Facts of the Case

This case concerns commercial arbitration over escrow accounts and has no GST content. The petitioner, SREI Equipment Finance Limited, filed four applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain the respondent, Karur Vysya Bank, from dealing with amounts in four escrow accounts, pending constitution of an arbitral tribunal under Assignment Agreements executed between the parties in 2019 and 2020. The petitioner also sought appointment of a Receiver over the accounts. The respondent Bank relied on a clause in a Designated Account Agreement said to authorise it to retain excess amounts for any shortfall in rent receivables or dues from the petitioner.

Issues Involved

  1. Whether the petitioner had made out a case for interim protection of the amounts in the escrow accounts pending formation of the arbitral tribunal.

Petitioner's Arguments

  • Preservation of the amounts in the escrow accounts was necessary to prevent irreversible prejudice before the arbitral tribunal could be constituted and take up the disputes under Section 17 of the Act.

Respondent's Arguments

  • Clause 5.4 of the Designated Account Agreement authorised the Bank to retain excess amounts for any shortfall in Rent Receivables or other outstanding dues from the petitioner.

Court Order / Findings

  • The Court held the interim relief sought was in the nature of preservation of the subject matter of the dispute under Section 9(1)(a) and (c) of the Act, and that the Bank's reliance on Clause 5.4 was a matter to be examined by the arbitral tribunal on evidence.
  • Finding the balance of convenience and risk of irreversible prejudice in the petitioner's favour, all four applications were allowed, restraining the Bank from transferring or dealing with the amounts in the specified escrow accounts until the arbitral tribunal is constituted.
  • Parties were directed to take expeditious steps to constitute the arbitral tribunal, in line with the 90-day timeline under Section 9(2) of the Act.

Important Clarification

This order contains no GST-related holding — it decides only an interim injunction question under commercial arbitration law, leaving the substantive dispute over the escrow accounts to the arbitral tribunal.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Sections 9, 9(2), 17

Decision – In Favour of

Decided in favour of the Petitioner (SREI Equipment Finance Limited) on the interim relief application only; the underlying dispute is yet to be decided by the arbitral tribunal.

Case Details

Court: High Court at Calcutta, Ordinary Original Civil Jurisdiction (Commercial Division)
Case No.: AP 408 of 2023 (with AP 409, 411, and 412 of 2023)
Coram: Hon'ble Justice Moushumi Bhattacharya
Date of Judgment: 9 August 2023

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