Belvedere Resources DMCC v. OCL Iron and Steel Ltd & Ors.

15. This request from SMN is said to have come after four days it had asked for an update on the MV GLYFADA‟s arrival at the loadport. Thus, in accordance with the terms of the contract, MV GLYFADA tendered its Notice of Readiness (hereinafter referred to as NOR) at Richards Bay at 1825 hours on 10 November 2022, within the contractual laycan of “1-15 November 2022”.

16. Further, vide email dated 15 November 2022, the petitioner expressed it disappointment, that the signed copy of the contract and advance payment was not made, the vessel had arrived at loadport in accordance with the contract. On 15 November 2022, SMN replied with a notice purporting to cancel “the deal”.

17. As a result of the above, the petitioner invoked arbitration under Clause Q of the TS – Appendix 5 ScoTA and commenced arbitration under the aegis of SIAC on 14 June 2024 seeking damages for wrongful termination of contract and costs of arbitration.

18. During the arbitration proceedings, OCL submitted a letter dated 11 July 2024 to SIAC, asserting SMN had ceased to exist following its amalgamation with OCL and denied the claims of the petitioner. The petitioner was made aware of the NCLT, Kolkata Bench‟s order dated 30 January 2024 sanctioning the amalgamation of SMN with R[1] upon receiving the letter.

SUBMISSIONS ON BEHALF OF THE PETITIONER

19. Mr. Gauhar Mirza, learned counsel for the petitioner assisted by Ms. Shivi Chola submits that ScoTA was finalized after ample negotiations between the both the parties thus demonstrating both parties were ad idem on all terms of the contract. Only formal execution of the contract was pending, the position regarding the same as per English Law is that acceptance of a contract can be inferred from the conduct of the parties and a formal signature is not required in every case. Reliance is placed of Anotech International (UK) Limited v. Reveille Independent LLC A3/2015/1099.

20. It is stated that the notice of cancellation dated 15 November 2022 not only constituted an express repudiation of contract but also amounted to an admission of its existence. The petitioner had already performed its obligations based on SMN‟s express assurances, making SMN‟s conduct a clear case of wrongful repudiation.

21. It is submitted that the losses suffered by the petitioner is an actual and direct loss. After SMN‟s repudiation of the contract, the petitioner was compelled to resell the same contractual cargo to a third party at a lower market price. The difference between the contract price with SMN and the resale price (at market value of that day) constituted a quantifiable loss which is a result of the breach of the contract and cannot be termed as hypothetical or vague. Reliance is placed on Golden Strait Corp v. Nippon Yusen Kubhishika Kaisha (2007) UKHL 12.

22. It is submitted that SMN was involved in amalgamation proceedings since April 2022, but this was concealed from the petitioner, at the time of contracting in October 2022. This concealment is stated to be deliberate.

23. It is submitted that a Section 9 petition was filed by the petitioner on

13 Nov, 2024 much prior to the constitution of the arbitral tribunal seeking interim measures to secure the disputed amount of USD 2,777,000 (approximately INR 23.34 Crores). This Court directed the respondent to file an affidavit of assets, both movable and immovable vide order dated 19 Dec 2024. The respondent refused to comply with the directions of the court. The respondent delayed the filing of affidavit of assets, the same was done by the respondent on 27 January

2025. It is further submitted that the respondent has sought repeated adjournments to delay the proceedings, which shows an attempt by the respondent to avoid substantive orders.

24. It is stated that vide order dated 03 February 2025 this Court disposed of the Section 9 application and had directed the petitioner to approach the arbitral tribunal for urgent relief. Thereafter, the petitioner filed an appeal under Section 37 of the Act (FAO)(OS)(COMM) No. 33/2025) challenging the order. The Hon‟ble Division Bench disposed of the appeal by remitting the matter back to this Hon‟ble Court for fresh consideration leaving all issues open and observing as under: -

25. Further, it has been contended that R[1] has consistently before the Hon‟ble Division Bench and this Court held that the Court lacks territorial jurisdiction on the ground that R[1] does not maintain an office or possess any assets in Delhi. However, it is stated that in its own fillings before the Bombay Stock Exchange and the National Stock Exchange R[1] has used its official letterhead bearing the address: "Corporate Office:3, LSC, Pamposh Enclave, Greater Kailash part-1, New Delhi - 110048, India, Ph: +91-11 42344422, emailocliron@gmail.com”.

