M/S Chaitanya Energy Private Limited vs. Mr. Neeraj Choubey, Sole Proprietor Of M/S Jra Infratech & Anr.

Facts

The petitioner, M/s Chaitanya Energy Private Limited, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures of protection. This arose from contracts with Respondent No. 1, Mr. Neeraj Choubey, proprietor of M/s JRA Infratech. Respondent No. 2, Engineering Projects (India) Limited (EPIL), had awarded a contract to Respondent No. 1 for construction work. Respondent No. 1 then entered into agreements with the petitioner to undertake this work on a back-to-back basis, with Respondent No. 1 retaining a 6% margin and remitting the rest to the petitioner. The petitioner alleged that Respondent No. 1 terminated their arrangement and invoked a performance bank guarantee of approximately Rs. 7 crores. The petitioner apprehended that Respondent No. 1 would appropriate all payments from EPIL, contrary to their agreement.

Held

The Court held that the petitioner had made out a prima facie case for the grant of a limited interim order. The reasoning was based on Clause 9.2 of the Back to Back Agreement (BBA), which provided for an escrow account arrangement where 6% of payments would go to Respondent No. 1 and the remaining 94% to the petitioner. The Court found that the balance of convenience favoured granting this interim protection, as the petitioner would suffer irreparable loss if the amounts were dissipated by Respondent No. 1. The Court directed that, until the next date of hearing, Respondent No. 1 would hold 94% of any amount remitted by EPIL under the contract and would not appropriate or utilize it without the Court's permission. Subsequently, as Respondent No. 1 did not appear to contest the petition, the interim order dated 27.09.2022 was made absolute, subject to further orders from the arbitral tribunal. This order was to remain in effect for four months or until the arbitral tribunal passed its own orders.

Key Issues

1. Whether the petitioner has made out a prima facie case for grant of interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, concerning the distribution of payments received from EPIL, as per Clause 9.2 of the Back to Back Agreement (BBA). Petitioner's Arguments: The petitioner argued that Clause 9.2 of the BBA clearly stipulated that 94% of payments received from the employer (EPIL) should be remitted to the petitioner, with Respondent No. 1 retaining only a 6% margin. They contended that Respondent No. 1's potential appropriation of the entire amount would cause irreparable loss. They relied on the BBA to establish the contractual obligation for payment distribution. Revenue/State's Arguments: The judgment does not record any specific arguments from Respondent No. 2 (EPIL). Respondent No. 1 remained unrepresented and did not present any arguments.