The Andhra Pradesh High Court at Amaravati has refused to interfere with an earlier order that vacated interim protection sought by Hong Kong-based Zion Shipping Ltd in a commercial arbitration dispute. The Division Bench held that the shipping company failed to establish a strong case for securing its monetary claim before arbitration was decided.
The ruling came in an appeal challenging the return of a security deposit linked to an alleged demurrage dispute arising from an international rice export contract.
Background of the Case
Zion Shipping Ltd had entered into a charterparty agreement in March 2021 with Indian rice exporters, including Sanam Rice Mills and associated firms, for transporting rice from Kakinada Port to Vietnam. The contract provided for payment of demurrage if loading or unloading exceeded the agreed time.
According to Zion Shipping, the discharge of cargo was delayed beyond the permitted laytime, resulting in demurrage charges. An invoice was raised in June 2021, but no payment followed. Nearly three years later, the company invoked arbitration in Singapore and approached the Andhra Pradesh High Court seeking interim protection under the Arbitration and Conciliation Act.
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In April 2024, a Single Judge had passed an ex parte order directing the exporters to deposit security of over USD 2.9 lakh or face attachment of rice cargo. The exporters deposited the amount but later sought vacation of the order. In October 2025, the Single Judge vacated the interim protection and ordered the return of the deposited security.
Zion Shipping then filed the present appeal.
Counsel for the appellant argued that without security, any future arbitral award would be meaningless. It was submitted that the exporters’ financial condition raised serious concerns and that the court should secure the claim to preserve the efficacy of arbitration.
On the other hand, the exporters contended that the cargo in question was routine stock-in-trade and not a permanent asset. They also argued that the demurrage claim was disputed and remained unadjudicated. The respondents pointed out that Zion Shipping had waited nearly three years before seeking court intervention.
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Court’s Observations
After examining the record, the Division Bench noted that interim measures under arbitration law are extraordinary in nature and cannot be granted mechanically.
The court observed,
“A claim for damages does not automatically become a debt unless liability is adjudicated.”
The judges emphasised that demurrage, though contractually provided, was still under dispute and subject to arbitration. Until the arbitral tribunal determines liability, the claim remains a mere right to sue.
The court also took note of the delay, observing that Zion Shipping remained inactive for several years and approached the court only when attachable cargo was available. This, the bench held, weakened the claim of urgency and necessity for interim protection.
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On balance of convenience, the court said restraining exporters from dealing with their normal commercial stock would cause disproportionate hardship, especially when the claim itself had not crystallised into an enforceable liability.
Decision
The Division Bench concluded that the Single Judge had applied settled legal principles correctly and that the appellate court should not interfere with a discretionary order unless it is perverse or arbitrary.
Finding no such infirmity, the High Court dismissed the appeal and upheld the order vacating interim relief. The court also directed that there would be no order as to costs.
With this, the appeal stood dismissed and all pending applications were closed.
Case Title: Zion Shipping Ltd vs Sanam Rice Mills & Others
Case No.: International Commercial Arbitration Appeal No. 2 of 2025
Decision Date: 7 January 2026
