LSS OCEAN TRANSPORT DMCC vs K.I. INTERNATIONAL LTD

2026:MHC:827
OSA(CAD) No. 15 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 22.01.2026 Pronounced on : 27.02.2026
CORAM
THE HON'BLE MR JUSTICE C.V. KARTHIKEYAN
AND
THE HON'BLE MR JUSTICE K. KUMARESH BABU
O.S.A (CAD) No. 15 of 2024
and
CMP No.3586 of 2024
LSS OCEAN TRANSPORT DMCC
A Company incorporated under the appropriate
Laws of the United Arab Emirates,
Having its Registered Office at Unit #2708,
Jumeirah Business Center 5- Cluster W - Dubai,
United Arab Emirates
Rep. by its Power of Attorney Holder
Mr. Ram Jay Narayan,
A6 Kumaravijayam, 99, Royapettah High Road,
Mylapore, Chennai – 600 004.
..Appellant/Petitioner
Vs
1. K.I. (INTERNATIONAL) LIMITED,
A Company incorporated under the Companies
Act 1956, Having its Registered Office at #664,
T. H. Road , Tondiarpet, Chennai – 600 081.
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OSA(CAD) No. 15 of 2024
2. Goyal Ispat Private Limited,
A Company incorporated under the Companies
Act 1956, Having its Registered Office at #664,
T. H. Road, Tondiarpet, Chennai 600 081.
..Respondents/
Respondents
This Original Side Appeal filed under Section 13(1) of the Commercial
Courts, Commercial Division and Commercial Appellate Division of High
Courts (Amendment) Act and section 50 of the Arbitration and Conciliation
Act, 1996 read with Order XXXVI Rule 9 of the O.S. Rules and Clause 15 of
the amended Letters Patent, prayed to set aside the order passed by the learned
Judge in Arb.O.P.No. (Comm.Div) 195 of 2022 dated 16.10.2023 and allow the
present Appeal.
For Appellant: Mr.P.Giridharan
For Mr.H.Siddarth
For Respondent(s): Mr. B. Arvind Srevatsa
JUDGMENT
(Judgment of the Court was delivered by C.V.Karthikeyan J.)
This appeal had been filed questioning an order dated 16.10.2023 in
Arb.O.P.No.(Comm. Div.).195 of 2022 passed by a learned Single Judge of this
Court.

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OSA(CAD) No. 15 of 2024
2.The appellant herein was the petitioner in Arb.O.P.No.(Comm.
Div.).195 of 2022.
3.Arb.O.P.No.(Comm. Div.).195 of 2022 had been filed taking advantage
of Sections 47 to 49 of the Arbitration and Conciliation Act, 1996 seeking a
declaration that the award dated 26.03.2021 and the corrected award dated
st nd
17.05.2021 are decrees of this Court and for a direction against the 1 and 2
respondents to jointly and severally to pay to the petitioner therein a sum of
st nd
Rs.2,28,91,856.20/- and for a further direction against the 1 and 2 respondents
to jointly and severally pay to the petitioner a further sum of Rs.67,66,770.10/-
st nd
and for a further direction against the 1 and 2 respondents to jointly and
severally pay to the petitioner a further sum of Rs.32,91,147.96/- and for a
st nd
further direction against the 1 and 2 respondents to pay the costs of the
petition.
4.By order dated 16.10.2023, a learned Single Judge of this Court had
partly allowed the petition by granting a decree in terms of the foreign arbitral
award dated 26.03.2021 and the corrective award dated 17.05.2021 against the
st
1 respondent alone, in accordance with Section 49 of the Arbitration and
nd
Conciliation Act, 1996. The petition was dismissed as against the 2
respondent. Costs were also not granted. Liberty was granted to the petitioner to
st
execute the foreign arbitral award and the corrective award against the 1
respondent by filing an execution petition seeking appropriate reliefs.

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OSA(CAD) No. 15 of 2024
nd
5.Aggrieved by the dismissal of the petition, as against the 2 respondent,
the petitioner had filed the present Appeal.
6.It is the contention of the appellant that by a voyage Charterparty dated
st
22.01.2018 entered into between the appellant and the 1 respondent, the
appellant as the disponent owner, agreed to carry a cargo of approximately
1,50,000 MT +/- 10% MOLOO (More or Less Owners Option) of coal on board
a single Decker Bulk Carrier Capesize ship from Richards Bay Terminal, South
Africa to Krishnapatnam Port, in this Country. The appellant then Chartered out
a vessel MV Citrus for this purpose. The vessel arrived at Krishnapatnam Port
on 30.01.2019 and proceeded to berth after discharge of 163,114 MT of coal.
She left Krishnapatnam Port on 05.03.2019.
st
7.According to the terms of the Charterparty, the 1 respondent was to
ensure that 25,000 MT of cargo was discharged everyday after the vessel had
tendered her notice of readiness at the port of discharge. Accordingly, cargo of
quantity of 163,114 MT should have been discharged within 7 days or to be
more precise in 6.5246 days, failing which demurrage charges would become
payable at the rate of USD 14,000 per day as stipulated in the terms of the
st
Charterparty. It had been specifically contended that the 1 respondent took
33.5972 days to discharge the cargo. The demurrage was therefore payable for
27.0727 days and at USD 14,000 per day, it came to a sum of USD 379,017.
st
This amount was claimed by the petitioner from the 1 respondent.
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OSA(CAD) No. 15 of 2024
st
8.The 1 respondent, however, disputed the computation of demurrage
on the ground that the cargo had been discharged in 12.497222 days (as
opposed to 33.5972 days as claimed by the petitioner) and it was therefore
stated that the demurrage charge was payable only for 5.972662 days (as
st
opposed to 27.0727 days). The 1 respondent claimed that the Krishnapatnam
st
Port had suspended ship movement which the appellant denied. The 1
respondent also stated that they had cash flow problems.
st
9.The appellant and the 1 respondent then entered into a first Deferment
Agreement on 13.03.2019. The appellant was permitted to exercise a lien on
15,000 MTs of cargo carried on in the vessel in consideration for all load port
and discharge port demurrage and deferring the payment of undisputed load
port demurrage in five month instalments of USD 45,201.17 per month starting
th th
from 15 day of April 2019 and subsequent instalments on the 15 day of each
subsequent month.
st
10.The 1 respondent also issued five post dated cheques dated
15.04.2019, 15.05.2019, 15.06.2019, 15.07.2019 and 15.09.2019 drawn in
favour of the agents of the appellant M/s.Taurus Shipping Pvt. Ltd., and drawn
on Union Bank of India, Washermanpet Branch, Chennai – 600 021. It was also
agreed between the parties that if the payment on any one of the months was not
honoured, M/s.Taurus Shipping Pvt. Ltd., was entitled to encash the other post
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OSA(CAD) No. 15 of 2024
st
dated cheques to cover the amount outstanding and payable by the 1
respondent to the appellant.
st
11.Thereafter, on request of the 1 respondent, the first Deferment
Agreement was amended by a second Deferment Agreement dated 12.04.2019.
st
By this agreement, the 1 respondent agreed to make payment towards the load
port demurrage of USD 226.005.86 and the undisputed discharge port
demurrage of a sum of USD 83,617.27 in three instalments to be paid on
15.04.2019 – USD 100,000 and on 25.04.2019 – USD 100,000 and on
05.05.2019 – USD 109,623.13.
st
12.Again the 1 respondent had provided as security an undated cheque
drawn on Union Bank of India, Washermanpet Branch, Chennai, for a sum of
Rs.2,06,78,000/- to be handed over to the agent of the appellant, M/s.Taurus
st
Shipping Pvt. Ltd. On the basis of the aforementioned agreement, the 1
respondent took delivery of 12500 MTs out of 15,000 MTs on which lien had
st
been exercised by the appellant on the first Deferment Agreement. The 1
respondent also surrendered his right to lien to the appellant for the balance
2500 MTs.
st
13.It had been further stated that in breach of their obligations, the 1
respondent failed to make payment of the admitted sums and paid only the first
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OSA(CAD) No. 15 of 2024
instalment of USD 100,000 towards the undisputed debt. In view of the said
breach, the appellant called upon M/s.Taurus Shipping Pvt. Ltd., to present the
cheque held as security for clearance. It was informed to the appellant that the
cheque dated 15.04.2019 for Rs.31,18,869/- and the cheque dated 15.05.2019
for Rs.31,18,869/- both drawn on Union Bank of India, Washermanpet Branch,
Chennai, had been dishonoured and returned with a memo dated 06.06.2019 on
st
the ground that the bank account of the 1 respondent was frozen. The further
cheque dated 15.06.2019, again for Rs.31,18,869/- and again drawn on Union
Bank of India, Washermanpet Branch, Chennai, was also dishonoured by memo
st
dated 17.06.2019 on the ground that the account of the 1 respondent was a Non
Performing Asset Account.
14.In view of the dishonour of the cheques, the appellant issued notice
dated 20.06.2019 under Section 138 of the Negotiable Instruments Act, 1881
st
calling upon the 1 respondent to effect payment of the amount due and payable
st
within a period of 15 days. It is further contended that the 1 respondent
admitted its liability and made payment by way of wire transfer / RTGS transfer
of the balance undisputed demurrage as agreed in the second Deferment
Agreement in two tranches on 28.06.2019 and 10.07.2019 through another
associate company M/s.Stride Steels Pvt. Ltd.
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OSA(CAD) No. 15 of 2024
15.However, the disputed sum of USD 295,400/- towards discharge port
demurrage remained unpaid. The appellant invoked the arbitration clause in the
Charterparty dated 02.08.2018 which was incorporated in the Fixture Note
dated 22.11.2018 which required disputes to be referred to London arbitration,
in accordance with English Law and the London Maritime Arbitrators
Association (LMAA) Terms. The arbitral tribunal then came to be constituted.
After the commencement of the arbitration proceedings, the appellant
apprehended that the cheque issued as security towards the disputed amount of
USD 295,400 would also be dishonoured.
16.In view of that particular fact, the appellant filed A.No.4708 of 2019
under Section 9 of the Arbitration and Conciliation Act, 1996 seeking protection
st st
of the security given by the 1 respondent. In the proceedings, the 1 respondent
replaced the undated cheque with another undated cheque for Rs.2,06,78,000/-
drawn on Union Bank of India, Washermanpet Branch, Chennai in favour of
nd
M/s.Taurus Shipping Pvt. Ltd., with a covering letter of the 2 respondent
issued in terms of clause 7 of the second Deferment Agreement dated
nd
12.04.2019. In the letter, the 2 respondent stated that the said cheque was
issued in accordance with clause 7 of the agreement dated 12.04.2019.
nd
17.It was contended that the 2 respondent was a group company of the
st
1 respondent. This was recorded in the order dated 17.09.2019 in A.No.4708 of
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OSA(CAD) No. 15 of 2024
st
2019. The appellant then sent a letter dated 31.07.2019 to the 1 respondent that
an agreement can be reached whereby the cargo which was under the lien could
be monetized. Since there was no response, the appellant filed A.No.6092 of
2019 for sale of the 2500 MTs of cargo under lien and appointment of an
Advocate Commission (A.No.231 of 2020) for sale of the remaining cargo of
2500 MTs.
st
18.The 1 respondent in their pleadings had claimed that the security
nd
given by the 2 respondent by way of cheque for Rs.2,06,78,000/- would be
sufficient to safeguard any claim. In view of that particular statement
A.No.6092 of 2019 was disposed of by order dated 04.10.2019. The Court
st
permitted both the appellant and 1 respondent to depute one person each as
joint receivers for the sale of 2500 MTs of coal. It was further observed that
nd
since the 2 respondent had issued a cheque as security, 2500 MTs of cargo
could be sold.
st
19.However, the 1 respondent did not nominate anybody as a receiver
and therefore, the appellant filed A.No.231 of 2020 seeking appointment of an
Advocate Commissioner for sale of 2500 MTs of coal. An Advocate
Commissioner was also appointed and he also effected sale by auction of the
said cargo which was confirmed by order dated 10.11.2020. Therefore, an order
was passed that against the demurrage charges, a sum of Rs.25,07,500/- which
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OSA(CAD) No. 15 of 2024
was due as on 07.12.2020 shall be paid to Krishnapatnam Port Company Ltd.,
Nellore and with respect to the customs duty, the auction purchaser may pay the
same within the specified period. It was also directed that the Customs
Authority can take steps to auction the remaining 2500 MTs of coal and after
deducting the customs charge and demurrage charges deposit the balance
amount to the credit of the appellant. That amount was directed to be deposited
in fixed deposit in a Nationalized Bank. It had been stated that consequent to the
sale of the cargo by the Advocate Commissioner a sum of Rs.50,07,898/- was
credited to the account of the appellant and an application was filed for payment
out and the same had also been allowed.
20.It must also be stated that parallelly the arbitration proceedings
proceeded and the first final partial award was passed by the Tribunal on
26.03.2021, adjudicating the claim of the appellant for a sum of USD
st
294,816.67 and directing the 1 respondent to pay the same together with
interest at 4.5% per annum, compounded at three-monthly rests, from the date
st
of award till date of payment. The 1 respondent was also directed to pay costs
to the appellant herein.
21.The appellant then filed an application under Section 57 of the
Arbitration Act, 1996 (English Act) for correction of certain typographical
errors and the corrected award was issued on 07.05.2021. The appellant then
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OSA(CAD) No. 15 of 2024
st
issued demand notices dated 05.07.2021, 26.07.2021 and 05.10.2021 to the 1
respondent calling upon them to pay the sums awarded under the award dated
26.03.2021 and the corrective award dated 17.05.2021.

st
22.Though notices were delivered to the 1 respondent, they failed to
honour their commitment. Thereafter, the appellant filed petition for
enforcement of the award under Sections 47 and 49 of the Arbitration and
st nd
Conciliation Act, 1996 as against the 1 and 2 respondents jointly and
severally.
nd
23.The 2 respondent was not a party to the arbitration proceedings. But
nd
however, the appellant sought to enforce the award also against the 2
st
respondent claiming them to be a group company of the 1 respondent and that
they had issued a cheque in accordance with clause 7 of the Arbitration
Agreement dated 12.04.2019 for a sum of Rs.2,06,78,000/-. It was contended
st nd
that the 1 and 2 respondents should be considered as one single economic
entity having common directors and having common key personnel in
management and also operating from the same premises. It was contended that
the businesses were interlinked each other and they were both of the business
dealings of the other and also about the contracts entered into by each other. It
was also contended that the members of the same family were operating the two
companies, interchangeably, with an intention to evade their liabilities.
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24.Before the learned Single Judge, the appellant sought lifting of
st nd
corporate veil to enforce the award against both the 1 and 2 respondents
jointly and severally. The learned Single Judge had directed the respondents to
disclose their assets in an affidavit in a sealed envelope before the Court. The
financial statement for the Financial Year 2016-17 to 2020-21 were disclosed
st nd
and it was contended by the appellant that both the 1 and 2 respondents were
family owned group companies having common Directors and intercompany
transactions. The learned Single Judge before whom Arb.O.P.(Comm.Div.) No
195 of 2022 came up for consideration had partly allowed the said petition by
granting a decree in terms of the Foreign Arbitral Award dated 26.03.2021 and
st
the corrective award dated 17.05.2021 against the 1 respondent and granted
liberty to execute the award by filing execution petition, but dismissed the
nd nd
petition as against the 2 respondent since the 2 respondent was not a party to
the arbitration proceedings.
25.Challenging that particular order, the present appeal had been filed.
26.Heard arguments advanced by Mr.P.Giridharan learned counsel for the
nd
appellant and Mr.B.Arvind Srevatsa, learned counsel for the 2 respondent.

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27.It is to be noted that it is the contention of both the learned counsels
st
that the 1 respondent had entered into liquidation and that process is pending.
