MANISH AGGARWAL Vs. RCI INDUSTRIES AND TECHNOLOGIES LTD

JUDGEMENT

(1.) By way of the present appeal under sec. 37(2)(b) of the Arbitration and Conciliation Act 1996 ('A&C Act'), the appellants impugn order dtd. 19/8/2021 made by the learned Sole Arbitrator, declining to allow an application seeking interim measures of protection under sec. 17 of the A&C Act. The application under sec. 17 was moved by the non-claimants, who are the appellants in the present appeal, who had sought to secure the amounts comprised in their counter-claims. The principal ground for seeking to secure the amount in dispute in the counter-claims was the alleged ruinous financial position of the claimant, who is the respondent in the present appeal.

(2.) The transaction that is the genesis of disputes between the parties is the sale by the appellants to the respondent of a business unit called Devi Metal Technologies (DMT) alongwith its assets on a 'going concern basis' based upon three principal documents:

(3.) Mr. Manish Vashisht, learned senior counsel appearing on behalf of appellants submits that at the time of sale of DMT to the respondent, the respondent was a 'solvent company' which had assured that the sale consideration would be paid to the appellants upon settlement and reconciliation of accounts. It is contended however, that during the pendency of arbitral proceedings, the respondent's net-worth has eroded; by reason whereof, the amount comprised in the counter-claims deserves to be secured, since otherwise the appellants would receive a mere 'paper award', which would be unenforceable. It is contended that the respondent's liabilities are much in excess of its total assets; and the respondent's balance sheet dtd. 14/4/2016 reflects that position, namely that the respondent's total assets are Rs.195.00 crores whereas its total liabilities are Rs.227.00 crores, thereby leading to a negative net-worth of Rs.65.00 crores. Furthermore, it is contended that all the respondent's lenders have declared their loans as non-performing assets since the respondent is not even able to pay its interest liability on such loans.