Supreme Court: A Division Bench comprising of Indira Banerjee and J.K. Maheshwari, JJ. held that once an Arbitral Tribunal is constituted, the court would not take up for consideration and apply its mind to an application for an interim measure, unless the remedy of applying to the arbitral tribunal for interim relief is inefficacious. However, this bar does not operate where already the application has been taken up for consideration and the court has applied its mind.
Questions of Law
The Supreme Court was deciding two questions of law:
(i) 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 and if so, what is the true meaning and purport of the expression “entertain” in Section 9(3) of the Arbitration Act?
(ii) 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?
Section 9(1) of the Arbitration Act 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. Further, Section 9(3) provides that once an Arbitral Tribunal has been constituted, the court shall not entertain an application under sub-section (1), unless the court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious. Under Section 17, an Arbitral Tribunal has the same power to grant interim relief as the court.
Factual Matrix and Appeal
A commercial dispute arose out of a Cargo Handling Agreement entered into between ArcelorMittal Nippon Steel (India) Ltd. and Essar Bulk Terminal Ltd. ArcelorMittal invoked the arbitration clause. Essar did not respond. Thereafter, ArcelorMittal approached Gujarat High Court under Section 11 of Arbitration Act for appointment of Arbitral Tribunal. Subsequently, both parties filed applications under Section 9(1) in Commercial Court seeking interim measures. The Commercial Court heard both the applications and reserved the orders. Meanwhile, the High Court appointed an Arbitral Tribunal. Pursuant to this, ArcelorMittal requested the Commercial Court to refer both the applications filed under Section 9 to the now-constituted Arbitral Tribunal. This prayer was however rejected by the Commercial Court.
ArcelorMittal challenged the order of the Commercial Court before the High Court, which was dismissed. Aggrieved, ArcelorMittal approached the Supreme Court.
Analysis and Observations
Determining the answer to the questions of law (mentioned above), the Supreme Court noted that Section 9(3) of Arbitration Act has two limbs. The first limb prohibits an application under Section 9(1) from being entertained once an Arbitral Tribunal has been constituted. The second limb carves out an exception to that prohibition, if the court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.
Further, to discourage the filing of applications for interim measures in courts under Section 9(1) of the Arbitration Act, Section 17 clothes the Arbitral Tribunal with the same powers to grant interim measures, as the court under Section 9(1). In fact, 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. The Court opined:
“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.”
Considering the true meaning and purport of “entertain” in Section 9(3), the Court summarised a catena of judicial precedents and noted that it is now well settled that the expression “entertain” means to consider the issues raised by application of mind. The court entertains a case when it takes up a matter for consideration. The process of consideration can continue till the pronouncement of judgment. That, however, makes no difference. The question is whether the process of consideration has commenced, and/or whether the court has applied its mind to some extent before the constitution of the Arbitral Tribunal. If so, the application can be said to have been entertained before the constitution of the Arbitral Tribunal.
Opining that the intent behind Section 9(3) was not to turn back the clock and require a matter already reserved for orders to be considered in entirety by the Arbitral Tribunal under Section 17 of the Arbitration Act, the Court observed:
“On a combined reading of Section 9 with Section 17 of the Arbitration Act, once an Arbitral Tribunal is constituted, the court would not entertain and/or in other words take up for consideration and apply its mind to an application for interim measure, unless the remedy under Section 17 is inefficacious, even though the application may have been filed before the constitution of the Arbitral Tribunal. The bar of Section 9(3) would not operate, once an application has been entertained and taken up for consideration, as in the instant case, where hearing has been concluded and judgment has been reserved.”
The Court noted that even after an Arbitral Tribunal is constituted, there may be myriads of reasons why the Arbitral Tribunal may not be an efficacious alternative to Section 9(1). This could even be by reason of temporary unavailability of any one of the arbitrators by reason of illness, travel etc. Further, unless applications for interim measures are decided expeditiously, irreparable injury or prejudice may be caused to the party seeking interim relief. Therefore, it could 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 the remedy under Section 17. Elaborating, the Court explained:
“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.”
Lastly, but importantly, the Supreme Court clarified that even if an application under Section 9 had been entertained before the constitution of the Arbitral Tribunal, the court always has the discretion to direct the parties to approach the Arbitral Tribunal, if necessary, by passing a limited order of interim protection.
Decision
In such view of the matter, the Supreme Court held that the High Court rightly directed the Commercial Court to proceed to complete the adjudication. It was however clarified 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. [ArcelorMittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., 2021 SCC OnLine SC 718, decided on 14-9-2021]