Case Note & Summary
The petitioner, M/s. Vedanta Limited (formerly Sesa Sterlite Ltd), a company engaged in extraction, sale and export of iron ore, entered into a Master Agreement dated 15.04.2016 with respondent no.1, Noble Resources International Pte Ltd, a Singapore-based commodity trading company, for sale of 12,70,000 Wet Metric Tons (WMT) of processed iron ore fines. The ore was to be shipped in fifteen shipments from June 2016 to May 2017. The first two shipments of 50,000 WMT each were delivered and paid for without dispute. The third shipment was shipped and part payment received. The dispute arose when respondent no.1 refused to accept the fourth and subsequent shipments. The petitioner filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim measures, including an injunction restraining respondent no.1 from drawing on bank guarantees and letter of credit, and directing acceptance of further shipments. The court considered the submissions of both sides, including the petitioner's argument that the respondent's refusal was without valid reason and the respondent's contention that the ore quality was not as per specifications. The court found that the petitioner had made out a prima facie case, the balance of convenience was in favor of the petitioner, and irreparable loss would be caused if interim relief was not granted. The court allowed the petition in part, restraining respondent no.1 from drawing on the bank guarantees and letter of credit, and directing maintenance of status quo regarding the letter of credit. The court also directed the petitioner to keep the bank guarantees alive pending arbitration.
Headnote
A) Arbitration - Interim Measures - Section 9 of Arbitration and Conciliation Act, 1996 - Prima Facie Case - The court examined whether the petitioner made out a prima facie case for grant of interim injunction restraining the respondent from drawing on bank guarantees and letter of credit. The court found that the respondent's refusal to accept shipments without valid reason constituted a breach of contract, and the petitioner had a strong prima facie case. (Paras 10-15) B) Arbitration - Interim Measures - Balance of Convenience - Section 9 of Arbitration and Conciliation Act, 1996 - The court held that the balance of convenience was in favor of the petitioner as the respondent had already received part payment and the petitioner would suffer irreparable loss if the bank guarantees were encashed. (Paras 16-20) C) Arbitration - Interim Measures - Irreparable Loss - Section 9 of Arbitration and Conciliation Act, 1996 - The court noted that the petitioner would suffer irreparable loss if the bank guarantees were invoked, as the amounts were substantial and the arbitration proceedings were pending. (Paras 21-25) D) Contract Law - Breach of Contract - Master Agreement - The court observed that the respondent's refusal to accept the fourth and subsequent shipments without any valid reason amounted to a breach of the Master Agreement, and the petitioner was entitled to interim protection. (Paras 6-9)
Issue of Consideration
Whether the petitioner is entitled to interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, restraining the respondent from drawing on bank guarantees and letter of credit, and directing the respondent to accept further shipments under the Master Agreement.
Final Decision
The court allowed the petition in part, restraining respondent no.1 from drawing on the bank guarantees and letter of credit, and directing maintenance of status quo regarding the letter of credit. The petitioner was directed to keep the bank guarantees alive pending arbitration.
Law Points
- Interim measures under Section 9 of Arbitration and Conciliation Act
- 1996
- Prima facie case
- Balance of convenience
- Irreparable loss
- Bank guarantees
- Letter of credit
- Specific performance
