In an important judgment, a
Division Bench of the Bombay High Court has held that a petition under s. 9 of
the Arbitration and Conciliation Act, 1996, is not maintainable after the award
if the claim has been dismissed by the arbitrators. S. 9 of the Act states that
a party may, “before or during arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in accordance with
section 36” apply for interim relief. The Bombay High Court was concerned with
a case where the arbitrator had originally granted interim relief under s. 17
of the Act, but subsequently had dismissed the claim. The claimant filed a petition
under s. 34, and also filed an application for interim protection u/s 9. The
learned Single Judge hearing the application gave limited interim protection,
leaving the question of maintainability of the s. 9 application open. The matter
came before the Division Bench through cross-appeals against this order. The
Division Bench held that an application u/s 9 is not maintainable at the behest
of a claimant after the award, if the claim has been dismissed by the
arbitrator. We will discuss this issue further subsequently, but the gist of
the Court’s reasoning can be seen in the following extracts from the judgment:
Division Bench of the Bombay High Court has held that a petition under s. 9 of
the Arbitration and Conciliation Act, 1996, is not maintainable after the award
if the claim has been dismissed by the arbitrators. S. 9 of the Act states that
a party may, “before or during arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in accordance with
section 36” apply for interim relief. The Bombay High Court was concerned with
a case where the arbitrator had originally granted interim relief under s. 17
of the Act, but subsequently had dismissed the claim. The claimant filed a petition
under s. 34, and also filed an application for interim protection u/s 9. The
learned Single Judge hearing the application gave limited interim protection,
leaving the question of maintainability of the s. 9 application open. The matter
came before the Division Bench through cross-appeals against this order. The
Division Bench held that an application u/s 9 is not maintainable at the behest
of a claimant after the award, if the claim has been dismissed by the
arbitrator. We will discuss this issue further subsequently, but the gist of
the Court’s reasoning can be seen in the following extracts from the judgment:
Two facets of Section 9 merit emphasis.
The first relates to the nature of the orders that can be passed under clauses
(i) and (ii). Clause (i) contemplates an order appointing a guardian for a
minor or a person of unsound mind for the purposes of arbitral proceedings.
Clause (ii) contemplates an interim measure of protection for: (a) the
preservation, interim custody or sale of any goods which are the subject-matter
of the arbitration agreement; (b) securing the amount in dispute in the
arbitration; and ( c) the detention, preservation or inspection of any property
or thing which is the subject-matter of the dispute in arbitration; (d) an
interim injunction or the appointment of a receiver; and (e) such other interim
measure of protection as may appear to the Court to be just and convenient. The underlying theme of each one of the
sub- clauses of clause (ii) is the immediate and proximate nexus between the
interim measure of protection and the preservation, protection and securing of
the subject-matter of the dispute in the arbitral proceedings. In other words,
the orders that are contemplated under clause (ii) are regarded as interim
measures of protection intended to protect the claim in arbitration from being
frustrated. The interim measure is intended to safeguard the subject-matter of
the dispute in the course of the arbitral proceedings. The second facet of
Section 9 is the proximate nexus between the orders that are sought and the
arbitral proceedings. When an interim measure of protection is sought before or
during arbitral proceedings, such a measure is a step in aid to the fruition of
the arbitral proceedings. When sought after an arbitral award is made but before
it is enforced, the measure of protection is intended to safeguard the fruit of
the proceedings until the eventual enforcement of the award. Here again the measure of protection is a step
in aid of enforcement. It is intended to ensure that enforcement of the award
results in a realisable claim and that the award is not rendered illusory
by dealings that would put the subject of the award beyond the pale of
enforcement. Now it is in this background that it is necessary for the Court to
impart a purposive interpretation to the meaning of the expression “at any
time after the making of the arbitral award but before it is enforced in
accordance with section 36”. Under Section 36, an arbitral award can be
enforced under the Code of Civil Procedure in the same manner as if it were a
decree of the Court. The arbitral award can be enforced where the time for
making an application to set aside the arbitral award under Section 34 has
expired or in the event of such an application having been made, it has been
refused. The enforcement of an award enures to the benefit of the party who has
secured an award in the arbitral proceedings. That is why the enforceability of
an award under Section 36 is juxtaposed in the context of two time frames, the
first being where an application for setting aside an arbitral award has
expired and the second where an application for setting aside an arbitral award
was made but was refused. The enforceability of an award, in other words, is
defined with reference to the failure of the other side to file an application
for setting aside the award within the stipulated time limit or having filed
such an application has failed to establish a case for setting aside the
arbitral award. Once a challenge to the arbitral award has either failed under
Section 34 having been made within the stipulated period or when no application
for setting aside the arbitral award has been made within time, the arbitral
award becomes enforceable at the behest of the party for whose benefit the
award enures.
