The main legal point established in the judgment is that the Court applied the principles of strong prima facie case and weighing the balance of convenience in favor of the respondent company in granting the interim measure under Section 9 of the Arbitration and Conciliation Act, 1996.

JUDGMENT :

1. Heard Mr. Unmesh Shukla, learned Senior Advocate appearing for Thakkar and Pahwa Advocates for the appellant and Mr. Shalin Mehta, learned Senior Advocate assisted by learned advocates Mr. Sauin A. Mehta and Mr. Krishal H. Patel for the defendant.

2. The present First Appeal impugns the judgment and order dated 27.10.2023 passed by the learned Commercial Court at City Civil Court, Ahmedabad in Commercial Civil Misc. Application No.171 of 2023 whereby the learned Court has allowed the application under Section 9 of the Arbitration and Conciliation Act, 1996 [“Act of 1996” for short] and directed the appellant to furnish a bank guarantee of Rs.29,61,159/-.

3. The brief facts of the case are that the appellant herein was awarded a contract by the National Highway Authority of India [“NHAI” for short] for ‘augmenting existing road from 180.478 km to 221.610 (design chainage from 181.450 km to 222.400km) on the Una to Kodinar National Highway No.8E in Gujarat by four laning’. The total project cost was Rs.40.95 crores. The appellant further subcontracted the said work to the respondent company vide Work Order bearing No.SEL/SBHPL/FY17-18/WO/03841 dated 10.2.2018. The respondent carried out the work for the appellant under the said work order. Accordingly, inspections came to be made and running bills were raised by the respondent. Further, for the period between 1.4.2018 to 30.09.2022, the respondent raised invoices and accordingly, payment certificates came to be issued by the appellant herein in favour of the respondent. Thus, as per the agreement between the parties, the respondent concluded the work order and a sum of Rs.25,97,639/- remained due and payable to the respondent by the appellant. Despite several reminders, the appellant did not make the payment of the outstanding dues. The respondent also proposed a settlement with the appellant, but it did not make any payment even as per the settlement proposed by the respondent. It is the case of the respondent that the appellant is liable to pay a sum of Rs.29,61,159/- in total towards the outstanding dues.

3.1 We may note that the work order consisted of an arbitration clause. The respondent company came to know that the appellant had received entire amount for the work done from the NHAI. Further, the audited accounts of the company for the financial year ended on 31.3.2023, showed huge losses. Also there was a negative cash flow in the balance sheet and profit and loss account. Apprehending genuine prejudice to its rights and interest, the respondent company moved an application under Section 9 of the Act of 1996 praying for the following reliefs:-

“28A. Direct the Respondent to provide monetary security by way of a Bank Guarantee of any Nationalized and/or Schedule Bank or any other appropriate security of Rs.34,88,713/- along with pendent lite interest in favour of the Applicant and/or deposit an equal amount of Rs.34,88,713/- along with pendent lite interest with this Hon’ble Court securing the amount in dispute in the Arbitration;

B. Pass an order of attachment of the Bank Account of the Respondent, to be disclosed by the Respondent by way of an affidavit, being in its special knowledge, for an amount of Rs.34,88,713/- along with pendent lite interest;

C. Pending hearing and till final disposal of the present Application, this Hon’ble Court may be pleased to direct Respondent to keep Rs. 34,88,713/- separately in its Bank Accounts and not deal with the same nor create any lien, charge, interest etc. over the same.

D. Pass an ex-parte ad interim relief in terms of Para 28(C);”

3.2 The appellant company filed its reply opposing the said application. It was contended by the appellant that the respondent company is trying to seek priority amongst other creditors. The respondent company being an unsecured operational creditor, by way of the said application wants to rank equal to the secured creditors. It was submitted that there is no urgency for granting the relief as