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TMI Blog2021 (9) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... as an order of Court - With the law as it stands today, the Arbitral Tribunal has the same power to grant interim relief as the Court and the remedy under Section 17 is as efficacious as the remedy under Section 9(1). There is, therefore, no reason why the Court should continue to take up applications for interim relief, once the Arbitral Tribunal is constituted and is in seisin of the dispute between the parties, unless there is some impediment in approaching the Arbitral Tribunal, or the interim relief sought cannot expeditiously be obtained from the Arbitral Tribunal. In this case there are no materials on record to show that there were any lapses or laches on the part of the Respondent, which delayed the constitution of an Arbitral Tribunal. The allegation that the Respondent had disabled itself from availing the remedy under Section 17, is unsubstantiated. Moreover, mere delay in agreeing to an Arbitrator does not dis-entitle a party from relief under Section 9 of the Arbitration Act. Section 11 of the Arbitration Act itself provides a remedy in case of delay of any party to the arbitration agreement to appoint an Arbitrator. Meaning of the the expression entertain - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is, whether the Court has the power to entertain an application under Section 9(1) of the Arbitration and Conciliation Act, 1996, hereinafter referred to as "the Arbitration Act", once an Arbitral Tribunal has been constituted and if so, what is the true meaning and purport of the expression "entertain" in Section 9(3) of the Arbitration Act. The next question is, 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. 3. The Appellant and the Respondent entered into an agreement for Cargo Handling at Hazira Port. The said Cargo Handling Agreement was amended from time to time. 4. Article 15 of the said Cargo Handling Agreement provided that all disputes arising out of the Cargo Handling Agreement were to be settled in Courts, in accordance with the provisions of the Arbitration Act and be referred to a sole Arbitrator appointed mutually by the parties. 5. Disputes and differences having arisen under the said Cargo Handling Agreement, the Appellant invoked the arbitration clause by a notice of arbitration dated 22nd November 2020. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. (2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under subsection (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. (3) 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." 9. Section 9 as originally enacted, has been renumbered as Section 9(1) by the Arbitration and Conciliation (Amendment) Act (Act 3 of 2016) with effect from 23rd October 2015. The said 2015 Amendment also incorporated sub-Section (2) and sub-Section (3) reproduced above. 10. Before the enactment and enforcement of the said 2015 Amendment, Section 17 read:- "17. Interim measures ordered by arbitral tribunal.- (1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11(6) of the Arbitration Act was disposed of by appointing a three-member Arbitral Tribunal, comprising of three retired Judges of this Court, to adjudicate the disputes between the Appellant and the Respondent. 14. On or about 16th July 2021, the Appellant filed an interim application being Commercial Civil Miscellaneous Application No.2 of 2021, praying for reference of both the applications filed by the Appellant and the Respondent respectively under Section 9 of the Arbitration Act, to the learned Tribunal. 15. Paragraph 3 of the said application filed by the Appellant is set out hereinbelow for convenience. "3. I say and submit that this Hon'ble Court had heard the AMNS Petition and the EBTL Petition extensively, and reserved the petitions for pronouncement of orders. The matters are listed on 20 July 2021 for pronouncement of orders." 16. By an order dated 16th July 2021, the Commercial Court dismissed the said application filed by the Appellant. The Commercial Court however granted the Appellant 10 days' time to challenge the order of the Commercial Court if it so desired. 17. The Appellant filed an application being R/Special Civil Application No.10492 of 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the role of the Court. Even though Section 9(3) does not oust the jurisdiction of the Court under Section 9(1), it restricts the role of the Court, post the constitution of an Arbitral Tribunal. Once an Arbitral Tribunal is constituted, the Court is not to entertain an application under Section 9 of the Arbitration Act unless it finds that circumstances exist, which may render the remedy under Section 17 of the Arbitration Act inefficacious. 24. Mr. Khambata submitted that the High Court rightly held that the Commercial Court had erred in construing the word 'entertain' narrowly, observing that entertain would not mean admitting for consideration, but would mean the entire process upto its final adjudication and passing of an order on merits. 25. Mr. Khambata referred to the observations of the 246th Report of the Law Commission of August 2014, that the insertion of Section 9(3) "seeks to reduce the role of the Court in relation to grant of interim measures once the Arbitral Tribunal has been constituted." Mr. Khambata submitted that this also appears to be the spirit of the UNCITRAL Model Law as amended in 2006. Accordingly, Section 17 has been amended to infuse the Arbitral T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can make corrections to a judgment and/or in other words continue to adjudicate and thus continue to entertain a proceeding even after a judgment is pronounced, until it is signed. 