28.Mr.P.Giridharan, learned counsel for the appellant took the Court
through the facts of the case. The learned counsel pointed out that the appellant
st
and the 1 respondent had entered into a Charterparty Agreement dated
22.11.2018 to transport 15,000 MTs of cargo / coal from South Africa to the
port at Krishnapatnam. The Charterparty Agreement contained a clause to refer
disputes to arbitration. There were demurrage charges payable to the load port.
st
After the cargo had been discharged at Krishnapatnam, the 1 respondent had
agreed to remove the cargo within a period of 5 days, but however, there was a
delay in such removal. The cargo was removed only after 35 days. The learned
counsel stated that for each day, the demurrage charge payable was USD
1,00,000. The appellant became liable to pay demurrage charges for the 27 days
st st
of delay in removing the cargo by the 1 respondent. The 1 respondent,
however, disputed that fact but admitted that there had been a delay of about 8
days.
st
29.In order to resolve the issues, the appellant and the 1 respondent had
st
entered into a first Deferment Agreement. The 1 respondent had issued five
separate cheques towards payment of the undisputed amount. They had also
issued yet another cheque as security. The cheques when presented for payment
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OSA(CAD) No. 15 of 2024
were dishonoured initially on the ground that the account was frozen and later
on the ground that the account was declared as Non Performing Asset. The
st
learned counsel pointed out that issuing cheques with the knowledge that the 1
st
respondent was heading towards liquidation was a clear indication that the 1
respondent had intention to default the appellant.
30.With respect to the disputed amounts, in accordance with the clause to
refer matters to arbitration, the appellant had instituted arbitration proceedings
at London which was the seat of arbitration. The arbitral tribunal returned a
finding adjudicating the claim of the appellant. Towards that particular claim,
st nd
the 1 respondent again issued three separate cheques. At this juncture, the 2
respondent came forward to issue a cheque for the entire amount as security for
st
the 1 respondent to discharge their liability to the appellant. The matters then
proceeded before a learned Single Judge of this Court by filing application
under Section 9 of the Act and directions were issued to bring to sale by auction
2500 MTs of coal.
st
31.The thrust of the arguments of the learned counsel was that the 1 and
nd
2 respondents are part of Group Companies with common Directors hailing
from the same family with business being done interchangeably and amounts
transferred from one company to another. It was specifically argued that his
nd
transfer was done to evade liabilities. The learned counsel argued that the 2
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OSA(CAD) No. 15 of 2024
st
respondent was an alter-ego of the 1 respondent and if the corporate veil of the
st
1 respondent was lifted, it would be clear that they were only a screen for the
nd
activities of the 2 respondent. It was under those circumstances that the
learned counsel filed the petition before the learned Single Judge seeking to
st nd
enforce the arbitral award against both the 1 and 2 respondents and to declare
the foreign award as the decree of the Court. This is required under Section 47
of the Arbitration and Conciliation Act, 1996. The learned Single Judge had
granted a decree as prayed with respect to declaration but refused to mulct the
nd
liability on the 2 respondent. The learned Single Judge was of the opinion that
nd nd
since the 2 respondent was not a party to the arbitral proceedings, the 2
respondent cannot be made liable for the award.
32.The learned counsel assailed that particular reasoning of the learned
Single Judge and stated that the Court should have taken a step forward to hold
st
that the 1 respondent had, even at the inception of the contract, knew that they
would not be in a position to honour their commitments under the agreement
and had issued cheques with knowledge that they would be dishonoured and
nd
further pointed out that the 2 respondent had stepped in and had issued a
st
cheque as security for and on behalf of the 1 respondent.

33.The learned counsel pointed out that a learned Single Judge had
recorded that they were both Group Companies and had therefore accepted the
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OSA(CAD) No. 15 of 2024
nd
cheque issued by the 2 respondent as security and had raised the lien over the
cargo and permitted it to sold by auction. The learned counsel stated that
therefore, the appellant should be permitted to enforce the award even against
nd
the 2 respondent, irrespective of the fact whether they were parties to the
arbitration proceedings or not. The learned counsel therefore urged that this
Court should reverse the judgment of the learned Single Judge and permit
nd
enforcement of the award as against the 2 respondent also.

nd
34.Mr.B.Arvind Srevatsa, learned counsel for the 2 respondent,
however, strongly contested the arguments advanced. The learned counsel
nd
pointed out that the 2 respondent as a Private Limited Company is a separate
st
entity having a separate seal, independent of the 1 respondent. It could be a fact
that some of the Directors were common to both companies, but that would not
nd
indicate that the 2 respondent should be made liable for the commitments of
st nd
the 1 respondent. The learned counsel pointed out that the 2 respondent was
st
not a party to any of the agreements entered into between the 1 respondent and
the appellant herein. Naturally, not being a party to the agreement, they cannot
be made liable for any breach of the said agreements. It was an issue only
st nd
between the appellant and the 1 respondent and as a third party stranger, the 2
respondent could never be called upon to answer the breach committed by one
or made responsible for any award passed owing to such breach.
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nd
35.The learned counsel further pointed out that the 2 respondent had
issued a cheque only as a security and not with any intention for the amount
being encashed by the appellant herein. It was only to show bonafide of the
sister concern and nothing more and nothing less. The learned counsel argued
nd
that since there was no privity of contract between the 2 respondent and the
st
appellant in any of the transactions between the appellant and the 1 respondent,
nd
the 2 respondent can never be made liable to honour the award which was
st
obtained only against the 1 respondent. He pointed out that even a pre-
nd nd
arbitration notice was not issued to the 2 respondent and therefore, the 2
respondent, not being a party to the arbitration proceedings cannot be bound by
nd
any award granted by the Tribunal. The 2 respondent was not heard during the
nd
arbitral proceedings. The 2 respondent did not have opportunity to test the
nd
documents filed by the appellant. The 2 respondent was kept completely in
dark about the said proceedings. He therefore argued that the learned Single
Judge had correctly appreciated the facts and had refused to permit enforcement
nd
of the award against the 2 respondent. The learned counsel sought dismissal of
the appeal.

