APHC010558612025

IN THE HIGH COURT OF ANDHRA PRADESH

AT AMARAVATI

(Special Original Jurisdiction)

[3524]

WEDNESDAY, THE SEVENTH DAY OF JANUARY

TWO THOUSAND AND TWENTY SIX

PRESENT

THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI

THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM

INTERNATIONAL COMMERCIAL ARBITRATION APPEAL NO: 2/2025

Between:

1. ZION SHIPPING LTD., HAVING ITS REGISTERED OFFICE AT 25TH

FLOOR, WORKINGTON TOWER, 78, BONHAM STRAND, SHEUNG

WAN, HONG KONG EMAIL ADDRESS

SHIDDINA@OCEANICDATH.COM. REPRESENTED BY ITS

AUTHORISED SIGNATORY MR MADALA SIINIVAS.

...PETITIONER

AND

1. SARALA FOODS PVT LTD, HAVING ITS REGISTERED OFFICE AT

D.NO 1-361 (OLD D.NO. 1-215/A) UPPALANKA, YANAM ROAD,

KARAPA MANDAL, EAST GODAVARI, KAKINADA RURAL, ANDHRA

PRADESH, INDIA, 533016 EMAIL ADDRESS

MD.SARALAFOODS@QMAIL.COM MD@SARALAFOODS.COM

RAIASEKHAR.MANQIDUDI@NORAOASHIDDINA.COM

2. M/S SRI SEETARAMANJANEYA SORTEX, HAVING ITS OFFICE AT D.

NO. 1-215/A, YANAM ROAD, UPPALANKA KARAPA MANDAL,

KAKINADA -533016. EMAIL ADDRESS

RAIASEKHAR.MANAIDUDI@NORAOASHIDDINA.COM

3. M/S AMIT CHAWAL UDHYOG, HAVING ITS OFFICE AT SINODHA

ROAD, TILDA NEORA, RAIPUR, CHATTISGARH 493114 EMAIL

ADDRESS- RAIASEKHAR.MANQIDUDI@NORQOASHIDDINQ.COM

4. KAKINADA SEAPORTS LTD, HAVING ITS REGISTERED OFFICE AT 8 -

2-418, MEENAKSHI HOUSE, 3RD FLOOR, ROAD NO. 7, BANJARA

HILLS, HYDERABAD- 500 034, TELANGANA, INDIA EMAIL ADDRESS

MAILKKD@KAKINADASEAPORTS.IN PORT PREMISES AT 2ND

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FLOOR, PORT ADMINISTRATIVE BUILDING BEACH ROAD,

KAKINADA - 533007.

...RESPONDENT(S):

pleased to set aside the Final Order dated 13.10.2025 passed by the Ld.

Single Judge of this Honble High Court in ICOMAOA. No. 5 of 2024 and

consequently direct the Respondents to fnairitain the security amount of USD

296,326.74 already deposited with this Honble Court until the disposal of the

arbitration proceedings between the Appellant and Respondents and pass

Counsel for the Petitioner:

1. SAI SANJAY SURANENI

Counsel for the Respondent(S):

1.

The Court made the following:

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THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI

THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM

I.C.O.M.A.A. No.2 of 2025

JUDGMENT: (per Hon’ble Sri Justice Maheswara Rao Kuncheam)

The present appeal is filed under Section 37 of the Arbitration and

Conciliation Act, 1996, by the appellant Zion Shipping Ltd., being

aggrieved by the Order dated 13.10.2025 passed by the learned Single

Judge of this Court in ICOMAOA No.5 of 2024.

2. The backdrop of the case is that initially, the appellant Company, by

invoking Section 9 of the Arbitration & Conciliation Act (in short ‘Act’), filed

ICOMAOA No.5 of 2024, before the learned Single Judge, seeking the

following main relief:-

“…..pleased to a Ex parte order maintenance of the status quo attachment

preservation interim custody or sale of 1600 MT of rice loaded/ being loaded on

to the vessel MV BULK MANARA at the anchorage of 4

th

Respondents port

pending the issuance of arbitration award b Ex parte direct Respondents to

furnish security in favor of the Petitioner for the sum of USD 296,326.74 along

with interest pending the issuance of arbitration awards and pass…..”

3. At the time of admission, the learned Single Judge on 23.04.2024

passed the ex parte conditional order of attachment of stock in trade of

1600 MTs of rice, subject to furnishing of security of USD 29,296,326.74

within 24 hours. The 1

st

respondent Company complied with the said

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conditional order dated 23.04.2024, by depositing the security amount on

24.04.2024 before the Registrar (Judicial) of this Court.

4. However, the 1

st

respondent Company filed ICOMAA No.3 of 2024

against the interim order dated 23.04.2024, passed in ICOMAOA No.5 of

2024 before the Division Bench of this Court. After hearing both sides,

the Hon’ble Division Bench pleased to direct the 1

st

respondent to submit

its objections /explanation before the learned Single Judge by stating their

case. Further, it is observed that in such an event, the learned Single

Judge shall pass appropriate orders, in accordance with law.

