THE HONBLE THE ACTING CHIEF JUSTICE SRI DILIP B.BHOSALE AND THE HONBLE SRI SRI JUSTICE M.S.RAMACHANDRA RAO
AND
THE HONBLE SRI JUSTICE A.RAMALINGESWARA RAO
C.M.A. No.1206 OF 2012
12-06-2015
M/s.East India Udyog Limited Appellant
Maytas Infra Limited & another Respondents
Counsel for Appellant: Sri M.Ravindernath Reddy
Sri A.Srinarayana
Counsel for Respondents:Sri S.Niranjan Reddy
<GIST:
>HEAD NOTE:
? Cases referred: 1) 2011(5) ALD 327 (DB) = 2011 (4) ALT 297 (DB)
2) 2008 (2) ALD 693 (DB) = 2008 (3) ALT 631 (DB)
3) (1999) 2 Supreme Court Cases 479
4) (2004) 3 Supreme Court Cases 155
5) AIR (SC)-2007-0-2144
6) (2007) 7 SCC 125
7) (2002) 2 SCC 510
8) [ 2014(3) BomCR 551]
9) (2010) 2 GLR 512 = MANU/GH/0312/2009
10) AIR 1999 MP 271
11) [2014(4) RLW 3660 (Raj.)]
12) [2003(2) ARBLR 259 (Gujarat)]
13) [2008(3) ARBLR 295 (Kar)]
THE HONBLE THE ACTING CHIEF JUSTICE SRI DILIP B.BHOSALE
AND
THE HONBLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
THE HONBLE SRI JUSTICE A.RAMALINGESWARA RAO
C.M.A. No.1206 OF 2012
JUDGMENT: (per the Honble The Acting Chief Justice Sri Dilip B.Bhosale)
The order of reference dated 28th January, 2013, which
has occasioned the constitution of this Full Bench, has been
passed by a Division Bench in the instant Civil Miscellaneous
Appeal. The Division Bench in this case having disagreed with
the view taken by another Division Bench of this Court in
Bilasraika Sponge Iron Pvt. Ltd., Hyderabad V. Devi
Trading Co., Hongkong( ) (for short Bilasraika) formulated
the following questions, which consequently require
determination by this Full Bench:
a) Whether the Court as defined under Section 2 (e) of
the Act, is entitled to dispose of the application filed
under Section 9 of the Act before initiation of the
arbitral proceedings under section 21 of the Act, ex-
parte without giving notice to the respondents, if the
facts and circumstances so warrant?
b) Whether the Court as defined under Section 2 (e) of
the Act, is entitled to grant any interim order
pending disposal of the interim measure application
under Section 9 of the Act?
c) Whether further application pending disposal of the
interim measure under Section 9 of the Act, is
maintainable?
02) The Division Bench, in the instant appeal, also
considered the judgment of this Court in Gulf Oil Corporation
Ltd., Hyderabad V. Singareni Collieries Co. Ltd.,
Kothagudem( ) (for short Gulf Oil) and having noticed the view
taken therein observed that the learned Judges were unable to
prima facie agree with the opinion of the Division Bench in
Bilasraika with regard to the power of the Court to pass an
ad-interim order/measure before disposal of interim measure
application filed under Section 9 of The Arbitration & Conciliation
Act, 1996 (for short the Act).
03) It would be advantageous to reproduce the relevant
observations made by this Court in Bilasraika for understanding
better the background against which the Division Bench in the
instant Civil Miscellaneous Appeal framed the aforementioned
questions and referred to Full Bench. The relevant paragraphs
16, 17 and 21 read thus:-
16. Since the jurisdiction to order interim measures
is conferred on the Court, in respect of any grievance
of a party before or during arbitral proceedings, it is
axiomatic that the Court has the power, authority and
jurisdiction to order ad-interim measures as well and
pending ordering of measures after hearing affected
parties (arrayed as respondent to an application under
Section 9). The appeal provided under Section 37 of the
1996 Act comprises within its locus an appeal against an
order granting ad-interim measures, pending passing of final
orders under Section 9 of the 1996 Act as well.
17. In the considered view of this Court since
Section 9 of the 1996 Act incorporates a power in the
Court to grant ad-interim measures, pending grant of
measures after hearing the concerned parties as well
and without the necessity of reliance on the
provisions of Order XXXVIII Rule 5 CPC, the order of
this Court dated 12.1.2011 could be considered
proprio vigore an order under Section 9 of the 1996
Act granting ad-interim measures. Such an order
could be appealed against under Section 37 of the
1996 Act.
21. In the view we have taken; that the power to pass
an order granting ad-interim measures before hearing
the respondent in an application under Section 9 of
the 1996 Act is also comprehended within the scope
of the powers granted under Section 9, the order dated
12.1.2011 could be truly and fairly considered an order
passed under Section 9 and it would not be necessary, in the
facts and circumstances of this case, for the appellant to
await the passing of an order under order XXXVIII Rule 6
CPC and to pursue remedies thereagainst. This appeal is
therefore maintainable as an appeal against an order passed
under Section 9 of the 1996 Act. This issue is answered
accordingly and in favour of the appellant.
