In a recent legal case, the Commercial Court delved into the nuances of securing arbitration awards through interim measures. The Court scrutinized the pre-conditions under the CPC before passing orders under the Arbitration Act, emphasizing the need for specific allegations supported by cogent material. This blog highlights the importance of satisfying all conditions for successful applications under Section 9 and the authority of the Court to pass appropriate orders to safeguard parties’ interests. Stay tuned to unravel the legal intricacies of securing arbitration awards.
Facts
- The Commercial Court passed an order under Section 9 of the Arbitration Act, 1996, directing the appellant to deposit the amounts of respective bank guarantees related to purchase orders.
- The appellant invoked a bank guarantee issued by respondent No. 1, which were characterized as performance bank guarantees.
- The appellant invoked arbitration on 22.07.2021 after invoking the bank guarantees.
- Respondent No. 1 filed applications under Section 9 of the Arbitration Act, 1996, regarding the bank guarantees in two different Commercial Courts on 23.07.2021.
- Before any further orders could be passed, the bank had already realized the payments under the bank guarantees invoked by the appellant.
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Arguments
- Appellant is aggrieved by the judgment and order of the High Court of Gujarat at Ahmedabad.
- The High Court dismissed the appeal and upheld the order of the Commercial Court.
- The Commercial Court directed the appellant to deposit the amount of performance bank guarantees for purchase order Nos. 01, 02, and 03.
- The appellant, who was the original opponent/respondent No. 1, has filed this appeal.
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Analysis
- The Commercial Court passed the order under Section 9(ii)(e) of the Arbitration Act, 1996 to secure the amount in dispute.
- The Commercial Court needed to ensure that the pre-conditions under Order XXXVIII Rule 5 of the CPC were met before passing such an order.
- Specific allegations with cogent material and prima-facie satisfaction that the appellant may defeat the decree/award by disposing of properties were required for such an order.
- Serious disputes exist regarding the amount claimed by the parties, to be adjudicated by the arbitral tribunal.
- Orders passed by the Commercial Court under Section 9 of the Arbitration Act, 1996 are primarily interim measures.
- For a successful application under Section 9, all conditions of Order XXXVIII Rule 5 of the CPC must be satisfied.
- The award in an arbitral proceeding may be defeated by the opposite party’s conduct.
- The Commercial Court has the authority to pass appropriate orders to secure the parties’ interests in such cases.
- For an order to be passed by the Commercial Court, the conditions specified in Order XXXVIII Rule 5 of the CPC must be satisfied.
- The order passed by the Commercial Court in this case was affirmed by the High Court.
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Decision
- The appeal succeeds and the impugned judgment and order are quashed and set aside.
- No costs are awarded.
- Appellant must provide an undertaking backed by the company’s Resolution before the Commercial Court.
- The undertaking ensures that any award passed by the Arbitrator in arbitration proceedings will be paid/honoured by the appellant, subject to challenge before a higher forum.
- The undertaking must be filed within four weeks from today.
Case Title: SANGHI INDUSTRIES LTD. Vs. RAVIN CABLES LTD. (2022 INSC 1050)
Case Number: C.A. No.-006908-006908 / 2022
