TaxTMI 
TaxTMI 
2020 (6) TMI 772
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....ration proceedings. iv. Pass such other further order(s) in favour of the Petitioner as this Hon'ble Court may deem fit and proper in the facts of the present case. 2. The Petitioner, Goodwill Non-Wovens (P) Limited is a private limited company incorporated under the provisions of the Companies Act, 1956 having its registered office at 54, Todarmal Road, Bengali Market, New Delhi 110001. The petitioner was incorporated in the year 2008 for the purpose of undertaking the business of buying, selling, exporting, importing, manufacturing, various commodities. The present petition is instituted, filed, verified and signed by the Director of the petitioner Company, Mr. Ashok Jain, on the basis of a Board Resolution date 15 May, 2020. 3. The respondent, XCoal Energy & Resources LLC., is a privately-owned global coal marketing and logistics company headquartered in Latrobe, Pennsylvania. 4. The parties entered into a Contract dated March 10, 2020 ('Contract', for shot) for sale and delivery of 13,500MT of Consol BEFH US High CV Thermal Coal ('Coal', for short) at the designated port. As per Clause 12 of the Contract, petitioner was to make requisite pa....
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....f any contract entered into by the respondent with M/s. Kalyani or any third party for that matter. 8. It is averred that the petitioner, immediately, on May 05, 2020, in response to the above-mentioned e-mail, sent an e-mail to the respondent stating that it had performed all its obligations under the Contract and in view thereof, respondent must discharge the Coal. 9. It is the case of the petitioner, even after pointing out that it had complied with all the contractual obligation, respondent failed to discharge the Coal and the respondent vide a telephonic conversation on May 08, 2020, informed the petitioner that the shipped quantity of Coal shall not be discharged at the designated port until such time certain third parties (viz. M/s. Kalyani) all of whom have purportedly entered into separate agreements with the respondent perform their respective contracts with the respondent, which is in violation of the stipulations of the Contract. 10. It is the case of the petitioner that, subsequent to stand contrary to the Contract taken by the respondent, it addressed a legal notice dated May 09, 2020 ('Notice of Default', for short) asking respondent to rectify the b....
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....the maintainability of the petition as per Section 2(2) of the Act, it was submitted by Mr. Parag P. Tripathi, learned senior counsel appearing on behalf of the petitioner that even though as per the dispute resolution clause (Clause 21), validity, construction and performance of the Contract shall be determined in accordance with laws of State of New York, USA and provides that all disputes shall be referred to a tribunal of 3 arbitrators pursuant to the rules of ICC, respondent has failed to establish non-applicability of Section 2(2) as there was nothing in the Contract, which excluded the applicability of Part-I of the Act. 14. It was submitted by Mr. Tripathi that, in fact relevant Rules of the ICC, which have been agreed by the parties to govern the arbitration proceedings, do not prevent either party from approaching the Court for grant of interim measures in terms of Articles 28.2 and 29.7 of the ICC Rules, which reads as under: "28.2: Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party ....
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....ich states that the buyer is relieved from its payment responsibility once fully clean letter of credit is received at seller's counter, Pre-Arrival Notice, Notice of Readiness dated May 05, 2020 by respondent's vessel agent ('Notice of Readiness' for short), Notice of Default, Letter of Termination and the various communications indicating that petitioner's obligations stands discharged. Moreover, Mr. Tripathi submitted that the prices of coal have depreciated to around USD 67.09 per MT, which has caused great loss/prejudice to the petitioner and the same is evident from a comparison of the Bill of Entries filed by the respondent itself in respect of one shipment for which IGM was filed on May 05, 2020 and another shipment which was refused by M/s. Kalyani and for which IGM was filed on May 28, 2020. 18. On the respondent's plea of it being a foreign company with no assets and that the ingredients of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 ('CPC', for short) were not satisfied, Mr. Tripathi submitted that it is wholly misplaced in view of a coordinate bench judgment of this Court in Steel Authority of India Limited v. AMCI Pty. ....
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.... in the arbitration, could such an award be enforced against the respondent. 21. He further submitted that law applicable to the present contract is the law of State of New York. The seat of arbitration is in New York. The curial law as well as the law applicable to the arbitration agreement is that of New York. It is thus clear that the intention of parties was to subject themselves to the jurisdiction of courts in New York alone-except to the extent it is essential to enforce an Award or protect such subsequent enforcement and assuming that an Award is passed against the respondent, the petitioner would have no way of getting the Award executed against the respondent in India, owing to non-availability of assets, under Part-II of the Act. 22. Mr. Panda relied upon paragraphs 41, 42 and 43 of the 246th Law Commission Report, to draw the attention of this Court to the rationale behind the insertion of proviso to Section 2(2) of Act by The Arbitration and Conciliation (Amendment) Act, 2015. He submitted that though the decision in Bharat Aluminum and Co. vs. Kaiser Aluminium and Co., (2012) 9 SCC 552, was a step in the right direction aimed to reduce the judicial intervention ....
