Bombay HC grants interim relief to Chinese manufacturer under Part I of Arbitration Act

The Bombay High Court recently granted ad-interim relief under Part I of the Arbitration and Conciliation Act, 1996 (Arbitration Act) to Chinese heavy industry giant Dalian Huarui Heavy Industry International Co. Ltd in relation to a 2012 agreement.

A Single Judge Bench of Justice GS Kulkarni granted interim protection to Dalian in a plea filed against the purchasers West Quay Multiport Private Limited and Tuticorin Coal Terminal Private Limited.

Dalian has claimed Rs 100 crore in unpaid dues against purchasers to whom it sold machinery vide the agreement. The company handed over cranes to purchasers for project work undertaken by the Visakhapatnam Port Trust. The purchasers, however, abandoned the work. The company thus approached the Bombay High Court seeking interim relief under Section 9 of the Arbitration Act.

Notably, the Bombay High Court has granted interim relief despite the fact that the agreement between the parties excluded the operation of Part I of the Arbitration Act.

As per Section 9 of the Act, a party may, before or during arbitral proceedings or at any time after the making of the arbitral award, approach Indian courts to preserve its interests.

Arbitration proceedings in relation to the matter have been invoked by Dalian before the Singapore International Arbitration Centre (SIAC).

Part I of Arbitration Act applies to disputes where the place of arbitration is within India. Part II applies to international commercial arbitration that takes place abroad.

However, under the Bhatia International regime, Indian courts can retain jurisdiction over agreements applied to commercial arbitration held outside India which are made prior to enforcement of 2015 amendment Act, unless Part I is expressly or impliedly excluded by an agreement.

Before the High Court, the lenders submitted that an agreement excluding Part I negotiated in 2012 is an “an agreement to the contrary” as contemplated under the proviso to Section 2 (2) of the Arbitration Act introduced vide the 2015 Amendment. It was argued by Dalian that the proviso to Section 2 (2) of the Arbitration Act required a specific agreement excluding Section 9 of the Arbitration Act post amendment.

The agreement had also prescribed resolution of disputes by way of arbitration at Singapore to be conducted as per SIAC rules.

Dalian claimed to have unpaid dues of around Rs. 100 crore against the purchasers and claimed to be an owner of 80% value of the goods. Bank of Baroda and the Board of Trustees of Visakhapatnam Port Trust also sought claims against the purchasers.

Senior Advocate Darius Khambata and Advocate Akshay Sapre, instructed by The Guild Advocates & Associate Counsel, New Delhi, appeared for Dalian. 

Advocate Sachin Chandarana, representing Bank of Baroda, contended that the bank has prior charge on the machinery in question. On the other hand, Khambata argued that the machinery is fully owned by the petitioner and that Bank of Baroda has no claim on it.

Dalian sought an interim order from the court to restrain the lenders and the Port from dealing with or disposing of the cranes in any manner.

The Court held that the submissions made by counsel for Dalian merit prima facie consideration and granted the company ad-interim protection till the parties are heard.

It also directed Bank of Baroda and the Board of Trustees of Visakhapatnam Port to file an affidavit in reply within two weeks in order to prove their claim on the machinery.

The Court further directed the purchasers, lenders and ports to restrain from dealing with, alienating or creating any third party rights in any manner, in respect of the cranes in question, till the matter is heard on July 29.

Read the order: