NDLI: Essar House Private Limited Vs. Arcellor Mittal Nippon Steel India Limited

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Arbitration and Conciliation Act 1996
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Arbitration and Conciliation Act, 1996 – s. 9 – Insolvency and Bankruptcy Code, 2016 – ss. 7, 14 – Code of Civil Procedure, 1908 – Or. 38, r. 5 –A sum of about Rs. 35 crores and Rs. 47 crores was paid by Essar Steel to the appellant shere in (Essar House Private and Essar Services)respectively, by way of refundable security deposit – A petition was filed u/s. 7, IBC for initiation of CIR Pagainst Essar Steel – Respondent, as resolution applicant submitted a Resolution Plan in respect of Essar Steel which was approved– Respondent took over Essar Steel – Sent legal notices calling upon the appellants to refund the security deposits – Denied – Application filed by respondent u/s.9, Arbitration Act was allowed, appellants were directed by Single Bench of High Court to deposit Rs. 35.5 crores and Rs. 47.41 crores respectively or to furnish bank guarantee for the entire amount with interest – Order confirmed by Division Bench – On appeal, held: Obligations under a contract cannot be assigned, without consent of the counterparty – Novation of contract or set off is not allowed in respect of a corporate entity undergoing CIRP without the consent of the Resolution Professional – In the present case, admittedly, the CIRP of Essar Steel commenced when the Resolution Professional took over the management of the affairs of Essar Steel under the IBC – Even if any prior inter se arrangement existed between the parties, Essar Services could not have adjusted the security deposit payable to Essar Steel under the amended agreement against the alleged dues of Essar Steel to a third party during the CIRP – Further, while it is true that the power u/s. 9, Arbitration Act should not ordinarily be exercised ignoring the basic principles of procedural law in the CPC, the technicalities of CPC cannot prevent the Court from securing the ends of justice – Besides the specific power of securing the amount in dispute, the Courts are empowered to pass any interim measure of protection, keeping in view the purpose of the proceedings before it – If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power u/s. 9 should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment u/Or. 38, r. 5, CPC – Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief u/s. 9 – A strong possibility of diminution of assets would suffice– In the instant case, prima facie, the refundable security deposit was not released to respondent on the purported ground of a convoluted series of internal arrangements between group companies for diversion of the security deposits towards liquidation of alleged dues of Essar Steel to third parties – This contention of the appellant was considered by the Division Bench –No infirmity in the well-reasoned judgment of the Division Bench – Contract. Arbitration and Conciliation Act, 1996 – s. 9 –Power of Court – Scope of– Discussed– Code of Civil Procedure, 1908.
Judge	Hon'ble Ms. Justice Indira Banerjee
Neutral Citation	2022 INSC 957
Petitioner	Essar House Private Limited
Respondent	Arcellor Mittal Nippon Steel India Limited
SCR	[2022] 11 S.C.R. 1001
Judgement Date	2022-09-14
Case Number	6574

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