2004 (1) TMI 705 - HC - Indian Laws

Court dismisses appeal under Arbitration Act, emphasizing equitable considerations over attachment conditions.

National Shipping Company Of Saudi Arabia Versus Sentrans Industries Limited

The court dismissed the appeal, emphasizing that the power under Section 9(ii)(d) of the Arbitration and Conciliation Act, 1996 is not restricted by the ... - Issues Involved:1. Applicability of Order 38 Rule 5 CPC to Section 9(ii)(d) of the Arbitration and Conciliation Act, 1996.2. Whether the court can order interim measures for security of the amount in dispute without satisfying conditions of attachment before judgment under Order 38 Rule 5 CPC.3. Interpretation and scope of Section 9 of the Arbitration and Conciliation Act, 1996.4. Evaluation of the facts and merits of the case for granting interim protection.Issue-wise Detailed Analysis:1. Applicability of Order 38 Rule 5 CPC to Section 9(ii)(d) of the Arbitration and Conciliation Act, 1996:The court examined whether the power exercisable under Section 9(ii)(d) of the Arbitration and Conciliation Act, 1996 is restricted by the conditions of attachment before judgment as prescribed under Order 38 Rule 5 CPC. The court noted that the Act of 1996 is materially different from the Arbitration Act, 1940, which explicitly applied the provisions of the CPC to arbitration proceedings. The court emphasized that Section 9 of the Act of 1996 does not specifically make the provisions of the CPC applicable, indicating a legislative intent to create a self-contained code for arbitration.2. Whether the court can order interim measures for security of the amount in dispute without satisfying conditions of attachment before judgment under Order 38 Rule 5 CPC:The court held that the power under Section 9(ii)(d) of the Act of 1996 is not restricted by the stringent provisions of Order 38 Rule 5 CPC. It was noted that the court must be satisfied that an interim measure is required to protect the interest of the party seeking such an order. The court emphasized that the power to secure the amount in dispute under arbitration is not hedged by the predicates set out in Order 38, and the court must exercise its discretion based on the material before it to ensure justice.3. Interpretation and scope of Section 9 of the Arbitration and Conciliation Act, 1996:Section 9 of the Act of 1996 empowers the court to order interim measures before or during arbitral proceedings or any time after the making of the arbitral award but before it is enforced. The court held that Section 9 is a substantive provision that enables a party to apply for interim protection if the other party's actions are inequitable or in breach of natural justice. The court further clarified that the provisions of Order 38 Rule 5 CPC cannot be read into Section 9 as it is, and the exercise of power under Section 9 must be guided by equitable considerations and the interest of justice.4. Evaluation of the facts and merits of the case for granting interim protection:The court examined the specific facts of the case, where the appellant sought an order directing the respondent to deposit a sum of US$ 20,63,747 to secure the claim in the arbitration proceedings. The appellant alleged breaches of fiduciary duties by the respondent under an agency agreement. However, the court found that the factual position regarding the recovery of the amount by the respondent was seriously disputed. The court noted that the matter was sub judice before the arbitral tribunal, and it would not be appropriate to record any specific finding on the disputed amount based on the documents produced by the appellant. The court concluded that the appellant failed to establish a clear case for interim protection, and no material indicated that the respondent intended to defeat the claim of the appellant. Consequently, the court dismissed the appeal, holding that no case for interim protection by way of an order under Section 9(ii)(d) had been made out.Conclusion:The court dismissed the appeal, emphasizing that the power under Section 9(ii)(d) of the Arbitration and Conciliation Act, 1996 is not restricted by the conditions of attachment before judgment under Order 38 Rule 5 CPC. The court must exercise its discretion based on equitable considerations and the interest of justice, and each case must be evaluated on its own facts and circumstances. In this case, the appellant failed to make out a case for interim protection, and the appeal was dismissed with no order as to costs.