(emphasis supplied)
04) In Gulf Oil (supra), the Division Bench while dealing
with Section 9 of the Act held that it only provides for the interim
arrangement, protection or any direction, which may warrant on
the facts and circumstances and a party can invoke the said
provision to seek any such relief as specified thereunder. It was
further observed that such relief can be invoked even before or
during the arbitral proceedings or at any time after the Award
but before it is enforced and that the relief as provided for or the
application, which needs to be filed under Section 9 of the Act, is
only for an interim measure and not for any substantive relief.
4.1) It would be relevant to reproduce the relevant
observations made by this Court in Gulf Oil (supra), which read
thus:-
12. In spite of such clear and categorical letter of the law
under the aforesaid provision, it is brought to our notice
that pending all such applications filed under Section
9 of the Act, seeking interim reliefs or measures or for
any directions, once again further interim applications
are being filed like the present one which is appealed
against in this appeal, seeking further or varied interim
reliefs by way of injunctions and directions which only
amounts to duplication of the very enquiry and adds to the
delays in disposal of main interim application and repetition
of the exercise. Such action is not only permissible and
contemplated under the law but goes far beyond the
scope of provision and objects intended under Section
9 of the Act. Therefore, it has to be seen that the very
application filed under Section 9 of the Act itself
should be treated as an interim application alone and
shall accordingly be disposed of on the same
procedure or approach as normally followed. This
Court is informed during the course of arguments that even
the main applications filed under Section 9 of the said Act
are being kept for quite long time for some or other reason
including due to pendency of such further interlocutory
applications and are being treated as a substantive
application almost on par like a regular suit or other O.P.,
touching upon the main lis. However, having regard to
the very nature of the proceedings as provided for
and as stated above, necessarily wherever such
applications are being filed by the parties, the Court
should take up the main application itself and dispose
of in the same manner as an interim application but
not to entertain any interim applications. In this case,
no doubt, the Court below has rejected the present interim
application on the ground that it is in total variance with the
main relief without taking up main applications. We refrain
from expressing any opinion on merits either way. Instead
of entertaining applications of this nature, which may give
scope to the parties to go on filing one application after the
other pending the main application under Section 9 of the
Act, the endeavour should be to take up the main
application under Section 9 of the Act and dispose of the
same as expeditiously as possible after appearance of the
respondent. Therefore, we hold that having regard to
the nature of proceedings as contemplated under
Section 9 of the Act, further interim application as has
been filed and framed is neither maintainable nor can
require to be considered by the Court. However, by
taking into consideration the apprehensions expressed
across the Bar in regard to long pendency and delays in
disposal of the applications filed under Section 9 of the Act,
we hold that all such applications shall have an expeditious
disposal as expeditiously as possible, immediately after the
appearance of the respondent not later than three months
from such appearance of the respondent. Such approach
would more apt and objectively meets the ends of justice.
(emphasis supplied)
4.2) Thus, from perusal of both the judgments, difference
of opinion is apparent. The reference order, therefore, having
disagreed with the view taken in BILASRAIKA, referred the
questions for determination to Full Bench.
05) The Division Bench, in the instant appeal, after
considering the judgments in Bilasraika and in Gulf Oil and
after referring to the judgment of the Supreme Court in
Sundaram Finance Ltd., V. NEPC India Ltd.,( ) and so also
to the Rules framed by this High Court being The Andhra
Pradesh Arbitration Rules, 2000 (for short the Rules), in the
concluding paragraph observed thus:-
This court in GULF OIL case (referred supra 2) held that
having regard to the nature of the proceedings as
contemplated under Section 9 of the Act, further interim
application is not maintainable and that application filed
under Section 9 of the Act shall have to be disposed of
expeditiously, which judgment was not cited or considered in
the later judgment of this Court in BILASRAIKA case. As
we are unable to prima facie agree with the opinion of
the later judgment of this court in BILASRAIKA case
with regard to the power of the Court to pass an
ad-interim order/measure before disposal of interim
measure application filed under Section 9 of the Act
and in view of the important issues involved which will have
a far reaching effect on various applications pending before
the Civil Courts under Section 9 of the Act, we deem it
appropriate that the matter be referred to a Full Bench for
an authoritative judgment on the following issues.
(emphasis supplied)
5.1) The issues/questions famed by the Division Bench
are already reproduced in the first paragraph of this Judgment.
06) The relevant facts, which are necessary for
consideration of the questions referred to the Full Bench, are
that the appellant filed a petition under Section 9 of the Act for
the relief of injunction restraining the 2nd respondent from
paying and the 1st respondent from receiving the amounts
covered by three(3) performance bank guarantees
dated 03.10.2007, 17.01.2008 and 12.12.2007 for
Rs.3,48,625/-, 15,78,950/- and Rs.24,07,500/- respectively. The
1st respondent is a Company while the 2nd respondent is a Bank.
