ESSAR HOUSE PRIVATE LIMITEDversusARCELLOR MITTAL NIPPON STEEL INDIA LIMITED

                          [2022] 11 S.C.R. 1001                            1001


                ESSAR HOUSE PRIVATE LIMITED                                A
                                   v.
     ARCELLOR MITTAL NIPPON STEEL INDIA LIMITED
                   (Civil Appeal No. 6574 of 2022)
                       SEPTEMBER 14, 2022                                  B
       [INDIRA BANERJEE AND A.S. BOPANNA, JJ.]
       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
                                                                           C
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         D
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
                                                                           E
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        F
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,
                                                                           G
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                    H
                                  1001
1002            SUPREME COURT REPORTS                        [2022] 11 S.C.R.


 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
 B
       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
 C     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.
 D          Arbitration and Conciliation Act, 1996 – s.9 –Power of Court
       – Scope of– Discussed– Code of Civil Procedure, 1908.
             Dismissing the appeals, the Court
             HELD: 1.1 Obligations under a contract cannot be assigned,
       without consent of the counterparty. In any case, novation of
 E     contract or set off is not allowed in respect of a corporate entity
       undergoing CIRP without the consent of the Resolution
       Professional. Section 14 of the IBC bars action to foreclose,
       recover or enforce any security interest created by a Corporate
       Debtor undergoing CIRP. Admittedly, the CIRP of Essar Steel
 F     commenced on 2nd August 2017 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
 G     CIRP. [Paras 33-36][1011-E; G-H; 1012-A-B]
             Citibank N.A. v. Standard Chartered Bank &Ors. (2004)
             1 SCC 12 : [2003] 4 Suppl. SCR 489; Khardah
             Company Ltd. v. Raymon& Co. (India) Pvt. Ltd. (1963)
             3 SCR 183 – relied on.
 H
  ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                      1003
           NIPPON STEEL INDIA LIMITED

      1.2 In deciding a petition under Section 9 of the Arbitration   A
Act, the Court cannot ignore the basic principles of the CPC. At
the same time, the power 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
Arbitration Act, the Court is not strictly bound by the provisions
                                                                      B
of the CPC. While it is true that the power under Section 9 of the
Arbitration Act should not ordinarily be exercised ignoring the
basic principles of procedural law as laid down in the CPC, the
technicalities of CPC cannot prevent the Court from securing
the ends of justice. It is well settled that procedural safeguards,
meant to advance the cause of justice cannot be interpreted in        C
such manner, as would defeat justice. Besides the specific power
of securing the amount in dispute, the Courts have been
empowered to pass any interim measure of protection, keeping
in view the purpose of the proceedings before it. The said
provision confers a residuary power on the Court to pass such
                                                                      D
other interim measures of protection as may appear to be just
and convenient. Many High Courts have also proceeded on the
principle that the powers of a Court under Section 9 of the
Arbitration Act are wider than the powers under the provisions
of the CPC. [Paras 39-43][1012-F-H; 1013-A-B]
      Ajay Singh &Ors. v. Kal Airways Private Limited and             E
      Ors (2017) SCC Online Del 8934; Jagdish Ahuja &
      Anr. v. Cupino Limited 2020 SCC Online Bom 849;
      Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. &Anr.
      2021 SCC Online Bom 75; Srei Infrastructure Finance
      Limited v. M/s. Ravi Udyog Pvt. Ltd & Anr. A.P. No.             F
      522 of 2008 – approved.
      1.3 Section 9 of the Arbitration Act confers wide power on
the Court to pass orders securing the amount in dispute in
arbitration, whether before the commencement of the arbitral
proceedings, during the arbitral proceedings or at any time after     G
making of the arbitral award, but before its enforcement in
accordance with Section 36 of the Arbitration Act. All that the
Court is required to see is, whether the applicant for interim
measure has a good prima facie case, whether the balance of

                                                                      H
1004            SUPREME COURT REPORTS                      [2022] 11 S.C.R.


