AA No.01/2025 HIGH COURT OF JAMMU & KASHMIR AND LADAKH (COMMERCIAL DIVISION) AT SRINAGAR Reserved on: 14.05.2025 Pronounced on: 23.05.2025 AA No.01/2025 SAMEER AHMAD LONE ...PETITIONER(S) Through: - Mr. Mohammad Ashraf Malik, Advocate, with Mr. Malik Fahdul and Salfi Izhar, Advocates. Vs. JANSAH CONSTRUCTIONS PVT. LTD. .…RESPONDENT(S) Through:- Mr. Sikandar Hayat Khan, Advocate. CORAM: HON’BLE MR. JUSTICE SANJAY DHAR, JUDGE JUDGMENT 1) The petitioner has invoked the jurisdiction of this Court under Section 9 of the Arbitration and Conciliation Act, 1996 (for short “the Act of 1996”), seeking an order of debit freezing of the bank account of the respondent, as an interim measure. 2) The facts emanating from the pleadings of the parties are that the respondent participated in tenders relating to construction and maintenance of road from LO34 – Arnas to Kanotah, Package No.JK14-625, Regular PMGSY (Batch-1, 2018-19), Stage – II, Block Arnas, District Reasi (Length = 10.590 Kms). After emerging as successful tenderer, the respondent was awarded contract for a sum of Rs.700.46 lacs AA No.01/2025 in terms of Acceptance Letter dated 27.10.2018. An agreement dated 30.10.2018 came to be executed by the respondent with Chief Engineer, PMGSY, for the purpose of execution and completion of the works awarded in its favour. 3) It seems that on 22.03.2023, an agreement came to be executed between the respondent and the petitioner herein, in terms whereof, execution of certain works within the scope of the tender was sub-contracted to the petitioner for its completion. As per the terms of the sub-contract dated 22.03.2023, the petitioner was to pay 20% of all items except item Nos.6 and 7, to the respondent. In respect of item No.6, 10% was to be paid to the respondent and for item No.7 as also for BT items, it was agreed between the parties that the payment shall be at par. In terms of clause (6) of the said agreement, the contractor was to make payment to the sub- contractor immediately after receipt of the same from the PGMSY Department. The date of completion of the contract was 31.03.2024 whereas the contract was to commence on 01.03.2024. 4) As per clause (8) of the agreement, the disputes arising between the parties were to be settled through mediation and negotiation through a neutral mediation. It was also agreed that the respondent may before, during or after any arbitration or mediation take any steps required by law to AA No.01/2025 preserve and secure any lien on the property to enforce payment of moneys due whereas clause (9) of the agreement provided for termination of the agreement at the option of respondent with at least 30 business days’ notice. In terms of clause (14) of the agreement, the sub-contractor had to indemnify the contractor, meaning thereby that the petitioner had to indemnify the respondent on account of damages, claims etc. due to delay in execution of the work. 5) The claim of the petitioner is that on 30.10.2024, the Executive Engineer, PMGSY Division, Mahore, forwarded to Superintending Engineer, PMGSY Circle, Reasi-Udhampur, a requisition for release of Rs.90,40,000/ in favour of the respondent for construction of road from Arnas to Kanota, Phase XII Stage II and vide transaction dated 26.11.2024, an amount of Rs.79,37,580/ was transferred by the Department in favour of the respondent against the aforesaid requisition. It is being contended that as per the terms of the contract, the respondent was supposed to pay to the petitioner the amount due after having received the aforesaid payment but the said payment is not being released by the respondent in favour of the petitioner. It has been alleged that the respondent is not desirous of making the payment to the petitioner despite availability of the funds and that the respondent is likely to AA No.01/2025 divert these funds for other purposes in order to defeat the claim of the petitioner. 6) The respondent, in its reply, has raised preliminary objection with regard to maintainability of the petition on the ground that the petition has not been filed before the Commercial Division of this Court. It has been contended that the petitioner cannot seek the remedy sought since the payments have already been made to him in terms of the agreement, as is evident from the documents placed on record. It has been further contended that after execution of the sub-contract with the petitioner, the petitioner did not adhere to the terms of the contract, inasmuch as progress of the work remained very slow, as a result of which the respondent received notices dated 18.01.2024, 24.05.2024, 29.08.2024 and 11.01.2025, from the employer in which it was made clear to the respondent that if the works are not completed without further delay, steps towards process of blacklisting of the respondent company would be set afoot. It was also made clear to the respondent company by the employer that the CDR would be forfeited and penalty of 10% would be imposed upon it. 7) It has been submitted that in response to the aforesaid notices, the respondent has addressed communications dated 19.01.2024 and 27.05.2024 to the petitioner AA No.01/2025 impressing upon him to commence the work and to complete the same at the earliest. It has been further submitted that a notice dated 05.02.2025 has been issued by the respondent company to the petitioner intimating its decision of exercising its right to terminate the agreement on account of breach and violation of the terms of the agreement by the petitioner. The respondent has further submitted that an amount of Rs.2.50 crores already stands released in favour of the petitioner and that till date it has received a sum of Rs.4.00 crores from the employer. 8) It is being claimed that the respondent has released the payment in favour of the petitioner commensurately in terms of clause (5) of the agreement. The respondent has given the details of the payments released by it in favour of the petitioner. It has been submitted that even if there exists any dispute in respect of the quantum of payments required to be made to the petitioner, the same is a subject matter of arbitration, which has to be determined by the Arbitral Tribunal and at this stage there is no occasion for freezing the bank account of the respondent company. 