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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

COMMERCIAL APPEAL NO. 136 OF 2017

IN
COMMERCIAL ARBITRATION PETITION (L) NO. 208 OF 2017

Heligo Charters Private Limited ... Appellant

V/s.

Aircon Feibars FZE ... Respondents

Mr. Vikram Nankani, Sr. advocate a/w. Mr. Sumeet Nankani, Mr. Akshay
Kishore, Mr. Dhruv Jain I/b. Economics Law Practice for appellants.

Mr. Aspi Chinoy, Sr. advocate a/w. Mr. Kunal Mehta, Ms. Bulbul Singh i/b.
Crawford Bayley & co. for respondents.

CORAM : NARESH H. PATIL AND

NITIN W. SAMBRE, JJ.

RESERVED ON : 7th June, 2018

PRONOUNCED ON : 29th June, 2018.

JUDGMENT [ Per Naresh H. Patil, J.] :

This appeal is directed against an order passed by the learned

Single Judge of this Court on 28th April, 2017 in Comm Arbitration

Petition (l) No. 208/2017. The respondent herein Aircon Beibars FZE

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(original petitioner) holds a foreign award passed on 25 th January,

2017 for an amount of approximately US$7 million equivalent to

Rs.46 Crores against the appellant herein Heligo Charters Pvt. Ltd.

The award was made pursuant to reference of disputes under the

Arbitration Clause contained in Clause 7 of the Settlement Deed

dated 9th September, 2014. The Award was passed in Singapore.

2. The original respondent­appellant herein did not challenge the

Award in the Singapore Court. It has thus become final. It is the

contention of the respondent herein that the appellant has failed to

pay awarded amount of US$ 7 million/Rs.46 Crores.

3. The Respondent herein had filed Arbitration Petition

No.269/2017 wherein it was pointed out that only significant asset

that the appellant/Heligo has in India, is a helicopter which it uses for

ONGC operations. The respondent expressed apprehension that

appellant might move the helicopter from the jurisdiction of the Court

or might encumber or alienate the same to prevent the same from

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being proceeded against in enforcement of the said Award. Therefore,

the petitioner had sought relief under Section 9 of the Arbitration Act,

1996 (as amended by Amendment Act of 2015) to restrain the

respondent from alienating, encumbering, or parting with possession

of the Helicopter and from removing it from the jurisdiction of the

Court, pending enforcement of the Foreign Award under Part II of the

Arbitration Act.

4. The learned Single Judge by an order dated 28 th April, 2017

confirmed the ad­interim injunction.

5. The learned Senior Counsel Mr. Vikram Nankani appearing for

the appellant submitted that the question of law arising herein is

what the law in force in India was on the date on which the

Arbitration Agreement was entered into by the parties. Clause 7 of

the Settlement Deed dated 9th September, 2014 reads as under:

“7. GOVERNING LAW AND ARBITRATION

This DEED shall be governed by and construed in

accordance with Singapore Law and any and all

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disputes, matters, differences of whatsoever nature

and howsoever arising out of this DEED shall be

referred to arbitration in Singapore in accordance with

the rules of the Singapore International Arbitration

Centre (SIAC) for the time being in force. The

Arbitration shall be conducted in English and the

parties shall endure to have the Arbitration concluded

within three (3) months of it being called for. Each of

the Buyer and the Seller shall be entitled to nominate

an Arbitrator. The two appointed arbitrators shall

within a period of no more than (10) days appoint a

third arbitrator such that the tribunal shall consist of

three arbitrators. If upon the receipt by the Buyer or

the Seller (as the case may be) of the nomination, in

writing, of the appointment of an arbitrator, Buyer or

the Seller (as the case may be) shall appoint their

arbitrator within 14 days, failing which the arbitrator

already appointed shall act as a sole arbitrator.”

