[Arbitration Act] Non-Disclosure Of Section 9 Petition In Another Matter Can't Be Termed As 'Egregious Fraud': Delhi High Court

Section 9 of the Arbitration and Conciliation Act, 1996 provides for interim measures by the court. It empowers a party to arbitration proceedings to seek interim relief from a judicial authority before, during, or after the arbitration proceedings.

Brief Facts:

Tata Projects Limited (“Appellant”) approached Commercial Court and filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim measures of protection, including a prayer to restrain the Power Grid Corporation of India (“Respondent”) from invoking a bank guarantee amounting to ₹58,64,277/-.

However, the Commercial Court dismissed the petition and held that the Appellant approached the court with unclean hands. It noted that before filing the petition under Section 9 of the Arbitration Act, the Appellant filed a similar petition before the District Judge, Commercial Court, Saket, which was withdrawn on 01.05.2024. The order indicated that the Appellant withdrew the petition on the basis that it was incorrectly filed in South District, Saket Courts.

The failure of the Appellant to disclose this fact in the petition was held by the Commercial Court as a fault on the Appellant's part. Feeling aggrieved, the Appellant challenged the decision of the Commercial Court in the Delhi High Court (“High Court”).

Observations by the High Court:

The High Court noted that the Appellant had previously withdrawn a similar petition filed before the District Judge, Commercial Court, South District. The High Court noted that the Appellant's explanation for withdrawing the previous petition, attributing it to a misunderstanding regarding jurisdiction, was erroneous.

The High Court held that the Arbitration Act mandates the filing of such petitions before a court as defined under Section 2(1)(e) of the Arbitration Act. Section 2(1)(e) of the Arbitration Act defines "Court" as the main civil court in a district, including the High Court when it deals with regular civil cases.

Given that the arbitration agreement stipulated New Delhi as the seat of arbitration, all courts within New Delhi possessing jurisdiction under Section 2(1)(e) of the Arbitration can entertain petitions under Section 9.

However, the High Court held that the failure to disclose the previous petition under Section 9 of the Arbitration in another matter does not amount to egregious fraud, which would bar the Appellant from pursuing the current petition.

The bench held that:

“we are of the view that non disclosure of the petition under Section 9 of the A&C Act in another matter cannot be termed as a case of egregious fraud.”

The High Court held that the Commercial Court did not address the merits of the case but merely dismissed the petition without providing reasons.

Consequently, the High Court set aside the judgment of the Commercial Court and remanded the matter to the Commercial Court for fresh consideration on merits.

Case Title: Tata Projects Ltd. Vs Power Grid Corporation Of India Ltd

Citation: 2024 LiveLaw (Del) 711

Case Number: FAO (COMM) 93/2024 CM APPL. 29905/2024

Advocate for the Appellant: Mr Rajeev Nayar, Sr. Adv. with Mr Naveen Chawla & Ms Surabhi Rana, Advs.

Advocate for the Respondent: Mr Jayant M. Mehta, Sr. Adv. with Mr Rishabh Kapur, Adv

Date of Judgment: 27.05.2024

Click Here To Read/Download Order or Judgment