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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
MILIND N. JADHAV, J.
Karanja Terminal & Logistics Pvt Ltd - Petitioner
Versus
Sahara Dredging Ltd - Respondent
Commercial Arbitration Petition No. 257 of 2022 With Interim Application No. 4479 of 2022
Decided On : 13-03-2023
Civil Procedure Code, 1908 - Order XXXVIII - Rule 5 - Arbitration & Conciliation Act, 1966 - Section 37(2)(b) - Arbitration - Challenged - Seeking stay on enforcement and implementation of the order - Parties entered into a contract for dredging and reclamation works namely Capital Dredging and Maintenance Dredging - Contract was revised and additional contract was executed - In 2018–19 Respondent failed to fulfill its contractual obligation of dredging a minimum quantity of 10,000/- Cu.m. per day under revised contract - This entitled claimant to withhold 40% of the payment as per contractual payment clause under the title ‘rate of progress to be achieved’ - Claimant issued two Cure Notices to Respondent due to its failure to meet the deadline - These notices were responded to by respondent vide letters dated- At outset would submit that contentious reconciliation statement appended to the letter dated is not a concluded contract or an acknowledgment of liability - Whether amount stated in the reconciliation statement was part of the counter claim pleaded by the Respondent and whether it was contained in the pleadings – Held, impugned order dated passed by learned Arbitrator directing the Petitioner to furnish suitable security equivalent to the amount of Rs.5,66,30,579/-, hence does not call for any interference - Court therefore upholds the said direction. Needless to state that observations made in this judgment are prima facie in nature and do not intend to represent any final expression and opinion on any of the issues on which learned Tribunal is in seisin and it is directed that learned Tribunal shall proceed entirely uninfluenced by any observations contained in this judgment - It is clarified that this Court is in present case, essentially concerned with a case for interference with interlocutory direction of learned Tribunal under Section 37 of the said Act and for the reasons adduced herein before, answered the issue in the negative - Petition is accordingly dismissed - Pending interim application stands disposed of accordingly.
JUDGMENT :
1. The present Commercial Arbitration Petition filed under Section 37(2)(b) of the Arbitration & Conciliation Act, 1966 (for short “the said Act”) challenges the Order dated 02.05.2022 passed by the learned Arbitrator in Section 17 Application filed by Respondent. By the said order, the learned Arbitrator allowed Respondent’s Section 17 Application to the extent of directing the Petitioner (original claimant) to furnish security for the amount of Rs.5,66,30,579/- or provide a bank guarantee of a nationalized bank of the said amount, pending the arbitral proceedings.
2. Interim Application No. 4479 of 2022 is filed for seeking stay on enforcement and implementation of the order dated 02.05.2022 which is the subject matter of challenge in the Arbitration Petition.
3. Arbitration Petition is taken up for final hearing and disposed of by this order.
4. To appreciate the lis between the parties leading to the passing of the impugned order, such of the relevant facts as are relevant are briefly set out hereunder:-
(ii) In 2018–19 Respondent failed to fulfill its contractual obligation of dredging a minimum quantity of 10,000/- Cu.m. per day under the revised contract. This entitled the claimant to withhold 40% of the payment as per the contractual payment clause under the title ‘rate of progress to be achieved’.
(iii) On 05.03.2021 and 12.04.2021 claimant issued two Cure Notices to Respondent due to its failure to meet the deadline. These notices were responded to by respondent vide letters dated 09.03.2021, 13.04.2021 and 18.04.2021.
(iv) On 21.05.2021 notice of termination was issued by claimant’s advocate invoking arbitration under Clause 15.3 of the contract.
(v) On 01.06.2021 and 16.06.2021 without prejudice settlement meetings were held between parties on video conference.
(vi) On 17/6/2021 during the third settlement meeting, officers of both parties drew up a joint reconciliation statement reflecting invoice amounts raised by Respondent and certified by claimant. This reconciliation statement reflecting the amount of Rs.5,66,30,279/- is the bone of the contention in the present proceeding.
(vii) On 14.07.2021 Respondent’s Advocate issued letter, inter alia, enclosing the reconciliation statement between parties alongwith admitted claim of Rs. 10.27 crore due to the Respondent.
(viii) On 20/7/2021 claim of Respondent was denied by claimant’s Advocate calling upon the Respondent to appoint its Nominee Arbitrator. This reply letter does not outrightly rejects or denies the reconciliation statement.
(ix) On 23.03.2021Respondent filed arbitration Petition before this Court.
(x) On 06.09.2021 Respondent filed Section 9 Petition before this court seeking relief of deposit.
(xi) On 23.11.2021 this Court constituted the Arbitral Tribunal and directed Respondent’s Petition under Section 9 to be heard before the learned Arbitrator.
(xii) On 25.01.2022 claimant filed Application under Section 17 of the said Act for seeking interim relief for securing its claims in arbitration, inter alia, on the ground that Respondent was not financially sound.
(xiii) On 18.02.2022 Respondent filed its defense along with its counter claim before the learned Arbitrator.
(xiv) On 03.03.2022 claimant filed its reply to Respondent's Section 9 / Section 17 application and annexed thereto an opinion of its C.A. stating claimant’s financial strength of Rs. 700 Cr.
(xv) On 02.05.2022 learned Arbitrator passed the impugned order, inter alia, partly allowing the Application by directing Applicant to provide security or provide a bank guarantee for the said amount of Rs.5,66,30,579/- pending arbitration.
(xvi) Hence th
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The discretionary power under section 17 of the A&C Act should be exercised sparingly and not to convert indeterminate and unsecured counter-claims into secure claims.
An arbitral tribunal, while adjudicating an application for interim protection under Section 17, does not determine the lis between the parties.
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The arbitral tribunal has broad powers to issue interim measures under the Arbitration and Conciliation Act, ensuring protection of claims during ongoing proceedings.
The main legal point established in the judgment is the applicability of Section 9 of the Arbitration and Conciliation Act, 1996 to international commercial arbitration, and the court's authority to ....
The main legal point established in the judgment is that the order passed by the Arbitrator under section 17(1)(ii)(b) of the Arbitration and Conciliation Act, 1996 was a proper exercise of jurisdict....
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