5. Consequently, the 1

st

respondent Company filed I.A.No.1 of 2025

under Order XXXIX Rule 4 C.P.C., to vacate the ex parte interim order

dated 23.04.2024 of the learned Single Judge of this Court. The learned

Single Judge, after hearing the arguments on both sides elaborately in

ICOMAOA No.5 of 2024 pleased to pass the orders dated 13.10.2025,

whereby and whereunder vacating the interim orders dated 23.04.2024

made in I.A.No.1 of 2024 and, as a result, dismissed the application filed

by the appellant Company and also directed the Registry to return the

security amount deposited by the 1

st

respondent. Assailing the said order

dated 13.10.2025 made in ICOMAOA No.5 of 2024, the instant appeal

emanated under Section 37 of the Act before us.

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BRIEF CASE OF THE APPELLANT:

6. The appellant, Zion Shipping Ltd., is a company incorporated under

the laws of Hong Kong, engaged in the commercial activity of owning and

chartering ocean-going vessels for maritime transportation. Respondent

Nos.1 to 3 are entities involved in the export of agricultural commodities,

primarily rice, etc., and are stated to have availed the services forming the

subject matter of the present dispute. Respondent No.4 is the operator of

the Kakinada Port and has been impleaded only as a formal party, without

any independent relief against it.

7. The appellant and respondent Nos. 1 to 3 entered into a fixture

note/charterparty agreement dated 12.03.2021, under which the

appellant, as owner of the vessel MV HAN THAR, chartered the said

vessel to respondent Nos. 1 to 3 for the carriage of 9,000 MT of rice from

Kakinada (port of loading) to Ho Chi Minh City, Vietnam (port of

discharge). The fixture note stipulated, inter alia, the quantity of cargo,

ports of loading and discharge, freight payable, laytime, and other

contractual covenants. It further provided for payment of demurrage at the

rate of USD 7,500 per day for any delay at the loading or discharging ports

and contained an arbitration clause providing for resolution of disputes by

arbitration in Singapore. Pursuant to the said agreement, the appellant

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duly carried the cargo, and upon arrival at the port of discharge, tendered

the Notice of Readiness on 21.05.2025.

8. As per the terms of the Fixture Note dated 12.03.2021, the

discharge of the cargo was required to be completed within 3 days and 16

hours, i.e., on or before 26.05.2021, but contrary to the contractual

stipulation, the discharge commenced on 29.05.2021 and was finally

completed only on 12.06.2021, resulting in total discharge period of 20

days and 19 hours. After deducting the contractually permitted laytime,

the delay occurred was 17 days and 2 hours. Consequently, the appellant,

in accordance with Clause 7 of the fixture note, issued Statement of Facts

dated 23.06.2021 and raised an invoice for USD 128,409.74 towards

demurrage, which, under the contract, was required to be paid within 15

days of submission of the supporting documents, i.e., on or before

07.07.2021. However, the respondents 1 to 3 failed and neglected to

honour the contractual obligation and made no payment towards the

demurrage claimed.

9. The appellant, through its authorised agent, issued several

reminders to respondent Nos.1 to 3 calling upon them to honour the

contractual obligation; however, no meaningful or constructive response

was forthcoming. Significantly, the respondents at no point disputed or

denied their liability towards the demurrage claim. As the default persisted,

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the appellant issued legal notice dated 06.08.2021 to respondent Nos.1

to 3, which also evoked no reply. Thereafter, on 18.04.2024, the appellant

raised an updated invoice for USD 128,409.74, together with interest at

24% per annum from July 2021, and additionally sought arbitration and

legal costs quantified at USD 80,000, thereby enhancing the cumulative

claim to USD 296,326.74 and the same yielded no result. In those

circumstances, the appellant approached this Court by filing an

application under Section 9 (1) of the Act, seeking an order of attachment

before judgment in respect of 1600 MT of rice, valued at USD 200 per MT,

belonging to the 1

st

respondent and scheduled to be loaded on the vessel

MV BULK MANARA , presently anchored at the port operated by

respondent No.4.

10. This Court vide an ex parte interim order dated 23.04.2024 in

ICOMAOA No.5 of 2024 directed respondent Nos.1 to 3 to furnish security

for the amount of USD 2,96,326.74 within 24 hours from the time of receipt

of notice and further directed to attach the cargo of rice of 1600 metric

tonnes being loaded on to the vessel MV BULK MANARA in the 4

th

respondent Port and if the security is furnished as directed, the order of

attachment shall be raised, otherwise in default the attachment shall

continue until further orders. Subsequently, arbitration proceedings were

initiated by the appellant for recovery of the claim amount, and the same

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are pending final adjudication due to the matter is being heard before this

Court. Finally, ICOMAOA No.5 of 2024 was dismissed vide orders dated

13.10.2025 by the learned Single Judge of this Court on merits.

BRIEF CASE OF THE RESPONDENTS :

11. Conversely, the respondents 1 to 3 claim that the appellant has no

title or interest at the relevant point of time i.e., at the time of attachment

under order dated 23.04.2024, subject cargo was being exported to

Sharjah, UAE on the vessel, ‘BULK MANARA’ by respondent No.1 under

a FOB (free on board) contract dated 25.03.2024, where the very title of

the cargo attached had already passed on to the buyer upon the cargo

being loaded on board the vessel.