36.We have carefully considered the arguments advanced and perused the
material records.
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37.The point which arises for discussion and determination is as follows:
“1.Whether the appellant is entitled to seek enforcement of
the Foreign Arbitral Award dated 26.03.2021 and the Corrective
st nd
Award dated 17.05.2021 against the 1 and 2 respondents jointly
and severally since they were Group Companies, irrespective of the
nd
fact that the 2 respondent was not a signatory to the agreement
relating to which arbitration proceedings were initiated and also
not a party during the arbitral proceedings but solely on the basis
nd
of a cheque issued by the 2 respondent as security for the
st
liabilities of the 1 respondent?”
38.The appellant / LSS OCEAN TRANSPORT DMCC, a company
st
incorporated under the appropriate Laws of the United Arab Emirates and the 1
respondent / K.I. (INTERNATIONAL) LIMITED, a company incorporated
under the Companies Act, 1956 had entered into a voyage Charterparty on
22.11.2018, whereby the appellant as a disponent owner agreed to carry cargo
of 1,50,000 MT +/- 10% MOLOO (More or Less Owners Option) of coal on
board a vessel which had been chartered, M.V.Citrus from Richards Bay
Terminal, South Africa to Krishnapatnam Port, India.
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39.The Vessel M.V.Citrus arrived at the port of discharge, Krishnapatnam
Port on 30.01.2019 and tendered notice of readiness (NOR) at 0100 hrs and
proceeded to berth and after discharging 163,114 MT of coal left
Krishnapatnam Port on 05.03.2019. The terms of the Charterparty stipulated
st
that the 1 respondent was to ensure that 25000 MT of cargo was discharged per
day after the vessel tendered her NOR at the port of discharge.
40.It was therefore contended by the appellant that the cargo should have
been discharged within 6.5246 days failing which demurrage charge would be
payable at the rate of USD 14,000 per day, as stipulated in the terms of the
st
Charterparty. It is further contended by the appellant that the 1 respondent took
33.5972 days to discharge the cargo and therefore demurrage charges was
payable for 27.0727 days and thus, a sum of USD 379,017 became due and
st
payable by the 1 respondent to the appellant which was the demurrage for the
st
period in excess of 6.5246 days. The 1 respondent, however, disputed this
computation and claimed that the vessel had used only 12.497222 days and
therefore, the demurrage was payable only for 5.972662 days.
st
41.Both the appellant and the 1 respondent then entered into a first
st
deferment agreement on 13.03.2019. The 1 respondent permitted lien on
15,000 MTs of cargo in consideration for all load port and discharge port
demurrage and agreed to pay the demurrage in five monthly instalments of USD
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OSA(CAD) No. 15 of 2024
45,201.17 per month. Cheques in this connection, were drawn in favour of the
agents of the appellant M/s.Taurus Shipping Pvt. Ltd., on Union Bank of India,
Washermanpet, Chennai. It had been covenanted in the said agreement that if
the payment of even one instalment is defaulted, then M/s.Taurus Shipping Pvt.
Ltd., can encash the post dated cheques to recover the amount due and payable
st
by the 1 respondent. Thereafter, this agreement was further amended and a
second demurrage agreement was entered into on 12.04.2019 wherein, the terms
st
of payment were readjusted to three instalments. The 1 respondent issued a
cheque again drawn at Union Bank of India, Washermanpet Branch, Chennai
for a sum of Rs.2,06,78,000/- as security to adhere to the terms of payment.
st
42.The 1 respondent then took delivery of 12,500 MTs of cargo and
surrendered its right of lien for 2500 MTs in addition to the cheque issued for a
st
sum of Rs.2,06,78,000/-. The 1 respondent paid only the first instalment. The
appellant therefore called upon M/s.Taurus Shipping Pvt. Ltd., to present the
cheques held as security for encashment. The cheques were returned for the
st
reason that the account of the 1 respondent was frozen and subsequently that it
was a Non Performing Asset Account. The appellant had separately initiated
proceedings under Section 138 of the Negotiable Instruments Act, 1881 for
st
dishonour of the cheques. Upon receipt of notice of such proceedings, the 1
respondent paid the undisputed demurrage charges as agreed in the second
demurrage agreement in two tranches through another associate company
M/s.Stride Steels Pvt. Ltd.
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43.But however, the disputed sum of USD 295,400/- was still payable
towards discharge port demurrage. The appellant invoked the arbitration clause
in the Charterparty dated 02.08.2018 and an award was passed on 26.03.2021
st
and a corrective award was passed on 17.05.2021 against the 1 respondent.
44.The appellant then filed an application in A.No.4708 of 2019 under
nd
Section 9 of the Act seeking security for the claim. The 2 respondent herein
st
came forward to replace the earlier cheque of Rs.2,06,78,000/- issued by the 1
respondent with another cheque for the same sum, undated, but again drawn on
Union Bank of India, Washermanpet, Chennai, in favour of M/s.Taurus
Shipping Pvt. Ltd., in accordance with clause 7 of the second deferment
agreement dated 12.04.2019.
45.The facts narrated above are not in dispute.
nd
46.The 2 respondent handed the cheque for consideration to the Court
and claimed that it could be held over as security. It was stated before the Court
nd st
that the 2 respondent was one of the group companies of the 1 respondent.
This statement had been recorded in the order dated 17.07.2019. Paragraph
Nos.4, 5, 6 and 7 on the said order in A.No.4708 of 2019 is extracted below:
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“ 4. The respondent defaulted in making payment of second
and third installments. So the applicant presented the cheques
given as security and all the three cheques were dishonoured for
the reason that the accounts were frozen. Hence, the security
furnished by the respondent was not a good security. The cargo
with the applicant is 5,000 MT of which 2,500 MT goes for the
lien pending an award as per Clause 7 of the agreement dated
12.04.2019 and for the balance 2,500 MT, the applicant is
before this Court seeking for an injunction as other than this
cargo there is no other asset of the respondent, which the
applicant can attach. If the applicant does not have any valid
security equivalent to the value of its claim, it will be difficult in
the event an award being passed to recover the same from the
respondent.
5. After arguments and deliberations, today the parties
have come up with certain proposal, as per which, out of the
balance 5,000 MT being held by the applicant, 2,500 MT to be
sold and the sale proceeds could be adjusted. Accordingly, the
respondent has today handed over an undated cheque bearing
No.233455 drawn on Union Bank of India, Washermenpet
branch, Chennai 600 021 for a sum of Rs.2,06,78,000/- (Rupees
Two Crores Six Lakhs and Seventy Eight Thousand only) in the
name of "Taurus Shipping Pvt. Limited", as per Clause 7 of the
agreement issued by Goyal Ispat Private Limited, which is said
to be one of the group companies of the respondent i.e. K.I.
(International) Limited to the learned counsel for the applicant,
which is also hereby acknowledged.
6. In view of the cheque that has been received today, out
of the 5,000 MT of Coal retained by the applicant, 2,500 MT
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OSA(CAD) No. 15 of 2024
shall be released to the respondent. The balance 2,500 MT, as
per Clause 7 of the agreement, will be kept as lien by the owner.
7. With the above directions, the application is closed.”
47.The appellant then filed O.A.No.6092 of 2019 for appointment of a
receiver to effect sale of 2500 MTs of cargo which was held in lien by the
st
appellant. That application was resisted by the 1 respondent herein, wherein
they specifically pointed out in their counter affidavit that the cheque issued by
nd
the 2 respondent was noted in the order in A.No.4708 of 2019 extracted supra
st
as sufficient security. In the counter affidavit, it was also stated that the 1
respondent had become insolvent and therefore, they were forced to handover a
nd
fresh cheque from their group company, the 2 respondent herein. The pleading
st
to that extent in the counter affidavit of the 1 respondent in O.A.No.6092 of
2019 is as follows:
“5. The fact that the Respondent under Clasue 7 of Agreement dated
22/11/2018, was forced agree to the Applicant to exercise lien on the
balance cargo of 2500 MTs and in addition also agreed to provide
an undated cheque for USD 295,4000 (equivalent to Indian Rupees
of Rs.2,06,78,000) as security for the disputed amount of dischage
port demurrage itself amount to an act of duress, rendering the
contract null and void. Since the cheque issued by Respondent's
sister concern on the earlier instance had become insolvent, the
Respondent's was once again forced to hand over a fresh undate
cheque from the Respondent's group concern Goval Ispat Private
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OSA(CAD) No. 15 of 2024
Limited, on 16/07/2019 as part of O.A. No 4708 of 2019, before this
Hon'ble Court for release of 7,500Mt cargo under the Agreement
clearly establishes the intention of the Applicant to merely force the
Respondent for out-of-court settlements. The Applicant even verified
the financial soundness of the company and was satisfied with the
security provided. That the same security is sufficient for the
Applicant to safeguard any claim, which is subject matter of dispute
between the parties. Hence, the clause which was entered into upon
duress cannot be operated to the detriment of the Respondent. Equity
demands the Applicant to permit the Respondent to make use of the
cargo. The lien is bad since the clause was imposed under economic
duress.”
48.The aforementioned pleading is extracted since it discloses reliance of
st nd
the 1 respondent on the 2 respondent to provide security for the debts which
st
could arise or which had arisen and which might become payable by the 1
st nd
respondent or become enforceable against the 1 respondent. The 2 respondent
st
had stepped in only on the ground that they are a group company of the 1
st nd
respondent. This interlink between the 1 and 2 respondents had been relied on
st st
by the 1 respondent and projected by the 1 respondent and therefore is not a
new fact pleaded by the appellant.
49.A learned Single Judge of this Court had passed orders on 04.10.2019
nd
and the earlier fact that a cheque had been provided as security by the 2
respondent was again noted. It had further been noted that the cheque had been
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OSA(CAD) No. 15 of 2024
issued in accordance with clause 7 of the second deferment agreement dated
12.04.2019. Further, taking into consideration that the cargo was a perishable
commodity and the weight and quality would deteriorate everyday the Court
st
had permitted both the 1 respondent and the appellant to nominate joint
receivers for the sale of 2500 MTs of coal held as security, in manner agreed by
the parties. The sale proceeds were directed to be kept in fixed deposit pending
disposal of the arbitral proceedings. At this stage, it would only be appropriate
to extract clause 7 of the second deferment agreement dated 12.04.2019.
“7.Charterers agree that owners can exercise a lien on the balance
of cargo of 2,500 MT and charterers further agree to provide an
undated cheque in the sum of USD 295,400 (equivalent to Indian
rupees Rs.2,06,78,000/-) in favour of “Taurus Shipping Pvt. Ltd.,”
as security for the disputed amount of discharge port demurrage.”
50.It must be stated that the signatories to this agreement were only the
st st
appellant and the 1 respondent. It must be further stated that the 1 respondent
had issued a cheque for a sum of Rs.2,06,78,000/- in favour of Taurus Shipping
st
Private Limited as undertaken. Since the other cheques issued by the 1
respondent had been dishonoured, on the ground that the account was frozen
and subsequently, on the ground that the account was declared as Non
nd
Performing Asset, the cheque already issued came to be of no value. The 2
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OSA(CAD) No. 15 of 2024
respondent then stepped in and issued another cheque for an even sum as
security for the disputed amount of discharge port demurrage which was the
subject matter of arbitration initiated between the parties.
nd
51.Thus, it is seen that the 2 respondent, who now claims to be a
st
stranger third party to the agreements between the appellant and the 1
respondent was actually aware of the nature of the agreements, was aware that
st
the 1 respondent had undertaken to provide security towards the disputed
st
amount which was the subject matter of arbitration, was aware that the 1
respondent would not be able to honour the security provided and therefore,
had, with knowledge issued the cheque for a sum of Rs.2,06,78,000/- as security
for the disputed amount of discharge port demurrage.
52.Thus, the cheque had been issued as security towards the award
amount, if passed by the arbitral tribunal, and which would become enforceable
st nd
against the 1 respondent. The 2 respondent had, therefore voluntarily, issued
st
the said cheque with knowledge that there was a possibility that the 1
respondent would be in a position not to satisfy an award if passed by the
arbitral tribunal and had permitted enforcement of the said award against the
security which it provided namely, the cheque for Rs.2,06,78,000/-
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OSA(CAD) No. 15 of 2024
nd
53.The 2 respondent was therefore aware of the nature of dispute
nd
referred to the arbitral tribunal. Though the 2 respondent can claim that they
were not a signatory to the agreement relating to which the arbitration
proceedings had been initiated, they had taken a conscious decision to provide
st
security for any award if granted against the 1 respondent. Naturally, when an
award had been passed, and if the appellant could not enforce the same against
st
the 1 respondent then they could proceed against the security provided by the
nd
2 respondent. By the act of issuing a cheque as security for the award amount
nd
if passed, the 2 respondent had directly undertaken to satisfy the award on
st
failure of the 1 respondent to satisfy the award, if passed against it.
nd
54.Viewed from this angle, the technical stand now taken by the 2
respondent that the award cannot be enforced against them since they were not a
signatory to the agreement relating to the arbitration proceedings initiated and
since they were not party to the arbitration proceeding has to be necessarily
rejected. The arbitration proceedings was confined to the disputes which had
st
arisen between the appellant and the 1 respondent relating to the demurrage
charges payable at the discharge port which proceeded from the terms of the
Charterparty Agreement dated 22.11.2018, and the first Deferment Agreement
dated 13.03.2019 and the second Deferment Agreement dated 12.04.2019.
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OSA(CAD) No. 15 of 2024
55.Those agreements related to the Charter of M.V.Citrus by the
appellant to transport 1,50,000 MTs +/- 10% MOLOO (More or Less Owners
Option) of coal on board a single Decker Bulk Carrier Capesize ship from
Richards Bay Terminal, South Africa to Krishnapatnam Port, India and towards
nd
the demurrage charges payable at the load port and discharge port. The 2
respondent was not involved in that business transaction. They however walked
into the dispute voluntarily by providing a cheque for Rs.2,06,78,000/- as
stipulated under the second deferment agreement dated 22.11.2018 as security
“ for the disputed amount of discharge port demurrage ”. The arbitral
proceedings related to “ the disputed amount of discharge port demurrage ”. The
appellant as claimant has claimed a sum of Rs.2,06,78,000/- in the arbitral
nd
proceedings. We therefore hold that the 2 respondent effectively stood as a
guarantor for enforcement of the award, if passed by the arbitral tribunal at
London and in evidence thereof and in acceptance of such status thereof had
issued the cheque as security for the amount claimed in the arbitral proceedings.
st nd
56.The allegation that the 1 and 2 respondents are group companies are
neither denied nor disputed. It is admitted by both sides that they have common
directors, that they have a common registered address and that there had been
transactions interse between them at various points of time. Though the fortunes
of one may not benefit the other directly, the misfortunate of one, in this
st
instance, the 1 respondent which had entered into liquidation would certainly
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OSA(CAD) No. 15 of 2024
have an effect on the security provided by the other. This security had been
provided to offset debt which might arise under a specific arbitral award. The
nd
2 respondent, in their capacity as group company by issuing a cheque as
security for the award is therefore bound to answer the claim for the award
amount granted.
57.This view now presented by this Court does not require to apply the
principle of lifting the corporate veil. The very fact that the cheque was issued
as security for a specific amount and for the exact sum claimed by the appellant
nd
before the arbitral tribunal itself is sufficient to hold that the 2 respondent had
voluntarily and consciously offered the cheque as security for the enforcement
of the award, if passed and for no other purpose.
58.An award had actually been passed in favour of the appellant for the
exact amount claimed by them and for the amount in the cheque provided as
nd nd
security by the 2 respondent. If on the basis of such cheque issued by the 2
nd
respondent, the appellant is not permitted to enforce the award against the 2
respondent, it would only lead miscarriage of justice.
st
59.The 1 respondent had entered into liquidation. This is a fact which
nd
cannot be denied or disputed by the 2 respondent. They are, in their own
terms, group companies. Significantly, though before the learned Single Judge a
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OSA(CAD) No. 15 of 2024
st
counsel represented the 1 respondent there has been no appearance on behalf of
st
the 1 respondent before this Court. This also leads this Court to hold that the
issuance of the cheques as security, purportedly, under clause 7 of the second
Deferment Agreement dated 22.11.2018 was tainted with fraudulent intention to
defeat enforcement of the award if passed by the Tribunal.