9) The petitioner has filed his rejoinder to the reply filed by the respondent, in which he has given details of the payments received by him from time to time. The petitioner has denied having received notices from the respondent. AA No.01/2025 10) I have heard learned counsel for the parties and perused record of the case. 11) Learned counsel for the respondent has raised a preliminary objection with regard to maintainability of the petition on the ground that the petitioner has not filed the statement of truth in terms of Order 6 Rule 15-A of CPC, which is mandatory in relation to pleadings in a commercial dispute. On this ground, it is being urged that the pleadings filed by the petitioner cannot be taken into consideration. In this regard, the learned counsel has relied upon the judgment of Delhi High Court in the case of A.V. Industries vs. Neo Neon Electrical Pvt. Ltd. (RFA(Comm) 2/2021 decided on 01.09.2023) 12) In the above context, it is to be noted that although the petitioner has not verified the petition in the manner as provided under Order 6 Rule 15-A of the CPC yet, after the filing of the petition, the petitioner has filed the statement of truth in support of the petition separately. Thus, there is a delayed compliance to the provisions contained in Order 6 Rule 15-A of CPC on the part of the petitioner. In the judgment of Delhi High Court in A.V. Industries case (supra), which has been relied upon by learned counsel for the respondent, it has been clearly stated that the delay in filing of the statement of truth may be considered as a procedural AA No.01/2025 irregularity though the filing of the same is mandatory. The petitioner, by making up the deficiency by filing statement of truth later in point of time, has corrected this irregularity. Therefore, he has complied with the provisions contained in Order 6 Rule 15A CPC. The contention of the respondent, as such, cannot be accepted. 13) Another contention that has been raised by learned counsel for the respondent with regard to maintainability of the petition is that in terms of sub-section (2) of Section 9 of the Act of 1996, the arbitral proceedings have to commence within a period of 90 days from the date an order for any interim measure of protection under sub-section (1) is made. According to the learned counsel, in the present case, the order of interim measure came to be issued by this Court on 03.01.2025 but till date arbitration proceedings have not started, therefore, the present petition deserves to be rejected. 14) In the above context, it is to be noted that order dated 03.01.2025 has been passed by a Bench of this Court which was not having jurisdiction to pass such order because after the constitution of Commercial Division of this High Court, it is only the Commercial Division which is vested with jurisdiction to entertain and decide petitions under Section 9 of the Arbitration and Conciliation Act in respect of the cases wherein value of the subject matter is above the specified AA No.01/2025 value. It is because of this reason that the petition came to be assigned to the Commercial Division. Since order dated 03.01.2025, whereby interim relief was granted in favour of the petitioner, was passed by a court having no jurisdiction to pass such order, as such, the same is non-est in the eyes of law. therefore, it cannot be stated that interim measure of protection under sub-section (1) of Section 9 of the Act was in operation as on the date of hearing of this petition. The period of 90 days has to commence from the date when an order of interim measure in terms of Section 9(1) of the Act is passed. The said period would commence only when Commercial Division of this Court passes such order. Therefore, the present petition cannot be dismissed in the face of provisions contained in sub-section (2) of Section 9 of the Act of 1996. 15) That takes to the merits of the case. Sub-section (1) of Section 9 of the Act of 1996 vests power with the Court to pass an order in the nature of an interim measure of protection in respect of certain matters. Sub-clause (b) of clause (ii) of sub-section (1) of Section 9 of the Act of 1996 vests power with a court to make an interim measure of protection for securing the amount in dispute in the arbitration. The petitioner in the present case is seeking an order of interim nature as covered under sub-class (b) noted above, inasmuch as the petitioner is seeking freezing of bank AA No.01/2025 account of the respondent so as secure the amount which, according to him is due to him. 16) In order to come to a conclusion as to whether or not the petitioner is entitled to such an order, it is necessary to analyse the legal position regarding passing of an order for securing the amount in dispute in the arbitration. The principles in this regard have been discussed and deliberated upon by the Supreme Court in the case of Essar House Private Limited vs. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178. It would be appropriate to refer to certain relevant paragraphs of the said judgment for understanding the legal position on the subject. The same are reproduced as under: 38. In deciding 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. 39. While it is 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. 40. 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 interim measure of protection as may appear to the Court to be just and AA No.01/2025 convenient, and 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. 41. 41. 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. xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx 47. 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. 48. 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 judgment under Order 38 Rule 5CPC. 49. 