6. In the written submissions it is submitted that the Scheme of

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the Arbitration Act vis­a­vis foreign seated arbitration does not

permit the respondent to approach courts in India under Section 9 of

the Act. This submission is based on the fact that the parties had

executed the Settlement Deed, and consequently the Arbitration

Agreement, prior to the Arbitration and Conciliation (Amendment)

Act, 2015 and had agreed to seat their arbitration in Singapore. The

parties have excluded availability of Part­I of the Act, including

Section 9 of the Act. The law in India was settled by the Supreme

Court in Bharat Aluminum Co. vs. Kaiser Technical Service

(2012) 9 SCC 552 ('BALCO' for short). It was held that Section 9 of

the Act was not applicable to foreign­seated International Commercial

Arbitration. The BALCO judgment was pronounced on 6th September,

2012. The Arbitration Agreement in the present case was executed on

9th September, 2014. Section 9 of the Act, therefore, is not applicable

to the facts of the case. The dispute between the parties was referred

to arbitration on 12th April, 2015. The amended act came into effect

from 23rd October, 2015. The Counsel, therefore, submitted that the

negative right of the parties under the Settlement Deed – to not have

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the ability to approach courts in India under Part I of the Act – had

accrued before the amendment to the Act took effect. It is submitted

that Section 26 of the Amendment Act must be given purposive

interpretation based on the findings of Apex Court in the case of

Thyssen judgment. The Counsel referred to the 246 th report of the

Law Commission of India. It is the submission of the Counsel that

proviso to Section 2(2) of the Arbitration Act cannot be made

applicable retrospectively. One of the written submission of the

appellant reads as under:

“14. Without prejudice to the submissions made

above, and in the alternative, the Appellant

further submits that there is yet another reason by

the petition in the present case is not

maintainable. This because the second condition

in the proviso to Section 2(2) is not fulfilled. The

proviso, inter alia, provides that if the seat of

arbitration is outside India, the foreign award has

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to be “enforceable and recognised” under Part II of

the Act. These words indicate that unless and

until the foreign award is first enforced and

recognised (accepted) by this Hon'ble Court, under

Section 48 read Section 49 of the Act, no petition

under Section 9 is maintainable.

15. Enforceability and recognition of foreign

award is a condition precedent for filing petition

under Section 9. This submission is fortified by

the language used in Section 9 itself, which while

covering the situation after award refers only

Section 36 of the Act, which applies to domestic

award. Hence, on a plain reading, Section 9, does

not cover a case of foreign award after arbitration

is concluded and therefore, the petition under

Section 9 in relation to foreign award can only be

maintained, if the second condition under the

proviso to Section 2(2) was also satisfied, namely,

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Section 9 of the foreign award should be

enforceable and recognised under Part II of the Act

by the competent court in India.

16. Indeed, since the Respondent has failed to

procure enforcement under Part II of the Act, for

more than twelve (12) months after the Foreign

Award was made, the Foreign Award has not

become enforceable in terms of section 49 of the

Act and remains to be tested for enforceability in

terms of Section 48 of the Act.

7. In the facts, the Counsel submitted that prima­facie case is

made out. Balance of convenience is not in favour of the respondent

and irreparable injury would be caused in case the relief is denied to

the appellant herein. The Counsel submitted that Single Judge failed

to appreciate the facts, the import of the judgment and the amended

provisions of the Arbitration Act.

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8. The learned Counsel for the appellant placed reliance on

following judgments:­

I) Harmony Innovation Shipping Ltd. Vs. Gupta Coal India

Ltd.

& anr.1

ii) Thyssen Stahlunion Gmbh Vs. Steel Authority of India

Ltd.2

iii) Bharat Aluminum Company Vs. Kaiser Aluminum

Technical Services.3

iv) Law Commission of India (Report No.246)

v) Order dtd. 17/4/17 in ARBPL/208/2017 passed by Justice

G.S. Patel.

9. In the case of Thyseen Stahlunion GMBH (cited supra),

the Apex Court observed in Paragraph 32 as under:

“32. Principles enunciated in the judgments show as to

1 (2015) 9 SCC 172

2 (1999) 9 SCC 334
3 (2012) 9 Supreme Court Cases 552.

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when a right accrues to a party under the repealed Act.

It is not necessary that for the right to accrue legal

proceedings must be pending when the new Act comes

into force. To have the award enforced when arbitral

proceedings commenced under the old Act under that

very Act is certainly an accrued right. Consequences for

the party against whom award is given after arbitral

proceedings have been held under the old Act though

given after the coming into force of the new Act, would

be quite grave if it is debared from challenging the

award under the provisions of the old Act. Structure of

both the Acts is different. When arbitral proceedings

commenced under the old Act it would be in the mind of

everybody, i.e., the arbitrators and the parties that the

award given should not fall foul of Sections 30 and 32 of

the old Act. Nobody at that time could have thought

that Section 30 of the old Act could be substituted by

Section 34 of the new Act.”

10. The learned Senior Counsel Mr.Chinoy appearing for

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respondents submitted that appellant therein has raised

technical/legal pleas to exercise of jurisdiction as follows:­

“e(i) that section 9 was not applicable as Part I

including section 9 was excluded by virtue of the

Arbitration being seated in Singapore and subject to

Singapore Law; and

(ii) that orders under section 9 could not be sought till

the Foreign Award had been recognised and held to

enforceable under Section 48. The Respondent had also

pointed out that the Helicopter had already been

provided as security to the Union Bank of India for

obtaining various banking facilities.

11. It is submitted that by an order dated 28 th April, 2017 the

learned Single Judge rejected the respondent's objection to the

exercise of jurisdiction under Section 9 and allowed the petition.

12. In the submission of the Counsel that mere fact that under the

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arbitration agreement the arbitration took place in foreign country

could not resolve any exclusion in non­applicability of Section 9 of the

Act. The learned Single Judge pointed out that since Section 2(2)

proviso is in relation to foreign awards, to accept the appellant's

submission “would be to render the amendment to section 2(2) utterly

otiose. The proviso to Section 2(2), which was added by the Arbitration

and Conciliation Act, 2015 reads as under:

“2(2) Provided that subject to an agreement to

the contrary, the provisions of sections 9, 27 and

clause (a) of sub­section (1) and sub­section (3) of

section 37 shall also apply to international commercial

arbitration, even if the place of arbitration is outside

India, and an arbitral award made or to be made in

such place is enforceable and recognised under the

provisions of Part II of this Act.”

13. The said proviso was added pursuant to Supreme Court

judgment in the case of BALCO cited supra. The Counsel referred to

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Report No.246 of Law Commission of India. In the submission of

learned Senior Counsel Mr. Chinoy notwithstanding that Part I is not

applicable to a Foreign Seated Arbitration, the proviso to Section 2(2)

was introduced to make only Section 9 (and other sections) of Part I

applicable even to Foreign seated Arbitrations, in order to provide a

remedy to a party who obtains a Foreign Award in such a Foreign

seated Arbitration, so that such a Party was not faced with the

situation that “the entity against which it had to enforce the award

has been stripped off its assets and has been converted into a shell

company.” It is submitted that the Amendment Act which introduced

section 2(2) proviso has treated section 9 as being distinct from the

rest of Part I of the Arbitration Act, 1996 and has made Section 9

applicable to the foreign seated arbitration, unless the parties

specifically agrees to the contrary. The Counsel further submitted

that remedy under Section 9 is a transitory provision pending the

process contemplated under Section 48 of the Act. This is obviously

intended to ensure that a Court can step in to protect an asset from

being diverted or dissipated and to ensure that the holder of a foreign

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Award, if he is able to get his foreign award pronounced enforceable

against an asset which he can proceed. In the written submissions

the respondent has specifically stated in paragraphs (d) (e) and (g) as

under:­

“(d) More once a Foreign Award is “recognised” and

held to be “enforceable” under section 48, there would

be no need to resort to section 9, as “the award would

be deemed to be a decree of the Court” (Ref: Section 49)

and orders by way of injunctions, attachment etc. can

be sought in Execution proceedings. It is only in the

interregnum, i.e. till the Foreign Award is held to be

enforceable as a decree if the Court (under sections 48

and 49), that recourse would be required under section

9 for interim protective orders to prevent dissipation

and diversion of assets.

