2022 Supreme(SC) 916

SUPREME COURT OF INDIA
INDIRA BANERJEE, A.S. BOPANNA, JJ.
Essar House Private Limited - Appellant
Versus
Arcellor Mittal Nippon Steel India Limited - Respondent
Civil Appeal No. 6574 of 2022 (Arising out of SLP (C) No. 3187 of 2021) With Civil Appeal No.….. of 2022 (Arising out of SLP (C) No. 3351 of 2021)
Decided On : 14-09-2022

IMPORTANT POINTS
(1) Novation of contract or set-off is not allowed in respect of a corporate entity undergoing CIRP without consent of Resolution Professional.
(2) In deciding a petition under Section 9 of Arbitration Act, Court cannot ignore basic principles of CPC – At the same time, power Court to grant relief is not curtailed by rigours of every procedural provision in CPC.

Headnote:

(A) Contract Act, 1872 – Sections 47 and 62 – Insolvency and Bankruptcy Code, 2016 – Section 14 – Novation of contract – Novation of contract or set-off is not allowed in respect of a corporate entity undergoing CIRP without consent of Resolution Professional – Section 14 of IBC bars action to foreclose, recover or enforce any security interest created by a Corporate Debtor undergoing CIRP – Obligations under a contract cannot be assigned, without consent of counterparty. (Paras 33 and 34)

(B) Arbitration and Conciliation Act, 1996 – Section 9 – Interim measure – In deciding a petition under Section 9 of Arbitration Act, Court cannot ignore basic principles of CPC – At the same time, power Court to grant relief is not curtailed by rigours of every procedural provision in CPC – In exercise of its powers to grant interim relief under Section 9 of Arbitration Act, Court is not strictly bound by provisions of CPC – Technicalities of CPC cannot prevent Court from securing ends of justice – Procedural safeguards meant to advance cause of justice cannot be interpreted in such manner, as would defeat justice – All that Court is required to see is, whether applicant for interim measure has a good prima facie case, whether balance of convenience is in favour of interim relief as prayed for being granted and whether applicant has approached court with reasonable expedition. (Paras 39, 40 and 48)

(C) Civil Procedure Code, 1908 – Order 38 Rule 5 – Arbitration and Conciliation Act, 1996 – Section 9 – Attachment before judgment – Proof of actual attempts to deal with, remove or dispose of property with a view to defeat or delay realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9 of Arbitration Act – Strong possibility of diminution of assets would suffice – To assess balance of convenience, Court is required to examine and weigh consequences of refusal of interim relief to applicant for interim relief in case of success in proceedings, against consequence of grant of interim relief to opponent in case proceedings should ultimately fail – If a strong prima facie case is made out and balance of convenience is in favour of interim relief being granted, Court exercising power under Section 9 of Arbitration Act should not withhold relief on mere technicality of absence of averments, incorporating grounds for attachment before judgment under Order 38 Rule 5 of CPC. (Paras 49 and 50)

Facts of the case:

Present appeals are against a common judgment and order dated 1st February 2021 passed by a Division Bench (Commercial Appellate Division) of High Court of Judicature at Bombay, dismissing the appeal being Commercial Arbitration Appeal (L) No. 1022 of 2021 filed by Appellant in the Civil Appeal arising out of SLP (C) No.3187 of 2021, Essar House Private Limited, hereinafter referred to as “Essar House Private”, under Section 37 of the Arbitration and Conciliation Act, 1996, and confirming an order dated 10th December 2020 passed by Commercial Division (Single Bench) of the High Court allowing an application filed by Respondent-Arcellor Mittal Nippon Steel India Limited, under Section 9 of Arbitration Act.

Findings of Court:

Sum of about Rs.35 Crores odd was paid by Essar Steel to Essar House Private and Rs.47 Crores odd to Essar Services, being the appellants in the respective appeals, by way of security deposit which is a refundable security deposit. Prima facie, refundable security deposit is not being released to Arcellor on purported ground of a convoluted series of internal arrangements between group companies for diversion of the security deposits towards liquidation of alleged dues of Essar Steel to third parties.

Result : Appeals dismissed.