Handicraft And Handlooms Exports Co Of India vs. Smc Comtrade Limited

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Date of Decision: 10 July, 2023
+ ARB. A. (COMM.) 19/2023 & I.A. 8304/2023
HANDICRAFT AND HANDLOOMS EXPORTS CO OF INDIA
..... Petitioner
Through: Mr. Varun Singh, Mr. Akshay
Dev and Mr. Rishabh Rana, Advocates

versus

SMC COMTRADE LIMITED ..... Respondent
Through: Mr. Shreyas Jain, Advocate with
Mr. Suman Kumar, Company Secretary

+ ARB. A. (COMM.) 21/2023
SMC COMTRADE LTD. ..... Petitioner
Through: Mr. Shreyas Jain, Advocate with
Mr. Suman Kumar, Company Secretary

versus

THE HANDICRAFTS AND HANDLOOMS EXPORTS
CORPORATION OF INDIA LTD (HHEC) ..... Respondent
Through: Mr. Varun Singh, Mr. Akshay
Dev and Mr. Rishabh Rana, Advocates

CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT
JYOTI SINGH, J.
1. ARB. A. (COMM.) 19/2023 has been filed by the Handicraft and
Handlooms Exports Corporation of India Ltd. (‘HHEC’), challenging the
order dated 02.03.2023, whereby the learned Arbitrator has allowed an
application filed by SMC Comtrade Limited (‘SMC’) under Section 17
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
16:46:13
ARB. A. (COMM.) 19/2023 and connected matter Page 1 of 34

of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the ‘1996 Act’) directing HHEC to preserve a sum of Rs.5 Crores in the
form of an FDR in the name of SMC till the passing of the final award,
within two weeks of the order. ARB. A. (COMM.) 21/2023 has been
filed by SMC challenging the order dated 02.03.2023 limited to
enhancement of the sum of Rs.5 Crores to Rs.10,51,99,624/-, the total
amount under the claims. Since both the appeals arise out of a common
order and the issues involved are inextricably linked, they are being
decided by a common judgment.
2. The learned Arbitrator is in seisin of disputes between the parties
with respect to First Agreement dated 13.09.2012 for import of
gold/silver bars, coins etc. (Bullion) on behalf of HHEC, which is a
Government company within the meaning of Section 617 of Companies
Act, 1956 and was engaged in the field of export of handicraft and
handloom products, jewellery etc. and was nominated by the
Government of India as an agency to import gold/silver/platinum under
the Foreign Trade Policy. As per the Agreement, subject to satisfaction
of the conditions precedent, SMC was to place an indent on HHEC
alongwith requisite security amount for import of Bullion on
consignment stock basis and/or letter of credit, stand-by letter of credit,
buyer’s credit indicating purity of Bullion, quantity, delivery date,
premium, provisional CIF price etc. On satisfaction of the indent, HHEC
was to place an order on the foreign supplier and obtain a proforma
invoice.
3. SMC was required to deposit with HHEC the applicable custom
duty including taxes and levies, if any, clearing and handling charges etc.
immediately on arrival of Bullion in India including Demurrage/
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
16:46:13
ARB. A. (COMM.) 19/2023 and connected matter Page 2 of 34

detention charges, if any. Delivery of the Bullion against purchases made
by SMC, in accordance with the various clauses of the First Agreement,
was to be made by HHEC to the authorized representative of SMC.
4. It is stated by SMC that upon obtaining the buyer’s credit, the
proceeds of sale consideration of the Bullion to SMC, were to be placed
in term deposit with a bank for a period mutually agreed between SMC
and HHEC and the interest accrued thereon was to be credited to SMC
after tax deduction at source. It is SMC’s case that the same arrangement
applied pari passu to SMC’s margin money with HHEC and the rates of
pre-determined margin of profit which was to accrue to HHEC by virtue
of the transactions were detailed in Clauses 9.1, 9.2 and 9.3 of the First
Agreement dated 13.09.2012.
5. Pursuant to circulars issued by the Reserve Bank of India dated
22.07.2013 and 14.08.2013, subjecting gold imports to ‘20:80 Scheme’
whereby 20% of every lot of gold imported into the country was to be
exclusively made available for the purpose of export and only the
balance 80% was available for domestic use, SMC and HHEC entered
into a Second Agreement on 25.02.2014, whereby SMC deposited a sum
of Rs.50 lacs with HHEC as security and this money was to be kept in
FDR with a scheduled bank and the interest accrued thereon was to be
credited to SMC.
6. SMC claims that vide email dated 07.05.2015, it asked HHEC to
provide actual tally of the Books of Accounts and share the TDS
certificate and on the same day, HHEC responded by stating that the
Books of Account indicated a balance of Rs.2,45,18,578.48 credit. Chief
Finance Manager addressed two letters confirming the balance as on
31.03.2014 and 31.03.2015 as Rs.6,69,54,985.65 and Rs.2,44,50,848.96,
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
16:46:13
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respectively. By another letter dated 04.01.2018, it was conveyed to
SMC that as per Books of Account, an amount of Rs.2,47,80,709.69 was
payable to SMC, subject to final outcome of CBI investigation pertaining
to an identical agreement with respect to another party. As per SMC,
there was an admission by HHEC in several letters dated 16.03.2018,
13.07.2018, 01.03.2019 that money was outstanding and payable to
SMC.
7. Since HHEC did not release the allegedly acknowledged amount
of Rs.2.48 Crores alongwith interest @ 18% p.a. commencing from the
date of approval i.e. 31.03.2014, SMC sent a legal notice to HHEC on
11.01.2020. Getting no response, SMC filed a civil suit for recovery,
being CS(COMM) 276/2020 in July, 2020, which was dismissed as not
maintainable vide order dated 29.07.2020, granting liberty to SMC to
avail the remedy of arbitration. SMC, thereafter preferred a writ petition
on 03.09.2020 being W.P.(C) 6152/2020 seeking a writ of mandamus
directing HHEC to refund the admitted security deposit. SMC states that
in the counter affidavit filed in the writ petition, HHEC admitted all
documents of acknowledgement of payment.
8. On 27.01.2021, HHEC invoked the Arbitration Agreement and
unilaterally appointed an Arbitrator, however, the learned Arbitrator
recused herself by a letter dated 01.02.2021 and the proceedings did not
progress. Thereafter, on 16.03.2021, the Union Cabinet issued a
Notification granting approval for closure of HHEC and as per the
information posted on HHEC’s website, the employees have been given
VRS and liabilities of contractor stand settled.
9. Once again on 24.05.2021, HHEC invoked Arbitration Agreement
and unilaterally appointed another Arbitrator. On 08.06.2021, SMC
Signature Not Verified
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By:KAMAL KUMAR
Signing Date:11.07.2023
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communicated its objection to the unilateral appointment, subsequent to
which, no further action was taken by HHEC. Vide order dated
28.01.2022, the writ petition was dismissed by the Court on two-fold
grounds i.e. concealment of the fact of filing CS(COMM) 276/2020 and
existence of the arbitration clause between the parties. LPA 223/2022
filed against the said order was dismissed as not pressed on 29.03.2022
with reduction of costs imposed by the learned Single Judge in the writ
petition. SLP 10950/2022 was also dismissed vide order dated
14.07.2022.
10. On 23.08.2022, SMC invoked the arbitration agreement, but there
was no response from HHEC showing inclination for arbitration. SMC
filed a petition in this Court under Section 11(6) of the 1996 Act being
ARB. P. 1163/2022, which was allowed on 09.12.2022 in the presence
of counsel for HHEC and the Court appointed the learned Arbitrator in
view of the judgment of the Supreme Court in Perkins Eastman
Architects DPC and Another v. HSCC (India) Limited, (2020) 20 SCC
760.
11. The learned Arbitrator sent a declaration under Section 12 of the
1996 Act on 23.12.2022 and on the same day the email sent by the
Arbitrator was acknowledged by the counsel who had appeared on
behalf of HHEC in the petition under Section 11(6) of the 1996 Act. On
10.01.2023, SMC filed its Statement of Claim and served a copy on
HHEC, both through email and physically. By email dated 11.01.2023,
another counsel acting on behalf of HHEC communicated to the learned
Arbitrator that HHEC had preferred Letters Patent Appeal against the
appointment of the Sole Arbitrator on the same day.

Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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12. On 12.01.2023, first hearing was conducted through Video
Conferencing (‘VC’) and the link was shared with HHEC. None
appeared on behalf of HHEC. The Arbitrator made an effort to contact
the counsel who had appeared for HHEC in Court on 09.12.2022, but
was informed that he was not representing HHEC in these proceedings
and this was recorded by the learned Arbitrator in the order sheet. In the
opinion of the learned Arbitrator, no credence could be given to the
email dated 11.01.2023 originating from a third party and accordingly,
notice was issued by all modes to HHEC at the addresses mentioned in
the petition intimating the next date of hearing i.e. 07.02.2023 with
scheduled time as 4:00 PM. It was also directed that if requested, the
hearing shall be through VC and the link shall be shared with the
opposite party by counsel for SMC.
13. On 06.02.2023, HHEC sent an e-mail through its counsel to the
learned Arbitrator with copy to counsel for SMC, informing that HHEC
was not consenting to the arbitration proceedings, as fraud had been
committed by SMC and the order dated 09.12.2022 appointing the
Arbitrator had been challenged by filing an LPA before this Court. It was
also stated that the Advocate appearing in the High Court was not given
approval for contesting the arbitration proceedings. On 07.02.2023,
second hearing was conducted through VC and link was shared with
HHEC for 4:00 PM. The order records that the learned Arbitrator waited
till 4:20 PM but no one joined on behalf of HHEC. The Arbitrator noted
that an e-mail forwarded by Senior Consultant of HHEC was received
that morning which indicated that notice of hearing had been duly
received. By this e-mail, the Arbitrator was informed of the filing of an
LPA against the order of appointment of the sole Arbitrator and that
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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HHEC did not consent to the arbitration proceedings. The order further
records that no one appeared on behalf of HHEC to inform about the
status of the LPA and in the absence of orders of the Court in the said
LPA proceedings, no occasion arose to stop the present proceedings
solely on the basis of the communication from HHEC. Arbitrator also
observed that since the appointment was made under Section 11(6) of the
1996 Act, no consent was required from HHEC. The next hearing was
scheduled on 02.03.2023, through physical mode, for arguments on
Section 17 application and SMC was directed to furnish a copy of the
Statement of Claim alongwith application under Section 17 of the 1996
Act to HHEC. Three weeks’ time was granted to HHEC to file the
Statement of Defence and counter claim, if any, as well as reply to the
application.
14. On 01.03.2023, an e-mail was sent by HHEC’s counsel to the
Arbitrator attaching a copy of the appeal, purportedly FAO(OS),
indicating 03.03.2023 as a tentative date of listing. None appeared for
HHEC during the hearing on 02.03.2023 and counsel for SMC opposed
the request of adjournment inter-alia on the ground that the appeal was
not maintainable under the provision of Section 37 of the 1996 Act,
against an order passed under Section 11.
15. The Arbitrator proceeded to hear the application under Section 17
recording non-appearance on behalf of HHEC and/or non-filing of
vakalatnama , despite knowledge of the hearing date and the observations
in the order dated 07.02.2023. Learned Arbitrator was of the view that in
the absence of a Court order staying the arbitral proceedings, there was
no occasion to stop the proceeding merely on a communication from the
counsel for HHEC. After hearing the counsel for SMC, the learned
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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Arbitrator directed preservation of part of the claimed amount and the
operative part of the order reads as follows:
“13. However, considering that the question of interest
being payable @ 18% p.a. would require adjudication, to
balance the equities, this Tribunal is of the view that a
direction may be issued to the Respondent to preserve a sum of
Rs. 5 Crores in the form of a FDR in the name of the
Claimant till passing of the final Award. The FDR be
created within two weeks from the date of this order. The copy
of the FDR be forwarded to the Tribunal for purposes of
record.”

Contentions on behalf of HHEC:
16. Learned Arbitrator failed to appreciate that SMC was indulging in
forum shopping and when it did not get favourable orders in the suit and
the writ petition, recourse was taken to arbitration proceedings.
17. Arbitration proceedings continued on 12.01.2023 and 07.02.2023,
despite requests to the learned Arbitrator via e-mails to defer the
hearings as HHEC had filed an appeal in this Court, challenging the
appointment of learned Arbitrator as matters involving fraud are not
arbitrable. Even before the hearing on 02.03.2023, counsel for HHEC
sent an email on 01.03.2023 to the learned Arbitrator requesting
deferment of the hearing on Section 17 application as the appeal
[FAO(OS)], was likely to be listed on 03.03.2023, but the learned
Arbitrator went ahead with the hearing and granted interim relief to SMC
directing HHEC to preserve a sum of Rs.5 Crores in the name of SMC,
in complete violation of principles of natural justice.
18. In Godrej Properties Ltd. v. Goldbricks Infrastructure Pvt. Ltd.,
2021 SCC OnLine Bom 3448 , the Bombay High Court has held that
Arbitral Tribunal must give proper and fair opportunity to the parties at
all stages of arbitral proceedings to present their case, which would
Signature Not Verified
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By:KAMAL KUMAR
Signing Date:11.07.2023
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include an ad-interim order. It was held that it is unknown to law and
peculiar for an Arbitral Tribunal to pass an ex parte ad-interim order, on
mere filing of a Section 17 application, without hearing the contesting
Respondent, which is a principle recognized by Section 24(2) of the
1996 Act. In the present case, learned Arbitrator did not grant
adjournment, despite knowing that an appeal had been filed and was
likely to be listed the next day. Principles underlying Order IX Rule 7
CPC would be squarely attracted in this case which provide that when
the Court adjourns the hearing of the suit ex parte and the Defendant at
or before such hearing, appears and assigns good cause for his previous
non-appearance, he may, upon such terms as the Court directs, be heard
in answer to the suit as if he had appeared on the date fixed for his
appearance.
19. In any event, there was no urgency for passing the interim order
under Section 17 of the 1996 Act when SMC had waited from 2019 till
2023 for taking recourse to the arbitration proceedings, assuming that
any cause of action had arisen in its favour in 2019. In fact, before
deciding the application for grant of interim relief, the learned Arbitrator
ought to have examined whether or not the claims preferred by SMC
were grossly time-barred, in view of its own admission that the last
alleged acknowledgment by HHEC was in 2019 and also looking at the
fact that the claims pertain to the year 2013-14. In State of Goa v.
Praveen Enterprises, (2012) 12 SCC 581 , the Supreme Court held that
the Court can examine if the claims are so hopelessly time barred that
they cannot be resurrected and referred to arbitration before making a
reference. Limitation was an important facet which the learned
Arbitrator ought not to have overlooked.
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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20. The impugned direction of the learned Arbitrator to preserve a
sum of Rs.5 Crores as FDR in the name of SMC is against the settled
law of security deposit and amounts to attachment before judgement,
which was wholly unnecessary in the present case. This Court in Manish
Aggarwal and Another v. RCI Industries and Technologies Ltd., 2022
SCC OnLine Del 1285, relying on the judgment of the Supreme Court in
Raman Tech. & Process Engg. Co. and Another v. Solanki Traders,
(2008) 2 SCC 302 has held that an order directing deposit of security is
akin to an order under Order XXXVIII Rule 5 CPC and can be passed
only when the Arbitral Tribunal is satisfied that if the amount is not
secured the proceedings would stand frustrated. The Supreme Court in
Evergreen Land Mark Private Limited v. John Tinson and Company
Private Limited and Another, (2022) 7 SCC 757, set aside the order of
this Court whereby 100% deposit of the claim amount was directed,
holding that this was a drastic measure going by the principles laid down
under Order XXXVIII Rule 5 CPC.
21. SMC has not placed on record any evidence to show that assets of
HHEC are depleting and per contra the balance sheet of HHEC for the
financial year 2020-21, which is in public domain, shows that it has
retained assets worth almost 300 Crores and liabilities have gone down.
The investigation by CBI is still pending and transactions for the period
2010-14 are being looked into and keeping this in mind as well as the
fact that HHEC would not fetter away its assets, the impugned order
ought not have been passed. HHEC is a secured organization as the
entire funding is by the Ministry of Textiles, Government of India and in
case SMC succeeds in the arbitration proceedings, HHEC has the
financial capacity to honour the award, if finally upheld.
Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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22. The learned Arbitrator has also erred by including interest factor,
which was excluded under Clause 14 of the Second Agreement between
the parties. It is trite that an Arbitral Tribunal has no jurisdiction to
award interest if the parties have by an agreement excluded the same.
Reliance was placed on the judgment of the Supreme Court in Garg
Builders v. Bharat Heavy Electricals Limited, (2022) 11 SCC 697 .
Contentions on behalf of SMC:
23. This Court has a very limited jurisdiction under Section 37(2) of
the 1996 Act to test the impugned order passed by the learned Arbitrator
under Section 17 and unless the order suffers from patent illegality or
perversity, interference is proscribed. Learned Arbitrator has passed a
well-reasoned order in exercise of the discretion, based on the telling
facts and circumstances of the case and taken a view which is not only
plausible but justified, warranting no interference.
24. SMC had availed services from HHEC under the First and Second
Agreement and paid an advance margin money in the FDR mode
amounting to Rs.22.85 Crores for gold import etc. out of which a balance
of Rs.2.48 Crores is pending since 2014. Several letters/communications
from the office of HHEC contain acknowledgements of the amount
outstanding to SMC. No justifiable reason is forthcoming to deny the
money due to SMC, save and except, CBI investigation against some
other firms and persons and it is for the first time in this appeal that
HHEC has disputed its liability, which is a false stand and contrary to its
record. No investigation/inquiry was ever initiated against SMC and this
is supported by reply given by the concerned authority to the unstarred
question in Rajya Sabha on 15.03.2018.

