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CASE NO.: Appeal (civil)  1427 of 2004

PETITIONER: National Aluminium Co. Ltd.      

RESPONDENT: Gerald Metals SA         

DATE OF JUDGMENT: 27/02/2004

BENCH: N Santosh Hegde & B P Singh.

JUDGMENT: J U D G M E N T

(Arising out of SLP(C)No.3202 of 2004)

SANTOSH HEGDE,J.

       Heard learned counsel for the parties.

       Leave granted.

       This appeal arises out of a dispute between the parties to  this appeal which under an agreement between the parties has to  be referred to arbitration as contemplated under Clause 26 of  the agreement between the parties.

       Pending disposal of the said dispute by the arbitrators the  respondent herein moved an application under section 9(d) of  the Arbitration and Conciliation Act, 1996 praying for the grant  of ex parte injunction restraining the appellant herein from  transferring or alienating the earmarked alumina lying in the  appellant’s Silos in Vishakapatnam Port area to any party other  than the respondent herein.

       The said application was opposed by the appellant herein  on various legal and factual grounds including the  maintainability of the application as also the jurisdiction of the  trial court to make any interim order under the said provision of  the Act.

       The trial court after hearing the parties however  considered it appropriate to make the following interim order :

       "In the result, the application is allowed and the  respondent shall allow the despatch of cargo to the petitioner  immediately on payment of original price to the respondent,  and on providing bank guarantee for the difference of price  agreed between the petitioner and the respondent and the price  on which Alumna is being sold in the international market at  the latest, and the security shall lie with the court and the party  that wins in arbitral proceedings shall take it after disposal of  arbitral proceedings basing on the direction given therein. The  petitioner is ordered accordingly."

       An appeal filed by the respondent against the said order  of the trial court under section 37 of the 1996 Act before the  High Court of Judicature Andhra Pradesh at Hyderabad came to  be rejected. While doing so the High Court slightly midified the

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order of the trial court in the following terms :

"1) The Gerald Metals shall be permitted to lift 33,300 MT +/-   5% of Alumnia on payment of agreed rates, 2)      That in addition to agreed rates, the Gerald Metals shall also  give a bank guarantee of an amount which is the difference  between the agreed rate and the rate of US $ 430 per MT of  Alumina in favour of NALCO. The bank guarantee shall be  furnished before the Registrar (Judicial) of this Court to  avoid delay in the matter who shall transmit it to NALCO. 3)      The bank guarantee shall be encashable by NALCO if they  succeed in the arbitration. 4)      No order as to costs."

        In this appeal various grounds both legal and factual have  been raised by the parties to this appeal in their pleadings as  well as the arguments addressed on behalf of them.

       We however on facts of this case think it unnecessary to  go into those questions of fact and law even for the purpose of  deciding this interlocutory application filed under section 9(3)  of the Act which will ultimately be subject to the award that  may be made in the arbitration proceedings. However we think  it necessary that with a view to protect the interest of both the  parties to make some modifications in the impugned order. We  do so because of the fact that the claim of the respondent herein  is yet to be decided by the arbitrators. However we notice by  the impugned order the courts below have directed the  compulsory sale of alumina which according to the appellant is  their property to the respondent which the appellant contends  cannot be done at an interlocutory stage because once their  property is sold in the event of they succeeding before the  arbitrator restoration of the property will become impossible.  However we are not inclined to accept this argument because it  is the case of the appellant themselves that they were ready and  willing to sell the subject matter of dispute (the Alumina) for  the best price in the market. Therefore the sale of the said goods  by itself would not in any manner cause irreparable loss to the  respondent. On the contrary, if the respondent is not allowed to  purchase the said goods there is a possibility of it suffering  comparatively a greater loss than that may be suffered by the  appellant by directing it to sell the goods to the respondent. We  however feel since as of today the appellant is the owner of the  property if the respondent is interested in purchasing the same  then without prejudice to the contentions of either party the  appellant may be paid the value of the goods as was prevailing  on the relevant date. Actually this is the purport of the orders of  the two courts below by the said courts instead of directing  payment of the market value of the goods have only directed  the payment for the contractual value of the goods which is US  $ 430 per MT. However the courts below have directed the  respondent to secure the difference in the value of the goods by  directing the respondent to furnish a bank guarantee. While  doing so the High Court has fixed the market value of the goods  at US $ 430 and directed the respondent to furnish a bank  guarantee for the difference in the amount between the agreed  rate and the rate of US $ 430 per MT of the goods to be sold by  the appellant to the respondent as per the terms of the  agreement.   

       Having heard the arguments of the parties we are of the  considered opinion if the respondent should be permitted to  take possession of the goods at an interim stage which the  appellant claims it has no right to, we think the appellant’s  interest should also be properly secured which can be done by

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calling upon the respondent to pay to the appellant the value of  Alumina which takes possession from the respondent @ US $  430 per MT before they take possession of the said goods.

       There is a serious dispute between the parties in regard to  the actual market value of the goods at the relevant date while  the appellant contends that the same is US $ 460.80 per MT.  The respondent contends it is much less than that since we in  this appeal do not want to go into that disputed question of fact  and as an interim arrangement we direct the respondent to pay  @ US $ 430 per MT of the Alumina to be purchased by the  respondents from the appellant because that is the figure  tentatively fixed by the High Court. We further direct the  respondent to furnish a bank guarantee for the balance amount  of US $ 31.80 per MT which the appellant claims to be the  market value before taking delivery of the goods in question.  The appellant will file an undertaking in this Court that in the  event of the arbitration award fixing a price less than what is  fixed by us or making the appellant liable to pay any sum that  may become liable to pay, assuring this Court to make due  payment, the same shall be paid in terms of the award within  the time to be stipulated in the award if any, within 3 months  from the date of the award with interest, if so awarded.   

       With the above modifications this appeal is disposed of.