Bar of Section 9(3) of A&C Act operates if application u/s 9(1) was not entertained till constitution of Arbitral Tribunal: SC

Read Judgment: Arcelor Mittal Nippon Steel India Ltd. vs. Essar Bulk Terminal Ltd.

Pankaj Bajpai

New Delhi, September 15, 2021:The Supreme Court has ruled that once an Arbitral Tribunal is constituted, the Court cannot take up an application u/s 9 of the Arbitration and Conciliation Act, 1996 for consideration, unless the remedy u/s 17 of the said Act is inefficacious.

A Division Bench of Justice Indira Banerjee and Justice J.K Maheshwari however observed that bar of Section 9(3) would not operate, once an application has been entertained and taken up for consideration, as in the instant case, where hearing has been concluded and judgment has been reserved.

The observation came pursuant to a dispute between Arcelor Mittal Nippon Steel (Petitioner) and Essar Bulk Terminal (Respondent) regarding a Cargo Handling Agreement.

The background of the case was that a Commercial Court in Surat had rejected Arcelor Mittal’s application to shift the proceedings to the arbitral tribunal. Later, since the Gujarat High Court rejected the petition by Arcelor Mittal against the Surat court’s order, the petitioner approached the Apex Court seeking as to whether the commercial court in Surat could pronounce an interim order in the arbitration dispute after the main arbitration tribunal was formed by the High Court.

The Top Court noted that 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).

Since the 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, added the Court.

The Division Bench elaborated 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.It could, therefore, never have been the legislative intent that even after an application u/s 9 is finally heard relief would have to be declined and the parties be remitted to their remedy u/s 17, added the Bench.

The Division Bench pointed out that when an application 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 u/s 17 is efficacious or not would not arise.

However, the requirement to conduct the exercise arises only when the application is being entertained and/or taken up for consideration, added the Bench.

The Top Court went on to reiterate 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 Apex Court therefore concluded that the bar of Section 9(3) operates where the application u/s 9(1) had not been entertained till the constitution of the Arbitral Tribunal.