Signature Not Verified
Digitally Signed
By:KAMAL KUMAR
Signing Date:11.07.2023
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25. Closure of HHEC has been approved by the Cabinet on
16.03.2021 and this fact is in the public domain. Majority of its
employees, if not all, have taken VRS and the offices are not functional.
No balance sheet has been filed by HHEC with the Ministry of
Corporate Affairs after 31.03.2021 and presently no information with
respect to its status can be accessed on the website of the company.
Available information on the financial health of HHEC did not inspire
confidence in its ability to honour the final award and the Arbitrator was
justified in directing preservation of atleast part amount and no prejudice
is caused to HHEC, as the money has not transferred hands.
26. Objection to the claims on ground of limitation is misconceived.
Even today the stand of HHEC in the rejoinder is that HHEC is not
shying away from the claim of SMC but the amount has been withheld
pending CBI inquiry, which shows that the matter is under consideration
and alive and thus limitation has not even commenced. Be that as it may,
this issue cannot be decided in this Appeal and will be decided by the
learned Arbitrator, if and when raised by HHEC, at the appropriate stage.
In any case, having chosen to stay away from the arbitral proceedings,
HHEC has not even raised this objection and cannot fault the Arbitrator
for not having decided the issue of claims being allegedly stale.
27. It is wrong for HHEC to contend that it was not given opportunity
for presenting its case. Record shows that the lawyers engaged by HHEC
were completely aware of all the dates of hearing and consciously and
deliberately chose to keep away from the proceedings on the frivolous
ground that HHEC had not consented to the Arbitrator appointed and had
filed an appeal challenging the order. The purpose of seeking interim
relief would be defeated if the matter is prolonged and adjourned at the
Signature Not Verified
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By:KAMAL KUMAR
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convenience of one party. In the order dated 07.02.2023, the Arbitrator
had recorded that the application under Section 17 shall be heard on
02.03.2023 and had given time to file reply. Despite the receipt of the
order, HHEC was unrepresented on the date of hearing and took a
calculated risk. Sending an email attaching a copy of the appeal and
informing the date of its tentative listing and not appearing, knowing that
the application was to be finally heard indicates its casual attitude in
handling the arbitration proceedings.
28. Principles of grant of interim relief under Section 17 of the 1996
Act, which is akin to Section 9 are settled and an Arbitral Tribunal has
the discretion and power to secure whole or part of the amount claimed,
if it is of the opinion that the non-claimant/Respondent may not be able
to satisfy the award and the proceedings will be finally frustrated. In Big
Charter Private Limited v. Ezen Aviation Pty. Ltd. and Others, 2020
SCC OnLine Del 1713, this Court has observed that a Court dealing with
a petition under Section 9, is concerned with protecting the corpus of
arbitral dispute and if the apprehension of dissipation of assets forming
the corpus is found to exist or circumstances indicate that the award
when delivered would be hindered, the Court can grant interim measures
of protection.
ANALYSIS:
29. The first question that arises for consideration is the scope and
ambit of jurisdiction of this Court under Section 37(2) of the 1996 Act.
The first judgment that comes to fore in the context of limitation on the
powers of an Appellate Court is the judgment of the Supreme Court in
Wander Ltd. v. Antox India (P) Ltd., 1990 Supp SCC 727 albeit
the decision does not emanate from arbitration proceedings but the
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principles shall apply. Relevant paras of the judgment are as
follows:
“13. On a consideration of the matter, we are afraid, the
appellate bench fell into error on two important propositions. The
first is a misdirection in regard to the very scope and nature of the
appeals before it and the limitations on the powers of the appellate
court to substitute its own discretion in an appeal preferred against
a discretionary order. The second pertains to the infirmities in the
ratiocination as to the quality of Antox's alleged user of the
trademark on which the passing-off action is founded. We shall deal
with these two separately.
14. The appeals before the Division Bench were against the
exercise of discretion by the Single Judge. In such appeals, the
appellate court will not interfere with the exercise of discretion of
the Court of first instance and substitute its own discretion except
where the discretion has been shown to have been exercised
arbitrarily, or capriciously or perversely or where the Court had
ignored the settled principles of law regulating grant or refusal of
interlocutory injunctions. An appeal against exercise of discretion is
said to be an appeal on principle. Appellate court will not reassess
the material and seek to reach a conclusion different from the one
reached by the Court below if the one reached by that court was
reasonably possible on the material. The appellate court would
normally not be justified in interfering with the exercise of discretion
under appeal solely on the ground that if it had considered the
matter at the trial stage it would have come to a contrary conclusion.
If the discretion has been exercised by the trial court reasonably and
in a judicial manner the fact that the appellate court would have
taken a different view may not justify interference with the trial
court's exercise of discretion. After referring to these principles
Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan
Joseph [(1960) 3 SCR 713 : AIR 1960 SC 1156] : (SCR 721)
“... These principles are well established, but as has been
observed by Viscount Simon in Charles Osenton &
Co. v. Jhanaton [1942 AC 130] ‘...the law as to the reversal by
a court of appeal of an order made by a judge below in the
exercise of his discretion is well established, and any difficulty
that arises is due only to the application of well settled
principles in an individual case’.”
The appellate judgment does not seem to defer to this principle.”

30. From a reading of the observations of the Supreme Court, it is
clear that an Appellate Court shall not interfere in exercise of discretion
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by the Court of first instance and substitute its views except where the
discretion is exercised arbitrarily, capriciously or where the decision
impugned is perverse and Court has ignored the settled principles of law
governing grant or refusal of interim orders. It is not open to re-assess
the material and if the view taken by the Court below is a reasonable or a
plausible view and all relevant material has been considered, no
interference is warranted solely on the ground that the Appellate Court
may have taken a different view on the same set of facts and
circumstances.
31. Reference may also be made in this regard to the judgment of a
Co-ordinate Bench of this Court in Green Infra Wind Energy Limited v.
Regen Powertech Private Limited, 2018 SCC OnLine Del 8273,
relevant paras of which are as follows:

Plaza Restaurants Pvt. Ltd., 2018 SCC OnLine Del 7940 , this Court
reiterated the above principles. In Bakshi Speedways v. Hindustan
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Petroleum Corporation, 2009 SCC OnLine Del 2476 , Court observed
that the principles applicable to an appeal under Section 37(2)(b) of the
1996 Act ought to be the same as principles in an appeal against an order
passed under Order XXXIX Rules 1 and 2 CPC i.e. unless the discretion
exercised by the Court against whose order the appeal is preferred is
found to have been exercised perversely and contrary to law, the
Appellate Court ought not to interfere merely because the Appellate
Court would have exercised its discretion otherwise. This position of law
was recognised by this Court in Shiningkart Ecommerce Pvt. Ltd. v.
Jiayun Data Limited, 2019 SCC OnLine Del 11464 and Sona
Corporation India Pvt. Ltd. v. Ingram Micro India Pvt. Ltd. and
Another, 2020 SCC OnLine Del 300.
33. In Dinesh Gupta and Others v. Anand Gupta and Others, 2020
SCC OnLine Del 2099, Court highlighted and emphasized that while
exercising any kind of jurisdiction over arbitral orders/awards or the
process itself, Court is required to maintain an extremely circumspect
approach. It must be always borne in mind that arbitration is intended to
be an avenue for alternative dispute resolution and not a means to
multiply or foster further disputes and therefore, when the Arbitrator
resolved the disputes, the resolution is entitled to due respect, save and
except, for reasons set out in the 1996 Act and ordinarily the orders must
be immune from judicial interference. The Court also observed that
challenge under Section 37(2) is necessarily to conform to the discipline
enforced by Section 5 which restricts judicial intervention in arbitral
proceedings and orders passed therein to avenues provided by Part-I of
the 1996 Act. Relevant passages from the judgment are as under:

