850 [2022] 4
SUPREME COURT S.C.R. 850
REPORTS [2022] 4 S.C.R.
A SANGHI INDUSTRIES LIMITED
v.
RAVIN CABLES LTD., AND ANR.
(Civil Appeal No. 6908 of 2022)
SEPTEMBER 30, 2022
B
[M. R. SHAH AND KRISHNA MURARI, JJ.]
Arbitration and Conciliation Act, 1996 – s.9 – Code of Civil
Procedure, 1908 – Or.XXXVIII, r.5 – Application u/s.9 – Power of
Commercial Court – Appellant invoked performance bank
guarantees issued by respondent no.1 – Thereafter, it invoked
C
arbitration – Respondent No.1 filed application u/s.9 before
Commercial Court regarding the bank guarantees, pending which
the bank realized the payments under the bank guarantees invoked
by the appellant – Commercial Court passed order u/s.9(ii)(e) to
secure the amount in dispute and directed the appellant to deposit
D the amount of bank guarantees – Order confirmed by High Court –
Held: Bank guarantees were already invoked and the amounts
thereunder were already paid by the bank much prior to the
Commercial Court passed the order u/s.9 – Unless and until the
pre-conditions u/Or.XXXVIII, r.5, CPC were satisfied and unless there
were specific allegations with cogent material and prima-facie the
E
Court was satisfied that the appellant was likely to defeat the decree/
award that may be passed by the arbitrator by disposing of the
properties and/or in any other manner, the Commercial Court could
not have passed such an order in exercise of powers u/s.9 – Order
passed by the Commercial Court in an application u/s.9 is mainly
F by way of interim measure – In a given case if all the conditions of
Or.XXXVIII, r.5, CPC are satisfied and the Commercial Court is
satisfied as aforesaid, it may pass an appropriate order including
the restrain order and/or any other appropriate order to secure the
interest of the parties – Further, in the present case even otherwise
there are serious disputes on the amount claimed by the parties –
G
Impugned order passed by the High Court and the order of the
Commercial Court, set aside – Commercial Courts Act, 2015.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6908
of 2022.
H
850
SANGHI INDUSTRIES LIMITED v. RAVIN CABLES LTD., AND 851
ANR.
From the Judgment and Order dated 11.02.2022 of the High Court A
of Gujarat at Ahmedabad in R/First Appeal No. 3253 of 2021.
Vivek Chib, Sr. Adv., Anirudh Wadhwa, Shaishir Divatia, Vipul
Kumar, Abhishek Kumar, Bikram Dwivedi, Shivendra Singh, Advs. for
the Appellant.
K. V. Viswanathan, Sr. Adv., Ms. Malvika Kapila, Arvind Raj, B
Ms. Tanwangi Shukla, Krishan Kumar, Atul Sheopuri, Nitin Pal, Kartik
Sarsoonia, Swikiritimala Dubey, Swati Jindal Garg, Advs. for the
Respondents.
The Judgment of the Court was delivered by
M. R. SHAH, J. C
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 11.02.2022 passed by the High Court of Gujarat at
Ahmedabad in Regular First Appeal No. 3253 of 2021, by which, the
High Court has dismissed the said appeal confirming the order passed
by the Commercial Court in an application under Section 9 of the D
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
Arbitration Act, 1996), by which the Commercial Court directed the
appellant herein – original opponent/respondent No. 1 to deposit the
amount of performance bank guarantees pertaining to purchase order
Nos. 01, 02 and 03 invoked by it, the original opponent/respondent No. 1
has preferred the present appeal. E
2. We have heard Shri Vivek Chib, learned Senior Advocate
appearing on behalf of the appellant and Shri K.V. Viswanathan, learned
Senior Advocate appearing on behalf of respondent No. 1 herein – the
main contesting party.