26. Thus, it is stated that this submission denying the existence of any office in Delhi is factually incorrect and amounts to a false statement on oath, attracting ingredients of perjury for which a separate application under Section 397 BNSS, 2023 (Crl. MA No. 9760/2025) has been filed.

27. Another affidavit filed by R[1] shows that R[1] holds shares worth INR

423.41 crores in Jai Balaji Industries Ltd., a listed company which also maintains an office in Delhi, among other cities.

28. It is submitted that the fixed and current assets including properties, plants and equipment disclosed by R[1] are mortgaged to secure credit facilities for their steel plants and are encumbered with secured loans amounting to INR 1039.20 crores. This raise concerns about the creditworthiness of R[1].

29. Further, R[1] has emerged from the Corporate Insolvency Resolution Process (CIRP) following an NCLT Order (Orrisa) dated 20 March

2023. The same raises reasonable concerns regarding their financial health and ability to satisfy any arbitral award.

30. Additionally, the defense of R[1] that it is not responsible for SMN‟s responsibility is misconceived in view of Section 232 of the Companies Act, 2013 as the transferee company assumes all liabilities of the transferor company, and the transferor ceases to exist. Reliance for the above is placed on Speedline Agencies v. T. Stanes and Co. Ltd. (2010) 6 SCC 257.

31. It has further been submitted that R1‟s claim that it is unaware of SMN‟s liabilities and has not inherited is false. In a writ petition filed by R[1] before this Court (Ocl Iron And Steel Limited v. Union of India 2024 SCC OnLine Del 5095), it has expressly been submitted that the company is now under the management of HI A MMT Pvt. Ltd. Public records confirm that both SMN and HI A MMT Pvt. Ltd. share two common directors – Manish Khemka and Suraj Kumar Singh. It is contended that Mr. Manish Khemka was directly involved in the negotiation of the contract and is marked on key correspondence which includes both the execution and cancellation of the agreement. He was also actively engaged in discussions to acquire SMN in January 2023 culminating in the sanctioned amalgamation.

32. Further it is submitted that the petitioner has a prima facie case as there was a concluded ScoTA agreement between the respondent and the petitioner. SMN repudiated the contract and thus petitioner suffered losses. This loss was mitigated as the petitioner sold the coal at a lower market price.

33. Lastly, it is submitted that there is a real risk that even if the petitioner succeeds in arbitration, the award rendered be worthless due to the dissipation or unavailability of attachable assets in India.

SUBMISSIONS ON BEHALF OF THE RESPONDENT NO. 1

34. Mr. Krishnaraj Thaker, learned senior advocate assisted by Mr. Anand Sukumar, Mr. S. Sukumaran, Mr. Bhupesh Kumar and Ms. Ruche Anand submits that there was no valid arbitration agreement between the petitioner and SMN in the absence of a binding, valid and concluded ScoTA.

35. It is stated that this Court lacks territorial jurisdiction as this Court is not the court as defined under Section 2(1) (e) (ii) of the Act. Neither the petitioner nor R[1] have their offices within the jurisdiction of this Court. The defendant must have a pace of business or residence in the area of the court at the time of institution of proceedings and not historically.

36. It is stated that the petitioner has given incorrect addresses of the registered office and branch office of R[1]. Further, the petitioner knew that R[1] did not have any office at Pamposh Enclave when the said application was filed in 2024. The reliance is placed on Patel Roadways Ltd. in (1991) 4 SCC 270, Rattan Singh Associates (P) Ltd. 136 (2007) DLT 629 and 2005 SCC OnLine Del 1041.

