E D & F Man Liquid Products Italia SRL vs Emil Traders Private Limited

Soumen Sen , CJ

This appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (in short “A & C Act, 1996”) is filed against the order dated 24 February 2026 in OP(ICA) No.1 of 2025, to the extent it denies an interim relief of securing the awarded sum and disclosing the assets by an affidavit under Section 9 of the said Act.

The appellants/petitioners are foreign companies. The Arbitral Award was put to execution and the execution application is pending. During the pendency of the said proceeding, an application under Section 9 of the A & C Act, 1996 was filed praying, inter alia, for attachment before judgment. The said application appears to have been necessitated by reason of the fact that the appellants were apprehensive  of  ultimately  realising  the  awarded  sum  as  there has been a failed attempt on the part of the respondent to invoke the provisions of the Insolvency and Bankruptcy Code.

Mr. Bharucha Zarir Pesi, the learned Senior Counsel appearing  on behalf  of the appellants,  submitted that  when the fraudulent intent of the respondent  is clear and borne out from the records, there is an imminent necessity for a  direction upon the  respondent  to  deposit  the  entire  awarded sum,  apart  from filing an affidavit of assets disclosing both movable and immovable properties as well as the details of the bank accounts. The learned Senior Counsel has referred to paragraphs  13  and  16  of  the  impugned  order  to  show  that  the learned Single Judge has accepted that  under Section  9(1)(ii)(b) of the A & C Act, 1996, the Court has jurisdiction to pass interim orders to secure the amount in dispute in the arbitration even after the arbitral award is passed, until it is enforced and the Court has jurisdiction to direct the respondent to  deposit  the  amounts  under  the  arbitral  award  in  exercise  of the powers under  Section  9 of  the  A & C Act, 1996,  despite the same  being  the  main  relief  sought  in  the  execution  petition. In appropriate cases, when other measures are not effective to secure the amounts in dispute, the Court is required to pass such  direction  for  the  ends  of  justice.  The  Court  has,  however, limited its jurisdiction to the extent of granting an order of injunction restraining the respondent from withdrawing any amount from its bank accounts and also from alienating or creating any encumbrance on any movable or immovable properties owned by it, which is inadequate to protect the claim of the appellants.

The learned Senior Counsel submitted that the Hon’ble Supreme Court in the case of Essar House Private Limitedv. Arcellor Mittal Nippon Steel India Limited (2022) 20 SCC 178, has analysed the scope and ambit of Section 9 of the A & C Act, 1996 and clearly enunciated the law. The Hon’ble Supreme Court has proceeded even to the extent of observing that 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 technicalities of the Code of Civil Procedure cannot prevent the Court from securing the ends of justice. It is thus submitted that  having  regard to the fraudulent intent  and motive of the respondent as would be reflected from their attempt to invoke the Insolvency and Bankruptcy Code, the learned Single Judge ought to have exercised such power, as envisaged under Section 9(1)(ii)(b) of the A & C Act, 1996, by securing the entire claim of the awarded sum till the enforcement of the award is finally decided.

The learned counsel for the respondent submitted that, unless the  enforceability  of  the  award is finally  established,  the appellants are not entitled to any relief by which the respondent can be directed to secure the entire awarded sum.

In  the  conspectus  of  the  aforesaid  facts,  the  order  passed by the learned Single Judge requires consideration.

The A & C Act, 1996 is a code in itself and Section 9 has a unique feature in the sense that it is an amalgam of Order XXXVIII and Order XXXIX of the Code of Civil Procedure. Section 9(1)(ii)(b) of the A & C Act, 1996 empowers the Court to pass an order for securing the amount in dispute in the arbitration  as  an  interim  measure  of  protection  and  in  Section 9(1)(ii)(e) such other interim measure of protection as may appear to the Court to be just and convenient.

