Leave us a Message

IN THE ABSENCE OF ANY IMMINENT THREAT OF ASSET DISPOSAL INTERIM PROTECTION CANNOT BE GRANTED- ANDHRA PRADESH HC

Background

The present case arose from a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 by Zion Shipping Ltd., a Hong Kong-based shipping company, seeking interim protection pending arbitration proceedings against Sarala Foods Pvt. Ltd. and others, Indian entities engaged in export of agricultural commodities. The dispute pertained to demurrage charges under a charter party agreement dated 12 March 2021, relating to the carriage of 9,000 MTs of rice from Kakinada (India) to Ho Chi Minh City (Vietnam) aboard the vessel MV Han Thar.

The agreement stipulated demurrage at USD 7,500 per day for delays beyond the agreed laytime, and provided for arbitration in Singapore. Zion Shipping claimed demurrage for 17 days and 2 hours of delay, amounting to USD 1,28,409.74, along with interest and costs totalling USD 296,326.74. When payment was not forthcoming, Zion Shipping sought an ex parte order for attachment of 1,600 MTs of rice being loaded on another vessel at the respondent’s port, or alternatively, an order directing the respondents to furnish security for the amount claimed.

 

Procedural History

On 23 April 2024, the High Court passed a conditional order of attachment of the rice cargo, to remain unless the respondent’s furnished security of USD 296,326.74. The respondents complied with this condition, leading to release of the cargo. However, they challenged the order in appeal. The appellate court, on 18 February 2025, permitted them to raise objections before the Single Judge and seek vacation of the attachment.

Subsequently, the respondents filed an application to vacate the ex parte order and another for return of the deposited security amount. The petitioner filed counters opposing these applications, while arbitration proceedings were already underway in Singapore, awaiting final award.

 

Court’s Analysis

The court noted that there was no dispute regarding the existence of the charter party agreement and the fact that the contract contained an arbitration clause. However, the court emphasized that demurrage claims being in the nature of liquidated damages do not automatically constitute a “debt” until adjudicated and crystallized through proper determination of liability.

The Court observed that the petitioner had not demonstrated any imminent threat of asset disposal or attempts by respondents to frustrate the arbitral award. The application under Section 9 could not be used as a mechanism to convert an unadjudicated claim into a secured one, particularly when arbitration proceedings were nearing completion.

 

Conclusion

The High Court held that interim attachment under Section 9 requires satisfaction of principles akin to Order 38 Rule 5 CPC, including proof of a prima facie case, balance of convenience, and imminent danger of asset dissipation. Since the petitioner failed to establish these prerequisites and the claim was yet to be adjudicated, continuation of the attachment was unwarranted.

Accordingly, the Court vacated the ex parte interim attachment order dated 23 April 2024 and directed the return of the security deposit to the respondents, without prejudice to the outcome of the arbitration proceedings.

 

Case Reference: Zion Shipping Ltd. Represented by its Authorised Signatory Mr. Madala Srinivas Versus Sarala Foods Pvt. Ltd. and Others  International Commercial Arbitration Original Application No - 5/2024 Decided on October 13, 2025, [Reserved on : 18.09.2025]