The first relates to the nature of the orders that can be passed under clauses
(i) and (ii). Clause (i) contemplates an order appointing a guardian for a
minor or a person of unsound mind for the purposes of arbitral proceedings.
Clause (ii) contemplates an interim measure of protection for: (a) the
preservation, interim custody or sale of any goods which are the subject-matter
of the arbitration agreement; (b) securing the amount in dispute in the
arbitration; and ( c) the detention, preservation or inspection of any property
or thing which is the subject-matter of the dispute in arbitration; (d) an
interim injunction or the appointment of a receiver; and (e) such other interim
measure of protection as may appear to the Court to be just and convenient. The underlying theme of each one of the
sub- clauses of clause (ii) is the immediate and proximate nexus between the
interim measure of protection and the preservation, protection and securing of
the subject-matter of the dispute in the arbitral proceedings. In other words,
the orders that are contemplated under clause (ii) are regarded as interim
measures of protection intended to protect the claim in arbitration from being
frustrated. The interim measure is intended to safeguard the subject-matter of
the dispute in the course of the arbitral proceedings. The second facet of
Section 9 is the proximate nexus between the orders that are sought and the
arbitral proceedings. When an interim measure of protection is sought before or
during arbitral proceedings, such a measure is a step in aid to the fruition of
the arbitral proceedings. When sought after an arbitral award is made but before
it is enforced, the measure of protection is intended to safeguard the fruit of
the proceedings until the eventual enforcement of the award. Here again the measure of protection is a step
in aid of enforcement. It is intended to ensure that enforcement of the award
results in a realisable claim and that the award is not rendered illusory
by dealings that would put the subject of the award beyond the pale of
enforcement. Now it is in this background that it is necessary for the Court to
impart a purposive interpretation to the meaning of the expression “at any
time after the making of the arbitral award but before it is enforced in
accordance with section 36”. Under Section 36, an arbitral award can be
enforced under the Code of Civil Procedure in the same manner as if it were a
decree of the Court. The arbitral award can be enforced where the time for
making an application to set aside the arbitral award under Section 34 has
expired or in the event of such an application having been made, it has been
refused. The enforcement of an award enures to the benefit of the party who has
secured an award in the arbitral proceedings. That is why the enforceability of
an award under Section 36 is juxtaposed in the context of two time frames, the
first being where an application for setting aside an arbitral award has
expired and the second where an application for setting aside an arbitral award
was made but was refused. The enforceability of an award, in other words, is
defined with reference to the failure of the other side to file an application
for setting aside the award within the stipulated time limit or having filed
such an application has failed to establish a case for setting aside the
arbitral award. Once a challenge to the arbitral award has either failed under
Section 34 having been made within the stipulated period or when no application
for setting aside the arbitral award has been made within time, the arbitral
award becomes enforceable at the behest of the party for whose benefit the
award enures.
Contextually, therefore, the scheme of Section 9 postulates an
application for the grant of an interim measure of protection after the making
of an arbitral award and before it is enforced for the benefit of the party
which seeks enforcement of the award. An interim measure of protection within
the meaning of Section 9(ii) is intended to protect through the measure, the
fruits of a successful conclusion of the arbitral proceedings. A party whose claim has been rejected in the
course of the arbitral proceedings cannot obviously have an arbitral award
enforced in accordance with Section 36. The object and purpose of an interim
measure after the passing of the arbitral award but before it is enforced is to
secure the property, goods or amount for the benefit of the party which seeks
enforcement.
application for the grant of an interim measure of protection after the making
of an arbitral award and before it is enforced for the benefit of the party
which seeks enforcement of the award. An interim measure of protection within
the meaning of Section 9(ii) is intended to protect through the measure, the
fruits of a successful conclusion of the arbitral proceedings. A party whose claim has been rejected in the
course of the arbitral proceedings cannot obviously have an arbitral award
enforced in accordance with Section 36. The object and purpose of an interim
measure after the passing of the arbitral award but before it is enforced is to
secure the property, goods or amount for the benefit of the party which seeks
enforcement.
