Delhi High Court: The appeals were filed by the appellants Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 read with Section 13 of the Commercial Courts Act, 2015 impugning a common judgment dated 22-06-2020 passed by the Single Judge directing the appellants to furnish a bank guarantee to secure a sum equal to 50% of the total of USD 34,133,214 within four weeks. A division bench of Amit Mahajan, and Vibhu Bakhru JJ., sets aside the impugned judgment directing the appellants to provide a bank guarantee to partly secure the claims of the respondent.
The appellants in the present appeals belong to a Group of Companies wherein appellant 1 is the parent company of Skypower Solar India Private Limited having its registered office in India. Appellant 3 is a company incorporated under the laws of Mauritius and is a wholly owned subsidiary of Skypower Global Cooperatief (SGC). SGC is a company incorporated under the laws of the Netherlands. The main grievance of the appellants is that by way of the impugned judgment, the Single Judge had, inter alia, directed the appellants to furnish a bank guarantee to secure a sum equal to 50% of the total of USD 34,133,214 within four weeks, from the date of the impugned judgment.
On the aspect of whether the impugned directions to furnish a Bank Guarantee equivalent to 50% of the amount claimed by the respondent, can be faulted on the ground that the conditions for issuing such a direction as stipulated under Order XXXVIII Rule 5 of the CPC, are not satisfied, the Court noted that though Sterling & Wilson (S&W) has established a prima facie case and that the balance of convenience is also in its favour, there is no finding to the effect that appellant 2 to 6 are alienating their assets or would do so and frustrate S&W’s recourse to enforce the arbitral award if it prevails in the arbitral proceedings. There is no finding that in absence of an order for securing the amounts in dispute, S&W would be unable to enforce the Arbitral Award that may be made in its favour.
The Court further noted that the powers of a court under Section 9 of the A&C Act to direct interim measures are wide and in the given cases, the court can direct furnishing of a security to secure the claims of the applicant pending the conclusion of the arbitral proceedings. Further, orders under Section 9 of the A&C Act can be passed before, during or after the arbitral proceedings. However, it is equally well settled that the powers available to a court for making orders under Section 9 of the A&C Act are the same as that the court has, for the purpose of, or in relation to, any proceedings before it. Thus, the powers under Section 9 of the A&C Act cannot be exercised in disregard of the provisions of the CPC or their underlying principles.
The Court observed that the orders passed under Order XXXVIII Rule (5) of the CPC are required to be issued in cases where the court is satisfied that the party has established a strong prima facie case and that the respondents are acting in a manner that would defeat the realization of the decree. These principles must be equally satisfied for securing protective orders under Section 9 of the Arbitration and Conciliation Act, which are orders under Order XXXVIII Rule (5) of CPC.
The Court concluded that in the present case, there are no observations or findings to the effect that if the orders for furnishing of the bank guarantee are not granted, S&W would be unable to enforce the Arbitral Award against appellant 2 to 6. There was also no material on record to even remotely suggest that the appellants 2 to 6 were alienating their assets or acting in a manner that would frustrate the enforcement of the Arbitral Award, if S&W India prevailed in the arbitral proceedings. Thus, an order directing them to furnish a Bank Guarantee, militates against the principles underlying Order XXXVIII Rule 5 of the CPC.
[Skypower Solar India Private Limited v Sterling and Wilson International FZE, 2023 SCC OnLine Del 7240, decided on 10-11-2023]
Advocates who appeared in this case :
For the Appellant : Mr. Tishampati Sen, Ms. Riddhi S, Mr. Anurag Anand & Mr. Himanshu Kaushal, Advs.
For the Respondent : Mr. Darpan Wadhwa, Sr. Adv. with Mr. Jaiyesh Bakshi, Mr. Ravi Tyagi, Ms. Manmilan Sidhu, Mr. Sameer Patel, Ms. Sudiksha Saini & Mr. Ankit Tyagi, Advs
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