/2022 INSC 0881/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.  6908 OF 2022
Sanghi Industries Limited               ...Appellant(s)
Versus
Ravin Cables Ltd., and Anr.       …Respondent(s)
J U D G M E N T 
M.R. SHAH, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment and order dated 11.02.2022 passed by the High
Court   of   Gujarat   at   Ahmedabad   in   Regular   First   Appeal
No. 3253 of 2021, by which, the High Court has dismissed
the   said   appeal   confirming   the   order   passed   by   the
Commercial Court in an application under Section 9 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as the Arbitration Act, 1996), by which the Commercial
Court   directed   the   appellant   herein   –   original
opponent/respondent   No.   1   to   deposit   the   amount   of
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performance bank guarantees pertaining to purchase order
Nos.   01,   02   and   03   invoked   by   it,   the   original
opponent/respondent   No.   1   has   preferred   the   present
appeal. 
2. We   have   heard   Shri   Vivek   Chib,   learned   Senior   Advocate
appearing   on   behalf   of   the   appellant   and   Shri   K.V.
Viswanathan, learned Senior Advocate appearing on behalf
of respondent No. 1 herein – the main contesting party. 
3. At the outset it is required to be noted that in the present
case the dispute is with  respect to three purchase orders,
namely,   purchase   order   Nos.   01,   02   and   03.   It   appears
that   the   appellant   served   a   notice   upon   respondent   No.   1
vide notice dated 11.06.2021 claiming a loss of INR 29.31
crores (approximately) owing to the defective quality of the
cables supplied. The said notice was replied by respondent
No.   1   vide   reply   dated   19.06.2021.   That   thereafter,
respondent   No.   1   served   a   legal   notice   dated   13.07.2021
on  the  appellant  claiming  for   outstanding   payment  of  INR
1.30   crores   (approximately).   That   the   appellant   vide
communication/letter  dated 21.07.2021 invoked  the bank
guarantees   issued   by   respondent   No.   1   herein,   which
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according to respondent No. 1 were by way of performance
bank   guarantees.   That   thereafter,   the   appellant   invoked
the   arbitration   on   22.07.2021.   Immediately   on   the   next
day   i.e.,   23.07.2021,   respondent   No.   1   herein   filed   two
applications/petitions   under   Section   9   of   the   Arbitration
Act,   1996,   being   application   No.   438/2021   before   the
Commercial Court  at  Ahmedabad and  another  application
No.   88/2021   before   the   Commercial   Court   at   Bhuj.
Application No. 88/2021 under Section 9 of the Arbitration
Act,   1996   filed   by   respondent   No.   1   herein   was   regarding
three   bank   guarantees,   which   is   the   subject   matter   of
present   case.  At  this  stage,  it  is  required  to   be  noted  that
by   the   time   any   further   order   could   be   passed   the   bank
realized the payments under the bank guarantees invoked
by   the   appellant.   That   the   Commercial   Court   passed   an
order   dated   13.10.2021   under   Section   9(ii)(e)   of   the
Arbitration Act, 1996 to secure the amount in dispute and
directed   the   appellant   herein   to   deposit   the   amount   of
respective   performance   bank   guarantees,   which   as   such
has   already   been   invoked   and   for   which   the   payments
were   already   made   by   the   bank.   The   order   passed   by   the
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Commercial   Court   under   Section   9   of   the   Arbitration   Act,
1996,   directing   the   appellant   to   deposit   in   the   court   the
amount   of   respective   bank   guarantees   pertaining   to
purchase order Nos. 01, 02 and 03 was the subject matter
of   appeal   before   the   High   Court   under   Section   13   of   the
Commercial Courts Act, 2015. By the impugned judgment
and   order,   the   High   Court   has   dismissed   the   said   appeal
which has given rise to the present appeal. 
