1. Present appeal has been filed by the Appellant under Section 37(2) (b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') challenging an interim order dated 11.09.2019 passed by the Sole Arbitrator, whereby the Arbitrator while declining to pass an Interim Award has passed an order in the nature of an interim measure directing the Appellant to furnish a Bank Guarantee for an amount of Rs. 1,39,63,482/-.
2. Brief facts necessary for adjudication of the present appeal are that the Appellant which is a Public Limited Company had amalgamated with M/s. TASEC Limited, the original Respondent before the Arbitrator. M/s. TASEC Limited was a leading provider of Homeland Security Services to Corporates and Government and provided integrated solutions in Cyber, Physical and OT security areas in India. Respondent is an advisor for IT/telecom needs, including telephone systems, carrier services, voice/video/data networks, IP surveillance, internet services, etc. Appellant is the Respondent in the Arbitration Proceedings and is being referred to as Appellant hereinafter, while Respondent who is the Claimant before the Arbitrator is being referred to as Respondent hereinafter.
3. North Central Railway (NCR) floated a tender in 2013 for supply, installation, testing and commissioning of Integrated Security System consisting of video surveillance system, personal and baggage screening system and access control system at Allahabad junction, Kanpur Central, Agra Cantonment, Mathura Junction and Jhansi Junction stations. Erstwhile Respondent M/s. TASEC submitted its bid on 31.03.2014 to the NCR to carry out work, under its earlier name M/s. Avana Integrated Systems Limited and NCR accepted the Bid vide its Acceptance Letter dated 22.04.2014 and awarded the Contract.
4. Pursuant to the contract, the Appellant entered into a back to back arrangement with the Respondent herein. Appellant issued a Purchase Order dated 18.06.2014 to carry out work for an amount of Rs. 11,17,00,000/-. As per Clause 3.2 of the General Terms and Conditions of the Purchase Order Respondent was obliged to complete the work and hand over the overall project on or before 22.09.2014.
5. Disputes arose between the parties on account of the Appellant making only partial payments to the Respondent. The matter was referred to a Sole Arbitrator in terms of the Arbitration Clause in the Contract. Respondent filed Statement of Claim before the Arbitrator and claimed that it had duly completed the work and had raised invoices for Rs. 3,93,56,499/-, on the Appellant, while the Appellant claimed that Respondent had completed only part of the work and, therefore, it was liable to make only part payment. Appellant took the stand that Respondent had raised invoices towards supply, installation, testing and commissioning of certain products, but it had failed to perform the installation and commissioning, due to which Appellant had to engage third-party vendors for completing the balance work. Appellant, by way of Counterclaim, claimed Rs. 3,33,02,101/- on account of additional amount incurred by it to complete significant portion of the work under the purchase order.
6. By an order dated 03.05.2019, the Arbitrator directed the Appellant to file a statement showing the payments allegedly due to the Respondent, in relation to the invoices raised by it. Appellant, in compliance with the order, filed a Statement of Account showing the details of the invoices raised by the Respondent and the payments made by the Appellant. The Statement reflected a difference in the amounts sought by the Respondent and the amount paid by the Appellant as "net balance". On the basis of the said Statement of Accounts, Respondent filed an application seeking payment of Rs. 1,39,63,482/- shown as 'net balance' as an Interim Award. Appellant filed its reply to the application.
7. Vide order dated 11.09.2019, learned Arbitrator rejected the prayer for Interim Award, but passed an order directing the Appellant to furnish a Bank Guarantee for the said amount to the satisfaction of the Coordinator DIAC, within one month to secure the interest of the Respondent and directed the parties to file their evidence and listed the matter for evidence on the basis of issues framed by it.
8. It is this order which is impugned by the Appellant in the present appeal before this Court.
9. Learned counsel for the Appellant firstly contends that the Statement of Account is mainly a reflection of the financial statement of the invoices raised by the Respondent and the payments made by the Appellant and the 'net balance' indicated therein is only a mathematical difference between the two amounts. Appellant in its Statement of Defence, categorically disputed that any such amount was payable by the Appellant and the Arbitrator thus could not have treated the said amount to be an admitted liability. A net balance in a statement cannot be read or treated as an admission. Admission of liability has to be categorical, unequivocal and a conscious and deliberate act of a party, showing an intent of admitting the liability.
