Bombay High Court
Jayajit Trust vs Manish Khera And Anr on 20 September, 2021
Author: B. P. Colabawalla
Bench: B. P. Colabawalla
9.carbpl.18859.21..doc
ANJALI
TUSHAR
ASWALE
Digitally signed by
ANJALI TUSHAR
ASWALE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Date: 2021.09.27
15:04:25 +0530 ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO. 18859 OF
2021
JAYAJIT TRUST ..Petitioner
Vs.
Manish Khera & Anr ..Respondents
Mr.Vishal Kanade a/w Vyom Shah, Anand Iyer, A. Pradhan i/b
Divya Shah Associates, for the Petitioner.
Mr. Ashok Singh, for the Respondents.
CORAM :- B. P. COLABAWALLA, J.
DATE :- SEPTEMBER 20, 2021.
P. C.:
1. The above Arbitration Petition is filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") seeking the following reliefs:-
"(a) pending the arbitral proceedings making of the Arbitral Award and until execution of the Arbitral Award, each of Aswale 1/26
9.carbpl.18859.21..doc the Respondents be directed to disclose on Oath/Affidavit, the true and complete details of all the assets (both movable and immovable including the bank accounts and other assets) held and owned by them and the encumbrances and charges, if any on these assets;
(b) pending the arbitral proceedings, making of the Arbitral Award and until execution of the Arbitral Award, the Respondents be restrained by an Order and injunction from in any manner dealing with, selling, transferring, disposing off or alienating or encumbering or mortgaging or charging or parting with possession of their assets;
(c) pending the arbitral proceedings, making of the Arbitral Award and until execution of the Arbitral Award, the Respondents be directed to jointly and / or severally deposit an amount of, or provide security to the extent of Rs.1,15,78,764/- (Rupees One Crore Fifteen Lakhs Seventy Eight Thousand Seven Hundred and Sixty Four only) in such manner as this Hon'ble Court may deem fit."
2. The disputes between the parties arise out of a "Put Option Agreement" dated 19th March, 2019 executed between the Petitioner (as the Debenture Holder), Respondent No.1 (as the Promoter of the 2nd Respondent), and Respondent No.2 (as the Confirming Party). At the outset, Mr. Kanade, the learned counsel appearing on behalf of the Petitioner, stated that since the reliefs Aswale 2/26
9.carbpl.18859.21..doc sought above are arising out of the aforesaid Put Option Agreement, at this stage, he is pressing the present Petition only against Respondent No.1. This is for the simple reason that Respondent No.2 is only a confirming party and does not have any liability under the Put Option Agreement.
3. The Arbitration Agreement between the parties can be found at Clause 10.2 of the Put Option Agreement which reads thus:-
"10.2. Dispute Resolution 10.2.1. If any dispute, controversy or claim between the Parties arises out of or in connection with this Agreement, including the breach, termination or invalidity thereof (a "Dispute"); the Parties shall use all reasonable endeavours to negotiate with a view to resolving the Dispute amicably. If a Party gives the other Party notice that a Dispute has arisen (a "Dispute Notice") and the Parties are unable to resolve the Dispute amicably within 30 (thirty) days of service of the Dispute Notice (or such longer period as the Parties may mutually agree), then the Dispute shall be referred to arbitration in accordance with the terms of Clause 10.2.3 below.
10.2.2. Subject to this Clause 10.2.1, any Dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or the consequences of its nullity) shall be referred to and finally resolved by binding arbitration conducted in accordance with the Arbitration and Conciliation Act, 1996.Aswale 3/26
9.carbpl.18859.21..doc All proceedings in the arbitration shall be conducted in English. The venue of the arbitration shall be Mumbai, India or such other place as may be determined by the Parties. The arbitral panel shall consist of three members. The Promoter on the one hand and the Debenture Holder on the other hand shall appoint 1 (one) arbitrator each and the arbitrators so appointed shall appoint the third arbitrator ("Arbitral Tribunal") 10.2.3 The award of the arbitral panel shall be final and conclusive and binding upon the Parties. The Parties further agree that all costs and expenses of the arbitration shall be borne by the Party against whom such award/decision is passed by the arbitrators."
