Calcutta High Court: Power of Court to Continue to Hear an Application for Interim Relief Would Not be Fettered under Section 9(3) of A&C Act, 1996

Calcutta High Court: Power of Court to Continue to Hear an Application for Interim Relief Would Not be Fettered under Section 9(3) of A&C Act, 1996

The Calcutta High Court by its single judge has observed that, while Section 9(3) of the Arbitration and Conciliation Act, 1996 bars the Court from taking up any interim application after the due constitution of the arbitral tribunal, the same could not fetter the power of a Court to continue hearing an application, which it had already entertained prior to constitution of Arbitral Tribunal.

In the present case an application for interim relief was filed by the petitioners on 10 February, 2023 and the Arbitral Tribunal was constituted on 17 May, 2023. Meanwhile, a Co-ordinate Bench of the Court passed an order on 15 March, 2023 directing the respondents to show-cause as to why the respondents should not be directed to deposit a sum of Rs. 5,95,40,498.60 for securing the claim of the petitioner.

Affidavits were exchanged between the parties and orders were passed by the Court on 10 April, 2023, 1 May, 2023 and 14 June, 2023. It was argued by the petitioner that the Court could continue hearing the petition for interim relief while the respondents relied on Section 9(3) of the 1996 Act to emphasize on the bar on the Court.

The Court upon perusal of Section 9(1) noted that it permits a party before or during arbitral proceedings or at any time after making of the arbitral award but before enforcement of the award to apply to a Court for interim measures. The width of the Court’s powers to grant interim relief to a party under section 9(1) and the right of a party to seek for such relief is almost boundless but is reined-in by section 9(3), stated the judge.

In this regard, the Court observed, “The constitution of the arbitral tribunal hence becomes a fetter on the Court from passing interim orders under section 9(1) or even entertaining an application under section 9(1) subject to the Court being of the view that circumstances are not conducive for the party seeking such interim relief before the arbitral tribunal under section 17 of the Act. Section 17 provides for interim measures by the arbitral tribunal and grants equal leeway to an arbitral tribunal to pass orders for interim relief.”

The Court referred to the decision of the Supreme Court in Arcelor Mittal Nippon Steel India Limited vs. Essar Bulk Terminal Limited, wherein the Court considered the expression ‘entertain’ and held that if the Court had already applied its mind to the issues raised, then the Court can proceed to adjudicate the application under section 9(1) notwithstanding the bar of section 9(3).

The Court noted the orders on record and observed that the Single Judge by the order dated 15 March, 2023 directed the respondents to show-cause as to why the respondents should not be directed to deposit a certain sum of money.

Apart from the length of the period of consideration, i.e., from 15 March, 2023 to 14 June, 2023 when affidavits were complete, the first order of 15 March, 2023 itself showed that the learned Single Judge had considered the factual contentions raised in the matter.

Therefore, the Court said that the order reflected that the learned Judge was satisfied on the facts and considered the necessity of passing such an order.

The Court was of the view that the word ‘entertain’ requires the Court to enter into an active consideration of the issues presented by the parties and pleaded in an application and involves the Court applying its mind to the facts and the law urged before it.

It was further elucidated by the Court that the process of entertaining a matter (with or without the Court being entertained) hence, commences from the day when the Court enters into the arena of the facts, law and essentially the dispute between the parties and cannot be broken up into phases of intensity or relevance.

Although, the Court clarified that the degree of a Court’s engagement in a matter may be subjective, the broad requirement is that a Court becomes alive and interested in the matter and applies its mind to the facts before it.

The Court held that the intended object of section 9(3) is to allow the arbitral tribunal to consider the prayer for interim relief once the tribunal has been constituted. Section 9(3) aims to prevent multiple levels of hearing for the same relief.

“The section envisages a clockwise motion of considerations of the matter after an arbitral tribunal has been constituted. The hands of the clock however stop to tick where the Court has already gone into the matter. Permitting the parties to re-agitate the matter in such cases before the arbitral tribunal would in effect rewind the clock which is not what section 9(3) intends,” remarked the Court.

Accordingly, Court held that it would continue hearing the interim application under Section 9(1), notwithstanding the constitution of the Arbitral tribunal, since it would not fall under the bar under Section 9(3) due to having already ‘entertained’ the dispute previously.