Introduction

It is a landmark judgment of Section 9 of the Arbitration & Conciliation Act, 1996 (A&C Act).

Facts

• Essar Steel faced insolvency proceedings in 2017, initiated by Standard Chartered Bank and State Bank of India.
  • Essar House Private, a real estate firm linked to Essar Steel, leased portions of Essar House to Essar Steel from April 2016 at a monthly rent of Rs.78,40,000.
• Essar Steel's financial obligations extended to group companies, including Equinox, which settled a debt of Rs. 60.95 crores for Essar Steel with HDFC Bank.
• In 2019, the defendant Arcelor Mittal Nippon Steel India Limited’s (defendant) Resolution Plan for Essar Steel was approved by the National Company Law Tribunal, with confirmation by the National Company Law Appellate Tribunal in June 2019.
• The Resolution Plan for Essar Steel, submitted by the defendant and approved by NCLAT, marked the beginning of a dispute between Arcelor and Essar House Private.
• Defendant claimed Essar House Private acknowledged receiving Rs. 25,80,00,000 from Essar Steel but contended it had offset this against a loan taken over from Marvel Mines, leaving no refundable security deposit.
• The defendant filed a petition under Section 9 of the A&C Act in November 2020, directing Essar House Private to deposit the disputed amount.
• The Single Bench allowed the petition, and the subsequent appeal was dismissed by the Commercial Appellate Division.
• In a separate instance, Arcelor paid Rs. 4,75,06,260 to Essar Services on behalf of Essar Steel and later sought a refund of Rs. 47.41 crores.
• Arcelor filed another Section 9 application, leading to a court directive for Essar Services to deposit the disputed amount.
• The Bombay High Court allowed the application of the defendant and asked Essar Services to Deposit Interim amount.
• Essar Services approached the Supreme Court stating that HC erred in not considering the requisites of Order XXXVIII, Rule 5 of the Code of Civil Procedure, 1908 (CPC) for grant of interim relief.

Issue Involved

• Whether the applicant for interim measure under Section 9 of the A&C Act has a good prima facie case?

Observation

• The SC held that in deciding a petition under Section 9 of the A&C Act the Court cannot ignore the basic principles of the CPC and at the same time, the power of the Court to grant relief is not curtailed by the rigours of every procedural provision in the CPC.
• In exercise of its powers to grant interim relief under Section 9 of the A&C Act the Court is not strictly bound by the provisions of the CPC.
• The court said that it is well settled that procedural safeguards meant to advance the cause of justice cannot be interpreted in such a manner as would defeat justice.

Conclusion

• The SC dismissed the appeal of Essar Services stating that if a prima facie case occurs to apply under Section 9 of the A&C Act court should not withhold relief on the mere technicality of absence of averments.