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68. It is, no doubt, possible to argue that the intent, of Section 5,
is to restrict judicial intervention, with arbitral proceedings, and
orders passed therein, to the avenues for such interference, as
provided by Part I of the 1996 Act, and not to restrict the scope of
the Sections and the provisions contained in Part I. Perhaps. Section
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Limited, 2021 SCC OnLine Del 4484 and Sanjay Arora v. Rajan
Chadha, 2021 SCC OnLine Del 4619 , this Court observed that only
where the order of the Tribunal under Section 17 suffers from patent
illegality or perversity that the Court under Section 37(2)(b) would
interfere. In Sanjay Arora (supra), it was observed that unlike appeals
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under other statute, appeals against orders of Arbitral Tribunal are
subject to overarching limitation contained in Section 5 of the 1996 Act.
Subsequently, in Manish Aggarwal (supra) , the Court again held that
viewed from the settled perspective of guarded and sparing use of
powers under Section 37(2)(b), it is only in exceptional circumstances
that this Court would interfere in the order passed by the Tribunal.
Reference may also be made in this context to a recent judgment of this
Court in Supreme Panvel Indapur Tollways Private Limited v. National
Highways Authority of India, 2022 SCC OnLine Del 4491.
35. From a conspectus of the aforesaid judgments, it is explicitly and
luminously clear that while exercising power under Section 37(2)(b), the
Court is required to maintain an extremely circumspect approach
keeping in mind the object and purpose of the legislation and Section 5
of the 1996 Act which is a clear pointer to the legislative intent of
keeping the Court’s interference at the minimum.

36. Once the scope of interference by this Court in an order passed by
the learned Arbitrator under Section 17 of the 1996 Act is understood, it
is necessary to look at the scope of power of the Arbitral Tribunal under
Section 17, which to my mind is an issue no longer res integra. Section
17 of the 1996 Act has been specifically enacted by the legislature to
provide to a party, during the arbitral proceedings or after the award is
made but before it is enforced, a right of seeking preservation of the
subject matter of the arbitration agreement and/or securing the amount in
dispute in arbitration. Post the amendment of Section 17 of the 1996 Act,
it is in the same province as Section 9 of the Act, as held by the Supreme
Court in a recent decision in Arcelor Mittal Nippon Steel (India) Ltd. v.
Essar Bulk Terminal Ltd., (2022) 1 SCC 712 and bestows power on the
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Arbitral Tribunal to make orders of interim protection on a wider
canvass. In Shakti International Private Limited v. Excel Metal
Processors Private Limited, 2017 SCC OnLine Bom 321, the Bombay
High Court summed up the scope and powers under Section 17 as
follows:
“ 48. Even after the enactment of the 1996 Act, as pointed out by
Mr. Jagtiani, different Courts took different views and approaches
on the scope of the arbitral tribunals' power to grant interim reliefs
or ‘interim measures of protection’ under Section 17 of the 1996 Act.
For instance, in the case of Intertoll ICS Cecons O & M Co. Pvt.
Ltd. v. National Highways Authority of India (supra), the Delhi High
Court at paragraphs 15-18 on pages 1026-1027 dealt with the scope
of powers under Sections 9 and 17 of the Act. In brief, the Court
expressed the view that the powers of an arbitral tribunal under
Section 17 of the 1996 Act are much narrower than that of a Court
under Section 9 of the Act, although there may be some overlap. The
Court in Intertoll (supra), held that an arbitral tribunal can only
protect the subject matter of the dispute, which must be tangible
property, and therefore it cannot order the furnishing of a security
for securing a money claim.
49. As against this, this Court in Baker Hughes Singapore
Pte. v. Shiv-Vani Oil and Gas Exploration Services Ltd. (supra) took
a broader view (at paragraphs 40, 50-51) of the arbitral tribunals
powers under Section 17 of the 1996 Act. This Court also
distinguished the Judgment in the case of Intertoll (supra). This
Court held, in Baker Hughes (supra), that an arbitral tribunal can,
in a given case, make an appropriate order of security.
50. A perusal of these decisions is helpful because it brings into
focus the reason why Section 17 as amended, was enacted.
51. Under the 1940 Act, the position was, as stated by the
Hon'ble Supreme Court in MD, Army Welfare Housing
Organization (supra), that an arbitral tribunal is not a Court of law
and its orders are not judicial orders and its functions are not
judicial functions.
52. This position changed under the 1996 Act, but in relation to
Section 17 of the 1996 Act, the same Judgment of Army
Welfare (supra), says that the power is a limited one, and that the
arbitral tribunal has no power to enforce its own order nor is it
made judicially enforceable.
53. Even though different Courts may have taken different views
on the scope of the powers under Section 17 of the 1996 Act, it is
very clear that the powers were narrower than Section 9 of the 1996
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Act. Ex facie, Section 17 of the 1996 Act did not provide for any
power for the appointment of a Receiver. Also, as noted by the
Hon'ble Supreme Court, there were difficulties in matters relating to
the enforcement of order passed by an arbitral tribunal under
Section 17 of the Act.
54. Whereas Section 9 of the 1996 Act expressly provided for
various interim orders that a Court could pass, Section 17 of the
1996 used the expression ‘any interim measure of protection as the
arbitral tribunal may consider necessary in respect of the subject
matter of the dispute’. Therefore, it was always necessary for a party
applying for interim relief before an arbitral tribunal to show that a
specific interim orders, covered by the express provisions of Section
9, was also covered by the limited language of Section 17 of the
1996 Act. These challenges and difficulties perhaps led to parties
applying for interim measures to a Court under Section 9 of the 1996
Act, even after a tribunal had been constituted.
55. It is in this background that Section 17 of the Amended Act
obviously came to be enacted. Section 17 of the Amended Act is
now in para materia or very similar in content to the provisions of
Section 9 of the Amended Act. The powers to make different types of
interim orders of protection are now enumerated in Section 17 of the
Amended Act, as they are under Section 9 of the Amended Act.
56. The powers, of an arbitral tribunal, to make orders is put on
par with that of a court. The language appearing after Section
17(1)(ii)(e) of the Amended Act makes this clear. It states “and the
arbitral tribunal shall have the same power for making orders, as
the Court has for the purpose of, and in relation to, any proceeding
before it.”
57. The issue of enforceability of such orders is now expressly
addressed by Section 17(2) of the Amended Act, which provides that
such orders of the arbitral tribunal, “… shall be deemed to be an
order of the Court for all purposes and shall be enforceable under
the Code of Civil Procedure, 1908 (5 of 1908), in the same manner
as if it were an order of the Court.”
58. In light of the enhanced powers and efficacy of recourse
under Section 17 of the Amended Act, there have been corresponding
changes to Section 9 of the Amended Act as well. Section 9(3) of the
Amended Act states that, “once the arbitral tribunal has been
constituted, the Court shall not entertain an application under sub-
section (1), unless the Court finds that circumstances exist which
may not render the remedy provided under section 17 efficacious.””


