When courts step in before the award: Bombay high court explains the scope of section 9 in Norvic Shipping Asia PTE ltd. v. Zigma International

Bombay High Court Clarifies Legal Intervention: Understanding Section 9 in Norvic Shipping Asia PTE Ltd. v. Zigma International.

The Bombay High Court in Norvic Shipping Asia PTE Ltd. v. Zigma International, Commercial Arbitration Petition (L) No. 15734 of 2026, decided on 2 July 2026, has delivered an important judgment explaining the scope of interim protection under Section 9 of the Arbitration and Conciliation Act 1996. The decision discusses the circumstances in which a court may secure a claimant's interests before the conclusion of arbitration and clarifies that the purpose of Section 9 is to preserve the effectiveness of the arbitral process rather than to decide the merits of the dispute.

The dispute arose out of a Repayment Schedule Agreement executed on 9 January 2025. Under this agreement the respondent acknowledged that an amount of USD 215310.01 was payable towards demurrage. The agreement also provided a schedule for repayment and stated that if any instalment was not paid the entire outstanding amount would immediately become due and payable. The petitioner alleged that the first instalment which fell due on 15 January 2025 was never paid despite repeated reminders and assurances from the respondent. The petitioner therefore invoked arbitration before the London Maritime Arbitrators Association and simultaneously approached the Bombay High Court under Section 9 seeking interim protection over the respondent's assets.

The petitioner relied heavily on the Repayment Schedule Agreement and the correspondence exchanged between the parties. According to the petitioner the respondent had repeatedly admitted its liability through emails and had only sought additional time for payment because of financial difficulties. It was only after arbitration was commenced that the respondent claimed the dispute had already been settled and further asserted that there existed a pledge through brokers known as Bulkcom. The petitioner denied these allegations and pointed out that no documentary evidence had been produced to support these defences. The petitioner also referred to notices issued by Bulkcom which suggested that payment might be diverted to another claimant instead of being made to the petitioner. On these facts the petitioner sought injunctions restraining the respondent from dealing with its assets along with directions for disclosure of assets and security for the claim.

The respondent opposed the petition by arguing that the petitioner had not pleaded any attempt on its part to remove or dissipate assets. It relied on the decision of the Supreme Court in Essar House (P) Ltd. v. Arcellor Mittal Nippon Steel (India) Ltd. (2022) 20 SCC 178 and submitted that without such pleadings no order securing the disputed amount could be passed. The respondent further argued that it had several creditors and that the petitioner could not claim any preference over them. It also raised a defence of oral set off and submitted that its inability to pay arose only because of genuine financial difficulties.

Justice Amit Borkar first examined the Repayment Schedule Agreement and observed that the respondent had expressly acknowledged its liability under the agreement. The Court noted that the execution of the agreement was not disputed and that the respondent had admittedly failed to pay even the first instalment. The emails placed on record assumed considerable importance because they repeatedly sought additional time and referred to financial difficulties but never denied the existence of the debt. According to the Court these communications constituted a prima facie acknowledgment of liability.

The Court also considered the respondent's subsequent defences relating to settlement pledge and oral set off. It observed that none of these assertions were supported by documentary material. Whether such arrangements actually existed would require evidence before the arbitral tribunal and could not be determined in proceedings under Section 9. At the interim stage these remained disputed pleas that did not weaken the petitioner's prima facie case.

A significant part of the judgment is devoted to explaining the true scope of Section 9. The Court relied upon the Supreme Court decision in Essar House and observed that the powers conferred by Section 9 are wider than the principles governing attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure. While those principles may guide the Court they cannot be mechanically applied. The purpose of Section 9 is to ensure that an arbitral award does not ultimately become incapable of enforcement because the respondent's assets are no longer available.

The Court explained that the expression strong possibility of diminution of assets does not require proof of dishonest conduct or actual transfer of property. It is sufficient if the surrounding circumstances objectively indicate that the respondent's assets may materially reduce before the arbitral award is enforced. Such diminution may occur through financial losses increasing liabilities creation of encumbrances transfer of valuable receivables or other commercial circumstances that reduce the pool of assets available for execution. Section 9 therefore operates as a preventive remedy that allows courts to intervene before the situation becomes irreversible.

Applying these principles to the present case the Court found several circumstances that justified interim protection. The respondent had defaulted on its obligations from the very beginning and had repeatedly admitted that it was facing severe financial difficulties. It had also referred to delayed customer payments and poor cash flow while acknowledging its inability to honour commitments. The existence of several creditors and competing claims over the same amount further increased the possibility that sufficient assets might not remain available when the arbitral award was finally enforced. Although financial distress by itself does not automatically justify relief under Section 9 the Court held that all these circumstances taken together established a real likelihood of diminution of assets.

The Court also considered the maintainability of the petition after the constitution of the arbitral tribunal. It observed that Section 9(3) ordinarily requires parties to approach the arbitral tribunal under Section 17 once the tribunal has been constituted. However this restriction applies only when the remedy before the tribunal is efficacious. Since the arbitration in the present case was seated in London the respondent failed to demonstrate that any interim order passed by the foreign tribunal could be effectively enforced against assets situated in India. Consequently the Bombay High Court held that the remedy under Section 17 was not equally effective and that the petition under Section 9 was maintainable.

After examining the material on record the Court concluded that the petitioner had established a strong prima facie case. The balance of convenience also favoured the petitioner because refusal of interim protection could result in an arbitral award that might ultimately remain unenforceable. The Court further held that irreparable prejudice would be caused if the respondent's assets diminished during the pendency of arbitration.

Accordingly the Court partly allowed the petition and directed the respondent to secure the petitioner's claim by either depositing USD 262837.98 together with GBP 9400 before the Court or by furnishing an unconditional bank guarantee for the same amount within four weeks. Until compliance the respondent was restrained from transferring encumbering or creating third party rights over its assets to the extent of the petitioner's claim. The respondent was also directed to disclose its bank accounts assets encumbrances transfers made during the previous two years and details of any pending insolvency proceedings. The prayer for appointment of a receiver was rejected at that stage though liberty was reserved to seek such relief if circumstances subsequently warranted it. The Court clarified that all observations were only prima facie and would not influence the arbitral tribunal while deciding the dispute on merits.

The judgment reinforces the preventive nature of Section 9 and makes it clear that courts are not required to wait until assets have actually disappeared before granting protection. It recognises that commercial realities often present risks that cannot be addressed by rigid procedural standards. At the same time it maintains that interim relief must remain proportionate and based on objective material. The decision therefore provides valuable guidance on the relationship between Sections 9 and 17 of the Arbitration and Conciliation Act and strengthens the role of Indian courts in protecting the effectiveness of both domestic and international arbitration proceedings.