Delhi HC Dismisses Section 9 Petition In Coal Contract Dispute | Says Unliquidated Damages Do Not Give Rise To Debt | Mere Existence Of Branch Office Does Not Confer Jurisdiction
Isabella Mariam
The High Court of Delhi Single Bench of Justice Jasmeet Singh dismissed a petition seeking interim measures under Section 9 of the Arbitration and Conciliation Act, 1996. The Court held that no case had been made out for directing the respondent to furnish security for an unadjudicated claim. The petitioner had approached the Court seeking directions to secure an amount of USD 2,777,000 (approximately INR 23.34 crore), claiming damages due to the alleged wrongful termination of a coal supply contract. The Court determined that it lacked territorial jurisdiction and that even on merits, the petitioner had not satisfied the conditions required for grant of interim protection.
In doing so, the Court recorded that "a claim for damages is not in the nature of a debt till it is adjudicated upon by a Court or an adjudicating authority." Further, the petition was dismissed not only on the ground of lack of territorial jurisdiction but also on the merits, with the Court holding that there was no evidence of intent on part of the respondent to obstruct or delay execution of a potential arbitral award. The Court made it clear that its observations were limited to the present petition and would not affect the arbitral proceedings.
The petitioner, a UAE-based company engaged in coal trading, filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996. The prayer sought directions from the Court to secure the claimed amount of USD 2,777,000 through a bank guarantee or fixed deposit receipt, restrain the respondents from altering their financial status, and attach their assets.
Respondent No. 1, OCL Iron and Steel Ltd., is engaged in the production of coal-based direct reduced iron and steel. Respondent Nos. 2 and 3, Oriental Iron Casting Ltd. and Aron Auto Ltd., are its wholly owned subsidiaries.
According to the petitioner, the dispute originated from a coal sale transaction initiated through WhatsApp communications on 30 September 2022 with a representative of S.M. Niryat Pvt. Ltd. (SMN). The petitioner offered to sell between 75,000 to 150,000 metric tons of coal on a CFR basis. This offer was accepted on the same day, forming what the petitioner described as a binding contract. Subsequently, the petitioner circulated a Standard Coal Trading Agreement (ScoTA) by email on 13 October 2022, incorporating key commercial and legal terms including the dispute resolution mechanism under SIAC Rules, with the seat of arbitration at Singapore.
On 26 October 2022, the petitioner nominated a vessel, MV GLYFADA, for loading the cargo. This was accepted by SMN on 27 October 2022, followed by repeated communications confirming various operational aspects including expected time of arrival and contractual terms. On 31 October 2022, SMN confirmed the contract terms and asked the petitioner to send the final contract. This was done on 2 November 2022, and SMN was requested to sign and return the document, as well as to make the advance payment.
However, on 15 November 2022, SMN cancelled the contract citing commercial reasons. The petitioner claims to have resold the cargo at a lower price and invoked arbitration under the SIAC Rules on 14 June 2024. During the arbitration, OCL informed the tribunal that SMN had ceased to exist following its amalgamation with OCL, as per an NCLT order dated 30 January 2024.
The petitioner contended that the conduct of SMN, and subsequently OCL, constituted a wrongful repudiation of a concluded contract. It relied on communications that allegedly confirmed the contract's finalisation and pointed out that performance had already commenced.
A Section 9 petition was initially filed on 13 November 2024, before the arbitral tribunal was constituted. The Court, by order dated 19 December 2024, directed the respondent to file an affidavit of assets. The respondent delayed compliance and finally filed the affidavit on 27 January 2025. Subsequently, on 3 February 2025, the petition was disposed of with liberty to approach the tribunal. This order was challenged by the petitioner before a Division Bench which remitted the matter back for fresh consideration.
The petitioner argued that OCL had made false statements regarding the existence of its office in Delhi. It referred to filings before stock exchanges which bore a Delhi address, and asserted that R1 held significant shareholding in a listed entity, Jai Balaji Industries Ltd., which had offices in Delhi. It also claimed that OCL's assets were encumbered and their financial standing was poor following their emergence from Corporate Insolvency Resolution Process (CIRP) in March 2023.
In response, the respondent contended that there was no valid arbitration agreement, that the petitioner had suppressed material facts, and that the High Court of Delhi lacked territorial jurisdiction. It denied maintaining any operational office in Delhi at the time of filing and disputed the applicability of any of its assets being located in Delhi as sufficient for jurisdiction. It argued that the petitioner’s claim was one for unliquidated damages and thus not enforceable through interim protection.
It also questioned the delay in invoking arbitration and pointed out that the claim had not been adjudicated. The respondent argued that mere holding of shares or undergoing CIRP could not justify orders of attachment or security. The defence also included the assertion that no part of the cause of action had arisen in Delhi.
