Isabella Mariam

The High Court of Delhi Single Bench of Justice Jasmeet Singh dismissed a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996. The Court declined to grant interim relief sought against a public sector enterprise, holding that the petitioner failed to establish a strong prima facie case, balance of convenience, or irreparable harm. The Court directed that the disputes raised, including claims of unpaid dues and allegations of defective supply, be adjudicated before the arbitral tribunal rather than through pre-arbitral interim measures.

The dispute arises from a contractual arrangement between a foreign trading company and a public sector steel enterprise. The petitioner, a company incorporated in the United Arab Emirates engaged in the mining, processing, and trading of metals and minerals, entered into a long-term Agreement for Sale and Purchase of Tuhup Hard Coking Coal dated 29 August 2023. The respondent, Rashtriya Ispat Nigam Limited (RINL), operating the Visakhapatnam Steel Plant, was designated as the purchaser under the agreement. A port authority, Adani Gangavaram Port Ltd., was arrayed as a pro forma party.

Also Read: Supreme Court | Criminal Courts Cannot Review or Recall Own Judgments | Only Clerical or Arithmetical Errors Permissible Under Section 362 CrPC

The agreement contemplated the supply of approximately 475,000 metric tonnes (MT) of Tuhup Hard Coking Coal (THC coal). It incorporated an arbitration clause referring disputes to arbitration under the Singapore International Arbitration Centre Rules, with the seat and venue at New Delhi. Payment obligations were originally structured on a Letter of Credit basis but were later modified under a series of amendments, including the 10th Amendment dated 14 August 2024. This amendment permitted open account payment terms requiring payment within 90 days from the bill of lading date for shipments, including one involving vessel MV Stefanos T.

Pursuant to this arrangement, the petitioner supplied 77,465 MT of THC coal under five Bills of Lading dated 1 June 2024, and raised invoices totaling USD 17,118,773.73, payable by 30 August 2024. Before the vessel departed from Indonesia, the petitioner insisted on clearance of past dues amounting to USD 8 million. Following negotiations, a settlement understanding was reached on 10 May 2024. The vessel arrived at Visakhapatnam on 11 June 2024 but was not permitted to berth until 27 July 2024. Discharge of coal was completed by 29 July 2024, and the respondent consumed the entirety of the shipment.

The petitioner claimed it incurred USD 110,000 towards hull cleaning charges and USD 1,332,526 towards demurrage charges due to delays. Partial payments were made by the respondent: USD 1,669,449.08 on 12 August 2024, USD 118,949.91 on 4 October 2024, USD 237,899.82 on 7 October 2024, and USD 386,980.21 on 25 April 2025. The total payment received was USD 2,413,279.03. The petitioner alleged an outstanding claim of approximately Rs. 139 crores (USD 16.5 million) remained unpaid.

The respondent contended that the quality of coal did not conform to contractual specifications. Annexure-II of the agreement prescribed a maximum permissible ash content of 9%. Independent analysis conducted on 5 August 2024 reportedly revealed ash content of 12.6%. Accordingly, the respondent asserted entitlement to price reduction or rebate under the contractual terms. The respondent also disputed liability for hull cleaning and demurrage charges, attributing delays to the petitioner’s refusal to allow berthing until settlement of earlier dues.

The petitioner approached the High Court under Section 9 of the Arbitration and Conciliation Act seeking interim relief, including directions for the respondent to furnish security equivalent to the outstanding amount, orders for attachment and preservation of coal stock, injunctions against delivery, and appointment of a court receiver with authority to sell coal in case of non-payment. An ancillary application sought restraint against the respondent from alienating assets without furnishing security.

Initially, the Court had secured petitioner’s interest by attaching steel bars worth Rs. 69.5 crores, but this order was set aside on appeal by the Division Bench, remanding the matter for reconsideration. The present judgment follows that remand.

The petitioner argued that the respondent’s precarious financial position, reflected in losses exceeding Rs. 2,900 crores in financial year 2022–23 and high liabilities, justified interim protection to avoid being left with a “paper decree.” The respondent countered that financial distress alone could not warrant relief, especially given substantial financial assistance sanctioned by the Government of India, including equity infusion and working capital support exceeding Rs. 12,000 crores.

