section 9
of the
Arbitration Act after filing of
section 34
application. It is submitted that
any   other   interpretation   would   be  ex   facie  contrary   to   the   law   that
mandates that the award remains unenforceable during the pendency of
the
Section 34
applications.

[3.6] It is further submitted by Shri Thakore, learned Counsel appearing
on behalf of the appellant that even otherwise the powers of grant of
interim relief have to be read as being identical in a proceeding before
Court and in a proceeding before Arbitrator since arbitration is only an

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alternative   forum   to   civil   proceedings.   It   is   submitted   that   when   the
Court   functions   in   proceedings   before   it,   it   has   inherent   powers.
However, such powers are not available to the Court exercising power
under
section 9
of the Arbitration Act. It is submitted that in fact the

Arbitration   Act
contemplates   minimal   interference   by   the   Court.   It   is
submitted that in view of the aforesaid, the judgments relied upon by the
respondent   in   the   cases   of
Delta   Construction   Systems   Limited
Hyderabad v. Narmada Cement Company Limited Mumbai
reported in
(
2002)2 BOMLR 225  (Para 11)  and  National Shipping Company of
Saudi Arabia v. Sentrans Industries Limited
reported in AIR 2004 Bom
136  (Para   10),   which   are   rendered   prior   to   decision   of   the   Hon'ble
Supreme Court in the case of
Adhunik Steel
(Supra) have to be read in
light of the ratio of
the said judgment
of the Hon'ble Supreme Court.

[3.7] It is further submitted by Shri Thakore, learned Counsel that even
otherwise the powers of Court cannot vary pre­award and post­award
for the following reasons.

(a) In view of
section 36
of the Arbitration Act, the award is of
no relevance till the application under
section 34
is disposed of.
The intent of the legislature was to treat the position as if decree is
not passed. Therefore,
Order XXI of the CPC
is not applicable.

(b) This is further confirmed by the language of
section 9
of the
Arbitration Act.

(c)  If a contrary view is taken, the law
laid down in
(2004)1
SCC 540 will be made otiose.

(d) Both   the   stages   have   to   be   treated   as   similar   to   the
pendency of a suit and the power of the Court to grant interim
relief has to be treated as identical in both stages.

[3.8] It   is   further   submitted   that   assuming   without   admitting   that

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different principles have to be applied pre­award and post­award, the
criteria for grant of any interim relief has never been contemplated to be
invalid to pay or to secure the payment for the plaintiff. It is submitted
that the criterion for grant of interim relief has always been the conduct
of the defendant. It is submitted that in fact
section 51
of the CPC also
makes it clear that even in execution, a person cannot be arrested for
inability to pay. It is submitted that therefore the criterion that award is
passed is  irrelevant.  It is  submitted  that   had the  appellant  conducted
itself   in   a   manner   so   as   to   defeat   the   execution   or   to   defraud   the
respondent only then would grant of such interim relief be justified.

[3.9] It is further submitted by Shri Thakore, learned Counsel appearing
on behalf of the appellant that the respndent's case is entirely based on
the losses incurred by the appellant and the debts of the appellant in the
last few years. It is submitted that it is not the case of the respondent
that the appellant has closed down or not functioning or is disposing of
its properties etc. It is further submitted that the fact that appellant was
making losses and had debts was completely irrelevant for deciding the
application. In any case, the appellant is a very large company which s a
running concern employing thousands of persons. It is further submitted
that it has very much turned the corner and has come out of a Corporate
Debt   Restructuring   package.   In   FY   2012­13,   its   gross   turnover   was
Rs.96,797 Crores and its cash profits were Rs.116 Crores. It is further
submitted that in that year the throughput in the refinery increased from
13.50   MMT   to   19.77   MMT.   Likewise,   in   the   nine   months   ended   on
31.12.2013,   the   gross   turnover   of   the   appellant   was   approximately
Rs.79,498 Crores and the appellant made a cash profit of about Rs.126
Crores. In this period also, the throughput in the refinery was as high as
15.88 MMT. It is further submitted that it has not defaulted in a single
payment as and when it falls due, be it a debt or a tax. At the time of

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filing the said further affidavit dated 13.03.2014 before the trial Court,
the appellant had already paid an amount of about Rs.4,232 Crores out
of   the   total   sales   tax   liability   of   about   Rs.6,169   Crores.   It   is   further
submitted that as on date, it has made further payment towards its sales
liability payable in instalments and only an amount of Rs.650.96 Crores
remains outstanding. It is further submitted that even for the huge sales
tax   liability   of   Rs.6169   Crores,   the   Hon'ble   Supreme   Court   did   not
impose any condition of giving any security on the appellant. Moreover,
in FY 2013­14, the appellant has also made substantial  revenue from
operations and has made profit of Rs.129.09 Crores and its reserves have
also   become   positive   and   are   to   the   tune   of   Rs.964.51   Crores.   It   is
further submitted that since the FCCBs of Rs.1224.65 Crores issued by
the appellant have been converted into equity during FY 2013­14, no
interest liability remains in that regard and the said debt is converted
into equity thus reducing the total debt. It is further submitted that such
a company cannot be subjected to drastic orders of deposit or furnishing
security.   Therefore   also,   the   appellant   has   made   payment   of   further
amount towards its sales tax liability which is now reduced to only about
650 Crores and the appellant's financial position has improved as can be
seen from its balance sheet for FY 2013­14 and its quarterly financial
result for the quarter ended June 2014 and also on account of infusion
of  equity  of  Rs.840   Crores (approximately)  by  the  promoters in  June
2014. It is further submitted that in light of the appellant's pleadings and
documents   which   were   before   the   trial   Court   when   it   passed   the
impugned order, the trial Court has committed a gross error in relying
solely on the respondent's pleadings/arguments/documents in regard to
the appellant's financial position. It is further submitted that moreover
the subsequent facts have shown further improvement in the appellant's
financial   position   and   are   also   required   to   be   considered   before
subjecting the appellant to such drastic orders.

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[3.10]It is further submitted by Shri Thakore, learned Counsel appearing
on behalf of the appellant that the following factual aspects with regard
to the balance­sheet are also required to be considered.

a.  The FCCBs were converted into shares on a premium. This
means that the said debt was converted into equity thus reducing
the debts of the company to that extent as also the interest liability
thereon.   Moreover,   the   conversion   was   on   a   premium,   which
naturally resulted in increasing the reserves of the company.
b. The "Reserves and Surplus" shown on page 44 of the appeal
show that in the year ending 31st March, 2013, the reserves were
in   negative   Rs.275.44   Crores   whereas   in   the   year   ended   31 st
March,   2014   on   account   of   the   combined   effect   of   the   Capital
Reserve,   Securities   Premium   Account,   Debenture   Redemption
Reserve, Net Profit for the year, etc. the balance as per the last
Balance Sheet (which was showing a loss of Rs.5345.26 Crores)
was wiped out and this resulted in creation of a positive reserve of
Rs.964.51 Crores.

c.  The financial results for the quarter ended 30 th June, 2014
(page   75   of   the   appeal)   show   that   for   the   quarter   ended   31 st
March, 2014, the company made a profit of Rs.1011 Crores and
for the quarter ended 30th June 2014, the company made a profit
of Rs.684 Crores. The Note 5 on page 77 shows that the company
also received Rs.839 Crores from a holding company as advance
towards Global Depository Shares which means that this is equity
infusion   and   has   nothing   to   do   with   the   profits   made   by   the
company during the fiscal year.

[3.11]It is further submitted by Shri Thakore, learned Counsel appearing
on behalf of the appellant that even otherwise the learned Judge has

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materially   erred   in   passing   the   impugned   order   and   directing   the
appellant  to furnish the   Bank Guarantee  of  Rs.79,61,76,998.58  ps. in
exercise of powers under
section 9
of the Arbitration Act solely on the
allegation that the appellant is running into loss and/or is having the
debts   and/or   huge   tax,   sales   tax   liability   of   Rs.6169   Crores.   It   is
submitted that the Civil Misc. Application No.295/2012 challenging the
corrected   interim   award   was   filed   in   June   2012,   and   the   Civil   Misc.
Application No.444/2013 challenging the corrected final award was filed
in June 2013. It is further submitted that the present application was
filed on 23.08.2013. Therefore, for all this while, the respondent did not
consider it necessary to seek such a relief. In all this while, the appellant
has not disposed of any property with intent to obstruct or delay the
execution of the award. Therefore, there is no real apprehension in the
respondent's   mind   in   this   regard   and   the   Civil   Misc.   Application
No.467/2013 is nothing but a pressure tactic and/or a devious means of
enforcing an unenforceable award. It is further submitted that there was
absolutely no justification for grant of such drastic relief. It is submitted
that even during the pendency of the arbitration proceedings no such
application   for   interim   measure   was   submitted   and   no   such
apprehension was ever made. It is further submitted that the Hon'ble
Supreme Court has not imposed any requirement of creation of security
in   favour   of   the   Government   in   respect   of   the   sales   tax   liability   of
Rs.6169   Crores.   It   is   submitted   that   the   said   amount   has   been
substantially paid as per the requirements granted and apart from that,
the company has not defaulted in any tax payment as and when due or
in servicing of loans. It is submitted that therefore also, the present is a
case   of   so­called   lack   of   confidence,   which   cannot   be   a   ground   for
directing such drastic interim measures.

[3.12]It is further submitted by Shri Thakore, learned Counsel appearing

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on behalf of the appellant that the allegation of the respondent that the
current   balance   sheet   of   the   appellant   shows   a   "rosy   picture"   where
there is none or that the figures of profit, revenue, turnover, reserves
cannot be believed, is neither correct nor relevant. It is submitted that as
stated earlier, such a relief cannot be granted on the ground that there
are  losses   or   huge   debts   which  may  make   it   difficult   /   impossible   to
enforce the award, but is to be granted on the ground that the appellant
with intent to obstruct or delay the execution of award (a) is about to
dispose   of   the   whole   or   any   part   of   its   property,   or   (b)   is   about   to
remove the whole or any part of its property from the local limits of the
jurisdiction   of   the   Court.   It   is   therefore   submitted   that   this   basis   for
foundation is admittedly not made out in the present case.

[3.13]Now,   so   far   as   the   reliance   placed   upon   the   decision   of   the
Hon'ble Supreme Court in the case of Steel Authorities of India (Supra)
is concerned, it is submitted that in the said decision, the decision of the
Hon'ble Supreme Court in the case of
Adhunik Steel
(Supra) has not be
considered at all.

Making above submissions and relying upon above decisions, it is
requested   to   allow   the   present   appeal   and   quash   and   set   aside   the
impugned judgment and award.

[4.0] Present appeal is opposed by Shri Kamal Trivedi, learned Senior
Advocate appearing on behalf of the United India Insurance Co. Ltd. Shri
Trivedi,   learned   Counsel   appearing   on   behalf   of   the   respondent   -
original   applicant   [hereinafter   referred   to   as   "original   applicant"]   has
vehemently   submitted   that   considering   the   financial   position   of   the
appellant   and   as   the   appellant   was   running   in   huge   losses   and   is
indebted heavily, in the facts and circumstances of the case, the learned
Judge   has   not   committed   any   error   in   passing   the   impugned   order

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directing the appellant to furnish the Bank Guarantee for an amount of
Rs.79,61,76,998.58   ps.   in   exercise   of   powers   under
section   9
of   the
Arbitration Act. It is submitted that the impugned order passed by the
learned District Court is absolutely just and proper and in consonance
with the provisions of
section 9
of the Arbitration Act more particularly
to protect the interest of original applicant in whose favour there is a
well reasoned award.

[4.1] It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the original applicant that the impugned order passed by
the learned District Court is a detailed and reasoned award wherein the
learned Court had, after examining the details placed on record by both
the parties and the pleadings on record, has concluded that the financial
condition of the appellant was such that the original applicant would be
unlikely   to   recover   the   amounts   awarded   to   it   in   the   arbitration
proceedings and has passed an order securing the awarded amount.