Although the conditions precedent for exercising the power under Order XXXVIII or Order XXXIX of the Code of Civil Procedure  have  not  been  specifically mentioned, ordinarily the Court exercising the power under Section 9 of the A & C Act, 1996 shall be guided by the said provisions, but should not limit its power if it appears to the Court that such interim measure  of  protection  is  necessary.  This,  in  effect,  permits  the Court to exercise its inherent power to pass any such interim measure as it considers just and convenient. The expressions“securing the amount in dispute” and “such other interim measure of protection as may appear to the Court to be just and convenient” are important features of the said section, which confer wide and sweeping powers on the Court to pass interim  measures  even  after  an  award  is  passed  but  before  its enforcement. In Essar House Private Limited (supra), the Hon’ble Supreme Court in analysing Section 9 of the  A & C Act, 1996,  has  observed  that  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. It is reiterated  in  the  said  decision  that  if  a strong primafacie 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  XXXVIII  Rule  5 of the CPC.  The  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 the 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 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.

In this regard, we may refer and rely upon the observations of the Hon’ble Supreme Court in paragraphs 38 to 42 and 47 to 49 of the decision in Essar House Private Limited(supra) which read as follows:

“38. Indeciding a petition under Section 9 of the Arbitration Act, the Court cannot ignore the basic principles of CPC. At the same time, the power of the Court to grant relief is not curtailed by the rigours of every procedural provision in 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 CPC.

Whileitis 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 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 such manner,as would defeat justice.

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) secure the amount  in  dispute  in  the  arbitration;  or  (ii)  such other interimme asure 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 ithas for the purpose of, and in relation to,any proceedings before it.

As  argued  by  Mr  Kaul,  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 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 CPC.

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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. 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.

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 judgmentunderOrder38Rule5CPC.

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 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 grantoftheinterimrelief totheopponentincase theproceedingsshouldultimatelyfail.

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It is equally important to refer to paragraph 43 of the Division Bench judgment of the Bombay High Court in Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel (India) Ltd. 2021 SCC OnLine Bom 149, referred to in paragraph 51 of the decision in Essar  House Private  Limited  (supra), in which the Division Bench of the Bombay High Court observed as under:

“43. If the Court is required to dismiss the petition under Section 9 of the Arbitration Act on the ground that the opponent has noassets at all or the assets of the opponent are fully encumbered, it will be against  the  principles of equitable justice required to be exercised by the Court while exercising powers underSection 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.”

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Even otherwise, all courts dealing with suits and execution  proceedings  are  mandatorily  required  to  follow, inter alia, the directions issued by the Hon’ble Supreme Court in Rahul  S.  Shah  v.  Jinendra  Kumar  Gandhi  and  Others (2021) 6 SCC 418, which are as under:

“42.6. In a money suit, the court must invariably resort to Order 21 Rule 11, ensuring immediate execution of decree for payment of money on oral application.

42.7. In a suit for payment of money, before settlement of issues, the defendant may be required to disclose his assets on oath, to the extent that he is being made liable in a suit. The court may further, at any stage, in appropriate cases during the pendency of suit, using powers under Section 151 CPC, demand security to ensure satisfaction of any decree.”

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In the instant case, award has already been passed and presently, the execution petition is pending. The order of the NCLT dismissing the petition for voluntary  winding up by order dated 17 July 2025, making adverse observations against the respondent,  is  a  relevant  consideration  to  find  out  whether  an interim measure of protection by directing the respondent to secure the amount in dispute in the arbitration is necessary, apart from filing a detailed affidavit of assets. A strong possibility  of  diminution  of  assets  in  this  regard  would  suffice. However, before an order is made for securing the amount, it has  to  be  seen  whether  the  respondent  has  sufficient  assets  to meet and satisfy the awarded sum in the event the enforcement of the award is held in favour of the appellants. The learned Single  Judge  has  overlooked  this  aspect  of  the  matter  and  has merely restricted the relief to an order of injunction. Under such circumstances, we direct the respondent and its Directors to make a fair disclosure of its assets, both movable and immovable, with valuation report duly certified by a chartered/accredited valuer to be incorporated in the affidavit of assets to be filed in the pending proceeding and also to disclose the annual accounts and balance sheets of the company  for  the  last three  years,  duly  certified  by  its  auditors on or before 23 March 2026, upon prior service to the appellants, as the matter is made returnable to the learned Single Judge on 25 March 2026. Upon such affidavit being filed and examined, in the event a finding is arrived at that the assets available are inadequate to meet the awarded sum, it will be open to the appellants to pray for a direction for securing the awarded sum till the enforceability of the award is decided.

The  interim  order  dated  24  February  2026  in  OP(ICA)  No. 1 of 2025 stands modified to the above extent.

The Appeal is allowed in part.