1999 (1) TMI 413 - SC - Indian Laws

Courts' Jurisdiction on Interim Orders Pre-Arbitration | 1996 Act Interpretation

Sundaram Finance Ltd. Versus NEPC India Ltd.

The Supreme Court held that under Section 9 of the Arbitration and Conciliation Act, 1996, courts have jurisdiction to issue interim orders before ... Whether under section 9 of The Arbitration and Conciliation Act, 1996 the Court has jurisdiction to pass interim orders even before arbitral proceedings commence and before an arbitrator is appointed? Held that:- Appeal allowed. The High Court erred in coming to the conclusion that the Trial Court had no jurisdiction in entertaining the application under section 9 because arbitration proceed- ings had not been initiated by the appellant. Accordingly set aside the judgment of the High Court but as the High Court has not considered the merits of the case, it is directed that the petition filed by the respondent, challenging the order of the Trial Court, be decided on merits Issues Involved:1. Jurisdiction of the Court under Section 9 of the Arbitration and Conciliation Act, 1996 to pass interim orders before the commencement of arbitral proceedings and before the appointment of an arbitrator.2. Interpretation of Section 9 of the Arbitration and Conciliation Act, 1996 in comparison to the Arbitration Act, 1940.3. Requirement of manifest intention to arbitrate for invoking Section 9.4. Necessity of High Courts to frame rules under Section 82 of the Arbitration and Conciliation Act, 1996.Detailed Analysis:1. Jurisdiction of the Court under Section 9 of the Arbitration and Conciliation Act, 1996:The primary issue was whether the Court has jurisdiction to pass interim orders under Section 9 of the Arbitration and Conciliation Act, 1996 before the commencement of arbitral proceedings and before the appointment of an arbitrator. The Court concluded that Section 9 allows the Court to pass interim orders 'before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced.' The term 'before' was interpreted literally, indicating that the Court can indeed pass interim orders before the commencement of arbitral proceedings. The judgment emphasized that any other interpretation would render the word 'before' redundant, which is not permissible.2. Interpretation of Section 9 of the Arbitration and Conciliation Act, 1996:The Court noted that the 1996 Act is significantly different from the Arbitration Act, 1940, and should be interpreted independently. Reference to the 1940 Act could lead to misconstruction. The Court highlighted that Section 9 of the 1996 Act corresponds to Article 9 of the UNCITRAL Model Law, which also allows for interim measures of protection before or during arbitral proceedings. The judgment clarified that the provisions of the 1996 Act should be interpreted based on the UNCITRAL Model Law rather than the 1940 Act.3. Requirement of manifest intention to arbitrate for invoking Section 9:The Court agreed that when an application under Section 9 is filed before the commencement of arbitral proceedings, there must be a manifest intention to arbitrate. This intention can be shown through various forms, such as an unequivocal reliance on the arbitration agreement, an express undertaking to invoke the arbitration clause, or issuing a notice invoking the arbitration clause. However, the Court emphasized that the absence of a notice under Section 21 does not debar the Court from dealing with an application under Section 9, provided the applicant demonstrates a manifest intention to arbitrate.4. Necessity of High Courts to frame rules under Section 82 of the Arbitration and Conciliation Act, 1996:The judgment highlighted the need for High Courts to frame rules consistent with the Act to facilitate the quick and satisfactory disposal of arbitration cases. The rules should address the procedure for filing applications, the documents required, and the manner in which such applications will be dealt with by the Courts.Conclusion:The Supreme Court set aside the High Court's judgment, which had concluded that the Trial Court lacked jurisdiction to entertain the application under Section 9 because arbitration proceedings had not been initiated. The case was remanded to the High Court to decide on the merits of the respondent's petition challenging the Trial Court's order. The appeals were disposed of with no order as to costs.