 A     convenience is in favour of interim relief as prayed for being
       granted and whether the applicant has approached the court with
       reasonable expedition. 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 under Section 9 of the
       Arbitration Act should not withhold relief on the mere technicality
 B
       of absence of averments, incorporating the grounds for attachment
       before judgment under Order 38 Rule 5 of the 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 under Section
 C     9 of the Arbitration Act. A strong possibility of diminution of assets
       would suffice. To assess the balance of convenience, the Court is
       required to examine and weigh the consequences of refusal of
       interim relief to the applicant for interim relief in case of success
       in the proceedings, against the consequence of grant of the
       interim relief to the opponent in case the proceedings should
 D
       ultimately fail. It is not in dispute that a sum of about Rs.35 crores
       odd was paid by Essar Steel to Essar House Private and Rs.47
       crores odd to Essar Services, being the appellants in the
       respective appeals, by way of security deposit which is a
       refundable security deposit. Prima facie, the refundable security
 E     deposit is not being released to Arcellor 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. The
       Division Bench considered this contention of the Appellant. No
       infirmity in the well-reasoned judgment and order of the Division
 F
       Bench. [Paras 48-53][1017-B-H; 1018-A-B; 1019-B]
              Committee of Creditors of Essar Steel India through
              Authorised Signatory v. Satish Kumar Gupta &Ors.
              (2020) 8 SCC 531 : [2019] 16 SCR 275; Raman Tech.
              & Process Engg. Co. &Anr. v. Solanki Traders (2008)
 G            2 SCC 302 : [2007] 12 SCR 409 – referred to.
                                Case Law Reference
       [2019] 16 SCR 275                 referred to             Para 21
       [2007] 12 SCR 409                 referred to             Para 30
       [2003] 4 Suppl. SCR 489         relied on               Para 32
 H
      ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                         1005
               NIPPON STEEL INDIA LIMITED

      CIVIL APPELLATE JURISDICTION : Civil Appeal No.6574                    A
of 2022.
       From the Judgment and Order dated 01.02.2021 of the High Court
of Judicature at Bombay in Commercial Arbitration Appeal (L) No.1022
of 2021 in Comm. Arbitration Petition (L) No.6602 of 2020.
        With                                                                 B

        Civil Appeal No.6575 of 2022.
      Shyam Divan, Sajan Poovayya, Sr. Advs., Mahesh Agarwal, Rishi
Agrawala, Rishabh Parikh, S. Sahil Reddy, E. C. Agrawala, Advs. for
the Appellant.                                                               C
       Neeraj Kishan Kaul, Sr. Adv., Siddhant Kant, Avishkar Singhvi,
Ms. Misha, Ms. Prabh Simran Kaur, Deepak Joshi, S. S. Shroff, Advs.
for the Respondent.
        The Judgment of the Court was delivered by
                                                                             D
        INDIRA BANERJEE, J.
        Leave granted.
       2. These appeals are against a common judgment and order dated
 st
1 February 2021 passed by a Division Bench (Commercial Appellate
Division) of High Court of Judicature at Bombay, dismissing the appeal       E
being Commercial Arbitration Appeal (L) No. 1022 of 2021 filed by the
Appellant in the Civil Appeal arising out of SLP (C) No.3187 of 2021,
Essar House Private Limited, hereinafter referred to as “Essar House
Private”, under Section 37 of the Arbitration and Conciliation Act, 1996,
hereinafter referred to as the “Arbitration Act” and confirming an order
dated 10th December 2020 passed by the Commercial Division (Single           F
Bench) of the High Court allowing an application filed by the Respondent-
Arcellor Mittal Nippon Steel India Limited, hereinafter referred to as
the “Arcellor”, under Section 9 of the Arbitration Act and directing Essar
House Private to deposit an amount of Rs.35.5 crores with the
Prothonotary and Senior Master of the High Court or, in the alternative,     G
to furnish bank guarantee of any nationalised bank for the entire amount
along with interest thereon.
      3. By the impugned judgment and order, the Division Bench has
also dismissed the appeal being Commercial Arbitration Appeal (L)
No.1023 of 2021, filed by the Appellant in the Civil Appeal arising out of   H
1006            SUPREME COURT REPORTS                        [2022] 11 S.C.R.


 A     SLP (C) No.3351 of 2021, Essar Services India Private Limited,
       hereinafter referred to as “Essar Services”, and confirming an order
       dated 10th December 2020 passed by the Commercial Division (Single
       Bench) of the High Court, allowing an application by Arcellor against
       Essar Services and directing Essar Services to deposit Rs.47.41 crores
       with the Prothonotary and Senior Master of the High Court or, in the
 B
       alternative, furnish Bank Guarantee of any nationalised bank for the
       entire amount along with interest thereon.
              4. Essar Services is engaged in providing services of accounting,
       account related services, review, research etc. Essar Services is a part
       of the Essar Group of Companies.
 C
             5. On or about 24th January 2012, Essar Services and Essar Steel
       India Limited, hereinafter referred to as “Essar Steel” entered into a
       Support Services Agreement, whereby Essar Services was to provide
       accounting and other services to Essar Steel.