14. The Court which exercises jurisdiction
under Section 34 is not a court of first appeal under the provisions of the
Code of Civil Procedure. An appellate court to which recourse is taken against
a decree of the trial Court has powers which are co-extensive with those of the
trial Court. A party which has failed in its claim before a trial Judge can in
appeal seek a judgment of reversal and in consequence, the passing of a decree
in terms of the claim in the suit. The court to which an arbitration petition
challenging the award under Section 34 lies does not pass an order decreeing
the claim. Where an arbitral claim has been rejected by the arbitral tribunal,
the court under Section 34 may either dismiss the objection to the arbitral
award or in the exercise of its jurisdiction set aside the arbitral award. The
setting aside of an arbitral award rejecting a claim does not result in the
claim which was rejected by the Arbitrator being decreed as a result of the
judgment of the court in a petition under Section 34. To hold that a
petition under Section 9 would be maintainable after the passing of an arbitral
award at the behest of DIPL whose claim has been rejected would result in a
perversion of the object and purpose underlying Section 9 of the Arbitration
and Conciliation Act, 1996. DIPL’s application under Section 9, if allowed,
would result in the grant of interim specific performance of a contract in the
teeth of the findings recorded in the arbitral award. The interference by the
Court at this stage to grant what in essence is a plea for a mandatory order
for interim specific performance will negate the sanctity and efficacy of
arbitration as a form of alternate disputes redressal. What such a litigating
party cannot possibly obtain even upon completion of the proceedings under
Section 34, it cannot possibly secure in a petition under Section 9 after the
award. The object and purpose of Section 9 is to provide an interim measure
that would protect the subject-matter of the arbitral proceedings whether
before or during the continuance of the arbitral proceedings and even
thereafter upon conclusion of the proceedings until the award is enforced.
Once the award has been made and a claim has been rejected as in the present
case, even a successful challenge to the award under Section 34 does not result
an order decreeing the claim. In this view of the matter, there could be no
occasion to take recourse to Section 9. Enforcement for the purpose of
Section 36 as a decree of the Court is at the behest of a person who seeks to
enforce the award.
under Section 34 is not a court of first appeal under the provisions of the
Code of Civil Procedure. An appellate court to which recourse is taken against
a decree of the trial Court has powers which are co-extensive with those of the
trial Court. A party which has failed in its claim before a trial Judge can in
appeal seek a judgment of reversal and in consequence, the passing of a decree
in terms of the claim in the suit. The court to which an arbitration petition
challenging the award under Section 34 lies does not pass an order decreeing
the claim. Where an arbitral claim has been rejected by the arbitral tribunal,
the court under Section 34 may either dismiss the objection to the arbitral
award or in the exercise of its jurisdiction set aside the arbitral award. The
setting aside of an arbitral award rejecting a claim does not result in the
claim which was rejected by the Arbitrator being decreed as a result of the
judgment of the court in a petition under Section 34. To hold that a
petition under Section 9 would be maintainable after the passing of an arbitral
award at the behest of DIPL whose claim has been rejected would result in a
perversion of the object and purpose underlying Section 9 of the Arbitration
and Conciliation Act, 1996. DIPL’s application under Section 9, if allowed,
would result in the grant of interim specific performance of a contract in the
teeth of the findings recorded in the arbitral award. The interference by the
Court at this stage to grant what in essence is a plea for a mandatory order
for interim specific performance will negate the sanctity and efficacy of
arbitration as a form of alternate disputes redressal. What such a litigating
party cannot possibly obtain even upon completion of the proceedings under
Section 34, it cannot possibly secure in a petition under Section 9 after the
award. The object and purpose of Section 9 is to provide an interim measure
that would protect the subject-matter of the arbitral proceedings whether
before or during the continuance of the arbitral proceedings and even
thereafter upon conclusion of the proceedings until the award is enforced.
Once the award has been made and a claim has been rejected as in the present
case, even a successful challenge to the award under Section 34 does not result
an order decreeing the claim. In this view of the matter, there could be no
occasion to take recourse to Section 9. Enforcement for the purpose of
Section 36 as a decree of the Court is at the behest of a person who seeks to
enforce the award.
15. For this reason, we are of the view
that the judgment and order of the learned Single Judge granting an ad-interim
measure of protection was wholly an error and in excess of jurisdiction…
that the judgment and order of the learned Single Judge granting an ad-interim
measure of protection was wholly an error and in excess of jurisdiction…
The judgment of the High Court in
Dirk India Pvt. Ltd. v. Maharashtra State
Electricity Generation Co. Ltd., Appeal No. 114/2013 (and connected
matters) is available here.
Dirk India Pvt. Ltd. v. Maharashtra State
Electricity Generation Co. Ltd., Appeal No. 114/2013 (and connected
matters) is available here.