Court Exercising Power U/Sec 9 Arbitration Act Not Strictly Bound By CPC ; Should Not Withhold Interim Relief On Mere Technicality: Supreme Court

The Supreme Court observed that a court exercising power under Section 9 of the Arbitration and Conciliation Act is not strictly bound by provisions of CPC and should not withhold relief on the mere technicality.

Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9, the bench of Justices Indira Banerjee and AS Bopanna observed.

Section 9 of the Arbitration Act provides that a party may apply to a Court for an interim measure or protection inter alia to (i) secure the amount in dispute in the arbitration; or (ii) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

In this case, the Bombay High Court allowed an application filed by Arcellor Mittal Nippon Steel India Limited under Section 9 of the Arbitration Act seeking orders directing Essar Services to deposit Rs.47,41,00,000/- with the Prothonotary and Senior Master of the High Court. 

Assailing this order, the appellant's contention before the Apex Court was that to grant discretionary interim relief under Section 9 of the Arbitration Act, the Court would have to satisfy itself that the applicant for interim relief, i.e., Arcellor had a bona fide and strong claim and that Essar House Private and/or Essar Services was about to remove or dispose of whole or part of its property with intent to obstruct or delay the execution. It was contended that the Court erred in not considering the requisites of Order XXXVIII, Rule 5 of the Code of Civil Procedure, 1908 (CPC) for grant of interim relief.

On the scope of Section 9 powers, the bench made following observations:

Court is not strictly bound by the provisions of the CPC

In deciding a petition under Section 9 of the Arbitration Act, the Court cannot ignore the basic principles of the CPC. At the same time, the power Court to grant relief is not curtailed by the rigours of every procedural provision in the CPC. In exercise of its powers to grant interim relief under Section 9 of the Arbitration Act, the Court is not strictly bound by the provisions of the CPC. 40. While it is true that the power under Section 9 of the Arbitration Act should not ordinarily be exercised ignoring the basic principles of procedural law as laid down in the CPC, the technicalities of CPC cannot prevent the Court from securing the ends of justice. It is well settled that procedural safeguards, meant to advance the cause of justice cannot be interpreted in such manner, as would defeat justice.

Strong Prima Facie Case and Balance Of Convenience

The court also noticed that many High Courts have also proceeded on the principle that the powers of a Court under Section 9 of the Arbitration Act are wider than the powers under the provisions of the CPC. While dismissing the appeal, the court noted:

Section 9 of the Arbitration Act confers wide power on the Court to pass orders securing the amount in dispute in arbitration, whether before the commencement of the arbitral proceedings, during the arbitral proceedings or at any time after making of the arbitral award, but before its enforcement in accordance with Section 36 of the Arbitration Act. All that the Court is required to see is, whether the applicant for interim measure has a good prima facie case, whether the balance of convenience is in favour of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition...

..If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 of the CPC.

 A strong possibility of diminution of assets would suffice

Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9 of the Arbitration Act. A strong possibility of diminution of assets would suffice. To assess the balance of convenience, the Court is required to examine and weigh the consequences of refusal of interim relief to the applicant for interim relief in case of success in the proceedings, against the consequence of grant of the interim relief to the opponent in case the proceedings should ultimately fail.

Case details

Essar House Private Limited vs Arcellor Mittal Nippon Steel India Limited | 2022 LiveLaw (SC) 765 | SLP(C) 3187 of 2021 | 14 September 2022 | Justices Indira Banerjee and AS Bopanna

Counsel: Sr. Adv Shyam Divan for appellant, Sr. Adv Neeraj Kishan Kaul for respondent

Headnotes

Arbitration and Conciliation Act, 1996 ; Section 9  - Proof of actual attempts to deal with, remove or dispose of the property with a view to defeat or delay the realisation of an impending Arbitral Award is not imperative for grant of relief under Section 9 - A strong possibility of diminution of assets would suffice - The power under Section 9 should not ordinarily be exercised ignoring the basic principles of procedural law as laid down in the CPC, but the technicalities of CPC cannot prevent the Court from securing the ends of justice - If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment under Order 38 Rule 5 of the CPC. (Para 39-50)

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