Delhi District Court
Zamil Air Conditioners India Pvt. Ltd vs Pawa International Private Limited on 9 September, 2022
IN THE COURT OF MS. SANTOSH SNEHI MANN,
DISTRICT JUDGE (COMMERCIAL COURT)-01,
PATIALA HOUSE COURTS, NEW DELHI
ARB. A (COMM.) 10/2022
In the matter of:
Zamil Air Conditioners India Pvt. Ltd.
Registered Office:
B1-11, 2nd Floor,
Mohan Co-operative Industrial Estate,
New Delhi - 110044,
(Through its Authorized Representative
Mr. Santosh Jha)
(E-mail id: [email protected]) ....Appellant
Versus
Pawa International Private Limited
Registered Office:
M-102, Greater Kailash-I,
New Delhi-110048
Through its Chairman & MD
(E-mail id: [email protected])
Also at:
Pawa International Private Limited
Pawa Presidential Business Park,
Tower No. '5', C-9, DDA Commercial Complex,
Vasant Kunj, Delhi-110070 ...Respondent
Date of institution : 15.07.2022
Conclusion of arguments : 25.08.2022
Date of Judgment : 09.09.2022
Arb. A 10/2022 Page no. 1 of 10
Zamil Air Conditioners India Pvt. Ltd. Vs.
Pawa International Private Limited
Appearance:
Appellant: Advocate Mrinal Beri
Respondet: Advocate Seerat Deep Singh.
JUDGMENT
1. The appellant under Section 37(2)(B) of the Arbitration and Conciliation Act (hereinafter The Act) read with Section 151 CPC has been filed against the order dated 31.05.2022 passed by Ld. Sole Arbitrator at Delhi International Arbitration Centre (DIAC) in case reference no. DIAC/2551/09-19, ARB. Pet. No.348/2019 case titled "Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Pvt. Ltd.", whereby ld. Arbitrator has directed the appellant to produce its certified bank account details for creating lien over on the bank account of the appellant till disposal of the arbitration proceedings.
2. Respondent appeared on notice and has filed a detailed reply.
3. Background facts in brief necessary for disposal of the appeal are :
(a) Appellant is a company incorporated under the Companies Act, 1956 having its registered office at B1-11, 2nd Floor, Mohan Co-operative Industrial Estate, New Delhi-110044, engaged in the business of design, manufacture and marketing of Room and Industrial Air Conditioning Units. Respondent is also a company incorporated under the Companies Act 1956, having its registered office at M-102, Greater Kailash-I, New Delhi- 110048.
(b) In the financial year 2013-14, respondent approached the appellant for supply, installation, testing & commissioning of Arb. A 10/2022 Page no. 2 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited ventilation works, for its project with the name "Pawa Grand"
at Sector-14, Rohini, Delhi. After meetings and discussion between the authorized representatives of the parties, a tender document for this project was executed between them on 27.07.2013, and an order was placed by the respondent with the appellant on 21.03.2014 for an amount of Rs. 30,50,000/-, which value was amended on 22.07.2014 as Rs. 33,52,360/-. Terms and conditions of the ventilation document included an arbitration clause.
(c) Dispute arose between the parties and the appellant invoked the arbitration clause in consequent to which appellant filed an application under Section 11 of the Act before the Hon'ble Delhi High Court, and vide order dated 24.09.2019, Hon'ble Delhi High Court relegated the parties to the DIAC for settlement of inter-se dispute along with the direction for appointment of Arbitrator from the panel of DIAC. Sh. Rakesh Tewari, District & Sessions Judge (Retd.), was appointed as the Sole Arbitrator by the Hon'ble Chairperson, DIAC. A communication in this regard was received by the appellant on 07.09.2020.
