JUDGMENT
F.I. Rebello, J.
1. Admit. Heard forthwith.
2. Disputes having arisen between the petitioner and respondent, Reference was made to an Arbitrator. The learned Arbitrator has been pleased to publish the Award on 15-1-2001 along with direction dated 30-3-2001. The respondent herein, aggrieved by the said Award preferred a petition before this Court. The petition was admitted.
2A. The petitioners in the present petition who were claimants in the dispute referred to Arbitration and respondent to the petition challenging the
Award have prayed that the respondents herein be ordered and decreed to deposit the various amounts as set out in the prayer clause. On the respondents depositing the said amount, the petitioners be allowed to withdraw the said amount. It is the case of the petitioners that considering the law laid down by the ‘Apex Court, as the Award has not yet become enforceable, the petition filed by them is maintainable under Section 9 of the Arbitration and Conciliation “Act, 1996. It is further contended that considering the challenges raised in the main petition and as there is an Award in favour of the petitioners herein, this court should grant reliefs as prayed for. Based on the material on record, it is sought to be contended that the financial position of respondent company is not very healthy. If the petitioners are not secured, there is every possibility that they will not be in a position to recover the amounts, if ultimately the petition filed by the respondent’s is dismissed. In support of the petition one Mr. P. Raghuraj Prasad has filed affidavits dated 19-6-2001 and 18-7-2001.
3. Respondent No. 1 has contested the contention of the petitioners. Affidavits in opposition to the case of the petitioners, have been filed by Mr. M. K. Swami on 18-6-2001, 11-7-2001 and 31-7-2001. In sum and substance respondent No. 1 contends that the petitioners have not made out a case for the reliefs as prayed for. Contention of the petitioner that the respondent company has been taken over by another company namely Larsen & Toubro Ltd. and that the cement manufactured in the plant of the respondent is packed in the bags of Larsen & Toubro and sold by the Larsen & Toubro Ltd. has been dealt with. The statement that the respondent company as a result is shown to be incurring artificial losses, has been denied. It is denied that it is only the respondent company which is shown to be incurring losses amongst the Cement Companies. Dealing with the said averments, Mr. Swami on behalf of the respondent has pointed out, that the company is a wholly owned subsidiary of L & T. However, the management of the company is different. The cement manufactured by the respondent is marketed by the respondent as well as by L & T. The proceeds of the cement marketed by L & T which is manufactured by the respondent is credited to the accounts of respondent. It is denied that the respondent is showing artificial losses. In an additional affidavit, which has been filed subsequently, it has been pointed out that pursuant to the measures taken for revival of the company, losses have been reduced and in fact the respondent has made a profit of Rs. 1.2 crores during the financial year 2000-2001. It is further pointed out that the results for the first quarter ending June 2001 which is announced by July 30, 2001 will show that the respondents have bettered its position from the last quarter of 2000-2001 and have shown profits of 1.43 crores. There are some other averments which I need not address myself to.
4. At the hearing of the petition on behalf of the respondent, it is sought to be contended that bearing in mind the scope of Section 9 of the Act of 1996, the reliefs as prayed for in the present petition cannot be granted. It is
pointed out that the petition is in fact for recovery of money. In the case of recovery of money at the highest what the petitioner would be entitled to is attachment before judgment. No such case has been made out by the petitioners. It is contended that though the provisions of the Civil Procedure Code are not applicable, the principles as contained in order 38 Rule 5 should be borne in mind. Reliance for that purpose is placed on the Judgment of the Single Judge of the Delhi High Court in the case of M/s Global Company v. National Fertilizers Ltd. in . It is then pointed out that a single Judge of this court, in the case of Indian Securities Ltd. v. Divis Laboratories Ltd. in Arbitration Petition No. 306 of 2000 decided on November 17, 2000 has followed the said Judgment. On accepted legal principles a judgment of a Co-ordinate Bench of this court, it is contended, should be followed. It is also pointed out that the arbitral proceedings come to an end on the happening of an event as contemplated by Section 32 of the Act of 1996. In the instant case, once the award is passed, the arbitral proceedings have come to an end. If arbitral proceedings have come to an end then Section 9 will have to be read bearing that in mind. Section 9 and clauses thereto, would indicate that most of them cover situations in the course of the arbitral proceedings and would not be available after the arbitral proceedings have come to an end.
