The Andhra Pradesh High Court (Amaravati Bench) clarified that the power under Order 38 Rule 5 CPC for attachment, being drastic and extraordinary, should not be exercised mechanically or merely for the asking. The clarification came in pursuance of the conduct of the petitioner in making an eleventh-hour attempt to secure attachment even without initiating any legal steps for recovery.
Noting that the applicant failed to establish a prima facie case, reasonable expedition, or any material indicating that the respondent was attempting to dispose of assets to defeat a potential arbitral award, the Court vacated the ex parte attachment order and directed the Registry to return the deposited security to the respondent.
A Single Judge Bench of Justice Challa Gunaranjan observed that liquidated damages under a charterer-party contract remain a contingent claim until adjudicated by the arbitral tribunal, and therefore, interim attachment was impermissible. The Single Judge therefore dismissed the application filed by a Hong Kong-based shipping company under Section 9 of the Arbitration and Conciliation Act, seeking interim attachment of 1,600 metric tonnes of rice and furnishing of security for USD 296,326.74 pending arbitration.
The Bench further noted that the claim made is undisputedly to be liquidated damages, and the parties have agreed on a specific rate to assess the damages. However, before embarking on the amount of damages, the liability per se has to be determined, and the said exercise of determining liability is now seized up before the arbitrator.
The Bench emphasized that unless the liability is determined, it cannot be said that the petitioner has an actionable claim. Petitioner, though having raised a demand claiming demurrage charges in July 2021 itself, has kept quiet till 2024 without initiating any legal steps. Even respondents merely denied the statement of facts to be unsigned by one of the parties, and the first invoice was never communicated to 1st respondent, and so also the second invoice, which stand is taken only after issuance of notice of arbitration.
This Bench thus opined that the liquidated damages so claimed now by the petitioner, unless they are determined qua liability, there cannot be any actionable claim in favour of the petitioner.
Briefly, in this case, the petitioner, a Hong Kong-based shipping company, had chartered its vessel MV Han Thar to the respondent, an Indian rice exporter, under a fixture note for transporting 9,000 MT of rice from Kakinada Port, India, to Ho Chi Minh City, Vietnam. The contract stipulated a demurrage rate of USD 7,500 per day beyond permitted laytime and provided for arbitration in Singapore. After the voyage, the petitioner claimed that discharge operations were delayed by 17 days, resulting in demurrage charges of USD 1,28,409.74, later increased with interest and costs to USD 296,326.74. Despite reminders and a legal notice in 2021, the respondent did not make any payment.
Later, while the respondent was loading a fresh cargo of 1,600 MT of rice on MV Bulk Manara at Kakinada Seaport, the petitioner filed a Section 9 application seeking attachment of the cargo or a security deposit of the claimed amount. The Court granted an ex parte conditional attachment, later lifted when the respondent deposited security. The respondent then moved an application to vacate the order, arguing that the claim was disputed, unadjudicated, and time-barred, and that the attachment was being used to coerce settlement rather than protect a legitimate debt.
Appearances:
Advocate Sanjay Suraneni, for the Appellant
Advocate Moguluru Iswarya, for the Respondent
