Introduction

It is trite law that the appellate jurisdiction of an authority can be limited or regulated by the legislature and its extent has to be decided with reference to the language employed by the statute conferring the appellate jurisdiction.1 In this regard, the width of jurisdiction or the limitations with reference to an appeal depends entirely on the statute conferring the right of appeal. Where the statute does not place any limitations or restrictions regarding the scope and width of the appeal, it is construed that the appeal provides a right of rehearing on the law as well as facts.2

The arbitral tribunal has been vested with the power of granting interim relief under section 2(1)(h) read with section 17 of the Arbitration and Conciliation Act, 1996 ('1996 Act').

Although the general position of law remains that a court is precluded from modifying an arbitral award when challenged under section 34 of the 1996 Act, the court can modify the interim order passed under section 17 of the 1996 Act while exercising its appellate jurisdiction under section 37 of the 1996 Act.3

However, such a power does not give a carte blanche to courts, and it has to be exercised keeping in mind the principles of minimal judicial interference espoused by the 1996 Act.

The Hon'ble High Court of Delhi recently clarified the scope of interference by the courts in a recent judgment rendered in the case of Asia Hotels (North) Ltd. v. Sital Dass Sons & Anr.4

Brief facts

Disputes between the parties relating to the revocation of the license agreement of the Respondents by the Appellant. The license was revoked by the appellant for the reason that the shopping arcade in which the licensed premises were situated, was in urgent need of total repair, as the internal fittings and wiring of the arcade required replacement for their safe operation.

The Respondents did not respond to the revocation letters of the Appellants and instead instituted suits before the Hon'ble High Court of Delhi challenging the revocation of the license agreement. During the pendency of the suits instituted by the Respondent, it was agreed between the parties that the appellant shall not demolish the licensed premises as an interim arrangement.

Subsequently, the suit instituted by the Respondent came to be dismissed vide order of the Hon'ble High Court dated 21.07.2020 holding that the parties are required to avail the remedy of arbitration.5

The Respondents preferred applications under section 9 and 11 of the 1996 Act. However, the applications filed by the Respondent under section 9 as well as section 11 were disposed of by the Hon'ble High Court vide order dated 06.08.2021, whereby the court appointed the sole arbitrator for the settlement of disputes through arbitration. It was held that the application of the Respondents under section 9 of the Act be read as an application under Section 17 of the Act. In terms of the said order of the Hon'ble High Court, the terms of the interim arrangement between the parties as per which the appellant would not take any action against the Respondents, was to continue until the learned arbitral tribunal entered reference i.e., until 02.09.2021.

After reference, the Respondents pursued their respective applications under section 17 of the 1996 Act seeking inter alia de-sealing of the licensed premises, with a further prayer for the restoration of access to the Respondents to carry on the business during the pendency of the arbitral proceedings, and maintenance of status quo by the Appellant during such period.

The Appellant also filed an application under section 17 of the 1996 Act seeking inter alia an injunction from the learned arbitral tribunal restraining the respondents therein from interfering with the peaceful possession and useful enjoyment of the licensed premises by the appellant during the pendency of the arbitral proceedings. It was further prayed by the appellant that since the premises required urgent repairs, irreparable harm would be caused to the appellant if its applications were not allowed.

The learned arbitral tribunal disposed of all the applications under section 17 of the Act filed on behalf of the appellant and the respondents by way of a common impugned order dated 23.04.2022. The arbitral tribunal on one hand refused to stay the operation of the notice revoking the license of the respondents during the arbitral proceedings on the ground that it may defeat the very purpose and cause of arbitration between the parties. The Respondents chose not to challenge the decision of the arbitral tribunal to not grant the stay of the revocation notice. Hence, the said finding had attained finality.

On the other hand, the arbitral tribunal did not permit the appellants to carry out the repairs and renovations. Accordingly, an appeal was filed under section 37 of the 1996 Act with respect to this aspect.

Submissions of the parties

The Appellant argued that the learned Arbitral Tribunal has failed to carry out the necessary exercise of considering the prima facie rights of the parties prior to exercising its discretion under Section 17 of the 1996 Act. That, the tribunal has failed to appreciate that throughout the subsistence of the agreements, the parties had proceeded on the basis that the license was revocable, and the renewal of the license agreements was necessary for the Respondents to continue to occupy the licensed premises. It was further, the case of the appellant that the Respondents occupied the licensed premises only as permissive licensees and the license agreement did not constitute an agreement to sell. Thus, the Respondents were neither in part possession of the licensed premises nor exercised any interest in the licensed premises, beyond those granted through the license agreements. The Appellant further submitted that; the Respondents failed to make out any prima facie case in their favour. Thus, the Respondents could not in any manner disturb the Appellant's possession and, the agreements being unregistered instruments, cannot be considered to be instruments of transfer of a right or interest in immovable property.6

The Respondents while placing reliance upon the judgment in the case of World Window Infrastructure Pvt. Ltd. vs. Central Warehousing Corporation, 2021 SCC Online Del 5099 contended that the scope of interference in an appeal against orders passed by Arbitrators under section 17 of the 1996 Act is limited.