[4.2] It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the original applicant that the powers under
section 9
of the
Arbitration   Act   can   be   exercised   even   after   the   award   has   been
pronounced and a challenge thereto is pending under
section 34
of the
Arbitration Act.
In support of his above submissions, he has relied upon
the decision of this Court in the case of
Chunilal Kapoorchanji Shah v.
Yuvraj Industries Limited
reported in 2009(3) GLH 434. It is submitted
that in the aforesaid decision this Court has held that so far as
section 9

of the Arbitration Act is concerned, the scope is very wide and the order
for interim measure can be ordered by the Court before or during the
arbitral proceedings or at any time after making of the  arbitral award
but before it is enforced in accordance with
section 34
of the Arbitration
Act and even an interim order can also be passed under
section 9
of the

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Arbitration Act. It is submitted that there cannot be any doubt that a
petition  under
section  9
of the Arbitration  Act can be filed in a post­
award situation.

[4.3] It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the  original applicant that as such the original applicant
filed
section 9
application for seeking deposit of the awarded amount so
as to secure the amounts awarded in arbitration. It is submitted that the
appellant's argument that the amounts awarded in arbitration are not
"amount in dispute" cannot be accepted when the appellant still dispute
those amounts by itself challenges to the award since the costs incurred
in the arbitration were also disputed and contentious and therefore, the
same is amounted to "amount in dispute". It is submitted that in a post­
award   situation,   once   award   has   been   pronounced,   the   rights   of   the
party are crystallized. The party in whose favour the orders have been
passed can  ofcourse approach the  Court under
section  9(ii)(b)
of  the
Arbitration Act to secure the awarded amounts, so as to ensure that it is
not reduced to paper decrees. It is submitted that such a situation would
arise   when   the   party   in   whose   favour   the   award   has   been   passed   is
unable to executed  the  award because  of  the  pendency of
section  34

petitions filed by the other party, but the party apprehends that by the
time
section 34
petition is decided by the Court, there would be nothing
left to seek execution of. It is submitted that the Court cannot be held to
be powerless nor can its power be fettered or hedged by any provision
of
the CPC
and the Court should be held to have the power to pass such
orders as would secure the amount in dispute. It is submitted that in the
present case, this has been done by directing the appellant to furnish a
Bank Guarantee.

[4.4] It is further submitted by Shri Trivedi, learned Counsel appearing

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on behalf of the original applicant that filing of the application under

section   9
of   the   Arbitration   Act   for   such   relief   cannot   tantamount   to
execution as contended on behalf of the appellant. It is submitted that
the decision  of the  Hon'ble Supreme Court in the case of
Pressteel &
Fabrications
(Supra) would not be applicable to the facts of the case on
hand.

It is submitted that the case of
Pressteel & Fabrications
(Supra)
was passed in different context and does not apply to the present case
since it does not deal with the powers of a Court under
section 9
of the
Arbitration   Act.   It   is   submitted   that   even   otherwise   the   aforesaid
decision does not in any manner restrict the powers of the Court under

section 9
of the Arbitration Act and to pass such interim measures as
would   be   necessary   for  securing  the   amount   in  dispute.

Shri  Trivedi,
learned Counsel appearing on behalf of the original applicant has relied
upon   the   decision   of   the   Andhra   Pradesh   High   Court   in   the   case   of

Sudershan   Rao   and   Ors.   v.   Evershine   Builders   Private   Limited
Mumbai
reported   in  2013(2)   ARB   LR   52   (AP)   [Para   15]  and   the
decision   of   the   Delhi   High   Court   in   the   case   of
Veda   Research
Laboratories Ltd. v. Survi Projects
reported in  164 (2009) DLT 388
[Para   13].

It   is   further   submitted   by   Shri   Trivedi,   learned   Counsel
appearing on behalf of the original applicant that even the decision of
the   Hon'ble   Supreme   Court   in   the   case   of
Pressteel   &   Fabrications

(Supra)   came   to   be   considered   by   the   Hon'ble   Supreme   Court
subsequently in the case of
SAIL v. AMCI PTY Ltd. & Anr.
reported in
2011(
3)   ARB   LR   502   (Delhi)   [Para   64]  and  Delta   Construction
Systems  Limited  Hyderabad  v.   Narmada  Cement   Company  Limited
Mumbai
reported  in  (2002)2 BOMLR 225 (Para 11).

It is  submitted
that   therefore   the   decision   in   the   case   of
Pressteel   &   Fabrications

(Supra) would not be applicable to the facts of the case on hand.

[4.5] It is further submitted that even the relief which was sought by the

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original applicant directing the appellant to deposit the awarded amount
in   the   Court   only   amounts   to   securing   the   amount   in   dispute   in   the
arbitration as envisaged under
section 9(ii)(b)
of the Arbitration Act. It
is submitted that such relief of depositing the monies into Court under

section 9(ii)(b)
of the Arbitration Act in a post­award scenario, has been
awarded   in
SAIL
(Supra)   and
Delta   Construction   Systems   Limited
Hyderabad
(Supra).

[4.6] It is further submitted that when
section 9
of the Arbitration Act
seeks to confer wide powers, as the very language used therein clearly
suggests   there   is   a   difference   between   pre­award   scenario   and   post­
award scenario, more particularly when after the award, rights of the
parties get crystallized, which is obviously not so in case of pre­award
scenario.   It   is   further   submitted   by   Shri   Trivedi,   learned   Counsel
appearing   on   behalf   of   the   original   applicant   that   scope   and   powers
available to the Court under
section 9
of the Arbitration Act are very
wide. It does not contain any fetters on the powers of the Court. It is
submitted that
section 9
of the Arbitration Act is divided into 2 parts -
the first part lays down the purposes for which the party can approach
the Court to seek interim measures for protection and the second part
lays down that for meeting those objectives, "the Court shall have the
same   power   for   making   orders   as   it   has   for   the   purpose   of,   and   in
relation to, any proceedings before it." It is submitted that therefore, the
powers of the Court under
section 9
of the Arbitration Act are very wide
enough to pass the orders that would meet the objective and purpose for
which a party has approached the Court. It is submitted that when the
Court decides an application under
section 9
of the Arbitration Act, it
must have due regard to the underlying objectives of the
Arbitration Act
,
which   is   to   permit   the   efficacy   of   arbitration   as   a   form   of   dispute
resolution. It is submitted that it is in fact for the achievement of the said

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objective that the Parliament has used very wide language under
section
of   the   Arbitration   Act,   which   cannot   be   rendered   ineffective   or
nebulous by strictly complying the provisions
of the CPC
. It is submitted
that just as on one hand, the exercise of the power under
section 9
of the
Arbitration   Act   cannot   be   carried   out   in   an   unchartered   territory
ignoring the basic principles of procedural law contained in
the CPC
, the
rigors of every procedural provision in
the CPC
, cannot be put into place
to   defeat   the   grant   of   relief   which   would   sub­serve   the   paramount
interests of justice and a balance has to be drawn between the said two
considerations. It is further submitted that while considering the whole
matter slightly from a different angle, it may be appreciated that if one
of the stipulated objectives under
section 9
of the Arbitration Act is to
secure the awarded amount, then it has to be held that the Court has the
power   to   pass  such   orders  so  as  to   meet   that   objective  and   purpose.
Thus, it cannot be said that the power of the Court is in any manner
fettered, hedged or subject to the conditions in
the CPC
.

[4.7] It   is   submitted   that   the   appellant   has   attempted   to   read   into

section 9
the provisions
of the CPC
strict senso  and has contended that
the   powers   of   the   Court   under
section   9
have   to   be   exercised   in
accordance with
the CPC
. It is submitted that the appellant has done so
by relying on the words used in
section 9
i.e. "same power for making
orders as it has for the purpose of, and in relation to, any proceedings
before it". It is submitted that the aforesaid construction of the appellant
is erroneous as it amounts to reading into the statute, the words which
neither  exist nor were meant to exist. The only clear meaning of the
above sentence is that in order to meet the purposes for which a party
has approached the Court under
section 9
, the Court shall have all such
powers   which   the   Court   ordinarily   has   while   dealing   with   a   matter
before it. It is submitted that it only lays down the width of the powers

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of the Court under
section 9
of the Arbitration Act and that those powers
are wide enough, but does not in any manner fetter the powers of the
Court   or   to   make   it   conditional   on   the   provisions
of   the   CPC
.   It   is
submitted that in short, under
section 9
of the Arbitration Act, the Court
will have the power to order for providing security of the amounts in
dispute / grant injunction / order attachment / appoint Receiver etc. but
it would not mean that such powers of the Court under
section 9
of the
Arbitration Act have to be exercised strictly in accordance with
the CPC

or that the conditions under
the CPC
for exercise of such power would
apply strict senso.

[4.8] It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the original applicant that the provisions
of the CPC
can at
best   act   only   as   guiding   principles   for   a   Court   exercising   its   powers
under
section 9
of the Arbitration Act. It is submitted that for instance,
while granting injunction, the Court under
section 9
of the Arbitration
Act could consider the celebrated guiding principles of prima facie case,
balance of convenience etc.
In support of his above submissions, Shri
Trivedi, learned Counsel appearing on behalf of the original applicant
has heavily relied upon the decisions of the Bombay High Court in the
case of
National Shipping Company of Saudi Arabia
(Supra) as well as
the   decision   in   the   case   of
Delta   Construction   Systems   Limited
Hyderabad
(Supra).

[4.9] Now, so far as the contention on behalf of the appellant that the
respondent herein - original applicant did not make out any case that
the   appellant   "is   about   to   dispose   of   the   whole   or   any   part   of   his
property, or is about to remove the whole or any part of his property
from the local limits of the jurisdiction of the Court" and without making
out such a case the Court cannot pass the interim measures of protection

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is concerned, Shri Trivedi, learned Counsel appearing on behalf of the
original applicant has submitted that firstly the provisions of
Order 38
Rule 5 of the CPC
relating to "Attachment before Judgment, etc." would
not apply in a post­award situation, where the rights of the parties have
been crystallized. It is submitted that secondly, in any event, a direction
to furnish a bank guarantee to secure the amounts in dispute cannot be
equated   to   an   order   for   attachment.   It   is   submitted   that   thirdly   the
powers of the Court under
section 9
of the Arbitration Act to secure the
awarded amount in a post­award situation cannot be made conditional
or subject to fulfilling the requirements of Order 38 Rule 5 or proving
that the appellant is about to dispose or remove the whole or any part of
his property from the local limits of the jurisdiction of the Court. It is
submitted that once such an application is made, it would be the duty of
the Court to secure the awarded amount in a post­award situation, more
particularly   when   the   party   approaching   the   Court   as   bonafide
apprehensions that if the amount is not secured, then it will not be able
to get the award executed at a later stage and would be left with a mere
paper decree. It is submitted that in the present case as such the original
applicant had made such grounds for the bonafide apprehension.

[4.10]It   is   further   submitted   that   at   the   post­award   stage,   the   party
applying is neither required to plead/prove nor is the Court required to
find a case where a party "is about to dispose of the whole or any part of
his property, or is about to remove the whole or any part of his property
from the local limits of the jurisdiction of the Court". It is submitted that
the power of the Court is thus to be exercised ex debito justica.
In support
of  his  above   submissions,  Shri   Trivedi,   learned  Counsel   appearing  on
behalf of the original applicant has heavily relied upon para 10 of the
decision   of   the   Bombay   High   Court   in   the   case   of
National   Shipping
Company of Saudi Arabia
(Supra); para 45 of the decision of the Delhi

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High Court in the case of
SAIL
(Supra).

It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the original applicant that at the stage of passing an order
under
section 9(ii)(b)
of the Arbitration Act and at the post­award stage,
the   Court   is   only   required   to   consider   that   since   there   is   already   an
award in favour of the party applying, whether the party applying would
suffer   irreparable   injury   if   no   order   securing   the   awarded   amount   is
passed on the materials brought on record. It is submitted that in the
aforesaid   background,   while   passing   the   impugned   order,   the   Court
below has considered the irreparable injury that would be caused to the
original   applicant   if   the   order   securing   the   awarded   amount   is   not
passed and that the award is not reduced to a paper decree.