The appellant is engaged in manufacture, supply and export of
various types of power transformers with high quality and in
conformity with the ISO-9001:2000 standard. Andhra Pradesh
Northern Power Distribution Company Limited (for short
APNPDCL) had awarded a contract to one M/s. Manchu Konda
Prakashan & Company for electrification of various divisions
situated in northern districts of Andhra Pradesh. The said work
was taken up by the 1st respondent informally from M/s. Manchu
Konda Prakashan & Company. The 1st respondent, which
required transformers for the project at Bansawada division of
Nizamabad District of north Andhra Pradesh, issued the purchase
order dated 30-07-2007 to the appellant for supply of
1791 transformers. The total value of the order was
Rs.8,72,01,650/-. Out of 1791 transformers, 799 were to be of
16 KVA and 992 were to be of 25 KVA. The terms and conditions
were stipulated in the purchase order. Pursuant to the
understanding with the 1st respondent, the aforementioned bank
guarantees were furnished in favour of the 1st respondent by the
2nd respondent agreeing to pay the value of bank guarantees on
its invocation. Pursuant to the purchase order dated 30-07-2007,
the appellant started making supplies of transformers and the
last consignment was delivered in the month of March, 2008.
According to the appellant, representatives of 1st respondent and
APNPDCL inspected the transformers at the site and on their
satisfaction the transformers were transmitted. Further, on
receipt of material at site, the 1st respondent took steps for
release of payments as agreed under the purchase order and
cleared 90% of the amount payable. Further, according to the
appellant, there was a delay of 3 to 4 months in making
payments, for which the appellant did not make grievance
immediately and accepted the delayed payments in good faith.
Even after completion of six months, neither the payment was
made nor any grievance about the quality of transformers was
made by the 1st respondent or its customer-APNPDCL. The
appellant contend that balance 10% of the amount was to be
paid by demand draft but payment was not made. The 1st
respondent claimed that balance amount payable was adjusted
towards the taxes paid by them. This claim of the 1st
respondent, according to the appellant, was absurd and not
consistent with the agreement between the parties. The
1st respondent also raised issues as to quality of transformers
when the appellant claimed the balance payment. According to
the 1st respondent, inspite of repeated reminders, the appellant
did not take steps to replace the defective transformers or to
rectify the defects and in these circumstances, the
1st respondent claimed that they were left with no option but to
invoke the performance of bank guarantees furnished by the
appellant by cancelling the purchase order.
07) We are not going into further details since we do not
propose to deal with the appeal on merits and we would like to
confine ourselves only to address the questions referred to this
Bench. We also would like to clear that while narrating the
factual matrix, we shall not be understood to have expressed
any opinion on merits of the case.
08) Mr.M.Ravindernath Reddy, learned counsel for the
appellant, and Mr.S.Niranjan Reddy, learned counsel for the
respondents, at the outset, submitted that having regard to the
facts and circumstances of the instant appeal and so also the
judgments of this Court in Bilasraika and Gulf Oil (supra), the
first and second questions as framed in the reference order
dated 28-01-2013 need to be reframed. We would not like to
examine whether the questions/issues referred are correctly
framed and we would like to proceed to address the questions,
as they are, in the light of the observations made in the
reference order dated 28-01-2013 and in the light of the law
declared in Bilasraika and Gulf Oil (supra) of this Court. At
this stage, we deem it appropriate to record that both the
learned counsel for the parties submitted that application under
Section 9 of the Act cannot be decided ex parte without giving
notice to the respondents, but the Court, as defined under
Section 2(3) of the Act, is entitled to grant an ad-interim order
pending disposal of the interim measure application under this
provision. In support of their contention, they relied upon the
judgments of the Supreme Court, this High Court and the other
High Courts and also invited our attention to the relevant
provisions of the Act and also the Rules.
09) The provisions of the Act, which are relevant for our
purpose, are Sections 2(e), 9, 17, 21 and Section 37. Section
2(e) defines Court. Since the definition of the word Court is
not in dispute we refrain from reproducing the same. Section 9
of the Act, which gives power to the Court to pass interim
orders, and the interpretation of which we are concerned with in
the present case reads thus:
9. Interim measures, etc. by Court :
A party may, before or during arbitral proceedings or
at any time after the making of the arbitral award but before
it is enforced in accordance with Section 36, apply to a
Court,-
(i) for the appointment of a guardian for a minor
or a person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect
of any of the following matters, namely,-
(a) the preservation, interim custody or sale of any
goods which are the subject-matter of the arbitration
agreement;
(b) securing the amount in dispute in the
arbitration;
(c) the detention, preservation or inspection of any
property or thing which is the subject-matter of the dispute
in arbitration, or as to which any question may arise therein
and authorizing for any of the aforesaid purposes any person
to enter upon any land or building in the possession of any
party, or authorising any samples to be taken or any
observation to be made, or experiment to be tried, which
may be necessary or expedient for the purpose of obtaining
full information or evidence;
(d) interim injunction or the appointment of a
receiver;
(e) such other interim measure of protection as
may appear to the Court to be just and convenient;
And the Court shall have the same power for making orders
as it has for the purpose of, and in relation to, any
proceedings before it.
