[Ameya Vikram Mishra is an Associate at the office of Justice AK Sikri (Retd.). Satya Jha is a graduate of NUJS, Kolkata.]
The 2015 Amendment Act brought significant changes to Section 9 of the Arbitration & Conciliation Act, 1996 (“Act”), which deals with granting interim reliefs by courts. The 2015 Amendment Act curtailed the court’s powers to grant interim reliefs once the arbitral tribunal has been constituted. Section 9(3) of the Act (as inserted by the 2015 Amendment Act) provides that the court shall not entertain an application under section 9 unless the court finds that the remedy sought from an arbitral tribunal under section 17 would be ‘inefficacious’.
Interestingly, in the recent decision of the Supreme Court of India in Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd., the Supreme Court has held that once an application for interim relief has been “entertained”, i.e., taken up for consideration by the court, and the court has applied its mind, it can proceed to adjudicate the same even after the constitution of an arbitral tribunal.
This post examines the decision of the Supreme Court in Arcelor Mittal and analyses its consequences, given the vacuum in the Act to deal with the status of the pending applications under section 9, once the arbitral tribunal has been constituted.
Decision in Arcelor Mittal
In facts of the said case, the appellant had approached the Gujarat High Court (“GHC”) under section 11 of the Act seeking the appointment of an arbitral tribunal. During the pendency of this application, both the parties filed applications under section 9 (1) of the Act seeking interim relief before the Commercial Court, Surat (“Surat Court”).
In June 2021, after hearing both the parties extensively, the Surat Court reserved its orders in the section 9(1) applications.
Subsequently, in July 2021, the GHC disposed of the appellant’s application under section 11 by appointing a three-member arbitral tribunal. Pursuant thereto, the appellant moved an application before the Surat Court seeking reference of applications filed by both the parties under section 9 to the newly constituted arbitral tribunal. However, the Surat Court dismissed this application.
The order of the Surat Court dismissing the aforementioned application of the appellant was challenged before the GHC. However, the GHC refused to interfere with the order of the Surat Court and held that the Commercial Court has the power to consider whether the remedy under section 17 of the Act is inefficacious and pass necessary orders under section 9. Aggrieved by the decision of the GHC, the appellant moved the Supreme Court.
While considering the scope of the term “entertain” under section 9(3) of the Act, the Supreme Court observed that the expression “entertain” means consideration of the issues raised by application of mind. It was held that the court entertains a matter when it takes it up for consideration, and such process of consideration may continue till pronouncement of judgment. Accordingly, the Supreme Court held that “On a combined reading of Section 9 with Section 17 of the Arbitration Act, once an Arbitral Tribunal is constituted, the Court would not entertain and/or in other words take up for consideration and apply its mind to an application for interim measure, unless the remedy under Section 17 is inefficacious, even though the application may have been filed before the constitution of the Arbitral Tribunal.”
In view of the above, it was held that the restriction under section 9(3) would not apply once an application under section 9(1) has been “entertained,” like in the present case, where the hearing had been concluded, and the Surat Court had reserved its order. In doing so, the Supreme Court noted that the objective of interim relief applications is urgent disposal while ensuring that the arbitration proceedings are not rendered infructuous.
Additionally, the Supreme Court was of the view that in such a case, the question of examining the efficacy of the remedy under section 17 would not arise since the application under section 9(1) had already been entertained and considered by the Surat Court.
The Act does not contain any express provision to deal with the status of pending interim applications under section 9(1) after the arbitral tribunal is constituted. Therefore, by clarifying the scope of the expression “entertain,” the Supreme Court has resolved the issue regarding the applicability of section 9(3) to pending interim relief applications once an arbitral tribunal is constituted.
While the Supreme Court has adopted a practical approach in the decision of Arcelor Mittal and ensured expeditious disposal of the interim relief applications, the aforesaid decision should be viewed in light of the peculiar factual scenario. In this regard, it is relevant to note that the arbitral tribunal had been constituted subsequent to the court having heard the interim relief application at length (which was listed 36 times and argued for 11 full days) and reserving its order in the said applications. In view of this, it would be impractical in the present case to direct the parties to approach the arbitral tribunal since it would defeat the very purpose of granting interim relief.
Pertinently, there is no provision in the Act that mandates the Court to transfer a pending Section 9(1) application to the arbitral tribunal once an arbitral tribunal has been constituted (see: Benara Bearings & Pistons Ltd v. Mahle Engine Components India Pvt). However, there is nothing in the Act that curtails the power of the Court to direct the parties to approach the arbitral tribunal for interim relief even after the Court has entertained an application under section 9(1) of the Act.
Accordingly, the decision in Arcelor Mittal should not be interpreted to mean that an arbitral tribunal cannot decide an interim application after such an application has been “entertained” by the Court. While the bar under section 9 (3) does not apply to interim applications under section 9 (1), which have been “entertained” by the court, all such applications cannot be painted with the same brush. This is because such applications may be at different stages of adjudication and accordingly, in cases wherein consideration of such application is at an early stage, for example, when the matter has been admitted, or the hearing has just commenced in the matter; it may be more effective to direct the parties to approach the arbitral tribunal for grant of interim reliefs.
Therefore, when an interim application under section 9 (1) is pending adjudication by a court, and the arbitral tribunal is constituted subsequently, the courts must exercise its discretion and wisdom on a case-to-case basis, considering: (i) the stage at which the proceedings are; and (ii) whether the interim relief sought would be granted more expeditiously by the arbitral tribunal or by the court. In cases wherein the proceedings under section 9 (1) are at an early stage, the court may direct to approach the arbitral tribunal for grant of such interim relief. This would not only ensure expeditious disposal of interim relief applications but would also ensure minimal judicial interference upon the constitution of the arbitral tribunal.
– Ameya Vikram Mishra & Satya Jha