4. Having   heard   learned   counsel   appearing   on   behalf   of   the
respective   parties   and   in   the   facts   and   circumstances   of
the   case,   more   particularly,   when   the   bank   guarantees
were   already   invoked   and   the   amounts   under   the
respective bank guarantees were already paid by the bank
much   prior   to   the   Commercial   Court   passed   the   order
under Section 9 of the Arbitration Act, 1996 and looking to
the tenor of the order  passed by the Commercial Court, it
appears   that   the   Commercial   Court   had   passed   the   order
under Section 9(ii)(e) of the Arbitration Act, 1996 to secure
the   amount   in   dispute,   we   are   of   the   opinion   that   unless
and   until   the   pre­conditions   under   Order   XXXVIII   Rule   5
of   the   CPC   are   satisfied   and   unless   there   are   specific
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allegations with cogent material and unless prima­facie the
Court   is   satisfied   that   the   appellant   is   likely   to   defeat   the
decree/award   that   may   be   passed   by   the   arbitrator   by
disposing   of   the   properties   and/or   in   any   other   manner,
the   Commercial   Court   could   not   have   passed   such   an
order   in   exercise   of   powers   under   Section   9   of   the
Arbitration   Act,   1996.   At   this   stage,   it   is   required   to   be
noted   that   even   otherwise   there   are   very   serious   disputes
on the amount claimed by the rival parties, which are to be
adjudicated   upon   in   the   proceedings   before   the   arbitral
tribunal.
 
4.1 The   order(s)   which   may   be   passed   by   the   Commercial
Court in an application under Section 9 of the Arbitration
Act,   1996   is   basically   and   mainly   by   way   of   interim
measure.   It   may   be   true   that   in   a   given   case   if   all   the
conditions of Order XXXVIII Rule 5 of the CPC are satisfied
and   the   Commercial   Court   is   satisfied   on   the   conduct   of
opposite/opponent party that the opponent party is trying
to   sell   its   properties   to   defeat   the   award   that   may   be
passed   and/or   any   other   conduct   on   the   part   of   the
opposite/opponent   party   which   may   tantamount   to   any
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attempt   on   the   part   of   the   opponent/opposite   party   to
defeat   the   award   that   may   be   passed   in   the   arbitral
proceedings,   the   Commercial   Court   may   pass   an
appropriate order   including  the  restrain  order  and/or  any
other   appropriate   order   to   secure   the   interest   of   the
parties.   However,   unless   and   until   the   conditions
mentioned in Order XXXVIII Rule 5 of the CPC are satisfied
such   an   order   could   not   have   been   passed   by   the
Commercial   Court   which   has   been   passed   by   the
Commercial   Court   in   the   present   case,   which   has   been
affirmed by the High Court. 
5. In view of the above and for the reasons stated above, the
present   appeal   succeeds.   The   impugned   judgment   and
order passed by the High Court and that of the order dated
13.10.2021   passed   by   the   Commercial   Court   in   an
application   under   Section   9(ii)(e)   of   the   Arbitration   Act,
1996   directing   appellant   to   deposit   the   amount   of
performance bank guarantees pertaining to purchase order
Nos.   01,   02   and   03   already   invoked   by   the   appellant
herein, are hereby quashed and set aside. 
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However, at the same time to protect the interest of the
parties,   we   direct   that   the   appellant   herein   shall   furnish
an undertaking backed by the Resolution of the appellant’s
company   before   the   Commercial   Court   that   in   case   any
award   is   passed   by   the   learned   Arbitrator   in   arbitration
proceedings,   the   same   shall   be   paid/honoured   by   the
appellant subject to the challenge before the higher forum.
Such   undertaking   backed   by   the   Resolution   of   the
appellant’s   company   shall   be   filed   before   the   Commercial
Court   within   a   period   of   four   weeks   from   today,   with   this
the present appeal is allowed. No costs.     
………………………………….J.
 [M.R. SHAH]
NEW DELHI; ………………………………….J.
SEPTEMBER 30, 2022 [KRISHNA MURARI]
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