SUPREME COURT REITERATES CIRCUMSTANCES WHEN A COURT CAN DECIDE UPON INTERIM RELIEF UNDER ARBITRATION ACT
The Bench of Hon’ble #SupremeCourt of India in the case of Arcelor Mittal Nippon Steel India Ltd. vs Essar Bulk Terminal Ltd. [Civil Appeal No. 5700/2021], vide its Judgment dated 14-09-2021 held that the Court can continue to decide an application under Section 9 of the Arbitration Act, 1996 (#ArbitrationAct) for #interimmeasures of protection, that has already been taken up for consideration by the court, prior to constitution of #arbitraltribunal.
The Appellant, Arcelor Mittal Nippon Steel India Ltd and the Respondent, Essar Bulk Terminal Ltd. entered into an agreement for Cargo Handling at Hazira Port (Cargo Handling Agreement). The said Cargo Handling Agreement was amended from time to time. Owing to certain disputes that arose under the said Cargo Handling Agreement, the Appellant invoked the arbitration clause and issued Notice of Arbitration upon the Respondent on 22-11-2020. The Respondent did not reply to the said Notice.
Thereafter, the Appellant filed an Application before the High Court of Gujarat (High Court) for appointment of an Arbitral Tribunal under Section 11 of the Arbitration Act. Later, the Respondent replied to the Notice of Arbitration on 30-12-2020 and contended that the disputes between the Parties were not arbitrable.
However, the High Court appointed a three-member Arbitral Tribunal, comprising of three retired Judges of the High Court, to adjudicate the disputes between the Appellant and the Respondent, under Section 11(6) of the Arbitration Act vide its Order dated 09-07-2021.
Thereafter, both the Appellant and the Respondent filed Applications before the Commercial Court and the 12th Additional District Judge, District and Sessions Court at Surat (Commercial Court) under Section 9 of the Arbitration Act seeking interim measures of protection from the Court during ongoing arbitration proceedings.
As the Arbitral Tribunal was constituted, the Appellant filed an Application seeking transfer of arbitration proceedings from Commercial Court to the Arbitral Tribunal constituted by the High Court. The Commercial Court dismissed the said Application filed by the Appellant, vide its Order dated 16-07-2021 on the ground that it had already concluded the proceedings before it and reserved the matter for Orders.
The Appellant filed a Civil Application No.10492 of 2021 in the High Court under Article 227 of the Constitution of India challenging the Order dated 16-07-2021 passed by the Commercial Court. The High Court, vide its Order dated 17-08-2021 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 said Arbitration Act.
The High Court Order dated 17-08-2021 was challenged by the Appellant before the Supreme Court in an Appeal. The Hon’ble Apex Court has observed and held that:
1) Section 9 (3) of the Arbitration Act provides that once an Arbitral Tribunal has been constituted, the Court shall not entertain an application under Section 9, unless the Court finds that circumstances exist which may not render, the remedy provided under Section 17 efficacious. Section 9 (3) of the Arbitration Act is reproduced below:
“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.”
2) It is well settled that the expression “entertain” means to consider an application and the issues that have been raised by applying mind. When a case is entertained by a court it means to include the stage of taking up the matter for consideration till the stage of pronouncement of judgment.
3) The Apex Court observed that once an arbitral tribunal is constituted, the Court cannot take up a Section 9 application for consideration, unless the remedy under Section 17 is inefficacious. However, once an application is entertained, in the sense that it is taken up for consideration, and the Court has applied its mind, in such case, the Court can certainly proceed to adjudicate the Section 9 application.
4) The Court interpreted Section 9 read with Section 17 of the Arbitration Act and observed that once an arbitral tribunal is constituted, the Court would not entertain and/or in other words take up for consideration and apply its mind to a Section 9 application for interim relief, unless the remedy under Section 17 is inefficacious, even though the Section 9 application may have been filed before the constitution of the arbitral tribunal. The bar of Section 9(3) of the Arbitration Act would not operate, once an application has been entertained and taken up for consideration by a court.
5) It further said that intent behind Section 9(3) is not to turn back the clock and require a matter already reserved for orders, to be considered in entirety by the Arbitral Tribunal under Section 17 of the Arbitration Act.
6) The Court pointed out that 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.
7) In this case, when an Application under Section 9 of the Arbitration Act has already been taken up 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.
8) That Court after referring to its various decisions held that the bar under Section 9(3) of the Arbitration Act operates where the application under Section 9(1) of the Arbitration Act had not been entertained till the constitution of the Arbitral Tribunal.
In view of the above, the Supreme Court held that the High Court has rightly directed the Commercial Court to proceed to complete the adjudication. However, the Appeal is allowed only to the extent of clarifying that it shall not be necessary for the Commercial Court to consider the efficacy of relief under Section 17 of Arbitration Act, since the Application under Section 9 of the Arbitration Act has already been entertained and considered by the Commercial Court.
Senior Legal Associate
The Indian Lawyer & Allied Services
Sushila Ram Varma
Chief Consultant and Co-Founder
The Indian Lawyer & Allied Services