Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6908 OF 2022
Sanghi Industries Limited ...Appellant(s)
Versus
Ravin Cables Ltd., and Anr. …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
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
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as the Arbitration Act, 1996), by which the Commercial
Signature Not Verified
Court directed the appellant herein – original
Digitally signed by
SNEHA
Date: 2022.09.30
16:26:25 IST
Reason:
opponent/respondent No. 1 to deposit the amount of
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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.
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 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 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
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according to respondent No. 1 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 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 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
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Commercial Court under Section 9 of the Arbitration Act,
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 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 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 preconditions under Order XXXVIII Rule 5
of the CPC are satisfied and unless there are specific
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allegations with cogent material and unless primafacie 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
Arbitration Act, 1996. At this stage, it is required to be
noted that even otherwise there are very serious disputes
on the amount claimed by the 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 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
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attempt on the part of the opponent/opposite party to
defeat the award that may 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 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 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.
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However, at the same time to protect the interest of the
parties, 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 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.
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
SEPTEMBER 30, 2022 [KRISHNA MURARI]
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