4. Respondent No.1 is an individual who is a majority shareholder and promoter of the 2nd Respondent. Respondent No.2 is a Private Limited Company engaged in the business of inter alia providing services to other entities engaged in the financial sector, including but not limited to giving leads and / or referral of potential customers interested in availing secured/unsecured loans, etc.
5. The brief facts giving rise to the present disputes are this. In or around March, 2019, Respondent No.1 was desirous of raising funds for the business of the 2nd Respondent company. For this purpose, Respondent No.1 approached the Petitioner with an Aswale 4/26
9.carbpl.18859.21..doc offer to allot them Compulsorily Convertible Debentures (for short the "CCDs") of the 2nd Respondent company. Pursuant to the authority granted by the Board of Directors and Shareholders of the 2nd Respondent company, it allotted to the Petitioner 100 unlisted, unrated CCDs of a nominal amount of Rs.1,00,000/- each aggregating to Rs.1,00,00,000/-. Respondent No.2 also issued a Debenture Certificate No.65 dated 27th March, 2019 in favour of the Petitioner recording the allotment of 100 CCDs bearing distinctive nos. 126-225 in the name of the Petitioner. The said CCDs were allotted to the Petitioner as per the offer letter and prospectus of the 2nd Respondent company dated 7th March, 2019.
6. Along with the allotment of the said CCDs to the Petitioner, the Petitioner and Respondent No.1 (as the Promoter of Respondent No.2) and Respondent No.2 (as a Confirming Party), also executed a Put Option Agreement dated 19th March, 2019. Under this Agreement, the Petitioner was granted the right (what is commonly known as a "Put Option") to call upon Respondent No.1 to purchase all or part of the said CCDs, as may be requested by the Petitioner in accordance with the said Agreement. The said Aswale 5/26
9.carbpl.18859.21..doc Put Option Agreement inter alia provided the following:-
(i) The purchase price per CCD payable by the Respondent No. 1 to the Petitioner shall be equivalent to the sum of value of the subscription amount for the said CCDs and all accrued and unpaid Coupons (including default Coupon, if any) thereon in respect of such CCDs as on the date of the exercise of the Put Option.
(ii) The Petitioner has a right to exercise the Put Option by informing Respondent No.1 accordingly in writing but only after the expiry of 24 months from the date of issue of the said CCDs. This Put Option could be exercised only if the said CCDs were not already converted by the Petitioner into equity shares of the 2nd Respondent Company. It is an admitted position that the said debentures have not been converted into equity shares of the 2nd Respondent company till date.
(iii) As and when any CCDs are lodged by the Petitioner with the Respondent No.2 Company for transfer, the Company is bound to transfer the said CCDs in favour of, and register the name of Respondent No.1 in its register of debenture holders, without any demur or protest.Aswale 6/26
9.carbpl.18859.21..doc
(iv) The exercise of the Put Option is to be completed within 60 days from the date of receipt of the Put Option Exercise Notice by Respondent No.1, i.e. the Completion Date.
(v) The Agreement further requires Respondent No.1 to hand over a Demand Promissory Note to the Petitioner for an amount equivalent to the Put Option consideration, i.e. Rs. 1 Crore plus further amounts payable. This Demand Promissory Note shall become effective in the event Respondent No. 1 fails to make payment of the entire Put Option consideration to the Petitioner by the Completion Date i.e. within the time period of 60 days from the receipt of the Put Option Exercise Notice issued by the Petitioner exercising and/or invoking the Put Option.
7. According to the Petitioner, the 2nd Respondent company failed to pay interest due on the said CCDs for the quarter ending 30th September, 2020. Since the payment was over due, the Petitioner addressed a letter dated 23rd December, 2020 to the Respondents inter alia requesting that the outstanding payments be made along with the default coupon of 2%. The Petitioner also informed the Respondents of their intent to exercise the Put Option and called upon Respondent No.1 to purchase all the CCDs Aswale 7/26
9.carbpl.18859.21..doc upon the expiry of two years from the date of allotment of the Debentures i.e. on or before April, 2021.
8. Thereafter, the Petitioner actually exercised their Put Option by giving a formal notice (the Put Option Exercise Notice) to Respondent No.1 on 2nd April, 2021 (Exhibit-H to the Petition). According to the Petitioner, despite exercising the aforesaid Option, Respondent No.1 has failed to pay its dues under the Put Option Agreement and it is in these circumstances that the present Petition is filed under Section 9 of the Arbitration Act seeking the reliefs more particularly set out earlier. For the sake of completeness, I must also mention that it is common ground before me that interest on the aforesaid CCDs for the quarter ending 31st March, 2021 and thereafter has also not been paid.
9. In this factual back drop, Mr. Kanade, the learned counsel appearing on behalf of the Petitioner, submitted that the Put Option Agreement clearly stipulated that the Petitioner had a right to exercise the Option of calling upon Respondent No.1 to purchase the said CCDs as per the terms and conditions of the said Aswale 8/26
9.carbpl.18859.21..doc Agreement. Mr. Kanade took me through the relevant clauses of the Put Option Agreement to contend that once the Petitioner exercised their Option, Respondent No.1 had to purchase the said CCDs from the Petitioner. If there was any default, then, Respondent No.1 was liable to compensate the Petitioner as set out in the said Agreement. Mr. Kanade submitted that the Petitioner exercised its Put Option vide their notice dated 2nd April, 2021. Despite receiving this notice, and there being several follow up emails in that regard (at Exhibits-J and J-1 to the Petition), there was no response whatsoever from Respondent No.1 and/or Respondent No.2. It is in these circumstances that the Petitioner was constrained to issue a notice dated 24th August, 2021 calling upon Respondent No.1 to make the outstanding payment, failing which the disputes be referred to arbitration under Clause 10.2 of the Put Option Agreement. He submitted that even this notice has not been replied to by the Respondents. Looking to the totality of the facts, Mr. Kanade submitted that this was a fit case where Respondent No.1 ought to be directed to deposit in this Court the principal sum of Rs.1,00,00,000/- (the value of the said Debentures) together with interest quantified at Rs.15,78,764/-, as Aswale 9/26
9.carbpl.18859.21..doc more particularly reflected in the particulars of claim annexed at Exhibit-M to the Petition. Mr. Kanade submitted that this relief is sought on the basis that there is absolutely no dispute regarding the payability of this amount by Respondent No.1 to the Petitioner and the fact that Respondent No.2 is in a precarious financial position inasmuch as proceedings under the provisions of the Insolvency and Bankruptcy Code, 2016 (for short the "IBC") have been initiated against the 2nd Respondent company. He, therefore, submitted that the Petition be made absolute in terms of prayer clauses (a), (b) and (c) reproduced above.
10. On the other hand, Mr. Singh, the learned counsel appearing on behalf of the Respondents, submitted that the above Petition is wholly misconceived because the Put Option Agreement has not been executed by the Petitioner. It has only been executed by Respondent Nos.1 and 2. Since the Put Option Agreement is not executed by the Petitioner, there is no valid Agreement between the parties and consequently there is no Arbitration Agreement. If this be the case, then, there is no question of granting any relief to the Petitioner under Section 9 of Aswale 10/26
9.carbpl.18859.21..doc the Arbitration Act, was the submission of Mr. Singh.
11. Without prejudice to the aforesaid argument, Mr. Singh contended that this investment made by the Petitioner in the CCDs, amounts to an investment in the equity of the 2nd Respondent company. This is for the simple reason that the said CCDs were to be compulsorily converted into equity shares of the 2nd Respondent company as provided in the offer letter. This being the case, the demand for return of money against such CCDs was wholly illegal and beyond the purview of the offer letter/prospectus. Mr. Singh pointed out that there is no provision in the offer letter by virtue of which the Petitioner can claim back their money and the entire demand is therefore illegal, arbitrary and liable to be rejected.
12. Mr. Singh lastly submitted that the entire Petition is based on a misrepresentation of the provisions of the offer letter/prospectus based upon which the said CCDs have been issued to the Petitioner. He submitted that in any event, the Put Option Agreement, which according to Mr. Singh is an Aswale 11/26
9.carbpl.18859.21..doc unexecuted document, cannot be read in isolation and would not have precedence over the offer letter/prospectus based upon which the said CCDs have been issued. For all the aforesaid reasons, Mr. Singh submitted that the Petition has no merit and the same ought to be dismissed with costs.
