CLOSE

27 December 2021, Monday

3 years ago

An ironclad case under Order 38 CPC is not necessary to make an interim order to secure the amount in dispute in arbitration. When the defence is prima facie untenable and the admission unequivocal, an order of deposit should be made: Bombay High Court

13 December 2021| Ultra Deep Subsea Pte Ltd. v. Hindustan Oil Exploration Company Ltd. & another | COAPL No. 22272 of 2021 Arb. P. No. 361 of 2021 | BP Colabawalla J | Bombay High Court | 2021 SCC OnLine Bom 5481

Upholding its jurisdiction to grant interim relief in foreign seated arbitrations, the Bombay High Court has, after discussing the law on the issue, passed an order securing the amount in dispute in arbitration (approximately USD 6,212,683.67).

The court found out prima facie that there was no real dispute as to the amounts payable because not only there were several admissions, no dispute had been raised at any time before the petitioner's legal notice. The petitioner had chartered a vessel to the respondent, and the respondent had extended the time charter on ten occasions and never disputed the vessel’s capability. Colabawalla J noted: “if there was any merit in this dispute, no prudent person would have continued to extend the Charter Party and continue to charter an incapable vessel or its crew, at least without informing the owner about the so-called inadequacies”.

Surveying the law on court's power to secure the amount in dispute, Colabawalla J ruled that:

  1. For considering interim measures, “the court would be guided by the principles which the Civil Courts ordinarily employ for considering grant or refusal of interim relief, particularly Order 39 Rules 1 & and 2 and Order 38 Rule 5, CPC”, but their texts do not unduly bind the court.
  2. The court must have due regard to the underlying purpose of Section 9, that is, to promote the efficacy of arbitration as a form of dispute resolution.
  3. Order 38 Rule 5 CPC are not fetters upon the Section 9 court's discretion. When the admission is clear and unequivocal, or there is no real dispute on the payable amounts, an order of deposit “may not only be made, but in the interest of justice, ought to be made”. Where the defence raised is prima facie untenable, and the petitioner has a good chance of success, an order of deposit to secure the claim can and indeed should be made under Section 9 ACA. [citing Jagdish Ahuja 2020 SCC OnLine Bom 849; Valentine Maritime 2021 SCC OnLine Bom 75; Essar House 2021 SCC OnLine Bom 149; Kotak Mahindra 2021 SCC OnLine Bom 305].

Referring to English authorities, the court also emphasised a clause of the charter party that required the respondent, even where an invoice is disputed, to pay first (“this clause is a salutary clause because it ensures … proper cash flow for the owner … and is in line with commercial common sense”).

An argument that the Section 9 remedy is not available in a foreign seated arbitration governed by foreign laws was emphatically rejected.

The court directed the respondent to deposit the amount or furnish a bank guarantee to the court's registry.

Read the decision here.

BACK   Next  

Categories: Adhunik Steels | Admitted Liability | Agreement to the Contrary | Applicability of Code of Civil Procedure | Applicability of Part I | Attachment Before Award | Balance of Convenience | Bank Guarantee | Conditions for Grant of Interim Measure | Interim Mandatory Injunction | Interim Measures by Court | Interim Measures in Foreign Seated Arbitration | Irreparable Loss | Jetpur Somnath | Jurisdiction | Jurisdiction in Foreign Seated Arbitration | Just and Convenient | Mandatory Orders | NHAI v. PNB | Order XXXIX CPC | Order XXXVIII CPC | Part I | Prima Facie Case | Scope of Section 9 ACA | Section 2 (2) ACA | Section 9 (1) (ii) (b) ACA | Section 9 ACA | Securing the Amount in Dispute in Arbitration | Valentine Maritime

JOIN OUR MAILING LIST:

connect with us: