386 MT cashew consignment preserved amid rival ownership claims and alleged Bill of Lading manipulation, Karnataka HC rules

The petitioner, COAF FZE, entered into Contract No. 2026-P0112 with Respondent No. 1, Avanikailani Commodities LLC, for the purchase of 500 metric tonnes of raw cashew nuts in shell, to be delivered from Ghana to Ho Chi Minh City, Vietnam.

The petitioner claimed to have paid the full contractual consideration, including USD 566,282.57 towards 386.541 metric tonnes of cargo that remained undelivered.

A draft Bill of Lading identified the petitioner’s transaction and Vietnam as the destination, but the cargo was subsequently diverted to New Mangalore Port, allegedly at the instance of Respondent No. 6, the representative of Respondent No. 1.

Respondent No. 1 admitted receipt of the petitioner’s payments and admitted that the cargo had been fraudulently diverted, while Respondent Nos. 6 and 7 disputed aspects of the payment arrangement and claimed an interest through SR Agro.

Respondent No. 5, Sindhu Cashew India Pvt. Ltd., claimed independent ownership based on a purported original Bill of Lading, allegedly issued in its favour pursuant to a separate transaction with Wincom Trading FZC LLC.

The petitioner invoked Section 9 of the Arbitration and Conciliation Act, 1996, seeking preservation of the cargo, restraint against its transfer or alienation, or alternatively a deposit or bank guarantee for its commercial value.

Respondent Nos. 3 and 4 were impleaded, and Respondent Nos. 5, 6 and 7 were also brought on record. The cargo was stated to be in the custody of Respondent No. 3, JSW Mangalore Container Terminal Pvt. Ltd.

1. Whether the petitioner had established a prima facie case for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, in respect of the undelivered cargo.

2. Whether Respondent Nos. 5, 6 and 7 had established grounds for rejection of the Section 9 petition, including on the basis of the alleged original Bill of Lading and their claimed interests in the cargo.

3. Whether a stranger to the arbitration agreement, claiming an independent interest in the subject matter, could be restrained in proceedings under Section 9 for the purpose of preserving the subject matter of arbitration.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the Court to grant interim measures for the protection and preservation of the subject matter of arbitration.

It relied on Sections 2, 3 and 4 of the Bill of Lading Act, 2025, under which rights in goods may vest in the consignee or endorsee, and a Bill of Lading in the hands of a consignee or endorsee for valuable consideration may constitute conclusive evidence of shipment as against the master or signatory.

The Court further relied on British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries, (1990) 3 SCC 481, which recognises a Bill of Lading as a receipt, evidence of the contract of affreightment, and a document symbolising possession and title to the goods, while clarifying that its transferee obtains no better title than the transferor.

Under Cox & Kings Ltd. v. SAP India Pvt. Ltd., (2024) 4 SCC 1, the expression “parties” may include signatories and non-signatories, with questions of arbitral inclusion ordinarily being determined by the arbitral tribunal; nevertheless, interim protective orders may be passed against strangers where necessary to preserve the subject matter.

The Court also applied the principle that the authenticity and evidentiary value of an alleged original Bill of Lading must be scrutinised where serious discrepancies and questions regarding consideration arise.

The Court found a prima facie transaction between the petitioner and Respondent No. 1 based on the contract, invoices, payment records, draft Bill of Lading and the admissions of Respondent Nos. 1 and 6 that the cargo had been intended for Vietnam but was diverted to Mangalore.

Although Respondent No. 5 relied on possession of an original Bill of Lading, the Court identified substantial anomalies: the Bill of Lading bore the same number and cargo particulars as the petitioner’s draft, but substituted the shipper, consignee-related details and destination; the document contained unexplained endorsements and seals; its pagination and rider pages were inconsistent; and the alleged payment of USD 132,000 appeared to have been made before the date of the commercial invoice against which it was supposedly made.

These discrepancies prevented the Court from treating Respondent No. 5’s document as prima facie credible.

At the same time, the petitioner’s draft Bill of Lading was not conclusive, and the Court declined to direct immediate release of the cargo to the petitioner because Respondent Nos. 6 and 7 disputed the payments and asserted competing claims through SR Agro.

The competing claims therefore created a serious risk of alienation or deterioration of the cargo.

Since Respondent No. 5 had voluntarily entered the proceedings and asserted an independent claim, it could not avoid a preservation order merely because it was not a party to the arbitration agreement.

The appropriate relief was consequently preservation and restraint, rather than adjudication of final title under Section 9.

Respondent Nos. 1, 5, 6 and 7, their representatives, agents, employees and persons claiming through or under them were restrained from alienating, transferring, diverting or disposing of the cargo contained in the specified 15 containers.

Respondent No. 3 was directed to ensure that the containers were not moved, shifted, transferred or disposed of and to preserve the cargo so as to prevent deterioration.

All preservation, storage and related charges were directed to be borne by the party ultimately found entitled to the cargo.

The interim measure was to remain in force for the period contemplated under Rule 9(4) of the Arbitration (Proceedings before the Courts) Rules, 2001.

The Court did not order release of the cargo to either the petitioner or Respondent No. 5, nor did it direct Respondent No. 1 to furnish a bank guarantee.