60.When the award had been passed and there was a real possibility of
nd
enforcing the same, the stand taken by the 2 respondent that they were not
parties to the arbitral proceedings and therefore the award cannot be enforced
against them has to be rejected. Their role began only when an award had been
st
passed and there was impossibility to enforce the same against the 1
respondent. The security provided by them namely, the cheque for a sum of
Rs.2,06,78,000/- then becomes a valuable security for the enforcement of the
st
award. The 1 respondent can never claim innocence and ignorance of the
st
nature of transactions between the appellant and the 1 respondent. They were
aware of the same and they had very specifically issued the cheque, not at the
st
calling of either the appellant or the 1 respondent, but under a specific clause in
the second deferment agreement dated 22.11.2018. They had misleded the
Court to hold, on the earlier occasion, when orders were passed in A.No.4708 of
2019 and in A.No.6092 of 2019, that the cheque was a valid security and had
been issued with intention as security for the disputed amount which was the
subject matter of the arbitral proceedings.
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OSA(CAD) No. 15 of 2024
nd
61.The learned counsel for the 2 respondent had argued very forcefully
nd
that enforcement could not be initiated against the 2 respondent. The learned
nd
Single Judge had accepted such argument and had held that the 2 respondent
st
not being a signatory to any of the agreements between the appellant and the 1
respondent and not being a party to the arbitral proceedings cannot now be
made a party in the enforcement application.
62.We do not agree with the reasons advanced. We hold that the learned
Single Judge had not taken note of one crucial fact namely, that the cheque had
actually been issued only as security towards the disputed amount of demurrage
charges, which was the subject matter of the arbitral proceedings and only to
provide security for the enforcement of the award, if passed by the arbitral
tribunal and for no other purpose. The award had been subsequently passed. We
nd
hold that the appellant has a right in law to proceed against the 2 respondent to
enforce the award on the basis of the cheque which had been issued as security
nd st
voluntarily and consciously by the 2 respondent for and on behalf of the 1
respondent. If not so permitted, it would only indicate that the Court condones
nd
an act of fraud by the 2 respondent in misleading the learned Single Judge who
accepted the said cheque and passed orders in A.No.4708 of 2019 and
A.No.6092 of 2019 accepting the said cheque as security.
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63.The case laws presented by the learned counsel for the appellant
related to proceedings under Section 11 of the Arbitration and Conciliation Act,
1996. However, this Court is now involved with enforcement of arbitral award
under Sections 46 to 49 of the Arbitration and Conciliation Act, 1996.
64.We are conscious that an award can be enforced only against a party to
the arbitral proceedings. However, when a guarantor had come forward to
provide a cheque as security towards the claim in the arbitral proceedings, then
if an award is passed, naturally, the claimant in whose favour the award had
been passed has a legal right to proceed against the guarantor either by
enforcing the security or if that security had become stale and unenforceable in
any other manner as is permissible under law.
65.We are deeply conscious that we have moved into unchartered
territory, but the complex world of Group Companies ostensibly formed with
separate objects, but in reality, to act as shadows of each other, has to be noted
by us. The very concept of Arbitration Act itself is to ensure that awards are not
frustrated by pleadings which might appear lawful but which are tainted with an
element of deception and fraud.
nd
66.In this case, the 2 respondent had issued a cheque as security for a
sum of Rs.2,06,78,000/- with knowledge when they issued the cheque, that if an
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OSA(CAD) No. 15 of 2024
award is passed they would be called upon to satisfy the award. They had
knowledge that they would be made a party in an application seeking
enforcement of the award. Having issued the cheque with such knowledge, they
cannot now put forth a plea that, since they were not parties to the agreement or
party to the arbitral proceedings, they cannot be made liable jointly and
st
severally with the 1 respondent for the award passed by the arbitral tribunal. If
permitted this would indirectly indicate encouragement of an act of deception
and underlying fraud, which should not be permitted and which should be
prohibited and which is now prevented by us.
67.In view of these reasons, the point framed for consideration is
nd
answered that the appellant is entitled to enforce the award against the 2
st
respondent also jointly and severally with the 1 respondent. We hold that there
nd st
is no dispute over the fact that the 2 respondent is a group company of the 1
nd
respondent and in the circumstances, owing to the fact that the 2 respondent
had issued a cheque towards the claim made in the arbitral proceedings as
security for the said sum, there is no need to venture into the formality of lifting
nd
the corporate veil, as the veil had been opened by the 2 respondent by
voluntarily acting as guarantor by issuing a cheque as security for the claim
made before the arbitral tribunal by the appellant. The pleas of innocence of the
nd
2 respondent of the agreements or of the arbitral proceedings are rejected by
us.
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68.In view of these reasons, we hold that the order of the learned Single
Judge in Arb.O.P.(Comm. Div.) No.195 of 2022 dated 16.10.2023 has to be set
aside and accordingly, the same is set aside. The Appeal stands allowed. No
costs. Consequently, connected civil miscellaneous petition is closed.

(C.V.K.,J.) (K.B.,J.)
27-02-2026
smv
Index: Yes/No
Speaking/Non-speaking order
Neutral Citation: Yes/No
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OSA(CAD) No. 15 of 2024
C.V.KARTHIKEYAN, J.
AND
K.KUMARESH BABU, J.
smv
Pre-delivery Judgment mad in
OSA (CAD) No. 15 of 2024
27-02-2026
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