(e) The patent fallacy in the Appellants submission is

apparent from the fact that the proviso to sec 2(2)

makes section 9 applicable to an international

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commercial arbitration taking place outside India “and

an arbitral award made, or to be made in such place..”.

Under the plain language of the Proviso to Section 2(2),

an Application under Section 9 could be made even

during the pendency of an Arbitration held outside

India; i.e. even prior to an Award having been made in

such a Foreign Arbitration. It would be ex facie

incongruous/absurd to construe the Proviso to section

2(2) to mean that an Application under section 9 would

be maintainable before the foreign Award was made

BUT would not be maintainable once the foreign

Award was made until the Award had been recognised

and held enforceable under Section 48.

(g) The reliance sought to be placed by the Appellants

between the language proposed by the Law

Commission for the proviso to sec 2(2) i.e. “if an award

made, or to be made, in such place would be

enforceable and recognised under Part II of this Act”,

and the section as enacted “if an award made, or to be

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made, in such place is enforceable and recognised

under Part II of this Act”, is misplaced. The change in

language is inconsequential and merely a matter of

phrasing. In both cases the said last sentence, is

merely descriptive of the “arbitral award made, or to be

made” as being a Foreign Award required to be

recognised and enforced under Part II of the Act. The

last sentence does not stipulate a second/additional

pre­condition for making an Application under section

9.

14. We have perused the judgments cited supra and written

submissions of the parties.

15. Heard learned Counsel appearing for the respective parties. We

agree with the submissions advanced by the Counsel appearing for the

respondents. The amended provisions of Section 2(2) clearly stipulates

that subject to an agreement to the contrary, the provisions of Section

9 shall apply to international commercial arbitration even if the place

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of arbitration is outside India. The contention that unless the award

is put to execution in accordance with provisions of Section 48, a party

is not entitled to seek interim­relief is not sustainable. There is no

such embargo or restriction placed for seeking recourse to interim

measures even if the award is foreign­seated one. The amendment

was brought into effect after the Law Commission submitted its report

consequent to judgment in the case of BALCO (cited supra).

Paragraph 194 of the judgment reads as under:

“194. In view of the above discussion, we are of

the considered opinion that the Arbitration Act,

1996 has accepted the territoriality principle

which has been adopted in the UNCITRAL Model

Law, Section 2(2) makes a declaration that Part I

of the Arbitration Act, 1996 shall apply to all

arbitrations which take place within India. We

are of the considered opinion that Part I of the

Arbitration Act, 1996 would have no application

to international commercial arbitration held

outside India. Therefore, such awards would

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only be subject to the jurisdiction of the Indian

courts when the same are sought to be enforced

in India in accordance with the provisions

contained in Part II of the Arbitration Act, 1996.

In our opinion, the provisions contained in the

Arbitration Act, 1996 make it crystal clear that

there can be no overlapping or intermingling of

the provisions contained in Part I with the

provisions contained in Part II of the Arbitration

Act, 1996.”

We are, therefore, not inclined to accept the contentions of the

appellant on that ground. In view of the amended provisions and

facts, we are of the view that operation of provisions of Section 9

cannot be excluded in absence of a specific agreement to the contrary.

The judgment in BALCO was pronounced on 6th September, 2012.

The dispute between the parties was referred on 8 th April, 2015. The

Arbitration agreement was executed between the parties on 9 th

September, 2014. Whereas the Act was amended on 23 rd October,

2015.