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....Kumar and Ors. vs. Prem Behari Khare, AIR 1989 SC 1247, to submit that Law Commission Reports can be referred to as external aids of construction especially where a particular enactment or amendment is the result of recommendation of the Law Commission of India. 25. He stated that reliance placed by the petitioner on Raffles Design International India Pvt. Ltd. & Anr. (supra) is misconceived, as in the said case, the party against whom relief was sought was Indian party and the Award (obtained from the Emergency Arbitrator) being enforceable in India, is clearly distinguishable in facts as compared to the present case. He contested the reliance placed by the petitioner on Steel Authority of India Limited (supra), by stating that the said judgment was prior in time to the 2015 Amendment and had India as the seat of Arbitration, and therefore clearly distinguishable. 26. Mr. Panda, without prejudice to his stand also stated that the petitioner has failed to show/prove that any cause of action or part any material part thereof has been suffered in New Delhi, to substantiate this Court has jurisdiction and that the ports Kandla/Tuna being in Gujarat, it would be High Court of Guj....
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....igation and there was a delay in discharge, nothing suggests that respondent is responsible for the same. 29. Mr. Panda also stated that the petitioner's allegation that that respondent did not allow discharging of the cargo at Tuna, is a bald allegation completely belying the CIF terms and the contractual scheme for discharge obligations. Arrangement for discharge in all CIF contracts is upon the Buyer and there is nothing in the present Contract that deviates from the same. The same has been contended by the respondent in their reply dated May 22, 2020 and May 26, 2020 that the petitioner never nominated their agent for taking discharge, neither did they intimate to the shipping line the discharge berth for the purpose of discharging at the discharge port which is required under clause 13(b) of the Contract. In fact, Mr. Panda submitted that from the communications dated May 05, 2020, May 06, 2020 and May 07, 2020, it is evident that the petitioner showed an inclination to receive the cargo at Kandla port but provided no details of any arrangements and in fact has unilaterally rejected the notice of readiness that was issued by the vessel on May 06, 2020. 30. It was sub....
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.... DLT 579 and Tata Advance Systems Ltd. Vs. M/s. Telexcell Information Systems Ltd., ARB.A.(COMM.) 29/2019 & I.A. 14057/2019. He further stated that petitioner has failed to establish/satisfy this Court that the respondent is attempting to remove or dispose of its assets with the intention of defeating the decree that may be passed, which is the requisite laid down by the Apex Court in Raman Tech & Process Engg. Co. and Anr. vs. Solanki Traders, (2008) 2 SCC 302, before the courts grant relief under Order XXXVIII Rule 5. 33. Mr. Panda also placed reliance on the following judgments of this Court in C.V. Rao vs. Strategic Port Investments KPC Ltd., 218 (2015) DLT 200, Olex Focas Pty. Ltd. & Anr. vs. Skodaexport Co. Ltd. & Anr., Parsoli Motors Works Pvt. Ltd. vs. BMW India Pvt. Ltd., 247 (2018) DLT 52, Huawei Technologies Company Ltd. vs. Sterlite Technologies Ltd., and BMW India Pvt. Ltd.(supra); to contend that the discretion of the Court to grant interim relief under Section 9 of the Act has to be exercised sparingly and in appropriate cases and the Courts should be extremely cautious in granting interim relief and that the Court's discretion ought to be exercised in e....
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....e price claimed as refund becomes due and payable, requiring the same to be put up as security immediately. 36. Having heard the learned counsel for the parties and considered the record, at the outset I may state that during the course of his submissions, Mr. Tripathi had stated that the petitioner is ready to lift the coal at the rate of USD 69.09 per MT subject to the respondent furnishing security for the balance amount. This submission was not agreeable to Mr. Panda, on instructions. The matter was accordingly heard on merits. Two issues arise for consideration in this case; firstly, whether the petition under Section 9 of the Act is maintainable and secondly, whether the petitioner has made out a case for grant of the reliefs as prayed for in this petition. 37. As the aforesaid issues arose for consideration, on the basis of the objections taken by Mr. Panda, the respondent's counsel, it is necessary to note his submissions in that regard. 38. On maintainability of the petition, the submission of Mr. Panda is that, as the arbitration under the Contract is an International Commercial Arbitration seated in New York, with applicable law being laws of the State of Ne....
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....s 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 subject-matter 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. (2) Where, before the commencement of the arbitral ....
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.... report of the Law Commission is concerned, the said report was considered by this Court in Raffles Design International India Pvt. Ltd. (supra). In the said case, this court also considered the Consultation Paper prepared by the Government of India justifying the incorporation of the proviso clause to Section 2(2) of the Act. The same are reproduced as under:- "87. The Consultation Paper placed by the Government of India in public domain also highlighted the need for amending Section 2 of the Act to enable the parties to approach the Courts in India for interim relief under Section 9 of the Act in the following words:- (xvii) It may be stated that it is the broad principle in International Commercial arbitration that a law of the country where it is held, namely, the Seat or forum or laws arbitri of the arbitration, governs the arbitration. However, if all the provisions of Part I are not made applicable to International Commercial arbitration where the seat of arbitration is not in India, some practical problems are arising. There may be cases where the properties and assets of a party to arbitration may be in India. Section 9 of the Act which falls in Part I pr....