9.1) As this Section refers to arbitral proceedings, it is
necessary to reproduce Section 21 of the Act, which relates to
commencement of arbitral proceedings. Section 21 reads thus:-
21. Commencement of arbitral proceedings:
Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on
the date on which a request for that dispute to be referred
to arbitration is received by the respondent.
9.2) Section 17 of the Act confers jurisdiction on the
Arbitral Tribunal as defined under Section 2(d) of the Act to pass
interim orders. Section 17 of the Act reads thus:-
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).
10) A glance at Section 9 would show that an application
for interim order/measure can be filed before or during arbitral
proceedings or at any time after the making of arbitral award,
but before it is enforced in accordance with Section 36. The
Arbitral proceedings, contemplated by Section 9 commences
on the date on which a request for particular dispute is received
by the respondent for its reference to arbitration, as provided for
in Section 21 of the Act. In this context, we will have to
understand what the expression before or during arbitral
proceedings occurring in Section 9 of the Act would exactly
mean. The first question referred for our consideration is
whether the Court can dispose of the application filed under
Section 9 of the Act before initiation of arbitral proceedings
under Section 21 of the Act, ex parte, without giving notice to
the respondents, if the facts and circumstances so warrant. In
view thereof, the expression before or during arbitral
proceedings occurring in Section 9 of the Act assumes
importance.
10.1 Section 17 of the Act provides that the arbitral
tribunal may, at the request of the 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. From a bare perusal of this provision, it is clear that
the arbitral tribunal can pass interim order during pendency of
the arbitration before the tribunal, while Section 9 empowers the
Court to make an order in the nature of interim measure before
or during arbitral proceedings or at any time after making of the
arbitral award but before it is enforced in accordance with
Section 36 of the Act.
10.2 Section 37 deals with appealable orders. Under
Section 37, for our purpose, the order granting or refusing to
grant any measure under Section 9 of the Act is appealable to
the Court authorized by law to hear the appeals from original
decree of the Court passing the order.
11. Next, we would like to consider the relevant Rules.
This High Court, in exercise of the powers conferred under
Section 82 of the Act made the Rules called as Andhra Pradesh
Arbitration Rules, 2000 (for short, the Rules). Rule 4 thereof,
provides for the procedure for making applications under
Sections 8, 9, 14, 27, 34, 39 & 43 of the Act. In the present
appeal, we are concerned only with the application under Section
9 of the Act.
11.1 Rule 6 of the Rules, provides that in an application
for interim measure filed under Section 9, before the
commencement of the arbitral proceedings, the applicant should
specifically refer to the steps, if any, already taken to seek
arbitration and that the applicant is willing and prepared to take
necessary steps for utmost expedition to seek reference to
arbitration in terms of the arbitration agreement/clause. Thus,
as stated in this Rule, it is clear that one can file application for
interim order/measure under Section 9 even before the
commencement of the arbitral proceedings subject to the
applicant specifically referring in the application the steps, if any,
already taken to seek arbitration or making statement in the
application to the effect that the applicant is willing and prepared
to take necessary steps with utmost expedition to seek reference
to arbitration in terms of arbitration agreement/clause. If the
application is not filed by the party in accordance with the
provisions of this Rule in particular, the Court is empowered to
reject the application after giving an opportunity to the applicant
to rectify the defects and, if necessary, giving a hearing to the
party as contemplated under Rule 7 of the Rules.
12. Having seen all the relevant provisions of the Act and
the Rules, in the light of the questions that are referred, we
would now like to proceed to consider the judgments of the
Supreme Court relied upon by learned counsel for the parties in
support of their contentions.
13) The arbitral proceedings, as we have seen,
commence only when a request to refer the dispute to
arbitration is received by the respondent as per Section 21 of the
Act. The material words occurring in Section 9 are before or
during the arbitral proceedings. This clearly contemplates two
stages when the Court can pass interim orders i.e., during
arbitral proceedings or before the arbitral proceedings. The
word before occurring in Section 9 will have to be interpreted to
mean that the Court can pass interim orders before the
commencement of arbitral proceedings. As observed by the
Supreme Court in Sundaram Finance (supra) any other
interpretation, insofar as the word before occurring in Section 9
is concerned, will have the effect of rendering the word before
in Section 9 as redundant. This is clearly not permissible.
In Sundaram Finance (supra) the Supreme Court considered
the question whether under Section 9 of the Act, the Court has
jurisdiction to pass interim orders even before arbitral
proceedings commence and before an arbitrator is appointed.
Paragraph 19 of this judgment is relevant for our purpose, which
reads thus:-
19. When a party applies under Section 9 of the 1996
Act, it is implicit that it accepts that there is a final and
binding arbitration agreement in existence. It is also implicit
that a dispute must have arisen which is referable to the
Arbitral Tribunal. Section 9 further contemplates arbitration
proceedings taking place between the parties.