37. It is stated that the notice dated 16.12.2022 is not a notice invoking arbitration as it is described as “Letter Before Commencement of Arbitration Proceedings” and is a final demand notice issued prior to invocation of arbitration. The arbitration was invoked by notice dated 14.06.2024.

38. It is stated that no part of the cause of action as alleged by the petitioner in the petition arose within the jurisdiction of this Court. The allegations stated by the petitioner do not constitute cause of action in an action for damages arising out of breach of contract.

39. It is stated that the arbitral reference is for recovery of damages for purported breach of a contract entered into between the petitioner and SMN. The test in terms of Section 2 (1) (e) (ii) is whether this Court could have entertained a suit for damages filed by petitioner against R[1] in this regard. Reliance is placed on A.B.C Laminart Pvt. Ltd.

40. Learned Senior Counsel further submits that the jurisdiction of the court to receive an application under Section 9 or Section 11 of the Act must be determined in terms of Section 16 to Section 20 of the Code of Civil Procedure, 1908 (hereinafter referred to as CPC), considering the principle of forum conveniens. Reliance is placed on Rattan Singh Associates (P) Ltd. 136 (2007) DLT 629, Rites Limited 2009 SCC OnLine Del 2527, Sri Ganesh Research Institute 2004 SCC OnLine Del 525, Capital Fire Engineers 2005 SCC OnLine Del

1041. The presence of assets within the jurisdiction in a claim for money will not determine place for suing as given under Section 20 of the CPC which only provides for the place of residence or business or where the cause of action has arisen.

41. It is stated that the presence of assets does not constitute cause of action for institution of a suit unless the asset concerned itself is the subject matter of the arbitral reference. In this case, it is stated that the shares held by R[1] are not subject matter of the arbitral reference which has been instituted for damages arising out of breach of contract. Presence of assets is only relevant for institution of execution proceedings.

42. Further, it is stated that the claim for damages in this case is unliquidated and is not debt and therefore cannot be secured. It is stated that claim is not a debt in praesenti and does not take the character of debt until the same is adjudicated and determined by this Court. Therefore, no security can be given. Reliance for this placed on Union of India v. Raman Iron Foundry (1974) 2 SCC 231, Bharat Heavy Electricals Limited v. ABB India Ltd. FAO (COMM) 19/2002[2].

43. It is stated that no case of Order XXXVIII Rule 5 of CPC has been made out for attachment under Section 9. The CIRP of R[1] has been successfully resolved. Unless dissipation of assets is established, test of Order XXXVIII Rule 5 is not satisfied, and no security can be directed under Section 9. Reliance is placed on Sanghi Industries Ltd.

44. Additionally, it is stated no prima facie case is made out as no document has been given in the petition in support of the losses suffered on re-sale of the goods when SMN repudiated the contract. A copy of the resale contract between the petitioner and a third party was handed over at the Bar during the hearing. It is said a document handed over without an affidavit does not hold merit. Even if considered it would be clear that it cannot be the re-sale contract for the goods shipped under the ScoTA with SMN inter alia as (i) port of delivery (ii) period of delivery (iii) chemical properties rejection parameters do not match.

45. Further, it has been stated that there is a delay in filing the application which itself defeats the prayer for security as the loss was suffered in November 2022 when the contract was breached. No change of circumstances since November 2022 is shown to warrant grant of security.

46. Lastly, it has been submitted that no cause is shown why the alternate remedy provided in Rule 30 SIAC Rules 2016 which provides for interim award/order akin to Section 17 of the Act has not been availed. The application is thus barred by Section 9(3) of the Act as the arbitral tribunal has been constituted.

ANALYSIS AND FINDIGNS

47. I have heard learned counsel for the parties.

48. From the aforesaid facts and stand of the parties, to my mind, three questions arise for determination by this Court:

(i) Whether the documents and correspondence show existence of a valid arbitration agreement between the parties?