10. It is next contended that the Arbitrator has not considered the principles for passing an order in the nature of an interim measure. Respondent had not been able to establish a prima facie case in its favour. The only submission of the Respondent was that the Appellant had deducted tax on the entire amount mentioned in the invoices raised by it. It is argued that the Appellant under Section 194C of the Income Tax Act, 1961 was obliged to deduct tax as soon as the Appellant recorded an invoice in its Books of Accounts. Had the Appellant not deducted the TDS and deposited the same with the Income Tax Authorities, it would have been liable under the said Act. However, deduction of TDS cannot be construed as an admission of liability towards the Respondent.
11. Learned counsel further argues that Respondent never established that balance of convenience was in its favour and in fact it was the Respondent who had abandoned the work midway instead of completing the entire work under the Purchase Order. No case had been made out by the Respondent that there was any apprehension of irreparable harm being caused to it. Respondent did not establish or even aver that there was a fear that the Appellant would abscond or alienate its assets which would put the Respondent in a position where it would be unable to execute the Award in future in case it was in its favour. It is further argued that the Appellant is a leading Aerospace and Defence Company with a turnover of approximately Rs. 526.70 crores in the financial year 2018-2019. It is a 100% subsidiary of Tata Sons Ltd, the Principal Holding Company of the Tata Group and was established as their flagship Company to develop into an umbrella organisation in Defence and Aerospace Sector. Ministry of Defence, Government of India is a major customer of the Appellant, with which it has significant number of contracts.
12. It is next contended that the Respondent had moved an application seeking an Interim Award on the basis of an alleged admitted liability by the Appellant. The Arbitrator declined to grant the relief sought and therefore, should have dismissed the application. However, contrary to the settled principles of law, it passed an order in the nature of an interim measure as though it was an application under Section 17 of the Act and directed the Appellant to furnish a Bank Guarantee. The interim order has been granted without there even being an application under Section 17 of the Act setting out a prima facie case and showing a cause for irreparable loss to the Respondent. It is submitted that even assuming that the Arbitrator had the right to pass such an order, Impugned Order is in the nature of Attachment before Judgment and, that too, in a pure money claim, which was disputed by the Appellant. It is submitted that law on Attachment before Judgment is no longer res integra. Twin conditions have to be satisfied by a party claiming the relief viz. prima facie case and a reasonable apprehension that the other party is seeking to remove its assets to defeat the fruits of the ultimate Award in favour of the Applicant. None of the two conditions were satisfied by the Respondent herein.
13. It is further argued that the application filed by the Respondent was to be dealt with under Section 31(6) of the Act which deals with the power of the Arbitral Tribunal to make an Interim Award. An order of securing the other party by way of an interim relief can only be granted when an application is made seeking such relief. In the present case, there was no application seeking relief of furnishing of Bank Guarantee or any other security. Since there was no such pleading or prayer, the Appellant did not have the opportunity to respond to the relief of furnishing a Bank Guarantee. On being given a chance to respond, Appellant would have shown that it was a financially sound Company and there was no fear that it would remove its assets to frustrate the Award. Moreover, the Arbitrator has completely erred in ignoring that not only was the claim of the Respondent disputed by the Appellant, but it also had raised a counterclaim and thus only after the evidence was led, liabilities could be ascertained.
14. Learning counsel for the Appellant has relied on the judgment of the Supreme Court in Raman Tech. & Process Engg. Co. and Anr. v. Solanki Traders : (2008) 2 SCC 302 and of this Court in BMW India Private Limited v. Libra Automotives Private Limited for the proposition that merely having a just and valid claim or even a prima facie case will not entitle a plaintiff to an order for Attachment before Judgment, unless he establishes that the defendant is attempting to remove or dispose his assets with the intent to defeat a decree that may be passed and equally well settled is the position that even where a Defendant is removing or disposing his assets an attachment order before judgment will not be issued till the Plaintiff is able to satisfy that it has a prima facie case. Learned counsel has also placed reliance on a judgment of this Court in Uppal Engg. Co. (P) LTD. v. Cimmco Birla LTD : 2005 (121) DLT 539 for the same proposition. Attention is also drawn to para 13 of the judgment where the Court has held that order of Attachment before Judgment is a drastic remedy and power must be exercised with utmost care and caution as it may ruin the reputation of parties against whom power is exercised. Court must act with utmost circumspection as this is an extraordinary relief.
