Karnataka High Court Restrains Sale Of 386.541 MT Cashews, Says Arbitration Orders Bind Strangers

On 27 August, the Karnataka High Court granted interim protection to UAE-based cashew trading company COAF FZE over 386.541 metric tonnes of raw cashew nuts lying in 15 containers at New Mangalore Port, restraining UAE-based supplier Avanikailani Commodities LLC, Indian cashew trader Sindhu Cashew India Pvt. Ltd. and two individuals claiming rights over the cargo from selling, transferring, diverting or otherwise dealing with it.

Justice M.G.S. Kamal held that an interim order preserving the subject matter of arbitration can bind even a stranger to the arbitration agreement who claims an independent right over the disputed property. The Bench observed:

“A stranger who voluntarily gets himself impleaded, staking independent right, title, and interest over the subject matter of the arbitration, and fails to prima facie establish and justify his claims over the subject matter of the arbitration cannot seek to wriggle out of the binding nature of preventive orders that may be granted to preserve the subject matter of the arbitration either.”

The dispute arose from a 6 April 2026 contract between COAF and Avanikailani for the supply of 500 metric tonnes of raw cashew nuts from Ghana to Vietnam. The agreement provided for disputes to be resolved under the Nuts and Dry Fruit Trade Association (NDFTA) Rules for Arbitration Dispute Settlement, with Dubai or Singapore as the seat of arbitration.

Avanikailani subsequently raised two invoices, covering 386.541 MT on 28 April 2026 and 112.072 MT on 4 May 2026. While the smaller consignment was delivered to COAF in Vietnam, the larger consignment remained undelivered despite COAF claiming full payment, which Avanikailani acknowledged. The disputed 386.541 MT consignment left Tema, Ghana on 24 April 2026 in 15 containers.

COAF alleged that Deekshith Ananta Poojary, who was associated with Avanikailani and was also a director of Ghana-based SR Agro Logistics, altered the shipping documents and diverted the Vietnam-bound cargo to New Mangalore Port.

Avanikailani supported COAF's case and admitted receiving payment. Poojary, however, admitted diverting the shipment, claiming that Avanikailani had failed to pay amounts allegedly due to SR Agro, through which the cashews had been procured. Poojary and his wife, Likhitha, claimed that the undelivered cargo belonged to them.

Sindhu Cashew then intervened and claimed independent ownership over the same cargo. It said that it had purchased 400 MT of cashews from Wincom Trading FZC LLC under a separate contract dated 19 March 2026, relying on what it described as the original Bill of Lading.

COAF approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996, which allows a Court to grant interim measures to preserve the subject matter of arbitration, seeking protection of the cargo pending constitution of the arbitral tribunal.

Sindhu Cashew opposed the plea and sought release of the goods based on the Bill of Lading, while COAF disputed the genuineness of its documents.

On examining the rival documents, the Court found serious discrepancies in Sindhu Cashew's case. One copy of the purported original Bill of Lading contained no seals, while another copy filed on 13 August 2026 carried six different seals without a satisfactory explanation.

It also questioned how an advance payment allegedly made in March 2026 could refer to a commercial invoice dated 3 June 2026. It therefore held that the documents lacked prima facie credibility.

At the same time, the Bench declined to release the cargo to COAF, holding that its draft Bill of Lading did not conclusively establish its entitlement. It also rejected COAF's alternative request for a bank guarantee. It held:

“Draft Bill of Lading is not conclusive evidence of the transaction, as compared to the original Bill of Lading, which admittedly has not been issued in favour of the petitioner.”

Accordingly, the High Court partly allowed the petition and restrained Avanikailani, Sindhu Cashew, Poojary and Likhitha from alienating, transferring, diverting or disposing of the cargo.

It also directed JSW Mangalore Container Terminal Pvt. Ltd. to keep the 15 containers in place and preserve the cashews against deterioration, with the expenses to be borne by the party ultimately found entitled to the cargo.

For Petitioner (COAF FZE): Senior Advocate Dhyan Chinnappa, with Advocates Mahesh Dube, Prashanth K. Asher, Bulbul Singh, Mahesh Vijay Dube and Riddhiman Borooah;

For Respondent No. 1 (Avanikailani Commodities LLC): Senior Advocate C.K. Nandakumar, with Advocate Abraham Joseph;

For Respondent No. 2 (New Mangalore Port Authority): Advocate Rayappa Y. Hadagali;

For Respondent No. 5 (Sindhu Cashew India Pvt. Ltd.): Senior Advocate Sandesh J. Chouta, with Advocate Prasanna Shetty;

For Respondent Nos. 6 and 7 (Deekshith Ananta Poojary and Likhitha): Senior Advocate Vivek Subbareddy, with Advocate Shiva Kumar Gowda.