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Bar renders under Section 9(3) of Arbitration Act
Section 9(1) of the Arbitration and Conciliation Act 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, the Supreme Court held (Arcelor Mittal Nippon Steel vs Essar Bulk)
If the application was entertained by the court before the constitution of the arbitral tribunal, the bar under Section 9(3) will not apply, the bench of Justices Indira Banerjee and JK Maheshwari held.
The court made it clear that 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. Of course, it hardly needs to 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.
The judgment was passed in a dispute between Arcelor Mittal Nippon Steel and Essar Bulk Terminal regarding a Cargo Handling Agreement. A commercial court in Surat had on July 16, 2021, rejected Arcelor Mittal's application to shift the proceedings to the arbitral tribunal, which the High Court had constituted on July 9. The Gujarat High Court, on August 18, rejected the petition by Arcelor Mittal against the Surat court’s order. The steel giant then approached the Supreme Court in an appeal against the High Court order. The issue before the Court was 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 stated that the bar under Section 9(3) would not operate, once an application has been entertained and taken up for consideration, as in the instant case, where hearing had concluded and judgment reserved.
Supreme Court noted that even after an arbitral tribunal is constituted, there may be myriads of reasons why the tribunal may not be an efficacious alternative to Section 9(1). The court said that 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. Applications for interim relief are inherently applications that are required to be disposed of urgently. The Court also opined that interim relief is granted in aid of final relief and the object is to ensure the protection of the property being the subject matter of arbitration so that the arbitration proceedings do not become infructuous and the arbitral award does not become an award on paper of no real value.
The top court held that the principles for grant of interim relief are (i) good prima facie case, (ii) balance of convenience in favour of the 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 under Section 9 is finally heard relief would have to be declined and the parties are remitted to their remedy under Section 17. The Court, therefore, proceeded to uphold the Surat court’s order rejecting the Arcelor Mittal's request to transfer proceedings to the arbitral tribunal constituted by High Court. The top court ruled that the Gujarat High Court order which directed the commercial court to proceed to complete the adjudication on Section 9 application for interim relief filed by Essar was correct.
Another issue which the Court considered was whether the court is obliged to examine the efficacy of the remedy under Section 17, before passing an order under Section 9(1) of the Arbitration Act, once an arbitral tribunal is constituted
The Supreme Court held 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 under Section 17 is efficacious or not would not arise.
The court held that the requirement to conduct the exercise arises only when the application is being entertained and/or taken up for consideration. 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 faraway 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).
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