3. At the outset it is required to be noted that in the present case F
the dispute is with respect to three purchase orders, namely, purchase
order Nos. 01, 02 and 03. It appears that the appellant served a notice
upon respondent No. 1 vide notice dated 11.06.2021 claiming a loss of
INR 29.31 crores (approximately) owing to the defective quality of the
cables supplied. The said notice was replied by respondent No. 1 vide G
reply dated 19.06.2021. That thereafter, respondent No. 1 served a legal
notice dated 13.07.2021 on the appellant claiming for outstanding payment
of INR 1.30 crores (approximately). That the appellant vide
communication/letter dated 21.07.2021 invoked the bank guarantees
issued by respondent No. 1 herein, which according to respondent No. 1
H
852 SUPREME COURT REPORTS [2022] 4 S.C.R.
A were by way of performance bank guarantees. That thereafter, the
appellant invoked the arbitration on 22.07.2021. Immediately on the next
day i.e., 23.07.2021, respondent No. 1 herein filed two applications/
petitions under Section 9 of the Arbitration Act, 1996, being application
No. 438/2021 before the Commercial Court at Ahmedabad and another
application No. 88/2021 before the Commercial Court at Bhuj. Application
B
No. 88/2021 under Section 9 of the Arbitration Act, 1996 filed by
respondent No. 1 herein was regarding three bank guarantees, which is
the subject matter of present case. At this stage, it is required to be
noted that by the time any further order could be passed the bank realized
the payments under the bank guarantees invoked by the appellant. That
C the Commercial Court passed an order dated 13.10.2021 under Section
9(ii)(e) of the Arbitration Act, 1996 to secure the amount in dispute and
directed the appellant herein to deposit the amount of respective
performance bank guarantees, which as such has already been invoked
and for which the payments were already made by the bank. The order
passed by the Commercial Court under Section 9 of the Arbitration Act,
D
1996, directing the appellant to deposit in the court the amount of
respective bank guarantees pertaining to purchase order Nos. 01, 02
and 03 was the subject matter of appeal before the High Court under
Section 13 of the Commercial Courts Act, 2015. By the impugned
judgment and order, the High Court has dismissed the said appeal which
E has given rise to the present appeal.
4. Having heard learned counsel appearing on behalf of the
respective parties and in the facts and circumstances of the case, more
particularly, when the bank guarantees were already invoked and the
amounts under the respective bank guarantees were already paid by the
F bank much prior to the Commercial Court passed the order under Section
9 of the Arbitration Act, 1996 and looking to the tenor of the order passed
by the Commercial Court, it appears that the Commercial Court had
passed the order under Section 9(ii)(e) of the Arbitration Act, 1996 to
secure the amount in dispute, we are of the opinion that unless and until
the pre-conditions under Order XXXVIII Rule 5 of the CPC are satisfied
G and unless there are specific allegations with cogent material and unless
prima-facie the Court is satisfied that the appellant is likely to defeat the
decree/award that may be passed by the arbitrator by disposing of the
properties and/or in any other manner, the Commercial Court could not
have passed such an order in exercise of powers under Section 9 of the
H Arbitration Act, 1996. At this stage, it is required to be noted that even
SANGHI INDUSTRIES LIMITED v. RAVIN CABLES LTD., AND 853
ANR. [M. R. SHAH, J.]
otherwise there are very serious disputes on the amount claimed by the A
rival parties, which are to be adjudicated upon in the proceedings before
the arbitral tribunal.
4.1 The order(s) which may be passed by the Commercial Court
in an application under Section 9 of the Arbitration Act, 1996 is basically
and mainly by way of interim measure. It may be true that in a given B
case if all the conditions of Order XXXVIII Rule 5 of the CPC are
satisfied and the Commercial Court is satisfied on the conduct of opposite/
opponent party that the opponent party is trying to sell its properties to
defeat the award that may be passed and/or any other conduct on the
part of the opposite/opponent party which may tantamount to any attempt
on the part of the opponent/opposite party to defeat the award that may C
be passed in the arbitral proceedings, the Commercial Court may pass
an appropriate order including the restrain order and/or any other
appropriate order to secure the interest of the parties. However, unless
and until the conditions mentioned in Order XXXVIII Rule 5 of the CPC
are satisfied such an order could not have been passed by the Commercial D
Court which has been passed by the Commercial Court in the present
case, which has been affirmed by the High Court.
5. In view of the above and for the reasons stated above, the
present appeal succeeds. The impugned judgment and order passed by
the High Court and that of the order dated 13.10.2021 passed by the
E
Commercial Court in an application under Section 9(ii)(e) of the
Arbitration Act, 1996 directing appellant to deposit the amount of
performance bank guarantees pertaining to purchase order Nos. 01, 02
and 03 already invoked by the appellant herein, are hereby quashed and
set aside.
However, at the same time to protect the interest of the parties, F
we direct that the appellant herein shall furnish an undertaking backed
by the Resolution of the appellant’s company before the Commercial
Court that in case any award is passed by the learned Arbitrator in
arbitration proceedings, the same shall be paid/honoured by the appellant
subject to the challenge before the higher forum. Such undertaking backed G
by the Resolution of the appellant’s company shall be filed before the
Commercial Court within a period of four weeks from today, with this
the present appeal is allowed. No costs.
Divya Pandey Appeal allowed.
(Assisted by : Deepak Panwar, LCRA) H