2001 (8) TMI 1420 - HC - Indian Laws

Court orders respondents to provide Rs. 1.5 crore bank guarantee for 20 weeks to secure petitioner's claim.

The Court directed the respondents to furnish a bank guarantee of Rs. 1.5 crores within 12 weeks, to be kept alive until the final disposal of the ... - Issues Involved:1. Maintainability of the petition under Section 9 of the Arbitration and Conciliation Act, 1996.2. Financial health of the respondent and the necessity for securing the petitioner's claim.3. Applicability of Civil Procedure Code principles to Section 9 of the Arbitration and Conciliation Act, 1996.4. Scope of the Court's power to grant interim relief under Section 9 after the arbitral award is passed but before it becomes enforceable.Issue-wise Detailed Analysis:1. Maintainability of the Petition under Section 9 of the Arbitration and Conciliation Act, 1996:The petitioners argued that their petition is maintainable under Section 9 of the Arbitration and Conciliation Act, 1996, even though the award has not yet become enforceable. They sought reliefs based on the material on record, highlighting the financial instability of the respondent company. The respondent contested this, arguing that the petition is essentially for the recovery of money and should be treated as such, suggesting that the principles of Order 38, Rule 5 of the Civil Procedure Code should apply.2. Financial Health of the Respondent and the Necessity for Securing the Petitioner's Claim:The petitioners contended that the respondent's financial position was weak and that there was a risk they would not be able to recover the amounts if the respondent's petition was dismissed. The respondent countered this by stating that their company, a wholly-owned subsidiary of Larsen and Toubro Ltd., was financially sound, showing reduced losses and even profits in recent financial statements. The Court considered these affidavits and financial statements to determine the necessity of securing the petitioner's claim.3. Applicability of Civil Procedure Code Principles to Section 9 of the Arbitration and Conciliation Act, 1996:The Court examined whether the principles of the Civil Procedure Code, specifically Order 38, Rule 5, should be applied to Section 9 of the Arbitration and Conciliation Act. It was noted that the Act of 1996 does not explicitly incorporate these provisions but allows the Court to exercise its powers as it would in any proceeding before it. The Court concluded that while the procedural provisions of the Civil Procedure Code could be applied, the substantive provisions should not restrict the Court's power under Section 9.4. Scope of the Court's Power to Grant Interim Relief under Section 9 After the Arbitral Award is Passed but Before it Becomes Enforceable:The Court clarified that its power to grant interim relief under Section 9 extends beyond the arbitral proceedings and includes the period after the award is passed but before it becomes enforceable. This ensures that the subject matter of the dispute is protected until the award can be enforced. The Court emphasized that the legislative intent was to provide continuous protection to the parties until the award becomes enforceable, rejecting the argument that the powers are limited post-award.Conclusion:The Court directed the respondents to furnish a bank guarantee of Rs. 1.5 crores within 12 weeks, to be kept alive until the final disposal of the petition and for 8 weeks thereafter. This decision was based on the need to secure the petitioner's claim while the respondent's petition challenging the award was pending. The Court's order was aimed at ensuring that the petitioners would not be left without a remedy in case the award was ultimately upheld.