[4.11]It is further submitted that even while exercising the powers under

section 9
of the Arbitration Act, the Court is not required to examine the
merit and correctness of the issues involved in the arbitral proceedings,
especially when such merits have been adjudicated upon and decided by
the   competent   and   mutually   appointed   Arbitral   Tribunal   and   while
challenges to such awards are pending before competent Courts in CMA
No.295/2012   and   CMA   No.444/2013.   It   is   submitted   that   in   such
circumstances,   the   Court   is   required   to   only   examine   whether   the
circumstances awarding a security have been satisfied or not.
In support
of his above submissions, he has relied upon the decision of the Hon'ble
Supreme Court in the case of
Adhunik Steels
(Supra).

Learned Counsel
appearing on behalf of the original applicant has also relied upon the
decision of the Madhya Pradesh High Court in the case of
Nepa Limited
v. Manoj Kumar Agrawal
reported in  AIR 1999 MP 57 [Para 17]  and
another   decision   of   the   Bombay   High   Court   in   the   case   of
Newage
Fincorp   (India)   Ltd.   v.   Asia   Corp   Securities   Limited
reported   in
2000(4) MH LJ 134 [Para 35].

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[4.12]Now,   so   far   as   the   submissions/contentions   on   behalf   of   the
appellant  whether  the   financial   condition  of  the  appellant  warrants  a
deposit to secure the amounts awarding the arbitration is concerned, it is
submitted   that   a   detailed   averments   and   documentary   evidence
regarding the financial condition of the appellant including the losses,
the   outstanding   debts  and  the   demands  made   by  the  appellant  in   its
letter to the Government of Gujarat and the sales tax pleadings before
the Hon'ble Supreme Court had been placed before the learned District
Court, which concluded that the financial condition of the appellant was
such   that   the   respondent   would   be   unlikely   to   recover   the   amounts
awarded to it in the arbitration. It is submitted that once the competent
Court   has   exercised   its   discretion   to   reach   such   a   conclusion,   the
Appellate   Court   would   re­appreciate   the   evidence   with   a   view   to
substitute the findings of the trial Court by its own findings.
In support
of his above submissions, he has relied upon the decisions of the Hon'ble
Supreme   Court   in   the   case   of
Wander   Ltd.   v.   Antox  India   (P)   Ltd.

reported in  1990(Supp) SCC 727 [Para 14]  and  Mohd. Mehtab Khan
and Ors. v. Khushnuma Ibrahim reported in  (2013)9 SCC 221 [Paras
20­22].

[4.13]It is further submitted by Shri Trivedi, learned Counsel appearing
on   behalf   of   the   original   applicant   that   even   otherwise   the   following
aspects   substantiates   the   apprehension   of   the   respondent   that   the
appellant   company   is   in   a   precarious   financial   position   and   that   the
original applicant would not be able to effectively enforce the awards
against the appellant.

a. The miniscule profits earned by the appellant in the last 2
quarters   have   done   nothing   to   wipe   out   the   huge   losses   being
suffered by the appellant in the last 9 years. Even with the profit

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of   Rs.126   Crores   earned   in   the   financial   year   2013­14,   the
cumulative losses suffered by the appellant over the last 9 years
remain at Rs.5,378.17 Crores.

b. The   current   outstanding   debt   liability   of   the   appellant
company amount to Rs.21,000 Crores.

c. The appellant has admitted during the course of arguments
that its fixed assets are mortgaged / under the charge of banks.
d. The purported profits sought to be relied upon the appellant
are misleading and are a mere case of window dressing. These so
called profits only arise due to internal transactions between the
appellant's  group   companies  which   were   non  cash   transactions.
The  said   profits  in   the  last   2  quarters  arise   due   to   an   advance
received from Essar Energy Holdings towards Global Depository
Schemes   and   due   to   conversion   of   convertible   bonds   (FCCB's)
received   from   Essar   Energy   Holdings   into   equity   shares   to   a
promoter company.

[4.14]Now, so far as the submission on behalf of the appellant regarding
its financial condition relying upon its balance­sheet for the year 2013­
14   and   the   submission   that   the   appellant   made   a   profit   of   Rs.125.8
Crores on the year ending 31.03.2013 as against a loss of Rs.1180.44
Crores on 31.03.2013 and that the reserves and surplus had gone upto
Rs.954.51   Crores   as   on   31.03.2014   as   against   an   earlier   negative
balance   of   Rs.275.44   Crores   as   on   31.03.2013   and   therefore   the
submission on behalf of the appellant that their financial condition has
been   improved   is   concerned,   it   is   submitted   by   Shri   Trivedi,   learned
Counsel appearing on behalf of the original applicant that as such the
profit of Rs.125.8 Crores was against a turnover of Rs.98610 Crores in
the same year and is, therefore, a ministerial amount. It is submitted that
while   proceedings   were   pending   before   the   learned   District   Court,   as

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such the appellant at that time had suffered a loss of Rs.860 Crores in
the   first   quarter   of   financial   year   2013­14.   It   is   submitted   that   the
appellant had made losses in 3 out of 4 financial quarters of the year
2013­14 and was able to make some profits in the last quarter of the
year   2013­14   resulting   in   an   annual   profit   of   Rs.125.8   Crores.   It   is
submitted   that   the   profit   in   the   year   2013­14   did   not   mean   that   the
losses made by the appellant company to the tune of Rs.1180.44 Crores
for the year 2012­13 was in the preceding years, were wiped out. It is
submitted that the said losses continued to remain. It is submitted that if
the losses in each of the financial years from 2005­06 till 2012­13 are to
be taken into account the total losses of the appellant are as follows:

Essar Oil - Stand Alone and Cumulative
Profit/Loss for the past 9 years
Amount in INR; Crores
Sr. Financial Year Net Profit/(Loss) Net   Profit/
No. [Stand Alone] (Loss)

1. 2005­2006 (93.68)   [Page   37   of  NA
Respondent's Affidavit]

2. 2006­2007 (67.49) [Page 38] NA

3. 2007­2008 (41.48) [Page 38] (51.45)

4. 2008­2009 (1,652.71) [Page 40] (1,696.16)

5. 2009­2010 (931.94) [Page 42] (2,627.65)

6. 2010­2011 (251.69) [Page 42] (2,879.34)

7. 2011­2012 (1,285.48) [Page 46] (4,164.82)

8. 2012­2013 (1,180) [Page 47] (5,345.26)
[Pg.44]
TOTAL (5,504.17)

It is submitted that even if the profit of Rs.125.8 Crores made in
the year 2013­14 is factored, the sum total of stand alone losses of the
appellant for the last 9 years would only reduce from Rs.5504.17 Crores
to Rs.5378.37 Crores.

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It   is   submitted   that   similarly   the   outstanding   debts   of   the
appellant company, which are identified as non­current liabilities in the
balance sheet, have continued to remain at very high levels since the
year 2009­10.

It is submitted  that even in  the  year 2013­14, the  debts of the
appellant   company   have   only   reduced   from   Rs.16,670   Crores   to
Rs.14528.56 Crores. It is submitted that one of the major ingredients of
the   non­current  liabilities   are   "Long­Term   borrowings",   which   are   the
loans taken by the appellant company from banks and other financial
institutions.

It   is   submitted   that   the   appellant   company   has   an   outstanding
debt   liability   of   Rs.21,000   Crores   as   stated   by   the   appellant's   Chief
Executive Officer on 06.03.2014.

It is further submitted that the balance sheet for the year 2013­14
also   shows   that   "Trade   Payables"   of   the   appellant   company   have
increased from Rs.11364.54 Crores [as on 31.03.2014] to Rs.19815.04
Crores [as on 31.03.2014]. It is submitted that "Trade Payables" are the
amounts of money that the appellant company has to pay towards raw
materials, goods and services in the short term. It is submitted that the
aforesaid   also   shows   an   increase   in   the   liability   of   the   appellant
company.

It is further submitted that the balance sheet shows a fixed asset of
the appellant company, but the said all assets are mortgaged / under the
charge of the banks. It is further submitted that even the reliance on
increase in reserves and surplus from Rs.964.51 Crores as on 31.03.2014
as   against   the   earlier   negative   balance   of   Rs.275.44   Crores   as   on
31.03.2013 is absolutely misleading. It is submitted that as per "Note 5"

of the balance sheet, the said increase took place because of an addition
of  sum   of   Rs.1256.15   Crores   on   account  of   conversion  of  convertible
bonds [FCCBs] into equity shares to Promoter Company. It is submitted

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that thus a loan given by a Promoter Company to the appellant company
was converted into equity and the loan amount got added as reserves
and surplus resulting in a positive figure. It is submitted that this was a
non­cash transaction. It is submitted that therefore reserves and surplus
did not increase on account of any positive transactions of the company.
It   is   submitted   that   in   any   case   as   on   31.03.2014,   the   carry   forward
losses of the previous year remained as high as Rs.5,219.58 Crores.

Making above  submissions,   it  is requested  that   in  the  aforesaid
facts and circumstances of the case, the learned District Court has rightly
exercised the powers under
section 9(ii)(b)
of the Arbitration Act and
has rightly passed an order directing the appellant to furnish the Bank
Guarantee   for   an   amount   of   Rs.79,61,76,998.58   ps.   with   a   view   to
secure the amount due and payable to the original applicant under the
awards and with a view to see that ultimately the award does not remain
a paper decree.

[4.15]Now,   so   far   as   the   reliance   placed   upon   the   decisions   of   the
Hon'ble Supreme Court in the case of
Adhunik Steel
(Supra) and
Arvind
Construction
(Supra),
Raman   Tech
(Supra)   and   the   decisions   of   the
Delhi High Court in order to contend that the principles governing the
attachment of a property before the execution of decree as set out in

Order 38 Rule 5 of the CPC
will be applicable to the application under

section 9(ii)(b)
of the Arbitration Act, by the learned Counsel appearing
on behalf of the appellant is concerned, it is submitted by Shri Trivedi,
learned Counsel appearing on behalf of the original applicant that none
of   the   aforesaid   cases   would   be   applicable   to   an   application   under

section 9(ii)(b)
of the Arbitration Act. It is submitted that none of the
cases   state   that   the   principles   of
Order   38   Rule   5   of   the   CPC
would
strictly apply in an application under
section 9(ii)(b)
of the Arbitration
Act where a deposit into Court is sought after the pronouncement of a

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unanimous and detailed award. It is submitted that the cases relied upon
by the appellant are in relation to the attachment of property and the
appointment of a receiver.

It is submitted that even the two Supreme
Court judgments relied upon by the learned Counsel appearing on behalf
of   the   appellant,   namely
Adhunik   Steels   Ltd.
(Supra)   and
Arvind
Construction
(Supra) do not contain any reference whatsoever to Order
38 Rule 5. It is submitted that the observations of the Apex Court in the
aforesaid two judgments cannot and should not be read like a statute.

It
is submitted that nevertheless all that the Apex Court ruled in said case
of
Adhunik   Steels   Ltd.
(Supra)   is   to   the   effect   that   the   power   under

section 9
of the Arbitration Act is not totally independent of well known
principles  governing  the   grant  of   an  interim  injunction  that   generally
governs the Courts.

[4.16]It is further submitted by Shri Trivedi, learned Counsel appearing
on behalf of the original applicant that even the decisions relied upon by
the appellant in the case of
Raman Tech
(Supra), Rajasthan  Cylinder
and Container Ltd. (Supra),
Premal Mundra
(Supra) and Saraswat Co­
operative
Bank Ltd.
(Supra) in support of their submission that while
exercising powers under
section 9
of the Arbitration Act, the principles
governing
Order 38 Rule 5 of the CPC
would be applicable is concerned,
it is submitted by Shri Trivedi, learned Counsel appearing on behalf of
the   original   applicant   that   in   none   of   the   aforesaid   decisions   the
provisions   of
section   9(ii)(b)
of   the   Arbitration   Act   in   a   post­award
scenario   were   under   consideration.   Therefore,   aforesaid   decisions   are
wholly irrelevant for the adjudication of the present dispute.