5. Let me first address myself to the issue as to whether the Judgment in Indian Securities Ltd. can be said to have laid down the law as canVassed as in the normal course of judicial discipline, a Co-ordinate Bench of this court should follow, unless it disagrees with the view, in which event, it must refer the issue for consideration by a larger bench. The court, however, must first consider as to what is the ratio of the Judgment of the Co-ordinate Bench. It is the ratio of the Judgment that is binding and ought to be followed. The ratio has to be culled out, bearing in mind and applying the normal tests that a court has to apply namely (1) is the issue arising in this petition directly in issue in Arbitration Petition No. 306 of 2000; (2) was that issue required to be decided for the purpose of disposing of the Petition and (3) are there discernible reasons for arriving at the conclusion arrived at. If only these three basic tests are answered, then can it be said that the law decided is the ratio decendi of the Judgment.
6. It is no doubt true that on behalf of the respondent, learned counsel has contended that the Judgment is based on a concession and therefore, should not be considered. Nevertheless, I proceed to consider whether the issue in the present petition was in issue before the learned Single Judge. In Paragraph nine of that Judgment the court has considered the issue of representation on the Board of Directors. That issue is not in issue before this Court. The second issue was whether the respondents should be directed to furnish security of the value as prayed for in the Prayer Clause and whether the petitioners are entitled for an attachment. In Paragraph twelve of the Judgment, the court has considered Section 9(2)(d) and (e). Section 9(ii)(b)
was not at all in consideration. Thereafter in paragraph thirteen, the court has proceeded on the footing that there was no material before it. Paragraph fourteen of the Judgment deals with the Judgment of the learned Single Judge of Delhi High Court in M/s Global Company (supra). The court has only observed that if the basis applied by the Delhi Ruling, are applied to the case before it, then no ground was made out to show that the respondent was financially unsound. Therefore, apart from merely referring to the observation in the judgment of the Delhi High Court, the learned Judge did not address itself to the issue as to the scope of either Clause (d) or (e) or Clause (b) of Section 9(ii). No reasons have also been given in the matter of interpretation of the section. Therefore, to my mind, even if it could be said that the issue was in issue, the two other requirements for culling out the ratio of the judgment are not satisfied and in these circumstances, it cannot be said that the Judgment in India Security Limited (supra) has interpreted the provision of Section 9(ii)(b) of the Act of 1996.
7. We then come to the Judgment of the learned Single Judge of Delhi High Court. The facts therein disclose that the decision was rendered before the Award was published. The learned Single Judge proceeded on that basis. The Court further observed comparing the provisions of the Act of 1940 with the Act of 1996 that in the Act of 1996 the provisions of Civil Procedure Code are not made applicable. Even then, the principles of Order 38 Rule 5 should be borne in mind. In the present petition I do not propose to enter into the issue as to whether the provisions of Civil Procedure Code are attracted or not except for some comments.
8. The Civil Procedure Code consists of procedural provisions as also substantive provisions. Court in Section 2(e) of the Act of 1996 is defined as the principal Civil Court of original jurisdiction in a District having jurisdiction to decide the questions forming the subject matter. Under Section 141 of the Civil Procedure Code the procedure provided in the code with regard to the suits shall be followed as can be made applicable in all proceedings in a court of civil jurisdiction. The provisions of the Act of 1996 have to be interpreted bearing in mind the law laid down by the Apex Court in Sunderam Finance Ltd. v. N.E.P.C., . For the purpose of interpretation of the Act of 1996, the provisions of the Act 1940 are not to be followed but the objects as set out in the Act of 1996 and the unicitral code are to be considered in consonance with the provisions of the Act of 1996. The Act of 1996 has provided when a party can have recourse to a court and also the orders which can be impugned by the remedy provided. The Act has also provided the forum to decide the disputes and the remedy against the decision of such a Forum. It lies to the Civil Court. The only question is whether procedural provisions of the Civil Procedure Code apply, to the extent they are not provided in the Act and the rules. Prima facie to my mind the procedural provisions not provided in the Act or the rules framed which are not inconsistent and are required for the purpose of effectively
disposing of the proceedings before the Competent Court would be applicable. The substantive provisions will be inapplicable as the Act itself provides for the same. However, after so observing, I do not propose to proceed any further as it may not be required for deciding the issue arising in the present case. The issue of applying the principles of Civil Procedure Code as held by the Delhi High Court will be considered hereinafter.
