The Supreme Court today heard a plea of Essar House Private Limited and Essar Steel India Limited, who allegedly did not refund back the security amount to Arcellor Mittal Nippon Steel India Ltd, even after ArcellorMittal Nippon Steel vacated the premises and handed over peaceful possession back to Essar Steel India Limited.
The Petitioners failed to comply with the order of Bombay High Court as the Bombay High Court while dismissing the appeals filed by Essar House and Essar Steel ordered them to refund back the amount or to furnish bank guarantee within the four weeks from today.
The Bench of Justice Indira Banerjee and Justice A.S. Bopanna granted protection in favour of Essar House and Essar steel that no coercive action should be taken against them and further adjourned the proceedings which is pending before Bombay High Court.
Essar House Private Limited and Essar Steel India Limited preferred to file appeal before apex court against the judgment of Bombay High Court, wherein their appeals got dismissed.
Sr. Adv. Neeraj Kishan Kaul appeared for both Essar House Private Limited and Essar Steel India Limited made submissions that – ‘ It is wrong to say I have committedcontempt immediately and false to state that I have not deposited money & false allegation that I have received money and siphoned it of.
Further Senior Counsel Kaul reiterated section 9 of Arbitration Act.
In 2014, Essar Steel India Limited disbursed an amount of Rs.47,41,00,000/- towards the security deposit to the appellant. They say another company called Equinox which is a group company of Essar, & both Essar Steel & Essar House at different point of time in diff transaction have taken loans from HDFC Bank & Essar steel paid the loan to HDFC bank which Essar was supposed to pay, contentions of Essar House and Essar Steel.
On behalf of Arcelor Mittal Nippon Steel India Pvt. Ltd made submission that allthese occurred prior to the initiation of CIRP and Essar Steel term loan recovery was of Rs. 28 Crores.
The counsel of Respondent further relied u pon judgment ofAdhunik Steels Ltd. vs. Orissa Manganese & Minerals (P) Ltd. (2007) 7 SCC 125 wherein the Court held that under section 9(i) (ii) (b) of the Arbitration Act, the Court is empowered to pass interim measure to secure the amount in dispute in arbitration which may be in the form of bank guarantee or deposit of money in Court. Such powers of Court can be exercised not only in the hands of the parties to arbitration but also in the hands of third party who has to admittedly pay any amount to the party to the arbitration agreement by directing such third party to deposit the amount on behalf of a party to arbitration agreement in Court.
The Bombay High court, in its finding held that the Essar House and Essar Steel did not argue on merits and it was proved that the Petitioner did not pay back the security amount to Arcellor.
The contentions put by the Petitioners Company before Bombay High court that they had disclosed about not having the asset other than one asset which is fully encumbered, before Ld. Single Judge. The Bombay High Court held in this regard that nothing holds court under section 9 to pass equitable order by securing the claim of the Petitioners in arbitration by directing the opponent to deposit such amount to furnish a bank guarantee once having rendered a prima-facie finding that the Petitionerswould have good chances of succeeding in the arbitration and if the claim made by the Petitioners are not secured, he would not be able to enjoy fruits of the arbitral award on its execution.
In the impugned judgment of High court passed by Division Bench held that ‘If the Court is required to dismiss the petition under section 9 of the Arbitration Act on the ground that the opponent has no assets at all or the assets of the opponent are fully encumbered, it will be against the principles of equitable justice required to be exercised by the Court while exercising powers under section 9 of the Arbitration Act so as to secure the claim of the applicant/Petitionersin the arbitral proceedings though he may have prima-facie good chances of succeeding in arbitration.’
The Facts of the case are that on 1st April, 2016, Essar Steel India Limited entered into a Rental Agreement with the appellant to occupy the ground floor, podium and twenty upper floors at 11 Keshavrao Khadye Marg, Opp. Race Course, Mahalaxmi, Mumbai – 400 034 on leave and license basis. The said Essar Steel India Limited paid the Essar House an amount of Rs.25,80,00,000/- toward security deposit under the said Rental Agreement. On 2nd August, 2017, the Ahmedabad bench of the National Company Law Tribunal (NCLT) admitted the Company Petitions filed by Standard Chartered Bank and State Bank of India against Essar Steel India Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. 100% shareholding of Essar Steel India Limited was acquired by Arcelor Mittal India Pvt. Ltd. (AMIPL).
The contentions of Arcellor Mittal were that despite sending several mails regarding refund of security amount under said Business centre Agreement, the security payment was not paid by Essar Steel.
Thereafter, an application u/s 9 seeking interim relief was filed by Arcellor before Ld. Single Judge. Various interim measures wasgranted in favour of Arcellor.