It is further submitted that even the decision of the Bombay High
Court in the case of
O.P. Roongta
(Supra), which has been relied upon
by the learned Counsel appearing on behalf of the appellant, will not be
applicable  to the  facts of the  case  on  hand as in  the   case  before  the

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Bombay High Court, the order was passed under
section 9(ii)(b)
of the
Arbitration Act, however in the present case the order has been passed
under
section 9(ii)(b)
of the Arbitration Act.

Making above submissions and relying upon above decisions and
submitting   that   considering   the   precarious   financial   condition   of   the
appellant,   the   learned   District   Court   has   not   committed   any   error   in
passing the impugned order in exercise of powers under
section 9(ii)(b)

of the Arbitration Act and therefore, it is requested to dismiss the present
appeal.

[5.0] Heard learned Counsel appearing on behalf of respective parties at
length.

[6.0] A short but an interesting question of law posed for consideration
before this Court is the scope and ambit of the powers of the Court while
considering the application under
section 9(ii)(b)
of the Arbitration Act
post­award scenario and the principles governing the order passed by
the   Court   in   exercise   of   the   powers   under
section   9(ii)(b)
of   the
Arbitration Act post­award scenario?

At the outset it is required to be noted that in the present case the
award/s   passed   by   the   Arbitral   Tribunal   are   subject   matter   of   the
proceedings   before   the   District   Court   being   Civil   Misc.   Application
Nos.295/2013 and 444/2013 under
section 34
of the Arbitration  Act.
Therefore, as such and considering
section 36
of the Arbitration Act, the
award/s   challenged   under
section   34
of   the   Arbitration   Act   are   not
executable   considering
section   36
of   the   Arbitration   Act.   As   such   the
aforesaid cannot be disputed by the original applicant and as such Shri
Trivedi, learned Counsel appearing on behalf of the original applicant is
not disputing the above. Even any decision on the aforesaid is required,
the   observations   made   by   the   Hon'ble   Supreme   Court   in   the   case   of

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Pressteel & Fabrications
(Supra) is required to be considered. In the case
before the Hon'ble Supreme Court a request was made by the party in
whose   favour   the   award   was   declared   by   the   Arbitral   Tribunal
requesting   to   atleast   direct   the   other   party   to   deposit   the   amount
awarded by the Arbitral Tribunal in the competent Civil Court so that
the   applicant   could   enjoy   the   fruit   of   the   said   award   during   further
proceedings   under
section   34
of   the   Arbitration   Act   and   to   that   and
considering   the   provision   of
section   34
of   the   Arbitration   Act,   the
Hon'ble Supreme Court has observed as under and has declared to grant
any such relief. The Hon'ble Supreme Court in
the said decision
in para
10 has observed and held as under:

"At one point of time, considering the award as a
money decree, we were inclined to direct the party to
deposit the awarded amount in the Court below so that
the   applicant   can   withdraw   it,   on   such   terms   and
conditions as the said Court might permit it to do so as
an interim measure"

"...there is no discretion left with the Court to pass
any   interlocutory   order   in   regard   to   the   said   award
except to adjudicate on the correctness of the claim made
by   the   applicant   therein.   Therefore,   that   being   the
legislative intent, any direction from us contrary to that,
also becomes impermissible."

Thus, considering the aforesaid observations made by the Hon'ble
Supreme Court as well as the mandatory language of
section 34
of the
Arbitration Act, when the award/s are challenged under
section 34
of
the Arbitration  Act and thus they became unexecutable, the aforesaid
questions posed for our considerations are required to be considered.

[6.1] From the application  submitted  by the  original applicant before
the learned District Court on which the learned District Court has passed
an   interim   order   and   considering   the   impugned   order   passed   by   the
learned   District   Court   and   as   it   is   not   in   dispute   that   the   original

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applicant   submitted   the   application   for   appropriate   order   by   way   of
interim measure to secure the amounts awarded by the learned Arbitral
Tribunal,   invoking   the   jurisdiction  of  the   District   Court   under
section
9(ii)(b)
of the Arbitration Act. It was the specific case on behalf of the
original applicant that as there is already an award/s declared by the
learned   Arbitral   Tribunal   and   looking   to   the   financial   position   of   the
appellant   and   as   the   appellant   is   running   in   losses   and   is   heavily
indebted,   it   was   requested   to   protect   the   interest   of   the   original
applicant by directing the appellant to deposit the amount of costs as per
the   final   award   declared   by   the   learned   Arbitral   Tribunal   so   that
ultimately if at all the award/s are to be executed, the award may not
remain as paper decree / award. Therefore, the sole ground on which
the relief was sought by the original applicant under
section 9(ii)(b)
of
the Arbitration Act was the bad financial condition of the appellant and
that   the   appellant   was   running   in   huge   losses   and   was   /   is   heavily
indebted   and   there   was   a   huge   sales   tax   liability   of   the   State
Government to the extent of Rs.6,169 Crores, which was required to be
paid   by   the   appellant   to   the   State   Government.   At   this   stage   it   is
required to be noted that neither before the learned District Court nor
even before this Court, it was the case on behalf of the original applicant
that there was any attempt on the part of the appellant herein is/was
about to dispose of the whole or any part of its property, or is/was about
to remove the whole or any part of its property from the local limits of
jurisdiction of the Court with an intent to obstruct or delay the execution
of any decree/award that may be passed against it.

It is submitted that it is the case on behalf of the appellant that
unless and until the essential requirements of
Order 38 Rule 5 of the
CPC
are satisfied and the Court is satisfied that the appellant with intent
to   obstruct   or   delay  the   execution   of   any  decree   that   may  be   passed
against him is about to dispose of the whole or any part of his property,

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or is about to remove the whole or any part of his property from the
local limits of the jurisdiction of this Court, no such relief / order can be
passed by the Court in exercise of powers under
section 9(ii)(b)
of the
Arbitration Act. Therefore, it is the case on behalf of the appellant that
even while passing the order under
section 9
of the Arbitration Act, the
provisions
of   the   CPC
more   particularly   while   passing   such   an   order
under
section 9(ii)(b)
of the Arbitration Act, the provisions of
Order 38
Rule 5 of the CPC
would be applicable and all the requirements of
Order
38 Rule 5 of the CPC
are required to be satisfied.

On the other hand it is the case on behalf of the original applicant
that the provisions of the CPC more particularly Order 38 Rule 5 of the
CPC would not be applicable stricto senso while exercising the powers by
the District Court / Court under section 9 more particularly section 9(ii)

(b) of the
Arbitration Act
more particularly at post­award stage.

While considering the aforesaid rival submissions and the scope
and ambit of
section 9
of the Arbitration Act and powers to be exercised
by the learned District Court under
section 9
of the Arbitration Act while
passing  the   order  under
section   9
of  the   Arbitration  Act   whether   the
provisions
of Code of Civil Procedure
, 1908 stricto senso apply,
section 9

of the Arbitration Act is required to be considered which reads as under:

9. Interim  measures,  etc.  by Court.­  A party may,  before  or during
arbitral proceedings or at any time after the making of the arbitral award
but before it is enforced in accordance with
section 36
, apply to a court­

(i) for the appointment of a guardian for a minor or a person
of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the
following matters, namely:­

(a) the preservation, interim custody or sale of any goods
which are the subject matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the   detention,   preservation   or   inspection   of   any
property or thing which is the subject­matter of the dispute
in   arbitration,   or   as   to   which   any   question   may   arise
therein  and  authorising  for  any of the aforesaid  purposes
any   person   to   enter   upon   any   land   or   building   in   the

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possession of any party, or authorizing  any samples to be
taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose
of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such   other   interim   measure   of   protection   as   may
appear to the court to be just and convenient,

and the Court shall have the same power for making orders as it has for
the purpose of, and in relation to, any proceedings before it.

Considering the provisions of section 9 of the Arbitration Act, the
Court may pass any order as provided under section 9(i) to section 9(ii)

(e)  either  pre­award or  post­award and  if  it  is  pre­award  before  it  is
enforced   in   accordance   with
section   36
.   It   also   further   specifically
provides that while  passing any order as provided under
section  9
in
exercise of powers under
section 9
of the Arbitration Act, the Court shall
have the said power for making orders as it has for the purpose of, and
in relation to any proceedings before it. The order which can be passed
as provided under
section 9(ii)
of the Arbitration  Act could be in the
nature   of   interim   measure   of   protection   in   respect   of   (a)   the
preservation, interim custody or sell of any goods which are the subject
matter of the arbitration agreement; (b) securing the amount in dispute
in arbitration; (c) the   detention,   preservation   or   inspection   of   any
property   or   thing   which   is   the   subject­matter   of   the   dispute   in
arbitration,   or   as   to   which   any   question   may   arise   therein   and
authorising for any of the aforesaid purposes any person to enter upon
any land or building in the possession of any party, or authorizing any
samples to be taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose of obtaining
full information or evidence; (d) interim injunction of the appointment
of receiver; (e) such other interim measures of protection as may appear
to the Court to be just and convenient. Considering the order that may

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be passed under
section 9(ii)
more particularly
section 9(ii)(b)
;
section
9(ii)(d)
and
section 9(ii)(e)
are akin to
Order 38 Rule 5 of the Code of
Civil Procedure
, 1908 and under Order 39 Rules 1 and 2
of the CPC
. The
object and purpose of the powers conferred upon the Court to pass any
order under
section 9
of the Arbitration Act seems to be to protect the
interest of the parties and so as to see that either arbitration proceedings
do   not   become   infructuous   or   to   see   that   if   ultimately   the   award   is
passed and executed under
section 36
of the Arbitration Act, the party in
whose  favour   the   award  is  declared,   is  able   to  enjoy  the   fruit  of   the
litigation / arbitral award. At this stage it is required to be noted that
Shri Kamal Trivedi, learned Counsel appearing on behalf of the original
applicant has also agreed and submitted that the provisions
of CPC
can
at   the   best   act   only   as   a   guiding   principle   for   a   Court   exercising   its
powers   under
section   9
of   the   Arbitration   Act,   for   instance,   while
granting   injunction,   the   Court   under
section   9
of   the   Arbitration   Act
could   consider   the   celebrated   guiding   principles   of  prima   facie  case,
balance of convenience etc. Even as observed herein even in
section 9
of
the Arbitration Act itself, it is specifically mentioned that it provides that
while passing the order under
section 9
of the Arbitration Act, the Court
shall have the same power for making orders as it has for the purpose of,
and in relation to any proceedings before it. It cannot be disputed that
whenever any powers are conferred upon the Court to pass a particular
order   as   provided   under   the   Statute,   the   grant   of   such   relief   is
necessarily required to be based on accepted principles and not in an
unguided manner. In the present case while exercising the powers under

section 9
of the Arbitration Act, therefore the Court is required to grant
any   relief   and/or   pass   any   order   as   provided   under
section   9
of   the
Arbitration Act, while considering the principles of grant of such orders
under
the CPC
and therefore, it can be said that while passing any order
under
section 9
of the Arbitration Act, the Court is required to be guided

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by the provisions
of CPC
.

