Furnishing of Security can be directed under Section 37 appeal

The Hon’ble Calcutta High Court has held that a party can be directed to furnish security under Section 37 appeal, for the loan as per the Agreement, even in absence of application under Section 9.

The Court held,

“21. This gives rise to an ancillary question as to whether in absence of an application under Section 9 of the 1996 Act, this Court whether in an appeal under Section 37(2)(b) of the said Act pass an order directing the appellant to secure any amount. The answer to this question lies in the nature of the order appealed against. It has one part which relates to jurisdiction of the Arbitrator to pass such order, the other part relates to the merits of the order based on facts of the case. It is correct as discussed above that ordinarily Court while setting aside the order in appeal on jurisdiction issue does not pass any further order except in an appropriate case. The appellants are all either residing or working for gain or carries on business outside the jurisdiction of this Court. The said agreement clearly provides in Clause 3.2(d) that the respondent can call upon the appellants to provide for security to secure the loan. The appellants have asked for stay of the order impugned. Even if the order is set aside on the ground of jurisdiction the Court while disposing the appeal impose condition in exercise of powers under Order 41 of CPC which is not inconsistent with any of the provisions of 1996 Act or the materials on record. The respondent is a Non-Banking Financial Company which operates on the basis of the license issued by the Reserve Bank of India (RBI) under Section 45JA of the Reserve Bank of India Act, 1949. In case of default of any loan, the respondent is accountable to several statutory authorities and banks. The Court, therefore, even in the absence of any application under Section 9 of the 1996 Act can pass necessary direction to the appellants to furnish security.”