12. It is the case of the 1

st

respondent that they were constrained to

deposit USD 196,480.00 before the Registry of this Court and that they

have deposited the alleged exaggerated amount claimed by the appellant.

OBSERVATIONS OF THE LEARNED SINGLE JUDGE:

13. The learned Single Judge, after perusing the record and considering

the submissions of both sides, framed the following questions:

“1) whether applicant has a strong/good prima facie case,

2) whether balance of convenience is in favour of granting

interim relief,

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3) whether applicant has approached the court with

reasonable expedition, and

4) whether the respondents is attempting to remove or

dispose of its assets with intention of defeating the decree

that may be passed.”

14. The learned Single Judge, after appreciating all the facts and

circumstances coupled with legal dictums, passed the order vacating the

ex parte interim orders dated 23.04.2024 and dismissed the petition filed

under Section 9 of the Act (ICOMAOA No.5 of 2024) on merits vide orders

dated 13.10.2025. For the sake of convenience, the relevant finding of

the learned Single Judge extracted hereunder:

“……..30…..This Court is not impressed with the

general and vague statements made. This is for the reason

that first of all petitioner has not given any specific details or

particulars of the assets which respondent is proposing to sell.

Strong possibility of diminution of assets is required to be

shown. This Court is conscious that all above do not require

applicant to demonstrate with actual proof. Having said that

still some amount of material is required to be placed in

support. Secondly, the cargo of rice, which is sought to be

attached, is merely stock in trade and the same does not

constitute to be a substantive asset.

Against the above dismissal order, the instant appeal was emanated

before this Court under Section 37 of the Act.

15. Heard Sri O.Manohar Reddy, learned Senior Counsel representing

the learned counsel for the appellant and Sri Manoj Khatri, learned

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counsel for respondent Nos.1 to 3. Perused the entire material available

on record.

SUBMISSIONS OF THE APPELLANT’S COUNSEL :

16. The learned Senior Counsel for the appellant contended that the

balance of convenience is to be gauged with reference to whether, , in the

absence of security, the appellant would be able to effectively enforce any

award against the respondents, and that it should not be linked to

considerations of expediency. With regard to the expediency, he submits

that the appellants have approached this Hon’ble Court when it located

the assets belonging to the respondents.

17. He further submits that the appellants did approach the court within

reasonable expediency, given that the limitation period in Singapore

where the arbitration seat is located.

18. The learned counsel asserts that the Raman Tech case was

rendered in the context of Order 38 Rule 5 provisions and has no

applicability here. And that the learned Single Judge has erred in relying

on the judgment of Hon’ble Supreme Court in Sanghi Enterprises to

apply Order 38 Rule 5 principles in the context of S.9 application of the

Act given that the judgment does not consider the binding precedent of

the Essar House Case.

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19. He further submits that the respondents are regular defaulters and

the appellant has doubts about the financial health of the respondents.

The learned counsel submits that the appellant is apprehending the

possibility that the respondents would try to defeat the award.

SUBMISSIONS OF THE LEARNED COUNSEL FOR RESPONDENT

Nos.1 to 3:-

20. Learned counsel for respondents Nos.1 to 3 contended that the

order of the learned single Judge should be sustained.

21. It is the contention of the respondents’ counsel that the very scope

and parameters of Section 37 of the Act are very narrow, and the appellant

has not been able to demonstrate their case to contradict the reasoned

orders passed by the learned Single Judge.

22. The learned counsel submits that the fundamental basis of the

petition seeking attachment of the subject cargo is flawed as respondent

No.1 has no title or interest in the attached cargo at the time of attachment

under Order dated 23

rd

April 2024 as the subject cargo was being exported

to UAE under FOB (Free on Board) contract, wherein, once the goods

cross the ship’s rail the seller neither has title nor possession nor any

insurable interest as the buyer becomes the owner of goods and bears all

risks associated with them.

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23. The learned counsel for the respondents also contends that the

appellant has grossly failed to show that respondent No.1 was in the

process of alienating of its assets with an intent to defeat the alleged claim

of the Appellant which is prime requirement under Order 38 Rule 5 of the

Civil Procedure Code which is akin to Section 9 of the Arbitration and

Conciliation Act, 1996. He further contends that respondent No.1 is in the

regular course of business and was in no way in process of

alienating/disposing of its assets with an intent to defeat the alleged claim

of the Appellant.

24. He argues that the vessel M.V Han Thar was supposed to reach the

discharge port i.e., Ho Chi Minh City, Vietnam, on or about 21

st

May 2021,

but the vessel reached Vung Tau on 21

st

May 2021 and the appellant

tendered Notice of Readiness, hence, the appellant's claim of alleged

demurrage is not maintainable and is invalid. He further submits that even

otherwise, the appellant’s claim is in the nature of damages, which

warrants adjudication, and without the same, no security can be granted.