15. Per contra, learned counsel for the Respondent contends that mere non-mentioning of Section 17 of the Act on the application was not enough to prevent the Tribunal from granting interim relief. Reliance is placed on the judgment of the Supreme Court in Pruthvirajsinh Nodhubha Jadeja (Dead) By Legal Representatives v. Jayeshkumar Chhakaddas Shah and Others : (2019) 9 SCC 533, 2019 SCC OnLine SC 1308, for the proposition that non-mentioning of correct provision or mentioning of incorrect provision is not fatal to the application if the power to pass such an order is available with the Court. An Arbitral Tribunal has the power to pass an order directing a party to furnish the Bank Guarantee as an interim measure to secure the opposite party. Therefore, non-mentioning of Section 17 of the Act was not fatal to the relief sought.
16. It is further argued that it is wrong for the Appellant to contend that the Impugned Order is in the nature of Attachment before Judgment. The order is simply an order granting interim relief of furnishing Bank Guarantee, till final disposal of the proceedings and that too on the basis of Statement of Account of the Appellant. It is not unusual or unprecedented for an Arbitrator to pass such an order to secure a Claimant during the proceedings and preserve the subject matter of the dispute. In any case, the amount is not being transferred to the Respondent and thus no prejudice is caused to the Appellant. It is submitted that it is wrong for the Appellant to argue that the claim for Interim Award was rejected. The Arbitrator instead of granting an Interim Award has simply modified the relief to furnish Bank Guarantee to the satisfaction of the DIAC.
17. Learned counsel for the Respondent further denies that the Respondent had abandoned the work as alleged by the Appellant. It was the Appellant who had failed to provide the layout and comply with other formalities which were required to complete the project and this is clearly reflected from the various emails exchanged between the parties.
18. Responding to the argument of the Appellant with regard to the procedure under the Income Tax Act, 1961, learned counsel for the Respondent argues that it is incorrect to state that deduction of TDS and its deposit with Income Tax Department does not confirm the liability of the Appellant. Reliance is placed on Section 129(1) of the Companies Act, 2013.
19. Reliance is also placed on Sections 133 and 143 of the Companies Act, 2013 to argue that there are certain set of principles and accounting standards as per which if a party deducts TDS and deposits and issues certificates then it is clear that the party has booked invoices and credited the amount against them as liability which is payable to the supplier.
20. It is argued by the Counsel that Respondent was able to establish a prima facie case in its favour as well as irreparable harm. Respondent is a MSME Company registered under SSI and is suffering on account of non-payment of its outstanding dues by the Appellant. Looking at the facts and the admission by the Appellant, the Arbitrator was of the view that the Respondent was required to be secured during the Arbitration Proceedings and thus passed the Impugned Order. The order calls for no interference by this Court in the present proceedings as there is no perversity or legal infirmity in the Impugned Order. For this proposition of law, reliance is placed on the judgment in the case of SPA Agencies (India) Private Ltd., Chennai v. Harish Rawtani and a judgment of this Court in BPL Limited v. Morgan Securities & Credits Pvt. Ltd. & Ors.
21. Learned counsel sought to distinguish the Judgment relied upon by the Appellant in the case of BMW (supra) by arguing that the said Judgment pertains to a petition filed under Section 9 of Act wherein Respondent had to pay towards sale of vehicles, under Loan and Hypothecation Agreement, which was not paid. Security was sought by the Petitioner for Rs. 6.5 Crore, while Petitioner had already encashed the Bank Guarantees for Rs. 7 Crores i.e. more than the amount sought under interim measure.
22. I have heard learned counsel for the parties and examined their rival submissions.
23. There cannot be a quarrel with the settled law that interference by the Courts should be the least in the orders of the Arbitral Tribunals. However, this cannot be understood to be laying down an absolute proposition that the orders of the Tribunal are totally immune to interference and in no case can they be set aside. The facts and circumstances of each case would determine whether the orders deserve to be interfered or not.
24. The issue that arises for consideration is what are the guiding principles for grant of relief by the Arbitral Tribunal under Section 17 of the Act. This law is no more res integra. It is settled that in exercising discretion while granting an interim relief under Section 17 of the Act, Tribunal should be extremely cautious and the power should be exercised for purpose of safeguarding the interests of the parties to the proceedings, so that the subject matter of the Arbitration is preserved. There should be adequate material on record to show that the Respondent will fritter away the property or assets or funds, being the subject matter of Arbitration, so as to frustrate the Award, in case the Claimant succeeds.