9. Let us therefore, examine as to what are the powers of this court and the reliefs it can grant by way of interim measure under Section 9 of the Act of the 1996. Section 9(ii) confers the following powers on the court for an interim measure of protection in respect of any of the following matters, namely:
(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made; or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the court to be just and convenient; What is however, more important is that in making these orders, the court shall have the same powers as it has for the purpose of and in relation to, any proceedings before it.
10. Section 9 therefore, itself has permitted the court to invoke all those procedural provisions as contained in the Code of Civil Procedure for the purpose of passing the orders and/or granting relief under Section 9. It may also be mentioned that apart from the court, under Section 17, the Tribunal itself at the request of the party, may order a party to take any interim measure of protection as the Tribunal may consider necessary in respect of the subject matter of the dispute and for that purpose, may require the party to provide appropriate security in connection with a measure ordered under Subsection (1). Under Section 26, the Tribunal can appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal and require a party to give the expert any relevant information or to produce or to provide access to, any relevant documents, goods or other property for this inspection. All this makes it clear that Act of 1996 itself has provided for interim measures that can be granted by the court and by the Arbitral
Tribunal. Insofar as the Court is concerned, there is further power conferred that the court meaning thereby the court having jurisdiction can exercise all the powers available to it as the court under the provisions of the Code of Civil Procedure. The substantive power conferred on the court by Section 9 is to be effected by the procedural provisions as contained in the Code of Civil Procedure. The Code of Civil Procedure for example under Order 38 has provided for the security by way of arrest before Judgment and attachment before judgment. The Court before issuing the warrant of arrest or attaching the property and/or in the event, defendant does not furnish security has to satisfy itself that the various predicates as set out in Order 38 of Code of Civil Procedure have been satisfied. The corresponding power in the court under Section 9 would be of securing the amount in dispute in the arbitration. The power of the court to secure the amount in dispute under arbitration is not hedged by the predicates as set out in Order 38. All that the court must be satisfied is that an interim measure is required. In other words, the party coming to the court must show that if it is not ‘secured, the Award which it may obtain would result in a paper decree or a decree which cannot be enforced on account of acts of a party pending arbitral process. Therefore, the court would not to be bound by the requirement of Order 38 Rule 5. Since the power is discretionary, the court must be satisfied that it is in the interest of justice, based on the material before it to pass order to secure the petitioner before it. The discretion to be exercised would be based as set out earlier on the material before it and the petitioner making out a case that there is need for an interim measure of protection. However, once the court passes the order, then the order to secure would be as per the procedure as laid down in the Code of Civil Procedure. Insofar as preservation, interim, custody etc. is concerned, the power as conferred under Order 39, Rule 7 is also provided by Section 9(ii)(c). Appointment of Receiver is covered by 9(ii)(d). Power to sell goods at interim stage is specifically provided for in Section 9(ii)(a). Apart from that there is general power reserved in the courts for such interim measure as it may thought proper under Section 9(ii)(a). The substantive provisions of granting interim relief as provided for in the Code of Civil Procedure therefore, cannot be read into Section 9. There are independent provisions in the Act itself. The exercise of the power must be construed, bearing in mind the object of the Act and the need to dispose of the matter as expeditiously and not hedged in, by the provisions of the Code of Civil Procedure. To my mind, therefore, it is not necessary for the court when called upon to secure the amount in dispute to find out whether the respondent before it is seeking to dispose of the property or taking the property outside the jurisdiction of the court. The court is not hedged by such restriction. If it were to be so, the legislature considering that the petition lies to the Civil Court could have provided that court can exercise all the powers it has under the Civil Procedure Code for granting interim relief. On the
contrary only procedural provisions to give effect to the power under Section 9 have been conferred. Considering that, to my mind, the observation of the learned Judge of the Delhi High Court in M/s Global (supra) when it noted that the principles of the Code of Civil Procedure will have to be borne in mind would only restrict the exercise of powers under Section 9. The power under Section 9 cannot be fettered by reading into it the requirements for granting interim reliefs which are not provided. To that extent, I am unable to agree with the view expressed by the Delhi High Court.
