Unsuccessful Litigant In Arbitral Proceedings Cannot Claim Interim Relief U/S 9 Of Arbitration Act: Bengaluru Court

Brief Facts

An agreement was executed between the applicant and the respondent on February 19, 2021 in which the respondent had to operate four pharmacies within KIMS Hospital. In the agreement, It was provided that consumables had to be purchased only from the applicant for the operating theatre (OT) and Intensive Care Unit ( ITU). Furthermore, it was also specified that medicines will be supplied for inpatients of the hospital on credit basis for which bill would be settled by the respondent. The license fee was agreed upon to be Rs. 42,00,000 per month.

This agreement was breached by the respondent by purchasing the consumables from an external supplier. Thereafter, several attempts were made by the applicant to resolve the issue but the respondent did not budge. It prompted the applicant to issue a legal notice on December 12, 2021. A notice of arbitration was also issued by the applicant on June 28, 2022 in which a sole arbitrator was appointed. However, the respondent expressed its disagreement on the name of sole arbitrator and suggested a different arbitrator. This led to filing of an application bearing CMP No. 698/2022 before the Karnataka High Court seeking appointment of a sole arbitrator. Interim reliefs were initially granted in an application filed under section 9 of the arbitration act but this application was later dismissed. An appeal was preferred against this dismissal in which the high court directed the respondent to pay 50% arrears and appointed a sole arbitrator.

Arbitration proceedings started and an award was passed in favour of the respondent in which the claim of the applicant was allowed partially and counter claim was dismissed. This award was also challenged in Com.A.P.No.104/2024.

Contentions

The applicant contended that agreement was breached by the respondent despite this, arbitrator passed an award against the applicant. It was further argued that the arbitrator had wrongly interpreted the evidence. The award was challenged by the applicant in Com.A.P.No.104/2024. It was further submitted that enforcing the award would deprive the applicant of their important rights as the award is under challenge. It was further submitted that they have established a prima facie case and balance of convenience is also in favour of them. It was further argued that irreparable loss will be caused to the applicant if the interim reliefs are not granted.

Per contra, the respondent submitted that the license agreement was entered into between them for a period of two years beginning from February 19, 2021. It was further contended that the applicant had to supply the medicines at 10% discount rate that too when the hospital required. It was further argued that there was no corresponding duty on the respondent to purchase the medicines only from the applicant. It was further contended that no notice dated December 13, 2021 was received by the respondent. Furthermore, it was also submitted that no evidence had been produced to show that the license agreement was for the period of 5 years. It was further contended that the license had already expired and the applicant had overstayed for the period of 1.5 years on the premises. It was further submitted that since the license expired, the respondent cannot be injuncted from recovering their legal dues as awarded in the award. It was further submitted that an application under section 9 of the arbitration is not maintainable as the applicant was an unsuccessful party in the award.

Court's Analysis

The court referred to the judgment of the Bombay High Court in Dirk India Pvt. Limited vs. Mahrasthra State Electricity Generation Com. Ltd. (2013) wherein it was held that interim reliefs under section 9 of the arbitration act cannot be given to an unsuccessful party in the arbitration proceedings. The court further observed that rejected claims in the proceedings cannot be protected by obtaining interim reliefs under section 9. The court further observed that when an award passed is set aside under section 34 of the arbitration act, it does not tantamount to decreeing rejected claims. It was held that a party whose claim has been rejected in the course of the arbitral proceedings cannot obviously have an arbitral award enforced in accordance with Sec.36. The object and purpose of an interim measure after passing of the arbitral award but before it is enforced is to secure the property, goods or amount for the benefit of the party which seeks enforcement.

The court further distinguished the judgments relied on by the applicant from the facts the present case and held that issues were altogether different in those cases. The court further referred to the Karnataka High Court judgment in Smt. Padma Mahadev and others vs. M/s. Sierra Constructions Pvt Limited (2021) wherein it was held that the applicant being unsuccessful in the arbitral proceedings cannot maintain an application U/Sec.9 of the Act

Conclusion

The court concluded that interim relief under section 9 of the arbitration act could not be sought by an unsuccessful party therefore the present application is liable to rejected, Accordingly, the present application was dismissed with costs.

Case Title: Overseas Pharma Private Limited vs Rajya Vokkaligara Sangha

Court: Bengaluru District Court

Case Reference: COM.A.A . 241 /2024

Judgment Date: 16/10/2024

Click Here To Read/Download The Order