With the Arbitration and Conciliation Amendment Act, 2015 ("2015 Amendment Act"), arbitral tribunals now have various options while deciding whether or not to issue interim remedies. In light of this, it is of the utmost importance to get an understanding of the many forms of interim relief that may be granted by courts and arbitral tribunals, as well as the restrictions associated with it. The purpose of this article is to conduct an analysis of Section 9(3) application as well as the subtle intent contained within it. The 2015 Amendment Act made substantial modifications to Section 91 of the Arbitration & Conciliation Act, 1996 ("the Act"), which governs the provision of interim remedy by courts. As a result of an amendment made in 2015, once an arbitral tribunal has been constituted, the court's ability to issue interim reliefs is restricted. The 2015 Amendment Act added Section 9(3)2 to the Act, which says once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.]
Over the course of the last several years, the courts in India have adopted a confrontational posture in favour of arbitration and highlighted the need for minimal judicial involvement in the proceedings and decisions of arbitrators.
A recent decision by the Hon'ble Supreme Court of India in the cases of Arcelor Mittal Nippon Steel India Ltd v Essar Bulk Terminal Ltd3., where the court has further defined the extent of the court's authority to "consider" and evaluate interim relief cases where the arbitral tribunal has been formed during the pendency of the interim relief proceedings of the parties before the court. Nonetheless, if the parties apply to the court under Section 9 before the composition of the arbitral tribunal, the court may evaluate the Section 9 application under certain conditions. This article focuses on a concise summary of the Supreme Court's decision in the above-mentioned case.
Arcelor Mittal Nippon Steel India Limited/Appellant (Arcelor) and Essar Bulk Terminal Limited/Respondent (Essar) engaged in a "cargo handling agreement" (The Agreement) at Hazira Port. Article 154 of the Agreement stipulated that any issues resulting from the agreement would be resolved in line with the Act. Eventually, conflicts emerged among the parties, and even the arbitration Agreement's provision was utilised. The Appellant had filed an application to the Gujarat High Court under section 11 of the Act for the formation of an arbitral tribunal. The Hon'ble Court formed an arbitral tribunal to settle the disagreements among the litigants while the Applications for interim relief to the Commercial court of Gujarat were still pending.
Based on this, Arcelor filed an interim application, requesting that the party's interim Relief Applications be sent to the arbitral panel that had just been created. Nevertheless, the Commercial Court denied the aforementioned interim application. Arcelor challenged the matter before the Gujarat High Court, but the High court also rejected the challenge, the High court was very clear while giving its verdict and held Commercial Court has the authority to determine whether the relief within Section 17 of the Act is ineffective and pass necessary orders under Section 9 of the Act. The Appellant challenged the Impugned Order by the high court before the Supreme Court.
ISSUES BEFORE HON'BLE SUPREME COURT CONCERNING THIS MATTER
The brief legal issue before the Supreme Court was whether the Court had the authority to hear an application under Section 9 of the Act after an arbitral tribunal had been established, and if so, what the meaning of the term "entertain" was under Section 9 of the Act. Furthermore, the Supreme Court had to determine whether it was required to consider the effectiveness of the relief as per Section 17 of the Act prior to issuing an order under Section 9(1) of the Act, even if an arbitral tribunal had been formed.
HON'BLE SUPREME COURT OBSERVATIONS
Regarding the issues, the Supreme Court ruled that the word "entertain" in Section 9(3) of the Act refers to giving consideration to the matters addressed. When a matter is brought before the court for deliberation, a case is considered entertaining.
The deliberation procedure may go on until a decision is reached. According to Section 9(3) of the Act, if the arbitration tribunal is formed and considering the dispute between the parties the court cannot accept an application as per Section 9 of the Act except if the remedy under Section 17 of the Act is ineffective.
However, when an application is "entertained" in the context that it is taken up for consideration and the court has devoted its thoughts to the issue, the court may without a doubt proceed to give a decision. The Supreme Court further highlighted that the purpose of Section 9(3) of the Act was not to rewind time and demand that an issue previously reserved for orders be addressed in its entirety by the arbitral tribunal under Section 17 of the Act. The prohibition of Section 9(3) of the Act would not apply after an application has been accepted and considered, as in the present instance when the hearing has finished and the decision has been reserved. Regarding examining the effectiveness of the remedy under Section 17 of the Act, the Supreme Court stated that when an application has been taken up for consideration and is undergoing consideration or has been considered, the question of examining whether the remedy under Section 17 of the Act is effective or not would not arise. The obligation to do the exercise comes only when the application is being considered and/or entertained.
The Hon'ble SC recaps that Section 9(1) of the Act permits parties to an arbitration agreement to seek interim measures prior to the commencement of arbitral proceedings, during arbitral proceedings, or at any time after the making of an arbitral award but prior to its enforcement under Section 36 of the Act. The bar of Section 9(3) of the Act applies if the application under Section 9(1) of the Act was not considered prior to the formation of the arbitral panel.