In   the   case   of
Adhunik   Steels
(Supra)   while   considering   the
powers of the  Court and to pass an order of interim measures under

section   9
of   the   Arbitration   Act   more   particularly   while   granting   the
order of injunction, the Hon'ble Supreme Court has specifically observed
and held that it would not be correct to say that the power under
section
of   the   Arbitration   Act   is   totally   independent   of   the   well   known
principles   governing   the   grant   of   interim   injunction   that   generally
governs the Courts in this connection. While observing and holding so in
paras 10 and 18, the Hon'ble Supreme Court has observed and held as
under:

"10. It is true that
Section 9
of the Act speaks of the court by way of an
interim measure passing an order for protection, for the preservation,
interim custody or sale of any goods, which are the subject­matter of
the arbitration agreement and such interim measure of protection as
may appear to the court to be just and convenient. The grant of an
interim prohibitory injunction or an interim mandatory injunction are
governed  by well known  rules and it is difficult to imagine that the
legislature   while   enacting
Section   9
of   the   Act   intended   to   make   a
provision which was dehors the accepted principles that governed the
grant   of   an   interim   injunction.   Same   is   the   position   regarding   the
appointment of a receiver since the Section itself brings in, the concept
of just and convenient while speaking of passing any interim measure
of protection. The concluding words of the Section, and the court shall
have the same power for making orders as it has for the purpose and
in relation to any proceedings before it" also suggest that the normal
rules that govern the court in the grant of interim orders is not sought
to be jettisoned by the provision. Moreover, when a party is given a
right to approach an ordinary court of the country without providing a
special procedure or a special set of rules in that behalf, the ordinary
rules   followed   by   that   court   would   govern   the   exercise   of   power
conferred by the Act. On that basis also, it is not possible to keep out
the   concept   of   balance  of   convenience,  prima   facie   case,   irreparable
injury and  the concept of just and  convenient  while passing  interim
measures under
Section 9
of the Act.

18.   It   is   true   that   the   intention   behind
Section   9
of   the   Act   is  the
issuance   of   an   order   for   preservation   of   the   subject­matter   of   an
arbitration   agreement.   According   to   learned   counsel   for   Adhunik
Steels, the subject­matter of the arbitration agreement in the case on
hand, is the mining and lifting of ore by it from the mines leased to

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O.M.M.   Private  Limited   for   a  period   of   10   years   and  its   attempted
abrupt termination by O.M.M. Private Limited and the dispute before
the arbitrator would be the effect of the agreement and the right of
O.M.M.   Private   Limited   to   terminate   it   prematurely   in   the
circumstances of the case. So viewed, it was open to the court to pass
an order by way of an interim measure of protection that the existing
arrangement   under   the   contract   should   be   continued   pending   the
resolution of the dispute by the arbitrator. May be, there is some force
in this submission made on behalf of the Adhunik Steels. But, at the
same time, whether an interim measure permitting Adhunik Steels to
carry on the mining operations, an extraordinary measure in itself in
the   face   of   the   attempted   termination   of   the   contract   by   O.M.M.
Private Limited or the termination of the contract by O.M.M. Private
Limited,   could   be   granted   or   not,   would   again   lead   the   court   to   a
consideration  of the classical  rules  for  the grant  of such  an interim
measure. Whether an interim mandatory injunction could be granted
directing  the continuance  of the working  of the contract,  had  to be
considered   in   the   light   of   the   well­settled   principles   in   that   behalf.
Similarly,   whether   the   attempted   termination   could   be   restrained
leaving the consequences thereof vague would also be a question that
might have to be considered in the context of well settled principles for
the grant  of an  injunction.  Therefore,  on the whole,  we feel that  it
would not be correct to say that the power under
Section 9
of the Act is
totally independent of the well known principles governing the grant of
an   interim   injunction   that   generally   govern   the   courts   in   this
connection.  So viewed,  we have  necessarily  to see whether  the High
Court was justified in refusing the interim injunction on the facts and
in the circumstances of the case."

In the case of
Arvind Constructions Company Ltd.
(Supra), in para
15, the Hon'ble Supreme Court has observed and held as under:

"15.The   argument   that   the   power   under
Section   9
of   the   Act   is
independent of the
Specific Relief Act
or that the restrictions placed by
the
Specific   Relief   Act
cannot   control   the   exercise   of   power   under

Section 9
of the Act cannot prima facie be accepted.The reliance placed
on
Firm Ashok Traders and Anr. Vs. Gurumukh Das Saluja and Ors.

[(2004) 3 S.C.C. 155] in that behalf does not also help much, since
this Court
in that case
did not answer that question finally but prima
facie felt that the objection based on
Section 69 (3)
of the Partnership
Act may not stand in the way of a party to an arbitration agreement
moving the court under
Section 9
of the Act. The power under
Section
is conferred on the District Court. No special procedure is prescribed
by the Act in that behalf. It is also clarified that the Court entertaining
an application under
Section 9
of the Act shall have the same power
for  making  orders  as it has  for  the purpose  and  in relation  to any
proceedings before it. Prima facie, it appears that the general rules that

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governed the court while considering the grant of an interim injunction
at the threshold are attracted even while dealing with an application
under
Section  9
of the Act.  There  is also the principle  that  when  a
power  is conferred  under a special statute and it is conferred on an
ordinary court of the land, without laying down any special condition
for exercise of that power, the general rules of procedure of that court
would  apply.
The Act
does not  prima  facie purport  to keep out  the
provisions  of the
Specific Relief Act
from consideration.  No doubt,  a
view that exercise of power under
Section 9
of the Act is not controlled
by the
Specific Relief Act
has been taken by the Madhya Pradesh High
Court. The power under
Section 9
of the Act is not controlled by
Order
XVIII Rule 5 of the Code of Civil Procedure
is a view taken by the High
Court of Bombay. But, how far these decisions are correct, requires to
be considered in an appropriate case. Suffice it to say that on the basis
of the submissions made in this case, we are not inclined to answer
that question  finally.  But,  we may  indicate that we are prima  facie
inclined to the view that exercise of power under
Section 9
of the Act
must   be   based   on  well   recognized   principles   governing  the   grant   of
interim   injunctions   and   other   orders   of   interim   protection   or   the
appointment of a receiver."

In   the   case   of
Goel   Associates
(Supra),   in   para   2,   the   Hon'ble
Supreme   Court   has   specifically   observed   and   held   that   though   the
provisions like
Order 38 Rule 5 of CPC
are not contained in
Arbitration
and Conciliation Act
, but its principles are to be applicable as such. It is
also   specifically   observed   that   the   provisions
of   CPC
would   be   the
guiding principle. In para 2 the  Hon'ble Supreme Court has observed
and held as under:

"2. Mr. Munjal, learned counsel for the appellant has relied upon a
judgment of the learned Single Judge titled  as
Rite Approach Group
Ltd.   Vs.   M/S   Rosoboronextport   MANU/DE/0439/2004
:

111(2004)DLT816 and another judgment of learned Single Judge of
the   Bombay   High   Court   in
Delta   Construction   Systems   Ltd.,
Hyderabad   vs.   Narmada   Cement   Company   Ltd.,   Mumbai
2002(2)
Arb. LR 47 (Bom) and on the basis of above said authorities, it was
contended that the power to grant interim relief cannot be controlled
or restricted by invoking the provisions of
Order 38 Rule 5 of the Code
of Civil Procedure
. To our mind, there cannot be any dispute to the
proposition   of   law   as   enunciated   by   the   learned   Single   Judge   of
Bombay High Court and this Court.  We have carefully analysed the
judgment  of the learned  Single  Judge  which  is impugned  before  us.
What   has   been   stated   in   the   judgment   is   that   in   the   given
circumstances, the relief of attachment cannot be granted. No doubt

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that the provisions like
Order 38 Rule 5 Code of Civil Procedure
are
not contained in the
Arbitration and Conciliation Act
but its principles
are to be applicable as such.
However, one cannot loose the sight that
the   provisions
of   Code   of   Civil   Procedure
would   be   the   guiding
principles as has been held by Supreme Court in ITI Ltd. Vs. Siemens
Public   Communications   Network   Ltd.   MANU/SC/0502/2002   :
[2002]3 SCR 1122. It was held that for want of specific exclusion
of
Code of Civil Procedure
in the Act of 1996, if cannot be inferred that
Code was not applicable but that would mean that the provisions of
Code have to be read into as it is when the Court exercises its powers
as prescribed in the Act of 1996. The procedural aspect provided in the
Code about which the Act of 1996 is silent, needless to say, when the
Court exercises its substantive power under the Act of 1996 shall be
applicable but the guiding  factor  for exercise of power  by the Court
under
section   9(ii)(b)
has   to   be   whether   such   order   deserves   to   be
passed  for  justice  to the  cause.  The  learned  Single  Judge  has   relied
upon  the  provisions   of
Order   38  Rule  5  Code  of Civil  Procedure
to
exercise   his   discretion   for   the   purposes   of   exercising   power   under

section 9(ii)(b)
as to whether that was a fit case for grant of an order
of attachment  or not.  Therefore,  it can't  be said that the impugned
order suffers from infirmity merely because the learned Single Judge
has stated in one sentence that the provisions of
Order 38 of the Code
of   Civil   Procedure
must   be   kept   in   view   while   disposing   of   such
application."

In   the   case   of
Brand   Value   Communications   Ltd.
(Supra),   the
Division Bench of the Calcutta High Court has held that while dealing
with an application under
section 9(ii)
of the Arbitration Act, the Court
should   be   guided   by   said   principle   as   required   to   be   followed   while
disposing of the applications under Orders 38 to 40
of the CPC
. While
holding so the Division Bench of the Calcutta High Court in paras 14 to
19 has observed as under:

"14. In the application under
Section 9
of the Act, no such allegation
has been made. The respondent has even admitted that it had no idea
about the assets of the appellant except the fact that it has equipments
and   machineries   for   telecasting   of   the   films.   Thus,   there   was   no
justification   of   passing   direction   for   payment   of   money   by   way   of
security.

15. The object of
Section 9(ii)
of the Act is similar to those contained
in Section 94 read with Orders 38 40
of the Code of Civil Procedure
as

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would   appear   from   the   language   employed   therein   which   is   quoted
below :

9.   Interim   measures,   etc.   by   Court.­   A   party   may,   before   or
during arbitral proceedings or at any time after the making of
the arbitral award but before it is enforced in accordance with

Section 36
, apply to a Court :­

(i) for the appointment of a guardian for a minor or a person
of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of
the following matters, namely :­

(a) the preservation, interim custody or sale of any goods
which   are   the   subject­matter   of   the   arbitration
agreement;

(b) securing the amount in dispute in the arbitration;

(c)   the   detention,   preservation   or   inspection   of   any
property   or   thing   which   is   the   subject­matter   of   the
dispute in arbitration, or as to which any question may
arise   therein   and   authorising   for   any   of   the   aforesaid
purposes any person to enter upon any land or building in
the possession of any party, or authorising any samples to
be taken or any observation to be made, or experiment to
be   tried,   which   may   be   necessary   or   expedient   for   the
purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e)   such   other   interim   measure   of   protection   as   may
appear to the Court to be just and convenient,
and the Court shall have the same power for making orders as it has
for   the   purpose   of,   and   in   relation   to,   any   proceedings   before   it.
(Emphasis supplied by us)

16.Therefore,   the   power   entrusted   to   a   Court   in   any   suit   or
proceedings   for   passing   orders   as   mentioned   in   the   Supplemental
Proceedings   indicated   in   Part   VI   of   the   body   of   the   Code   of   Civil
Procedure has been substantially repeated in Section 9(ii) of the Act by
making it clear that in dealing with such an application, the Courts
shall have the same power as it has for the purpose of or in relation to
any proceedings before it.

17.Thus,   it   is   clear   that   while   dealing   with   an   application   under

Section   9(ii)
of   the   Act,   the   Court   should   be   guided   by   the   same
principles,   which  are required   to  be followed   while   disposing   of  the
applications under Orders 38­40 of the Code.

