Court rules that interim measures under Section 9 of Arbitration and Conciliation Act, 1996, must cease upon termination of arbitration; JSW Steel Ltd. held liable for storage costs of attached steel coils
In a significant judgment delivered on August 27, 2026, the Bombay High Court, presided by Mr. Somasekhar Sundaresan, J., addressed a complex commercial dispute involving JSW Steel Ltd., Delta Iron & Steel Co. Pvt. Ltd., and other parties. The case centered on interim attachment orders granted under Section 9 of the Arbitration and Conciliation Act, 1996 (“the Act”) in aid of arbitration proceedings, concerning unpaid dues for hot rolled steel coils supplied by JSW Steel Ltd. to Delta Iron & Steel.
The Court examined the legal ramifications following the withdrawal of the underlying arbitration proceedings by JSW Steel Ltd. in November 2025, subsequent to the referral of Delta and Yatin Steels India Pvt. Ltd. to the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. The judgment provides crucial clarity on the scope and lifespan of interim measures granted under Section 9 of the Act.
Background and Factual Matrix:
JSW Steel Ltd. had initiated arbitration proceedings seeking recovery of unpaid amounts for steel coils supplied under a Franchise Agreement dated July 1, 2018. At JSW’s behest, the Bombay High Court passed an ex parte interim order on August 23, 2019, attaching 160 steel coils held in various warehouses, including eight coils stored at Karu Metals Private Limited’s warehouse (the “Subject Coils”).
Several third parties, including Ms. Aashna Khanna (proprietress of Aashna Steel Traders) and Karu Metals, filed interim applications challenging the continued attachment and raising concerns regarding warehousing costs. A Court Receiver was appointed to manage the attached assets.
While the arbitration tribunal was constituted and the Section 9 petition disposed of in June 2022, JSW Steel withdrew the arbitration proceedings in November 2025 due to the insolvency resolution of Delta and Yatin Steels. This development effectively ended the underlying dispute.
Key Legal Issues and Court’s Findings:
1. Termination of Arbitration and Effect on Interim Measures: The Court held that the jurisdiction under Section 9 is inseparably linked to the existence of arbitration proceedings. Interim protective measures granted under Section 9 are inherently interim and intended to preserve assets pending arbitration. Once arbitration is terminated, the legal basis for such measures ceases to exist, and the interim order must be vacated. The Court emphasized that no protective measures can continue in the absence of arbitration.
2. Maintainability of Applications by Third Parties: Third parties adversely affected by the interim order, who were not heard prior to its issuance, have the right to approach the Section 9 Court for relief, including the release of wrongfully attached assets. The Court rejected JSW’s contention that the applications by Aashna and Karu were not maintainable due to lack of privity with the arbitration agreement.
3. Title and Ownership of Subject Coils: While JSW asserted ownership as the unpaid seller, the Court observed that JSW’s cause of action as an unpaid seller had extinguished with the insolvency resolution process and subsequent withdrawal of arbitration. The Court relied on earlier judicial pronouncements that an unpaid seller who has parted with possession loses any lien or right to retain goods. Moreover, many of the Subject Coils were found not identifiable within the scope of the original Section 9 petition, further undermining JSW’s claim to continue attachment.
4. Liability for Storage Costs: The Court ruled that the party at whose behest the interim order was passed (JSW) must bear all costs related to the custody and storage of the attached goods, including warehouse charges. JSW was directed to pay Karu Metals for storage of seven coils until November 10, 2022, Paramshakti Steel Ltd. for storage of eight coils after that date, and Rishabh Digha Steel for storage of three coils throughout. Aashna was held responsible for storage charges of one coil stored at Karu Metals prior to November 10, 2022, as it was not under the Court Receiver’s custody then.
5. Restitution and Damages: The Court acknowledged the principle that acts of the Court should not cause prejudice and that parties injured by wrongful attachments are entitled to restitution and damages. However, it noted that Aashna had not pleaded quantified damages and granted liberty to initiate separate proceedings for such claims.
6. Costs and Expenses: Given JSW’s protracted and untenable pursuit of the attachment even after the arbitration ended, the Court ordered JSW to pay Rs. 1.5 lakhs to Karu Metals and Rs. 2.5 lakhs to Aashna towards legal costs, reflecting the commercial realities and equities involved.
Significance:
This judgment reinforces that interim protection measures under Section 9 of the Arbitration and Conciliation Act, 1996, are strictly ancillary to arbitration proceedings and cannot survive their termination. It clarifies that a party obtaining such interim relief must bear the financial consequences of that relief, including storage costs of attached goods.
Furthermore, it underscores the rights of third parties affected by such interim orders to seek judicial intervention for relief and restitution. The ruling also highlights the impact of insolvency resolution on the survival of arbitration claims and associated interim orders.
The judgment serves as a cautionary note to parties seeking interim relief under arbitration law, emphasizing the need for prompt and sustained pursuit of arbitration and the consequences of withdrawal or termination on interim measures.
Bottom Line:
Arbitration proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 - Interim measures of protection granted under Section 9 must necessarily abate upon the termination of arbitration proceedings. Costs for the storage of assets held under attachment by the Court Receiver must be borne by the party at whose behest the interim order was passed.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 9, Insolvency and Bankruptcy Code, 2016, Sale of Goods Act, 1930 Sections 47 and 49, Code of Civil Procedure, 1908 Section 144
Aashna Steel Traders v. Delta Iron & Steel Co. Pvt. Ltd., (Bombay) : Law Finder Doc Id # 2968228
