TaxTMI 
TaxTMI 
2021 (9) TMI 731
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.... 4. Article 15 of the said Cargo Handling Agreement provided that all disputes arising out of the Cargo Handling Agreement were to be settled in Courts, in accordance with the provisions of the Arbitration Act and be referred to a sole Arbitrator appointed mutually by the parties. 5. Disputes and differences having arisen under the said Cargo Handling Agreement, the Appellant invoked the arbitration clause by a notice of arbitration dated 22nd November 2020. According to the Appellant, the Respondent did not respond to the notice of arbitration. 6. The Appellant approached the High Court of Gujarat at Ahmedabad under Section 11 of the Arbitration Act, for appointment of an Arbitral Tribunal. On or about 30th December, 2020, the Respondent replied to the notice of arbitration, contending that the disputes between the parties were not arbitrable and further contending that the total amount due and payable by the Appellant as on 24th December, 2020 was Rs. 673.84 crores inclusive of interest of Rs. 51.11 crores. 7. On or about 15th January, 2021, the Appellant filed an application being Commercial Civil Miscellaneous Application No.2 of 2021 under Section 9 of the Arbitratio....
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....n 17 efficacious." 9. Section 9 as originally enacted, has been renumbered as Section 9(1) by the Arbitration and Conciliation (Amendment) Act (Act 3 of 2016) with effect from 23rd October 2015. The said 2015 Amendment also incorporated sub-Section (2) and sub-Section (3) reproduced above. 10. Before the enactment and enforcement of the said 2015 Amendment, Section 17 read:- "17. Interim measures ordered by arbitral tribunal.- (1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1)." 11. After enactment of the said 2015 Amendment, Section 17 reads:- "17. Interim measures ordered by arbitral tribunal.- (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal- (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (i....
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.... Appellant is set out hereinbelow for convenience. "3. I say and submit that this Hon'ble Court had heard the AMNS Petition and the EBTL Petition extensively, and reserved the petitions for pronouncement of orders. The matters are listed on 20 July 2021 for pronouncement of orders." 16. By an order dated 16th July 2021, the Commercial Court dismissed the said application filed by the Appellant. The Commercial Court however granted the Appellant 10 days' time to challenge the order of the Commercial Court if it so desired. 17. The Appellant filed an application being R/Special Civil Application No.10492 of 2021 in the Gujarat High Court under Article 227 of the Constitution of India challenging the order of the Commercial Court. 18. The said application under Article 227 of the Constitution was heard by a Division Bench of the High Court and listed for final arguments on 2nd August, 2021. In the meanwhile, the High Court directed the Commercial Court to defer the pronouncement of orders in the applications under Section 9 of the Arbitration Act till 9th August, 2021. 19. On 5th August 2021, the application under Article 227 of the Constitution was heard again an....
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....onstruing the word 'entertain' narrowly, observing that entertain would not mean admitting for consideration, but would mean the entire process upto its final adjudication and passing of an order on merits. 25. Mr. Khambata referred to the observations of the 246th Report of the Law Commission of August 2014, that the insertion of Section 9(3) "seeks to reduce the role of the Court in relation to grant of interim measures once the Arbitral Tribunal has been constituted." Mr. Khambata submitted that this also appears to be the spirit of the UNCITRAL Model Law as amended in 2006. Accordingly, Section 17 has been amended to infuse the Arbitral Tribunal with the same powers as a Court. 26. Mr. Khambata submitted the Report dated July 30, 2017 of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, chaired by Hon'ble Mr. Justice B. N. Srikrishna also referred to the insertion of Section 9(3) and observed that the "2015 amendments, in two important respects, signal a paradigm shift towards minimizing judicial intervention in the arbitral process. First, the amendment to Section 9 of the ACA provides that Courts should not entertain applicat....
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....of the Arbitration Act. The fact that orders were reserved on 7th June 2021 does not mean that the Commercial Court stopped entertaining the said petitions. 32. Referring to Deep Chand & Ors v. Land Acquisition Officer & Others (1994) 4 SCC 99 : AIR 1994 SC 1901, Mr. Khambata submitted that the term "adjudication" means "..formal giving or pronouncing a judgment or decree in a Court proceeding.." and implies a hearing by a Court. Thus, the term "entertain" in Section 9(3) of the Arbitration Act, is to be interpreted to mean "adjudicate" and implies the passing of an order and/or judgment. 33. Mr. Khambata argued that the word "entertain" in Section 9(3) has to be interpreted in the context of Section 9(1) of the Arbitration Act. Section 9(1) of the Arbitration Act provides for the "making of orders" for the purpose of grant of interim relief. The internal aid to construction provided under Section 9 of the Arbitration Act further substantiates the Appellant's submission that entertain would necessarily mean all acts including the act of making orders under Section 9(1) of the act. 34. Mr. Khambata submitted that while the Respondent's nominee Arbitrator has withdrawn, the ....