31. Mr. Khambata argued that, in this case the Commercial Court had not passed its orders in the Section 9 applications. It had not even pronounced its orders. Thus, as on the date of the impugned order, the Commercial Court was entertaining the Section 9 applications. Even today the Commercial Court is entertaining the applications under Section 9 of the Arbitration Act. The fact that orders were reserved on 7th June 2021 does not mean that the Commercial Court stopped entertaining the said petitions. 32. Referring to Deep Chand & Ors v. Land Acquisition Officer & Others (1994) 4 SCC 99 : AIR 1994 SC 1901, Mr. Khambata submitted that the term "adjudication" means "..formal giving or pronouncing a judgment or decree in a Court proceeding.." and implies a hearing by a Court. Thus, the term "entertain" in Section 9(3) of the Arbitration Act, is to be interpreted to mean "adjudicate" and implies the passing of an order and/or judgment. 33. Mr. Khambata argued that the word "entertain" in Section 9(3) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to the petition under Section 11 of the Arbitration Act. The Respondent filed a belated reply on 7th June, 2021, after the hearing of the applications under Section 9 had concluded. 39. Mr. Khambata submitted that it is well settled that a party invoking Section 9 of the Act must be ready and willing to go to arbitration. In support of his submission Mr. Khambata cited Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors. (2004) 3 SCC 155. Mr. Khambata contended that the Respondent had itself delayed the nomnation of the substitute Arbitrator, but is now is taking the plea of inefficacy of the remedy under Section 17 of the Arbitration Act. 40. Mr. Khambata submitted that the High Court had erred in directing the District Court to pass orders in the applications under Section 9 of the Arbitration Act, despite the fact that no party had filed any application in the Commercial Court, challenging the efficacy of the arbitral proceedings. Mr. Khambata submitted that the High Court's interpretation of Section 9(3) of the Arbitration Act is in accordance with the prevalent law as settled by this Court and the various High Courts. 41. Mr. Khambata referred to the meaning of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court had erred in directing the District Court to pass orders in the petitions under Section 9, even though it had interpreted the word 'entertain' to mean "the whole gamut upto its final adjudication and passing of an order on merits". Mr. Khambata argued that, having observed that the Commercial Court had erred in interpreting 'entertain' narrowly and also that there was no challenge to the efficacy of the arbitral proceedings before the District Court as on the date of the impugned order, the High Court should not have directed the Commercial Court to pass orders. 46. Mr. Kapil Sibal appearing on behalf of the Respondent submitted that the question before this Court, of whether Section 9(3) of the Arbitration Act would be applicable in respect of the aforesaid two applications under Section 9 of the Arbitration Act, filed by the Appellant and the Respondent respectively, has to be answered in the negative since the applications were finally heard on merits and reserved for orders on 7th June 2021, before the constitution of the Arbitral Tribunal on 9th July, 2021. 47. Mr. Sibal argued that the application under Article 227 filed in the Gujarat High Court was not maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibal argued that an application is "entertained" when the court applies its mind to it. Entertain means "admit into consideration" or "admit in order to deal with". In support of his submission Mr. Sibal cited Lakshmi Rattan Engineering Works Ltd. (supra), Anil Kunj Bihari Saraf v. Namboodas S/o Shankarlal and Ors. (1996) SCC Online MP 112 (Paras 5-12) and Kundanlal v. Jagan Nath Sharma (supra). 53. Mr. Kapil Sibal further argued that, whether a matter had already been "admitted into consideration", would depend on whether the Trial Court had admitted into consideration and applied its mind to the Section 9 Applications, filed by the respective parties, and therefore, the Section 9 Applications had gone past the stage of "entertainment", as contemplated under Section 9(3) of the Arbitration Act. Mr. Sibal argued that the High Court has erroneously held: "The word 'entertain' occurring in sub-section (3) of section 9 would not merely mean to admit a matter for consideration, but it also entails the whole procedure till adjudication, i.e., passing of final order." 54. Mr. Sibal argued that the prayer in the application dated 16th July, 2021 filed by the Appellant could never hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any distinct hierarchy. 60. Mr. Sibal categorically denied that the Respondent has delayed commencement of arbitration. He submitted that the disputes raised in the notice of arbitration dated 22nd November, 2020 given by the Appellant did not correspond to the disputes raised by the Appellant in its Section 9 Application in the Commercial Court. The question of arbitrability of the disputes raised in the notice is still to be determined. 