37. In Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P)
Ltd., (2007) 7 SCC 125 albeit in the context of Section 9, Supreme Court
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held as follows:
“11. 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
subject-matter 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.”

38. The Kerala High Court in K.G. Rathish Kumar and Others v.
M/s. NPR Finance Ltd., 2012 SCC OnLine Ker 29908 and this Court in
Dinesh Gupta (supra) have held that an interim measure of protection
can be granted by Arbitral Tribunal which may include providing
appropriate security. Insofar as provisions of Order XXXVIII Rule 5
CPC are concerned, from a reading of judgment of Dinesh Gupta
(supra) , it emerges that while exercising jurisdiction under Section
17(1)(ii)(b), the Arbitrator may not be strictly bound by the confines of
the said provisions but cannot act in a manner completely opposed
thereto. It is beyond debate and was rightly urged by HHEC that in
Raman Tech. & Process Engg. Co. and Another (supra), the Supreme
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Court has held that the power under Order XXXVIII Rule 5 CPC is a
drastic and extraordinary power and should not be exercised
mechanically or merely for the asking and should be used sparingly and
strictly.
39. Having seen the scope of interference in the impugned order as
well as the powers of the learned Arbitrator under Section 17 of the 1996
Act, this Court would now examine the impugned order and the rival
contentions of the parties in light of the principles elucidated in the
judgments referred above.
40. The first contention of HHEC was that no opportunity was given
to present its case and the impugned order was passed in its absence.
This contention in my view deserves to be rejected outrightly. It is a
matter of record that the learned Arbitrator was appointed by this Court
under Section 11(6) of the 1996 Act vide order dated 09.12.2022. The
Arbitrator sent declaration under Section 12 on 23.12.2022 and on the
same date the email was acknowledged by the counsel for HHEC, who
had appeared before Court when the petition under Section 11(6) was
disposed of. SMC filed its Statement of Claim on 10.01.2023 and a copy
was served both by email and physically on HHEC. On 11.01.2023,
counsel for HHEC through email communicated that an LPA had been
preferred against the order appointing the Arbitrator on the same day.
During the hearing on 12.01.2023, there was no appearance on behalf of
HHEC. On contacting the counsel who had appeared in this Court when
the Arbitrator was appointed, it was learnt that the counsel had
withdrawn his vakalatnama . Since the e-mail had been received
from third party, the learned Arbitrator did not take cognizance of
the same and to ensure that HHEC was duly represented, directed
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issuance of notice by all modes to HHEC at the addresses mentioned in
the petition indicating the next date i.e. 07.02.2023 and the time of
hearing.
41. On 06.02.2023, again one day before the next hearing on
07.02.2023, an email was sent by counsel for HHEC, reiterating the
filing of an LPA. On 07.02.2023, the hearing was conducted through VC
and link was shared with HHEC. The Arbitrator waited for over 20
minutes but none appeared to represent HHEC. The Arbitrator took on
record the stand of HHEC in the e-mail that an LPA had been filed
against the appointment of the Arbitrator and HHEC was not consenting
to the arbitration proceedings. Thereafter, the hearing was adjourned to
02.03.2023 for arguments on the application under Section 17 through
physical hearing. SMC was directed to furnish a copy of Statement of
Claim along with application under Section 17 on HHEC, if not already
furnished and three weeks were granted to HHEC to file Statement of
Defence and counter claim, if any, and reply to Section 17 application.
42. Pertinently, before adjourning the hearing to 02.03.2023, learned
Arbitrator recorded in the order that none appeared on behalf of HHEC
even to inform about the status of the LPA filed. Since the appointment
of the Arbitrator was by order of the Court, further consent of parties to
proceed with arbitration was not required and that all objections
statutorily available would have to be raised before the Arbitrator to be
dealt with as per law. It was also noted that the e-mail sent on
06.02.2023 only revealed a disinclination to participate alleging fraud
committed by SMC and filing of an LPA. The Arbitrator was of the
opinion and in my view rightly so, that in the absence of orders of the
Court in the appeal stated to have been filed, there was no occasion to
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stop the arbitration proceedings solely on the basis of a communication
of HHEC.
43. As a matter of record, even on the adjourned date i.e. 02.03.2023,
HHEC was unrepresented and the order reflects that an email was sent
on behalf of HHEC by its counsel on 01.03.2023, merely attaching a
copy of appeal, stated to be FAO(OS) and not LPA and intimating
03.03.2023 as a tentative date of listing. Despite being aware that the
application under Section 17 was listed for hearing on 02.03.2023,
HHEC consciously kept away from the hearing and took a calculated
risk of an order being passed in its absence. As held by the Supreme
Court in Sohan Lal Gupta (Dead) through LRS. and Others v. Asha
Devi Gupta (Smt.) and Others, (2003) 7 SCC 492, the Arbitrator has the
right to regulate and manage its hearings. Reasonable opportunity means
that each party must have notice that the hearing is to take place and
should be given an opportunity to be present at the hearing. However, if
after having proper notice, a party chooses not to appear, law does not
mandate that the Arbitral Tribunal should put the proceedings in
abeyance or adjourn them indefinitely, waiting for one party. Principles
of natural justice cannot be put in a straitjacket formula and violation
thereof depends upon facts and circumstances of each case. Party has no
absolute right to insist on his convenience being consulted in every
respect and the matter is within the discretion of the Arbitrator and Court
will intervene only in the event of positive abuse.
44. Order sheets reflect that apart from sending emails communicating
the filing of LPA/FAO(OS), no one cared to join the proceedings on
behalf of HHEC albeit it is clear as day that none of the two remedies
chosen by HHEC were legally correct. However, even assuming that
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HHEC intended to challenge the order of appointment of the Arbitrator
under Section 11(6), mere filing of the appeal(s) was not reason enough
to abstain from the hearings, particularly, when the order dated
07.02.2023 clearly notified that the application under Section 17 was
listed for hearing on 02.03.2023. It is not the case of HHEC even today
that it had no notice of the hearings and/or that the application was heard
without giving time to file reply.
45. Before this Court, HHEC urges that no prejudice would have been
caused to SMC if the learned Arbitrator would have adjourned the
hearing on 02.03.2023 as the appeal filed by HHEC was likely to be
listed the next day, which in my view, is an over simplification of the
situation in the facts of this case. First and foremost, HHEC took
recourse to wrong remedies for challenging the appointment of the
Arbitrator. Even today the outcome of the LPA is unknown and insofar
as the FAO(OS) 30/2023 is concerned, it is stated that the same was
dismissed on 03.03.2023 as not maintainable. It was admitted during the
course of hearing that no further challenge was laid to the appointment
of the learned Arbitrator. Secondly, in the absence of a stay order from
the Court, the counsel ought to have been instructed to appear and
apprise the Learned Arbitrator of the status and the appearance could
have been without prejudice to the appeal filed. The Arbitrator made
every effort to notify the dates of hearing and give sufficient opportunity
to HHEC and cannot be faulted. The chain of events which are docketed,
lead this Court to conclude that the impugned order does not warrant an
interference on this score.
46. On merits also the impugned order is a well-reasoned order,
passed after taking into account all relevant aspects that were required
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for considering the application under Section 17. Learned Arbitrator has
taken note of several documents authored by the officials of HHEC,
indicating the amounts outstanding to SMC, commencing from the year
2014 and finally reduced to a sum of Rs.2,47,80,709.69 over the years,
reflected in the document dated 01.03.2019. The impugned order
indicates that most of the documents relied upon are in the nature of
audited/unaudited balance sheets of HHEC and/or acknowledgments
based on its Books of Accounts. Arbitrator has also considered that in
the documents being Annexures P-16 and P-17 pertaining to the year
2018, HHEC has raised the plea that the amount could not be released to
SMC on account of pending CBI investigations in respect of another
company. Cognizance was taken of Annexure P-20, which is a response
to an unstarred question before the Rajya Sabha reflecting that no case or
inquiry was pending against SMC. On this basis, the learned Arbitrator
has come to a prima-facie conclusion that the reason for withholding the
payment had no legs to stand. Pertinently, the learned Arbitrator also
took note of the fact that Cabinet had approved the closure of HHEC and
a Press release was issued to this effect in the year 2021.
47. Taking a holistic view of the cumulative facts viz: approval of
closure of HHEC, official documents acknowledging the residual
amount from the initial security deposit due to SMC and the factum of
there being no inquiry/CBI investigation/criminal case against SMC at
any stage, the learned Arbitrator took a conscious decision in its
discretion to preserve part of the subject matter of the arbitration
agreement.
48. It needs to be noted that by the impugned order, the learned
Arbitrator in its discretion has only directed HHEC to preserve a sum of
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Rs.5 Crores in the form of FDR in the name of SMC and produce a copy
of the FDR for record, observing that since the Government of India has
taken a decision to close HHEC, it would be necessary to secure the
amount in dispute so that a situation does not arise where in the
eventuality of an award being made in favour of SMC, it is left only with
a solace of having a technical victory with no means to enjoy the fruits.
Even today, HHEC is unable to dispute the approval of the Cabinet for
its closure or that its employees have taken VRS and/or it is not carrying
any business transactions. The argument of HHEC before this Court is
that the list of assets on the website shows that HHEC has assets worth
Rs.300 crores and would be enough to satisfy the award, if passed in
favour of SMC. Firstly, this is an argument HHEC ought to have raised
before the Arbitrator, which it chose not to do by staying away from the
proceedings. Secondly, while HHEC has highlighted the assets, its
pending liabilities towards other parties are unknown to this Court. The
factum of closure and VRS by its employees is prima facie a pointer of
the financial health of HHEC and a preservation order by the learned
Arbitrator in these circumstances, in my considered opinion, requires no
interference. Learned Arbitrator is the best judge to assess the manner in
which the claimant is to be secured, pending the proceedings, so that the
award is not rendered a paper award.
49. SMC has rightly relied on the judgment of the Bombay High
Court in Baker Hughes Singapore Pte v. Shiv-Vani Oil & Gas
Exploration Services Ltd., 2014 SCC OnLine Bom 1663, where the
moot question before the Court was whether the power of the Court
under Section 9(ii)(b) to grant interim measures or protection by
ordering a party to secure the amount in dispute in the arbitration, can be
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exercised by the Arbitral Tribunal under Section 17. It requires to be
noted that the judgment was on the unamended provision which is now
Section 9(1)(ii)(b) of the Amended Act. The Bombay High Court held
as follows:

xxxx xxxx xxxx
43. On plain reading of section 17 of the Arbitration and
Conciliation Act, 1996, in my view the money claim made by the
petitioner in the arbitration proceedings would amount to the
‘subject matter of the dispute’. The respondent had in the written
statement opposed the said claim. The money claim was thus the
subject matter of the dispute based on the invoices issued by the
petitioner upon the respondent.
44. Under section 6.1 of the contract, the respondent had agreed
to pay the undisputed invoices to the petitioner within 60 days from
the date of submission of such invoices. The case of the petitioner
before the arbitral tribunal was that none of those invoices were
disputed by the respondent in the correspondence exchanged
between the parties till the petitioner invoked the arbitration
agreement. The respondent had acknowledged the liability from time
to time and had promised the petitioner to pay the amount due and
payable under the Mud Services Contract to the petitioner from time
to time. The respondent had pleaded difficulties in making payment
on the ground that the payments of the respondent due from ONGC
was held up. The respondent had submitted schedule of payment
from time to time to the petitioner with an assurance to pay. The
respondent had also made part payment pursuant to such
correspondence exchanged between the parties. Only when the
petitioner invoked arbitration agreement, the respondent for the first
time raised a dispute and denied the said claim contrary to what was
conveyed in the correspondence prior thereto.
xxxx xxxx xxxx

46. In my prima facie view on perusal of various letters
addressed by the respondent prior to the petitioner invoking
arbitration agreement, it is clear that the respondent was pleading
financial difficulty on the ground that their payment due from ONGC
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xxxx xxxx xxxx

xxxx xxxx xxxx
50. Interim reliefs are in aid of final reliefs. The arbitral tribunal
while deciding such application for interim measures ought to have
considered the material on record including affidavits for taking a
prima facie view. In my view application under section 17 could not
have been rejected on the ground that the rival claims could not be
considered at all since evidence was yet to be led. For the purpose of
considering interim measures, the arbitral tribunal has to consider
whether the claimant has made out a prima facie case that he would
succeed finally in the arbitration proceedings and whether had made
out a case for grant of interim measures. In my view, the arbitral
tribunal has failed to exercise that power and duty to even look into
the matter for the purpose of taking a prima facie view which is
mandatory while considering an application for interim measures.
51. Since the arbitral tribunal is also empowered to make an
interim award and to grant money claim on the basis of admitted
claim and/or acknowledged liability, in my view the arbitral tribunal
has also power to grant interim measures so as to secure the claim
which is subject matter of the dispute before the arbtiral tribunal if
such case is made out by the applicant. The provisions under
sections 9 and 17 of the Arbitration and Conciliation Act are meant
for the purpose of protecting the subject matter of the dispute till the
arbitration proceedings culminates into an award.
52. Division Bench of this court in case of Nimbus
Communication Ltd. (supra) has adverted to the judgment of
division bench of this court in case of National Shipping Company of
Saudi Arabia v. Sentrans Industries Ltd., (2004) 2 Bom CR 1. The
division bench of this court in case of National Shipping
company (supra) has held that though the power under section
9(ii)(b) is wide, it has to be governed by the paramount
consideration that a party which has a claim adjudicated in its
favour ultimately by the arbitrator should be in a position to obtain
the fruits of the arbitration while executing the award. Court has to
also consider whether a denial of such order would result in a grave
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injustice to the party seeking a protective order. The obstructive
conduct of the party against whom such a direction is sought is also
regarded as a material consideration.
xxxx xxxx xxxx

