2021 (9) TMI 731 - SC - Indian Laws

Court can adjudicate Section 9 application after Tribunal formation, clarifies appeal

The Court clarified that it can entertain an application under Section 9(1) of the Arbitration Act even after the constitution of an Arbitral Tribunal if ... Power of Court to entertain an application under Section 9(1) of the Arbitration and Conciliation Act, 1996, once an Arbitral Tribunal has been constituted - true meaning and purport of the expression “entertain” in Section 9(3) of the Arbitration Act - whether the Court is obliged to examine the efficacy of the remedy under Section 17, before passing an order under Section 9(1) of the Arbitration Act, once an Arbitral Tribunal is constituted? HELD THAT:- To discourage the filing of applications for interim measures in Courts under Section 9(1) of the Arbitration Act, Section 17 has also been amended to clothe the Arbitral Tribunal with the same powers to grant interim measures, as the Court under Section 9(1). The 2015 Amendment also introduces a deeming fiction, whereby an order passed by the Arbitral Tribunal under Section 17 is deemed to be an order of Court for all purposes and is enforceable as an order of Court - 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. 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. Meaning of the the expression “entertain” - HELD THAT:- 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. 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 - Negative Kompetenz-Kompetenz is a sequel to the rule of priority in favour of the Arbitrators, that is, the requirement for parties to an arbitration agreement to honour their undertaking to submit any dispute covered by such an agreement to arbitration. This entails the consequence that the Courts are prohibited from hearing such disputes. 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. The appeal is allowed only to the extent of clarifying that it shall not be necessary for the Commercial Court to consider the efficacy of relief under Section 17, since the application under Section 9 has already been entertained and considered by the Commercial Court - Appeal allowed in part. Issues Involved:1. Whether the Court has the power to entertain an application under Section 9(1) of the Arbitration and Conciliation Act, 1996, once an Arbitral Tribunal has been constituted.2. The meaning and purport of the expression 'entertain' in Section 9(3) of the Arbitration Act.3. Whether the Court is obliged to examine the efficacy of the remedy under Section 17 before passing an order under Section 9(1) of the Arbitration Act, once an Arbitral Tribunal is constituted.Detailed Analysis:1. Power of the Court to Entertain an Application under Section 9(1) Post Constitution of Arbitral Tribunal:The Court examined whether it retains the power to entertain an application under Section 9(1) of the Arbitration Act after the constitution of an Arbitral Tribunal. The Court noted that Section 9(3) restricts the Court from entertaining such applications unless it finds that circumstances exist which may not render the remedy provided under Section 17 efficacious. The Court emphasized that the Arbitral Tribunal, once constituted, should ideally handle interim measures to minimize judicial intervention and decongest the court system. However, the Court retains the discretion to entertain applications if the remedy under Section 17 is deemed inefficacious.2. Meaning and Purport of the Expression 'Entertain' in Section 9(3):The term 'entertain' in Section 9(3) was scrutinized to determine its scope. The Court referred to various judgments and legal dictionaries to conclude that 'entertain' means considering an application on merits, which includes the entire process up to the final adjudication and passing of an order. The Court clarified that once an application is taken up for consideration and the Court has applied its mind, it can proceed to adjudicate the application even if the Arbitral Tribunal is constituted subsequently. The process of consideration continues until the pronouncement of the judgment.3. Obligation to Examine the Efficacy of Remedy under Section 17:The Court discussed whether it is mandatory to examine the efficacy of the remedy under Section 17 before passing an order under Section 9(1) after the constitution of an Arbitral Tribunal. The Court held that the efficacy of the remedy under Section 17 must be assessed at the time of entertaining the application. If the application has already been entertained and considered, the question of examining the efficacy of the remedy under Section 17 does not arise. The Court emphasized that the legislative intent was not to turn back the clock and require matters already reserved for orders to be reconsidered by the Arbitral Tribunal under Section 17.Conclusion:The Court concluded that:- The Court can entertain an application under Section 9(1) even after the constitution of an Arbitral Tribunal if the remedy under Section 17 is inefficacious.- The term 'entertain' includes the entire process of considering an application on merits up to the final adjudication.- Once an application is entertained and considered, the Court can proceed to adjudicate it without reassessing the efficacy of the remedy under Section 17.The appeal was allowed to the extent of clarifying that the Commercial Court need not consider the efficacy of relief under Section 17 since the application under Section 9 had already been entertained and considered. The judgment and order under appeal did not otherwise call for interference.