61. Mr. Sibal submitted that the Respondent was in contact with the Appellant to agree on the name of the Arbitrator. Eventually the parties consented to have a three member Arbitral Tribunal. On 25th August, 2021, Justice G.T. Nanavati (Retired) resigned on the ground of health, after which there is no functional Arbitral Tribunal. Even after the Arbitrator appointed by the Respondent resigned, the Respondent promptly commenced the process for appointment of substitute arbitrator, and addressed a letter dated 27.08.2021 to the Appellant. 62. Distinguishing the judgments cited by Mr. Khambata, Mr. Sibal emphatically argued that the word "entertain" in Section 9(3) of the Arbitration Act would mean the first occasion when the Court takes up th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in approaching the Arbitral Tribunal, or the interim relief sought cannot expeditiously be obtained from the Arbitral Tribunal. 69. There can be no dispute with the proposition as held in State Bank of India and Ors. v. S.N. Goyal (supra), that when a judgment is reserved, mere dictation does not amount to pronouncement. When a judgment is dictated in open Court, that amounts to pronouncement. A judgment not dictated in open Court, has to be pronounced in Open Court. Even after pronouncement, the Judge can make corrections before signing and dating the judgment. Once a judge pronounces, signs and dates the judgment, he becomes functus officio. However, the law enunciated by this Court in State Bank of India and Ors. v. S. N. Goyal (supra) is not attracted in this case. The judgment does not interpret or explain the expression "entertain". 70. In Deep Chand & Ors v. Land Acquisition Officer (supra), cited by Mr. Khambata, the question was, whether objections under Section 49 of the Land Acquisition Act 1894 to acquisition, on the premise that the property proposed for acquisition was only part of the house, manufactory or building amounts to an adjudication. 71. This Court re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any party to the arbitration agreement to appoint an Arbitrator. 76. Mr. Khambata rightly submitted that a party invoking Section 9 of the Act must be ready and willing to go to arbitration. The law enunciated in Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors. (supra) is well settled. In this case, both the Appellant and the Respondent have invoked the jurisdiction of the Commercial Court under Section 9 of the Arbitration Act. 77. As argued by Mr. Sibal, in Tufan Chatterjee (supra) the applicant seeking interim relief under Section 9 of the Arbitration Act had referred to Section 26 of the Amendment Act (Act 3 of 2016) and contended that the 2015 Amendment would not apply to proceedings pending when the 2015 Amendment came into force. 78. It was also argued that arbitral proceedings having commenced before the 2015 Amendment came into effect and/or in other words, before 23rd October 2015, the 2015 Amendments would not apply to the arbitral proceedings, which would be governed by the law as it stood before the amendment. The Arbitral Tribunal would, therefore, not be able to grant relief under Section 17 as amended by the 2015 Amendments. As argued by Mr. Kapil Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court dismissed the appeal from the order of the District Court dismissing the application under Section 9 on the ground that an application for interim relief would have to be filed before the Arbitral Tribunal. 82. In Energo Engineering Projects Ltd. v. TRF Limited (supra) authored by one of us (Indira Banerjee, J.), a Division Bench of Delhi High Court held:- "27. A harmonious reading of Section 9(1) with Section 9(3) of the 1996 Act, as amended by the 2015 Amendment Act, makes it amply clear that, even after the amendment of the 1996 Act by incorporation of Section 9(3), the Court is not denuded of power to grant interim relief, once an Arbitral Tribunal is constituted. 28. When there is an application for interim relief under Section 9, the Court is required to examine if the applicant has an efficacious remedy under Section 17 of getting immediate interim relief from the Arbitral Tribunal. Once the court finds that circumstances exist, which may not render the remedy provided under Section 17 of the 1996 Act efficacious, the Court has the discretion to entertain an application for interim relief. Even if an Arbitral Tribunal is non functional for a brief period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84. In Banara Bearings & Pistons Ltd. (supra) cited by Mr. Sibal a Division Bench of the Delhi High Court, speaking through Badar Durrez Ahmed J. Held: "24...... We are of the view that Section 9(3) does not operate as an ouster clause insofar as the courts' powers are concerned. It is a well-known principle that whenever the Legislature intents an ouster, it makes it clear. We may also note that if the argument of the appellant were to be accepted that the moment an Arbitral Tribunal is constituted, the Court which is seized of a Section 9 application, becomes coram non judice, would create a serious vacuum as there is no provision for dealing with pending matters. All the powers of the Court to grant interim measures before, during the arbitral proceedings or at any time after the making of the arbitral award but prior to its enforcement in accordance with Section 36 are intact (and, have not been altered by the amendment) as contained in Section 9(1) of the said Act. Furthermore, it is not as if upon the very fact that an Arbitral Tribunal had been constituted, the Court cannot deal with an application under sub-section (1) of Section 9 of the said Act. Section 9(3) itself pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of depreciation of the value of the assets due to constant use. Prima facie, the respondent has defaulted in instalments. In terms of the agreement, the appellant financier is entitled to take possession of the hypothecated assets. After the enactment of the Arbitration and Conciliation (Amendment) Act of 2015 with effect from 23 rd October, 2015, the Court is not to entertain an application under Section 9(1) of the Arbitration and Conciliation Act, 1996, once the Arbitral Tribunal has been constituted, unless the Court finds that circumstances exist, which may not render the remedy provided under Section 17 efficacious. 