Jurisdiction of High Courts Under Section 37 Of Arbitration Act Is Limited To Arbitrary, Capricious And Perverse Orders: Bombay High Court

The Bombay High Court division bench of Justice A.S. Chandurkar and Justice Rajesh S. Patil held that the appellate jurisdiction under Section 37 of the Arbitration Act is limited to cases where the lower court's order was arbitrary, capricious, perverse, or ignored settled legal principles on interlocutory injunctions. Section 37 of the Arbitration Act allows appeals against specific orders related to arbitration, including refusals to refer to arbitration, measures under Section 9, and decisions on arbitral awards under Section 34. Brief Facts: M/s Halliburton Indian Operations (“Halliburton/Appellant”) won a tender from the Oil and Natural Gas Corporation (“ONGC”) and entered into a contract to charter hire a stimulation vessel for Mumbai Offshore for three years. Halliburton further subcontracted the work to Vision Projects Technologies Pvt. Ltd. (“Vision/Respondent”), which agreed to provide necessary services using its Platform Supply Vessel (PSV), which was to be converted into a Well Stimulation Vessel (WSV) by adding specialized equipment in the vessel. Halliburton was responsible for installing, maintaining, and eventually removing this equipment at its own cost. Later, the Directorate General of Shipping notified a change in law, restricting Offshore Support Vessels from carrying Hydrochloric Acid unless reassessed and certified under the Offshore Service Vessel Chemical Code. Initially, an exemption was granted to the vessel for ONGC use, but later it required the installation of lifeboats by 31/03/2023. As further extensions were not granted, Vision invoked the Force Majeure clause on 03/04/2023. Halliburton also invoked the force majeure clause under both the main contract and the sub-contract, but Vision rejected this invocation on 15/05/2023. Due to the refusal to extend the compliance time beyond 31/05/2023, the vessel was docked at the port on 01/06/2023. Subsequently, Halliburton issued a termination notice to Vision. ONGC rejected Halliburton's force majeure invocation, and Vision reiterated the rejection, stating that Halliburton was liable for charter payments from June 2023 until the equipment was removed. In March 2024, Halliburton filed a petition before the commercial court under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). It sought permission, as an interim relief, to remove its equipment from the vessel and to restrain Vision from cold laying the vessel. The single judge denied Halliburton's request, stating that the termination was not in accordance with Clause 6.1 of the sub-contract and that the relief sought was in the nature of final relief. Aggrieved by the denial of interim relief by the single judge, Halliburton filed a commercial appeal under Section 37 of the Arbitration Act before the Bombay High Court (“High Court”). Contentions of Halliburton India Operations (Appellant): Halliburton argued that the lack of an extension from the Directorate General of Shipping necessitated invoking the force majeure clause, and since Vision did not challenge the termination, Halliburton was justified in seeking interim measures. Halliburton cited the Supreme Court decision in Indian Oil Corporation Ltd. vs. Amritsar Gas Service and Others [1991) 1 SCC 533], to argue that the action of termination would not fall even if a shorter notice period was given. Halliburton emphasized that no activities had been conducted since 01/06/2023, making it reasonable for Halliburton to remove its equipment. Halliburton argued that the vessel could not meet the Directorate General of Shipping's requirements, necessitating the invocation of the force majeure clause. It terminated the sub-contract with Vision, providing fifteen days' notice instead of the ninety days as stipulated in the sub-contract. As a justification, it contended that the short notice could be monetarily compensated, a matter to be adjudicated in arbitration. Contentions of Vision Projects Technologies (Respondent): Vision argued that the appeal's scope was limited and that the interim measure sought was essentially a final relief, which was rightly denied by the single judge. The termination notice was defective due to insufficient notice period, and Vision had a possessory lien (security interest) on the vessel until dues were paid. Vision also argued that allowing the equipment removal would place it at a disadvantage in recovering its dues. Vision maintained that it was owed dues from Halliburton from 01/06/2023 onwards, having maintained the vessel and specialized equipment, and incurred related expenditures including Goods and Service Tax liabilities. Further, Vision reiterated its rights as a bailee under Sections 148 and 170 of the Contract Act, 1872, claiming it could retain the equipment until dues were settled (Halliburton disputed this, stating Vision had no bailment rights over the...

Jurisdiction of High Courts Under Section 37 Of Arbitration Act Is Limited To Arbitrary, Capricious And Perverse Orders: Bombay High Court

Rajesh Kumar

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