Delhi High Court - Orders
Parsvnath Estate Developers Private ... vs Facebook India Online Services Private ... on 15 September, 2021
Author: C.Hari Shankar
Bench: C.Hari Shankar
$~20 (Original Side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB. A. (COMM.) 45/2021, I.A. 11317/2021 (Section 151
CPC for stay) and I.A. 11318/2021 (for exemption)
PARSVNATH ESTATE DEVELOPERS
PRIVATE LIMITED ..... Petitioner
Through: Mr. Vijay Nair, Mr. Rahul
Malhotra, Mr. Manoranjan Sharma, Mr.
Varun Garg and Mr. R.K. Sharma, Advs.
versus
FACEBOOK INDIA ONLINE
SERVICES PRIVATE LIMITED ..... Respondent
Through: Mr. Tejas Karia, Mr. Gauhar
Mirza, Mr. Shyamal Anand, Ms. Avlokita
Rajvi, Ms. Malikah Mehra, Mr. Suyash
Srivastava and Mr. Vishesh Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
ORDER
% 15.09.2021 ARB. A. (COMM.) 45/2021, I.A. 11317/2021 (Section 151 CPC for stay) and I.A. 11318/2021 (Section 151 CPC for exemption)
1. Mr. Nair, learned Counsel for the petitioner, has argued at length on the proposition that mere financial stringency of the opposite party before the Arbitral Tribunal cannot constitute a justifiable basis to direct furnishing of security. Such a direction, according to him, would necessarily, require a priori finding that the party, which is directed to furnish security, is in the process of dissipating its assets or acting otherwise, so as to frustrate an award, which may ultimately be come to be passed against that party. In the absence of any such Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM.) 45/2021 Page 1 of 4 Signing Date:16.09.2021 21:36:13 finding or any material to justify such a finding, Mr. Nair submits that no direction for furnishing security under Section 17(1)(ii)(b) of the Arbitration and Conciliation Act, 1996 ("1996 Act" in short) can be passed. He has placed reliance, for this purpose, on the judgment of a coordinate Bench of this Court in Natrip Implementation Society v. IVRCL Limited 1.
2. Mr. Tejas Karia, learned Counsel for the respondent, submits that the facts in Natrip1 were distinguishable. He especially relies on the concluding passages in Natrip1, which note the fact that the claim, of which security was sought in that case was the claim for un- liquidated damages.
3. As against this, Mr. Karia submits that the claim of his client, in the present case, is for an ascertained and definite amount and the law in relation to which stands settled in his favour by the decision in Gatx India Pvt Ltd v. Arshiya Rail Infrastructure Ltd 2, which has been noticed and distinguished in Natrip1 on this specific ground.
4. Mr. Karia has also placed reliance on earlier decisions on earlier decision of this Court in Dinesh Gupta v. Anand Gupta 3 and Shiningkart Ecommerce Pvt Ltd v. Jiayun Data Ltd 4.
5. This issue is coming up before this Court time and again. In Dinesh Gupta3, I have already expressed an opinion that, perhaps, 1 2016 SCC OnLine Del 5023 2 (2015) 216 DLT 20 3 MANU/DE/1727/2020 4 2019 SCC OnLine Del 11464 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM.) 45/2021 Page 2 of 4 Signing Date:16.09.2021 21:36:13 mutatis mutandis applicability, to Section 17(1)(ii)(b) of the 1996 Act, of the provisions of Order XXXVIII Rule 5 of the CPC and the law laid down in this regard in respect thereof, may be questionable. Even so, judicial authorities seem to be ad idem on the fact that the principles behind Order XXXVIII Rule 5 of the CPC do apply to Section 17(1)(ii)(b) of the 1996 Act.
6. This scope of the issue is, thus, whether in the absence of specific finding regarding dissipating of assets or of the opposite party acting otherwise so as to defeat the award, which may ultimately be come to be passed, an Arbitral Tribunal is wholly bereft of authority in directing furnishing of security and whether, if it does pass such a direction, a case for interference by the High Court, in exercise of its power under Sections 37(2) of the 1996 Act, can be said to be made out.
7. To my mind, it may not be possible to hold, in absolute terms, that, in every case, a finding of dissipating of assets is a prerequisite for furnishing of security under Section 17(1)(ii)(b) of the 1996 Act. Hence, a peculiar situation may arise, in which net worth of the company may be eroding at an exponential rate, but the company is, as yet, not dissipating its assets. Should, in such circumstances, the Arbitral Tribunal wait till net worth of the company reaches a point where it would become impossible for it to comply with the arbitral award, which may come to be passed against it at some future stage? Or, on the other hand, should the Arbitral Tribunal direct furnishing a security, to balance the equities, when the company is still in a Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM.) 45/2021 Page 3 of 4 Signing Date:16.09.2021 21:36:13 position to do so? Prima facie, I am inclined towards the view that, if the Arbitral Tribunal adopts a latter course, it may not be an appropriate case to interfere under Section 37 of the 1996 Act.
8. Nonetheless, as the issue is of some importance, and is recurring, I deem it appropriate to fix this matter for hearing on 24th September, 2021.
9. Both sides are directed to place on record short notes of their respective submissions not exceeding four pages, specifically limited to this aspect. It would be of use if learned Counsel would also place compilation of all authorities at least of this Court on the point, especially those rendered in the context of Section 17(1)(ii)(b) of the 1996 Act, after it was amended. The authorities may be placed in the form of an indexed compilation. The judgments should not be marked or highlighted, but the relevant paras thereof may be indicated in the index accompanying the compilation.
10. Mr. Karia requests for permission to comply with the impugned arbitral order, insofar as it directs deposit on the part of his client, by making such deposit before the Registrar General of this Court. He is permitted to do so.
C.HARI SHANKAR, J SEPTEMBER 15, 2021 r.bararia Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI ARB. A. (COMM.) 45/2021 Page 4 of 4 Signing Date:16.09.2021 21:36:13