Application For Pre Award Under Section 9 Of The A&C Act Can Be Filed In A Court Where The Assets Of The Respondent Are Located

Application For Pre Award Under Section 9 of The A&C Act

In the aforementioned case, it came up for consideration before the Hon’ble Delhi High Court whether an application for pre award under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”) in a foreign seated arbitration could be filed in the court in whose jurisdiction the assets of the Respondent are located.

In the present case, the Applicant/Claimant, namely, Shanghai Electric Group Co. Ltd., had entered into an “Equipment Supply and Service Contract” dated 26.06.2008 (“Contract”) with the Respondent, namely, Reliance Infrastructure Ltd. The project under the contract came to be completed by 23.11.2017 and as of August 2019, the Applicant/Claimant was owed a humongous sum of nearly USD 135,320,728.42/- (approximately INR 995 crores). Owing to the aforesaid dispute, the arbitration proceedings, administered by Singapore International Arbitration Centre (“SIAC”) and United Nations Commissions on International Trade Law (“UNCITRAL”) rules have commenced.

It was contended by the Applicant/Claimant that since the commencement of the arbitral proceedings, the Respondent has been quickly disposing of its assets and given the same request for the interference of the Court in securing the assets to the extent of the amount in dispute. The Respondents raised questions on the maintainability of the application stating that the Hon’ble Court does not have jurisdiction to entertain the application as no cause of action arose in its jurisdiction.

The Hon’ble High Court taking the aforesaid and other contentions raised by the parties and further, in light of the principles laid down by the Hon’ble Bombay High Court in Trammo DMCC v. Nagarjuna Fertilizers and Chemicals Ltd.^[1], concluded that an application under Section 9 in a foreign seated arbitration would be as per Section 47 of the Act and the jurisdiction of the Court would only be based on the subject matter of the award. 

The High Court, upon deciding the application on merits, proceeded to record that the Applicant/Claimant had failed to establish that disposal of assets by the Respondent contained any mala fide intent on denying the fruits of an award to the Applicant/Claimant. The Hon’ble High Court went on to further note that not every disposal of an asset would justify the grant of interim measure.

With respect to the contention raised by the Applicant/Claimant that the Respondent would dispose of all its assets in order to deny the claim of the Applicant/Claimant, the Hon’ble High Court went on to further record that the apprehension of the Applicant/Claimant was impractical as shares of the Respondent in a single entity were worth more than the arbitral claim amount. Therefore, the financial condition alone could not be the reason for attachment before the award.

Given the aforesaid facts, circumstances and the judgements, the Hon’ble Delhi High Court, being of the view that the Applicant/Claimant had failed to prove the prima facie case and lack of any merit in the apprehension on part of the Applicant/Claimant, proceeded to dismiss the Application on merits, leaving open all rights and contentions of the parties before the Arbitral Tribunal.

^[1] 2017 SCC OnLine Bom 8676