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 grant of the interim relief to the opponent in case the proceedings should ultimately fail. AA No.01/2025 17) In Sanghi Industries Limited vs. Ravin Cables Ltd. and anr. 2022 SCC OnLine SC 1329 the Supreme Court while considering a similar issue has observed as under: 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 pre-conditions under Order XXXVIII Rule 5 of the CPC are satisfied and unless there are specific allegations with cogent material and unless prima-facie 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. 5. 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 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 AA No.01/2025 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. 18) From the foregoing analysis of law on the subject, it is clear that the principles laid down in the Civil Procedure Code for grant of interim reliefs act as a guideline to the Court while considering grant of interim relief under Section 9 of the Arbitration and Conciliation Act. Therefore, for grant of an interim relief of the nature as contained in sub-clause (b) of clause (ii) of sub-section (1) of Section 9 of the Act of 1996, the principles governing the grant of an order under Order 38 Rule 5 of the Civil Procedure Code will have to be borne in mind. However, it has to be noted that rigours of procedural provisions of the CPC cannot be applied while considering an application under Section 9(1) of the Act of 1996 so as to defeat the grant of relief. The Court has to strike a balance between the preservation of the efficacy of arbitration as an effective mechanism for dispute resolution and the principles underlying the provisions of the CPC relating to grant of interim injunction. 19) With the aforesaid legal position in mind, let us now advert to the facts of the present case. There is no dispute to the fact that in terms of the agreement executed between the parties, the respondent was obliged to release payment after AA No.01/2025 deducting its commission in terms of clause (5) of the agreement to the petitioner immediately upon receipt of the payment from the PMGSY Department. It has been admitted by the respondent that it has received a total amount of ₹4.00 crores from the PMGSY Department and has released a sum of ₹2.50 crores in favour of the petitioner in terms of clause (5) of the agreement. According to the respondent, whatever was due to the petitioner in terms of clause (5) of the agreement, the same has already been paid to him and that nothing more is to be paid to him. 20) In terms of clause (5) of the agreement, at the most the respondent was entitled to deduct 20% from the different items of the work, meaning thereby that if the respondent has received an amount of ₹4.00 crores from the PMGSY Department, it was obliged to release the said amount less by 20%, which comes to ₹3.20 crores to the petitioner. However, even as per the admission of the respondent, the petitioner has received only an amount of Rs.2.50 crores, thus leaving a balance unpaid amount of ₹70,00,000. 21) The contention of the respondent is that there has been delay in execution of the work on account of the reasons attributable to the petitioner which has prompted the employer to issue communications to the respondent warning it of punitive actions. The issue whether there was any delay AA No.01/2025 attributable to the petitioner in connection with execution of the work would be determined by the Arbitrator during the arbitration proceedings where both the parties will be at liberty to file their claims/counter claims. As per clause (14) of the agreement executed between the parties, the petitioner is obliged to indemnify the respondent for any damages and claims etc. on account of delay but it is not the case of the respondent that it has exercised its lien on outstanding payments on account of the fact that the petitioner has defaulted in completing the work within the situated period. The consistent stand of the respondent in its reply is that it has paid whole of the amount which was due to the petitioner in terms of clause (5) of the agreement. This assertion of the respondent, in the face of its own admission, appears to be without any substance. 22) In the face of aforesaid facts and circumstances, prima facie, it appears that the petitioner has succeeded in showing that he is entitled to receive an amount of ₹70,00,000 from the respondent, which, it appears, has been withheld by the respondent without any justification. 23) The petitioner has clearly pleaded in para (11) of the petition that the respondent despite availability of the funds is not desirous of making payment to him and that the respondent is likely to divert these funds for other purposes AA No.01/2025 so as to defeat claim of the petitioner. Therefore, there are specific pleadings made by the petitioner which satisfy the requirements of Order 38 Rule 5 of the CPC. In these circumstances if the interim order is not passed in favour of the petitioner, there is likelihood of his claim getting defeated, more particularly because the respondent in its reply has not come forward with any material to show that it has the capacity to satisfy the claim of the petitioner from any other source. 24) In view of the foregoing discussion, this Court finds it a fit case where interim measure of the nature as contemplated under sub-clause (b) of clause (ii) of sub-section (1) of Section 9 of the Arbitration and Conciliation Act is required to be taken. 25) Accordingly, the petition is allowed and the bank account of the respondent bearing No.0455020500000002 maintained at J&K Bank, Branch Lower Munda, Anantnag, is ordered to be debit freezed to the extent of Rs.35.00 lacs (rupees thirty-five lacs), which constitutes 50% of the outstanding amount as calculated hereinbefore. (SANJAY DHAR) JUDGE Srinagar, 23.05.2025 “Bhat Altaf-Secy” Whether the order is reportable: YES Mohammad Altaf Bhat I attest to the accuracy and authenticity of this document 23.05.2025 02:41