Case Note & Summary
The petitioners, Pacific Basin Handymax (UK) Ltd., filed a Notice of Motion under Order 39 Rule 11 of the Code of Civil Procedure, 1908, seeking to strike off the defence of the respondent, Ashapura Minechem Ltd., in Arbitration Petition No. 24 of 2010, and to allow the petition in terms of prayer clause (a). Alternatively, they sought a mandatory order directing the respondent to comply with an earlier order dated 20 December 2010 to deposit security of USD 24,157,442.00 and sterling pounds 5,000.00. The background involves a contract of affreightment (COA) executed on 25 October 2007 for shipping bauxite from Gujarat to China. Disputes arose when the respondent ceased to offer shipments, citing force majeure due to governmental interference. The matter was referred to arbitration in London under English law, resulting in a foreign award dated 8 July 2009 and a cost award dated 15 March 2010 in favour of the petitioners. The petitioners filed Arbitration Petition No. 24 of 2010 under Section 49 of the Arbitration and Conciliation Act, 1996, seeking enforcement of the award. The court had earlier directed the respondent to deposit security. The respondent failed to deposit the full amount, leading to the present motion. The court considered the arguments: the petitioners argued that the respondent's conduct was contumacious and warranted striking off defence, while the respondent contended that the order for security was not a condition precedent to defend the petition and that they were willing to comply but faced financial difficulties. The court held that the power under Order 39 Rule 11 CPC is discretionary and should not be exercised lightly. It found that the respondent had not wilfully disobeyed the order and that the main petition was still pending. Therefore, the court dismissed the notice of motion, allowing the respondent to continue defending the arbitration petition on merits.
Headnote
A) Civil Procedure - Striking off Defence - Order 39 Rule 11 CPC - Security Deposit - The court held that the power to strike off defence under Order 39 Rule 11 CPC is discretionary and should be exercised only in cases of wilful disobedience or contumacious conduct. Non-compliance with a security deposit order does not automatically warrant striking off defence, especially when the respondent has shown willingness to comply and the petition is pending adjudication on merits. (Paras 1-2) B) Arbitration - Enforcement of Foreign Award - Section 49 Arbitration and Conciliation Act, 1996 - The court noted that the arbitration petition under Section 49 seeks enforcement of a foreign award. The respondent's defence should not be struck off merely for non-deposit of security, as the main petition is yet to be decided on merits. (Paras 2-3)
Issue of Consideration
Whether the respondent's defence in the arbitration petition should be struck off under Order 39 Rule 11 CPC for non-compliance with an order to deposit security, and whether the petition should be allowed in terms of prayer clause (a).
Final Decision
Notice of Motion dismissed. No order as to costs. Respondent allowed to continue defending Arbitration Petition No. 24 of 2010 on merits.
Law Points
- Order 39 Rule 11 CPC
- Section 49 Arbitration and Conciliation Act
- 1996
- Enforcement of foreign award
- Security deposit
- Striking off defence
