On March 6, the Delhi High Court issued a restraining order against Reliance Infrastructure, owned by Anil Ambani, preventing the sale of assets valued at $135 million. This action comes amidst an ongoing dispute with Shanghai Electric. Shanghai Electric and Reliance Infrastructure are engaged in a legal battle concerning the Sasan Power Project.
NEW DELHI: On Wednesday, the Delhi High Court restricted Reliance Infrastructure, owned by Anil Ambani, from selling, transferring, or encumbering its assets of $135 million. This measure aims to retain these assets as security amid an arbitration conflict with the Chinese firm Shanghai Electric Group. This decision emerged as a result of Shanghai Electric’s challenge to a previous ruling from 2022, which had dismissed its request for interim relief to secure the arbitration amount, estimated at Rs 1,100 crores ($146 million).
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The bench, comprising Justice Sanjeev Sachdeva and Justice Manoj Jain, ordered that Reliance Infrastructure is to refrain from any sale, transfer, or encumbrance of its assets up to the specified amount.
“Respondent Reliance Infrastructure Ltd. is restrained from selling, alienating, transferring, or encumbering its assets, amounting to US$ 135,320,728.42. Though the awarded amount, along with interest and costs, works out to more than the above amount, the order is restricted to the amount prayed for in the petition under Section 9 of the Arbitration Act,” the High Court ordered today.
The dispute is part of a broader dispute linked to the Sasan Power Project, with both entities having financial dues and damages. In a landmark judgment dated January 31, 2024, the Singapore International Commercial Court (SICC) validated an arbitration award requiring Reliance Infrastructure to compensate Shanghai Electric with approximately $146 million.
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The Delhi High Court‘s decision came despite Reliance Infrastructure’s argument that the plea for security by Shanghai Electric was following the arbitration award. The court emphasized that the Arbitration Act permits interim measures at any stage of the arbitration process until the award’s enforcement, dismissing Reliance’s objections and allowing Shanghai Electric’s appeal.
“It is clarified that this restraint would be subject to any charge on the assets already created in favour of a bank or a financial institution. In the event of the sale of an already encumbered asset by a bank or financial institution, the balance, if any, after satisfaction of the charge shall be kept in a designated account, shall not be utilized by the respondent for any purpose, and shall be subject to the outcome of the enforcement petition filed by the appellant,” the judgment stated.
Senior Advocates Rajiv Nayar, Dayan Krishnan, and their team representing Shanghai Electric. Reliance Infrastructure’s defense was represented by Senior Advocates Sandeep Sethi, Parag Tripathi, and their team.
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“Section 9 of the Arbitration Act permits a party to apply to a court for interim measures before, during, or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Arbitration Act. By virtue of the proviso to Section 2(2) of the Arbitration Act, Section 9 applies to international commercial arbitration. Thus, any party can apply to a court for interim measures before, during, or after the making of the arbitral award,” the High Court held.
“Thus, it is held that the outer limit for seeking interim measures under Section 9 of the Arbitration Act would not become applicable on mere filing of the application seeking enforcement. There is thus no merit in the said argument raised on behalf of the respondent; the same is accordingly rejected,” the court said.
CASE TITLE: Shanghai Electric Group Co. Ltd. Vs. Reliance Infrastructure Ltd.
