The Court’s jurisdiction to arrest a ship in an action in rem should not be exercised for the purpose of providing security of an award, which may be made in arbitration proceedings
The present suit was filed for securing the claim of Plaintiff in arbitration proceedings along with accrued interest and costs for the present proceedings. The suit was confined to seeking security pending arbitration. The interesting issue that arose for consideration was with regard to the maintainability of the civil suit during the pendency of arbitration proceedings outside India, whether it would provide a cause of action qua grant of injunction as sought. The Court made a fine distinction between two settled propositions namely, the popular BALCO judgment and also the judgment given by the Bombay High Court in the Golden Progress case.
Golden Progress Case – the Court in this case considered whether an application under Section 9 of the Arbitration and Conciliation Act, 1996 for security pending the award, could be obtained by arrest of a ship in rem. It was held, for arrest of a vessel for obtaining security for an award that may be made in the arbitration proceeding, an application under Section 9 of the Act is not maintainable. The Court’s holding was in the context of admiralty jurisdiction for recovery of the claim and arrest of the vessel where the parties have agreed to submit the dispute to arbitration can be maintained and in such case if by way of an interim measure, the vessel is arrested or security is provided to obtain the release of the vessel, matter shall proceed in accord with Article VII of the International Convention on Arrest of Ships, 1999.
In this case it was held that the law laid down by Bhatia Case does not mean to conclude that an application under Section 9 of the Act is maintainable for the arrest of the vessel for obtaining security for an award that may inure for their benefit in the foreign arbitration. It was held that the said provision does not cover the arrest of the ship or the keeping of the ship under arrest in the exercise of the Court’s jurisdiction in rem at all as what is provided by S. 9(ii)(b) is securing the amount in dispute in the arbitration by way of an interim measure which does not include the arrest of the vessel.
The Court in the present judgment held that the ship may be arrested in the admiralty jurisdiction only to acquire/assume jurisdiction or to obtain security for satisfaction of the claim when decreed or in execution of a decree and once the vessel is arrested, the suit must proceed to trial against the owner as in any other suit.
As per the Golden Progress Judgment, as observed, the admiralty Court would have no jurisdiction to arrest a ship or keep a ship under arrest when a party sought to invoke the admiralty jurisdiction not to obtain the hearing and determination of claim but for the purpose of obtaining security for an award for arbitration proceedings. Recovery of claim can only be in the suit where the plaintiff has sought a decree -‘recovery of the claim’.
This judgment was accordingly distinguished and held as not applicable as there was no prayer for decree or substantial relief in the present case case. In Golden Progress, the suit itself was primarily for a claim and for decree against the Defendants therein.
Applicability of BALCO judgment – The Supreme Court in this case held that an inter parte suit simply for interim reliefs pending arbitration would not be maintainable. The Apex Court held that in order to claim an interim relief, the existence of a pending suit is necessary and pendency of the arbitration proceedings outside India would not provide a cause of action for the suit where the main prayer is for interim relief and in a suit where it is only for interim relief as security pending arbitration, interlocutory reliefs and the final relief would be identical and such a suit would not be maintainable because an interlocutory injunction can only be granted during the pendency of the suit, claiming the relief which is likely to result in a final decision upon the subject in dispute.
The suit would be maintainable only on the existence of a cause of action, which would entitle the plaintiff for the substantive relief claimed in the suit and the interim relief must be a part of the substantive relief to which plaintiff’s cause of action entitled him. These ingredients will be missing in a suit claiming only interim relief during pendency of the arbitration proceedings outside India. Since the dispute is to be decided by the arbitration, no substantive relief concerning the merits of the arbitration could be claimed in the suit and the plaintiff’s only claim would depend on the outcome of the arbitration proceedings in a foreign country over which the Courts in India would have no jurisdiction. The cause of action would clearly be contingent/ speculative. There would be no existing cause of action and the plaint itself would be liable to be rejected under Order 7 Rule 11(a) of the Civil Procedure Code. In effect no interim relief could be granted unless it is in aid of as an auxiliary to the main relief that may be available to a party on final determination of rights in a suit.
The Court’s jurisdiction to arrest a ship in an action in rem should not be exercised for the purpose of providing security of an award, which may be made in arbitration proceedings because the purpose of the exercise of the jurisdiction is to provide security in respect of the action in rem, and not to provide security in some other proceedings like an arbitration proceeding. If the plaintiff invokes the jurisdiction of the Court to obtain the arrest of the ship as security for an award in an arbitration proceeding, the Court should not issue a warrant of arrest.
[Rushab Ship International LLC vs. Bunkers onboard Ship M. V. African
Eagle and Freight due for transportation of cargo Laden and Ors.]
(Bombay HC, 09.06.2014)