Sanchayita Lahkar

The High Court of Delhi Single Bench of Justice Jasmeet Singh dismissed a plea by Rescom Mineral Trading FZE seeking interim protection against Rashtriya Ispat Nigam Limited (RINL) under Section 9 of the Arbitration and Conciliation Act, 1996. The Court noted that a party’s weak financial position, by itself, cannot justify securing an untested claim before arbitration. The petition sought orders for security of Rs. 139 crores linked to coal supplies and ancillary charges, which RINL disputed on grounds of quality variations. Justice Singh underscored that interim attachment requires more than allegations of financial instability, as the claim remained unadjudicated. Finding that the statutory standards of Order XXXVIII Rule 5 CPC and the tests of prima facie case, balance of convenience, and irreparable injury were not met, the Court declined relief.

The petitioner, Rescom Mineral Trading FZE, a company incorporated in the United Arab Emirates engaged in mining and trading of minerals, entered into a long-term Agreement with Rashtriya Ispat Nigam Limited (RINL) for the supply of 4,75,000 MT of Tuhup Hard Coking Coal. The Agreement, dated 29 August 2023, contained an arbitration clause providing for arbitration under the Rules of the Singapore International Arbitration Centre, with New Delhi as the seat of arbitration.

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The petitioner alleged that under the Agreement and its amendments, coal was supplied to RINL on specified terms. A shipment of 77,465 MT of coal was supplied under bills of lading dated 1 June 2024, for which invoices totaling USD 17,118,773.73 were raised. Payments became due on 30 August 2024. The petitioner contended that despite consuming the coal, RINL had failed to discharge the full payment, leaving an outstanding liability of USD 16,535,071.76, approximately Rs. 139 crores, along with additional demurrage and hull cleaning charges. Payments made by RINL amounted to USD 2,413,279.03.

The petitioner further contended that RINL’s precarious financial condition, reflected in losses of Rs. 2,900 crores in 2022–23 and liabilities exceeding assets, raised concerns that any arbitral award may remain unenforceable. The petitioner argued that without interim measures such as securing payment through bank guarantee, attachment of coal stock, or restraining alienation of assets, it would suffer irreparable loss.

RINL opposed the petition, asserting that its financial position had improved with substantial government aid, including an infusion of Rs. 11,440 crores approved by the Union Cabinet. It argued that claims were unadjudicated, disputed, and premature, especially in light of independent analysis showing the coal’s ash content at 12.6%, exceeding contractual limits and entitling RINL to a rebate. RINL also contended that the charges claimed for demurrage and hull cleaning were not attributable to its conduct. It maintained that it had consistently made payments, demonstrating bona fide intention to fulfill obligations, and that no evidence was produced to show dissipation of assets.

The petitioner relied on previous orders securing dues against RINL in other matters, while RINL distinguished those on factual grounds, arguing that in those cases liabilities were admitted. The dispute in the present matter, it submitted, involved contested claims requiring arbitral determination.

The Court recorded: “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.” It further stated that these included “a clear strong prima facie case and convincing evidence that the other party is actively trying to dissipate its assets to defeat the outcome of the award.”

The Court referred to the Supreme Court’s decisions in Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel India Ltd. and Sanghi Industries Ltd. v. Ravin Cables Ltd. Observing: “In view of the settled principle that unadjudicated claims cannot be secured through interim relief merely because a party is in financial distress, even if the contentions of the petitioner that respondent No. 1 is facing financial distress is for sake believed, the same alone doesn’t make a strong prima facie case in favour of the petitioner.”

The Court remarked: “Mere averment that there are various news reports that comment on precarious financial status of respondent No. 1 and plan to disinvest it, is no proof of attempt to remove or dispose of the assets with an intent to defeat the realisation of an impending Arbitral Award.”

The Court noted: “The parties are at variance about the ash content of the supplied THC coal, and whether respondent No. 1 is consequently entitled to rebate as per the terms of the Agreement. There is also an issue of estoppel i.e., whether respondent No. 1 can almost after 120 days of the date of Bills of Lading object to the quality of the THC coal.” The Court clarified that such issues required arbitral adjudication.

The Court stated that consistent payments made by RINL indicated its willingness to meet obligations: “To my mind these consistent payments made by respondent No. 1, establishes 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 relied on precedent, stating: “Further, the respondent No. 1 is a Public Sector Enterprise and 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.”

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Justice Singh held: “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.”

“For the said reasons, the petition is dismissed. 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. Once the Arbitral Tribunal is constituted, either party shall be at liberty to seek appropriate interim measures under section 17 of the 1996 Act.” The Court disposed of all pending applications.

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