A court may refer parties to arbitration despite allegations of fraud, as long as the agreement is not prima facie null and void, and can modify security conditions based on arbitral findings.

ORDER :

1. This application has been filed to permit the defendant/ applicant to withdraw the amount deposited to the tune of Rs.1,63,000/- together with accrued interest which is lying in the form of fixed deposit receipt dated 03.09.2024 to the credit of the present Suit.

2. The background of the present case and the order passed in Application No.5196 of 2024 dated 03.03.2025, which lead to the present application is extracted hereunder:

“The plaintiff entered into two time charter parties with the defendant in respect of the vessel “ASL Courageous” 2900 HP (the tug) and barge “ASLCO 3008” (the barge). Both the tug and the barge were operating under Singapore flags. As the charterer under these time charters, the plaintiff approached this Court by way of an action in rem under the the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (the Admiralty Act) by asserting a maritime claim. The suit claim is for recovery of a sum of Rs.1,66,66,666/- with further interest thereon at 18% p.a. from the date of suit till realization. The plaintiff had also prayed for the arrest of the tug and barge and for the sale thereof so as to enable the suit claim to be discharged from the sale proceeds.

2. By order dated 30.07.2024, a warrant of arrest was issued. Upon receipt of notice, the defendant came forward to provide security for the suit claim. After noticing that the interest claim was only from the date of plaint, by order dated 12.08.2024, a warrant of release was directed to be issued upon receiving banker’s cheque dated 08.08.2024 for a sum of Rs.1,66,66,666/-, which represents the principal suit claim. The Registrar General of this Court was directed to invest the proceeds of the banker-s cheque in an interest bearing fixed deposit account with the Indian Bank, Madras High Court Branch, to the credit of the suit. Such deposit was directed to be for an initial period of one year with the obligation to renew the same periodically until the disposal of the suit.

3. The defendant presented this application in the above facts and circumstances under Section 45 of the Arbitration and Conciliation Act , 1996 (the Arbitration Act) seeking reference of the dispute to arbitration. The affidavit in support of the application was affirmed on 18.09.2024. Thereafter, the defendant filed an application to condone the delay of 89 days in filling the written statement. The said application is pending.

4. Learned counsel for the plaintiff submitted that the dispute is liable to be referred to arbitration for the following reasons:

(i) Time charter party dated 02.03.2024 in respect of the tug contains a dispute resolution clause, which provides for arbitration before the Singapore Chamber of Maritime Arbitration. Likewise, the charter party relating to the barge also provides for dispute resolution through arbitration by the Singapore Chamber of Maritime Arbitration.

(ii) Upon the release of the tug and barge by providing security for the suit claim, the suit is converted from an action in rem to an action in personam. In support of this contention, learned counsel referred to and relied upon the judgment of the Hon-ble Supreme Court in M.V.Elisabeth and others v. Harwan Investment and Trading Pvt. Ltd. , 1993 Supp (2) SCC 433 (M.V. Elisabeth), particularly paragraph 83 thereof. Reliance was also placed on the judgment of a Division Bench of the Bombay High Court in Angsley Investments Limited v. Jupiter Denizcilik Tasimacilik Mumessillik San. Ve Ticaret Limited Sirketi and Others , 2023 SCC OnLine Bom 559 (Angsley Investments), especially paragraphs 11 and 12 thereof.