Arcelor Mittal Nippon Steel India (formerly Essar Steel India) has filed a contempt petition before the Bombay High Court against Essar Services India Private Limited (ESIPL) and Essar House Private Limited (EHPL) in relation to a previous order in which the latter were directed to deposit Rs 80 crore as a security deposit in an arbitration dispute.
The dispute arose when ESIPL and EHPL refused to return the interest-free security deposit on the grounds that they unilaterally novated their obligation in the bilateral agreement, which purportedly set off their liability to make any repayment to Arcelor Mittal.
Arcelor Mittal approached the HC as the Essar companies' failure to repay the refundable security deposit raised serious doubts about their financial ability. The amount in question was a refundable security deposit payable upon termination of the two agreements executed with ESIPL and EHCL respectively.
It has filed an interim application under the Arbitration and Conciliation Act seeking that the Essar companies be directed to deposit the amount in the HC before the commencement of the arbitration process.
In December 2020, a single judge of the HC had directed Essar companies to deposit the security amount, which was upheld by a Division Bench.
Essar companies challenged this before the Supreme Court, where they also sought an urgent stay on the order of the High Court.
Meanwhile, Arcelor filed the present plea alleging contempt on the part of the Essar companies for willfully and deliberately disobeying the court orders by neither depositing the amount in HC nor furnishing a bank guarantee.
It further claimed that Essar companies action of approaching the SC indicated their attempts to buy additional time and delay following the HC directions.
On Monday, a division bench of Justices SJ Kathawalla and Milind Jadhav asked Arcelor whether the Essar companies had given any undertaking which had been breached. Arcelor categorically denied the same.
To this, the HC asked as to why Arcelor did not choose to file an execution application if there was no undertaking breached.
Arcelor’s counsel Birendra Saraf said that they wanted affidavits from ESIPL and EHCL stating on record that they had no means to make the Court-directed deposits.
Essar’s counsel Ashish Kamath said that it has always stated its inability to make the payments, which had been recorded in the single-judge as well as the Division Bench orders.
Saraf, however, pointed out that there were receivables to ESIPL and EHCL from companies that they had not disclosed, and sought an order to have such disclosure.
HC then asked ESIPL and EHCL to file an affidavit within two weeks placing on record the current status of all receivables and what steps they are taking to recover the same.