Thus, the case presented competing assertions of financial incapacity, contractual non-compliance, and contested claims of outstanding amounts, culminating in the Court’s assessment of whether interim measures under Section 9 were justified.

Justice Jasmeet Singh recorded that Section 9 of the Arbitration and Conciliation Act confers wide powers on courts to grant interim measures but that such powers are guided by principles underlying the Code of Civil Procedure. The Court stated: “Though the Court is not strictly bound by the provisions of CPC, it cannot completely disregard its underlying principles. Hence, for an interim order akin to attachment before an Award, the Court needs to satisfy itself that the conditions underlying Order XXXVIII Rule 5 of CPC are met.”

The judgment discussed at length the apparent divergence in Supreme Court jurisprudence between Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel India Ltd. and Sanghi Industries Ltd. v. Ravin Cables Ltd. The Court noted: “It would thus be the latter view as enunciated in Sanghi Industries which the Court would be obliged to follow.”

Addressing the petitioner’s reliance on financial distress, the Court cited precedent: “The contention that financial distress of a party can be a sole ground for directing that party to secure a claim of unadjudicated damages as claimed by the other party is, in my view, bereft of any merit.”

The Court observed that disputes concerning ash content, liability for demurrage and hull cleaning charges, and entitlement to rebate were factual issues requiring arbitral determination. “All these issues between the parties are to be decided during the arbitral proceedings. In a case of this nature where the dispute between the parties is highly reliant upon the interpretation of the terms of the Agreement and the facts and circumstances surrounding it, this Court refrains from making any observations on the merits of the case.”

On the question of irreparable harm, the Court found: “There is no material evidence brought forward by the petitioner to substantially prove… attempt to remove or dispose of the assets with an intent to defeat the realisation of an impending Arbitral Award.”

The Court acknowledged payments made by the respondent and concluded: “These consistent payments made by respondent No. 1 establish its willingness to meet its financial obligations towards the petitioner. Hence, it cannot be said that the petitioner has established a prima facie case that the respondent No. 1 is acting with a malafide intention to defeat the eventual Arbitral Award.”

The Court also emphasized the public character of the respondent: “When dealing with public revenue there is a higher threshold that is required to be met before an interim relief could be granted against a Public Sector Enterprise.”

Also Read: Delhi High Court | GST Department Cannot Probe Misuse Of GSTIN By Third Party | Investigation Authority Vests In Economic Offences Wing Under CGST Act, 2017

The High Court dismissed the petition. Justice Jasmeet Singh recorded: “For the foregoing reasons, the petitioner has not made out the principles of Order XXXVIII Rule 5 of CPC. Additionally, the petitioner has also failed to meet the three-prong test, as the petitioner does not have a strong prima facie case, the balance of convenience does not lie in its favor, and no irreparable harm will be caused to the petitioner which cannot be compensated in terms of money.”

The Court clarified that its findings were confined to the determination of interim relief and would not prejudice the arbitral proceedings. “Needless to say, the observations made herein are solely for the purpose of deciding the present petition and shall not be construed as expressing any opinion on the merits of the dispute that may be referred to the Arbitral Tribunal, or on the merits of any application that either party may bring before the Arbitral Tribunal.”

The Court further stated: “Once the Arbitral Tribunal is constituted, either party shall be at liberty to seek appropriate interim measures under section 17 of the 1996 Act.”

Accordingly, the petition and all pending applications were disposed of.

Advocates Representing the Parties

For the Petitioners: Mr. Anirudh Bhakru, Mr. Divyam Agarwal, Ms. Ananya Mago, Mr. Khitiz Jain, Mr. Rohan Chandra, Advocates

For the Respondents: Mr. Rajshekhar Rao, Senior Advocate with Mr. Shravan Yammanur, Mr. Mangesh Krishna, Ms. Prachi Kaushik, Ms. Aashna Chawla, Mr. Zahid Hashmi, Advocates

Case Title: Rescom Mineral Trading FZE v. Rashtriya Ispat Nigam Limited & Anr.

Neutral Citation: 2025:DHC: 7467

Case Number: O.M.P. (I) (COMM.) 402/2024 & CCP(O) 5/2025, I.A. 582/2025, I.A. 4997/2025

Bench: Justice Jasmeet Singh