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2020 Supreme(Del) 657
IN THE HIGH COURT OF DELHI AT NEW DELHI
V. Kameswar Rao, J.
Goodwill Non-woven(p) Limited - Appellant
Versus
Xcoal Energy & Resources Llc - Respondent
Original Miscellaneous Petition (I) (Comm) No. 120 of 2020
Decided On : 09-06-2020
Parag P Tripathi, Advocate, Sriniwas Ramaswamy, Advocate, Shikhar Khare, Advocate, Monish Panda, Advocate, Sumit Rai, Advocate, Kshitiz Arya, Advocate
The Court held that the petition under Section 9 of the Act was maintainable even though the arbitration was seated outside India. The Court also held that the Court can grant interim relief under Section 9 of the Act against a foreign party having no assets in India. The Court further held that the Court cannot refuse to entertain a petition under Section 9 of the Act on the ground that the foreign party does not have any assets in India.
Headnote:
ARBITRATION - Section 9 - Interim relief - Maintainability - Foreign seated arbitration - Applicability of Section 2(2) of the Act - Whether the Court can exercise its jurisdiction under the proviso to Section 2(2) of the Act - Whether the Court can grant interim relief under Section 9 of the Act against a foreign party having no assets in India - Whether the Court can refuse to entertain a petition under Section 9 of the Act on the ground that the foreign party does not have any assets in India - Whether the Court should ignore the principles or the well-known guidelines while deciding an application under Section 9(ii)(b) of the Act - Whether the Court should be unduly bound by the text of Order XXXVIII Rule 5 of CPC while exercising its powers under Section 9 of the Act - Whether the Court can pass orders mechanically as sought by the petitioner under Section 9 of the Act - Whether the Court can exercise its discretion in favour of the petitioner for grant of interim relief under Section 9 of the Act.
Fact of the Case:
Petitioner, an Indian company, entered into a contract with the respondent, a US-based company, for the sale and delivery of coal. The contract provided for arbitration in New York and the governing law was the law of New York. The petitioner made full payment to the respondent under the contract and the respondent shipped the coal to the petitioner. However, the respondent later informed the petitioner that the coal would not be discharged at the designated port until certain third parties, who had allegedly entered into separate agreements with the respondent, performed their respective contracts with the respondent. The petitioner terminated the contract and claimed a refund of the monies remitted under the contract along with damages in arbitration proceedings. The petitioner also filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim relief to secure the amount in dispute.
Finding of the Court:
The Court held that the petition under Section 9 of the Act was maintainable even though the arbitration was seated outside India. The Court held that the proviso to Section 2(2) of the Act, which makes Sections 9, 27, 37(1)(a) and 37(3) of the Act applicable to foreign seated arbitration, was incorporated to facilitate the parties to move the Court in India, even though the arbitration is seated outside India. The Court also held that the Court can grant interim relief under Section 9 of the Act against a foreign party having no assets in India. The Court held that the Court cannot refuse to entertain a petition under Section 9 of the Act on the ground that the foreign party does not have any assets in India. The Court further held that the Court should not ignore the principles or the well-known guidelines while deciding an application under Section 9(ii)(b) of the Act, but at the same time it should not be unduly bound by the text of Order XXXVIII Rule 5 of CPC. The Court also held that the Court cannot pass orders mechanically as sought by the petitioner under Section 9 of the Act. The Court further held that the Court can exercise its discretion in favour of the petitioner for grant of interim relief under Section 9 of the Act only if the petitioner satisfies the Court that (a) it has a prima facie case and balance of convenience in its favour and shall succeed in the arbitration proceedings and (b) that the respondent is acting in a manner as to defeat the realization of the future award that may ultimately be passed.
Issues: Whether the petition under Section 9 of the Act is maintainable - Whether the Court can grant interim relief under Section 9 of the Act against a foreign party having no assets in India - Whether the Court can refuse to entertain a petition under Section 9 of the Act on the ground that the foreign party does not have any assets in India - Whether the Court should ignore the principles or the well-known guidelines while deciding an application under Section 9(ii)(b) of the Act - Whether the Court should be unduly bound by the text of Order XXXVIII Rule 5 of CPC while exercising its powers under Section 9 of the Act - Whether the Court can pass orders mechanically as sought by the petitioner under Section 9 of the Act - Whether the Court can exercise its discretion in favour of the petitioner for grant of interim relief under Section 9 of the Act.