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....e nomnation of the substitute Arbitrator, but is now is taking the plea of inefficacy of the remedy under Section 17 of the Arbitration Act. 40. Mr. Khambata submitted that the High Court had erred in directing the District Court to pass orders in the applications under Section 9 of the Arbitration Act, despite the fact that no party had filed any application in the Commercial Court, challenging the efficacy of the arbitral proceedings. Mr. Khambata submitted that the High Court's interpretation of Section 9(3) of the Arbitration Act is in accordance with the prevalent law as settled by this Court and the various High Courts. 41. Mr. Khambata referred to the meaning of "entertain" in Black's Law Dictionary (Bryan A. Garner, 8th edition, 2004), which is to "bear in mind or "to give judicial consideration to". Mr. Khambata also cited the judgment of a Division Bench of the Calcutta High Court in Sri. Tufan Chatterjee v. Sri. Rangan Dhar 2016 SCC Online Cal 483 (Paras 35, 43), authored by one of us, (Indira Banerjee, J.). In Tufan Chatterjee (supra), the word "entertain" was interpreted to mean "considering an application on merits, even at the final stage". Mr. Khambata arg....
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....t have directed the Commercial Court to pass orders. 46. Mr. Kapil Sibal appearing on behalf of the Respondent submitted that the question before this Court, of whether Section 9(3) of the Arbitration Act would be applicable in respect of the aforesaid two applications under Section 9 of the Arbitration Act, filed by the Appellant and the Respondent respectively, has to be answered in the negative since the applications were finally heard on merits and reserved for orders on 7th June 2021, before the constitution of the Arbitral Tribunal on 9th July, 2021. 47. Mr. Sibal argued that the application under Article 227 filed in the Gujarat High Court was not maintainable for the following reasons: (i) The Arbitration Act being a self-contained Code providing the right of appeal at various stages, Article 227 cannot be invoked to circumvent the procedure under Arbitration Act. Power under Article 227 can only be exercised where a party is left either remediless or where clear bad faith is shown. (ii) An application under Article 227 of the Constitution of India lies where the lower Court has acted outside the bounds of its authority, without jurisdiction, in violation of ....
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....onsideration", would depend on whether the Trial Court had admitted into consideration and applied its mind to the Section 9 Applications, filed by the respective parties, and therefore, the Section 9 Applications had gone past the stage of "entertainment", as contemplated under Section 9(3) of the Arbitration Act. Mr. Sibal argued that the High Court has erroneously held: "The word 'entertain' occurring in sub-section (3) of section 9 would not merely mean to admit a matter for consideration, but it also entails the whole procedure till adjudication, i.e., passing of final order." 54. Mr. Sibal argued that the prayer in the application dated 16th July, 2021 filed by the Appellant could never have been granted. Mr. Sibal pointed out that the Appellant sought an order for referring all disputes between the parties as mentioned in the two applications under Section 9 of the Arbitration Act to the Arbitral Tribunal for adjudication. However, the Arbitration Act did not confer power under the Arbitration Act on the Court, to relegate or transfer a pending application under Section 9(1) of the Arbitration Act to the Arbitral Tribunal, the moment an Arbitral Tribunal were con....
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.... the Respondent was in contact with the Appellant to agree on the name of the Arbitrator. Eventually the parties consented to have a three member Arbitral Tribunal. On 25th August, 2021, Justice G.T. Nanavati (Retired) resigned on the ground of health, after which there is no functional Arbitral Tribunal. Even after the Arbitrator appointed by the Respondent resigned, the Respondent promptly commenced the process for appointment of substitute arbitrator, and addressed a letter dated 27.08.2021 to the Appellant. 62. Distinguishing the judgments cited by Mr. Khambata, Mr. Sibal emphatically argued that the word "entertain" in Section 9(3) of the Arbitration Act would mean the first occasion when the Court takes up the application for consideration, and would have no application to a case where the application is fully heard and orders are reserved. 63. Section 9(1) of the Arbitration Act, as amended enables a party to an arbitration agreement to apply to a Court for interim measures of protection before or during the arbitral proceedings, or at any time after an award is made and published, but before the Award is enforced in accordance with Section 36 of the Arbitration Act. ....