7. The hearing before the Arbitral Tribunal may have been concluded. Proceedings are, however, still pending before the Arbitral Tribunal. It may have been possible to make an application before the Arbitral Tribunal. However considering the lethargic manner in which the learned Arbitrator has been proceeding the remedy of the Appellant under Section 17 of the Arbitration and Conciliation Act, 1996 does not appear to be efficacious. The amendments being recent, complicated issues of law may also arise with regard to the applicability of the amended provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional Bench of the Allahabad High Court as denoting the point of time at which an application to set aside the sale is heard by the court. The expression "entertain", it is stated, does not mean the same thing as the filing of the application or admission of the application by the court. A similar view was again taken in Dhoom Chand Jain v. Chamanlal Gupta [AIR 1962 All 543] in which the learned Chief Justice Desai and Mr Justice Dwivedi gave the same meaning to the expression "entertain". It is observed by Dwivedi, J., that the word "entertain" in its application bears the meaning "admitting to consideration", and therefore when the court cannot refuse to take an application which is backed by deposit or security, it cannot refuse judicially to consider it. In a single bench decision of the same court reported in Bawan Ram v. Kunj Beharilal [AIR 1961 All 42] one of us (Bhargava, J.) had to consider the same rule. There the deposit had not been made within the period of limitation and the question had arisen whether the court could entertain the application or not. It was decided that the application could not be entertained because proviso (b) debarred the court from entertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application is due to commence." 91. In Hindustan Commercial Bank Ltd. v Punnu Sahu (supra), the Court held that the expression "entertain" in the proviso to clause (b) Order 21 Rule 90 (as amended by Allahabad High Court), means to "adjudicate upon" or "proceed to consider on merits" and not "initiation of proceeding." 92. In Martin & Haris Limited (supra), the Court was considering proviso to Section 21 of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 which provided that where the building was in the occupation of a tenant since before its purchase by the landlord, such purchase being made after the commencement of this Act, no application shall be entertained on the grounds mentioned in Clause (a), unless a period of 3 years has elapsed since the date of such purchase and the landlord has given a notice in that behalf to the tenant, not less than 6 months before such application, and such notice may be given before the expiration of the aforesaid period of 3 years. The Court held :- " Thus the word "entertain" mentioned in the first proviso to Section 21(1) in connection with grounds mentioned in clause (a) would necessarily mean entertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitral Tribunal by reason of illness, travel etc. 97. Applications for interim relief are inherently applications which are required to be disposed of urgently. 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. 98. 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. 99. 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 be remitted to their remedy under Section 17. 100. When an application has already been taken up for consideration and is in the process of consideration or has already been considered, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (2021) 2 SCC 1 at page 98 :- "129. Principles of competence-competence have positive and negative connotations. As a positive implication, the Arbitral Tribunals are declared competent and authorised by law to rule as to their jurisdiction and decide non-arbitrability questions. In case of expressed negative effect, the statute would govern and should be followed. Implied negative effect curtails and constrains interference by the court at the referral stage by necessary implication in order to allow the Arbitral Tribunal to rule as to their jurisdiction and decide non-arbitrability questions. As per the negative effect, courts at the referral stage are not to decide on merits, except when permitted by the legislation either expressly or by necessary implication, such questions of non-arbitrability. Such prioritisation of the Arbitral Tribunal over the courts can be partial and limited when the legislation provides for some or restricted scrutiny at the "first look" referral stage. We would, therefore, examine the principles of competencecompetence with reference to the legislation, that is, the Arbitration Act." [Emphasis supplied] 106. As held in Vidya Drolia (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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