Judgments relied upon by the court

The Hon'ble Delhi High Court, in the case of Edelweiss Asset Reconstruction Company Ltd. vs. GTL Infrastructure Ltd. and Anr.7,

"136. Once the legislature has consciously conferred appellate powers, to the High Court, against orders of Arbitral Tribunals, rendered under Section17 of the 1996 Act, I see no reason, absent any statutory or precedential proscription to the contrary, for not allowing such appellate jurisdiction its full play and effect. No doubt, while exercising jurisdiction, even as an appellate court under Section 37, the High Court would be required to maintain the discipline of the 1996 Act, which requires minimal interference with the decision of the learned Arbitral Tribunal. Where, however, the directions contained in the impugned Order of the learned Arbitral Tribunal are found to be unsustainable on account of the prior rights of the appellant before this Court, to which the attention of the learned Arbitral Tribunal was never invited, interference, in order to protect the legitimate interests of the appellant, is justified. Once a case for interference is found to exist, the appellate jurisdiction of the Court, under Section 37 would, in my view, also extend to modifying the order of the learned Arbitral Tribunal, in view of the inalienable indicia of appellate jurisdiction, as identified and delineated in Tirupati Balaji Developers (P) Ltd., (2004) 5 SCC 1."

Similarly, in the case of Augmont Gold Pvt. Ltd vs. One 97 Communication Limited1, while holding that Court has the authority to modify the decision of Arbitral Tribunal in an appeal under Section 37 of the Act, the Delhi High Court held as follows:-

"74. The scope of jurisdiction which embraces its governing considerations is restricted, as already observed hereinabove. While remaining within those constraints, however, the Court, in its appellate avatar, can modify the award; something which is outside the reach of the Section 34 Court. Expressed otherwise, and more simply, having examined the award/order under challenge within the limited scope of Section 34 or 37, if the Court finds that the interests of justice could be met by modifying the decision of the Arbitral Tribunal, it can do so under Section 37, but it cannot do so, under Section 34. This, in my opinion, is one of the inevitable sequelae of the legislative dispensation in conferring, on Courts, appellate jurisdiction over orders passed under Section 17 by the Arbitral Tribunal, granting or refusing to grant interim protection."

Observations of the court

Upon analyzing the relevant provisions and corresponding dicta on the subject matter, the court observed that the learned arbitrator had to consider the applications of the parties under section 17 of the 1996 Act independently and not simply follow the pre-arbitral protection orders as passed by the court.

Pertinently, when the pre-arbitral orders were passed by the Hon'ble Delhi High Court, the licensees of the Respondents had already stood revoked and possession was taken back by the Appellant. Thus, the plain intent of the orders passed by the High Court was clearly to permit the learned Arbitrator to adjudicate the issues raised before him in the applications under section 17 of the 1996 Act.

Further, while noting that the scope of interference in an appeal against orders passed by Arbitrators under Section 17 of the 1996 Act is limited, the Court held that "in appropriate cases, the Court can exercise its jurisdiction under section 37 of the Act to protect the legitimate interest of the appellant, which includes modifying the order of the arbitral tribunal." And, at the stage of considering the grant of interim relief, the Court has to see if a party has been able to establish the three essential elements of a prima facie case, the balance of convenience and irreparable harm and injury.

The appellant has satisfied the said conditions and there is no legal impediment in granting permission to the appellant to carry out the requisite repairs and renovation in the premises in question as an interim relief.

Analysis

The Delhi High Court on previous occasions1 has emphasized that the power of the court to modify interim orders must be exercised sparingly keeping in mind the objective of the 1996 Act, (i.e., minimal judicial interference). The present decision of the Hon'ble Delhi High Court has also emphasized minimal interference with the decision of the arbitral tribunals. However, it is keenly felt that the precise contours which define the scope of interference/extent of modification permitted by the courts have not been identified yet.

Footnotes

1. James Joseph v.. State of Kerala, 2010 SCC OnLine SC 956

2. Ibid.

3. Ibid

4. Asia Hotels (North) Ltd. v. Sital Dass Sons & Anr.2022/DHC/005842

5. CS (COMM) 214/2020 and CS (COMM) 191/2020

6. Section 107 of the Transfer of Property Act read with Sections 17 and 49 of the Registration Act 1908.

7. Edelweiss Asset Reconstruction Company Ltd. Vs. GTL Infrastructure Ltd. and Anr. 2020 SCC Online Del 2081.

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