Jindal Saw Ltd v. M A Zahid Proprietor SMSK Mineral Trading Company

1. Ms. Rashmeet Kaur, learned counsel had entered appearance on behalf of caveator/Respondent on 21.02.2023.

2. Caveat stands discharged.

3. Present petition has been filed under Section 9 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘1996 Act’) seeking the following prayers:

KUMAR Location: the list of movable and immovable properties including the bank accounts and restrain the Respondent, its agents, associates, employees, successors, nominees, assigns and agents from dealing/creating third party right with the said immovable and movable assets;

Hon’ble Court to a sum of Rs.12,78,34,139/- (Rupees Twelve Crores Seventy Eight Lacs Thirty Four Thousand One Hundred Thirty Nine Only) in terms of the award dated 02.11.2022 passed by the Ld. Arbitrator or in the alternative, furnish a bank guarantee of equivalent amount, to enable the Petitioner to secure the said awarded amount of Rs.12,78,34,139/-(Rupees Twelve Crores Seventy Eight Lacs Thirty Four Thousand One Hundred Thirty Nine Only);

4. Petitioner is a Company incorporated under the Companies Act, 1956 engaged in business of manufacture of ductile iron/saw/seamless pipes at its various manufacturing plants. Respondent is a sole proprietor of M/s. SMSK Mineral Trading Company and had approached the Petitioner for supply of iron ore (raw material). Petitioner placed purchase orders on the Respondent and remitted payments in advance from time to time and according to the Petitioner total sum of Rs.16,11,60,000/- was paid to the Respondent. However, against the receipt of the money from the Petitioner, Respondent supplied iron ore only for a sum of Rs.8,94,42,415/-. Hence, a balance sum of Rs. 7,17,17,585/-, is admittedly outstanding from the Respondent. On 31.08.2011, Respondent had assured that he would pay the balance amount and in furtherance of this assurance a KUMAR Location: settlement deed was executed between the parties along with an affidavit dated 22.07.2013, wherein Respondent admitted and acknowledged the dues and undertook to pay the same immediately after vacation of the order of attachment of his bank account.

5. When the Respondent did not fulfill his promises and assurances, Petitioner invoked the arbitration agreement existing between the parties, in the year 2016. During the arbitration, Petitioner learnt that Respondent was alienating his properties. The appointment of the Arbitrator was however challenged by the Respondent under Section 16 of the 1996 Act. The application was allowed by the Arbitral Tribunal and proceedings were closed on 22.09.2017.

6. Petitioner thereafter filed Arb. P. No. 685/2017 in this Court under Section 11(5) for appointment of an Arbitrator and vide order dated 20.03.2018 a sole Arbitrator was appointed. Respondent again filed an application under Section 16 of the 1996 Act on the ground that the claims were premature and there were no arbitrable disputes. The learned Arbitrator disposed of the claims as premature on 15.10.2019, however, in Arb. A. (COMM) No. 10/2020 under Section 37(2)(b) of the 1996 Act, the order was set aside. Respondent agreed for the matter to be remanded back to the Arbitrator and on 18.04.2022, learned Arbitrator entered upon reference. After conclusion of evidence, learned Arbitrator passed the award dated 02.11.2022, awarding a sum of Rs.7,17,17,585/- in favour of the Petitioner along with interest @12% p.a. from 23.05.2016 till 90 days of the award and @ 16% p.a. from expiry of 90 days till date of payment/realisation along with costs of proceedings quantified at Rs.15 lacs.

7. By the present petition, Petitioner seeks interim protection restraining the Respondent from alienating the properties mentioned in the petition, amongst other reliefs. It is the case of the Petitioner that during the pendency of the arbitration proceedings on 27.05.2022, Respondent had informed the Arbitral Tribunal that he had no intention of travelling abroad and would do so only with advance intimation to the Petitioner and Arbitral Tribunal and gave an undertaking that the assets mentioned in the affidavit dated 25.05.2022, which were unencumbered and in physical possession of the Respondent shall not be alienated or encumbered or parted with till one month after the decision of the Arbitral Tribunal. The learned Arbitrator had accepted the undertaking of the Respondent and bound him down. However, since the undertaking was only for a period of one month after the passing of the award and the award was passed on 02.11.2022, Petitioner had no option but to file the present petition to restrain the Respondent from alienating the properties. Case of the Petitioner is that Respondent has alienated 18 out of 25 properties and there is an imminent danger of alienation of the remaining properties.

8. By order dated 01.12.2022, the Court granted interim protection to the Petitioner restraining the Respondent from alienating the properties enumerated in paragraph 14 of the present petition. Court also directed the Petitioner to take recourse to appropriate legal remedy for enforcement of the arbitral award.

9. Learned counsels for the parties inform the Court that Petitioner has now filed an enforcement petition before the District and Sessions Court, Ballari bearing Filing No. 280/2023, Registration No. 275/2023 and CNR No. KABI09-000409-2023.

10. Since Petitioner has taken recourse to an appropriate remedy to seek enforcement of the arbitral award, no purpose will be achieved in keeping the present petition pending. At the same time, it is imperative that the interim order granted by this Court on 01.12.2022 is continued, in view of the award rendered in favour of the Petitioner and the protection granted to the Petitioner during the pendency of the arbitral proceedings, which was to continue till one month after the passing of the award, so as to secure the awarded amount. This becomes necessary in view of the fact that Respondent has alienated substantial part of the assets and if the restraint order is not continued, the award would remain a paper award and Petitioner may not be able to enjoy the fruits of the arbitral proceedings, which culminated in its favour. In this context, I may refer to the relevant part of the interim order dated 27.05.2022 passed by the learned Arbitrator, which is as follows:-