Ispat Industries Ltd Vs m.v. Thor Orchid decided on 4.3.2004
This case, apart from other issues, discusses the scope of judicial intervention under S.5 as well as the remedy available under S.9 for grant of interim relief by the court.
To briefly sum up the case, the plaintiff was an Indian company dealing in iron ore and the defendant was the foreign flag vessel of Thailand, owned and controlled by Thor Orchids Shipping Co Ltd. In December 2003, the plaintiff entered into a Charter party with the defendant for carriage of iron ore. Subsequently, a dispute arose and the plaintiff claimed that the matter be referred to LMA Arbitration in England, however, approached this court for interim relief since the vessel was within the admiralty jurisdiction of this court when the suit was instituted.
The plaintiff prayed for and was granted the relief that the defendant vessel be arrested , detained and sold and the proceeds thereof be applied to satisfy the plaintiff's claims. The plaintiff felt that International commercial arbitration would come under S.45 and therefore S.5 of Part I of the Act would not apply and oust this court's jurisdiction.
The defendant applied for and obtained vacation of the order, after which it applied for dismissal of the suit, contending that the present suit for relief is not maintainable since the charter party was entered into in Mumbai and the arbitration was international commercial arbitration, the only remedy that could be availed was under S.9 of the Act (Interim measures by Court).
In reviewing the case, the Supreme Court's decision in Bhatia International Vs Bulk Trading SA & Anr: JT 2002 (3) SC 150 was considered where it was held that merely because S.9 is found in Part I and sub section (2) states that this part shall apply where the place of arbitration is India, S.9's applicability is not excluded where the place of arbitration is outside India. However, the question whether the remedy of instituting a case is ousted merely because the remedy under S.9 is available was not discussed in this case.
On the other hand, the division bench held that where remedy under s.9 was available, S.5 ousts the jurisdiction of the court to entertain the suit. It was finally held that since the charter party was entered into in Bombay, this court will have the jurisdiction to grant relief under S.9 and by virtue of S.5, a suit for the same relief claimed by the plaintiff in another application would get ousted. Accordingly the defendant's motion was granted.
Deepak Mitra Vs District Judge, Allahbad
The permissibility of application for interim measures, independent of substantive proceedings was discussed in this case. This Court chose to disagree with another recent decision of Delhi High Court [Ashok Chawla Vs Rakesh Gupta: 1996(37) DRJ 566] which had taken the view that a petition u/s 9 is not entertainable except in the course of proceedings for substantive relief under the Act.
This Court, on the other hand, held that the letter and spirit of Section 9 indicate that it is a self contained provision contemplating that a party may make independent and substantive application under this provision. The party need not have made an application for substantive relief in relation to arbitration matters and in such proceedings, only should have made an application for interim relief u/s 9.
It was further held that the only source of powers of the Court to make orders by way of interim measures is Section 9 and there is not independent power dehors that provision. The Court is aware that the case law on this point is exiguous which may, however, grow only with the passage of time but the interpretation that the Court may make interim measures independent of any substantive proceedings appears to be consistent with the changes brought about by the 1996 Act.
Arun Kapoor Vs Vikram Kapoor
According to the facts, the parties had referred their dispute to a sole arbitrator and terms of settlement of interim arrangement was reached before the Tribunal. The petitioner had moved twice before the arbitrator to obtain injunction and had failed in the attempt. Thereafter, he filed an application for an identical injunction in this court, during the pendency of arbitral proceedings.
It was held that it is a cardinal rule that if the party invokes preliminary alternative remedy before the Arbitral Tribunal, it is debarred from invoking the jurisdiction of the Court u/s 9. Ordinarily, if the arbitrator is seized of the matter the interim relief should not be entertained and the parties should be advised to approach the arbitrator unless and until the nature of relief intended to be sought falls outside the jurisdiction of the arbitrator or beyond the terms of the agreement or reference of disputes. Otherwise the very object of adjudication of disputes by arbitration would stand frustrated. A party should be discouraged to knock on the door of the Court, particularly when the arbitrator is seized of all the relevant or even ancillary disputes.
Kamala Solvent Vs Manipal Finance Corporation Ltd, Manipal
The applicant herein had invoked the provisions of Section 9 (ii)(e) and had filed the present application seeking an injunction restraining the 3rd respondent (who is the sole arbitrator) from proceeding further with the proposed arbitration.
It was held that such an application is unsustainable since under the agreement, the applicant had admittedly given consent for the appointment of the 3rd respondent as sole arbitrator and also for the venue of the arbitration proceedings. This being the case, it is not open for the applicant now to challenge the appointment of the arbitrator.
National Building Construction Corpn Ltd (NBCC) Vs IRCON International Ltd.
The petitioner had moved the court u/s 9 for interim relief, however, the matter was neither referred to arbitration not was anything done to move for reference.
It was held that Section 9 provides that a party may, before or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced in accordance with Section 36, may apply to the court for interim injunction. In this case, the matter has neither been referred to arbitration nor has anything been done so far to move for reference. Since no steps for substantive relief on it had been taken, the petitioner's application was dismissed.
