The Bombay High Court has refused to grant interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, against a third party to a foreign award as it has already been determined in the substantive enforcement proceedings that the award is not enforceable against that third party.
The Court clarified that the remedy under Section 9 of the 1996 Act is ancillary to the main proceedings, and if the award itself cannot result in an enforceable decree against a party, no protective interim order can be passed against that party. Thus, a party cannot maintain a separate Section 9 petition to seek additional interim reliefs against an award-debtor when an enforcement petition, in which interim reliefs have already been sought, is concurrently pending.
A Single Judge Bench of Justice Sandeep V. Marne observed that the central issue was whether interim measures under Section 9 could be granted against Vijay Sales, a third party against whom the foreign award was held to be unenforceable. The Bench noted that the Petitioner was attempting to use a collateral proceeding under Section 9 to obtain a contradictory finding to the one recorded in the substantive enforcement proceedings, where Vijay Sales was deleted as a party.
The Bench observed that in the enforcement proceedings, it was held that Vijay Sales was not a party against whom the award was made, and thus, the award could not be enforced against it. The Bench opined that it could not, in a Section 9 proceeding, invoke the ‘Group of Companies’ doctrine to establish the liability of Vijay Sales when the enforcement court had already dismissed the proceedings against it.
Further, the Bench observed that interim measures under Section 9 against a third party are typically granted when the third party is ‘claiming through or under’ a party to the arbitration. In this case, Vijay Sales was not claiming under Amstrad; the claim against it arose from an independent guarantee, which should have been adjudicated in the arbitration from which Vijay Sales was deleted.
Regarding the prayer for interim relief against Amstrad, the Bench noted that the Petitioner had already sought interim reliefs in the pending enforcement petition. Thus, filing a separate Section 9 petition for a deposit order was deemed an improper division of prayers. The Bench also observed that a post-award direction for deposit under Section 9 is not a routine matter and cannot be used as a shortcut to execution, especially when the enforcement petition is pending.
Briefly, the Petitioner, Ningbo Aux Imp & Exp Co. Ltd. (Ningbo), a Chinese company, entered into an agreement to supply air-conditioner units to the first Respondent, Amstrad Consumer India Pvt Ltd. (Amstrad). The second Respondent, Vijay Sales (India) Pvt Ltd. (Vijay Sales), had issued a guarantee certificate on 28 February 2020, making it responsible for payments by Amstrad to Ningbo for orders up to USD 10 million in case of a default by Amstrad. The disputes arose regarding payments for invoices, leading Ningbo to initiate arbitration proceedings under the Shanghai International Arbitration Centre (SHIAC) against both Amstrad and Vijay Sales.
However, upon verbal instruction from the SHIAC Case Manager, Ningbo refiled the arbitration application solely against Amstrad, as Vijay Sales was not a party to the proforma invoices containing the arbitration clause. Later, the SHIAC Arbitral Tribunal passed an award directing Amstrad to pay Ningbo USD 1,448,940.91 and RMB 180,533.38.
Subsequently, Ningbo filed an enforcement petition in the Bombay High Court against both Amstrad and Vijay Sales. On an application by Vijay Sales, the Court directed the deletion of Vijay Sales from the enforcement proceedings, holding that the foreign award could not be enforced against it. This order was not challenged and attained finality.
Following this, Ningbo filed the present petition under Section 9 of the Arbitration and Conciliation Act, seeking interim measures, including a direction for both Respondents to deposit the awarded amount, to secure the award pending the enforcement proceedings against Amstrad.
Appearances:
Advocates Kshama Loya and Sankriti Sharma, for the Petitioner
Advocates Karl Tamboly, Reehan Ajmerwala, Eshika Chandan, and Siddharth Punj, for the Respondents