(d) After completion of pleadings in the arbitration proceedings, on 25.03.2022, respondent filed an application under Section 17 of the Act for interim relief to secure an amount claimed by the respondent in the counter-claim, taking the plea that the appellant company is on the verge of closing down its business operations in India and would do business operations from Arb. A 10/2022 Page no. 3 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited Dammam, Saudi Arabia. Though the counsel for the appellant clarified and denied the contentions raised in the application, ld. Arbitrator vide order dated 25.03.2022, gave directions for physical appearance of the Director of the appellant and AR of the respondent company on the next date i.e. 30.04.2022. On the request of the Director of the Claimant company, conveying their non-availability on personal ground on 30.04.2022, matter was adjourned for appearance on 31.05.2022. Impugned order was passed by ld. Arbitrator on 31.05.2022, operative part of which is reproduced as under :
"After deliberation between the parties on the application under Section 17 of the Act of 1996 moved by the respondent/counter- claimant and in order to secure the part claim mentioned in the counterclaim, which has been ascertained after deducting the amount of the claim in the claim petition from the amount claimed by the Respondent in the counterclaim and making it a round figure, the Director of the claimant company is directed to produce or get produced the bank account of the claimant company with full particulars on the next date of hearing and thereafter an appropriate order directing the concerned Bank Official for creating lien over the said amount till the disposal of this arbitration proceedings. For the adjournment secured through email by the claimant on the direction against order of 25.03.2022 on 28.04.2022. The ground taken in the said email dated 28.04.2022 for the absence of Director and the AR of the company to be present before this Tribunal, is not found satisfactory and justifiable. Accordingly, a cost of Rs. 5000/- is imposed upon the claimant for adjournment sought on 28.04.2022 to be paid to the counsel for the respondent on the next date of hearing.
Copy of this order be given dasti to both the parties and particularly to the said Director of the claimant company to be produced before the concerned Bank Official for supplying the certified particulars of the bank account.
The date already fixed i.e. on 01.06.2022 stands cancelled and now to come up for said purpose on 16.07.2022 at 3.00 PM through physical hearing."
(emphasis supplied) Arb. A 10/2022 Page no. 4 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited
4. The above order is assailed in the appeal on the ground that despite the fact that the Director and the AR of the appellant company were present before ld. Arbitrator, before passing the impugned order, they were neither examined nor their statements were recorded to ascertain truthfulness of the averments made by the respondent in its application under Section 17 of the Act, i.e.
- (a) whether the Claimant Company is under liquidation ?, (b) whether the Claimant Company has any plans to shut down its business operation from India? and, (c) whether there is any charge/lien and/or mortgage of any sort on the property of the Claimant?; that ld. Arbitrator did not record submissions of the counsel for the appellant in the impugned order; that it is an unreasoned order, wherein no findings have been given on apprehensions of the respondent raised in the application under Section 17 of the Act; and that order is whimsicle and which has put unnecessary burden on the Claimant with financial implications; and finally that the order has been passed without according a reasonable opportunity to Claimant of being heard in the matter for disproving the averments made by the respondent in the application.
5. In reply, preliminary objections inter-alia taken by the respondent are - that the present appeal is abuse of process of law and is wholly misconceived, filed with malafide intention to delay and scuttle the proceedings; that the present appeal is not maintainable and pre mature as the application under Section 17 of the Act is still pending before the Tribunal; and that the impugned order Arb. A 10/2022 Page no. 5 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited dated 31.05.2022 is only an interim direction pending disposal of the application under Section 17 of the Act. Averments with respect to the proceedings before the arbitral tribunal are not disputed whereas averments with respect to legality of the impugned order/direction are assailed as misconceived and mischievous.
6. I have heard Advocate Mrinal Beri, counsel for the appellant and Advocate Seerat Deep Singh, counsel for the respondent. I have perused the record carefully.
7. It was argued by ld. Counsel for the appellant that an order putting a lien on the bank account of the appellant amounts to pre- determination of claim of the respondent before conclusion of trial, and that impugned order puts the appellant under unnecessary financial burden in case of a disputed claim. It was argued and that direction given to the Director of the appellant company vide impugned order to produce or get produced the bank account of the claimant company with full particulars and thereafter to pass an appropriate order directing the concerned bank to create lien, is a decisive order and the appeal is not pre- mature. In support of the arguments, ld. Counsel for the appellant has relied on the following judgments:
(a) Intertoll ICS Cecons. O & M Co. Pvt. Ltd. Vs. National Highways Authority of India, (2013) SCC OnLine Del 447
(b) Raman Tech. & Process Engg. Co. and Another, (2008) 2 SCC 302
(c) Tata Advanced Systems Limited Vs. M/s Telexcell Arb. A 10/2022 Page no. 6 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited Information Systems Limited, 2020 SCC OnLine Del 1716
(d) Manish Aggarwal & Anr. Vs. RCI Industries and Technologies Ltd., 2022 SCC OnLine Del 1285
8. Per Contra, it was argued by ld. Counsel for the respondent that all the judgments relied and referred to by the counsel for the appellant are with respect to final order of the Arbitrator on an application under Section 17 of the Act, whereas there is no such order as yet in the present case.