Hairtha Finance Ltd Vs ATV Projects India Ltd
The applicant had filed an application u/s 9(ii) for interim protection and the Counsel for the respondent objected that since there is a dispute regarding appointment of the arbitrator, which itself pending, the applicant cannot sustain the application filed u/s 9 (ii) (a), (b), (c) or (e).
It was held that such a submission cannot be countenanced. Section 9 can be invoked even without referring the dispute to the arbitrators as the requirement is that there should be a dispute which is referable to the arbitral tribunal. It was not disputed that such a requirement was in existence in this case.
Maharashtra State Electricity Board Vs Datar Switchgear Ltd
This case discussed the scope of power of the court u/s 9 vis a vis the powers granted to the arbitrator u/s 17. The court held that if the power that has been conferred upon the court u/s9 is compared with the power conferred on the arbitral tribunal u/s17, it is immediately noticeable that the court can exercise its power either before or during arbitral proceedings or even thereafter upon making of the award but before it is enforced. The Act does not contemplate interference of courts at the interim stage in matters of jurisdiction of the Tribunal or n challenges to the existence or validity of the arbitration agreement.
u/s 9(ii)(e), the court is conferred with residuary power which is sufficiently wide to provide an avenue of redressal to ensure and protect a party against abuse of the arbitral process and grant such interim protection as it may appear to the court to be just and fair. Unlike the power of the arbitral tribunal u/s17, which is co-extensive with the continuation of arbitral proceedings, the power of the court u/s 9 arises both before and during arbitral proceedings and even thereafter. The court must be bound by the general discipline of the Act, which constitutes a code in itself, that discipline being of limited judicial intervention. Therefore, in consonance with the norm of restricted judicial intervention, the court has to assess whether a strong prima facie case has been made out for the exercise of its jurisdiction u/s 9(ii)(e).
A prayer for relief u/s 9(ii)(e) is not a substitute for enforcing the order of the tribunal. A willful disregard of the tribunal's order must be shown to exist. The court has to exercise its powers u/s 9 with caution and circumspection. A default in effecting payment cannot be a ground in itself to justify exercise of power by the court u/s 9.
Sivananda Steels Ltd Vs India Cements Capital Finance Ltd
There was a hire-purchase agreement b/w the parties in respect of machineries. The appellant company was declared sick u/s 3(1)(o) of SICA Act. An arbitrator was appointed to adjudicate the claim. When the appellant committed a default, the respondent invoked section 9 of the Act, as the machineries in question were owned by the respondent. The question that arose was whether proceedings u/s 9 were barred by Section 22(1) and 32(1) of SICA.
It was held that the action initiated by the respondent u/s 9 of the Act was not inconsistent to the SICA Act, Rules or Schemes, both on the score of general overriding provisions in Section 32(1) as also the specific overriding provisions in sub sections 16(5), 22(1), 22(2),22(3), 22(4) and 23(1). Nothing is indicated that they prevail over the Arbitration Act, ie. Section 32(1) has overriding effect only in respect of those laws which are inconsistent with the said Act on the same subject. The Arbitration Act and SICA Act occupy 2 separate and distinct fields, hence there arises no question of repugnancy between the two.
Here, allowing the appellant company to continue in possession of the machineries belonging to the respondent would cause further liability for the respondent who would continue to suffer loss till the disposal of the case by BIFR or AIFR. Section 22 of SICA was not enacted to aggravate the financial difficulties of a sick company. Therefore sections 22(1) and 32(1) do not bar proceedings u/s 9 of the Arbitration Act.
Narayan Prasad Lohia Vs Nikunj Kumar Lohia
This case probed into the question whether an arbitration agreement becomes invalid on the ground that it provided for appointment of only 2 arbitrators.
It was held that even if the parties provided for appointment of 2 arbitrators, the agreement does not become invalid. Under Section 11(3) the two arbitrators should then appoint a third arbitrator who shall act as presiding arbitrator. However, such an appointment should preferably be made in the beginning, even though the two arbitrators may also appoint a 3rd arbitrator at a later stage, ie. If and when they differ. This ensures that on a difference of opinion the arbitration proceedings are not frustrated. But if the 2 arbitrators agree and give a common award, there is no frustration of the proceedings. In such a case their common agreement would have prevailed, even if the 3rd arbitrator had differed.
National Aluminium Company Ltd Vs Metalimpex Ltd
The Arbitration Agreement envisaged 2 arbitrators who in turn would appoint an umpire. One arbitrator was appointed by the petitioner who requested the respondent to appoint the other. On the failure of the respondent to do so, the petitioner approached the Chief Justice for appointment of sole arbitrator.
It was held that a sole arbitrator cannot be appointed in such circumstances in the absence of an agreement between the parties in this regard. Since the arbitration agreement envisages 2 arbitrators who in turn would appoint the presiding arbitrator, it may not be legal to appoint the sole arbitrator. If both the parties had been represented before the court and they had agreed, a sole arbitrator could have been appointed.
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