25. The learned counsel for the respondents also contends that the

appellant cannot seek attachment under Section 9 of the Act, due to his

inexplicable delay for three years from 23.06.2021(date of first invoice) to

18.04.2024 (date of second invoice), with a time lapse of three years,

without initiating the process as mentioned in the fixture note.

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26. The learned counsel for the respondents further submits that there

is no contractual agreement between the parties, no specified clause in

the Fixture Note regarding 24% interest rate per annum, imposing legal

costs of USD 80,000 and an additional amount. In the absence of such

clause and without any rational basis, shows the arbitral inflation of the

appellant.

ANALYSIS OF THE COURT:

27. In the light of the above rival submissions of the respective counsel,

the following moot point falls for our consideration:-

Whether the orders dated 13.10.2025 of the

learned Single Judge call for interference or not?

SCOPE OF SECTION 37 OF THE ACT :

28. Before venturing into the adjudication of the instant case, it is apt to

note the scope of Section 37 of the Act, which was invoked by the

appellant before us.

29. Scope of Appellate Court Powers under Section 37(1)(b) of the Act,

as amended by Act No.3 of 2016 (w.e.f. 23-10-2015), the following Clause

(a) to (c) have been substituted in Sub-Section (1) to Section 37 of the

Act:-

(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

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(c) setting aside or refusing to set aside an arbitral award

under section 34.

30. It is trite to note that the legislative intent underlying the 2015

Amendment to the Act is to minimise judicial intervention in arbitral

proceedings. A conjoint reading of the non-obstante clause in Section 37

with clauses (1)(a) and (b) of Section 37 demonstrates that the legislature

intended to confine the appellate remedy exclusively to orders: (a)

refusing to refer parties to arbitration under Section 8, and (b) granting or

refusing to grant any interim measure under Section 9. The statutory

scheme precludes recourse to any other court or invocation of any other

law as an alternative, thereby bypassing all extraneous remedies.

31. The Court, under Section 37 of the Act, is guided by principles

analogous to those under the CPC, but is not strictly bound by its

technicalities. The appellate power to scrutinize the impugned orders

under Section 9 under Clause (b) supra, shall be guided by the objective

to ensure the preservation of the subject-matter of arbitration and ensuring

that the arbitration process remains meaningful and should be extended

to scrutinize as to whether the impugned order passed under Section 9 of

the Act is within the consonance and object of the Act.

32. The Constitutional Courts, upon an extensive survey of judicial

precedents, have elucidated the contours of appellate jurisdiction under

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Section 37 of the Act, consistently holding that the said jurisdiction is

narrow and circumscribed. However, upon a clear examination, it is

evident that the ratio of the decisions is confined to the scope of appellate

intervention in matters arising post-adjudication under Section 34 of the

Act, i.e., after the statutory remedy of setting aside an arbitral award has

either been invoked or exhausted. The scope of characterising the

jurisdiction under Section 37 of the Act as limited, related to revisional or

supervisory powers, or precluding re-appreciation of evidence cannot be

mechanically extended to appeals falling under clauses (a) and (b) of sub-

section (1) of Section 37 of the Act, particularly in the context of the post-

2015 amendment regime, which materially altered the statutory

framework governing interim measures and appellate scrutiny.

33. In the case of Punjab State Civil Supplies Corporation Limited

and Another Vs. Sanam Rice Mills and Others

1

, the Apex Court

reiterated the principle of minimal judicial interference in arbitration

proceedings, as held under:

“....14. It is equally well settled that the appellate power under

Section 37 of the Act is not akin to the normal appellate

jurisdiction vested in the civil courts for the reason that the scope

of interference of the courts with arbitral proceedings or award is

very limited, confined to the ambit of Section 34 of the Act only

and even that power cannot be exercised in a casual and a

cavalier manner......”

1

2024 SCC OnLine SC 2632

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34. To proceed further, it is relevant to consider the statutory provision

of Section 9 of the Act, which deals with the interim measures as under:-

“……9. Interim measures, etc., by Court.—1 [(1)]A party may,

before or during arbitral proceedings or at any time after the making

of the arbitral award but before it is enforced in accordance with

section 36, apply to a court— (i) for the appointment of a guardian

for a minor or person of unsound mind for the purposes of arbitral

proceedings; or (ii) for an interim measure of protection in respect

of any of the following matters, namely:— (a) the preservation,

interim custody or sale of any goods which are the subject-matter of

the arbitration agreement; (b) securing the amount in dispute in the

arbitration; (c) the detention, preservation or inspection of any

property or thing which is the subjectmatter of the dispute in

arbitration, or as to which any question may arise therein and

authorising for any of the aforesaid purposes any person to enter

upon any land or building in the possession of any party, or

authorising any samples to be taken or any observation to be made,

or experiment to be tried, which may be necessary or expedient for

the purpose of obtaining full information or evidence; (d) interim

injunction or the appointment of a receiver; (e) such other interim

measure of protection as may appear to the Court to be just and

convenient, and the Court shall have the same power for making

orders as it has for the purpose of, and in relation to, any

proceedings before it…..”

