ESSAR HOUSE PRIVATE LIMITED versus ARCELLOR MITTAL NIPPON STEEL INDIA LIMITED

ESSAR HOUSE PRIVATE LIMITED versus ARCELLOR MITTAL NIPPON STEEL INDIA LIMITED

The Court held that Section 9 empowers courts to grant interim measures to secure amounts in dispute where the applicant shows a strong prima facie case, balance of convenience favors relief and the applicant has acted with reasonable expedition; procedural technicalities relating to Order 38 Rule 5 CPC do not automatically bar Section 9 relief, and novation or set-off of security deposits during an ongoing CIRP is impermissible without the Resolution Professional's consent, thus justifying the directed deposits or bank guarantees.

Parties
Appellant: Essar House Private Limited; Appellant: Essar Services India Private Limited; Respondent / Applicant Under Section 9: Arcellor Mittal Nippon Steel India Limited
Jurisdiction
India
Judgment Date
14 September 2022
Procedural Posture
Civil Appeal Under Section 37 of the Arbitration and Conciliation Act, 1996 Arising From Section 9 Applications / Judgment on Appeal (appeal Dismissed)
Outcome
Appeals dismissed; High Court Division Bench judgment and Single Bench orders affirmed
Legal Topics
Interim Relief Under Section 9, CIRP and Effect on Contracts/novation, Security Deposit and Set Off, Attachment Before Judgment (order 38 Rule 5 Cpc)
Arbitration and Conciliation Act, 1996 Insolvency and Bankruptcy Code, 2016 Code of Civil Procedure, 1908 Contract Law Interim Relief Under Section 9 CIRP and Effect on Contracts/novation Security Deposit and Set Off Attachment Before Judgment (order 38 Rule 5 Cpc)

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Parties

Essar House Private Limited

Appellant

Essar Services India Private Limited

Appellant

Arcellor Mittal Nippon Steel India Limited

Respondent / Applicant Under Section 9

Procedural Posture

Civil Appeal Under Section 37 of the Arbitration and Conciliation Act, 1996 Arising From Section 9 Applications / Judgment on Appeal (appeal Dismissed)

Legal Issues

  1. 1 Whether interim relief under Section 9 of the Arbitration Act can be granted despite absence of specific averments required by Order 38 Rule 5 CPC
  2. 2 Whether security deposits of the corporate debtor could be novated or set off during CIRP without consent of the Resolution Professional
  3. 3 Whether the appellants had a bona fide defence of set-off/novation negating the need for Section 9 relief

Ratio Decidendi

The Court held that Section 9 empowers courts to grant interim measures to secure amounts in dispute where the applicant shows a strong prima facie case, balance of convenience favors relief and the applicant has acted with reasonable expedition; procedural technicalities relating to Order 38 Rule 5 CPC do not automatically bar Section 9 relief, and novation or set-off of security deposits during an ongoing CIRP is impermissible without the Resolution Professional's consent, thus justifying the directed deposits or bank guarantees.

Court Disposition

Appeals dismissed; High Court Division Bench judgment and Single Bench orders affirmed

Orders

  • Order of the High Court directing Essar House Private Limited to deposit Rs.35,51,89,875 with the Prothonotary and Senior Master of the High Court or alternatively furnish a bank guarantee for the entire amount with interest upheld
  • Order of the High Court directing Essar Services India Private Limited to deposit Rs.47,41,00,000 with the Prothonotary and Senior Master of the High Court or alternatively furnish a bank guarantee for the entire amount with interest upheld