13. I have heard the learned counsel for the parties at length and perused the papers and proceedings in the above Arbitration Petition. The facts before me are clearly undisputed. It is not in dispute that pursuant to the offer letter/prospectus dated 7th March, 2019, the Petitioner was allotted 100 CCDs having a face value of Rs. 1,00,000/- each, aggregating to a sum of Rs.1,00,00,000/-. These CCDs were to be converted into equity shares of the 2nd Respondent company either (i) at the end of 4 years and 11 months; or (ii) prior thereto, if such an offer was made by the 2nd Respondent to the Petitioner and the same was accepted by the Petitioner. Over and above this, and independently, the Petitioner and Respondent No.1 as well as Respondent No.2 entered into a Put Option Agreement dated 19th March, 2019. In the said Agreement, the Petitioner is described as a Debenture Holder, Respondent No.1 is described as the Promoter and Aswale 12/26
9.carbpl.18859.21..doc Respondent No.2 is described as a Confirming Party. The relevant clauses of this Agreement read thus:-
"2. PUT OPTION 2.1. The Company and the Promoter grant to the Debenture Holder, the right and an option to require the Promoter to purchase all or part of the Option Debentures, on the terms of this Agreement (the "Put Option"). The price per debenture at which the Option Debentures shall be transferred pursuant to the execution of the Put Option shall be equivalent to the sum of the value of the Subscription Amount paid by the Debenture Holder to purchase all or part of the Option Debentures and all accrued and unpaid Coupon (including Default Coupon, if any) thereon in respect of such Debentures, as the date of exercise of the Put Option ("Option Price').
2.2. The Debenture Holder shall have a right to exercise the Put Option by informing the promoter in writing by submitting a duly filled Put Option Exercise Notice (in the form appearing in Schedule 1 hereto), (a) only after the expiry of 24 months from the date on which the Option Debentures were issued and allotted to the Debenture Holder ("Put Option Period"); and (b) provided that the Debenture Holder has not converted the Option Debentures into Equity Shares of the Company during the Put Option Period.
2.3. The Company acknowledges, confirms, covenants and warrants that as and when such number of Option Debentures are lodged with the Company for transfer from the Debenture Holder to the Promoter, it shall forthwith, without any demur or protest, transfer the Option Debentures in favour of the Promoter and register the name of the Promoter in its register of Debenture Holders of the Company.
3. EXERCISE OF PUT OPTION 3.1. The Debenture Holder, in accordance with the terms of this agreement, may exercise the Put Option, at any time after the Aswale 13/26
9.carbpl.18859.21..doc Put Option Period, provided that the Debenture Holder has not converted the Option Debentures into Equity Shares of the Company during the Put Option Period, by serving a prior written notice of exercise on the Promoter and the Company (the "Put Option Exercise Notice") to require the Promoter to purchase the Option Debentures for an amount equal to the price determined in accordance with Clause 2.1 above ("Put Option Consideration").
3.2. The Put Option Exercise Notice shall specify the name of the seller(s) who shall be the Debenture Holder and a date falling within 60 (sixty) days from the date of the receipt of the Put Option Exercise Notice by the Promoter, on which the exercise of the Put Option shall be completed ("Completion Date").
**************** 3.4. Following an exercise of the Put Option, the Company agrees to transfer, on the Completion Date, the legal and beneficial interest in such number of Option Debentures with all rights and obligations attached or accruing to them at the date of the Put Option Exercise Notice on the terms provided in this Agreement to the Promoter in the proportion set out in the Put Option Exercise Notice.
***************** 3.6. The Debenture Holder undertakes and covenants to the Promoter that it has, and shall have as at the date of the Put Option Exercise Notice and the Completion Date, the right to sell and transfer the whole of the legal and beneficial interest in the title to Option Debentures.
***************** 3.8. The Debenture Holder undertakes and covenants to the Promoter that the Promoter shall, with effect from the completion Date, be entitled to exercise all rights attached or accruing to such Option Debentures transferred to the Promoter in accordance with the terms of this Agreement including, without limitation, the right to receive all dividends or other distributions or any return of capital declared, made or paid by the Company on or after the Completion Date.