35. The analogous provision to Section 9 of the Act enunciated in the

Civil Procedure Code, 1908, is Order 38 Rule 5 of the Civil Procedure

Code, which deals with “attachment before judgment” in ordinary civil

suits. It allows the court to attach the defendant’s property only if there is

material to show that the defendant is about to remove or dispose of

property with the intention to obstruct or delay execution of a future

decree. In this context Order 38 Rule 5 of C.P.C is extracted hereunder:-

“……5. Where defendant may be called upon to furnish

security for production of property. (1) Where, at any stage of

a suit, the Court is satisfied, by affidavit or otherwise, that the

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defendant, with intent to obstruct or delay the execution of any

decree that may be passed against him,

(a) is about to dispose of the whole or any part of his property,

or

(b) is about to remove the whole or any part of his property

from the local limits of the jurisdiction of the Court, the Court

may direct the defendant, within a time to be fixed by it, either

to furnish security, in such sum as may be specified in the

order, to produce and place at the disposal of the Court, when

required, the said property or the value of the same, or such

portion thereof as may be sufficient to satisfy the decree, or to

appear and show cause why he should not furnish security.

(2) The plaintiff shall, unless the Court otherwise directs,

specify the property required to be attached and the estimated

value thereof.

(3) The Court may also in the order direct the conditional

attachment of the whole or any portion of the property so

specified.

(4) If an order of attachment is made without complying with

the provisions of sub-rule (1) of this rule, such attachment shall

be void….”

36. In the case of Raman Tech. & Process Engg. Co. v. Solanki

Traders

2

, the Hon’ble Supreme Court has held as under:

“……4. The object of supplemental proceedings (applications

for arrest or attachment before judgment, grant of temporary

injunctions and appointment of receivers) is to prevent the ends of

justice being defeated. The object of Order 38 Rule 5 CPC in

particular, is to prevent any defendant from defeating the realisation

of the decree that may ultimately be passed in favour of the plaintiff,

either by attempting to dispose of, or remove from the jurisdiction of

the court, his movables. The scheme of Order 38 and the use of the

words “to obstruct or delay the execution of any decree that may be

passed against him” in Rule 5 make it clear that before exercising

the power the said Rule, the court should be satisfied that there is

a reasonable chance of a decree being passed in the suit against

2

(2008) 2 SCC 302

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the defendant. This would mean that the court should be satisfied

that the plaintiff has a prima facie case. If the averments in the plaint

and the documents produced in support of it, do not satisfy the court

about the existence of a prima facie case, the court will not go to

the next stage of examining whether the interest of the plaintiff

should be protected by exercising power under Order 38 Rule 5

CPC. It is well settled that merely having a just or valid claim or a

prima facie case, will not entitle the plaintiff to an order of

attachment before judgment, unless he also establishes that the

defendant is attempting to remove or dispose of his assets with the

intention of defeating the decree that may be passed. Equally well

settled is the position that even where the defendant is removing or

disposing his assets, an attachment before judgment will not be

issued, if the plaintiff is not able to satisfy that he has a prima facie

case.

5. The power under Order 38 Rule 5 CPC is a drastic and

extraordinary power. Such power should not be exercised

mechanically or merely for the asking. It should be used sparingly

and strictly in accordance with the Rule. The purpose of Order 38

Rule 5 is not to convert an unsecured debt into a secured debt. Any

attempt by a plaintiff to utilise the provisions of Order 38 Rule 5 as

a leverage for coercing the defendant to settle the suit claim should

be discouraged. Instances are not wanting where bloated and

doubtful claims are realised by unscrupulous plaintiffs by obtaining

orders of attachment before judgment and forcing the defendants

for out-of-court settlements under threat of attachment….”

37. The Raman Tech case has established that the interim relief (asset

attachment as security) can only be granted when the party proves that

there is a prima facie case, and also demonstrates that the respondents

are trying to sell/encumber/consume the stock with the intent to defeat the

decree that may be passed.

38. In this context, it is also relevant to note the dictum of the Apex Court

in Essar House case, for the sake of comprehensive view, it is apt to

extract the relevant para Nos.47, 48 & 49 in the above dictum:-

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“……47. Section 9 of the Arbitration Act confers wide power

on the Court to pass orders securing the amount in dispute in

arbitration, whether before the commencement of the arbitral

proceedings, during the arbitral proceedings or at any time after

making of the arbitral award, but before its enforcement in

accordance with Section 36 of the Arbitration Act. All that the Court

is required to see is whether the applicant for interim measure has

a good prima facie case, whether the balance of convenience is in

favour of interim relief as prayed for being granted and whether

the applicant has approached the court with reasonable

expedition……”

“......48. If a strong prima facie case is made out and the

balance of convenience is in favour of interim relief being granted,

the Court exercising power under Section 9 of the Arbitration Act

should not withhold relief on the mere technicality of absence of

averments, incorporating the grounds for attachment before

judgment under Order 38 Rule 5CPC....”

