The main legal point established is that the Arbitral Tribunal's power to order interim measures under Section 17 of the Act is limited and should be based on non-speculative claims. Certification of claims and establishing a prima facie case of financial distress are essential.

1. This appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 filed by Lanco Infratech Ltd. (‘Lanco’) is directed against an order dated 4th June, 2016 passed by the Arbitral Tribunal (‘AT’) allowing the application filed by the Respondent Hindustan Construction Company Ltd. (‘HCCL’) under Section 17 of the Act and directing Lanco to furnish a bank guarantee to the extent of 50% of the amount claimed by HCCL within 30 days in an approved RBI format for an initial period of 12 months and to be kept renewed from time to time upto 30 days from the date of pronouncing of the Arbitral Award.

2. The background to the present appeal is that Lanco is part of the Lanco conglomerate group known as the 'Lanco Group' which has various subsidiaries dealing with power infrastructure, construction, real estate etc. Lanco entered into two contracts for civil works of Power House, transformers and Butterfly Valve Caverns and switch yard of Teesta VI Hydroelectric Project, Sikkim and Contract No. LITC/Contract/Teesta-VI/4B i.e., LOT IV B and for civil works for various tunnels from RD 10370 upto junction with the bottom of Surge Tunnels including Adit Tunnels- IVA and IV near Subin Khore of Teesta-VI, Hydroelectric Project, LOT IV B on 25th June, 2008. Disputes that arose between the parties were unable to be resolved through mutual discussions. HCCL then invoked the arbitration clause and nominated its Arbitrator. The Institution of Engineers (India) appointed an Arbitrator on behalf of Lanco and in turn both the Arbitrators appointed the presiding Arbitrator and completed the AT.

3. The challenge to the constitution of the AT was disposed of by this Court by order dated 19th January, 2015 leaving it open to the Lanco to raise this challenge before the AT itself. Thereafter, a challenge was raised by Lanco in an application under Section 16 of the Act which was negatived by the AT by an order dated 4th April, 2015.

4. Lanco states that on 30th April, 2015 it received a copy of the Statement of Claim filed by HCCL which, for the LOT IVA, was for the sum of Rs. 32,64,31,545 and for LOT IV B in the sum of Rs.184,05,09,141. Lanco filed its Statement of Defence on 3rd December, 2015.

5. The admission/denial of documents took place on 6th January, 2016. According to Lanco, since no original document was filed by HCCL, it made a statement that the said documents could neither be admitted nor denied as they were only photocopies. Thereafter, HCCL filed an application under Section 17 of the Act seeking interim measures requiring Lanco to furnish a suitable security in the form of a bank guarantee, fixed deposit or in any other form which would be sufficient to satisfy the arbitral award that may be passed in favour of HCCL against the claims for LOT IV-A and LOT IV-B. Inter alia it was contended by HCCL that it had a good prima facie case on merits, and that on various occasions, Lanco itself had admitted its liability and had assured to pay a certain sum to HCCL and that Lanco was suffering from financial constraints as was evident from its balance sheet, profit and loss account and the fact that winding up petitions were pending against it in various courts. Further, Lanco was stated to be undergoing a Strategic Debt Re-structuring (‘SDR’).

6. Before the AT, it was contended by Lanco that it had already disputed the correctness of HCCL’s claims as well as the documents produced by it and that the claims were totally fictitious and arbitrary. It was stated that the claims which were essentially towards overhead costs, expenses towards retention of equipments, loss of earning capacity and profit etc. far from being admitted by Lanco were bogus, false and fabricated and without any basis and, therefore, the question of securing such claims did not arise. It was pointed out that the proceedings before the AT were on account of HCCL’s own failure to meet its contractual commitment and, therefore, it could not take advantage of its