3.9. The Promoter shall, on the Execution Date, hand over the Aswale 14/26
9.carbpl.18859.21..doc Demand Promissory Note to the Debenture Holder for an amount equivalent to the Put Option Consideration, which Demand Promissory Note shall become effective only in the event the Promoter fails to make the payment of the entire Put Option Consideration on the Completion Date upon the Debenture Holder issuing the Put Option Exercise Notice to the Promoter in accordance with the provisions of this Agreement. In the event of any failure on the part of the Promoter to make the payment of the entire Put Option Consideration for any reason whatsoever, the Promoter shall be liable to pay an additional interest at the rate of 20% (Twenty Per Cent) on the unpaid amount of the Put Option Consideration from the date on which the payment becomes due and payable till the date of payment/realization."
14. As can be seen from the aforesaid Agreement, the Petitioner has an option to call upon Respondent No.1 to purchase the CCDs on the expiry of 24 months from the date on which the said CCDs were issued and allotted to the Petitioner. This, was of course, subject to the fact that the Petitioner had not already converted the said CCDs into equity shares. It is not in dispute that the said CCDs have not been converted into equity shares of the 2nd Respondent company. It is also undisputed that the Petitioner has exercised its Put Option as recorded in their letter dated 2nd April, 2021 duly received by Respondent No.1 & Respondent No.2. Looking at the terms of the Agreement and the facts narrated above, at least prima facie, I am satisfied that Aswale 15/26
9.carbpl.18859.21..doc Respondent No.1 has to pay to the Petitioner the sum of Rs. 1,00,00,000/- (being the face value of the said CCDs) together with interest thereon as more particularly set out in the said Agreement.
15. However, before I proceed further, it would only be fair to deal with the arguments canvassed by Mr. Singh. The first argument canvassed by Mr. Singh was that the Put Option Agreement is not executed by the Petitioner, and therefore, is a non-est Agreement. If this be the case, the Arbitration Agreement itself perishes, and hence, then no relief can be granted to the Petitioner under Section 9 of the Arbitration Act, was the submission of Mr. Singh. I am unimpressed with this argument. The Put Option Agreement is admittedly executed by Respondent No.1 as well as Respondent No.2. It is true that this Agreement has not been executed by the Petitioner. However, that would make little difference. The Petitioner is not resiling and/or abandoning this Agreement. In fact, the Petitioner has come to this Court seeking enforcement of this Agreement against Respondent No.1. The fact that the Respondents have executed Aswale 16/26
9.carbpl.18859.21..doc this Agreement is not in dispute. The Petitioner, under this very Agreement, has exercised its Put Option and called upon Respondent No.1 to purchase the said CCDs from the Petitioner. There is correspondence also on record to show that the Respondents were constantly made aware of the Petitioner exercising their Put Option under the aforesaid Agreement. Never in any correspondence or prior to the filing of the affidavit in reply, have the Respondents ever taken up the contention that the Agreement is unenforceable because it is not signed by the Petitioner. At least, at this prima face stage, I find this argument is canvassed only as an after-thought so as to somehow deny the Petitioner its legitimate dues. I, therefore, have no hesitation in rejecting this argument.
16. The second argument canvassed by Mr. Singh was that the investment by the Petitioner in the CCDs issued by the 2nd Respondent was really an investment in the equity shares of the 2nd Respondent company, and therefore, there was no question of the Petitioner seeking a refund of their money under the said CCDs. In other words, Mr. Singh contended that on the expiry of 4 years 11 Aswale 17/26
9.carbpl.18859.21..doc months, these CCDs would automatically get converted into equity shares of the 2nd Respondent company, and hence, there is no question of there being any monetary liability being foisted on either of the Respondents. This argument of Mr. Singh, I am afraid, is only partly correct. It is true that Respondent No.2 company, having issued the CCDs to the Petitioner, would not be monetarily liable to the Petitioner under the said CCDs. This is for the simple reason that on the expiry of 4 years and 11 months, the 2nd Respondent Company would convert these CCDs into equity shares of the said Company. However, this does not apply to Respondent No.1. Respondent No.1 (as a Promoter of Respondent No.2), has entered into a Put Option Agreement with the Petitioner specifically giving them the right to exercise the option to sell these CCDs to Respondent No.1 after expiry of 2 years from the date of allotment provided the said CCDs are not already converted into equity shares. This liability is of Respondent No.1. Respondent No.2 is joined to the Put Option Agreement only as a Confirming Party. It is, therefore, incorrect on the part of Mr. Singh to contend that the Petitioner cannot look to recover the amounts under the said CCDs from either of the Respondents. As Aswale 18/26
9.carbpl.18859.21..doc mentioned earlier, the Petitioner cannot look to recover this amount from Respondent No.2. However, it can certainly look to recover these amounts from Respondent No.1 who was the Promoter of Respondent No.2 and who had entered into the Put Option Agreement with the Petitioner. This being the case, I do not find any merit even in the second argument canvassed by Mr. Singh. I may hasten to add that Respondent No.2 would be liable to the Petitioner for interest on the aforesaid CCDs for the quarter ending 31st March, 2021, which has admittedly not been paid and which is for a period before the Petitioner exercised its Put Option.
