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ANDHRA PRADESH HIGH COURT
Ninala Jayasurya and Nyapathy Vijay, JJ.
Tuf Metallurgical Private Limited – Petitioner
versus
Bst Hk Limited and Ors. – Respondents
International Commercial Arbitration Appeal No.2 of 2024
Decided on 3.1.2025
(A) Civil Procedure Code, 1908 – Order 38 Rule 5 – Arbitration and Conciliation Act, 1996 – Section 9 – Attachment before Judgment – Principles for granting interim order as provided in CPC cannot be given a go by, but rigour of procedures prescribed in CPC need not be followed – After a prima facie case is made out, mere technicality of absence of averments incorporating grounds for attachment before judgment under Order 38 Rule 5 CPC should not deter Court from passing interim order under Section 9 of Arbitration Act – There should be a prima facie case and possibility of erosion of asset value making arbitral award nugatory – Even in absence of necessary pleadings, Court can exercise power of attachment under Order 38 Rule 5 CPC – Auch a power can be exercised de hors pleadings just because language of Section 9 of Arbitration Act enables Civil Court to pass orders which are just and convenient. (Paras 24, 27 and 30)
(B) Civil Procedure Code, 1908 – Order 38 Rule 5 – Attachment before Judgment – Order 38 Rule 5(3) CPC also provides for conditional attachment of whole or part of property so specified – Order 38 Rule 5 CPC does not debar Court to pass ex-parte order of attachment if Court is of the opinion that there is requirement of doing so as defendant might dispose of property in interregnum – On attachment, defendant can appear before Court and show cause as to why attachment should be removed. (Paras 34 and 35)
Result: Appeal dismissed.
JUDGMENT
ICOMAA. No.2 of 2024
Nyapathy Vijay, J.—The present appeal is filed under Section 37 of Arbitration and Conciliation Act, 1996 questioning the order dated 12.09.2024 passed by the learned single Judge of this Court in I.A.No.2 of 2024 in ICOMAOA.14 of 2024.
2. Facts of the case: The brief facts leading to this case are as under:
The 1st Respondent company was registered under the Laws of Hong Kong and the Appellant company was incorporated under the Indian Companies Act, 1956 and both are engaged in the business of trading of iron ore. The Appellant and Respondent No.1 had executed a contract on 19.12.2023 for sale/purchase of 55000 WMT (+/- 10% WMT) iron ore fines vide contract No.BST/TUF/20231219. As per the contract, the Appellant represented that the Cargo with certain specifications would be supplied. The relevant part of the specification for the purpose of this case is that the iron ore would be having an ‘Fe’ content of 56%.
3. As per Clause 4.1 of the Contract, the base price of the Cargo was USD 96.00 per DMT CFR FO on the premise that the cargo of iron ore has 56% ‘Fe’ content. As per Clause 5, if the ‘Fe’ content of the Cargo was below 54.00%, the 1st Respondent had a right to renegotiate the price.
4. As per Clause 6 of the Contract, 96% of provisional payment would be made by the 1st Respondent on submission of Letter of Credit (L/C). The balance of 4% payment would be realized by submission of documents referred in Clause 7.2 of the Contract. The certificates of quality and quantity issued by a named surveyor S.K. Mitra would be the basis on which the provisional payment of 96% would be made and the clause further provided that the final survey of the Cargo would be conducted by C.I.Q (Entry-Exit Inspection and Quarantine of the People’s Republic of China) for determining the final quality and quantity of the Cargo shipped. The contract provided that the CIQ results at the discharging port would be final. The ‘Fe’ refers to the iron content in the Cargo.
5. While so, a Cargo was loaded at Vizag port on ‘MV Oriental Wind’ by the Appellant on 08.01.2024 along with a certificate issued by the nominated surveyor i.e. S.K. Mitra. As per the certificate issued, the ‘Fe’ content of the Cargo is 56.04%. Upon shipment of the Cargo and after due submission of document (L/C), the Appellant realized provisional payment of 96% of the value of the Cargo amounting to US$ 4,908,653.99. The Cargo was discharged at Lanshan port, China on 28.01.2024. On inspection of the Cargo by CIQ at the discharge port, the ‘Fe’ content of the Cargo was found to be an average of 52.21%. As the CIQ report was final, as per clause 9 of the Contract, since the ‘Fe’ content of the Cargo was less than 54%, the Respondent No.1 invoked the contractual clause and called for a price re-negotiation.
6. After negotiations, Addendum No.BST/TUF/20231219-1 dated 06.03.2024 was executed by the Appellant and Respondent No. 1. As per the Addendum, the parties agreed to appoint third-party agency, selected by Respondent No.1 i.e. Bureau Veritas (BV), to conduct dynamic re-sampling and reinspection of the Cargo. On 30.04.2024, BV issued a certificate that the average ‘Fe’ content of the Cargo was 52.60%. On the basis of the BV certificate, the price of the Cargo was to be adjusted with reference to the prevailing import price for ‘Fe’ 53-52% of Indian Origin at the time of issuance of certificate by BV.
7. Parallelly, the Respondent No.1 sold the Cargo to an importer in China, i.e. New Tianjin Steel ITG Mining Company Ltd., which in turn sold the Cargo to its buyer, one Zhejiang Hanggong Energy Co., Ltd., in the domestic market in China @ US$ 56/DMT which was the prevailing import price in China for Indian origin iron ore fines having ‘Fe’ content of 53-52%. Accordingly, the Respondent No.1 sought for re-negotiation of the original price of the Cargo. As per the Addendum dated 06.03.2024, the price payable by the Respondent No.1 for the Cargo @ US$ 56/D
(1) Attachment before Judgment – Even in absence of necessary pleadings, Court can exercise power of attachment under Order 38 Rule 5 CPC.(2) Attachment before Judgment – Order 38 Rule 5 CPC does not....
Interim relief under Arbitration Act can secure assets to prevent loss of arbitral awards, necessitating enforcement of contractual obligations despite procedural technicalities.
The court emphasized the necessity of satisfying pre-conditions under Order 38 Rule 5 CPC for granting interim relief under Section 9 of the Arbitration Act.
An attachment before judgment requires a strong prima facie case and demonstration of urgency, which the appellant failed to establish.
A conditional order of attachment under Section 9 of the Arbitration and Conciliation Act does not constitute a final order, allowing the respondent to furnish security to lift the attachment.
The financial distress of a party cannot justify securing unadjudicated claims as interim relief under Section 9 of the Arbitration Act; a prima facie case, balance of convenience, and irreparable ha....
The main legal point established in the judgment is the wide powers of the court under Section 9 of the Arbitration and Conciliation Act, 1996 to grant interim measures and protect the subject matter....
The main legal point established in the judgment is that the Court applied the principles of strong prima facie case and weighing the balance of convenience in favor of the respondent company in gran....
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