 D           6. On 15th May 2014, Essar Services entered into an Amended
       and Restated Support Services Agreement with Essar Steel. Under
       Clause 3.2 of the said Amended and Restated Support Services
       Agreement, Essar Steel was required to deposit a sum of Rs.73 crores
       as security deposit. Essar Steel deposited a total sum of Rs.47.41 crores
       with Essar Services as security deposit in terms of the Support Services
 E     Agreement. Further, Essar Steel had to pay a sum of Rs.6,38,75,000/-
       per month to Essar Services on account of charges for the services
       rendered by Essar Services to Essar Steel.
              7. The Support Services were discontinued for the period from
       January 2016 to March 2016, but restored after some adjustments/
 F     variations in charges, and an inter-corporate arrangement between Essar
       Steel, Essar Services and Equinox Business Park Private Limited,
       hereinafter referred to as the “Equinox”.
             8. Essar House Private, a company registered under the Companies
       Act, 1956, is engaged in the business of dealing in real estate. Essar
 G     House Private is the owner of the building Essar House, situated at
       Keshavrao Khadye Marg, Opposite Race Course, Mahalaxmi, Mumbai-
       400034.
              9. On or about 1st April 2016, Essar House Private entered into an
       agreement styled as “Rental Agreement” with Essar Steel, under which
 H     the ground floor, Podium and 20 upper floors in Essar House, was let out
  ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                                1007
  NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

to Essar Steel on leave and license basis, for a period of 36 months            A
commencing on 1st April 2016, at a monthly rent of Rs.78,40,000/-. In
terms of the aforesaid Rental Agreement, Essar Steel was to pay an
amount of Rs.25.80 crores to Essar House Private as interest free
refundable security deposit.
       10. Essar House Private was a group company of Essar Steel               B
until 2019. Many of the group companies have/had credit transactions
with HDFC Bank. It is submitted that the lenders of Essar Steel started
realising the dues of Essar Steel to lenders from the group companies.
Equinox is another group company of Essar Steel. Equinox on the
instructions of Essar Steel, made a payment of Rs.60.95 crores to HDFC
bank in discharge of the financial liabilities of Essar Steel to the bank. It   C
appears that HDFC Bank granted a loan of Rs.26,00,00,000/- (Rupees
twenty six crores only) to Marvel Mines and Minerals Private Limited,
hereinafter referred to as “Marvel Mines”. The said amount has
apparently been appropriated towards dues of the Essar Steel of HDFC
Bank.                                                                           D
      11. By an email dated 26th April 2017, Essar Steel acknowledged
that HDFC Bank had disbursed a loan of Rs.26 crores to Marvel Mines,
of which Rs.26 crores had been appropriated towards term loan
recoveries.
       12. It is the case of the Appellant that on the instructions of Essar    E
Steel and on behalf of Essar Steel, Equinox made payments to HDFC
Bank from time to time in discharge of debts due from Essar Steel to
Equinox. As on 31st March 2018, the total dues payable by the Essar
Steel to Equinox was Rs.74,84,39,302/- (Rupees seventy four crores,
eighty four lacs, thirty nine thousand, three hundred and two only)             F
inclusive of interest.
      13. On or about 2nd August 2017, the Standard Chartered Bank
and the State Bank of India jointly filed a petition under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of the
Corporate Insolvency Resolution Process (CIRP) against Essar Steel in           G
the Ahmedabad Bench of the National Company Law Tribunal (NCLT).
On 14th August 2017, Essar House Private filed its claim against Essar
Steel with the Resolution Professional appointed for Essar Steel.
      14. On 17th September 2018, Essar Steel entered into an agreement,
hereinafter referred to as the “Business Centre Agreement” in terms
                                                                                H
1008             SUPREME COURT REPORTS                          [2022] 11 S.C.R.


 A     whereof Essar Steel was allowed to use six floors of the Essar House,
       i.e., 10 th, 12 th, 13 th, 15 th, 16 th and 17 th floor at a monthly rent of
       Rs.1,78,80,000/- (Rupees one crore seventy eight lacs and eighty thousand
       only).
             15. Under the said agreement, Essar Steel was required to make
 B     a security deposit of Rs.35,51,89,875/- (Rupees thirty five crores, fifty
       one lacs, eighty nine thousand, eight hundred and seventy five only).
       However, out of Rs.35,51,89,875/-, the security deposit of
       Rs.25,80,00,000/- paid by the Essar Steel under the Rental Agreement
       was adjusted towards the security deposit payable to Essar House Private
       under the Business Centre Agreement.
 C
              16. By a letter dated 17th September 2018, Essar Infrastructure
       Services Private Limited claimed that it had transferred the balance
       security deposit of Rs.9,71,89,875/- (Rupees nine crores, seventy one
       lacs, eighty nine thousand, eight hundred and seventy five only) to Essar
       House Private.
 D
             17. In the meanwhile, on 16th August 2017, Essar Services filed a
       proof of claim as an Operational Creditor in respect of unpaid invoices
       under the Support Services Agreement, with the Resolution Professional
       of Essar Steel.