25. While dealing with the power of the Court under Section 9 of the Act, Supreme Court in the case of Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd : (2007) 7 SCC 125 held as under:
"10. It is true that Section 9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was de hors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the Section itself brings in, the concept of 'just and convenient' while speaking of passing any interim measure of protection. The concluding words of the Section, "and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it" also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act."
26. A Division Bench of the Bombay High Court in the case of Nimbus Communications Limited v. Board of Control for Cricket in India and Ors relying on Adhunik Steels (supra) held as under:
"22. The judgment of the Supreme Court in Adhunik Steels has noted the earlier decision in Arvind Constructions which holds that since Section 9 is a power which is conferred under a special statute, but which is exercisable by an ordinary court without laying down a special condition for the exercise of the power or a special procedure, the general rules of procedure of the court would apply. Consequently, where an injunction is sought under Section 9 the power of the Court to grant that injunction cannot be exercised independent of the principles which have been laid down to govern the grant of interim injunctions particularly in the context of the Special Relief Act 1963. The Court, consequently would be obligated to consider as to whether there exists a prima facie case, the balance of convenience and irreparable injury in deciding whether it would be just and convenient to grant an order of injunction. Section 9, specifically provides in sub-clause (d) of clause (ii) for the grant of an interim injunction or the appointment of a receiver. As regards sub-clause (b) of clause (ii) the interim measure of protection is to secure the amount in dispute in the arbitration. The underlying object of Order 38 Rule 5 is to confer upon the Court an enabling power to require a defendant to provide security of an extent and value as may be sufficient to satisfy the decree that may be passed in favour of the plaintiff. The exercise of the power to order that security should be furnished is, however, pre-conditioned by the requirement of the satisfaction of the Court that the defendant is about to alienate the property or remove it beyond the limits of the Court with an intent to obstruct or delay execution of the decree that may be passed against him. In view of the decisions of the Supreme Court both in Arvind Constructions and Adhunik Steels, it would not be possible to subscribe to the position that the power to grant an interim measure of protection under Section 9(ii)(b) is completely independent of the provisions of the Code of Civil Procedure 1908 or that the exercise of that power is untrammeled by the Code. The basic principle which emerges from both the judgments of the Supreme Court is that though the Arbitration and Conciliation Act 1996 is a special statute, Section 9 does not either attach a special condition for the exercise of the power nor does it embody a special form of procedure for the exercise of the power by the Court. The second aspect of the provision which has been noted by the Supreme Court is the concluding part of Section 9 under which it has been specified that 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. This has been interpreted in both the judgments to mean that the normal rules that govern the Court in the grant of an interlocutory order are not jettisoned by the provision. The judgment of the Division Bench of this Court in National Shipping Company (supra) notes that though the power by Section 9(ii)(b) is wide, it has to be governed by the paramount consideration that a party which has a claim adjudicated in its favour ultimately by the arbitrator should be in a position to obtain the fruits of the arbitration while executing the award. The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave injustice to the party seeking a protective order. The obstructive conduct of the party against whom such a direction is sought was regarded as being a material consideration. However, the view of the Division Bench of this Court that the exercise of power under Section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in view of the decision of the Supreme Court in Adhunik Steels.
xxx xxx xxx
24. A close reading of the judgment of the Supreme Court in Adhunik Steels would indicate that while the Court held that the basic principles governing the grant of interim injunction would stand attracted to a petition under Section 9, the Court was of the view that the power under Section 9 is not totally independent of those principles. In other words, the power which is exercised by the Court under Section 9 is guided by the underlying principles which govern the exercise of an analogous power in the Code of Civil Procedure 1908. The exercise of the power under Section 9 cannot be totally independent of those principles. At the same time, the Court when it decides a 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. Just as on the one hand the exercise 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 1908 cannot be put into place to defeat the grant of relief which would subserve 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 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)."
