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Bar U/s 9(3) Arbitration Act Not Applicable If Application Was Taken Up By Court Before Constitution Of Arbitration Tribunal: Supreme Court

LIVELAW NEWS NETWORK
14 Sep 2021 1:29 PM GMT
Bar U/s 9(3) Arbitration Act Not Applicable If Application Was Taken Up By Court Before Constitution Of Arbitration Tribunal: Supreme Court
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The Supreme Court observed that the bar under Section 9(3) of the Arbitration and Conciliation Act operates only when the application under Section 9(1) had not been entertained till the constitution of the Arbitral Tribunal.

"Once an Arbitral Tribunal is constituted the Court cannot take up an application under Section 9 for consideration, unless the remedy under Section 17 is inefficacious. However, once an application is entertained in the sense it is taken up for consideration, and the Court has applied its mind to the Court can certainly proceed to adjudicate the application", the bench comprising Justices Indira Banerjee observed.

The court added that when an application has already been taken up by the court for consideration and is in the process of consideration or has already been considered, the question of examining whether remedy under Section 17 is efficacious or not would not arise.

In this case, the Commercial Court heard the applications filed by parties under Section 9(1) of the Arbitration Act and reserved the same for orders on 7th June, 2021. On 9th July 2021, a three-member Arbitral Tribunal was appointed. Before the High Court, the jurisdiction of the Commercial Court to proceed with the applications was challenged. The High Court held that the Commercial Court has the power to consider whether the remedy under Section 17 of the Arbitration Act is inefficacious and pass necessary orders under Section 9 of the Act.

Section 9(1) of the Arbitration Act, enables a party to an arbitration agreement to apply to a Court for interim measures of protection before or during the arbitral proceedings, or at any time after an award is made and published, but before the Award is enforced in accordance with Section 36 of the Arbitration Act. However, sub-Section (3) of Section 9 provides that once an Arbitral Tribunal has been constituted, the Court shall not entertain such an application, unless the Court finds that circumstances exist which may not render, the remedy provided under Section 17 efficacious.

Thus, the issue in this case was whether the Court has the power to entertain an application under Section 9(1) once an Arbitral Tribunal has been constituted. If so, the true meaning and purport of the expression "entertain" in Section 9(3). The bench made the following observations in this regard:

Meaning of Expression Entertain

93. It is now well settled that the expression "entertain" means to consider by application of mind to the issues raised. The Court entertains a case when it takes a matter up for consideration. The process of consideration could continue till the pronouncement of judgment.. Once an Arbitral Tribunal is constituted the Court cannot take up an application under Section 9 for consideration, unless the remedy under Section 17 is inefficacious. However, once an application is entertained in the sense it is taken up for consideration, and the Court has applied its mind to the Court can certainly proceed to adjudicate the application

No reason why the Court should continue to take up applications for interim relief, once the Arbitral Tribunal is constituted

68. With the law as it stands today, the Arbitral Tribunal has the same power to grant interim relief as the Court and the remedy under Section 17 is as efficacious as the remedy under Section 9(1). There is, therefore, no reason why the Court should continue to take up applications for interim relief, once the Arbitral Tribunal is constituted and is in seisin of the dispute between the parties, unless there is some impediment in approaching the Arbitral Tribunal, or the interim relief sought cannot expeditiously be obtained from the Arbitral Tribunal

There could be numerous reasons which render the remedy under Section 17 inefficacious.

96. Even after an Arbitral Tribunal is constituted, there may be myriads of reasons why the Arbitral Tribunal may not be an efficacious alternative to Section 9(1). This could even be by reason of temporary unavailability of any one of the Arbitrators of an Arbitral Tribunal by reason of illness, travel etc.
100. There could be numerous reasons which render the remedy under Section 17 inefficacious. To cite an example, the different Arbitrators constituting an Arbitral Tribunal could be located at far away places and not in a position to assemble immediately. In such a case an application for urgent interim relief may have to be entertained by the Court under Section 9(1).


Principles for grant of interim relief

97. Applications for interim relief are inherently applications which are required to be disposed of urgently. Interim relief is granted in aid of final relief. The object is to ensure protection of the property being the subject matter of Arbitration and/or otherwise ensure that the arbitration proceedings do not become infructuous and the Arbitral Award does not become an award on paper, of no real value.

98. The principles for grant of interim relief are (i) good prima facie case, (ii) balance of convenience in favour of grant of interim relief and (iii) irreparable injury or loss to the applicant for interim relief. Unless applications for interim measures are decided expeditiously, irreparable injury or prejudice may be caused to the party seeking interim relief.

99. It could, therefore, never have been the legislative intent that even after an application under Section 9 is finally heard relief would have to be declined and the parties be remitted to their remedy under Section 17.


Conclusion

107. It is reiterated that Section 9(1) enables the parties to an arbitration agreement to approach the appropriate Court for interim measures before the commencement of arbitral proceedings, during arbitral proceedings or at any time after the making of an arbitral award but before it is enforced and in accordance with Section 36 of the Arbitration Act. The bar of Section 9(3) operates where the application under Section 9(1) had not been entertained till the constitution of the Arbitral Tribunal. Ofcourse it hardly need be mentioned that even if an application under Section 9 had been entertained before the constitution of the Tribunal, the Court always has the discretion to direct the parties to approach the Arbitral Tribunal, if necessary by passing a limited order of interim protection, 37 particularly when there has been a long time gap between hearings and the application has for all practical purposes, to be heard afresh, or the hearing has just commenced and is likely to consume a lot of time. In this case, the High Court has rightly directed the Commercial Court to proceed to complete the adjudication.




Case: Arcelor Mittal Nippon Steel India Ltd. vs Essar Bulk Terminal Ltd. ; CA 5700 OF 2021

Citation: LL 2021 SC 454

Coram: Justices Indira Banerjee and JK Maheshwari



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