Case Note & Summary
The dispute arose out of a commercial arbitration petition filed by JSW Steel Ltd. under Section 9 of the Arbitration and Conciliation Act, 1996 against Delta Iron & Steel Co. Pvt. Ltd., Yatin Steels India Pvt. Ltd., and ARK Industries Pvt. Ltd. JSW claimed non-payment for hot rolled steel coils supplied under a Franchise Agreement dated July 1, 2018 between JSW and Delta. On August 23, 2019, an ex parte interim order was passed, leading the Court Receiver to attach, seal, and take possession of 160 coils stored in multiple warehouses. Ms. Aashna Khanna, proprietress of Aashna Steel Traders, filed Interim Application No.542 of 2019 seeking release of eleven steel coils seized by the Court Receiver, eight of which were stored in the warehouse of Karu Metals Private Limited. Karu Metals Private Limited filed Interim Application No.1537 of 2026 complaining that no one was paying for the usage of its warehouse space. The Section 9 petition was disposed of on June 13, 2022, but arbitration proceedings were withdrawn by JSW on November 11, 2025, by which time Delta and Yatin had been referred to Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. The Court Receiver held multiple meetings and filed Court Receiver Report No.102 of 2025 on February 26, 2025, setting out the contentions of respective parties and seeking directions. The core legal issues were whether interim measures under Section 9 survive the withdrawal of arbitration proceedings and whether JSW could claim continued attachment or return of the steel coils based on its alleged ownership as unpaid manufacturer. JSW contended that it was the original manufacturer of the coils and was never paid, so the coils belonged to it and should not be released to Aashna. Aashna sought release of the coils, while Karu sought payment for storage. The court observed that interim measures under Section 9 are interim in nature and must abide by the outcome of arbitration. With arbitration withdrawn, the very basis for holding on to the steel coils had come to an end. The court noted that JSW's claim was a money claim, and even if a final arbitral award had been obtained before CIRP commenced, the decretal amount would have been an unsecured debt subject to the resolution process. The court held that the attachment under Section 9 was in the nature of a security interest which terminated when the arbitration came to an end without adjudication. JSW's contentions about Aashna not proving title to the coils were academic once arbitration was withdrawn. The court rejected JSW's claim for continued attachment or return of the coils, holding that the continued possession of the Subject Coils by the Court Receiver was untenable, and proceeded to dispose of the interim applications accordingly.
Headnote
A) Arbitration Law - Interim Measures Under Section 9 - Effect of Withdrawal of Arbitration - Arbitration and Conciliation Act, 1996, Section 9 - The court held that interim measures under Section 9 are inherently interim and must abide by the outcome of arbitration; when arbitration proceedings are withdrawn, the very basis for holding on to the attached steel coils comes to an end; continued possession of the Subject Coils by the Court Receiver became untenable; Held that JSW's contention to retain or claim release of the coils to itself was rejected (Paras 5-10). B) Insolvency Law - Treatment of Money Claims in CIRP - Unsecured Creditor Status - Insolvency and Bankruptcy Code, 2016 - JSW's claim for non-payment of steel coils was a money claim; even if a final arbitral award had been obtained before CIRP, the decretal amount would have been an unsecured debt subject to the resolution process; the attachment under Section 9 was akin to a security interest which terminated when arbitration ended without adjudication; Held that JSW's contentions about Aashna not proving title to the coils were academic after withdrawal of arbitration (Paras 4, 11-12).
Issue of Consideration
Whether interim attachment of steel coils under Section 9 of the Arbitration and Conciliation Act, 1996 survives the withdrawal of arbitration proceedings, and whether a party that has withdrawn arbitration can claim continued attachment or release of the attached coils to itself based on a money claim.
Final Decision
The court rejected JSW's claim for continued attachment or return of the Subject Coils, holding that the interim attachment under Section 9 of the Arbitration and Conciliation Act, 1996 was interim in nature and came to an end with the withdrawal of arbitration proceedings; continued possession of the Subject Coils by the Court Receiver was untenable.
Law Points
- Interim measures under Section 9 of the Arbitration and Conciliation Act
- 1996 are interim in nature and must abide by the outcome of arbitration proceedings
- withdrawal of arbitration proceedings ends the basis for attachment of assets
- money claim in arbitration would constitute an unsecured debt subject to CIRP under IBC
- 2016
- attachment under Section 9 is in the nature of a security interest which terminates when arbitration ends without adjudication
- continued possession of attached assets by Court Receiver becomes untenable after withdrawal of arbitration.