18.In the case before us, the dispute between the parties being purely
conflicting monetary claims advanced by the parties, in our opinion,
the learned Single Judge erred in law in passing a direction for deposit

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of  the   money   on   the  appellant   merely   on  a   prima   facie   finding   on
merit   in   the   absence   of   any   finding   that   the   appellant   was   either
transferring  or alienating  his properties  to avoid  payment  of money
that may be awarded against it or that it was threatening or intending
to remove or dispose of his properties with a view to defrauding  his
creditors.   At   this   stage,   we   may   profitably   refer   to   the   following
observations   of  the   Supreme   Court   in   the  case   of   Raman   Tech   and
Process  Eng.
Co.  v.  Solanki  Traders
reported  in (2008)  2 SCC  302
while   considering   a   case   of   grant   of   relief   of   attachment   before
judgment :

"5. The power under Order 38, Rule 5, C. P. C. is a drastic and
extraordinary   power.   Such   power   should   not   be   exercised
mechanically   or   merely   for   the   asking.   It   should   be   used
sparingly and strictly in accordance with the Rule. The purpose
of Order 38, Rule 5 is not to convert an unsecured debt into a
secured debt. Any attempt by a plaintiff to utilise the provisions
of Order 38, Rule 5 as leverage for coercing the defendant to
settle  the suit claim  should  be discouraged.  Instances  are not
wanting   where   bloated   and   doubtful   claims   are   realised   by
unscrupulous   plaintiffs   by   obtaining   orders   of   attachment
before   judgment   and   forcing   the   defendants   for   out­of­court
settlements under threat of attachment.

6. A defendant is not debarred from dealing with his property
merely because a suit is filed or about to be filed against him.
Shifting of business from one premises to another premises or
removal   of   machinery   to   another   premises   by   itself   is   not   a
ground   for   granting   attachment   before   judgment.A   plaintiff
should show, prima facie, that his claim is bona fide and valid
and also satisfy the Court that the defendant is about to remove
or   dispose   of   the   whole   or   part   of   his   property,   with   the
intention of obstructing or delaying the execution of any decree
that may be passed against him, before power is exercised under
Order 38, Rule 5, C. P. C. Courts should also keep in view the
principles relating to grant of attachment before judgment. (See

Premraj Mundra v. Md. Manech Gazi
for a clear summary of
the principles.)"
(Emphasis given by us)

19. The principles mentioned above squarely apply to the proceedings
under
Section 9(ii)
of the Act and a Court before passing any direction
in   the   nature   of   attachment   before   award   should   follow   those
principles.   The   learned   Single   Judge,   as   it   appears   from   the   order
impugned, totally ignored the abovementioned principles.

In the case of
Shin Satellite Public Co.
(Supra), the learned Single
Judge of the Delhi High Court after considering various other judgments

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on the point enumerated the principles for exercise of discretion under

section 9
of the Arbitration Act in para 36. The Delhi High has observed
as under:

"36.
In
Escorts   Finance   Limited
(supra)   a   Division   Bench   of   this
Court   had   held   that   the   mere   fact   that   the   arbitrators   had   been
appointed who also could exercise power to appoint a receiver could
not be a ground to dismiss the petition under
Section 9
of Arbitration
& Conciliation Act summarily.

Another single Judge of this Court in

Atul   Limited
(supra)   had   held   that   recourse   under
Section   17
of
Arbitration   &   Conciliation   Act,   1996   is   an   enabling   additional
recourse and is not in substitution of
Section 9
and, therefore,
Section
cannot operate as an ouster of jurisdiction of court granted under

Section 9
of the Act and, therefore, the court would  have powers  to
pass appropriate orders under
Section 9
of the Act notwithstanding the
pendency of the arbitral proceedings.

Similarly, in
National Highways
Authority   of   India
(supra),   it   was   held   that   despite   the   overlap
between the powers under
Section 17
and
Section 9
of the Arbitration
& Conciliation Act, 1996, it is apparent that the powers under
Section
of the Act are much wider inasmuch as they extend to period  - pre
and  post the award  -  as well  as with regard  to subject  matter  and
nature   of   orders   and,   therefore,   pendency   of   application   under

Section17
does not oust the jurisdiction of the court under
Section 9
of
the   Arbitration   &   Conciliation   Act,   1996   to   pass   interim   orders.

Another Learned single Judge of this Court in
Modi Rubber Limited v.
Guardian International Corp
, 141 (2007) DLT 822 had held that the
proceedings under
Section 9
are concerned only with preservation of
property and to prevent violation of claimed rights of the parties so
that   no   irreparable   loss   and   damage   inures   to   the   parties   till   the
arbitration   results   in   a   dispute   redressal.   It   was   also   held   that   the
issues   which   are   to   be   decided   in   the   substantive   arbitration
proceedings cannot be gone into in a petition under
Section 9
of the
Arbitration & Conciliation Act, 1996. In
the said judgment
relying on
various   other   judgments,   the   principle,   manner   and   limitation   of
exercise of discretion while appointing a receiver or an injunction has
been culled out in paragraph 209, as also the effect of suppression of
material facts and delay. The relevant paras 209 and 210 enumerating
the principle for exercise of discretion are as under:­

209. It is also necessary to examine the parameters  within which
the   Court   shall   exercise   such   power.   The   manner   and   limits   of
exercise of such discretion have fallen for consideration in several
judicial   pronouncements   and   the   principles   laid   down   can   be
usefully called out thus:

(i)   Even   though
Section   9
does   not   embody   the   ingredients   of

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Order   38   Rule   5   of   the   Code   of   Civil   Procedure
,   1908   nor   the
conditions of the Order 38 Rule 5 can be read into it, however for
the exercise of discretion thereunder, the Court can take guidance
from the provisions of Order 39 as well as
Order 38 of the Code of
Civil Procedure
, 1908 [Ref. 2004 (111) DLT 816 : 2004 (4) AD
(Delhi) 618 : 2004 (75) DRJ 104, Rite Approach Group Ltd. v.

Rosoboron Export].

(ii) The scope of
Section 9
of the Arbitration and Conciliation Act,
1996  is in pari  meteria  with  the  provisions  of
Order  39  of  the
Code of Civil Procedure
, 1908. The power vested in the Court by
virtue  of
Section  9
must  be exercised  in consonance  with equity
which   tempers   the   grant   of   discretionary   relief   as   the   relief   of
interim injunction  is wholly equitable in nature. [Ref. (
1995)  5
SCC   545,  Gujarat   Bottling  Co.  Ltd.  v.   Coca  Cola  & Ors.
;  2004
(115)  DLT   219=2004  (
8)   AD   (Delhi)   361,   Reliance   Infocomm
Ltd. v. Bharat Sanchar Nigam Ltd
.]

(iii) The intention of the defendant is a sine qua non for invoking

Section 9
where the claim is to secure the amount in dispute in
arbitration. The Court can take guidance from
Order 38 Rule 5 of
the CPC
and
Sections 18
and
of the Arbitration Act, 1940 for
considering  whether  such  a relief as has been  prayed  for  in the
petition   under
Section  9
deserves  to  be  granted  [Ref.  AIR  1998
Delhi   397=1998   (3)   RAJ,   M/s.   Global   Co.   v.   M/s.   National
Fertilisers Ltd.; 2005 (117) DLT 183 : 2005 (
2) AD (Delhi) 592,
Mala   Kumar   Engineers   Pvt.   Ltd.   (MKE)   v.   B.   Seenaiah   &   Co.
(Projects) Ltd.
].

(iv) Protection under
Section 9
can be granted only when a
prima   facie   case   is   made   out   and   balance   of   convenience   and
possibility of irreparable loss and injury to the petitioner is made
out.
Section 23
of the Specific Relief Act, 1963 provides that the
provision   of   liquidated   damages   is   not   a   bar   to   the   specific
performance of the contract. The general rule of equity is also that
if a thing is agreed to be done, though there is a penalty attached
thereto to secure its performance,  yet the Court in its  discretion
enforces specific performance thereof. The jurisdiction of the Court
is discretionary and must be exercised on such judicial principles
when balance of convenience and possibility of irreparable loss and
injury is shown to the plaintiff [Ref. 2005 (
120) DLT 387, Geep
Batteries (India) Pvt. Ltd. v. Gillette India Ltd.
; 2005 (118) DLT
591 : 2005 (
81) DRJ 233, Techno Construction v. Kunj Vihar Co­

operative Group Housing Society].

(v) The discretionary power of the Court under
Section 9
has to be
exercised by the Court sparingly and cautiously, bearing in mind

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that the objective of the Court is to create an alternative dispute
redressal   mechanism   and,   consequently,   the   interference   by   the
Court is not required at every stage [Ref. 2006 (128) DLT 694 DB,
Sanrachna (India) Inc. v. AB Hotels Ltd.]. Whenever the powers of
the   Courts   are   invoked   under
Section   9
with   the   objective   of
supporting   the   arbitration,   the   Court   must   act   with   alacrity.
However, this would not justify grant of interim orders and relief
on   the   mere   asking   [Ref.
2000   (87)   DLT   449   :   2000   (6)   AD
(Delhi)   509   :   2000   (
55)   DRJ   750,   CREF   Finance   Ltd.   v.   Puri
Construction Ltd.
; 2006 (
91) DRJ 83, Sea Transport Contractors
Ltd. v. Indian Farmers Fertilizers
Co­operative Ltd.].

(vi) The scope and object of
Section 9
of the statute is to grant
such relief by way of interlocutory injunction so as to mitigate the
risk   or   injustice   to   the   petitioner   during   the   period   before   that
uncertainty   can  be  resolved.  Its   object  is   to  protect   the  plaintiff
against injury by violation of his right for which he could not be
adequately compensated in damages which would be recoverable
in the action if the uncertainty were resolved in his favour at the
trial [Ref. AIR 1995 SC 2372, Gujarat Bottling Co. v. Coca Cola &
Co.;   2006   (4)   AD   (Delhi)   38,   Country   Development   &
Management Services Pvt. Ltd. v. Brookeside Resorts Pvt. Ltd.]. In
2006   133   DLT   153,   Shaw   v.   Him   Neel   Breweries   Ltd.,  learned
Single   Judge   of   this   Court   held   that   the   interim   orders   are
calculated to ensure that the assets of the party are not dissipated
or   frittered   away   and   that   such   orders   do   not   fall   within   the
moratorium of
Section 22
.

(vii) The application seeking  interim measures of protection
under
Section   9
of   the   Arbitration   and   Conciliation   Act,   1996
pertaining   to   the   preservation,   interim   custody   or   sale   of
equipment which is the subject matter of the agreement would be
covered   under
Section   9(ii)(a)
as   also   under
Sections   9(ii)(c)
,

9(ii)(d)
and
9(ii)(e)
of the Act [Ref. 2006 (3) AD (Delhi) 168 :

2006 (87) DRJ 225 : 2006 (127) DLT 776 :
AIR 2006 Delhi 134,
National   Highways   Authority   of   India   (NHAI)   v.   China   Coal
Construction Group Co.
].

(viii) The Court has the power to pass an order under
Section 9

during the pendency of the arbitration or even after the arbitral
award but before the award is enforced in accordance with Section

36. Such order can be passed for preservation, interim custody or
sale of any goods which are the subject matter of the arbitration
agreement or securing the amount in the dispute and the like [Ref.

2006 (128) DLT 694, Sanrachna (India) Inc. v. AB Hotels Ltd.;
2000  (
87)  DLT  449,  CREF Finance  Ltd. v. Puri  Construction  &
Ors.
].

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(ix) The   power   under
Section   9
to   grant   interim   relief   is
available   to   the   Court   while   under
Section   17
,   such   powers   to
make   interim   measures   are   made   available   to   the   Arbitral
Tribunal.   Even   though   there   may   be   some   degree   of   overlap
between the two provisions, however, the powers under
Section 9

are   much   wider   inasmuch   as   they   extend   to   the   pre   and   post
award period as well as with regard to the subject matter and the
nature   of   the   orders   which   the   Court   is   empowered   to   pass.
Therefore, pendency of an application under
Section 17
before the
Arbitral Tribunal does not denude the Court of its power to make
an order for interim measures under
Section 9
of the statute [Ref.
2006 (3) AD (Delhi) 168 : 2006 (87) DRJ 225 : AIR 2006 Delhi
134 : 2006 (
127) DLT 766, National Highways Authority of India
(NHAI) v. China Coal Construction Group Co.
].