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.... to enforce the interim relief obtained by it. That being the case, it is a distinct possibility that a foreign party would obtain an arbitral award in its favour only to realize that the entity against which it has to enforce the award has been stripped of its assets and has been converted into a shell company. (ii) While the decision in BALCO was made prospective to ensure that hotly negotiated bargains are not overturned overnight, it results in a situation where Courts, despite knowing that the decision in Bhatia is no longer good law, are forced to apply it whenever they are faced with a case arising from an arbitration agreement executed pre-BALCO. XXXX XXXX XXXX" 47. From the above, it is seen that the thought process, which weighed for incorporating proviso to Section 2(2) of the Act is the difficulty faced by both the Indian and the foreign party in seeking orders/interim measures in India in a foreign seated arbitration. So, it follows that proviso to Section 2(2) was incorporated to facilitate the parties to move the Court in India, even though the arbitration is seated outside India. 48. The submission of Mr. Panda that enforceability is....
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....t must be held that the present petition under Section 9 of the Act, for the reliefs claimed, is maintainable and the plea of Mr. Panda is rejected 51. On issue No. 2, it was the submission of Mr. Tripathi that the petitioner has a prima-facie case, by referring to Letter of Credit, which was released in respondent's bank account on April 21, 2020, Pre-Arrival Notice, Notice of Readiness, Notice of Default, Letter of Termination and various communications indicating the petitioner's obligations stand discharged. Moreover, it is the case of Mr. Tripathi that the price of coal has depreciated to around USD 67.05 per MT as against the contractual value of USD 87.09 per MT. 52. Further, on the plea of Mr. Panda that for grant of the relief prayed, it is relevant that the ingredients of Order XXXVIII Rule 5 of CPC have to be satisfied, Mr. Tripathi had relied upon the judgment of this Court in Steel Authority of India Limited (supra) wherein the Court directed a foreign company to deposit a sum of USD 152.85 million by relying on the judgment of the Bombay High Court in National Shipping Company of Saudi Arabia (supra). 53. Mr. Panda contested the submissions of Mr. Tri....
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....o state that what should govern the grant of relief under Section 9 of the Act, which is in the nature of interim relief pending arbitration proceedings, has been considered by a Coordinate Bench of this Court in its recent opinion in the case of BMW India Pvt. Ltd. and Ors. (supra), wherein the Court has referred to most of the judgments relied upon by the Counsels for the parties as referred above and in paras 25 to 29 held as under:- "25. Before further delving into these disputed and contested claims, it is first necessary to analyze the objection raised by the Respondent on the issue of maintainability of the Petitions having regard to the nature of relief sought. Respondents contend that in order to succeed in the present petitions, Petitioner No. 1 has to satisfy the threshold prescribed under Order 38 Rule 5 of the Code of Civil Procedure 1908. Mr. Dayan Krishnan on the contrary relies upon the judgment of the Division Bench of this Court in Ajay Singh v. Kal Airways Pvt. Ltd., FAO (OS) (Comm) 61/2016 decided on 3rd July 2017 and Huawei Technologies Company Ltd. Vs. Sterlite Technologies Ltd., to submit that Petitioners have a prima facie case in their favour and t....
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....r would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong' in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle." 27. It was observed later, in the same judgment that: "The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injus....
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....uld be principled and premised on some known guidelines and hence the analogy of Order 38 and 39, CPC is certainly applicable. At this stage, the judgments relied upon by the learned counsel for the Respondents also need to be mentioned. Respondents have relied upon C.V. Rao & Ors. v. Strategic Port Investment, (2015) 218 DLT 200, Lanco Infratech Ltd. v. HCC Ltd. (2016) 234 DLT 175, Intertoll ICS Cecons O&M v. NHAI, ILR (2013) II Delhi 1018, Raman Tech v. Solanki Traders, 2008 (2) SCC 302 and Kopastin Holding Ltd. v. Uday Bahadur & Ors,. 28. Besides the aforenoted judgments, there are several other judgments that deal with this issue. In Nimbus Communication Ltd. v. Board of Control for Cricket in India, the Bombay High Court held as under:- "The judgment of the Supreme Court in Adhunik Steels has noted the earlier decision in Arvind Constructions which holds that since section 9 is a power which is conferred under a special statute, but which is exercisable by an ordinary Court without laying down a special condition for the exercise of the power or a special procedure, the general rules of procedure of the Court would apply. Consequently, where an injunction is ....
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....les that govern the Court in the grant of an interlocutory order are not jettisoned by the provision. The judgment of the Division Bench of this Court in National Shipping Company (supra) notes that though the power by section 9(ii)(b) is wide, it has to be governed by the paramount consideration that a party which has a claim adjudicated in its favour ultimately by the arbitrator should be in a position to obtain the fruits of the arbitration while executing the award. The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave injustice to the party seeking a protective order. The obstructive conduct of the party against whom such a direction is sought was regarded as being a material consideration. However, the view of the Division Bench of this Court that the exercise of power under section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in view of the decision of the Supreme Court in Adhunik Steels" (emphasis supplied) 29. All the above noted ....