“......49. Proof of actual attempts to deal with, remove or

dispose of the property with a view to defeat or delay the

realisation of an impending arbitral award is not imperative for

grant of relief under Section 9 of the Arbitration Act. A strong

possibility of diminution of assets would suffice. To assess the

balance of convenience, the Court is required to examine and

weigh the consequences of refusal of interim relief to the applicant

for interim relief in case of success in the proceedings, against the

consequence of grant of the interim relief to the opponent in case

the proceedings should ultimately fail....”

39. The Hon’ble Supreme Court explained the broader scope of the

provisions under Section 9 of the Act, wherein, it held that all that a court

was required to see whether the applicant for interim measures had a

good prima facie case, whether the balance of convenience was in favour

of the grant of the prayed interim reliefs, and whether the applicant

approached the Court with reasonable expedition. If these conditions

were met, a court exercising power under Section 9 of the Act ought not

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to withhold the relief on mere technicalities such as the absence of

averments, incorporating the grounds for attachment before judgment

under Order 38 Rule 5 CPC. And also held that an actual attempt to deal

with, remove or dispose of the property with a view to defeat or delay the

realisation of an impending arbitral award is not imperative for the grant

of relief under Section 9 of the Act, rather a strong possibility of diminution

of assets would suffice.

40. In a subsequent decision of Sanghi Industries Ltd. v. Ravin

Cables Ltd., the Hon’ble Supreme Court observed as follows:-

“4. … it appears that the commercial court had passed the order

under Section 9(ii)(e) of the Arbitration Act, 1996 to secure the amount

in dispute, we are of the opinion that unless and until the preconditions

under Order 38 Rule 5 CPC are satisfied and unless there are specific

allegations with cogent material and unless prima facie the Court is

satisfied that the appellant is likely to defeat the decree/award that may

be passed by the arbitrator by disposing of the properties and/or in any

other manner, the commercial court could not have passed such an

order in exercise of powers under Section 9 of the Arbitration Act, 1996.

5. … However, unless and until the conditions mentioned in

Order 38 Rule 5 CPC are satisfied such an order could not have been

passed by the commercial court which has been passed by the

commercial court in the present case, which has been affirmed by the

High Court.”

In the above case, the Hon’ble Supreme Court emphasised the principles

enunciated under Order 38 Rule 5 CPC in granting interim measures

under Section 9 of the Arbitration Conciliation Act

41. At this juncture, it is relevant to point out that the decisions in both

Essar House and Sanghi Industries cases were rendered by Benches

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comprising an equal coram and the judgment in Sanghi Industries case

was delivered a month after the pronouncement of the judgment in the

Essar House Case.

42. In Sky Power Solar Pvt. Ltd. Vs. Sterling and Wilson

International

3

, the Division Bench of the Delhi High Court in respect of

paras 48 and 49 of the judgment in Essar House Private Limited Vs

Arcellor Mittal Nippon Steel India Ltd. held that:

“…….72. The aforesaid observations cannot be read in

isolation. Although the Supreme Court had held that an applicant

is required to establish a good prima facie case as well as the

balance of convenience in his favour, for the grant of interim

relief. However, the said observations cannot be read to mean

that other underlying principles for the grant of interim orders as

contemplated under Order 38 Rule 5 CPC are required to be

ignored or disregarded. In a subsequent para, the Supreme

Court had observed that a mere technicality of the absence of

averments incorporating the grounds for attachment before the

judgment under Order 38 Rule 5 CPC should not withhold relief.

However, these observations read in the context of the decision,

clearly indicate that the same cannot be read to mean that the

underlying principles for the grant of interim relief as

contemplated under Order 38 Rule 5 CPC can be disregarded. It

is material to note that in Essar House (P) Ltd. case, the Supreme

Court was considering an appeal against an order of the

commercial court of the Bombay High Court. In its order, the

Bombay High Court had held that Section 9 of the A&C Act does

not preclude a court to pass an equitable order for securing the

claim of the applicant in a case where "once having rendered

prima facie finding that the applicant would have good chances

of succeeding in the arbitration and if the claim made by the

applicant is not secured, he would not be able to enjoy fruits of

the arbitral award on its execution". Thus, the underlying principle

that the interim orders for securing a claimant in an arbitral

3

2023 SCC OnLine Del 702

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proceeding can be made only in cases where the court is prima

facie satisfied that but for securing the claimant, it would be

unable to reap the benefits of a favourable award, was satisfied

in that case…..”

Further, cited the decision of the Sanghi Industries, mentioning that it

was delivered after the judgment of Essar House.

43. In the backdrop of above statutory provisions coupled with the

narrow scope conferred to the appellate court’s jurisdiction and well

settled legal principles, we will now proceed to examine the orders of the

learned Single Judge.

PRIMA FACIE CASE:

44. Undisputedly, Section 9 of the Act provisions relates to interim

measure of protection. As such, in order to adjudicate the said relief, it is

just and essential to determine a strong prima-facie case which is

indispensable and inextricable.

45. Undisputedly, the Notice of Readiness was issued at Vung Tau port,

by the appellant, but not at Ho Chi Minh as stipulated in the contract. This

change affects the commencement of the laytime and the applicability of

demurrages. However, the Respondents have not objected to the

issuance of the Notice of Readiness at Vung Tau port, at the earliest

opportunity.