(ii) Whether this Court has the territorial jurisdiction to entertain and try the present petition under Section 9 of the Arbitration and Conciliation Act, 1996? (iii)Whether the respondent should be directed to furnish security to the extent of USD 2,777,000/-.

49. Section 7 of the Arbitration and Conciliation Act, 1996 defines an Arbitration Agreement. Section 7(4)(b) of the Act reads as under:- “Section 7 (4) An arbitration agreement is in writing if it is contained in— (a)……………. (b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or …..”

50. To better understand the controversy at hand, it is pertinent to refer to the communications exchanged between the parties. Email exchange between R[1] and the Petitioner Email exchange between the Petitioner and R[1] Email exchange between the Petitioner and R[1] WhatsApp Communication between the Petitioner and R[1] Email by R[1] – canceling the deal

51. A perusal of the email exchanges clearly shows that the petitioner had duly forwarded the ScoTA to R[1] on 02 November 2022 and R[1] had assured the petitioner that the contract will be sent after being signed and stamped.

52. ScoTA contains arbitration clause being clause Q of the TS – Appendix 5 ScoTA. To my mind the above documents show that an arbitration agreement is duly contained in the exchange of emails providing a record for the agreement.

53. A perusal of Section 7(4)(b) of the Act reveals that it is not necessary for a concluded contract to be in existence for a valid arbitration agreement to be existing between the parties. The arbitration agreement must form a part of documents/communication exchange between the parties. The same has duly been so laid down by the Hon‟ble Supreme Court in Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 wherein, it has been observed as under: -

or entities through their actions of exchanging documents. However, the important aspect of the said provision lies in the fact that the parties should be able to record their agreement through a documentary record of evidence. In Great Offshore Ltd. v. Iranian Offshore Engg. & Construction Co. [Great Offshore Ltd. v. Iranian Offshore Engg. & Construction Co., (2008) 14 SCC 240], this Court observed that Section 7(4)(b) requires the Court to ask whether a record of agreement is found in the exchange of letters, telex, telegrams, or other means of telecommunication. Thus, the act of agreeing by the persons or entities has to be inferred or derived by the Courts or tribunals from the relevant documents and communication, neither of which can be equated with a conventional contract.” (Emphasis added)

54. In the facts and circumstances of the present case, SCoTA was sent vide email dated 02 November 2022 by the petitioner to R[1]. The respondent No.1 duly responded to the said email on 03 November 2022 and in furtherance thereof, asked for its updated ETA/ETB on a daily basis. Additionally, R[1] via WhatsApp on 03 November 2022 informed the petitioner that the SCoTA would be signed and sent immediately.

55. The above correspondence leaves no room for doubt that the arbitration agreement was contained in the exchange of email and WhatsApp communications between the parties, and hence, there is an existence of a valid arbitration agreement between the parties. Hence, issue no.1 as enumerated in paragraph 48 is decided in favor of the petitioner.

56. As regards the territorial jurisdiction, prima facie it seems that R[1] has a branch office at Delhi as is evident from the filing of 12 May 2023 and 23 September 2022. However merely maintaining a branch office will not clothe this court with the territorial jurisdiction in the matter. A perusal of the communications between the petitioner and Anshuman Gayen a correspondent of R[1] and Appendix 5: Form of Transaction Summary (SCoTA Transaction Summary) shows the address of R[1] as 4th Floor, Room No. 402, Sagar Trade Cube, 104, SP Mukherjee Road, Kolkata, West Bengal. The documents clearly suggests that it was the Kolkata office which was communicating and was seized of the matter vis a vis the petitioner.

57. Hence only because R[1] has office at Pamposh Enclave, New Delhi will not give this court jurisdiction to entertain and try the petition, in view of the law laid down Rattan Singh Associates v. M/S Gill Power Generation Company Pvt. Ltd. 2007 SCC OnLine Del 19, the relevant paragraph reads as under:-

58. Mere existence of a branch office which, prima facie, had nothing to do with the transaction in question will not give Delhi, jurisdiction to entertain the present petition. Additionally, it is also the statement of the respondent No.1 that respondent No.1 no longer carries operations at Pamposh Enclave.