 E           18. Essar Services and Essar Steel mutually reconciled their
       accounts, in March 2018, acknowledging that Rs.47,41,00,000/- was paid
       to Essar Services as security deposit and sum of Rs.23,21,93,750/- was
       payable by Essar Steel to Essar Services.
              19. Sometime in 2018-19, Equinox allegedly assigned its receivable
 F     from Essar Steel to one Edwell Infrastructure Hazira Limited, hereinafter
       referred to as “Edwell”, to whom Essar Steel had owed an aggregate
       amount of Rs.88,13,03,623/- inclusive of interest as on November 2019.
       Later in 2019, the obligation of Essar Services to make payment of
       Rs.47.41 crores to Essar Steel was novated to Edwell and it was agreed
       that payment would be made to Edwell.
 G
             20. Arcellor as resolution applicant submitted a Resolution Plan in
       respect of Essar Steel. The said Resolution Plan was approved by the
       Adjudicating Authority (NCLT), Ahmedabad Bench by an order dated
       8th March 2019. By an order dated 4th June 2019, the Appellate Tribunal
       (NCLAT) confirmed the order dated 8th March 2019 of Adjudicating
 H     Authority.
     ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                           1009
     NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

       21. The Resolution Plan submitted by Arcellor in respect of Essar      A
Steel was approved by this Court in Committee of Creditors of Essar
Steel India through Authorised Signatory v. Satish Kumar Gupta &
Ors. 1
       22. On 27th November 2019, Essar House Private sent an email
to Arcellor stating that the Business Centre Agreement as extended            B
was expiring on 30th November 2019 and called upon Arcellor to vacate
Essar House by 15th December 2019. On 15th December 2019, Arcellor
vacated Essar House. On 16th December 2019, Arcellor took over Essar
Steel pursuant to the judgment dated 15th November 2019 of this Court.
       23. By an email dated 11th January 2020, Arcellor called upon the      C
Essar House Private to refund the interest free security deposit amounting
to Rs.35,51,89,875/-. The email was followed by a reminder email dated
19th January 2020 and more emails.
       24. On 17th June 2020, Arcellor sent a legal notice to Essar House
Private calling upon the Essar House Private to refund the security deposit   D
to Arcellor within seven days along with interest.
       25. By an email dated 27th June 2020, Essar House Private
acknowledged that Essar House Private had received security deposit
of Rs.25,80,00,000/- from Essar Steel, but contended that Essar House
Private had taken over loan of Rs.26 crores due from Essar Steel to           E
Marvel Mines and had adjusted the same against the security deposit
kept by Essar Steel with Essar House Private. The balance amount of
Rs.9,71,89,875/- had allegedly been paid by the Essar House Private to
Edwell Infrastructure in discharge of debt owed by Essar Steel to Edwell
Infrastructure. There was, therefore, no security deposit left to be
refunded by the Essar House Private to the Arcellor.                          F
      26. On 17th November 2020, Arcellor filed an application under
Section 9 of the Arbitration Act being Commercial Arbitration Petition
(L) No. 6602 of 2020 in the Commercial Division of the High Court of
Judicature at Bombay seeking orders directing the Essar House Private
to deposit Rs.35,51,89,875/- with the Prothonotary and Senior Master of       G
the High Court. The said application has been allowed by the Single
Bench of the High Court. An appeal being Arbitration Appeal (L) No.1022
of 2021 filed against the order of the Single Bench has been dismissed
1
    (2020) 8 SCC 531
                                                                              H
1010               SUPREME COURT REPORTS                        [2022] 11 S.C.R.