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46. The Fixture note dated 12.03.2021 prescribed a fixed rate of

demurrage under clause 7. The appellant issued of statement of facts and

an invoice in the year 2021 demanding the settlement of freight and

demurrage within 15 days as stipulated in clause 10 of the fixture note.

And the Respondents did not deny the claim until the arbitration notice.

On the basis of the material record, an arguable claim for demurrage was

raised by the appellant.

47. It is pertinent to note that the demurrage here is liquidated damages

and liability is being contested before the arbitrator. As no pecuniary

obligation arises until adjudication is complete, the claim is a mere right to

sue for damages, which cannot by itself justify securing the amount

through attachment because Order XXXVIII Rule 5 of the CPC cannot be

used to convert an unsecured claim for damages into a secured debt.

48. It is well settled legal principle that a claim for un-liquidated damages

does not give rise to a debt until the liability is adjudicated and damages

assessed by a decree or order of a Court or other adjudicatory forum.

When there is a breach of contract, the party who commits the breach

does not eo instanti (at that very instant) incur any pecuniary obligation,

nor does the party complaining of the breach become entitled to a debt

due from the other party. The only right that the party aggrieved by the

breach of the contract is the right to sue for damages, which is not an

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actionable claim, and this position is made amply clear by the amendment

(34 of 2019) w.e.f. 31-10-2019 in Section 6(e) of the Transfer of Property

Act, which provides that a mere right to sue for damages cannot be

transferred, as stated in the Transfer of Property Act, 1882 as follows:

6. What may be transferred. — Property of any kind may

be transferred, except as otherwise

provided by this Act or by any other law for the time being in force.

(e) A mere right to sue cannot be transferred.

The above provision strengthens the present case that the appellant has

the only right to sue, but it cannot impose interest, as it is not a debt.

49. In fact, the aggrieved party’s sole entitlement is to approach a

Judicial Forum to seek recovery of damages. Damages constitute

compensation awarded by the competent judicial fora for the injury or loss

sustained by the party. Importantly, such compensation does not arise

from any pre-existing pecuniary obligation on the part of the party

committing the breach rather, it flows from the orders of the Judicial Forum

upon adjudication.

50. Consequently, no pecuniary liability crystallizes until the Competent

Forum determines that the party complaining of the breach is entitled to

damages. At the stage of assessment, the said forum is not merely

quantifying a liability that already exists; rather, it first establishes liability

and then proceeds to determine the extent of damages. Until such

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determination is made, the alleged debtor incurs no enforceable

obligation, and no actionable pecuniary liability arises against him.

51. In the backdrop of above facts and circumstances in our considered

view, the appellant has not been able to establish a strong prima facie

case. The claim is predicated on disputed demurrage allegedly arising

from liquidated damages and the very liability is yet to be determined. The

validity of the Notice of Readiness dated 21.05.2021 and its issuance at

Vung Tau instead of the contractually agreed discharge port at Ho Chi

Minh City, the alleged waiver by the respondents, the unsigned Statement

of Facts, and the disputed issuance and service of invoices are all

contentious issues requiring adjudication. In the absence of a

determination on liability, the claim does not crystallize into an enforceable

or actionable debt. Hence, the prima facie case may be arguable, but it

does not operate conclusively as a strong prima facie case in favour of

the appellant.

BALANCE OF CONVENIENCE :

52. As held in Essar’s case, to assess the balance of convenience, the

Court is required to weigh the consequences of refusal of interim relief to

the applicant for interim relief in case of success in the proceedings,

against the consequence of grant of the interim relief to the opponent in

case the proceedings should ultimately fail.

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53. It is pertinent to note the admitted fact in the lis is that, in terms of

ex-parte interim orders dated 23.04.2024 passed by the learned Single

Judge, the 1

st

respondent immediately complied with the said conditional

orders within 24 hours by depositing the required amount before the

Registry of this court on 24.04.2024 itself, which crystal clears the

bonafide conduct of the 1

st

respondent Company. Hence, mere allegation

of the appellant Company that the 1

st

respondent company would fritter

away its assets with a view to frustrate the award in the event of his

succeeding the arbitral proceedings has no significance.

54. In fact, a quantity of 1,600 MT of rice constitutes routine business

stock and not a special or earmarked asset. Restraining the company

from dealing with its normal stock would disrupt its core export operations.

On the other hand, the appellant issued the Notice of Readiness (NOR)

in May 2021, and on issuance of the invoice on 23.06.2021, the appellant

did not take any action and waited till 18.04.2024 to issue the second

invoice, which included interest @ 24% for the initial demurrage claim. It

is pertinent to note that the appellant has not explained the complete

inaction on the part of the respondents for a period of 3 years, until 2024.

55. The appellant only approached the Court after 3 years of delay with

a claim that was yet to be adjudicated, whereas maintaining the rice in a

frozen state was likely to cause substantial commercial detriment to the

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1

st

respondent. In fact, this absolute unexplained silence for such a long

period leads us to conclude that the balance of convenience clearly does

not lie in favour of the appellant and emphasises that the appellant had

not approached the court with reasonable expedition.