9. I have carefully considered the rival submissions in the light of facts of this case and the judgments cited.
10.During the arbitral proceedings, the Arbitral Tribunal is empowered to pass interim orders for securing the amount in dispute. Relevant portion of Section 17 of the Act is reproduced as under:
17. Interim measures ordered by arbitral tribunal. - (1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal -
(i) ........................................................................
(ii) for an interim measure of protection in respect of any of the following matters, namely: -
(a) ...............................................................
(b) securing the amount in dispute in the arbitration:
............................................................"
11. A party aggrieved by an order passed under Section 17 of the Act, can file an appeal against the said order. Relevant portion of Section 37 of Act reads as under :
37. Appealable orders. -
(1)............................................................................ (2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal. -
Arb. A 10/2022 Page no. 7 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited
(a)...............................................................
(b) granting or refusing to grant an interim measure under section 17............................................................
12.In Intertoll ICS (Supra), Hon'ble Delhi High Court has held that a direction under Section 17 of the Act to furnish bank guarantee would indeed be an extraordinary one and has to necessarily be preceded by a determination of the possible extent of the claim that is likely to be awarded. It was further held that power of the Tribunal under Section 17 of the Act, even if assumed to be as wide as that of the Court under Section 9 of the Act, cannot extend to directing the provision of security in the form of a bank guarantee in relation to a speculative claim for damages. It was held that an order for grant of interim relief under Section 17 of the Act is required to be preceded by a determination that the party seeking interim relief has a prima facie case.
13.In Raman Tech (Supra), Hon'ble Supreme Court has held that power of ordering attachment before judgment under Order 38 Rule 5 CPC is drastic. For such an order to be passed, the party seeking relief has to satisfy the Court that it has a prima facie case. It was only thereafter that the Court would proceed to the next stage of examining whether interests of the party should be protected.
14.In Tata Advanced (Supra), while referring to the guiding principals for grant of relief by the Arbitral Tribunal under Section 17 of the Act, Hon'ble High Court of Delhi has held that Arb. A 10/2022 Page no. 8 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited it is a settled legal preposition that in exercising discretion while granting interim relief under Section 17 of the Act, the Tribunal should be extremely cautious and power should be exercised for purpose of safeguarding the interests of the parties to the proceedings, so that subject matter of the Arbitration is preserved. It has been further held that there should be adequate material on record to show that the respondent will fritter away the property or assets or funds, being the subject matter of Arbitration, so as to frustrate the Award, in case of Claimant succeeds.
15.Coming to the facts of the case before this Court in the present appeal, it is a matter of record that there is no formal final order of the Arbitral Tribunal on the application of the respondent under Section 17 of the Act as yet. Though apprehension in the mind of the appellant is not totally unfounded, since direction has given to the Director of the appellant company vide impugned order to produce or get produced the bank account of the claimant company with full particulars, so that an appropriate order can be passed directing the concerned Bank Official for creating a lien over the said amount to secure the counter claim, till the disposal of the arbitration proceedings.
16.It is the case of the appellant that apprehension of the respondent that the appellant company will close its business operations in India, is totally unfounded, and further that the appellant company is neither under liquidation nor the appellant company is in the process to shut its operations in India nor there is any Arb. A 10/2022 Page no. 9 of 10 Zamil Air Conditioners India Pvt. Ltd. Vs. Pawa International Private Limited charge/lien/mortgage of any sort on the property of the appellant.
17.Though vide impugned order direction has been given by the Sole Arbitrator to the Director of the Appellant company to produce or get produced the bank account of the claimant company with full particulars, there is no formal order to create lien to secure the amount in the counter claim. The law is settled with respect to scope and power of the Arbitral Tribunal while exercising power under Section 17 of the Act. Appellant will have due opportunity to argue when the stage comes to pass the final order under Section 17 of the Act by the Arbitral Tribunal. The impugned order is of the nature of an interim proceedings/directions pending consideration of the application under Section 17 of the Act. This Court has no hesitation to record that in the absence of formal final order of Arbitral Tribunal on the application under Section 17 of the Act, the present appeal is pre-mature and cannot sustain.
18.The appeal is thus dismissed. Parties are left to bear their own costs.
19.File be consigned to the record room.
Pronounced in the open Court (Santosh Snehi Mann)
th
on this 09 Sept., 2022 District Judge,(Commercial Courts)-01
Patiala House Courts, New Delhi
Arb. A 10/2022 Page no. 10 of 10
Zamil Air Conditioners India Pvt. Ltd. Vs.
Pawa International Private Limited