 A     by the Commercial Appellate Division of the High Court (Division Bench),
       by the judgment and order impugned.
               27. Arcellor paid Rs.4,75,06,260 to Essar Services on behalf of
       Essar Steel in settlement of its claims/dues. However, on 14th July 2020
       Arcellor addressed a legal notice to Essar Services for refund of Rs.47.41
 B     crores. Arcellor filed an application under Section 9 of the Arbitration
       Act being Commercial Arbitration Petition (L) No.6607 of 2020 in the
       Commercial Division of Bombay High Court seeking orders directing
       Essar Services to deposit Rs.47,41,00,000/- with the Prothonotary and
       Senior Master of the High Court.
               28. By an order dated 10th December 2020, the Commercial
 C     Division of the Bombay High Court, Single Bench directed Essar Services
       to deposit Rs.47.41 crores with the Prothonotary and Senior Master of
       the High Court. The Essar Services filed Arbitration Appeal No.1023 of
       2021 under Section 37 of the Arbitration Act read with Section 13 of the
       Commercial Courts Act in the Commercial Appellate Division of the
 D     High Court (Division Bench). The appeal has been dismissed by the
       judgment and order impugned.
               29. Mr. Shyam Divan, learned Senior Counsel appearing on behalf
       of the Appellants emphatically argued that no amount was due from
       Essar House Private or from Essar Services to Arcellor. The security
 E     deposits of Essar Steel with Essar House Private and Essar Services
       had at the instructions of Essar Steel, been discharged to liquidate dues
       of Essar Steel to creditors.
               30. Mr. Shyam Divan further argued that, to grant discretionary
       interim relief under Section 9 of the Arbitration Act, the Court would
       have to satisfy itself that the applicant for interim relief, i.e., Arcellor
 F     had a bona fide and strong claim and that Essar House Private and/or
       Essar Services was about to remove or dispose of whole or part of its
       property with intent to obstruct or delay the execution. Mr. Divan argued
       that the Court erred in not considering the requisites of Order XXXVIII,
       Rule 5 of the Code of Civil Procedure, 1908 (CPC) for grant of interim
 G     relief. In support of his submissions, Mr. Divan cited Raman Tech. &
       Process Engg. Co. & Anr. v. Solanki Traders2 where this Court held
       :-
                “5. The power under Order 38 Rule 5 CPC is a drastic and
                extraordinary power. Such power should not be exercised
       2
 H         (2008) 2 SCC 302
     ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                          1011
     NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

         mechanically or merely for the asking. It should be used            A
         sparingly and strictly in accordance with the Rule. The
         purpose of Order 38 Rule 5 is not to convert an unsecured
         debt into a secured debt..”
       31. Mr. Neeraj Kishan Kaul, learned Senior Counsel appearing
on behalf of the Respondent in the two appeals argued that the defence       B
of the Essar House Private/Essar Services of set off was a sham defence.
He argued that Essar House Private/Essar Services had not brought a
single document on record to support the assertions made by them. It is
well settled that novation of an agreement cannot be brought about by
the unilateral action of a party to an agreement. Consent of Arcellor
was necessary.                                                               C

       32. In Citibank N.A. v. Standard Chartered Bank & Ors.3
cited by Mr. Kaul, this Court held :-
         “47. Novatio, rescission or alteration of a contract under
         Section 62 of the Indian Contract Act can only be done with         D
         the agreement of both the parties of a contract. Both the parties
         have to agree to substitute the original contract with a new
         contract or rescind or alter. It cannot be done unilaterally...”
     33. In any case, obligations under a contract cannot be assigned,
without consent of the counterparty, as laid down by this Court in           E
Khardah Company Ltd. v. Raymon & Co. (India) Pvt. Ltd.4 :-
         “... An assignment of a contract might result by transfer either
         of the rights or of the obligations thereunder. But there is a
         well-recognised distinction between these two classes of
         assignments. As a rule obligations under a contract cannot be       F
         assigned except with the consent of the promisee, and when
         such consent is given, it is really a novation resulting in
         substitution of liabilities...”
       34. In any case, novation of contract or set off is not allowed in
respect of a corporate entity undergoing CIRP without the consent of         G
the Resolution Professional. Section 14 of the IBC bars action to
foreclose, recover or enforce any security interest created by a Corporate
Debtor undergoing CIRP.
3
    (2004) 1 SCC 12
4
    (1963) 3 SCR 183                                                         H
1012             SUPREME COURT REPORTS                          [2022] 11 S.C.R.


