Arbitration and Conciliation Act, 1996 – Sections 9 and 37 – Interim measures – Attachment / security pending arbitration – Scope of appellate interference – Order 38 Rule 5 CPC – Mere right to sue – Demurrage claim – Unadjudicated liability – No crystallised debt – Balance of convenience – Delay and lack of expedition – Dismissal of appeal
Held:
An interim measure under Section 9 of the Arbitration and Conciliation Act, 1996, seeking attachment or security, cannot be granted merely on the basis of an unadjudicated claim for demurrage, which constitutes at best a right to sue for damages and not a crystallised debt. Order 38 Rule 5 CPC principles continue to guide Section 9 jurisdiction, and such drastic relief cannot be used to convert an unsecured and disputed claim into a secured one. In an appeal under Section 37 of the Act, the appellate court will not interfere with a discretionary order of the Single Judge unless the order is perverse, arbitrary, or contrary to settled legal principles.
(Paras 27–63)
ANALYSIS OF FACTS AND LAW
I. Nature of Proceedings
The appeal was filed under Section 37 of the Arbitration and Conciliation Act, 1996, assailing the order dated 13.10.2025 passed by the learned Single Judge in ICOMAOA No.5 of 2024, whereby an application under Section 9 of the Act seeking attachment/security pending arbitration was dismissed and the deposited security directed to be returned.
(Paras 1–5)
II. Origin of the Dispute
The appellant, a foreign shipping company, entered into a fixture note/charterparty dated 12.03.2021 with respondent Nos.1 to 3 for carriage of rice from Kakinada to Vietnam. The appellant alleged delay in discharge of cargo and raised a claim for demurrage, followed by an updated claim including interest and costs, aggregating to USD 296,326.74.
(Paras 6–9)
Arbitration proceedings were initiated as per the arbitration clause. Pending arbitration, the appellant invoked Section 9 of the Act, seeking attachment of 1600 MT of rice and security for the claimed amount.
(Paras 9–10)
III. Interim Orders and Subsequent Proceedings
An ex parte conditional attachment order was passed on 23.04.2024, subject to furnishing security, which the 1st respondent complied with within 24 hours. Upon objections, the learned Single Judge vacated the interim order and dismissed the Section 9 application on merits, directing return of the security.
(Paras 3–5, 13–14)
IV. Core Issues Before the Division Bench
The principal issue before the Division Bench was whether the order dated 13.10.2025, vacating interim protection under Section 9, warranted interference under Section 37 of the Act.
(Para 27)
V. Scope of Appellate Jurisdiction under Section 37
The Court reiterated that appellate jurisdiction under Section 37 is narrow and circumscribed, particularly where the appeal arises from an order granting or refusing interim measures under Section 9. Interference is permissible only if the order suffers from perversity, arbitrariness, or violation of settled principles.
(Paras 28–33, 61)
VI. Applicability of Order 38 Rule 5 CPC Principles
The Court undertook an elaborate examination of the interplay between Section 9 of the Act and Order 38 Rule 5 CPC, holding that:
-
Section 9 relief is discretionary and extraordinary.
-
Principles underlying Order 38 Rule 5 CPC continue to apply.
-
Mere existence of a claim or prima facie case is insufficient.
-
There must be material indicating an intention to defeat the award or a real risk of asset dissipation.
(Paras 35–43, 58)
VII. Nature of the Claim – Demurrage and Right to Sue
The Court held that the demurrage claim, though described as liquidated damages, was seriously disputed and pending adjudication before the arbitrator. Until liability is determined, no pecuniary obligation or debt crystallises.
Relying on settled principles, the Court held that:
-
A claim for damages gives rise only to a mere right to sue.
-
Such a right is not transferable and does not constitute a debt.
-
Attachment/security cannot be ordered to secure such a claim.
(Paras 47–50, 59)
VIII. Balance of Convenience and Delay
The Court found that:
-
The respondent had promptly complied with the earlier conditional order, indicating bona fides.
-
The attached rice was stock-in-trade, not a substantive asset.
-
The appellant remained inactive for nearly three years before seeking interim relief.
-
Such unexplained delay defeated any claim of urgency or necessity for extraordinary protection.
(Paras 53–57)
Accordingly, the balance of convenience was held to be against the appellant.
(Paras 52–56)
IX. No Perversity in the Single Judge’s Order
Applying the principles governing appellate interference with discretionary orders, the Division Bench held that the learned Single Judge’s order was neither arbitrary nor perverse, and was in consonance with settled legal principles.
(Paras 61–62)
RATIO DECIDENDI
-
An unadjudicated claim for demurrage or damages does not constitute a crystallised debt and amounts only to a right to sue, which cannot be secured by attachment under Section 9 of the Arbitration and Conciliation Act, 1996.
-
Relief under Section 9 is discretionary and guided by principles underlying Order 38 Rule 5 CPC; it cannot be used to convert an unsecured and disputed claim into a secured one.
-
In an appeal under Section 37 of the Act, the appellate court will not interfere with a discretionary order of the Single Judge unless it is perverse, arbitrary, or contrary to settled law.
-
Unexplained delay and absence of material showing risk of asset dissipation are fatal to a claim for interim protection under Section 9 of the Act.