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....ed 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 Black's 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." 7....
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....on Act. 77. As argued by Mr. Sibal, in Tufan Chatterjee (supra) the applicant seeking interim relief under Section 9 of the Arbitration Act had referred to Section 26 of the Amendment Act (Act 3 of 2016) and contended that the 2015 Amendment would not apply to proceedings pending when the 2015 Amendment came into force. 78. It was also argued that arbitral proceedings having commenced before the 2015 Amendment came into effect and/or in other words, before 23rd October 2015, the 2015 Amendments would not apply to the arbitral proceedings, which would be governed by the law as it stood before the amendment. The Arbitral Tribunal would, therefore, not be able to grant relief under Section 17 as amended by the 2015 Amendments. As argued by Mr. Kapil Sibal, the applicability of the 2015 Amendment to pending proceedings under Section 9 of the Arbitration Act in a Court, as also the power of the Arbitral Tribunal to grant relief under Section 17 in pending Arbitration proceedings, were in issue in Tufan Chatterjee (supra). 79. The High Court distinguished Court proceedings from arbitral proceedings and held that the 2015 Amendment would apply to Court proceedings. The High Court....
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....n 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 examine....
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....it makes it clear. We may also note that if the argument of the appellant were to be accepted that the moment an Arbitral Tribunal is constituted, the Court which is seized of a Section 9 application, becomes coram non judice, would create a serious vacuum as there is no provision for dealing with pending matters. All the powers of the Court to grant interim measures before, during the arbitral proceedings or at any time after the making of the arbitral award but prior to its enforcement in accordance with Section 36 are intact (and, have not been altered by the amendment) as contained in Section 9(1) of the said Act. Furthermore, it is not as if upon the very fact that an Arbitral Tribunal had been constituted, the Court cannot deal with an application under sub-section (1) of Section 9 of the said Act. Section 9(3) itself provides that the Court can entertain an application under Section 9(1) if it finds that circumstances exist which may not render the remedy provided under Section 17 efficacious. 25. We may also note that there is no provision under the said Act which, even as a transitory measure, requires the Court to relegate or transfer a pending Section 9(1) appli....
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....rd 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 ....
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....taken in Dhoom Chand Jain v. Chamanlal Gupta [AIR 1962 All 543] in which the learned Chief Justice Desai and Mr Justice Dwivedi gave the same meaning to the expression "entertain". It is observed by Dwivedi, J., that the word "entertain" in its application bears the meaning "admitting to consideration", and therefore when the court cannot refuse to take an application which is backed by deposit or security, it cannot refuse judicially to consider it. In a single bench decision of the same court reported in Bawan Ram v. Kunj Beharilal [AIR 1961 All 42] one of us (Bhargava, J.) had to consider the same rule. There the deposit had not been made within the period of limitation and the question had arisen whether the court could entertain the application or not. It was decided that the application could not be entertained because proviso (b) debarred the court from entertaining an objection unless the requirement of depositing the amount or furnishing security was complied with within the time prescribed. In that case the word "entertain" is not interpreted but it is held that the Court cannot proceed to consider the application in the absence of deposit made within the time allowed by ....
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....nitiation of proceeding." 92. In Martin & Haris Limited (supra), the Court was considering proviso to Section 21 of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 which provided that where the building was in the occupation of a tenant since before its purchase by the landlord, such purchase being made after the commencement of this Act, no application shall be entertained on the grounds mentioned in Clause (a), unless a period of 3 years has elapsed since the date of such purchase and the landlord has given a notice in that behalf to the tenant, not less than 6 months before such application, and such notice may be given before the expiration of the aforesaid period of 3 years. The Court held :- " Thus the word "entertain" mentioned in the first proviso to Section 21(1) in connection with grounds mentioned in clause (a) would necessarily mean entertaining the ground for consideration for the purpose of adjudication on merits and not at any stage prior thereto as tried to be submitted by learned Senior Counsel, Shri Rao, for the appellant." 93. It is now well settled that the expression "entertain" means to consider by application of mi....
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.... matter of Arbitration and/or otherwise ensure that the arbitration proceedings do not become infructuous and the Arbitral Award does not become an award on paper, of no real value. 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 w....
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....n-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 competencecompetence with reference to the legislation, that is, the Arbitration Act." [Emphasis supplied] 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. Vidy....