Court Exercising Powers Under Section 9 Of A&C Act Is Not Bound To Strictly Follow Provisions Of Order XXXVIII Rule 5 Of CPC: Calcutta High Court

The bench of Justice Moushumi Bhattarcharya held that unlike O. XXXVIII R. 5 of CPC wherein the party seeking relief has to discharge the onus of showing that the other party seeks to obstruct or delay the execution of any decree by disposing of the entirety or part of the property or intends to remove the same from the local limits of the jurisdiction of the Court, Section 9 of the A&C Act does not require the petitioner to show that the opposite party will dissipate the subject matter of the arbitration.

Facts

The parties entered into an EPC Contract dated 27.07.2013. The agreement was made pursuant to an agreement between the respondent and NHAI for construction of a four-lane highway on BOT basis. The petitioner was engaged as a sub-contractor by the respondent. The EPC agreement contained an arbitration clause.

There was a delay in the completion of the project work which led to a dispute between the parties. The petitioner wrote a letter to the respondent, intimating it about the loss suffered by it on account of delay and other causes attributable to the respondent. In response to the said letter, the respondent told the petitioner to submit documents in support of its claims. Accordingly, the petitioner vide its letter dated 20.06.2017 submitted documents in support of its claims. Thereafter, the respondent informed the petitioner that it has initiated an arbitration against the principal employer/NHAI and the claims of the petitioner would also be included in the claims of the respondent against the NHAI.

Thereafter, the petitioner informed the respondent that its claims are independent of any claim that the respondent has against the NHAI, however, it agreed to wait for a period of 6 months. Thereafter, on 09.05.2019, the respondent informed the petitioner that in the arbitration with NHAI, it has got a favourable award for Rs. 322.78 crores, however, the claims qua the amount due to the petitioner has been rejected by the tribunal.

Accordingly, the petitioner invoked the arbitration clause and issued the notice of arbitration dated 30.09.2019. In response to the notice of arbitration, the respondent denied its liability contending that the EPC contract was on back-to-back basis. Upon the failure of the parties to mutually appoint an arbitrator, the petitioner approached the Court for the appointment of the arbitrator under Section 11 of the A&C Act. It also filed an application under Section 9 of the A&C Act seeking a direction upon the respondent to secure an amount of Rs. 76 crores out of the amount it got under the arbitration award.

Contention of the Parties

The respondent raised the following objections to both the petitions:

• The claims of the petitioner are time barred as the cause of action for the same arose way back in the year 2016 and the notice of arbitration was issued after the expiry of 3 years period.
• Mere exchange of communication between the parties would not extend the period of limitation.
• Mere talks or attempts at negotiation would not stop the clock of limitation once it has started running.
• The relief sought by the petitioner under Section 9 application cannot be granted as it has failed to satisfy the test laid down under Order XXXVII Rule 5 of CPC i.e., that the respondent would dispose of the subject matter of arbitration or that it won’t be able to satisfy the award, if delivered in petitioner’s favour.

The petitioner made the following counter-arguments:

• The period of limitation stood extended in view of the acknowledgment of the debt by the respondent in its letter dated 11,05.2018, therefore, in view of Section 18 of Limitation Act, the period of limitation would begin afresh from the said date and the notice of arbitration was invoked within the limitation.
• The lead member of the petitioner underwent insolvency and a moratorium was declared against it, therefore, in view of Section 60(6) of the IBC 2016, the time consumed therein shall be excluded for the purpose of calculating limitation.

Analysis by the Court

First, the court examined whether the claims of the petitioner were time barred. It observed that though the cause of action for the same arose in the year 2018, however, the respondent in its email dated 11.05.2018 has acknowledged the debt by stating that it would include the claims of the petitioner in the arbitration against the NHAI.

The Court held that the express admission by the respondent would attract Section 18 of the Limitation Act and the period of limitation would start afresh from the said date. It held that the notice of arbitration was issued within 3 years from the date of the letter of acknowledgment, therefore, the on a prima facie examination, the claims cannot be held to be time barred.

The Court also observed that the parties were in in the middle of a negotiation as the respondent initially not denied that the petitioner has to be compensated for the delay in the execution of the project. It observed that the petitioner has placed on record, the entire history of negotiation which is material to the question of limitation.

The Court distinguished between the negotiations which are attempted by the parties only with a view to defeat limitation and where genuine attempts are made to arrive at an amicable settlement. It held that the court must ascertain the ‘breaking point’ in such cases.

The Court also observed that the lead member of the petitioner was admitted into insolvency and a moratorium was declared against it. The Court referred to Section 60(6) of IBC to hold that said provision of the IBC contemplated exclusion of the entire period during which the moratorium was in force in respect of the corporate debtor with regard to a proceeding contemplated therein.

The Court also held that the petitioner would also be entitled to the benefit of the Supreme Court orders extending the limitation in view of Covid-19, it held that the Section 11 petition was also filed within the permissible time period by the petitioner. Accordingly, it decided the issue of limitation in favour of the petitioner and appointed the arbitrator.

Next, the Court considered the application under Section 9 of the A&C Act. The Court observed that pursuant to a direction by the Delhi High Court, NHAI has deposited the entire arbitral amount of Rs. 322.78 crores before the Court and the respondent, to date, has withdrawn an amount of Rs. 50 crores approx. out of the said amount.

The Court rejected the contention of the respondent that the application of the petitioner fails to meet the requirement of Order XXXVIII Rule 5 of CPC. It held that the Court exercising powers under Section 9 of the A&C Act is not strictly bound by the provisions of interim relief contained under Code of Civil Procedure, 1908.

The Court held that unlike O. XXXVIII R. 5 of CPC wherein the party seeking relief has to discharge the onus of showing that the other party seeks to obstruct or delay the execution of any decree by disposing of the entirety or part of the property or intends to remove the same from the local limits of the jurisdiction of the Court, Section 9 of the A&C Act does not require the petitioner to show that the opposite party will dissipate the subject matter of the arbitration.

The Court reiterated that under Section 9, the Court is only required to ascertain a prima facie case, balance of convenience and irreparable loss. It held that since the respondent had already admitted the claims of the petitioner by referring them to NHAI arbitration, the has a prima facie case. Moreover, it is an SPV, which has no other business and in view of the fact the respondent already has an award to the tune of Rs. 322.78 Crores in its favour, therefore, it is entitled to the interim relief.

Accordingly, the Court disposed of the petitions with above directions.

Case Title: Prathyusha – AMR JV v. Orissa Expressway Pvt Ltd, AP 863 of 2022

Date: 19.09.2023

Counsel for the Petitioner: Mr. Joy Saha, Sr. Adv. Mr. Sourojit Dasgupta, Adv. Mr. Vishwarup Acharyya, Adv.

Counsel for the Respondent: Mr. Sarvapriya Mukherjee, Adv. Mr. Aritra Basu, Adv. Mr. Sanket Sarawgi, Adv.

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