27. In the case of Raman Tech. (supra) the following principles were laid down by the Supreme Court:
"4. The object of supplemental proceedings (applications for arrest or attachment before judgment, grant of temporary injunctions and appointment of receivers) is to prevent the ends of justice being defeated. The object of Order 38 Rule 5 CPC in particular, is to prevent any defendant from defeating the realization of the decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove from the jurisdiction of the court, his movables. The Scheme of Order 38 and the use of the words 'to obstruct or delay the execution of any decree that may be passed against him' in Rule 5 make it clear that before exercising the power under the said Rule, the court should be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant. This would mean that the court should be satisfied that the plaintiff has a prima facie case. If the averments in the plaint and the documents produced in support of it, do not satisfy the court about the existence of a prima facie case, the court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under Order 38 Rule 5 CPC. It is well-settled 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 or dispose of his assets with the intention of defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.
5. The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used 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. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out of court settlement, under threat of attachment.
6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgment. A plaintiff should show, prima facie, that his claim is bonafide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment. (See - Prem Raj Mundra v. Md. Maneck Gazi : AIR 1951 Cal 156, for a clear summary of the principles.)"
28. In the case of Huawei Technologies Ltd. vs. Sterlite Technologies Ltd : (2016) 1 SCC 721, the Supreme Court held that relief can only be granted when there is adequate material on record leading to a definite conclusion that the Respondents are likely to render the proceedings infructuous, if the Award is passed against them.
29. Following these principles, a Coordinate Bench of this Court in BMW (supra) held:
"27. A careful analysis of the judgment in Ajay Singh (supra), reveals that in the said case, the Division Bench has held that Section 9 of the Act grants wide powers to the Court in fashioning an appropriate interim order. It has also been held that Court should not find itself unduly bound by the text of those provisions and should rather follow the underlying principles. Essentially, the Division Bench has held that the discretion should be exercised appropriately while granting an interim order and such discretion must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection. Even in Huawei Technologies (supra), the Court has recognized that all the requisite conditions of Order 38 Rule 5, CPC are required to be satisfied for considering the prayer of securing the amount and the Court should exercise its discretion very carefully. It was also held that where it appears that there are exceptional circumstances, it has ample power to secure the amount, if it is just and convenient. However, the aforenoted judgments do not seem to suggest that while exercising power under Section 9 the necessary conditions and ingredients under Order 38 Rule 5 CPC, are not required to be insisted upon. The judgments relied upon by the Petitioner only stress that the power should be principled and premised on some known guidelines and hence the analogy of Order 38 and 39, CPC is certainly applicable. ."
30. In the case of Mahaguj Collieries Limited v. Adani Enterprises Limited, being Commercial Arbitration Petition Nos. 681 and 682/2018, decided on 25.02.2019, the Bombay High Court held that after the Amendment of Section 17, principles laid down by the Division Bench in case of Nimbus (supra) would equally apply to the Arbitral Tribunal while exercising powers under Section 17 of the Act.
31. Reading of all these judgments leads to only one conclusion that when an interim order is sought by an Applicant under Section 17 of the Act, the well known principles laid down governing the grant of interim injunctions/relief would have to be kept in mind. The Tribunal has a mandate to consider existence of a prima facie case, balance of convenience and irreparable injury, in deciding whether it would be just in the circumstances of the case to grant relief. Tribunal would also be bound by the underlying principles of Order XXXVIII Rule 5 CPC, though it may not be strictly bound by its textual provisions.
32. At this juncture, it needs to be examined whether the Respondent had made out a case for grant of interim relief, within the four corners of the set principles. Before the Tribunal considered grant of relief under Section 17 of the Act, it was imperative to examine if the Applicant had set the stage by not only pleading but also proving that it had a prima facie case in its favour and that the Appellant herein was in the process of dissipating or removing its assets/funds so as to render the Award a mere paper Award.
33. In the present case, it is an admitted fact that the Respondent filed an application seeking an Interim Award on the basis of an alleged admission of liability in the Statement of Account filed by the Appellant. The Tribunal after considering the application did not grant the relief of Interim Award and instead passed the direction to furnish a Bank Guarantee of the said amount. Therefore, as a matter of record, no application was filed by the Respondent under Section 17 of the Act. While the Respondent may be right in contending that mentioning of a wrong provision of Law or non-mentioning of a correct provision, cannot be fatal to grant of relief, if otherwise warranted, but in the present case the question is not of form but of substance. Respondent had not even sought the relief granted by the Tribunal. More importantly, since there was no application under Section 17 of the Act, Respondent had neither set up a case that the Appellant was about to remove his assets from the limits of the jurisdiction of the Tribunal, with intent to obstruct or delay the fruits of the Award coming to the Respondent in case he succeeded nor was any prima facie case made out. Since there was no application and thus no pleadings, Appellant did not have the opportunity to satisfy the Tribunal about its financial condition or bonafides that it would not fritter away its assets. Claims of the Respondent were disputed by the Appellant and it had no occasion to rebut the existence of prima facie case in favour of the Respondent herein. In the absence of any application under Section 17 of the Act with the necessary averments, in my view, the Tribunal was not justified in passing the Impugned Order.
