Court says Section 9 relief cannot be denied merely because the tribunal was later constituted; holds foreign arbitral remedy under FOSFA was not shown to be efficacious for securing assets in India.
The Bombay High Court has set aside a single judge’s refusal to grant interim protection in a foreign-seated arbitration and directed an Indian respondent to furnish a bank guarantee for admitted dues of USD 66,92,500, or its INR equivalent, within two weeks. Till compliance, the respondent has been restrained from alienating or creating third-party rights in its Mumbai property.
A division bench of Justices A.S. Gadkari and Kamal Khata held that a party who had approached the court under Section 9 of the Arbitration and Conciliation Act, 1996, before constitution of the arbitral tribunal, could not be denied relief merely because the tribunal was subsequently constituted during pendency of the petition.
The dispute arose out of six contracts executed between a Singapore-based company, Sunfield Global Pte Limited, and Liberty Investments Private Limited, an Indian company engaged in the trading of vegetable and seed oils. Sunfield claimed that Liberty owed it a balance amount of USD 66,92,500, as admitted in a communication dated 3 October 2025. When payment was not made, Sunfield moved the Bombay High Court under Section 9 seeking either a direction to furnish security by way of bank guarantee or, alternatively, an injunction restraining Liberty from dealing with its Mumbai property.
The single judge dismissed the petition, leading to the present appeal under Section 37 of the Act. During the pendency of the Section 9 proceedings, a three-member arbitral tribunal was constituted under the FOSFA Rules, with London as the juridical seat.
Before the appellate bench, Sunfield argued that the FOSFA tribunal did not provide an efficacious remedy for securing a monetary claim against assets located in India, especially since the relief sought was not limited to preservation of property that was the subject matter of the arbitration. It contended that Section 38 of the English Arbitration Act, read with the FOSFA Rules, did not empower the tribunal to grant effective protection over Indian assets or to direct security for an admitted debt. The company also stressed that the respondent had admitted liability but was still withholding payment, making interim protection necessary to prevent the final award from becoming a mere paper decree.
Liberty Investments, on the other hand, argued that once the arbitral tribunal was constituted, Section 9(3) barred the court from entertaining the petition unless the remedy before the tribunal was shown to be inefficacious. It submitted that the appellant had not pleaded or proved such inefficacy and that interim measures were available before the foreign tribunal and under English law.
The High Court rejected the respondent’s objections. It held that Section 9(3) is not an absolute bar and does not apply where the remedy before the arbitral tribunal is not efficacious. The bench found that the relief available under Section 38 of the English Arbitration Act related only to detention, preservation or inspection of property that is the subject matter of the dispute, whereas the appellant had sought security for a monetary claim and restraint against alienation of property that was not the subject matter of arbitration.
The court also emphasized that the respondent had admitted the dues but failed to pay them, and that the appellant, being a foreign entity, had shown a strong prima facie case, balance of convenience, and risk of irreparable harm. The bench observed that courts in arbitration matters must not ignore conduct aimed at frustrating legitimate claims and that interim relief is meant to ensure that arbitration does not end in an unenforceable award.
Relying on earlier precedents, including Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd. and its own recent decision in Norvic Shipping Asia PTE Ltd. v. Zigma International, the court reiterated that the test under Section 9(3) is the efficacy of the alternate remedy, not merely its existence. It further held that the appellant could not be penalized for the court’s own delay in hearing the petition after it had been filed in time.
Allowing the appeal, the High Court directed Liberty Investments to furnish a bank guarantee from a nationalized or scheduled commercial bank for the claimed amount, along with interest and costs, within two weeks. Until then, it restrained the respondent from transferring or creating third-party rights in the Mumbai property identified in the petition.
Bottom Line :
Arbitration and Conciliation Act, 1996 Section 9 In foreign seated arbitration, where Section 9 petition was filed before constitution of Arbitral Tribunal and remedy before FOSFA Tribunal/English law mechanism was not shown to be efficacious for securing claim against assets in India, Court can grant interim protection by directing furnishing of bank guarantee for admitted dues or restraining alienation of property in India.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 9, 9(3), 17, 37; English Arbitration Act, 1996 Section 38; Code of Civil Procedure, 1908 Section 13
