The Court has the power to grant interim measures under Section 9 of the Arbitration Act against a third party who is not a party to the arbitration agreement, if that third party is likely to be affected by the interim measures. The Court also has the power to grant interim measures to secure the amount in dispute in arbitration, which may be in the form of a bank guarantee or deposit of money in Court.

JUDGMENT :

R.D. DHANUKA, J.

1. By these two appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”) both these appellants (original respondent no. 1 and respondent no. 2 respectively) have impugned the order passed by the learned Single Judge granting interim measures in favour of the respondent no. 1 (original petitioner) under Section 9 of the Arbitration Act.

2. The appellant in Commercial Appeal (L) No. 7013 of 2020 has impugned the entire order passed by the learned Single Judge whereas the appellant in Commercial Appeal (L) No. 8386 of 2020 has impugned the directions issued by the learned Single Judge in paragraph 42(e)(i) to (vi) of the order dated 11th November 2020. By consent of parties, both these appeals were heard together and are being disposed of by common order. Some of the relevant facts for the purpose of deciding these two appeals are as under.

3. On 21st August 2019, Oil and Natural Gas Corporation Limited (hereinafter referred to as “ONGC”) entered into a contract with the appellant i.e. Valentine Maritime Limited (hereinafter referred to as “VML”) for laying of 165.77 kms. subsea pipeline spread in 23 segments including associated subsea activities, Installation of 27 nos. riser, Modification of 18 nos. topside and Demolition of 86 nos. riser (redundant and replacement). On 30th October 2019, ONGC issued a Letter of Award in favour of VML. On 30th October 2019, VML issued a Letter of Acceptance appointing Kreuz Subsea Pvt. Ltd. (hereinafter referred to as “KSS”) as a Sub-contractor for subsea installation work associated with the pipeline replacement project of ONGC i.e. part of the work under ONGC-VML contract.

4. It is the case of KSS that VML failed to establish letter of credit for 20% of the Sub Contract value i.e. US$ 5.4 million during the period between October 2019 and March 2020. Only in the month of February 2020, VML issued a conditional Letter of Credit for US $ 2 million. The KSS therefore did not issue performance bank guarantee (PBG) of 12.2% i.e. US$ 2.9 million. It is the case of KSS that KSS repeatedly offered/reiterated that on the VML establishing a contractually compliant irrevocable and unconditional Letter of Credit for US $ 5.4 million, they will immediately issue a contractually compliant PBG for US $ 2.9 million.

5. It is the case of KSS that till the end of 2020, there was no dispute between KSS and VML. The KSS had received the amount of their invoice approximately US $ 12.118 Million. However, after 24th March 2020, progress of the work was affected by the Nation Wide Lockdown. There was also delay by the VML in timely delivery/supply of materials. The KSS however preserved and almost managed to maintain the pace of the work. By letter dated 14th May 2020, VML recorded its appreciation for KSS. In the month of May 2020, the KSS submitted invoices for US $ 4765570 duly supported by completion certificates signed/issued by ONGC. It is the case of the KSS that VML did not raise any dispute within the five day period as stipulated.

6. By letter dated 27th May 2020, the VML alleged that there had been one weeks’ delay by KSS in mobilisation of the Barge in February 2020 under Clause 11.2(a) and further it was entitled to provisionally withhold as liquidated damages an amount of 10% of the Contract value under Clause 11.2 (b) i.e. USD 2,567,346 until the KSS remobilised its marine spread and completed the same. Entitled to provisionally withhold as liquidated damages an amount of 10% of the Contract value under Clause 11.2 (b) i.e. USD 2,567,346 until the KSS remobilised its marine spread and completed the same. In the said letter, it was alleged by VML that as the KSS had failed to furnish a Performance Bank Guarantee for 12.20%, the VML was entitled to withhold 12.20% of the contract value i.e. US $ 2,972,900. The VML further alleged that it was not liable to make payment of the April invoices of US $ 4.765 Million.

7. It is the case