34. It also needs to be mentioned that the Tribunal while directing the deposit has not even given any reason for coming to such a conclusion. The relevant part of the order of the Tribunal, which is unreasoned and cryptic, is extracted hereunder:
"At this stage, it would not be possible to comment on the accounting procedure being followed by the respondent. Keeping in view the defence taken up by the respondent that the Claimant had not completed the work and also the counter claim of the respondent it would not be proper to pass an interim award of payment of the amount to the Claimant at this stage but in order to secure the payment which is shown as net balance in the statement of account filed by the respondent, the interest of the Claimant can be secured by other means.
It is, therefore, directed that the respondent shall furnish a bank guarantee in the sum of Rs. 1,39,63,482/- to the satisfaction of the Coordinator, Delhi International Arbitration Centre within one month."
35. I am fortified in my view by a judgment of the Bombay High Court in the case of Mahaguj (supra). In the said case, the Respondent filed an application under Sect
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ions 17 and 31 of the Act praying for an Interim Award/interim relief. Tribunal came to a conclusion that material on record did not show an admission of liability by the Claimant and declined to pass an Interim Award under Section 31(6) of the Act. This part of the Award was not challenged by the Respondent. What was challenged before the High Court was the conclusion of the Tribunal, where the Tribunal while dealing with the alternate of prayer of the Respondent for directing the Claimant to deposit the amount in escrow account, rejected it on the ground that Respondent had not made out a case on the principles of Order XXXVIII Rule 5 CPC. The Tribunal noted that Respondent had not pleaded any such case and rejected the prayer. This part of the order of the Tribunal was challenged before the Bombay High Court and was upheld. Relevant paras of the judgment are as under: "21. As can be seen from these averments, it is quite clear that there is no averment at all and no case whatsoever has been made out for ordering the Claimant to deposit a sum of Rs. 150 crores. When such a relief is sought for, the principles that govern the grant of such a relief are under the provisions of Order XXXVIII Rule 5 of the CPC. It is now well settled that the power under Order XXXVIII Rule 5 of the CPC is a drastic and extraordinary power. Such a power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the rules. The purpose of Order XXXVIII Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a party to utilize the provisions of Order XXXVIII Rule 5 as a leverage for coercing the other party to settle the claim should be discouraged. It is now also well settled that the principles on which an order can be made for deposit by a Court would also apply to the Arbitral Tribunal. The principles laid down in the CPC for grant of interlocutory remedies must furnish a guide to the Arbitral Tribunal when it determines an application under Section 17 of the Act. xxx xxx xxx 23. As mentioned earlier and as also recorded in the impugned order, there is not a single averment in the application that would justify the order of the deposit. In fact, the impugned order categorically records that the respondent's alternative prayer for directing the Claimant to deposit the amount of Rs. 150 crores in an escrow account can be considered only if the respondent makes out a case similar to one under Order XXXVIII Rule 5 of the CPC. The Tribunal also records that the respondent has not even pleaded any such case. This being the position, I do not find that the Arbitral Tribunal had in any way gone wrong in refusing the prayer of the respondent for directing the Claimant to deposit the sum of Rs. 150 crores." 36. Respondent has relied on the judgments in case of SPA Agencies (supra) and BPL Ltd. (supra) to contend that the Tribunal under Section 17 of the Act has powers to direct a party to furnish Bank Guarantee. There can be no dispute on the powers of the Tribunal but the question in the present case is whether the power was exercised after applying the well settled principles for grant of interim measure and the answer is in the negative. Thus these judgments cannot help the respondent to sustain the impugned order. 37. In view of the above, Impugned Order passed by the Tribunal cannot be sustained and is hereby set aside. 38. Appeal is allowed. It is made clear, this Court has not expressed any opinion on the merits of the case and the Tribunal will decide the case uninfluenced by any observations made herein. 39. Pending application also stands disposed off.