In Brief
Essar House Private and Essar Services challenged orders requiring them to deposit approximately Rs.35.5 crores and Rs.47.41 crores respectively (or provide bank guarantees) as security in arbitration proceedings under Section 9 of the Arbitration Act. The appellants contended they had no assets and that the security deposits had been adjusted against debts owed by their group company, Essar Steel. The Court dismissed the appeals, holding that Section 9 grants broader powers than CPC procedure requires, and the Court need not strictly follow Order 38 Rule 5 CPC. A strong prima facie case and balance of convenience suffice for interim relief; proof of asset disposal attempts is not imperative. The Court found principles of equitable justice required securing Arcellor's claim, particularly where its chances of success in arbitration appeared good and the defendant had encumbered assets or insufficient unencumbered resources.", <parameter name="cited_cases">[ { "raw_citation": "Raman Tech. & Process Engg. Co. & Anr. v. Solanki Traders", "paragraph": "30", "treatment": "distinguished", "treatment_by": "this_court", "treatment_quote": "The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt... In any case, the High Court has taken note of the pleadings for invoking the principles of Order 38 Rule 5 CPC and observed that while deciding a petition under Section 9 of the Arbitration Act, the Court cannot ignore the basic principles of the CPC. At the same time, the power Court to grant relief is not curtailed by the rigours of every procedural provision in the CPC." }, { "raw_citation": "Citibank N.A. v. Standard Chartered Bank & Ors.", "paragraph": "32", "treatment": "relied", "treatment_by": "this_court", "treatment_quote": "Novatio, rescission or alteration of a contract under Section 62 of the Indian Contract Act can only be done with the agreement of both the parties of a contract. Both the parties have to agree to substitute the original contract with a new contract or rescind or alter. It cannot be done unilaterally." }, { "raw_citation": "Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd.", "paragraph": "33", "treatment": "relied", "treatment_by": "this_court", "treatment_quote": "An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognised distinction between these two classes of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities..." }, { "raw_citation": "Ajay Singh & Ors. v. Kal Airways Private Limited and Ors.", "paragraph": "44", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "Jagdish Ahuja & Anr. v. Cupino Limited", "paragraph": "45", "treatment": "approved", "treatment_by": "this_court", "treatment_quote": "As far as Section 9 of the Act is concerned, it cannot be said that this court, while considering a relief thereunder, is strictly bound by the provisions of Order 38 Rule 5. As held by our Courts, the scope of Section 9 of the Act is very broad; the court has a discretion to grant thereunder a wide range of interim measures of protection 'as may appear to the court to be just and convenient', though such discretion has to be exercised judiciously and not arbitrarily." }, { "raw_citation": "Nimbus Communications Limited v. Board of Control for Cricket in India", "paragraph": "45", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. & Anr.", "paragraph": "46", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.", "cited_year": "2007", "paragraph": "46", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "National Shipping Company of Saudi Arabia", "paragraph": "46", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "Deccan Chronicle Holdings Limited v. L & T Finance Ltd.", "paragraph": "46", "treatment": "referred", "treatment_by": "this_court" }, { "raw_citation": "Srei Infrastructure Finance Limited v. M/s. Ravi Udyog Pvt. Ltd & Anr.", "paragraph": "47", "treatment": "approved", "treatment_by": "this_court", "treatment_quote": "An application under section 9 of the Arbitration & Conciliation Act, 1996 for interim relief is not to be judged as per the standards of a plaint in a suit. If the relevant facts pleaded, read with the documents annexed to the petition, warrant the grant of interim relief, interim relief ought not to be refused by recourse to technicalities" }, { "raw_citation": "Committee of Creditors of Essar Steel India through Authorised Signatory v. Satish Kumar Gupta & Ors.", "paragraph": "21", "treatment": "referred", "treatment_by": "this_court" } ]
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