Interim Relief Can't Undo Completed Sale Or Replace Enforcement In Arbitration: Bombay High Court

The Bombay High Court has dismissed a plea seeking to stop the sale of a vessel and secure an arbitral award, holding that once a sale is completed, the court cannot restrain the transaction or use interim relief to indirectly enforce an award.

Justice Sandeep V. Marne said interim protection under the arbitration law is meant to prevent imminent dissipation of assets. It cannot be used to undo a concluded transaction or as a substitute for enforcement proceedings.

“The sale of the Ship has taken place. Whether it is a valid transfer within the meaning of Section 42 of the Merchants Shipping Act is not required to be adjudicated in the present petition,” the court said.

“Section 9 remedy would ordinarily be available only when it is demonstrated that the award creditor is in the process of seeking enforcement of the award but there is imminent danger of dissipation of the assets,” It added.

The dispute involved a sub-time charter agreement for the vessel NOR Goliath. After an accident, the parties went to arbitration seated in Singapore under the Singapore Chamber of Maritime Arbitration rules. The tribunal passed two partial awards. The second partial award, delivered in June 2025, granted monetary relief in favour of Telford Marine DMCC.

After the award, Telford Marine approached the High Court saying Bhambhani Shipping was a loss-making company and that its only asset was the vessel MV HALANI-6. It said the vessel was being sold to defeat recovery of the award and sought interim protection under Section 9 of the Arbitration Act, which allows courts to grant temporary measures to preserve assets. During the proceedings, it emerged that the vessel had already been sold to a third party, with the entire sale consideration paid directly to Saraswat Bank, a secured creditor.

Telford Marine alleged that the sale was sham and collusive. It also claimed the vessel was sold at a throwaway price and in breach of the Merchant Shipping Act. The respondents said the sale was negotiated months before the award and that the proceeds were used entirely to discharge secured dues.

On merits, the court held that once completion of sale is established from sufficient material, no injunction can be granted in such proceedings. It said questions on statutory compliance and validity of the sale fall outside the limited scope of interim relief.

“This Court is not supposed to rule on validity of the sale of the vessel,” the court said.

The court rejected the undervaluation argument, noting that no independent valuation was produced and that the sale proceeds were applied towards the secured debt.

“Petitioner has not produced any independent valuation of the vessel and is merely raising a surmise based on initial quoted offer. It must also be borne in mind that Saraswat Bank had charge over the vessel and must be keeping a close watch on the sale consideration” the court said.

The court also noted that Saraswat Bank was a secured creditor and that there was no surplus from the sale. It said the petitioner, as an unsecured creditor, could not have recovered any amount from the sale even otherwise.

“Respondent No.1 has admittedly not received any overflow amount out of the said transaction,” the court said.

While holding that a plea for interim protection can be filed where there is a genuine fear of assets being dissipated, the court cautioned that such relief cannot be pursued indefinitely without steps to enforce the award.

Finding no case for interim relief, the High Court dismissed the petition, holding that interim protection cannot be used to undo a concluded transaction or indirectly enforce an arbitral award.