If an application under Section 9 of the Act had been entertained prior to the constitution of the arbitral 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, especially when there has been a long time gap between hearings and the application must, in all practicality, be heard anew, or the hearing has just commenced and is expected to consume a longer than usual time.
Since the Commercial Court had previously received and evaluated the application under Section 9 of the Act, the Supreme Court ruled that it was unnecessary for the Commercial Court to consider the effectiveness of relief under Section 17 of the Act. The same contention was held In the case of Godolphin India Private Limited versus UM Projects LLP5 the Karnataka high court has held that, in light of the doctrine enunciated by the Supreme Court, the High Court concluded that the limitation under Section 9(3) of the Act does not applicable after the Court has "entertained" a petition under Section 9(1) of the Act prior to the appointment of the arbitrator. In the instant instance, the subject of reviewing the effectiveness of the relief under Section 17 of the Actjust wouldn't arise, because the Commercial Court has previously received and evaluated a petition under Section 9(1) of the Act. In light of the Supreme Court's pragmatic perspective in the matter of Arcelor Mittal Nippon Steel India Limited, Section 9(3) of the Act is inapplicable to the situation at hand.
ANALYSIS AND CONCLUSION
The interim measures under Section 9 and Section 17 of the Act are a fundamental part of arbitration processes in India, and the Supreme Court emphasises the key features of their scope and interaction in this judgement by interpreting the word "entertain" in Section 9(3) of the Act, the Supreme Court clarifies that the parties to the arbitration proceedings are not required to argue afresh before the arbitral tribunal for an interim measure when the matter was "entertained" by the court prior to the constitution of the arbitral tribunal. Nonetheless, it also gave the court the power to instruct the parties, if necessary, to seek the arbitral tribunal. Second, the Supreme Court defined the court's authority under Section 9 of the Act by noting that, when an application under Section 9 of the Act is accepted, the court shall not evaluate the effectiveness under Section 17 of the Act. This is a good clarification by the Supreme Court as it assures that there is no unnecessary repetition in the arbitration processes, which will ultimately lead to a swift settlement of the disagreement in the arbitration proceedings.
During its review of Section 9 of the Act, the Supreme Court found that Section 9(3) of the Act has two distinct parts. After an arbitral tribunal has been established, an application filed according to subsection (1) of section 9 of the act cannot be considered by the court, as stated in the first part of the provision. The second part carves out an exception to that embargo, and it does so in the event that the court determines that there are circumstances that may prevent the remedy that is given by Section 17 of the Act from being effective.
It was further observed that even after an arbitral tribunal is constituted, there may be multitudes of reasons why the arbitral tribunal may not be an efficacious alternative to Section 9(1) of the Act. These myriads of reasons include any reason such as the temporary unavailability of any one of the arbitrators of an arbitral tribunal due to personal reasons, health issues, emergency travel, etc. It is contended that even after an arbitral tribunal is constituted, There may be multitudes of reasons why the arbitral tribunal may not be an appropriate forum for relief, and every application for relief should not be considered with the same lens; The facts and circumstances of each case should be considered since these applications may be at varying phases of dispute resolution, Nonetheless, if in the exceptional circumstances the Court had at least partially heard the application and considered it, it may decide to continue with the case.
As is obvious from the language of the provision, the Delhi High Court in the case of Benara Bearings & Pistons Ltd. v. Mahle Engine Components India (P) Ltd6., has determined in that Section 9(3) of the Act does not act as an expulsion clause insofar as the court's powers are concerned and that the court's authority under Section 9 of the Act is not diminished or curtailed7. It has also ruled that if a Section 9 of the Act application is made, the court must determine whether the petitioner has an effective remedy under Section 17 of the Act for obtaining prompt interim relief from the arbitral panel.
There may be occasions in which obtaining interim relief from the tribunal may not be effective. Delhi high court in the case of Bhubaneshwar Expressways Pvt. Ltd. v. NHAI8 there may be some instances though the tribunal is constituted, it was unable to operate since one of the arbitrators had recused himself. Therefore, the Delhi High Court determined that the Section 17 of the Act remedy was ineffective and that it would be required to hear the case under Section 9 of the Act. Hence facts and circumstances of each case should be looked into while applying section 9(3) of the Act prohibition for entertaining cases by the court because the probability regarding the arbitral tribunal may not be an appropriate forum for relief cannot be disregarded.
1 Section 9 of the Arbitration & Conciliation Act, 1996.
2 Section 9(3) of the Act.
3 Arcelor mittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712.
4 Article 15 of the Cargo Handling Agreement.
5 writ petition no. 10281 of 2022(GM-CPC).[ High court of Karnataka at Bengaluru,DOJ: 1st day of July, 2022]
6 2017 SCC OnLine Del 7226.
7 TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377
8 Bhubaneshwar Expressways Pvt. Ltd. v. National Highways Authority of India, 2019 SCC OnLine Del 11390.
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