(x) It has been held that though
Section 9
enables a party, before
or during arbitral proceedings or at any time after the making of
the arbitral award but before it is enforced under
Section 36
of the
Act, may apply to the Court for an interim order under
Section 9
,
however, without a substantive move for reference or declaration
on  the   petitioner‟s   stand   on   the   sub stantive   relief   by   an
appropriate   forum,
Section   9
cannot   be   invoked   for   grant   of
interim   relief   [Ref.   2004   (
3)   SCC   155,   Firm   Ashok   Tralers   &
Another v. Gurmukh Das
; AIR 1999 SC 565, Sudarshan Finance
Ltd. v. NEPC;  1998  (1) AD (Delhi) 513  : 1998  (
44)  DRJ  399,
National Building Construction Corporation Ltd. (NBCC) v. Ircon
International   Ltd.
].   (xi)   So   far   as   the   questions   which   can   be
considered  in a petition  under
Section  9
of  the  Arbitration  and
Conciliation Act, 1996 are concerned, certainly issues which are to
be   decided   in   the   substantive   arbitration   proceedings   cannot   be
gone   into   in  a  petition  under
Section   9
of  the   statute.   Thus,   a
question   as   to   whether   the   agreement   between   the   parties   was
validly entered into or whether it was validly terminated has to be
determined   only   in   the   arbitration   proceedings   and   cannot   be
determined in a petition under
Section 9
of the statute [Ref.
(8) AD (Delhi) 617 : 2003 (
66) DRJ 239, S. Raminder Singh v.
NCT of Delhi
].

A   similar   question   had   arisen   before   this   Court   in
MANU/Del./1524/2001,
D.R.  Sondhi  v.  Hella  K.G.  Hueck  & Co.  In

para 14 of the judgment, it was held by this Court that the question as
to whether the material breach has been committed or not or if there is
any breach at all was agitated but it was not gone into for the reason
that it is not the question for determination at present.

210. This Court while considering the petition under
Section 9
of the
Arbitration and Conciliation Act, 1996, does not have the jurisdiction

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to return a finding on the merits of a claim made or a dispute raised
by the parties before the arbitrator. However, there can be no dispute
that this Court is required to examine the existence of a prima facie
case on the assertions of the petitioner with regard to the termination
of the agreement in the facts and law applicable and as to strength in
the petitioner‟s case as to the bindingness and subsistence of the SHA."

[6.2] In another decision in the case of
Mala Kumar Engineers Pvt. Ltd.
(MKE
) (Supra) in paras 21 and 22, it is observed and held as under:

"21. In the decision MANU/DE/0656/1998 : AIR 1998 Delhi 397, M/s.
Global Company v. M/s. National Fertilizers Ltd., learned Single Judge of
this Court  held that the intention  of the defendant  is sine qua non  for
invoking
section 9
where claim is to secure the amount in dispute in the
arbitration. It was held that guidance could be taken from
Order 38 Rule
5 of CPC
and
Sections 18
and
of the Arbitration Act, 1940. In para 11,
it was observed as under:

"11. It is true that the said
Arbitration Act, 1940
stands repealed
by the Act of 1996 and the provisions contained in
the Code of Civil
Procedure
are not applicable to the proceedings under the Act, still,
in my opinion, in the absence of guidelines how the power for grant
of relief under
Section 9(ii)(b)
is to be exercised by the Court, the
principles underlying the aforesaid sections are to be applied. It is
only on adequate material being supplied by the petitioner that the
Court   can   form   opinion   that   unless   the   jurisdiction   is   exercised
under the said
section 9(ii)
there is real danger of the respondent
defeating, delaying or obstructing the execution of the award made
against it. On the basis of the only ground of protection of financial
interest   of   the   petitioner   taken   in   para   6   of   the   petition,   the
respondent a Govt. of India Undertaking cannot be legally directed
to furnish security for the amount of US $ 88,250 together with
interest @ 9% p.a. Petition thus deserved to be dismissed."

22. Petitioner has not averred that the respondent is a bankrupt or a
near   bankrupt   company.   Petitioner   has   nowhere   alleged   that   if   the
amount is not secured, it would not be possible for the petitioner to recover
the   amount,   if   awarded   during   arbitration.   There   is   no   averment   that
respondent No.1 has taken resort to any action which could be indicative
of an  intention  to deprive  the petitioner  the benefit  of the award,  if in
favor of the petitioner."

Considering the law
laid down by
the Hon'ble Supreme Court in
the aforesaid decisions and the various decisions of other High Courts

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referred to herein  above and the scope, ambit, object and purpose of
passing the order of interim measure as provided under
section 9(ii)
of
the Arbitration Act, it can be said that the Court exercises powers under

section 9
of the Arbitration Act either in a pre­award situation or post­
award situation has to be guided by the provisions
of the CPC
such as
Order 38 Rule 5; Order 39 Rules 1 and 2 and other provisions
of the
CPC
.   The   powers   conferred   upon   the   Court   under
Section   9
of   the
Arbitration Act therefore, to that extent cannot be said to be un­feterred
and/or unguided. Therefore, keeping the larger question open whether
while exercising the powers under
section 9
of the Arbitration Act, the
provisions
of the CPC
stricto senso  would apply for not, it is held that
while exercising the powers under
section 9
of the Arbitration Act by the
Court and while passing the orders under
section 9(ii)
of the Arbitration
Act i.e. order to interim measure, the Court is required to be guided by
the principles of grant of such or a similar reliefs under
the CPC
and
while   passing   such   orders   the   Court   is   required   to   bear   in   mind   the
celebrated   principles   while   passing   such   orders   under
the   CPC
.     As
observed herein above, even the learned Counsel appearing on behalf of
the original applicant has also submitted that while granting the interim
injunction   under
section   9(ii)
of   the   Arbitration   Act,   the   Court   is
required to consider the principles laid down while granting the relief
under   Order   39   Rules   1   and   2
of   the   CPC
i.e.   the  prima   facie  case,
balance   of   convenience   and   irreparable   loss.   If   that   be   so   then   even
while passing the order of interim measure and furnishing the security
and/or passing any order of interim measure under
section 9(ii)
of the
Arbitration   Act,   the   Court   is   certainly   required   to   be   guided   by   the
provisions
of the CPC
more particularly
Order 38 Rule 5 of the CPC
etc.
At   this   stage   it   is   required   to   be   noted   that   as   such   the   arbitration
proceedings in
Arbitration  Act
are substituted of the  civil  proceedings
before the Civil Court.

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[6.3] Under   the   circumstances,   it   is   held   that   while   exercising   the
powers under
section 9
of the Arbitration Act, the Court is required to be
guided by the principles as provided under the provisions
of the  CPC

while passing the similar orders passed by the Court under
the CPC
such
as grant of injunction; Order 38 Rule 5; appointment of receiver and/or
any   such   order   of   interim   measure   as   provided   under
the   CPC
more
particularly to protect the interest of the parties.

[6.4] In   light   of   the   above   observations,   this   Court   is   required   to
consider   the   legality   and   validity   of   the   impugned   order   of   interim
measure   passed   by   the   learned   District   Court   passed   in   exercise   of
powers under
section 9(ii)(b)
of the Arbitration Act.

As observed herein above, the  respondent herein  submitted  the
application  before the learned trial Court seeking interim relief under

section 9
of the Arbitration Act solely on the ground that the financial
condition of the appellant herein - original respondent is very poor and
is   eminent   loss   to   the   applicant   and   alleging  inter   alia  that   as   the
appellant herein - original respondent is making consistent loss and the
original applicant is a public sector insurance company and it is likely to
take considerable time in the proceedings to recover the amount and it
may happen that ultimately in future the awards would potentially be
reduced to mere paper award if the applicant is unable to recover the
amounts rightfully due to it. It was also submitted that there is a prima
facie  balance   of   convenience   and   irreparable   loss   in   favour   of   the
applicant. Therefore, it was prayed for appropriate orders directing the
appellant   herein   to   deposit   an   amount   of   Rs.79,61,76,998.58   ps.   as
awarded by the Tribunal in its awards dated 25.04.2012 and 21.06.2013
with the Hon'ble Court. That the averments made in the application in
paras 5 to 19 are as under:

"5. The Applicant submits that the Applicant was drawn into

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this   frivolous   and   expensive   litigation   and   arbitration   since
2003   and   the   same   frivolity   on   the   part   of   the   Respondent
continues   even   now.   As   was   clearly   affirmed   by   the
Respondent in good faith, and in fact made an overpayment.
The   Arbitral   Tribunal   had   ordered   the   repayment   of   this
amount to the Applicant, but the Applicant has not been able
to enforce this Corrected Interim Award dated 25 April 2012 or
later the Corrected Final Award dated 21 June 2013.

6. The Awards of the Arbitral Tribunal on their own accord
demonstrate that there is a prima facie case in favour of the
Applicant. The very fact that the Arbitral Tribunal has, after a
detailed perusal and analysis of the evidence and arguments
on   all   counts   and   after   receiving   submissions,   rejected   the
claims   of   the   Respondent   and   awarded   a   total   amount   of
Rs.796,176,998.58   (Rupees   Seventy   Nine   Crores   Sixty   One
Lakhs Seventy Six Thousand Nine Hundred Ninety Eight and
Fifty Eight Paise) (inclusive of interest at the rate of 18% from
the date of the Awards up until 15 August 2013) in favour of
the   Applicant   clearly   demonstrates   that   the   Applicant   is
entitled   to   the   monies   as   awarded   by   the   Tribunal   in   its
detailed Awards. The Applicant is entitled to these amounts on
account   of   the   excess   monies   paid   by   the   Applicant   to   the
Respondent and the costs incurred towards the arbitration that
was   preceded   by   litigation   that   was   instituted   by   the
Respondent.

7. As such, the Applicant is entitled to the amounts duly
awarded by the Arbitral Tribunal in its Awards. However, in
view
Section 36
of the Act, the Award cannot be executed till

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the determination of the
Section 34
petition. Be that as it may,
the   Applicant   is   entitled   to   seek   interim   protection   under

Section 9
of the Act in order to secure the amount awarded in
favour of the Applicant.

8. In  addition  to   the   prima  facie  case  that   the  Applicant
was demonstrated, the financial crisis which the Respondent
Company is currently facing and has been consistently facing
for   many   years   further   augments   the   need   for   interim
measures to secure the Applicant's entitlements.

9. The Respondent is a loss making entity and had always
been a loss making entity. The Respondent's published annual
accounts   clearly   demonstrate   that   the   Respondent   is   a
company running on heavy debt and the Applicant relies on
the annual financial statements published by the Respondent
to   substantiate   the   same.   The   following   figures   since   2005­
2006 elucidate the losses incurred annually by the Respondent,
and show that those losses are becoming worse:

(a) 2005/06 a loss of Rs.93.68 Crores;
(b) 2006/07 a loss of Rs.67.49 Crores;
(c) 2007/08 a loss of Rs.51.45 Crores;
(d) 2008/09 a loss of Rs.1,696.16 Crores;
(e) 2009/10 a loss of Rs.2,627.65 Crores;
(f) 2010/11 a loss of Rs.2,879.34 Crores;
(g) 2011/12 a loss of Rs.4,164.82 Crores;
(h) 2012/13 a loss of Rs.1,180 Crores as incurred in this
financial year
(i) 2013/14 (First Quarter) a loss of Rs.863 as incurred in
this financial quarter

The   copies   of   the   Financial   Reports   of   the   Respondent
evidencing the abovementioned figures of losses are annexed

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herewith and marked as Annexure E (Colly).

10. During   the   same   time,   the   debts   of   the   Respondent
continue   to   have   burgeoned.   The   outstanding   debt   of   the
Respondent is clear from the figures below:

(a) 2009/10 : Rs.10,355 Crores;
(b) 2010/11 : Rs.18,047 Crores;
(c) 2011/12 : Rs.16,999 Crores;
(d) 2012/13 : Rs.16,760 Crores.

The   copies   of   the   Financial   Reports   of   the   Respondent
evidencing   the   abovementioned   figures   of   outstanding   debts
are annexed herewith and marked as Annexure F (Colly).