56. Thus, the comparative hardship to the 1

st

respondent Company was

far greater, coupled with the fact that the claim amount is yet to be

adjudicated before the learned arbitrator and the appellant did not satisfy

the two essential pre-requisites to grant interim measure under Section 9

of the Act. Therefore, the balance of convenience does not lie in favour

of the appellant.

OTHER FACTORS:

57. As rightly concluded by the learned Single Judge that the appellant

had failed to act with reasonable expedition and observed that where a

party remains silent and elects to assert its rights only at the juncture when

attachable cargo becomes available, the extraordinary power of

attachment cannot be invoked as a matter of course. Such a delay cannot

be brushed aside as a mere procedural lapse, rather, it goes to the root of

the appellant’s bona fides and negates any real necessity for exceptional

interim protection under Section 9 of the Act.

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58. Moreover, as observed in the Sky Power judgment that the

underlying principles for the grant of interim relief as contemplated under

Order 38 Rule 5 CPC cannot be disregarded, one of the underlying

principles for the grant of interim relief is that the appellant should also

establish that the defendant is attempting to remove or dispose of his

assets with the intention of defeating the orders that may be passed.

However, in the present case, the appellant has not even able to show

any real risk of asset diminution. In fact, Paragraphs 28 and 29 in Section

9 petition (ICOMAOA No.5 of 2024) contained only vague or unsupported

allegations. Though the appellant is not required to demonstrate such

asset dissipation with strict or conclusive proof, it should still establish a

reasonable apprehension of dissipation warranting protective relief. By

refusing attachment based on such vague, unsubstantiated claims, the

learned Single Judge correctly applied the well settled legal principles.

59. In Union of India Vs. Raman Iron Foundry

4

, it is distinguished

between an arguable claim for damages and a crystallised debt.

Unliquidated damages cannot give rise to debt. Since the demurrage

here is a liquidated damage, and the liability is being contested before the

arbitrator, no pecuniary obligation arises until adjudication. As such, the

claim is a mere right to sue for damages, which cannot by itself justify

4

(1974) 2 SCC 231

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securing the amount through attachment because Order XXXVIII of CPC

cannot be used to convert an un-secured, un-adjudicated damages claim

into a secured debt. Hence, the learned Single Judge has correctly held

that the petitioner has only the right to sue for damages until the arbitrator

determines liability.

60. Based on Ultratech Cement Ltd. V. Sunfield Resources Pvt.

Ltd., the appellant’s claim of demurrage is based upon consideration of

the facts and the contractual terms mentioned in the fixture note. The court

cannot place reliance on precedents concerning the demurrage clause,

as those were rendered in the light of specific facts and circumstances

and peculiar in nature. Here, the facts have to be checked by the arbitrator

and not by us, more particularly, while exercising the powers under

Section 37 of the Act. Hence, the court cannot rely on judgments that

dealt with the demurrage clause, even though the respondents had

waived the right to challenge the demurrage by being silent during the

Notice of Readiness, the validity of the waiver and Notice of Readiness

involves detailed factual foundational questions that have to be dealt with

by the Arbitrator, not by the Court at this interim stage.

61. The appellate jurisdiction is circumscribed by the principle that

interference is warranted only where the impugned order suffers from

arbitrariness, perversity, or violation of settled legal principles. The

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concept of “perversity” strictly limits appellate intervention. The said

position was well founded in Wander Ltd. v. Antox India (P) Ltd.

5

,

wherein the Hon’ble Supreme Court held that an appellate court cannot

re-appreciate the material or take a different view merely because another

view is possible. This principle has further been reiterated in the judgment

of Ramakant Ambala Choksi v. Harish Ambalal Choksi

6

, wherein the

Hon’ble Supreme Court held that in the absence of perversity, the High

Court must refrain from interfering with the discretionary Orders. In the

present case at hand, we do not find any arbitrariness, perversity, or

violation of settled legal principles in the orders under challenge before

us.

CONCLUSION:

62. In the aforesaid facts and circumstances, the discretion vested in

and exercised by the learned Single Judge while dismissing the petition

under Section 9, calls for no interference by us. Moreover, the orders

under the appeal cannot be characterised as perverse, arbitrary, or

vitiated by any patent illegality and considering the settled position that an

appeal under Section 37 of the Act is not in the nature of a first appeal.

5

1990 Supp SCC 727

6

(2024) 11 SCC 351

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63. For the foregoing conclusion arrived at by this Court, we see no

grounds to interfere with the impugned orders. Accordingly, the appeal is

dismissed.

There shall be no order as to costs. As a sequel, all pending

applications shall stand closed.

___________________

RAVI NATH TILHARI, J

_____________________________

MAHESWARA RAO KUNCHEAM, J

GVK

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THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI

AND

THE HONOURABLE SRI JUSTICE MAHESWARA RAO KUNCHEAM

I.C.O.M.A.A. No.2 of 2025

Dt. 07.01.2026

GVK