Ex-Parte Interim Measures Appealable Under Section 37 Of Arbitration Act, Courts Must Allow Appeal In Exceptional Cases: Karnataka High Court

The High Court held that the nature of ex-parte interim measures is similar to final orders since they conclusively deny the relief sought. However, it held that the interference should be in exceptional cases since the aggrieved party can move to vacate the ex-parte order.

Section 9 allows parties to an arbitration agreement to approach the court for certain interim measures before, during, or after the arbitration proceedings.

Section 37 specifies which orders made under the Act are appealable and which are not.

Brief Facts:

M/s KLR Group Enterprises (“KLR Group”) had an ongoing dispute with the Respondents regarding a property. It filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) seeking an interim measure against the Respondents before the X Additional District and Sessions Judge, Bengaluru Rural (Commercial Division). The District and Sessions Judge dismissed the application and refused to grant the relief.

Feeling aggrieved, KLR Group filed an appeal before the Karnataka High Court (“High Court”) under Section 37(1)(b) of the Arbitration Act to set aside the order of the District and Sessions Judge. It also requested an ad-interim ex-parte injunction to restrain the Respondents from interfering with its peaceful possession and development works on the disputed property until the resolution of the commercial appeal.

KLR Group argued that the power to grant interim orders under Section 9 of the Arbitration Act includes the power to grant ex-parte interim orders. This power is recognized in the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 (“2001 Rules”). Therefore, an order issuing an emergent notice and declining an ex-parte order is appealable under Section 37 of the Arbitration Act.

The Respondents contended that an appeal under Section 37 of the Arbitration Act is maintainable against an interlocutory order only if it falls under Order XLIII of the Code of Civil Procedure, as per Section 13(1A) of the Commercial Courts Act. They argued that the impugned order was not a final order, and the application was still pending before the District Judge. The scheme of the Arbitration and Commercial Courts Acts does not allow an appeal against an order refusing to grant an ex-parte order, as it would defeat the objective of speedy dispute resolution.

Observations of the High Court:

The issue before the High Court was whether an order granting or refusing an ex-parte interim measure under Section 9 of the Arbitration Act is appealable under Section 37 of the same act or if such an appeal is barred under Section 13(1A) of the Commercial Courts Act, 2015.

The High Court noted that Section 9 of the Arbitration Act provides for interim measures in arbitrable disputes, while Section 37 allows for appeals against certain orders. Section 37, amended in 2019, starts with a non-obstante clause and specifies which orders are appealable. The key question before the Court was to assess if "granting or refusing to grant any measure under Section 9" in Section 37 includes only final orders or also ex-parte interim measures.

Rule 9 of the 2001 Rules, though similar to Order XXXIX Rule 3 of the CPC, indicates that ex-parte interim measures granted are under Section 9 of the Arbitration Act. Rule 9 recognizes the power inherent in Section 9 but does not confer it independently.

The High Court held that orders refusing ex-parte interim measures are akin to final orders since they conclusively deny the relief sought. Thus, such orders are appealable under Section 37 of the Arbitration Act. Similarly, orders granting ex-parte interim measures are also appealable, though interference in such cases should be minimal, as the aggrieved party can move to vacate the ex-parte order.

Therefore, the High Court held that orders granting or refusing ex-parte interim measures under Section 9 of the Arbitration Act are appealable under Section 37, even if filed before the Commercial Court. The scope of interference in such appeals was held to be limited. Appeals against orders granting ex-parte measures should be entertained only in exceptional cases.

Thus, the matter was remitted to the trial court to consider the Section 9 application and KLR Group was given interim protection until then. It was also clarified that this interim order should not indicate the merits of KLR Group's claim.

Case Title: M/s KLR Group Enterprises vs Madhu HV and Ors.

Case No.: Commercial Appeal No. 56 OF 2024

Advocate for the Appellant: Sri Dhananjay Joshi for Sri Shashidhar R

Advocate for the Respondent: Sri Prashanth G (for R1); Sri Ashok Haranahalli along with Sri Prasanna BR (for R2-R5)

Date of Pronouncement: 19^th July 2024