Mr.Subramanium is, therefore, right in submitting that
when an application under Section 9 is filed before the
commencement of the arbitral proceedings, there has
to be manifest intention on the part of the applicant to
take recourse to the arbitral proceedings if, at the
time when the application under Section 9 is filed, the
proceedings have not commenced under Section 21 of
the 1996 Act. In order to give full effect to the words
"before or during arbitral proceedings" occurring in Section
9, it would not be necessary that a notice invoking the
arbitration clause must be issued to the opposite party
before an application under Section 9 can be filed. The
issuance of a notice may, in a given case, be sufficient to
establish the manifest intention to have the dispute referred
to Arbitral Tribunal. But a situation may so demand that a
party may choose to apply under Section 9 for an interim
measure even before issuing a notice contemplated by
Section 21 of the said Act. If an application is so made, the
court will first have to be satisfied that there exists a valid
arbitration agreement and the applicant intends to take the
dispute to arbitration. Once it is so satisfied the court will
have the jurisdiction to pass orders under Section 9 giving
such interim protection as the facts and circumstances
warrant. While passing such an order and in order to ensure
that effective steps are taken to commence the arbitral
proceedings, the Court while exercising jurisdiction
under Section 9 can pass a conditional order to put
the applicant to such terms as it may deem fit with a
view to see that effective steps are taken by the
applicant for commencing the arbitral proceedings.
What is apparent, however, is that the court is not debarred
from dealing with an application under Section 9 merely
because no notice has been issued under Section 21 of the
1996 Act.
(emphasis supplied)
14) In Firm Ashok Traders and another V.
Gurumukh Das Saluja and others( ) the Supreme Court
considered two questions; 1) effect of the bar created by
Section 69(3) of the Partnership Act on maintainability of an
application under Section 9 of the Act; and 2) in the event of the
question of maintainability being decided for Group A, what
interim arrangement, whether by way of appointment of receiver
or otherwise, would meet the ends of justice? While dealing
with these two questions, the Supreme Court in paragraph 18
observed thus:-
18. Under the A&C Act, 1996, unlike the predecessor Act
of 1940, the Arbitral Tribunal is empowered by Section 17 of
the Act to make orders amounting to interim measures. The
need for Section 9, in spite of Section 17 having been
enacted, is that Section 17 would operate only during the
existence of the Arbitral Tribunal and its being functional.
During that period, the power conferred on the Arbitral
Tribunal under Section 17 and the power conferred on the
court under Section 9 may overlap to some extent but so far
as the period pre- and post- the arbitral proceedings is
concerned, the party requiring an interim measure of
protection shall have to approach only the court. The party
having succeeded in securing an interim measure of
protection before arbitral proceedings cannot afford to
sit and sleep over the relief, conveniently forgetting
the proximately contemplated or manifestly
intended arbitral proceedings itself. If arbitral
proceedings are not commenced within a reasonable
time of an order under Section 9, the relationship
between the order under Section 9 and the arbitral
proceedings would stand snapped and the relief
allowed to the party shall cease to be an order made
'before' i.e. in contemplation of arbitral proceedings. The
court, approached by a party with an application under
Section 9, is justified in asking the party and being told how
and when the party approaching the court proposes to
commence the arbitral proceedings. Rather, the scheme in
which Section 9 is placed obligates the court to do so. The
court may also while passing an order under Section 9 put
the party on terms and may recall the order if the party
commits breach of the terms.
(emphasis supplied)
15) An application under Section 9 under the scheme of
the Act is not a suit. Though such application results in initiation
of civil proceedings, the time or the stage for invoking the
jurisdiction of Court under Section 9 can be before or during
arbitral proceedings, or at any time after making of the arbitral
award but before it is enforced in accordance with Section 36.
Section 9 though permits application being filed in the Court
before the commencement of the arbitral proceedings does not
give any indication of how much before. The party invoking
Section 9 may not have actually commenced the arbitral
proceedings but must be able to satisfy the Court that the
arbitral proceedings are actually contemplated or manifestly
intended as observed in Sundaram Finance (supra) and are
positively going to commence within a reasonable time. What is
a reasonable time, as observed in Firm Ashok Traders (supra),
would depend on the facts and circumstances of each case and
the nature of interim relief sought for would itself give an
indication thereof, but the distance of time must not be such as
would destroy the proximity of relationship of the two events
between which it exists and elapses. Thus, it is settled that an
application for interim order/measure under Section 9 can be
filed even before commencement of the arbitral proceedings and
if any such application is filed the applicant has to make his
intention clear to take recourse to the arbitral proceedings or the
Court while exercising jurisdiction under this provision can pass
a conditional order to put the applicant to such terms as it may
deem fit with a view to see that effective steps are taken by the
applicant for commencement of the arbitral proceedings. If the
arbitral proceedings are not commenced within a reasonable
time of an order under Section 9, the relationship between the
order under this provision and the arbitral proceedings would
stand snapped and the relief allowed to the party shall cease to
be an order made before i.e., in contemplation of arbitral
proceedings.