 A            35. Admittedly, the CIRP of Essar Steel commenced on 2nd August
       2017 when the Resolution Professional took over the management of
       the affairs of Essar Steel under the IBC.
              36. Even if any prior inter se arrangement existed between the
       parties, Essar Services could not have adjusted the security deposit payable
 B     to Essar Steel under the amended agreement against the alleged dues of
       Essar Steel to a third party during the CIRP.
              37. Mr. Shyam Divan argued that while deciding a Section 9
       application filed under the provisions of the Arbitration Act, the principles
       of the CPC are to be strictly followed. The principles enunciated by this
 C     Court in Raman Tech. & Process Engg. Co. & Anr. (supra) were
       required to be followed in letter and spirit.
             38. In this case, however, the High Court has taken note of the
       pleadings for invoking the principles of Order 38 Rule 5 CPC and
       observed:-
 D           “31. In our view, the paragraphs of the aforesaid pleadings
             of the respondent in arbitration petition filed under section 9
             filed by the respondent were sufficient to secure the claim of
             the respondent under section 9 of the Arbitration Act and to
             invoke the principles of Order 38 Rule 5 of the Code of Civil
 E           Procedure even if it is strictly made applicable to the facts of
             this case.”
              39. In deciding a petition under Section 9 of the Arbitration Act,
       the Court cannot ignore the basic principles of the CPC. At the same
       time, the power Court to grant relief is not curtailed by the rigours of
 F     every procedural provision in the CPC. In exercise of its powers to
       grant interim relief under Section 9 of the Arbitration Act, the Court is
       not strictly bound by the provisions of the CPC.
              40. While it is true that the power under Section 9 of the Arbitration
       Act should not ordinarily be exercised ignoring the basic principles of
       procedural law as laid down in the CPC, the technicalities of CPC cannot
 G
       prevent the Court from securing the ends of justice. It is well settled that
       procedural safeguards, meant to advance the cause of justice cannot be
       interpreted in such manner, as would defeat justice.
             41. Section 9 of the Arbitration Act provides that a party may
       apply to a Court for an interim measure or protection inter alia to (i)
 H
     ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                            1013
     NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

secure the amount in dispute in the arbitration; or (ii) such other interim    A
measure of protection as may appear to the Court to be just and
convenient, and the Court shall have the same power for making orders
as it has for the purpose of, and in relation to, any proceedings before it.
      42. As argued by Mr. Kaul, besides the specific power of securing
the amount in dispute, the Courts have been empowered to pass any              B
interim measure of protection, keeping in view the purpose of the
proceedings before it. The said provision confers a residuary power on
the Court to pass such other interim measures of protection as may
appear to be just and convenient.
       43. Many High Courts have also proceeded on theprinciple that           C
the powers of a Court under Section 9 of the Arbitration Act are wider
than the powers under the provisions of the CPC.
       44. In Ajay Singh & Ors. v. Kal Airways Private Limited and
Ors.5 the Delhi High Court correctly held :
         “...Section 9 grants wide powers to the courts in fashioning          D
         an appropriate interim order, is apparent from its text.
         Nevertheless, what the authorities stress is that the exercise
         of such power should be principled, premised on some known
         guidelines - therefore, the analogy of Orders 38 and 39.
         Equally, the court should not find itself unduly bound by the         E
         text of those provisions rather it is to follow the underlying
         principles...”
      45. In Jagdish Ahuja & Anr. v. Cupino Limited6, the Bombay
High Court correctly summarised the law in Paragraph 6 extracted
hereinbelow :-                                                                 F
         “6. As far as Section 9 of the Act is concerned, it cannot be
         said that this court, while considering a relief thereunder, is
         strictly bound by the provisions of Order 38 Rule 5. As held
         by our Courts, the scope of Section 9 of the Act is very broad;
         the court has a discretion to grant thereunder a wide range
                                                                               G
         of interim measures of protection “as may appear to the court
         to be just and convenient”, though such discretion has to be
         exercised judiciously and not arbitrarily. The court is, no
         doubt, guided by the principles which civil courts ordinarily
5
    (2017) SCC Online Del 8934
6
    2020 SCC Online Bom 849                                                    H
1014                 SUPREME COURT REPORTS                        [2022] 11 S.C.R.


 A                employ for considering interim relief, particularly, Order 39
                  Rules 1 and 2 and Order 38 Rule 5; the court, however, is not
                  unduly bound by their texts. As this court held in Nimbus
                  Communications Limited v. Board of Control for Cricket in
                  India(Per D.Y. Chandrachud J, as the learned Judge then
                  was), the court, whilst exercising power under Section 9, “must
 B
                  have due regard to the underlying purpose of the conferment
                  of the power under the court which is to promote the efficacy
                  of arbitration as a form of dispute resolution.” The learned
                  Judge further observed as follows:
                  “Just as on the one hand the exercise of the power under
 C                Section 9 cannot be carried out in an uncharted territory
                  ignoring the basic principles of procedural law contained in
                  the Code of Civil Procedure 1908, the rigors of every
                  procedural provision in the Code of Civil Procedure 1908
                  cannot be put into place to defeat the grant of relief which
 D                would subserve the paramount interests of justice. A balance
                  has to be drawn between the two considerations in the facts
                  of each case.”
              46. In Valentine Maritime Ltd. v. Kreuz Subsea Pte. Ltd. &
       Anr. , the High Court held :-
              7