11. The Applicant submits that the Respondent is and has
been a loss making entity which is heavily debt ridden. The net
worth of the  Respondent Company has eroded over the  last
few years. When the debt ridden Respondent was denied sales
tax   benefits   by   the   Supreme   Court,   the   net   worth   of   the
Company was only about Rs.6,840 Crores and the Company
was directed by the Hon'ble Supreme Court to repay Rs.6,300
Crores of benefit which the Respondent had wrongly availed at
the expense of the State of Gujarat. This obviously has resulted
in the wiping off of a substantial portion of the Respondent's
net worth in addition to increasing its debts.

12. The  Respondent is a listed public company trading  its
shares on both the Bombay Stock Exchange and the National
Stock Exchange, and the share prices of the Respondent are
subject   to   regular   heavy   fluctuations,   which   add   to   the

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Applicant's   legitimate   apprehensions   about   the   Respondent's
financial instability.

13. The Applicant is further concerned by the time taken for
the final adjudication of the Respondent's Applications under

Section   34
of   the   Act.   The   Applicant   is   concerned   that   the
Respondent   will   seek   to   delay   and   disrupt   the
Section   34

proceedings before this Hon'ble Court and is also likely to drag
the Applicant to Appeal Proceedings against the Orders of this
Hon'ble Court just for the purposes of denying the Applicant its
right   to   receive   monies   properly   and   duly   awarded   to   it.
Clearly, if the Applicant is unable to secure the amount which
it is entitled to as per the Awards of the Tribunal, the Awards
will become nothing but mere paper awards.

14. With its increasing debts and diminishing net worth, and
the many investigations and actions affecting the controlling
family  of   the   Respondent,   the   Respondent  could  alienate   its
assets at anytime. The Applicant, a public sector undertaking
and   an   unsecured   creditor   of   the   Respondent,   is   gravely
concerned that it would not be to recover these monies at the
conclusion of the proceedings.

15. Therefore, the Applicant is constrained to approach this
Hon'ble   Court   to   secure   the   interests   of   the   Applicant   to
recover from the Respondent by seeking deposit of the amount
awarded   by   the   Tribunal   with   this   Hon'ble   Court.   The
Applicant is gravely concerned for securing the sums awarded
to it under valid Arbitral Awards, and the Applicant would be
seriously prejudiced and subjected to irreparable injury if these

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sums are not secured.

16. The   above   stated   financial   status   of   the   Respondent
clearly   demonstrates   that   the   balance   of   convenience   is   in
favour of securing the monies due from the Respondent. The
very   fact   that   the   Arbitral   Tribunal   passed   well   reasoned
Awards   after   hearing   all   the   evidence,   considering   the
documentation placed before it and after hearing submissions
also confirms that the balance of convenience is in favour of
securing the payments due under the Award.

17. The   Applicant   is   a   public   sector   insurance   company,
operating   on   public   monies.   Failure   on   the   part   of   the
Applicant to recover the sums to which it is properly and duly
entitled would cause a loss to the public exchequer and would
result in grave prejudice. It is submitted that irreparable injury
would be caused if the payment of these amounts is kept in
abeyance   for   an   indefinite   period   of   time   owing   to   the
substantial time the challenge proceedings are likely to take,
especially   given   the   misconduct   of   the   Respondent,   and   the
Awards would potentially be reduced to mere paper awards if
the Applicant is unable to recover the amounts rightfully due
to   it.   The   Applicant   submits   that   this   Hon'ble   Court   should
exercise its discretion to prevent any such indefensible loss of
public monies.

18. The   Applicant   states   that   this   Hon'ble   Court   is   fully
empowered to grant the reliefs as prayed under
Section 9
of
the Arbitration and Conciliation Act, 1996. The Applicant has
not filed any Application before any other Court seeking these

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reliefs.

19. The Applicant submits that the Respondent ought to be
directed to take necessary steps to secure the awarded amount
because   of   the   above   stated   poor   financial   condition   of   the
Respondent   and   also   if   no   deposit   is   made   the   Award   may
reduced into a mere paper award."

Thus,   from   the   aforesaid   averments   and   allegations   in   the
application,   the   only   main   ground   pleaded   was   the   poor   financial
condition of the appellant herein and that the appellant is consistently
loss making company. At this stage it is required to be noted that except
above there are no allegations against the appellant that with a view to
defeat in future the decree/awards, the appellant company is trying to
dispose   off   its   properties   detrimental   to   the   interest   of   the   original
applicant.

[6.5] From   the   material   on   record   it   appears   that   the   appellant
company   is   a   running   company   and   its   financial   position   has   been
improved consistently. That in the earlier years they had a financial tax
liability of Rs.6169 Crores (approximately) which has been repaid by the
appellant company as per the installments as directed by the Hon'ble
Supreme   Court.   It   also   appears   from   the   balance­sheet   that   in   the
financial   year   2012­13,   its   gross   turn   over   was  Rs.96,797   Crores
(approximately) and it made a cash profit of about Rs.116 Crores and
that,   in   9   months   ended   on   31.12.2013,   its   gross   turn   over   was
Rs.79,498   Crores   (approximately)   and   the   respondent   made   a   cash
profit of about Rs.126 Crores. From the balance sheet it appears that as
per   the   last   Balance   Sheet   (which   was   showing   a   loss  of   Rs.5345.26
Crores), the loss has been wiped out and this resulted in creation of a

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positive reserve of Rs.964.51 Crores. The financial results for the quarter
ended 30th June, 2014 show that for the quarter ended 31 st March, 2014,
the company made a profit of Rs.1011 Crores and for the quarter ended
30th June 2014, the company made a profit of Rs.684 Crores, though the
aforesaid is disputed by the original applicant. The aforesaid is from the
balance  sheet of  the  appellant  company.  Be  that  as it  may,  from  the
aforesaid, it cannot be said the appellant company is such a loss making
company which is likely to run away and/or in future there is likelihood
of   award   becoming   paper   decree.   As   observed   herein   above,   as   such
there are no allegations at all that the appellant company is disposing off
its properties to defeat the awards which are in favour of the original
applicant.   At   this   stage   it   is   required   to   be   noted   that   as   per   the
provisions   of   the
Arbitration   Act
more   particularly   in   view   of   the
provision   of
section   36
of   the   Arbitration   Act,   the   awards   are
unenforceable.

[6.6] Considering the aforesaid facts and circumstances and considering
the powers to be exercised by the Court under
section 9(ii)(b)
of the
Arbitration Act and the provisions of
Order 38 Rule 5 of the CPC
and
even if it is considered that the provisions of
Order 38 Rule 5 of CPC

would not be applicable  stricto senso, however even as admitted by the
learned   Counsel   appearing   on   behalf   of   the   original   applicant,   the
provisions
of CPC
may be considered and/or the powers to be exercised
by the Court under
section 9(ii)(b)
of the Arbitration Act would be akin
to the provisions
of CPC
more particularly
Order 38 Rule 5 of the CPC
in
absence of any other allegations that the appellant company is disposing
off   the   properties   with   a   view   to   defeat   the   awards   at   the   time   of
execution of the awards, merely on the assumption that the appellant
company is making loss, the learned trial Court has materially erred in
passing the impugned order. In the facts and circumstances of the case,

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the impugned order passed by the learned trial Court is not warranted
and cannot be sustained.

[6.7] It appears to the Court that while passing the impugned order the
learned trial Court has not exercised the discretion judiciously. As such
while   considering
section   9
of   the   Arbitration   Act   more   particularly

section 9(ii)(b)
of the Arbitration Act, the powers which are vested with
the Court is to pass any order of interim measure of protection securing
the amount in dispute in the arbitration. Therefore, when the awards are
unenforceable   in   view   of   the   proceedings   pending   before   the   Court
under
Section 36
of the Arbitration Act and there are no allegations that
the appellant has disposed of any property and/or is about to dispose of
any   property   with   intent   to   obstruct   or   delay   the   execution   of   the
awards, merely because the company is making a loss, but otherwise is
an absolute running company having the plants and machineries worth
thousands of crores and even having yearly turn over of thousands of
crores, such an order of interim measure under
section 9(ii)(b)
of the
Arbitration Act is not justified and warranted.

[6.8] From the impugned order it appears that the learned trial Court
has considered the  prima facie  case, balance  of  convenience  which  as
such are  required to be considered while  granting interim injunction,
which   are   not   required   to   be   considered   while   passing   the   order   of
interim measure under
section 9(ii)(b)
of the Arbitration Act. What is
required to be considered while passing the order of interim measure in
exercise   of   powers   under
Section   9(ii)(b)
of   the   Arbitration   Act   is
whether  during  the  pendency of  the  arbitration  proceedings  either   at
pre­award   or   post­award   stage   some   measure   of   protection   is   to   be
granted so as to secure the amount in dispute in arbitration. So, if at any
point  of   time   it  is  found  from   the   conduct   of   one  of   the  party   more

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particularly with  respect to  arbitration  proceedings  initiated  that  they
are likely to dispose of the property with a view to defeat in future the
decree/awards, the Court may in exercise of powers under section 9(ii)

(b) of the
Arbitration Act
pass an order of interim measure. Therefore,
while exercising powers under
section 9(ii)(b)
of the Arbitration Act and
passing any order of interim measure only, aforesaid aspect is required
to be considered and at that stage the Court is not required to consider
the prima facie case and/or balance of convenience as has been done by
the learned trial Court, as, as such in view of the pending proceedings
under
section   36
of   the   Arbitration   Act,   as   such   the   awards   are
unenforceable.

[6.9] It is also required to be noted at this stage that as such during the
pendency   of   the   arbitration   proceedings   before   the   learned   Arbitral
Tribunal, no such application for interim measurement was submitted by
the original applicant though as such in past the appellant company was
making the loss. It is to be noted that subsequently in last two to three
years   the   financial   condition   of   the   company   has   been   improved
substantially   and   even   they   have   also   cleared   the   debts   towards   tax
liability to the extent of Rs.6169 Crores (approximately).

[7.0] In view of the aforesaid facts and circumstances of the case, we
are of the opinion that impugned order passed by the learned trial Court
directing the appellant to furnish a Bank Guarantee for an amount of
Rs.79,61,76,998.58   ps.   while   passing   the   order   of   interim   measure
under
section 9(ii)(b)
of the Arbitration Act cannot be sustained and the
same deserves to be quashed and set aside.

[8.0] In view of the  above and for the  reasons stated above, present
First Appeal succeeds. Impugned order dated 31.05.2014 passed by the

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learned   Additional   District   Judge,   Vadodara   in   Civil   Miscellaneous
Application   No.467/2013   directing   the   appellant   to   furnish   a   Bank
Guarantee for an amount of Rs.79,61,76,998.58 ps. is hereby quashed
and set aside. Present First Appeal is allowed accordingly, however there
shall be no order as to costs.

In   view   of   disposal   of   main   First   Appeal,   no   order   in   Civil
Application No.9131/2014.

Sd/­
(M.R. SHAH, J.)
Sd/­
(K.J. THAKER, J.)

At   this   stage   Shri   Ajay   Mehta,   learned   advocate   appearing   on
behalf   of   the   original   applicant   has     requested   to   issue   appropriate
direction directing the learned District Court for expeditious hearing of
the   applications   submitted   under
section   34
of   the   Arbitration   Act
challenging the respective awards. The prayer is not opposed by learned
Counsel appearing on behalf of the appellant.

Under the circumstances and in the facts and circumstances of the
case,   more   particularly   when   the   awards   are   declared   under   the
provisions   of   the
Arbitration   Act
,   learned   District   Court   is   hereby
directed   to   decide   and   dispose   of   the   respective   applications   under

section 34
of the Arbitration Act in which the original awards declared
by the Arbitral Tribunal are challenged, preferably within a period of six
months from the date of receipt of the present order.

Sd/­
(M.R. SHAH, J.)
Sd/­
(K.J. THAKER, J.)
Ajay

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