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16. In respect of interpretation placed by the Counsel appearing for the

appellant under the provisions of Section 2(2), 9 and 48, we are of the

view that the interim protection in the facts cannot be denied to the

respondent irrespective of as to whether the award was put to

execution or not? Such a measure is made available in law under

Section 9 of the Act so as to prevent dissipation and diversion of

assets. This being the object and purpose behind the amended

provisions which is based on the recommendations of the Law

Commission. We do not find any error in the view adopted by the

learned Single Judge on this count. The judgments cited supra by the

Counsel appearing for the appellant do not support and sustain the

interpretation placed by the Counsel.

17. It is to be noted that although the arbitration agreement was

entered into in September 2015, the objection under Section 9 was

filed in April 2017 i.e. 19 months after the amendment.

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18. In Paragraph­11 of the impugned order dated 28 th April, 2017,

the learned Single Judge quoted the extract of Report No.246 of the

Law Commission of India which reads as under:­

While the decision in BALCO is a step in the right

direction and would drastically reduce judicial

intervention in foreign arbitrations, the Commission

feels that there are still a few areas that are likely to

be problematic.

(i) Where the assets of a party are located in

India, and there is a likelihood that that

party will dissipate its assets in the near

future, the other party will lack an

efficacious remedy if the seat of the

arbitration is abroad. The latter party will

have two possible remedies, but neither will

be efficacious. First, the latter party can

obtain an interim order from a foreign Court

or the arbitral tribunal itself and file a civil

suit to enforce the right created by the

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interim order. The interim order would not

be enforceable directly by filing an execution

petition as it would not qualify as a

“judgment” or “decree” for the purposes of

sections 13 and 44A of the Code of Civil

Procedure (which provide a mechanism for

enforcing foreign judgments). Secondly, in

the event that the former party does not

adhere to the terms of the foreign Order, the

latter party can initiate proceedings for

contempt in the foreign Court and enforce the

judgment of the foreign Court under sections

13 and 44A of the Code of Civil Procedure.

Neither of these remedies is likely to provide

a practical remedy to the party seeking to

enforce the interim relief obtained by it.

That being the case, it is a distinct possibility

that a foreign party would obtain an arbitral

award in its favour only to realize that the

entity against which it has to enforce the

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award has been stripped of its assets and has

been converted into a shell company.

(ii) While the decision in BALCO was made

prospective to ensure that hotly negotiated

bargains are not overturned overnight, it

results in a situation where Courts, despite

knowing that the decision in Bhatia is no

longer good law, are forced to apply it

whenever they are faced with a case arising

from an arbitration agreement executed pre­

BALCO.

In Paragraph­18 the learned Single Judge observed as under:­

18. On the question of whether such an order ought to

be made on merits, Mr.Nankani says that Heligo is

good for the money. Given that this is about a

helicopter, he succumbs to temptation in describing his

client as being “not a fly­by­night operator”. If that is

so, Mr. Nankani's client's option is simple: his client

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must make available by a deposit in Court sufficient

money or security to secure a potential enforcement of

the foreign award that has been rendered against it. If

not, I see no reason why a limited injunction of the

nature that I have described, i.e. subject to a prior

claim by a secured creditor ought not to be made.

Certainly, I am not able to see any prejudice being

caused to the Respondent. On the other hand, as I

have noted, if an injunction is refused, there is every

possibility of irreparable prejudice to Aircon. In my

view, there is not only prima­facie case, bu the balance

of convenience also favours the Petitioner.

19. The Award was passed on 25th January, 2017. The learned

Single Judge has rightly dealt with the issue and has reached

reasonable and proper conclusion. We do not find any error or

perversity in the view adopted by the learned Single Judge. In the

facts, we do not notice any prejudice being caused to the appellant. If

the injunction is refused, there is every possibility of irreparable loss

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being caused to the respondent. The respondent has made out a

strong prima­facie case and balance of convenience is also in favour of

respondent­original petitioner. We, therefore, find no merit in the

Appeal. It stands dismissed. No order as to costs.

(NITIN W. SAMBRE, J) (NARESH H. PATIL, J.)

L.S. Panjwani, P.S.

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