Ratio Decidendi: The Court held that the petition under Section 9 of the Act was maintainable even though the arbitration was seated outside India. The Court held that the proviso to Section 2(2) of the Act, which makes Sections 9, 27, 37(1)(a) and 37(3) of the Act applicable to foreign seated arbitration, was incorporated to facilitate the parties to move the Court in India, even though the arbitration is seated outside India. The Court also held that the Court can grant interim relief under Section 9 of the Act against a foreign party having no assets in India. The Court held that the Court cannot refuse to entertain a petition under Section 9 of the Act on the ground that the foreign party does not have any assets in India. The Court further held that the Court should not ignore the principles or the well-known guidelines while deciding an application under Section 9(ii)(b) of the Act, but at the same time it should not be unduly bound by the text of Order XXXVIII Rule 5 of CPC. The Court also held that the Court cannot pass orders mechanically as sought by the petitioner under Section 9 of the Act. The Court further held that the Court can exercise its discretion in favour of the petitioner for grant of interim relief under Section 9 of the Act only if the petitioner satisfies the Court that (a) it has a prima facie case and balance of convenience in its favour and shall succeed in the arbitration proceedings and (b) that the respondent is acting in a manner as to defeat the realization of the future award that may ultimately be passed.
Final Decision: The Court dismissed the petition filed by the petitioner under Section 9 of the Act.
JUDGMENT
V. Kameswar Rao, J. - This is a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, with the following prayers-:
i. Direct the Respondent to furnish adequate security in the form of a bank guarantee issued by a nationalized bank in India or such other security that shall cover the entire sum in dispute between the parties;
ii. Alternatively, direct the Respondent to deposit with this Hon''ble Court a sum of USD 1,182,735 which is equivalent to the amount paid by the Petitioner herein to the Respondent as consideration under the Contract dated 10.03.2020.
iii. Direct the amount so deposited by the Respondent be kept in an interest-bearing fixed deposit until the conclusion of the arbitration proceedings.
iv. Pass such other further order(s) in favour of the Petitioner as this Hon''ble Court may deem fit and proper in the facts of the present case.
2. The Petitioner, Goodwill Non-Wovens (P) Limited is a private limited company incorporated under the provisions of the Companies Act, 1956 having its registered office at 54, Todermal Road, Bengali Market, New Delhi 110001. The petitioner was incorporated in the year 2008 for the purpose of undertaking the business of buying, selling, exporting, importing, manufacturing, various commodities. The present petition is instituted, filed, verified and signed by the Director of the petitioner Company, Mr. Ashok Jain, on the basis of a Board Resolution date 15 May, 2020.
3. The respondent, XCoal Energy & Resources LLC., is a privately-owned global coal marketing and logistics company headquartered in Latrobe, Pennsylvania.
4. The parties entered into a Contract dated March 10, 2020 (''Contract'', for shot) for sale and delivery of 13,500MT of Consol BEFH US High CV Thermal Coal (''Coal'', for short) at the designated port. As per Clause 12 of the Contract, petitioner was to make requisite payment to the respondent and in turn the respondent was to make the delivery of the Coal to the petitioner upon receipt of such payment.
5. It is the case of the petitioner and admitted by the respondent that in terms of Clause 12 of the Contract, the petitioner established an irrevocable Letter of Credit bearing number 027LC01200720007 drawn on HDFC Bank, New Delhi (''Letter of Credit'', for short) for the entirety of the cargo value. Against the said Letter of Credit, full payment amounting to a sum of USD 1,182,735 was remitted to the respondent''s designated bank account held with Wells Fargo Bank, N.A., New York International Branch on April 21, 2020. Pursuant to the establishment of the aforesaid Letter of Credit, the respondent shipped to the petitioner 13,500MT of Coal on board the vessel MV Berge Toubkal from Console Marine Terminal, Baltimore, Maryland on March 22, 2020. The Commercial Invoice dated March 27, 2020 issued by the respondent (''Commercial Invoice'', for short) inter alia records that the payment under the aforesaid Letter of Credit was due at sight. The payment under the said Letter of Credit was subsequently realized by respondent on April 21, 2020.
6. It is the case of the petitioner that it even received a 12- Day Pre-Arrival Notice dated April 22, 2020 (''Pre-Arrival Notice'', for short) issued by the vessel agent of respondent. Vide the said Pre-Arrival Notice, the petitioner was informed that the vessel was due to arrive at the designated port on May 04, 2020, where the Coal would be discharged in accordance with the Contract. And in repose to the said Notice, the petitioner vide email dated April 23, 2020 wrote to respondent stating inter alia that it had performed its respective obligations including making the full payment under the Contract on April 21, 2020 and requested respondent to ensure immediate unloading and delivery of the Coal, which was due to arrive on May 04, 2020.
7. It is the case of the petitioner, on May 04, 2020, it received a copy of a marked e-mail sent by the respondent to M/s Kalyani (India) Private Ltd. (''M/s. Kal