16) The Supreme Court in Arvind Constructions Co.
Pvt. Ltd., V. Kalinga Mining Corporation( ), though did not
consider the question that has fallen for reconsideration, while
considering the provisions contained in Section 9 and while
dealing with the argument that the power under this Section is
independent of the Specific Relief Act or that the restrictions
placed by the Specific Relief Act cannot control the exercise of
power under Section 9, observed that the said argument cannot
prima facie be accepted. The power under Section 9 is conferred
on the District Court and for exercising the power no special
procedure is prescribed by the Act in that behalf. It further
clarified that the Court entertaining an application under
Section 9 of the Act shall have the same power for making
orders as it has for the purpose and in relation to any
proceedings before it. The relevant observations made by the
Supreme Court in Arvind Constructions reads thus:-
The argument that the power under Section 9 of the Act is
independent of the Specific Relief Act or that the restrictions
placed by the Specific Relief Act cannot control the exercise
of power under Section 9 of the Act cannot prima facie be
accepted. The reliance placed on Firm Ashok Traders and
Anr. Vs. Gurumukh Das Saluja and Ors. [(2004) 3 S.C.C.
155] in that behalf does not also help much, since this Court
in that case did not answer that question finally but prima
facie felt that the objection based on Section 69 (3) of the
Partnership Act may not stand in the way of a party to an
arbitration agreement moving the court under Section 9 of
the Act. The power under Section 9 is conferred on the
District Court. No special procedure is prescribed by
the Act in that behalf. It is also clarified that the Court
entertaining an application under Section 9 of the Act
shall have the same power for making orders as it has
for the purpose and in relation to any proceedings
before it. Prima facie, it appears that the general rules
that governed the court while considering the grant of
an interim injunction at the threshold are attracted
even while dealing with an application under Section 9
of the Act. There is also the principle that when a power is
conferred under a special statute and it is conferred on an
ordinary court of the land, without laying down any special
condition for exercise of that power, the general rules of
procedure of that court would apply. The Act does not prima
facie purport to keep out the provisions of the Specific Relief
Act from consideration. No doubt, a view that exercise of
power under Section 9 of the Act is not controlled by the
Specific Relief Act has been taken by the Madhya Pradesh
High Court. The power under Section 9 of the Act is not
controlled by Order XVIII Rule 5 of the Code of Civil
Procedure is a view taken by the High Court of Bombay. But,
how far these decisions are correct, requires to be
considered in an appropriate case. Suffice it to say that on
the basis of the submissions made in this case, we are not
inclined to answer that question finally. But, we may
indicate that we are prima facie inclined to the view
that exercise of power under Section 9 of the Act must
be based on well recognized principles governing the
grant of interim injunctions and other orders of
interim protection or the appointment of a receiver.
(emphasis supplied)
16.1) The Supreme Court in Adhunik Steels Ltd., V.
Orissa Manganese and Minerals (P) Ltd.( ) while dealing with
Section 9 of the Act in paragraph 11 observed thus:-
It is true that Section 9 of the Act speaks of the court by
way of an interim measure passing an order for protection,
for the preservation, interim custody or sale of any goods,
which are the subject-matter of the arbitration agreement
and such interim measure of protection as may appear to
the court to be just and convenient. The grant of an interim
prohibitory injunction or an interim mandatory injunction
are governed by well-known rules and it is difficult to
imagine that the legislature while enacting Section 9 of the
Act intended to make a provision which was dehors the
accepted principles that governed the grant of an interim
injunction. Same is the position regarding the appointment of a
receiver since the section itself brings in the concept of just and
convenient while speaking of passing any interim measure of
protection. The concluding words of the section, and the
courtshall have the same power for making orders as it has for the
purpose and in relation to any proceedings before it also suggest
that the normal rules that govern the court in the grant of interim
orders is not sought to be jettisoned by the provision. Moreover,
when a party is given a right to approach an ordinary court
of the country without providing a special procedure or a
special set of rules in that behalf, the ordinary rules
followed by that court would govern the exercise of power
conferred by the Act. On that basis also, it is not possible
to keep out the concept of balance of convenience, prima
facie case, irreparable injury and the concept of just and
convenient while passing interim measures under Section 9
of the Act.
(emphasis supplied)
16.2) In ITI Ltd. V. Siemens Public Communications
Network Ltd.( ) the Supreme Court while dealing with the
question whether the revision petition under Section 115 of the
Civil Procedure Code lies to the High Court as against an order
made by a civil court in an appeal preferred under Section 37 of
the Act observed that it is true in the present Act application of
the Code of Civil Procedure is not specifically provided for, but
what is to be noted is: there is no express prohibition against the
application of the Code to a proceeding arising out of the Act
before a civil court. We find no such specific exclusion of the
Code in the Act. When there is no express exclusion, we cannot
by inference hold that Code is not applicable.
16.3) The power to grant interim order/measure under
Section 9 is conferred on a Civil Court. No special procedure is
prescribed by the Act in that behalf. It is equally true that in the
present Act, application of the Code of Civil Procedure is not
specifically provided for, but there is no express prohibition
against the application of the Code to a proceeding arising out of
the Act before a Civil Court. In other words, there is no specific
exclusion of the Code in the Act, and therefore, it cannot be
stated, as observed by the Supreme Court in Siemens Public
Communications Network Limited (supra) the Code is not
applicable. The general rules, therefore, would stand attracted,
for the Court, while considering the grant of interim
order/measure at the threshold, while dealing with an application
under Section 9 of the Act. The grant of interim order/measure
are governed by well known Rules and in view thereof, the
Supreme Court in Adhunik Steels Limited (supra) observed
that it is difficult to imagine that the Legislature while enacting
Section 9 of the Act intended to make a provision which was
dehors the accepted principles that govern the grant of interim
injunction. It is, thus, clear that when a party is given the right
to approach the Civil Court under Section 9 of the Act, without
providing a special procedure or special set of Rules in that
behalf, ordinary rules followed by that Court would govern the
exercise of power conferred by the Act including the power to
grant an ex parte ad-interim order.
17) We would also like to refer to the judgments of
different High Courts dealing with the provision contained in
Section 9 of the Act.
17.1) The Bombay High Court in Mrs.Perin Hoshang
Davierwalla & Anr. V. Mr.Kobad Dorabji Devierwalla &
Ors( ) dealt with the appeal arising from the order passed by the
trial court rejecting the appellants application under Section 9 of
the Act seeking appointment of Court Receiver of the business
and assets of the partnership firm of the appellants and
respondents. In this appeal, the Bombay High Court while
dealing with the contentions urged on behalf of the respondents
that an order granting or refusing grant of ad interim relief
pending disposal of an arbitration application under Section 9, is
an order passed by the Court in exercise of its power under
Order 39 Rule 1 of the Code of Civil Procedure. In paragraph 8,
the Bombay High Court observed thus:-
8. It is difficult to see how any order passed by the
Court in an application to it under Section 9 of the Act is not
an order passed under Section 9 by reason of the Court
having exercised powers under Order 39 Rule 1. As
explained in the case of Arvind Constructions Co. (P) Ltd.
(supra), whilst powers are conferred on the District Court
under Section 9 of the Act for ordering an interim measure
of protection, no special procedure is prescribed by the Act
in that behalf. Whilst entertaining an application under
Section 9 of the Act, the Court has the same power for
making orders as it has for the purpose of and in relation to
any proceeding before it. This is on the principle that when
a power is conferred under a special statute and on an
ordinary court of land without laying down any special
condition for exercise of that power, the general rules of
procedure of that court would apply. Thus, every order by
the District Court under Section 9, whether ad-interim or
interim, is passed by using powers of the Court which are
ordinarily exercised whilst deciding an interlocutory
application before it. These include powers under Order 39
or well recognised principles for exercise of such powers.
The order passed by the court in an application made to it
under Section 9 of the act by exercising such powers is very
much an order passed under Section 9, and is appealable
under Section 37 of the Act. Grant or refusal of an interim
measure of protection by way of an ad-interim order under
Section 9 of the Act is, thus, an appealable order under
Section 37. There is nothing in law which requires the life of
such an order to extend beyond the pendency of the
proceeding under Section 9. The judgment of our court in
Conros Steels Pvt. Ltd. (supra) has not decided the point as
to whether or not an ad-interim order passed under
Section 9 is appealable under Section 37. A casual reference
to 'final order' under Section 9 being appealable cannot be
termed as laying down any such law.
17.2) The High Court of Gauhati in Sati Oil Udyog Ltd.
and Anr. V. Avanti Projects and Infrastructure Ltd.( ) while
dealing with the provisions contained in Section 9 of the Act and
the preliminary objection with regard to maintainability of the
appeal under consideration and after noticing that the trial court,
for protection of the suit property, directed that the appellants
should not create any third party interest over the suit property
and maintain status quo until further orders, observed that there
can be no doubt that the impugned directions amount to
granting of injunction. It was further observed that whether
such an order, because of the fact that it has been passed
ex parte, would fall within the ambit of Section 9 and be
regarded as an interim measure within the meaning of Section 9
and/or whether such directions, as have been given by the
interim order, would be amenable to the appellate provisions
aimed in Section 37(1)(a) of the Act, are questions required to
determine. These questions were ultimately answered in the
affirmative.
17.3) The Madhya Pradesh High Court in Jabalpur Cable
Network Pvt.Ltd. V. E.S.P.N. Software India Pvt. Ltd. and
Ors.( ) observed that it cannot be disputed that under
Section 9 of the Act the Court has power to grant interim
injunction or to take such other interim measure of protection as
may appear to the Court to be just and convenient.
