Back
2023 Supreme(Del) 4823
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jyoti Singh, J.
Handicraft And Handlooms Exports Co of India – Appellant
Versus
Smc Comtrade Limited – Respondent
Arb. A. (COMM.) 19 of 2023 & I.A. 8304 of 2023 and ARB. A. (COMM.) 21 of 2023
Decided On : 10-07-2023
Mr. Varun Singh, Mr. Akshay Dev and Mr. Rishabh Rana, Advocates, for the Petitioner in ARB. A. (COMM.) 19 of 2023 & I.A. 8304 of 2023 & for the Respondent in ARB. A. (COMM.) 21/2023.
Mr. Shreyas Jain, Advocate with Mr. Suman Kumar, Company Secretary, for the Respondent in ARB. A. (COMM.) 19 of 2023 & I.A. 8304 of 2023.
Mr. Varun Singh, Mr. Akshay Dev and Mr. Rishabh Rana, Advocates in & for the Respondent in ARB. A. (COMM.) 21/2023.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(6) and 17 - Challenge to arbitrator's direction to preserve Rs.5 Crores til final award - Appellant contends denial of fair hearing; Respondent claims reasoned basis for order - Appellant failed to present case despite notice - Court affirmed arbitrator's discretion aiding interim relief to safeguard subject matter (Paras 15, 40, 46, 51).
(B) Nature of interim relief under Section 17 - It is akin to Section 9, allowing protection of claim until resolution; Arbitrator must balance equities (Paras 36-38).
Facts of the case:
The Handicraft and Handlooms Exports Corporation of India Ltd. challenged a preservation order issued to secure part of the disputed amount arising from agreements related to bullion imports, amid ongoing arbitration following several failed attempts at amicable resolution (Paras 2-10).
Findings of Court:
The court found that the Arbitrator's order was well-reasoned and in accordance with statutory powers to ensure that the claimant could obtain relief if awarded.
Issues: Whether the order to preserve funds was justified given claims of pending investigations and the non-appearance of the appellant in arbitration.
Ratio Decidendi: The court ruled that the Arbitrator was justified in proceeding absent the appellant's representation and that interim protection is essential to prevent an unjust outcome pending final arbitration (Paras 46-50).
Result: Appeals dismissed.
| Table of Content |
|---|
| 1. factual background of the case. (Para 1 , 2 , 3 , 4 , 5) |
| 2. assertion of contractual claims and disputes. (Para 6 , 7 , 8) |
| 3. chronology of arbitration initiation. (Para 9 , 10 , 11) |
| 4. arbitration procedure and parties' participation. (Para 12 , 13 , 14) |
| 5. arguments against the arbitrator's process. (Para 15 , 16 , 17) |
| 6. legal standards for interim orders. (Para 18 , 19 , 20 , 21) |
| 7. justifications for the arbitrator's decisions. (Para 22 , 23 , 24 , 25 , 26 , 27) |
| 8. judicial approach towards appeals. (Para 29 , 30 , 31 , 32 , 33 , 34) |
| 9. clarification of arbitration law principles. (Para 35 , 36 , 37 , 38 , 39) |
| 10. assessing arbitrator's exercise of discretion. (Para 40 , 41 , 42 , 43) |
| 11. evaluation of evidence and credibility. (Para 44 , 45 , 46 , 47) |
| 12. conclusions drawn on substantive claims. (Para 48 , 49 , 50) |
| 13. final rulings and dismissal of appeals. (Para 51 , 52 , 53 , 54 , 55) |
JUDGMENT
Jyoti Singh, J. ARB. A. (COMM.) 19/2023 has been filed by the Handicraft and Handlooms Exports Corporation of India Ltd. (`HHEC'), challenging the order dated 02.03.2023, whereby the learned Arbitrator has allowed an application filed by SMC Comtrade Limited (`SMC') under Section 17 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the `1996 Act') directing HHEC to preserve a sum of Rs.5 Crores in the form of an FDR in the name of SMC till the passing of the final award, within two weeks of the order. ARB. A. (COMM.) 21/2023 has been filed by SMC challenging the order dated 02.03.2023 limited to enhancement of the sum of Rs.5 Crores to Rs.10,51,99,624/-, the total amount under the claims. Since both the appeals arise out of a common order and the issues involved are inextricably linked, they are being decided by a common judgment.
2. The learned Arbitrator is in seisin of disputes between the parties with respect to First Agreement dated 13.09.2012 for import of gold/silver bars, coins etc. (Bullion) on behalf of HHEC, which is a Government company within the meaning of Section 617 of Companies Act, 1956 and was engaged in the field of export of handicraft and handloom products, jewellery etc. and was nominated by the Government of India as an agency to import gold/silver/platinum under the Foreign Trade Policy. As per the Agreement, subject to satisfaction of the conditions precedent, SMC was to place an indent on HHEC alongwith requisite security amount for import of Bullion on consignment stock basis and/or letter of credit, stand-by letter of credit, buyer's credit indicating purity of Bullion, quantity, delivery date, premium, provisional CIF price etc. On satisfaction of the indent, HHEC was to place an order on the foreign supplier and obtain a proforma invoice.
3. SMC was required to deposit with HHEC the applicable custom duty including taxes and levies, if any, clearing and handling charges etc. immediately on arrival of Bullion in India including Demurrage/detention charges, if any. Delivery of the Bullion against purchases made by SMC, in accordance with the various clauses of the First Agreement, was to be made by HHEC to the authorized representative of SMC.
4. It is stated by SMC that upon obtaining the buyer's credit, the proceeds of sale consideration of the Bullion to SMC, were to be placed in term deposit with a bank for a period mutually agreed between SMC and HHEC and the interest accrued thereon was to be credited to SMC after tax deduction at source. It is SMC's case that the same arrangement applied pari passu to SMC's margin money with HHEC and the rates of pre-determined margin of profit which was to accrue to HHEC by virtue of the transactions were detailed in Clauses 9.1, 9.2 and 9.3 of the First Agreement dated 13.09.2012.
5. Pursuant to circulars issued by the Reserve Bank of India dated 22.07.2013 and 14.08.2013, subjecting gold imports to `20:80 Scheme' whereby 20% of every lot of gold imported into the country was to be exclusively made available for the purpose o