17. Having rejected the two arguments canvassed by Mr. Singh, I have to now examine whether the Petitioner has made out a case for an order of deposit. From the record, I find that there is absolutely no dispute with reference to the payability of the amounts due to the Petitioner under the said CCDs. Prima facie, I find that Respondent No.1 has no real defence to the claim made and/or proposed to be made by the Petitioner. In these circumstances, I would be fully justified in ordering Respondent No.1 to deposit the amount due under the said CCDs in this Court Aswale 19/26
9.carbpl.18859.21..doc to secure the claim in the proposed arbitration. I say this because I am supported by several decisions of this Court on this issue. In this regard, Mr. Kanade has relied upon (i) a Division Bench Judgement of this Court in the case of Jagdish Ahuja v. Cupino Limited [2020 SCC OnLine Bom 849]; and (ii) a decision of a learned single Judge of this Court in the case of Kotak Mahindra Bank Ltd. Vs. Williamson Magor & Co. Ltd. & Anr [2021 SCC OnLine Bom 305] to contend that where there is no real dispute about the payability of the amounts claimed by the Petitioner, then it would be just and fair to direct the Respondent/s to secure these amounts by passing an order of deposit.
18. A Division Bench of this Court, in the case of Jagdish Ahuja (supra) has clearly laid down that where the Court is of the view that there is practically no defence to the amount payable and where it is in the interest of justice to secure the amount which forms the subject matter of the proposed arbitration, even if no case is strictly made out within the letter of Order 38 Rule 1 or 2, though there are serious allegations concerning such case, it is certainly within the power of the Court to order a suitable interim Aswale 20/26
9.carbpl.18859.21..doc measure of protection under Section 9 of the Arbitration Act. In other words, in the aforesaid case, the Division Bench has held that where there is no defence to the payability of the amount and where the interest of justice so demands, the Court always has the power under Section 9 to secure the amount by ordering the respondents to deposit the sum in Court. The relevant portion of the aforesaid decision reads thus:
"7. In an appropriate case, where the court is of the view that there is practically no defence to the payability of the amount and where it is in the interest of justice to secure the amount, which forms part of the subject matter of the proposed arbitration reference, even if no case strictly within the letter of Order 38 Rule 1 or 2 is made out, though there are serious allegations concerning such case, it is certainly within the power of the court to order a suitable interim measure of protection. As we have noted above, the amount is either to be deposited into the treasury in accordance with the agreement between the parties or if, for any reason, it is not payable to the revenue towards the Respondent's tax liability, as is the case of the Appellants here, it is to be paid to the Respondent itself as part of the price of debentures. In fact, when these two options were posed by the learned Single Judge to the Appellants' counsel, in fairness both conceded that there was no third option."
