Court Upholds Interim Relief in Arbitration Appeals

The court dismissed the appeals, upholding the High Court's decision to grant interim relief under Section 9 of the Arbitration Act. It emphasized the wide powers conferred by Section 9 and the need to balance procedural safeguards with the ends of justice. The court also reiterated principles regarding novation of contracts and set-offs, particularly in the context of Corporate Insolvency Resolution Process (CIRP), finding that Essar Services could not adjust security deposits without consent during the CIRP.

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Issues Involved:
1. Whether Essar House Private and Essar Services owe any amount to Arcellor.
2. Whether the High Court correctly granted interim relief under Section 9 of the Arbitration Act.
3. Applicability and interpretation of Order XXXVIII, Rule 5 of the CPC in the context of Section 9 applications.
4. Validity of set-off claims and novation of contracts without consent.
5. The impact of the Corporate Insolvency Resolution Process (CIRP) on claims and set-offs.

Issue-wise Detailed Analysis:

1. Whether Essar House Private and Essar Services owe any amount to Arcellor:
The court examined the claims of Essar House Private and Essar Services regarding the discharge of security deposits. Essar House Private argued that the security deposits were used to liquidate Essar Steel's debts to third parties, including Marvel Mines and Edwell Infrastructure. However, the court found that the refundable security deposits were not being released to Arcellor, indicating a convoluted series of internal arrangements between group companies. The court concluded that the security deposits were still owed to Arcellor.

2. Whether the High Court correctly granted interim relief under Section 9 of the Arbitration Act:
The court upheld the High Court's decision to grant interim relief under Section 9 of the Arbitration Act. It emphasized that Section 9 confers wide powers on the court to secure the amount in dispute and to pass any interim measures of protection as may appear just and convenient. The court noted that the principles of the CPC should guide but not unduly bind the court's discretion in granting interim relief. The court found that the High Court had correctly applied these principles and that the balance of convenience favored granting interim relief to Arcellor.

3. Applicability and interpretation of Order XXXVIII, Rule 5 of the CPC in the context of Section 9 applications:
The court discussed the applicability of Order XXXVIII, Rule 5 of the CPC, which deals with attachment before judgment. It clarified that while the principles of Order XXXVIII, Rule 5 should guide the court, the technicalities of the CPC should not prevent the court from securing the ends of justice. The court emphasized that procedural safeguards should advance the cause of justice and not defeat it. The court found that the High Court had appropriately considered the principles of Order XXXVIII, Rule 5 in its decision.

4. Validity of set-off claims and novation of contracts without consent:
The court addressed the issue of set-off claims and novation of contracts. It reiterated that novation or alteration of a contract under Section 62 of the Indian Contract Act requires the agreement of both parties and cannot be done unilaterally. The court cited precedents to support this view, including Citibank N.A. v. Standard Chartered Bank & Ors. and Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd. The court found that Essar House Private and Essar Services had not provided sufficient evidence to support their claims of set-off and novation.

5. The impact of the Corporate Insolvency Resolution Process (CIRP) on claims and set-offs:
The court noted that the CIRP of Essar Steel commenced on 2nd August 2017, and the Resolution Professional took over the management of Essar Steel's affairs. It emphasized that during the CIRP, any set-off or novation of contracts required the consent of the Resolution Professional. The court found that Essar Services could not have adjusted the security deposit payable to Essar Steel against alleged dues to a third party during the CIRP without such consent.

Conclusion:
The court dismissed the appeals, finding no infirmity in the High Court's judgment and order. It upheld the High Court's decision to grant interim relief under Section 9 of the Arbitration Act, emphasizing the wide powers conferred by Section 9 and the need to balance procedural safeguards with the ends of justice. The court also reiterated the principles regarding novation of contracts and set-offs, particularly in the context of CIRP.

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