Case: ARCELOR MITTAL NIPPON STEEL INDIA LTD Vs. ESSAR BULK TERMINAL LTD


Decision:
1[ds]65. However, sub-Section (3) of Section 9 of the Arbitration Act, on which much emphasis has been placed both by Mr. Khambata and Mr. Kapil Sibal provides that once an 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.66. Sub-Section (3) of Section 9 has two limbs. The first limb prohibits an application under sub-Section (1) from being entertained once an Arbitral Tribunal has been constituted. The second limb carves out an exception to that prohibition, if the Court finds that circumstances exist, which may not render the remedy provided under Section 17 efficacious.68. 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.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 referred to Blacks Law Dictionary (6th edition) where adjudication has been defined as hereunder:-Adjudication.- The legal process of resolving a dispute. The formal giving or pronouncing a judgment or decree in a court proceeding; also the judgment or decision given. The entry of a decree by a court in respect to the parties in a case. It implies a hearing by a court, after notice, of legal evidence on the factual issue(s) involved.72. This Court found that a reading of Section 49 of the Land Acquisition Act showed that a right had been given to the owner of the land to object to acquisition of part of any house, manufactory or other building. Decision on the objection under Section 49(1) to acquisition of only part of a house, manufactory or building would not amount to an adjudication on the question of whether the land proposed to be taken was reasonably required for the full and unimpaired use of the house, manufactory or building. The judgment is not of relevance to the issues involved in this appeal.74. The judgment in Manbhupinder Singh Atwal v. Neeraj Kumarpal Shah (supra) was rendered in facts and circumstances of that case where proceedings had been pending before the Arbitral Tribunal under Section 17, but the party against whom relief had been sought protracted the proceedings, by indulging in making bare, baseless allegations and insinuations against the Arbitrators of bias and impropriety and thereafter made allegations against the Arbitrators of alleged inaction, to make out a case of inefficacy of the remedy under Section 17. The judgment has no manner of application in this case.75. 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.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.80. The judgment in Tufan Chatterjee (supra) was rendered in an appeal against an order of the District Court dismissing the application of the appellant under Section 9 of the Arbitration Act, with the observation that since arbitral proceedings had been initiated, the Court was no longer authorized to pass orders on an application under Section 9(1) of the 1996 Act. The High Court interpreted the expression entertain and held:-35. However, as rightly argued by Mr. Bhattacharya, there is difference between the expressions institute and the expression entertain. The expression institute is not synonymous with the expression entertain. In Martin & Harris Ltd. v. 6th Additional District Judge reported in (1998) 1 SCC 732  cited by Mr. Bhattacharya, the Supreme Court interpreted the expression entertain in Clause 21(1)(a) of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972, to mean entertaining the ground for consideration for the purpose of adjudication on merits and not any stage prior thereto. Unlike the Limitation Act, which bars the institution of a suit after expiry of the period of limitation, Section 26 prohibits the Court from entertaining an application under Section 9, except in circumstances specified in Section 9(3), which necessarily means considering application on merits, even at the final stage.36. After amendment by the Amendment Act of 2015, the scope of Section 17 has considerably been widened and the Arbitral Tribunal has expressly been conferred the same power, as the Court under Section 9. An order of the Tribunal under Section 17 is also enforceable in the same manner as an order of Court under Section 9, under the provisions of the Civil Procedure Code.81. The 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 time, an application for urgent interim relief has to be entertained by the Court under Section 9 of the 1996 Act.29. It is a well settled proposition that if the facts and circumstances of a case warrant exercise of discretion to act in a particular manner, discretion should be so exercised. An application for interim relief under Section 9 of the 1996 Act, must be entertained and examined on merits, once the Court finds that circumstances exist, which may not render the remedy provided under Section 17 of the said Act efficacious.30. In our view, the Learned Single Bench patently erred in holding there is no impediment or situation where the remedy under Section 17 of the Act is not efficacious. The Learned Single Bench failed to appreciate that the pendency of a Special Leave Petition in which the constitution of the Arbitral Tribunal was under challenge, was in itself, a circumstance which rendered the remedy of the parties under Section 17 uncertain and not efficacious.xxx xxx xxx34. An application for interim relief should ordinarily be decided by the Arbitral Tribunal, once an arbitral tribunal is constituted. However, if circumstances exist which may not render the remedy under Section 17 of the 1996 act efficacious, the Court has to consider the prayer for interim relief on merits, and pass such order, as the Court may deem appropriate.35. The Learned Single Bench has not at all considered whether any interim protection was at all necessary in this case. The bank guarantee was apparently unconditional. In effect, the appellants have been restrained from invoking an unconditional guarantee. The application cannot be heard out until the special leave petition is disposed of.86. In Srei Equipment Finance Limited (Sefl) v. Ray Infra Services Private Limited & Anr. (2016) SCC OnLine Cal 6765 authored by one of us (Indira Banerjee J.), the Division Bench of Calcutta High Court held:5. Under Section 9 of the Arbitration and Conciliation Act, 1996 - a party might 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 to Court under Section 9 for interim relief.6. In our view, the learned Single Bench erred in holding that there was no scope for further order in the pending application under Section 9. The learned Single Bench has not considered the question 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 23rd 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 provisions to