50. In the limited scope and confines of jurisdiction that the Court has
over the interim order passed by the learned Arbitrator, this Court does
not find that the same warrants interference. Be it ingeminated that
whether it is Section 9 or 17 of the 1996 Act, the ultimate consideration,
applying the law laid down in Ajay Singh v. Kal Airways Private
Limited and Others, 2017 SCC OnLine Del 8934, is doing complete and
substantial justice between the parties. The impugned order has not
resulted in grant of an order in the nature of mandatory injunction to pay
any amount to SMC and nor has the learned Arbitrator directed a
deposit. HHEC has only been directed to preserve the amount in the
form of an FDR in the name of SMC for securing the amount being part
of the subject matter of the arbitration proceedings. The learned
Arbitrator has exercised a power statutorily conferred under Section
17(1)(ii)(b) and the order passed is a well-reasoned order balancing the
equities between the parties. The impugned order is far from being
perverse or in excess of jurisdiction and cannot be termed as a product of
arbitrary exercise of discretion applying the parameters circumscribing
the limited window of interference under Section 37(2) of the 1996 Act.
51. Insofar as the issue of the claims being barred by limitation is
concerned, rival parties have their own stand to take and it is not for this
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Court in the present appeal to adjudicate on this issue. It is also not
understood how in the absence of this plea being raised before the
Arbitrator, HHEC can fault the Arbitrator in not deciding that the claims
of SMC are allegedly time barred. Similarly, whether or not SMC is
entitled to include interest as a part of the claim on the alleged
outstanding amount is a matter of merits and outside the scope of
consideration in the present appeal.
52. Insofar as ARB. A. (COMM.) 21/2023 is concerned, this Court
sees no reason to enhance the amount directed to be preserved by the
learned Arbitrator. The total claim of SMC is approximately Rs.10
Crores and the learned Arbitrator has directed preservation of 50% of the
said amount. The discretion is exercised on laid down parameters and no
infirmity can be found with the same.
53. The judgments relied upon by learned counsel for HHEC, in my
view, are inapplicable to the facts of the present case. In State of Goa
(supra), the Supreme Court has observed that the issue of limitation is
not an issue to be decided in an application under Section 11 of the 1996
Act, but in appropriate cases, the Court may consider whether the
application was in regard to a claim which on the face of it was so
hopelessly barred by time that it is already a dead/stale claim not
deserving to be resurrected and referred to arbitration. The judgment
clearly has no relevance to the controversy before this Court in the
present appeals, particularly, when this plea is not even taken before the
learned Arbitrator. Insofar as the judgments in Raman Tech. & Process
Engg. Co. and Another (supra) and Manish Aggarwal (supra) are
concerned, the propositions of law laid down cannot be disputed.
However, in the present case this Court does not find any reason to
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interfere when the learned Arbitrator has come to a finding after
assessing the facts and circumstances of the case that a preservation
order is required, which was solely in the discretion and domain of the
Arbitrator. Garg Builders (supra) was cited in the context of interest
factor claimed by SMC. This is an issue which will be decided by the
learned Arbitrator as and when the merits are adjudicated and is
irrelevant at this stage.
54. The judgment of the Supreme Court in Evergreen Land Mark
Private Limited (supra) also does not help HHEC as the fact situation in
the case was completely different. The primordial issue in the said case
was a dispute relating to rentals for the period March, 2020 to December,
2021, for which, the Arbitral Tribunal had directed the Appellant therein
to deposit the amount as an interim measure under Section 17 of the
1996 Act. The liability to pay was seriously disputed by the Appellant by
invoking force majeure principle contained in clause 29 of the Lease
Agreement, premised on complete closure due to lockdown on account
of pandemic COVID-19. The Supreme Court even in such circumstances
only modified the order of the Arbitral Tribunal to the extent of the
period covered by complete closure due to lockdown and for the
remaining period, the direction to deposit was sustained.
55. Great emphasis was placed by learned counsel for HHEC on the
judgment of the Bombay High Court in Godrej Properties Ltd. (supra)
where the Court has observed that it is unknown to law for an Arbitral
Tribunal to pass an ex parte ad interim order on a mere filing of
Section 17 application without hearing the contesting Respondent, who
would be affected by the said order. However, a minute scrutiny of the
facts of the said case would show that after the Sole Arbitrator was
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appointed by the Court and the learned Arbitrator entered upon
reference, applications under Section 17 were filed by both parties. On
08.09.2021 and thereafter on 12.09.2021, these applications were
reserved for orders. Subsequent to 12.09.2021, there was an exchange of
email between the parties in regard to sale of unsold flats in the
concerned towers. In this backdrop, on 07.10.2021 at 6:00 PM,
Appellant before the Bombay High Court received a second application
appended with an email seeking relief under Section 17 on an
apprehension that the Appellant was trying to arbitrarily sell the balance
inventories of Tower-‘F’. A request was made by the Respondent to the
Arbitral Tribunal for fixing an early hearing on the said application.
Immediately on the next day i.e. 08.10.2021, the Arbitral Tribunal took
up the application suo moto , without hearing the Respondent/Applicant
and much less the Appellant and passed an ex parte order. It is in these
extreme circumstances that the Court was constrained to hold that an
opportunity ought to have been granted to the contesting party. Reliance
on the judgment is therefore wholly misconceived.
56. For all the aforesaid reasons, this Court finds no merit in the
appeals and the same are accordingly dismissed alongwith the pending
application.
57. It is clarified that the observations in the judgment are only
prima facie in nature and do not represent any final expression on
the merits of the issues of which the learned Arbitrator is in seisin. The
learned Arbitrator shall proceed uninfluenced by any observations in this
judgment which are for the purpose of deciding the present appeals.


JYOTI SINGH, J
JULY 10 , 2023 /ck
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