19. After the aforesaid decision, another learned single Judge of this Court (G. S. Patel J.) had the occasion to consider the law on the subject in the case of Kotak Mahindra Bank Ltd Aswale 21/26
9.carbpl.18859.21..doc (supra). After considering the law laid down by this Court, the learned Judge held thus:-
"31. Lest it be argued either here or in any other forum that no case has been made out under Order 38 Rule 5 of the Code of Civil Procedure, 1908 ("CPC"), which seems to me more or less the habitual and automatic chanting of every respondent in a Section 9 Petition, this needs to be stated : that is not the law. The recent decision of the Division Bench of this Court (RD Dhanuka and VG Bhisht JJ) in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Ltd. [2021 SCC OnLine Bom 149] makes it clear that there is no requirement that for such relief an iron-
clad case under Order 38 Rule 5 of the Code of Civil Procedure, 1908 ("CPC") must be made out (or, if not argued, that the Court must hunt for it). The Division Bench reaffirmed the principle that has long been settled, and restated repeatedly, but which seem to be reagitated in the wrong way again and again. The Division Bench said in the clearest terms that the principles of the CPC, including especially Order 38 Rule 5, are guides to a Section 9 Court and the order it makes under that Section. They are not fetters upon the Section 9 Court's discretion. On my reading of the Division Bench order, the position in law is that in such a case an order of deposit not only can be made, but ought to be made. In Valentine Maritime Ltd. v. Kreuz Subsea Pte Ltd. [2021 SCC OnLine Bom 75], the Division Bench of this Court reiterated this position regarding Order 38 Rule 5 and also held that in appropriate case, where the defence is prima facie untenable, the Petitioner has a chance of success, and the defence is moonshine, an order of deposit to secure the claim can and indeed should be made under Section 9. This was also the view of another Division Bench of this Court in Jagdish Ahuja v. Cupino Ltd. [2020 SCC OnLine Bom 849]. All three decisions referenced and explained the previous Division Bench decision in Nimbus Communications Ltd. v. Board of Control for Cricket in India Aswale 22/26
9.carbpl.18859.21..doc [2013 (1) Mah L.J. 39] and the Supreme Court decision in Adhunik Steels Ltd. v. Orissa Manganese & Minerals (P) Ltd.[(2007) 7 SCC 125]. I followed the Division Bench decisions (referencing this law) in Parle Agro Pvt. Ltd. v. Shree Aqua Purifier Pvt. Ltd. and IIFL Finance Ltd. v. Shrenik Dhirajmal Sirqya.
32. Williamson Magor has no defence at all. Khaitan's defence is untenable and, in view of the settled law on the subject, is unstatable and probably the most complete moonshine. There is a contract with a clear and unequivocal obligation cast on the Respondents. The Petitioner has an excellent chance of success. Accordingly, the Respondents are required to deposit with the Prothonotary and Senior Master an amount of Rs. 14.88 crores by 31st March 2021.1 have rounded off the amount of deposit."
(emphasis supplied)
20. This being the law laid down by this Court and considering the fact that there is no real defence to the payability of the amounts under the Put Option Agreement in relation to the said CCDs, I am of the opinion that a case for an order of deposit is made out against Respondent No.1. In these circumstances, the following order is passed:-
(i) Pending the Arbitral Proceedings and until the execution of the Arbitral Award, Respondent No.1 is Aswale 23/26
9.carbpl.18859.21..doc directed to deposit in this Court a sum of Rs.
1,15,78,764/- within a period of eight weeks from today.
(ii) Over and above this, there shall be interim relief in terms of prayer clauses (a) and (b) which read thus:-
"(a) pending the arbitral proceedings, making of the Arbitral Award and until execution of the Arbitral Award, each of the Respondents be directed to disclose on Oath/Affidavit, the true and complete details of all the assets (both movable and immovable including the bank accounts and other assets) held and owned by them and the encumbrances and charges, if any on these assets;
(b) pending the arbitral proceedings, making of the Arbitral Award and until execution of the Arbitral Award, the Respondents be restrained by an Order and injunction from in any manner dealing with, selling, transferring, disposing off or alienating or encumbering or mortgaging or charging or parting with possession of their assets;
(iii) It is clarified that the interim relief granted in terms of prayer clauses (a) and (b) is only against Respondent No.1 and not against Respondent No.2.
(iv) If the aforesaid deposit order is complied with, the Aswale 24/26
9.carbpl.18859.21..doc Respondents shall be at liberty to file an application seeking recall of the interim reliefs granted in terms of prayer clauses (a) and (b), either before this Court or before the Tribunal under Section 17 of the Arbitration Act. If the same is filed, it shall be decided on its own merits and in accordance with law.
(v) If the sum of Rs.1,15,78,764/- is not deposited in this Court within a period of eight weeks from today, the Petitioner shall be entitled to execute this order under Section 36 of the Code of Civil Procedure, 1908 to ensure that the said monies are brought in this Court.
21. It is needless to clarify that all observations made in this order are only prima facie and tentative and will not bind the Tribunal as and when it decides the lis between the parties.
22. The above Section 9 Petition is disposed of in the aforesaid terms.
Aswale 25/26
9.carbpl.18859.21..doc
23. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
[ B. P. COLABAWALLA, J. ] Aswale 26/26