17.4) The High Court of Rajasthan (Jaipur Bench) in Road
Infrastructure Development Company of Rajasthan Ltd. V.
I.V.R.C.L. Ltd.( ) observed that any order granting or refusing
to grant any measure under Section 9 would be appealable.
The words any measure are words of widest amplitude. The
use of the term any measure would obviously include an
interim order. Therefore, the words any measure would
include an interim order passed by the Court while exercising its
power under Section 9.
17.5) The High Court of Gujarat in Aventis Pasteur S.A
V. Cadila Pharmaceuticals Ltd.( ) after considering the
provisions of Sections 9 and 37 of the Act held that the appeal
filed against an ex parte ad interim injunction under
Section 37 of the Act is maintainable.
17.6) The High Court of Karnataka in Symphony Services
Corp.(India) Pvt. Ltd. V. Sudip Bhattacharjee( ) has taken
a view in relation to the maintainability of an appeal under
Section 37 that an appeal is maintainable only against a final
order passed under Section 9 of the Act. The relevant
observations made in this judgment read thus:-
13. In the case on hand, it is to be noticed that the original
proceedings under Section 9 of the Act are still pending. It is no
doubt true that an application is filed treating it as under Section 9
of the Act, but however, it is not an interim measure but is an
interim measure, which would necessarily mean that it is only an
application, which is filed, pending adjudication of the main
petition under Section 9 of the Act. Hence, I am of the view that
Section 37 (1) (a) of the Act is not applicable and the impugned
order cannot be termed as a final order under Section 9 of the Act,
which would make it an appealable order. Hence, the petition is
maintainable.
18) Having considered the judgments of the Supreme
Court and the High Courts and after having perused the relevant
provisions carefully, it appears to us that when an application is
made under Section 9 of the Act to a Court, such application
gives rise to a proceeding, which is original in nature. Such a
proceeding is not dependent upon the pendency of any other
proceedings such as any suit or appeal. As a matter of fact,
Section 9 itself makes it clear that an application seeking interim
measure, as provided therein, may be made even before any
arbitral proceedings are commenced. In other words, even
before commencement of arbitral proceedings, an application
under Section 9 can be filed and such application, being original
in nature, in our opinion, would stand on the same footing as the
proceedings within the meaning of Section 141 of the Civil
Procedure Code. As observed earlier that no special procedure is
prescribed by the Act for dealing with an application for interim
measure/order under Section 9 thereof and further when power
is conferred under a special statue on a Civil court without laying
down any special condition for exercise of that power, the
general rules that governed the Court while considering the
grant of interim measure/order at the threshold are attracted.
Thus, when an application under Section 9 is made and during
pendency of such application, an ex parte ad interim order
becomes imperative, in the facts and circumstances of the case,
it is open to the Court to pass an ad interim ex parte order based
on well recognized principles contemplated by the provisions of
Order XXXIX Rules 1 and 2 of the Civil Procedure Code governing
the grant of interim injunctions and/or other orders of interim
protection or the appointment of a Receiver. The power to grant
an ex parte interim order is derived by a Court under the
principle that every Court has the power to pass an order, which
it must pass so as to ensure that the application, made before it,
does not become infructuous merely because of the fact that no
specific provision has been made dispensing, in an emergent
situation, the necessity to pass an ex parte order. In other
words, the Court cannot be stated to be completely helpless in
the matter of an ad-interim order/measure otherwise the entire
purpose of the application under Section 9 of the Act would
stand defeated, if ultimately the party approaching the Court
under Section 9 succeeds in the Arbitration proceedings. It is
difficult to conceive that the Legislature, so intended while
providing the remedy to a party to approach the Court under
section 9 of the Act. In short, when any power is expressly
granted by a statute, there is impliedly included in the grant,
even without special mention, every power and every control,
the denial of which would render the grant itself ineffective.
19) Insofar as the question whether a Court can dispose
of the application filed under Section 9 of the Act even before
initiation of arbitral proceedings under Section 21 of the Act is
concerned, requires no further discussion in view of the
judgments of the Supreme Court in Sundaram Finance (supra)
and in Firm Ashok Traders (supra), which we have already
considered in the foregoing paragraphs. Thus, we answer the
questions as framed in the order of reference as follows:-
the Court as defined under Section 2(e) of the Act, is
undoubtedly entitled to dispose of the application filed
under Section 9 of the Act even before initiation of the
arbitral proceedings under Section 21 of the Act. The
Court, however, cannot dispose of such application
ex parte without giving notice to the respondents, but
Court can pass ex parte ad interim order pending the
application filed under Section 9 of the Act.
20) Registry is directed to place the Civil Miscellaneous
Appeal before the Court, which is assigned to hear such appeals,
for deciding it on merits in the light of the opinion expressed by
the Full Bench.
___________________
DILIP B.BHOSALE, ACJ
______________________
M.S.RAMACHANDRA RAO, J
_______________________
A.RAMALINGESWARA RAO, J
12th June, 2015.