 E                “88. ...It is now a well settled legal position, that at least with
                  respect to Chartered High Courts, the power to grant
                  temporary injunctions are not confined to the statutory
                  provisions alone. The Chartered High Courts had an inherent
                  power under the general equity jurisdiction to grant temporary
 F                injunctions independently of the provisions of the Code of
                  Civil Procedure, 1908...”
                   xxx                       xxx                      xxx
                  93. Insofar as judgment of Supreme Court in case of Raman
                  Tech. & Process Engg. Co.(supra) relied upon by Mr.
 G                Narichania, learned senior counsel for the VML is concerned,
                  it is held by the Hon’ble Supreme Court that merely having a
                  just or valid claim or a prima facie case, will not entitle the
                  plaintiff to an order of attachment before judgment, unless
                  he also establishes that the defendant is attempting to remove
       7
 H         2021 SCC Online Bom 75
ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                       1015
NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

  or dispose of his assets with the intention of defeating the       A
  decree that may be passed. The Hon’ble Supreme Court has
  further held that the purpose of Order 38 Rule 5 is not to
  convert an unsecured debt into a secured debt. The said
  judgment of the Hon’ble Supreme Court was not in respect of
  the powers of court under section 9 of the Arbitration and
                                                                     B
  Conciliation Act, 1996 but was in respect of power under
  Order 38 Rule 5 of the Code of Civil Procedure, 1908 in a
  suit. Even otherwise, the said judgment is distinguishable in
  the facts of this case.
    xxx                     xxx                     xxx
                                                                     C
  95. Insofar as judgment of this Court delivered by the Division
  Bench of this court in case of Nimbus Communications Limited
  v. Board of Control for Cricket in India (supra) relied upon
  by the learned senior counsel for the VML is concerned, this
  Court adverted to the judgment of Hon’ble Supreme Court in
  case of Adhunik Steels Ltd. v. Orissa Manganese and                D
  Minerals (P) Ltd., (2007) 7 SCC 125 and held that in view of
  the decision of the Supreme Court in case of Adhunik Steels
  Ltd., (supra) the view of the Division Bench in case of National
  Shipping Company of Saudi Arabia (supra) that the exercise
  of power under section 9(ii)(b) is not controlled by the           E
  provisions of the Code of Civil Procedure, 1908 cannot stand.
  This court in the said judgment of Nimbus Communications
  Limited (supra) held that the exercise of the power under
  section 9 of the Arbitration Act cannot be totally independent
  of the basic principles governing grant of interim injunction
  by the civil Court, at the same time, the Court when it decides    F
  the petition under section 9, must have due regard to the
  underlying purpose of the conferment of the power upon the
  Court which is to promote the efficacy of arbitration as a
  form of dispute resolution.
  96. This court held that just as on the one hand the exercise      G
  of the power under Section 9 cannot be carried out in an
  uncharted territory ignoring the basic principles of procedural
  law contained in the Code of Civil Procedure, 1908, the rigors
  of every procedural provision in the Code of Civil Procedure,
                                                                     H
1016                SUPREME COURT REPORTS                      [2022] 11 S.C.R.


 A               1908 cannot be put into place to defeat the grant of relief
                 which would sub-serve the paramount interests of justice. A
                 balance has to be drawn between the two considerations in
                 the facts of each case. The principles laid down in the Code
                 of Civil Procedure, 1908 for the grant of interlocutory
                 remedies must furnish a guide to the Court when it determines
 B
                 an application under Section 9 of the Arbitration and
                 Conciliation Act, 1996. The underlying basis of Order 38 Rule
                 5 therefore has to be borne in mind while deciding an
                 application under Section 9(ii)(b) of the Arbitration Act.

 C                xxx                      xxx                     xxx
                 104. The Division Bench of this court in case of Deccan
                 Chronicle Holdings Limited v. L & T Finance Ltd., 2013 SCC
                 OnLine Bom 1005 after adverting to the judgment of Supreme
                 Court in case of Adhunik Steel Ltd. (supra), judgment of the
 D               Division Bench of this court in case of Nimbus
                 Communications Ltd. (supra) held that the rigors of every
                 procedural provision of the Code of Civil Procedure cannot
                 be put into place to defeat the grant of relief which would
                 sub-serve the paramount interests of the justice. The object
                 of preserving the efficacy of arbitration as an effective form
 E               of dispute resolution must be duly fulfilled. This would
                 necessarily mean that in deciding an application under Section
                 9, the Court would while bearing in mind the fundamental
                 principles underlying the provisions of the Code of Civil
                 Procedure, at the same time, have the discretion to mould the
 F               relief in appropriate cases to secure the ends of justice and
                 to preserve the sanctity of the arbitral process. The Division
                 Bench of this Court in the said judgment did not interfere
                 with the order passed by the learned Single Judge directing
                 the parties to furnish security so as to secure the claim of the
                 original petitioner in arbitration by applying principles of
 G               Order 38 Rule 5 of the Code of Civil Procedure. …”
              47. In Srei Infrastructure Finance Limited v. M/s. Ravi Udyog
       Pvt. Ltd & Anr.8, the Calcutta High Court, speaking through one of us
       (Indira Banerjee, J.), as Judge of that Court, said :-
       8
 H         A.P. No. 522 of 2008
  ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                              1017
  NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