11. We then come to the second contention as to whether after the Award has been passed, the power of this court to grant interim relief insofar as Section 9 is concerned is limited. That the Court has power to grant interim relief under Section 9 before the Award becomes enforceable is no longer in issue. See Sunderam Finance Ltd. v. N.E.P.C. India Ltd., . The argument is canvassed on behalf of the respondent considering the various expressions used in the various clauses of Section 9 of the Act of 1996. It will be very difficult for the court on first principles to accept that the powers of the court to grant interim relief are wider before an award is passed than that after the passing of an award. On the contrary after the Award is passed, the right of the party to an extent is crystalised. For example, in the case of damages, if earlier it is not debt, after the Award, it becomes crystalised subject to enforcement. All that Section 32 of the Act contemplates is the manner in which proceedings come to an end. It does not mean that when proceedings come to an end there is automatically a decree. The Act itself provides for a challenge under Section 34 or for correction under Section 33. It is only on exhausting these remedies resorted under the Act does the Award become enforceable or if there is no challenge, then on the expiry of the period for challenging the award considering Section 34. It is in these circumstances and knowing that a party cannot be left without a remedy before the Award is enforced, that the legislature in its wisdom has used the expression “before it is enforced”. Therefore, the power under Section 9 in all its force must be available to the extent applicable till the Award becomes enforceable. After the Award becomes enforceable the provisions of Order 21 of the Civil Procedure Code are applicable, as the Award becomes a decree and can be executed as a decree,
12. It is no doubt true that Section 9(ii) uses the expression “subject-matter of the arbitration agreement”, “securing the amount in dispute in the arbitration”, “the detention preservation or inspection of any property or things which is the subject-matter of the dispute in arbitration”, “interim injunction or the appointment of a receiver” and “such other interim measure of protection”. That does not mean that these expressions have to be read to mean that they are available only when the arbitral proceedings are going on or before the commencement of the arbitral proceedings. The section itself starts with the expression “A party may, before or during 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 a Court”. Thus Sections 9(i) and 9(ii) would be applicable even if the Award has been passed but before it becomes enforceable though the arbitral process terminates except in cases covered by Section 32(3). Parliament when it conferred power in the court under Section 9 to grant interim relief, recognized situations that will arise on the termination of the arbitral proceedings and the need to protect the subject matter of the dispute by using the expression till the Award can be enforced as the award till it becomes enforceable does not become a decree. To my mind therefore, the contention as sought to be ‘raised on behalf of the petitioners that the various clauses of Section 9 must be read as to provide for different situations before arbitration, during arbitration and after arbitration has to be rejected. The power to grant relief at all the stages is similar but depending on the nature of the relief sought.
13. Having said so, the question remains what reliefs are the petitioners, if at all entitled to. The court will have to bear in mind that the petition has been admitted. Once the petition is admitted the Award cannot be enforced considering Section 36 of the Act. However, from the Award itself, what is apparent is that the petitioner has extracted and transported lime stone on behalf of the respondent for which amounts have not yet been paid. This is not disputed. Even if there are disputes in terms of the contract which were the subject matter of the challenge to the Award, at least to the extent of the amount which are due and payable to the petitioners and which have been found to be due will have to be secured. Insofar as amounts by way of damages for breach, though there is an Award yet there is still no “debt” as the amount awarded will become a “debt” only on challenge to the Award being rejected. There was also no interim measure to deposit the amount during the pendency of the proceedings. The language used in Section 9(ii) is an interim measure of protection, if it is money then to secure the amount in dispute. Considering the affidavit of 18-7-2001 of Mr. P. Raghuraj, the Director of the petitioners respondents will have to be called upon to secure the petitioner by furnishing a bank guarantee.
14. In the light of that the respondents to furnish a Bank Guarantee in the name of Prothonotary and Senior Master for an amount of Rs. One Crore and Fifty Lakhs (Rs. 1,50,00,000/-) within 12 weeks from today. It is further directed that the said Bank Guarantee will be kept alive till the hearing and final disposal of the petition and for the period of 8 weeks thereafter and in terms of the directions for Bank Guarantee issued in Arbitration Petition No. 392 of 2001.
15. Parties/Authorities to act on the ordinary copy of this order duly authenticated by the Associate/Court Stenographer of this Court.