Foreign-seated arbitration petition under Section 9 dismissed for lack of prima facie case

The court held that the petition under Section 9 of the Arbitration and Conciliation Act, 1996, is maintainable even for a foreign-seated arbitration without assets in India. However, the petitioner failed to establish a prima facie case or demonstrate that the respondent was likely to defeat the realization of a future award. Therefore, the court dismissed the petition for interim relief.

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Issues Involved:
1. Maintainability of the petition under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Grant of interim relief as prayed by the petitioner.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 9 of the Arbitration and Conciliation Act, 1996:

The respondent argued that the petition is not maintainable because the arbitration is an International Commercial Arbitration seated in New York, governed by New York law, and the respondent has no assets in India. The jurisdiction under the proviso to Section 2(2) of the Act is asset-based, meaning it applies only when the counterparty’s assets are in India. The petitioner, however, contended that the contract does not exclude the applicability of Part-I of the Act and relied on ICC Rules (Articles 28.2 and 29.7), which allow parties to seek interim measures from competent judicial authorities.

The court analyzed Section 2(2) and Section 9 of the Act, noting that the proviso to Section 2(2) makes Sections 9, 27, 37(1)(a), and 37(3) applicable to foreign-seated arbitration. The court referenced the judgment in *Raffles Design International India Pvt. Ltd.* and the Supreme Court judgment in *BCCI vs. Kochi Cricket Pvt. Ltd.*, which support the applicability of Section 9 to foreign-seated arbitration.

The court rejected the respondent's argument that the petition under Section 9 cannot be maintained against a foreign party without assets in India. It clarified that Section 9 allows for interim measures without presupposing the existence of assets in India and that interim measures can be sought to secure the amount in dispute, irrespective of asset location. Thus, the petition under Section 9 was held to be maintainable.

2. Grant of Interim Relief as Prayed by the Petitioner:

The petitioner argued that it has a prima facie case, having fulfilled its contractual obligations, and that the respondent’s refusal to discharge the coal constitutes a breach. The petitioner also expressed concerns about the depreciation in coal prices and sought interim relief to secure the disputed amount. The respondent countered that the contract was a CIF contract, which concluded upon loading the goods and receiving payment. The respondent argued that the petitioner failed to establish any breach of material obligations and that the termination of the contract was invalid.

The court emphasized that the grant of interim relief under Section 9 should be guided by principles akin to those under Order XXXVIII Rule 5 of CPC, requiring a prima facie case and evidence that the respondent is likely to act in a manner that would defeat the realization of a future award. The court referred to several judgments, including *Adhunik Steel Ltd. v. Orissa Manganese and Minerals Ltd.*, which underscored the need for caution and the presence of exceptional circumstances to grant such relief.

The court found that the petitioner’s allegations were bald and unsupported by evidence. The court noted that the disputed facts regarding the contract’s execution and termination must be decided by the Arbitral Tribunal. The court concluded that the petitioner failed to demonstrate that the respondent was likely to render the arbitration proceedings infructuous by dissipating assets. Consequently, the court refused to exercise its discretion to grant interim relief and dismissed the petition.

Conclusion:

The court held that the petition under Section 9 of the Arbitration and Conciliation Act, 1996, is maintainable even for a foreign-seated arbitration without assets in India. However, the petitioner failed to establish a prima facie case or demonstrate that the respondent was likely to defeat the realization of a future award. Therefore, the court dismissed the petition for interim relief.

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