FOB contracts — Title to goods Under an FOB contract, once goods cross the ship’s rail, title and risk pass to the buyer. Attachment of such cargo is impermissible when the exporter has no subsisting title or interest at the time of attachment. (Paras 11–12, 22)

advocatemmmohan

Arbitration and Conciliation Act, 1996 — Section 37 — Scope of appellate interference

An appeal under Section 37 of the Arbitration and Conciliation Act is not in the nature of a first appeal. Interference is warranted only when the order under challenge is arbitrary, perverse, or contrary to settled legal principles. Re-appreciation of facts or substitution of discretion is impermissible.
(Paras 28–33, 61–62)

Arbitration and Conciliation Act, 1996 — Section 9 — Interim measures — Governing principles

While exercising jurisdiction under Section 9, the Court must consider: (i) existence of a strong prima facie case, (ii) balance of convenience, (iii) reasonable expedition, and (iv) likelihood of asset dissipation with intent to defeat the award. These principles remain applicable post-2015 amendment.
(Paras 13–14, 38–40, 44–45)

Section 9 and Order XXXVIII Rule 5 CPC — Relationship

Although Section 9 is wider than Order XXXVIII Rule 5 CPC, the underlying principles governing attachment before judgment cannot be disregarded. Section 9 cannot be used to convert an unsecured or unadjudicated claim into a secured debt.
(Paras 35–37, 42–43, 58–59)

Demurrage — Nature of claim — Liquidated damages — Crystallisation of liability

A claim for demurrage, though arising from contractual stipulation, does not crystallise into a pecuniary liability until adjudicated. Until liability is determined, such a claim remains a mere right to sue and cannot justify securing the amount by attachment.
(Paras 47–51, 59)

Unliquidated damages — Right to sue — No debt

A claim for damages does not give rise to a debt until adjudicated. A mere right to sue for damages is not an actionable or transferable claim and cannot form the basis for attachment or security.
(Paras 48–50, 59)

Balance of convenience — Commercial stock-in-trade

Attachment of routine commercial stock-in-trade, such as export cargo, which forms part of regular business operations, is not justified in the absence of strong evidence of asset dissipation, as it causes disproportionate hardship to the respondent.
(Paras 53–56)

Reasonable expedition — Delay — Effect

Unexplained delay of several years in invoking interim protection disentitles the applicant to discretionary relief under Section 9, as it undermines bona fides and negates urgency.
(Paras 54–57)

Asset dissipation — Requirement of material

Vague or general allegations of possible asset alienation are insufficient. Even though strict proof is not required, the applicant must place some material indicating a real risk of diminution of assets.
(Paras 58–59)

FOB contracts — Title to goods

Under an FOB contract, once goods cross the ship’s rail, title and risk pass to the buyer. Attachment of such cargo is impermissible when the exporter has no subsisting title or interest at the time of attachment.
(Paras 11–12, 22)

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ANALYSIS (PARA-WISE SYNTHESIS)

1. Scope of Section 37 (Paras 28–33, 61–62):
   The Division Bench clarified that appellate jurisdiction under Section 37 is narrow and supervisory in nature. Interference is confined to cases of perversity or patent illegality, and the Court cannot reassess factual findings or substitute its own discretion.

2. Interim measures under Section 9 (Paras 38–40, 44–45):
   The Court reiterated that Section 9 relief requires satisfaction of traditional equitable parameters—prima facie case, balance of convenience, and urgency—while ensuring the arbitral process remains meaningful.

3. Demurrage claim and crystallisation (Paras 47–51):
   Though demurrage is contractually stipulated, liability was disputed and subject to arbitration. Until adjudication, no enforceable pecuniary obligation arose, rendering the claim insufficient to justify security.

4. Order XXXVIII Rule 5 principles (Paras 35–37, 58–59):
   The Court held that Section 9 cannot bypass the foundational safeguards of Order XXXVIII Rule 5. Attachment cannot be granted merely to secure a speculative or disputed claim.

5. Delay and lack of expedition (Paras 54–57):
   The appellant’s silence for nearly three years before invoking Section 9 was held fatal. Interim relief is discretionary and cannot be invoked opportunistically when attachable assets surface.

6. Commercial hardship and balance of convenience (Paras 53–56):
   The Court found that attachment of export cargo, being routine stock-in-trade, would severely disrupt the respondent’s business, whereas the appellant’s claim remained unadjudicated.

7. Asset dissipation not proved (Paras 58–59):
   The appellant failed to demonstrate even a reasonable apprehension of asset dissipation. Mere assertions, without material particulars, were held insufficient.

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RATIO DECIDENDI

1. An appeal under Section 37 of the Arbitration and Conciliation Act is not a first appeal; interference is permissible only where the order under challenge is perverse, arbitrary, or contrary to settled legal principles.

2. Interim measures under Section 9 cannot be granted to secure an unadjudicated or disputed claim for damages, as such a claim does not constitute a crystallised debt.

3. The principles underlying Order XXXVIII Rule 5 CPC continue to inform the exercise of power under Section 9, and Section 9 cannot be used to convert an unsecured claim into a secured one.

4. Unexplained delay and lack of reasonable expedition disentitle a party to discretionary interim relief under Section 9.

5. Attachment of routine commercial stock-in-trade is impermissible in the absence of cogent material showing a real risk of asset dissipation with intent to defeat an arbitral award.