TaxTMI 
TaxTMI 
2020 (1) TMI 1720
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....o the Arbitral Tribunal appointed by this Court vide order dated 06.09.2018. The appellant has submitted its statement of claim and claimed Rs. 23,21,58,854/- against the respondents making them jointly and severely liable. The respondents filed a counter claim to the tune of Rs. 2,70,00,000/-. 4. In the course of proceedings, the respondents preferred an application under Section 17 of the Act dated 06.11.2018, praying for directions against the appellant to refund a sum of Rs. 2,70,00,000/- being a sum equivalent to security deposit made under terms of the Lease Deeds. 5. The application was disposed of by the Tribunal vide order dated 11.12.2018 by taking on record the statement of the appellant. The operative part of the order reads as under: - "..........In order to secure the refund of Interest Free Refundable Security Deposit in terms of the clauses of the Lease Deed the learned counsel for the Claimant has given a statement to the effect that the Claimant Company shall not transfer by way of sale or in any other manner except leasing out the Property No. G-9 Block B-1, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi-110044 or put the property under any encu....
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.... 9. Aggrieved with the said order, the appellant has filed the present appeal. 10. The genesis of the impugned order are two applications both dated 14.01.2019, filed by the respondents herein. The first application was an application under Section 17 of the Act for securing the sum equivalent to an amount of Rs. 2.70 Crores towards Interest Free Refundable Security Deposit (IFRSD) and the second application was under Section 27(5) of the Act for initiating contempt proceedings against the appellant and its Directors for violating the order and undertaking, both dated 11.12.2018. 11. The grievance of the respondents in the said applications was that on a perusal of the balance sheets, the Company Master Data, Directors' report, as well as other documents filed by the appellant company on the website of Ministry of Corporate Affairs, the respondents discovered that the property with respect to which the undertaking had been given on 11.12.2018 was already mortgaged for total loan of Rs. 73,79,50,000/- with Vijaya Bank and the said Bank had first and exclusive charge on the property. Further, the appellant was required to seek permission from the Bank before creating any furth....
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....submits that the respondents had applied for recall of the earlier order dated 11.12.2018 by raising three grounds which are as under: - "(i) On perusal of Company Master Data as well as other documents on the website of Ministry of Corporate Affairs states that property offered as security is already mortgaged with various Banks much before 11.12.2018, amounts to concealment. (ii) The property is found to be mortgaged for a total loan of Rs. 73,79,50,000/- with Vijaya Bank with charge created way-back on 11.12.2018. (iii) The value of the property as on 17.11.2017 is found to be Rs. 39.37 Cr." 15. The appellant had opposed the applications on the following grounds: - "(i) 2nd Application for same relief is not maintainable. Factum of mortgage of property with the Bank was well in the knowledge of respondents besides incorporated by way of covenants in the lease deeds itself. (ii) The plea of property mortgaged for loan aggregating over Rs. 73,79,50,000/- is against record as certified by Bank. Reliance is placed on correspondences with the Bank. (iii) The value of property as on making of statement is Rs. 44.79 Cr. with loan outstanding being Rs. 13,22,00529/-. The ot....
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....and their balance sheet reflects healthy state of affairs. In the financial year 2017-18, respondent no. 1 had generated a revenue of Rs. 328 Crores and paid a tax of Rs. 117.6 Crores. The Tribunal while deciding the said application had solely relied on the balance sheet of respondent no. 1 and the fact that respondents were Group Company and confirming party, respectively for each other under the lease deeds. On a mere statement of the respondents that they will be able to satisfy the awarded amount, the application was dismissed. 20. Per contra, learned counsel for the respondents submits that during the course of arguments on the application under Section 17 of the Act before the Tribunal, the appellant had voluntarily given an undertaking that it would not transfer or in any other manner create third party rights in the property in question except for leasing out the same. After the said undertaking was given, the respondents came across documents relating to the appellant on the website of the Ministry of Corporate Affairs which revealed that the property in question had been mortgaged with Vijaya Bank against a loan of Rs. 14.60 Crores and the bank had the first charge over....
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.... senior counsel for the appellant is that the respondents were all through aware that the property which was sought to be offered as security, before the Tribunal was mortgaged with Vijaya Bank. In fact, the rent payable by the respondents was the primary security and the appellant had executed a General Power of Attorney, in favour of the Bank authorizing it to receive rent from the respondents. The Tribunal had negated all the grounds on which the application for recall of the order was filed and having held that the appellant was not guilty of contempt could not have modified the order. Argument is also raised on different yardsticks adopted by the Tribunal while dealing with similar applications by the parties. 25. The respondents, on the other hand, contend that the appellant ought to have disclosed the encumbrances on the property to the Tribunal and in any case the encumbrances are of a nature that the property would not be an adequate security to secure the amount due and payable to the respondents, if ultimately the award was rendered in their favour. It is also contended that the order calls for no interference in a jurisdiction exercised by this Court under Section 37 o....
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....in a Fixed Deposit which, in the opinion of the Tribunal, is important to secure and preserve the subject matter of the dispute during the arbitral proceedings. 28. Insofar as the contention of the appellant that the Tribunal has applied different yardsticks to the two similar applications between the parties, is concerned, the contention only merits rejection. The contention of the appellant in defence to the application under Section 17 of the Act filed by the respondents was that the respondents did not have any registered office within the jurisdiction of Delhi and even the balance sheets did not show any asset in Delhi. It was not the stand of the appellant that the respondents had no property in any part of the country which could be a security in case the appellant was to succeed. It was also not the case of the appellant that the respondents had taken loans and were indebted to any bank and thus were not in a healthy condition financially to satisfy the award, in case the same was in favour of the appellants. The Tribunal had on a perusal of the balance sheets found as a matter of fact that in the financial year 2017-2018, respondent no. 1 had generated a revenue of Rs. 32....
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....(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 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 disp....
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....arties and has considered the submissions made by the parties before the Arbitral Tribunal. This Court in exercise of its power under Section 37 of the Act cannot interfere with the order passed by the Arbitral Tribunal under Section 17 of the Act unless the discretion exercised by the Tribunal is found to be perverse or contrary to law. As an Appellate Court, the interference is not warranted merely because the Appellate Court in exercise of its discretion would have exercised the same otherwise. " xxx xxx xxx "20. In view of the above, the Arbitral Tribunal having exercised its discretion and found a balance of equity between the parties, this Court in exercise of its power under Section 37(2)(b) of the Act would not interfere with the same unless it is shown that the discretion so exercised is perverse in any manner or contrary to the law. In the present case, no such exception has been made out by the appellant." 31. The Court relied upon the various judgments as under: "17. In Wander Ltd. v. Antox India P. Ltd., 1990 Supp SCC 727, the Supreme Court while dealing with the power of the Appellate Court under the Code of Civil Procedure, 1908 has held as under: "13. On a ....