Court Empowered To Grant Money Claim Under Section 9 Of A&C Act On Basis Of Admitted Claim: Bombay High Court

The bench of Justice Bharati Dangre concluded that the Court is empowered to pass an order under Section 9 of A&C Act granting the applicant's money claim, on the basis of an admitted claim or acknowledged liability. It noted that the Court, while considering a relief under Section 9, is not strictly bound by the provisions of Order 38 Rule 5 of CPC.

The respondent- Naseem Qureshi, engaged the services of the petitioner firm- JP Parekh & Son, as an Architect, for the redevelopment of his property. Subsequently, Letters of Appointment were issued in favour of the petitioner.

After the respondents failed to clear the bills raised by the petitioner and terminated its services by appointing a new Architect, the petitioner filed an application under Section 9 of the A&C Act before the Bombay High Court, seeking a direction to the respondents to pay the fees payable under the Letters of Appointment.

The petitioner- JP Parekh & Sons, while relying upon the arbitration clause contained in the Letter of Appointment, submitted before the High Court that the respondents had breached the terms and conditions of the Agreement. It added that the respondents terminated the appointment of the petitioner as an Architect, to evade their obligation to pay the petitioner's professional fees.

Referring to Section 9(1)(ii)(b) of the A&C Act, the petitioner contended that interim measures can also be issued by the Court for the specific purpose of securing the amount in dispute.

Thus, the petitioner averred that since the amount due and payable under the bills issued by it, was admitted by the respondent, there were good chances of succeeding in the arbitral proceedings. Therefore, it argued that the same justified the grant of interim measures pending the arbitration proceedings, even if no case was strictly made within the purview of Order 38, Rule 1 and 2 of the CPC.

The respondent Naseem Quresh contended that the contract between the parties was in the nature of a service contract and the claim raised by the petitioner in the Section 9 application was in the form of a monetary claim. It added that since the contract between the parties was determinable, the Court cannot grant specific performance.

The High Court ruled that the power to grant interim measures under Section 9 of the A&C Act must be guided by the underlying principles which govern the exercise of analogous power under the Code of Civil Procedure (CPC). The Court added that exercise of power under Section 9 cannot be carried out in an uncharted territory, ignoring the basic principles of procedural law contained in the CPC. However, it ruled that procedural provisions enumerated in the CPC cannot be invoked to defeat the grant of interim relief, while deciding an application under Section 9 of the A&C Act.

Further, the bench held that the Court, while exercising its power to issue interim measures, must ascertain the manifest intention of the applicant to take recourse to the arbitral proceedings at the time of filing the Section 9 application. It added that the said intention can be gathered from the surrounding circumstances, including from the issuance of notice under A&C Act, so as to establish the applicant's manifest intention to refer the dispute to arbitration.

The High Court added that the power conferred upon the Court under Section 9 is not unbridled and that it is subject to certain restrictions; firstly, it can be exercised by the Court to the same extent and manner as it could be exercised in relation to any proceedings before it. Secondly, such exercise of power to make interim arrangements should not militate against any power which might be vested in the arbitral tribunal.

The bench referred to the decision of the Bombay High Court in Jagdish Ahuja & Anr. versus Cupino Ltd. (2020), where the High Court had ruled that the Court, while considering a relief under Section 9 of the A&C Act, is not strictly bound by the provisions of Order 38, Rule 5 of CPC.

Further, the Court noted that the Division Bench of the Bombay High Court in Valentine Maritime Ltd. versus Kreuz Subsea Pte Limited & Anr. (2021) has held that the arbitral tribunal is empowered to make an interim Award granting money claim on the basis of the admitted claim and/ or acknowledged liability of the opposite party.

Noting that the power of the Court under Section 9 of the A&C Act is wider than the power under the provisions of CPC, the bench observed that the provisions of Section 9 and 17 of the A&C Act are meant for protecting the subject matter of the dispute, till the arbitral proceedings culminate into an Award. Further, it added that the Court is also entitled to consider whether denial of such order would result in great prejudice to the parties seeking such protective order.

The Court referred to the averments made by the petitioner in the Section 9 application, where it pleaded that the respondents, by their own admission, were dissipating their assets, which may render an Award in favour of the petitioner a paper Award. Further, the petitioner contended that the bills raised by it under the Letter of Appointment, regarding its professional fees and other charges, were admitted by the respondents.

Observing that the respondents had failed to specifically deny the claims raised by the petitioner, regarding the amounts due to it under the agreement, the bench ruled that the apprehension expressed by the petitioner was sufficient to secure its claim by invoking Order 38 Rule 5 of CPC.

The respondent Naseem Quresh submitted before the High Court that the party invoking section 9 need not have actually commenced the arbitral proceedings, however, it must be able to satisfy the Court that the arbitral proceedings were actually contemplated and were positively going to be commenced within a reasonable time.

The respondent argued that despite a lapse of one year from the issue of termination notice and the filing of the Section 9 application, no arbitral proceedings had been instituted by the petitioner. Thus, it argued that there was no material to indicate that the arbitral proceedings were actually contemplated or manifestly intended and therefore, the relief under Section 9 could not be granted.

Dismissing the contentions of the respondent, the Court ruled that in view of Section 9 (2) of the A&C Act, as inserted by the 2015 Amendment Act, there is a statutory provision which itself contemplates the commencement of arbitral proceedings within a period of 90 days from the date of an order granting interim measures, or within such time as the Court may determine.

While holding that the power under Section 9 of the A&C Act is totally independent of the principles governing grant of injunction under CPC, the Court directed the respondents to deposit the amount claimed by the petitioner.

"Thus, from the pleadings in the Petition, which are not traversed, it is evident that there is practically no defence to the paybility of the amount and since Respondent Nos.1 and 2 have already appointed new Developer through whom work is likely to be carried out, and on being satisfied that the prima-facie case exist in favour of the Petitioners and balance of convenience also lies in their favour and irreparable loss would be caused to them if the amount is not secured by directing it to be deposited towards the fees due and payable in terms of the Letter of Appointment, in absence of any denial that the amount is not payable, I deem it appropriate to grant relief, pending the commencement of the arbitration proceedings to be initiated within the period of 90 days from today."

Case Title: J P Parekh & Son & Anr. versus Naseem Qureshi & Ors.

Dated: 08.12.2022 (Bombay High Court)

Counsel for the Petitioner: Mr. J.P. Sen, Senior Advocate a/w Shanay Shah, M.S. Federal, Murtuza Federal, Mihir M., Sudarshan Satalkar and Nikhil Jalan.

Counsel for the Respondents: Mr. Prateek Seksaria a/w Nishant Chotani, Rohit Agarwal, Dipti Karadkar i/b Ramiz Shaikh for Respondent Nos.1 and 2.

Mr. Aseem Naphade a/w Shabbir Shora i/b Shabbir Shora for Respondent No.3.

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