      “An application under section 9 of the Arbitration &                    A
      Conciliation Act, 1996 for interim relief is not to be judged
      as per the standards of a plaint in a suit. If the relevant facts
      pleaded, read with the documents annexed to the petition,
      warrant the grant of interim relief, interim relief ought not to
      be refused by recourse to technicalities...”
                                                                              B
       48. Section 9 of the Arbitration Act confers wide power on the
Court to pass orders securing the amount in dispute in arbitration, whether
before the commencement of the arbitral proceedings, during the arbitral
proceedings or at any time after making of the arbitral award, but before
its enforcement in accordance with Section 36 of the Arbitration Act.         C
All that the Court is required to see is, whether the applicant for interim
measure has a good prima facie case, whether the balance of
convenience is in favour of interim relief as prayed for being granted
and whether the applicant has approached the court with reasonable
expedition.
                                                                              D
      49. 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 under Section 9 of the Arbitration Act should not
withhold relief on the mere technicality of absence of averments,
incorporating the grounds for attachment before judgment under Order
38 Rule 5 of the CPC.                                                         E

       50. 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 under Section 9 of
the Arbitration Act. A strong possibility of diminution of assets would
suffice. To assess the balance of convenience, the Court is required to       F
examine and weigh the consequences of refusal of interim relief to the
applicant for interim relief in case of success in the proceedings, against
the consequence of grant of the interim relief to the opponent in case the
proceedings should ultimately fail.
                                                                              G
       51. It is not in dispute that a sum of about Rs.35 crores odd was
paid by Essar Steel to Essar House Private and Rs.47 crores odd to
Essar Services, being the appellants in the respective appeals, by way of
security deposit which is a refundable security deposit. Prima facie, the
refundable security deposit is not being released to Arcellor on the
purported ground of a convoluted series of internal arrangements between      H
1018            SUPREME COURT REPORTS                         [2022] 11 S.C.R.


 A     group companies for diversion of the security deposits towards liquidation
       of alleged dues of Essar Steel to third parties.
              52. The Division Bench considered this contention of the Appellant
       and rightly held :-

 B           “33. The affidavit of disclosure filed by the appellant on 21st
             January, 2021 annexed at Ex.B also clearly indicates that
             the appellant was heavily indebted and did not have asset
             other than the asset disclosed in the affidavit in reply.
               xxx                       xxx                      xxx
 C
             39. There is no substance in the submission made by the
             learned counsel for the appellant that since the appellant
             had already disclosed in the reply to the petition under section
             9 that there was only one asset in the hands of the appellant
             and the same was also mortgaged, learned single Judge could
 D           not have passed an order of deposit or to furnish a bank
             guarantee in lieu of the order of deposit under section 9 of
             the Arbitration Act. In our view, the Court has ample power
             under Section 9 to secure the claim of the applicant in
             arbitration. Merely because the appellant has disclosed
             before the learned Single Judge that it does not have any
 E
             asset other than one asset and that also is fully encumbered,
             that does not preclude the Court under Section 9 of the
             Arbitration Act to pass an equitable order by securing the
             claim of the applicant in arbitration by directing the opponent
             to deposit such amount to furnish a bank guarantee once
 F           having rendered a prima-facie finding that the applicant
             would have good chances of succeeding in the arbitration
             and if the claim made by the applicant is not secured, he would
             not be able to enjoy fruits of the arbitral award on its
             execution.
 G             xxx                       xxx                      xxx
             43. 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
 H
   ESSAR HOUSE PRIVATE LIMITED v. ARCELLOR MITTAL                            1019
   NIPPON STEEL INDIA LIMITED [INDIRA BANERJEE, J.]

       justice required to be exercised by the Court while exercising        A
       powers under section 9 of the Arbitration Act so as to secure
       the claim of the applicant in the arbitral proceedings though
       he may have prima-facie good chances of succeeding in
       arbitration.”
       53. We find no infirmity in the well-reasoned judgment and order      B
of the Division Bench. The appeals are, accordingly, dismissed.


Divya Pandey                                            Appeals dismissed.
(Assisted by : Deepak Panwar, LCRA)
                                                                             C




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