Anil Ambani’s Firm Restrained by Delhi HC in Shanghai Electric Dispute

The Delhi High Court has ordered Anil Ambani’s Reliance Infrastructure to retain its assets worth $135 million as security for its arbitration dispute with the Chinese company Shanghai Electric Group. The order was passed on an appeal filed by Shanghai Electric against a single-judge’s 2022 order that denied its request for interim relief to secure the amount that was allegedly due and payable to it by Reliance Infrastructure.

Background of the dispute

The dispute between the two parties arose from a contract signed in 2010 for the supply of equipment and services by Shanghai Electric for the Sasan Power Project, a coal-fired power plant in Madhya Pradesh owned by Reliance Infrastructure. The contract value was around $8.3 billion.

According to Shanghai Electric, Reliance Infrastructure failed to make payments for the equipment and services delivered by it and also breached other contractual obligations. Shanghai Electric initiated arbitration proceedings against Reliance Infrastructure in Singapore in 2016 and claimed damages of around $1.8 billion.

In January 2024, the Singapore International Commercial Court (SICC) upheld an arbitral award passed in favour of Shanghai Electric in 2022 and directed Reliance Infrastructure to pay around $146 million in dues and damages to Shanghai Electric.

Delhi High Court’s order

Shanghai Electric filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 in the Delhi High Court seeking interim measures to secure the arbitral award. It sought an order restraining Reliance Infrastructure from selling, alienating, transferring or encumbering its assets worth $135 million.

Reliance Infrastructure opposed the petition and contended that it had no assets in India and that the petition was infructuous as the arbitral award had already been rendered. It also argued that Shanghai Electric had not shown any prima facie case or balance of convenience in its favour.

A single-judge of the Delhi High Court dismissed the petition in 2022 and held that there was no imminent threat of dissipation of assets by Reliance Infrastructure and that Shanghai Electric had not made out a case for interim relief.

Shanghai Electric challenged the single-judge’s order before a division bench of the Delhi High Court. The division bench, comprising Justices Sanjeev Sachdeva and Manoj Jain, allowed the appeal and passed an order restraining Reliance Infrastructure from selling, alienating, transferring or encumbering its assets worth $135 million.

The division bench observed that Section 9 of the Arbitration Act permitted a party to apply for interim measures before, during or after the making of the arbitral award but before it was enforced. It also noted that Shanghai Electric had established a prima facie case and balance of convenience in its favour and that there was a risk of dissipation of assets by Reliance Infrastructure.

The division bench clarified that its order would be subject to any charge on the assets already created in favour of a bank or a financial institution. It also directed Reliance Infrastructure to file an affidavit disclosing its assets within four weeks.

Implications of the order

The order of the Delhi High Court is a significant development in the long-running arbitration dispute between Shanghai Electric and Reliance Infrastructure. It shows that the Indian courts are willing to grant interim relief to secure arbitral awards in favour of foreign parties against Indian parties.

The order also puts pressure on Reliance Infrastructure to comply with the arbitral award or to settle the dispute with Shanghai Electric amicably. It may also affect Reliance Infrastructure’s ability to raise funds or to dispose of its assets for its other businesses.

The order is likely to be challenged by Reliance Infrastructure before the Supreme Court of India. The enforcement of the arbitral award will also depend on the outcome of any challenge before the SICC or any other competent court.

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