Two companies namely Essar House Pvt Ltd (EHPL) and Essar Services India Pvt Ltd (ESIPL) had received respectively Rs 35 crore and Rs 47 crore security deposit from Essar Steel.
ArcelorMittal (formerly Essar Steel) had approached the court for urgent protective interim orders before the commencement of arbitration process under Section 17 of the Arbitration and Conciliation Act 1996.
According to two separate court orders, Essar Steel had entered into a rental agreement with Essar Housing. This was to occupy the ground floor, podium and 20 upper floors of the Essar House, situated at Mahalakshmi area in Central Mumbai. While ESIPL was providing management, administrative and accounting services to the Essar Steel.
The ArcelorMittal was seeking a refundable security deposit that the erstwhile Essar Steel had paid to these two companies and were payable upon termination of the contract with these companies.
However, both the Essar companies EHPL and ESIPL refused to refund the same money back on the ground that they had unilaterally novated its obligation in the bilateral agreement which subsequently set-off their liability to make any repayment.
Since there was a clause of arbitration with both the parties, ArcelorMittal decided to invoke the clause and approach the Bombay High Court to secure the amount until the arbitration tribunal gives an award.
“The claim of the Petitioner as set out in the Petition makes out a straightforward prima facie case. There is no doubt that the balance of convenience is with the Petitioner. It is the Respondent that claims to have made unilateral adjustments and effected some sort of unilateral novation. The balance of convenience is clearly with the Petitioner,” said Justice Gautam Patel in his order on December 10.
The order further said, there is no reason why the Petitioner (ArcelorMittal) should be left, pending arbitration, with no security for its claim. “I am not, in this order, directing payment by the Respondent to the Petitioner. I am requiring it to provide security by making a cash deposit in this Court or by furnishing security to the satisfaction of the Prothonotary and Senior Master. In my view, that is an eminently reasonable relief sought and one that must be granted,” said the court in one of the order.
Senior Counsel, Dr Birendra Saraf, along with law firm Shardul Amarchand Mangaldas & Co (SAM & Co) represented Arcelor Mittal Nippon Steel India. While two Essar firms were being represented by senior counsel Vikram Nankani and law firm Naik Naik & Co.