59. Additionally, no part of cause of action has arisen in Delhi. The contract between the petitioner, having its office at Dubai and R[1] having its office at Kolkata was negotiated through brokers at Singapore. As per the contract, the supply for coal was from Richards Bay, South Africa to Paradip, Orrisa and Sagar, West Bengal. Lastly, the contract was repudiated from Kolkata.

60. The petitioner has also argued that the respondent No.1 holds 423.41 Crores worth of shares in Jai Balaji Industries, which has its office at Delhi, and hence, this Court will have territorial jurisdiction. In the absence of an exclusive jurisdiction clause or an exclusive seat of arbitration clause, sections 15 to 20 of the Code of Civil Procedure, 1908 do not contemplate the jurisdiction of a Court where assets of the defendant are situated. The said argument may be valid for an execution petition but will not apply to the present petition.

61. For the aforesaid reasons issue no.2 is decided against the petitioner and I am of view, that this court does not have the territorial jurisdiction to entertain and try the present petition.

62. Even though I have held that this Court does not have the territorial jurisdiction in the matter but as the matter has been argued on merits, I am also proceeding to discuss the merits of the claims of the petitioner.

63. The third issue is whether the whether the respondent should be directed to furnish security to the extent of USD 2,777,000/-.

64. In the present case, the claim is for damages caused due to breach of contract. The same are unliquidated damages. The law relating to unliquidated damages is clear and settled. Unliquidated damages do not give rise to debt unless the liability is adjudicated upon by a competent Court or an adjudicating authority and the damages have been assessed.

65. When there is a breach of contract, the aggrieved party, does not ipso facto become entitled to debt due from the other party. The only right it has is the right to sue for damages. The aggrieved party is not entitled to compensation/damages due to an existing obligation on part of the party who committed the breach. Pecuniary liability only arises after the Court has determined that the aggrieved party is entitled to damages. This view has been consistently supported by the Courts in India, the Hon‟ble Supreme Court in the case of Union of India v. Raman Iron Foundry, (1974) 2 SCC 231 observed as under: -

66. Hence claim for damages is not in the nature of a debt till it is adjudicated upon by a Court or an adjudicating authority. There exists no obligation to an amount when damages are claimed for breach of contract unless the competent court adjudicates upon the claim and holds that there has been a breach of contract committed by the defendant and is thereby liable to compensate the aggrieved party for the loss following which the quantum of such liability is assessed.

67. A breach of contract entitles the aggrieved party a right to sue for damages but does not create a right to claim “debt”. After the competent court holds an enquiry, as to whether the defendant has committed breach of the contract and has therefore incurred a liability towards the aggrieved party does a claim for damages turn into “debt due”. Damages are payable only by a decree of the Court and not on the account of quantification by the aggrieved party. The same as been reiterated by a co-ordinate bench of this Court in Thar Camps Pvt. Ltd. v. Indus River Cruises Pvt. Ltd. & Others 2021 SCC OnLine Del 3150 wherein it was observed as under:-

(ii) In regard to a claim for damages (whether liquidated or unliquidated), there is no “existing obligation” to pay any amount. No pecuniary liability in regard to a claim for damages, arises till a court adjudicates upon the claim for damages and holds that the defendant has committed breach and has incurred a liability to compensate the plaintiff for the loss and then assesses the quantum of such liability. An alleged default or breach gives rise only to a right to sue for damages and not to claim any “debt”. A claim for damages becomes a “debt due”, not when the loss is quantified by the party complaining of breach, but when a competent court holds on enquiry, that the person against whom the claim for damages is made, has committed breach and incurred a pecuniary liability towards the party complaining of breach and assesses the quantum of loss and awards damages. Damages are payable on account of a fiat of the court and not on account of quantification by the person alleging breach.……………………….”

68. As of today, at best, the petitioner has a claim against R[1] for breach of contract. The claim of the petitioner is yet to crystalise into a debt due.