The Court examined whether there existed a valid arbitration agreement, whether territorial jurisdiction was made out, and whether interim protection was warranted under Section 9.
On the arbitration agreement, the Court recorded: "A perusal of the email exchanges clearly shows that the petitioner had duly forwarded the ScoTA to R1 on 02 November 2022 and R1 had assured the petitioner that the contract will be sent after being signed and stamped." Further, "ScoTA contains arbitration clause being clause Q of the TS – Appendix 5 ScoTA. To my mind the above documents show that an arbitration agreement is duly contained in the exchange of emails providing a record for the agreement."
The Court applied Section 7(4)(b) of the Act and cited the Supreme Court judgement in Cox & Kings Ltd. v. SAP India Pvt. Ltd., (2024) 4 SCC 1: "Section 7(4)(b) dispenses with the conventional sense of an agreement as a document with signatories. Rather, it emphasises on the manifestation of the consent of persons or entities through their actions of exchanging documents."
Accordingly, the Court held: "The above correspondence leaves no room for doubt that the arbitration agreement was contained in the exchange of email and WhatsApp communications between the parties, and hence, there is an existence of a valid arbitration agreement."
Regarding territorial jurisdiction, the Court noted: "Merely maintaining a branch office will not clothe this court with the territorial jurisdiction in the matter." Referring to previous filings and address references, the Court stated: "The documents clearly suggest that it was the Kolkata office which was communicating and was seized of the matter vis a vis the petitioner."
The Court concluded: "Only because R1 has office at Pamposh Enclave, New Delhi will not give this court jurisdiction to entertain and try the petition." It added: "In the absence of an exclusive jurisdiction clause or an exclusive seat of arbitration clause, sections 15 to 20 of the Code of Civil Procedure, 1908 do not contemplate the jurisdiction of a Court where assets of the defendant are situated."
On the issue of interim relief, the Court noted: "Unliquidated damages do not give rise to debt unless the liability is adjudicated upon by a competent Court or an adjudicating authority and the damages have been assessed." Citing Union of India v. Raman Iron Foundry, (1974) 2 SCC 231, it stated: "The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim."
The Court reiterated: "At best, the petitioner has a claim against R1 for breach of contract. The claim of the petitioner is yet to crystalise into a debt due."
Further, the Court discussed the applicability of Order XXXVIII Rule 5 CPC and recorded: "The object of Order 38 Rule 5 was not to convert an unsecured debt as a secured one." It held: "There is nothing to show as to the intent of R1 to obstruct or delay the execution of a decree that may be passed against it."
The Court first addressed the issue of territorial jurisdiction and concluded that it had no authority to entertain the petition. It recorded: "Hence only because R1 has office at Pamposh Enclave, New Delhi will not give this court jurisdiction to entertain and try the petition." It further stated: "In the absence of an exclusive jurisdiction clause or an exclusive seat of arbitration clause, sections 15 to 20 of the Code of Civil Procedure, 1908 do not contemplate the jurisdiction of a Court where assets of the defendant are situated."
Despite this finding, the Court proceeded to examine the merits. It noted: "Even though I have held that this Court does not have the territorial jurisdiction in the matter but as the matter has been argued on merits, I am also proceeding to discuss the merits of the claims of the petitioner."
On the question of whether the petitioner had established a case for interim relief, the Court held: "Claim for damages is not in the nature of a debt till it is adjudicated upon by a Court or an adjudicating authority." It found that the petitioner had not produced material to show the respondent intended to frustrate any decree or arbitral award, stating: "There is nothing to show as to the intent of R1 to obstruct or delay the execution of a decree that may be passed against it."
The Court reiterated the limited scope of interim protection for unadjudicated damages: "The orders of attachment affects the financial health of the company and are not to be passed merely as a routine." It also observed that the financial condition of R1 and its secured liabilities were insufficient to justify the grant of interim relief under Order XXXVIII Rule 5 CPC.
Concluding the matter, the Court stated unequivocally: "In view of aforesaid observations, the petition is dismissed."
The Court further clarified: "The observations made herein are only for the purpose of deciding the present petition and will have no bearing on the final adjudication of the matter."
As for other reliefs sought, the Court held: "Pending applications, if any, are disposed of."*
Advocates Representing the Parties:
For the Petitioners: Mr. Gauhar Mirza, Advocate; Ms. Shivi Chola, Advocate
For the Respondents: Mr. Krishnaraj Thaker, Senior Advocate with Mr. Anand Sukumar, Advocate; Mr. S. Sukumaran, Advocate; Mr. Bhupesh Kumar, Advocate; Ms. Ruche Anand, Advocate
Case Title: Belvedere Resources DMCC v. OCL Iron and Steel Ltd. & Ors.
Neutral Citation: 2025: DHC:5128
Case Number: O.M.P.(I)(COMM.) 397/2024
Bench: Justice Jasmeet Singh