pending arbitral proceedings.87. In Avantha Holdings Limited v. Vistra ITCL India Limited 2020 SCC OnLine Del 1717 a Single Bench of the Delhi High Court (C. Hari Shankar J.) held:-45. The Court, while exercising its power under Section 9 of the 1996 Act, has to be acutely conscious of the power, vested in the arbitrator/arbitral tribunal, by Section 17 of the same Act. A reading of Section 9, and Section 17, of the 1996 Act, reveals that they are identically worded. The interim measures, which can be ordered by the arbitral tribunal, under Section 17, are the very same as those which can be ordered by the Court under Section 9. It is for this reason that sub-section (3) of Section 9 proscribes grant of interim measures, by the Court, consequent on constitution of the arbitral tribunal, save and except where the Court finds that circumstances exist, which may not render the remedy, under Section 17, to be efficacious. The Court, while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot, therefore, usurp the jurisdiction which would, otherwise, be vested in the arbitrator, or the arbitral tribunal, yet to be constituted.88. We fully approve the view taken by the Single Bench of the Delhi High Court in Avantha Holdings Limited (supra) except for the observation that the Court, while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot usurp the jurisdiction which would, otherwise, be vested in the arbitrator, or the Arbitral Tribunal, yet to be constituted. The bar of Section 9(3) operates after an Arbitral Tribunal is constituted. There can therefore be no question of usurpation of jurisdiction of the Arbitral Tribunal under Section 17 before the Arbitral Tribunal is constituted. The Court is obliged to exercise power under Section 9 of the Arbitration Act, if the Arbitral Tribunal is yet to be constituted. Whether the Court grants interim relief or not is a different issue, for that would depend on the facts of the case - whether the Applicant has made out a good prima facie case, whether the balance of convenience is in favour of relief being granting to the applicant, whether the applicant would suffer irreparable injury by refusal of interim relief etc.93. It is now well settled that the expression entertain means to consider by application of mind to the issues raised. The Court entertains a case when it takes a matter up for consideration. The process of consideration could continue till the pronouncement of judgment as argued by Khambata. Once an Arbitral Tribunal is constituted the Court cannot take up an application under Section 9 for consideration, unless the remedy under Section 17 is inefficacious. However, once an application is entertained in the sense it is taken up for consideration, and the Court has applied its mind to the Court can certainly proceed to adjudicate the application.94. Mr. Sibal rightly submitted that the intent behind Section 9(3) was not to turn back the clock and require a matter already reserved for orders to be considered in entirety by the Arbitral Tribunal under Section 17 of the Arbitration Act.95. 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. The 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. Mr. Khambata may be right, that the process of consideration continues till the pronouncement of judgment. However, that would make no difference. The question is whether the process of consideration has commenced, and/or whether the Court has applied its mind to some extent before the constitution of the Arbitral Tribunal. If so, the application can be said to have been entertained before constitution of the Arbitral Tribunal.96. 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). 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.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, the question of examining whether remedy under Section 17 is efficacious or not would not arise. The requirement to conduct the exercise arises only when the application is being entertained and/or taken up for consideration. As observed above, 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 far away 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).101. As pointed out by Mr. Khambata, the 246th Report of the Law Commission, submitted in August 2014 states that Section 9(3) seeks to reduce the role of the Court in relation to grant of interim measure, once the Arbitral Tribunal has been constituted. This is also in keeping with the UNCITRAL Model Law which discourages Court proceedings in relation to disputes arising out of an agreement which contains a clause for arbitration.102. As held by this Court in Amazon.com NV Investment Holdings LLC v. Future Retail (supra), the object of introducing Section 9(3) was to avoid Courts being flooded with applications under Section 9 of the Arbitration Act.104. In Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. (2013) 1 SCC 641 ,  this Court observed that majority of the countries admit to the positive effect of kompetenz – kompetenz principle, which requires that the Arbitral Tribunal must exercise jurisdiction over the dispute under the arbitration agreement. Thus, challenge to the existence or validity of the arbitration agreement would not prevent the Arbitral Tribunal from proceeding with the hearing and ruling upon its jurisdiction. If it retains jurisdiction, it may make an award on the substance of the dispute, without waiting for the outcome of any court action aimed at deciding the issue of jurisdiction.105. As held by this Court in Vidya Drolia and Ors. v. Durga Trading Corporation (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 competence- competence with reference to the legislation, that is, the Arbitration Act.106. As held in Vidya Drolia (supra), the Courts do not decide on merits except when permitted by legislation either expressly or by necessary implication. Prioritisation of the Arbitral Tribunal over the the Courts can be partial and limited when the legislation so provides. Vidya Drolia (supra) was referred to a larger Bench, but on a different issue.107. It is reiterated 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 bar of Section 9(3) operates where the application under Section 9(1) had not been entertained till the constitution of the Arbitral Tribunal. Ofcourse it hardly need 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, particularly when there has been a long time gap between hearings and the application has for all practical purposes, to be heard afresh, or the hearing has just commenced and is likely to consume a lot of time. In this case, the High Court has rightly directed the Commercial Court to proceed to complete the adjudication.