69. Additionally, the prayers as sought by the petitioner are akin to prayers under Order XXXVIII Rule 5 for attachment. The powers under the Order XXXVIII Rules 5 are extraordinary powers and must be exercised sparingly in accordance with the law. The object of Order XXXVIII Rule 5 is not to convert unsecured debt into a secured one but to ensure that the defendant does not obstruct or delay the execution of the decree. A co-ordinate bench of this Court in Skypower Solar India (P) Ltd. v. Sterling and Wilson International FZE, (2023) 6 HCC (Del) 702, has held:- “63. The principle for granting orders under Order 38 Rule 5CPC are now well-settled. In Raman Tech. & Process Engg. Co. v. Solanki Traders [Raman Tech. & Process Engg. Co. v. Solanki Traders, (2008) 2 SCC 302: (2008) 1 SCC (Civ) 539], the Supreme Court had observed that the power under Order 38 Rule 5 are drastic and extraordinary powers and are required to be used sparingly and in accordance with the rule. The Supreme Court also observed that the purpose of Order 38 Rule 5 was not to convert an unsecured debt as a secured one. The object of Order 38 Rule 5 was to prevent any defendant from defeating the realisation of a decree that may ultimately be passed in favour of the plaintiff…….”

70. In order to successfully establish a case, the petitioner is required to show that the defendant with an intent to obstruct or delay the execution of a decree that may be passed against him is about to dispose of whole or part of his property or is about to remove any part or whole of his property from the local limits of the jurisdiction of the Court.

71. It is settled law that an order under Section 9 the Arbitration and Conciliation Act, 1996 as sought by the petitioner, cannot be passed unless the conditions as provided under Order XXXVIII Rule 5 are satisfied.

72. Only after the pre-requisites as noted above are met can an order under Section 9 of the Act be passed. The Hon‟ble Supreme Court in Sanghi Industries Ltd. v. Ravin Cables Ltd. and Anr. 2022 SCC OnLine SC 1329 has reaffirmed this position and has observed as under:-

opposite/opponent party which may tantamount to any attempt on the part of the opponent/opposite party to defeat the award that may be passed in the arbitral proceedings, the Commercial Court may pass an appropriate order including the restrain order and/or any other appropriate order to secure the interest of the parties. However, unless and until the conditions mentioned in Order XXXVIII Rule 5 of the CPC are satisfied such an order could not have been passed by the Commercial Court which has been passed by the Commercial Court in the present case, which has been affirmed by the High Court.”

73. Further, a co-ordinate bench of this Court, in the case of Thar Camps (supra) reiterated the above principles as under:-

any order for security, or for interim protection in any other manner, can be passed. The threshold of these considerations, unfortunately for the petitioner, remains inviolate in the present case. No prima facie case exists, for the claim, of the petitioner against IRCPL, of Rs. 18 crores. Neither can, in law, the Court proceed to detain the vessels, independently owned by Respondents 4 and 5, thereby transgressing on the rights enuring to them under the Charter Agreements.”

74. From the facts narrated above, at best, it can only be said that the petitioner has a claim, but that claim is yet to be established, the amount is yet to be quantified, financial health of R[1] being bad is yet to be established and the fact that R[1] is malafidely disposing of its assets is also yet to be established.

75. The orders of attachment affects the financial health of the company and are not to be passed merely as a routine. In the present case, there is nothing to show as to the intent of R[1] to obstruct or delay the execution of a decree that may be passed against it.

76. The fact that R[1] was under CIRP and R[1] has loans secured by mortgaging its properties is not sufficient to pass an order under Order XXXVIII Rule 5. R[1] is a commercial company and its operations require taking loans, mortgaging assets and to my mind the same cannot be sufficient to effect attachment.

77. In view of aforesaid observations, the petition is dismissed.

78. The observations made herein are only for the purpose of deciding the present petition and will have no bearing on the final adjudication of the matter.

79. Pending applications, if any, are disposed of.

JASMEET SINGH, J JULY 01, 2025