# ARCELOR MITTAL NIPPON STEEL INDIA LTD v. ESSAR BULK TERMINAL LTD

- **Citation:** [2021] 5 S.C.R. 1022
- **Court:** Supreme Court of India
- **Decided:** 2021-09-14
- **Case number:** Civil Appeal No. 5700 of 2021
- **Bench:** Indira Banerjee, J. K. Maheshwari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/arcelor-mittal-nippon-steel-india-ltd-v-essar-bulk-terminal-ltd-35302
- **Pages:** 34

## Headnote

Arbitration and Conciliation Act, 1996 - ss. 9, 11 and 17 -
Appellant and respondent entered into an agreement for cargo
handling - Disputes arose between the parties - Appellant invoked
arbitration clause and gave notice to respondent - Appellant filed
application u/s.11 of the Act, for appointment of an Arbitral Tribunal
before the High Court - Respondent replied to arbitration notice
stating that the dispute was not arbitrable and there was an amount
due and payable by the appellant - Both appellant and respondent
filed separate applications u/s.9 before the Commercial Court - In
pursuance to the earlier application u/s.11, the High Court appointed
three member Arbitral Tribunal - Thereafter, the appellant filed
application for reference of both the applications filed u/s.9 to the
Tribunal - The Commercial Court dismissed the application for
reference - The order of the Commercial Court was challenged
before the High Court - The High Court held that the Commercial
Court has the power to consider whether the remedy u/s.17 of the
Arbitration Act is inefficacious and pass necessary orders u/s.9 of
the said Act - Before the Supreme Court, the appellant contended
that s.9(3) of the Act restricts the power to entertain an application
under sub-section (1) of s.9 of the Act once an Arbitral Tribunal
has been constituted - Held: s. 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 s.36 of the
Arbitration Act - The bar of s. 9(3) operates where the application
u/s. 9(1) had not been entertained till the constitution of the Arbitral
Tribunal - If an application u/s. 9 had been entertained before the
constitution of the Tribunal, the Court always has the discretion to
direct the parties to approach the Arbitral Tribunal, if necessary by
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passing a limited order of interim protection, particularly when there
has been a long time gap between hearings and the application has
for all practical purposes, to be heard afresh, or the hearing has
just commenced and is likely to consume a lot of time - The High
Court has rightly directed the Commercial Court to proceed to
complete the adjudication - It is clarified that it shall not be
necessary for the Commercial Court to consider the efficacy of relief
u/s. 17, since the application u/s. 9 has already been entertained
and considered by the Commercial Court.
Arbitration and Conciliation Act, 1996 - s. 9(3) - Expression
'entertain' - Held: 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.
Partly allowing the appeal, the Court
HELD: 1. The bar of Section 9(3) operates after an Arbitral
Tribunal is constituted. There can therefore be no question of
usurpation of jurisdiction of the Arbitral Tribunal under Section
17 before the Arbitral Tribunal is constituted. The Court is
obliged to exercise power under Section 9 of the Arbitration Act,
if the Arbitral Tribunal is yet to be constituted. Whether the Court
grants interim relief or not is a different issue, for that would
depend on the facts of the case - whether the Applicant has made
out a good prima facie case, whether the balance of convenience
is in favour of relief being granting to the applicant, whether the
applicant would suffer irreparable injury by refusal of interim relief
etc. [Para 88][1049-G-H; 1050-A-B]
2. 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. Once an Arbitral Tribunal is
constituted the Court cannot take up an application under Section
9

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SUPREME COURT REPORTS
[2021] 5 S.C.R.
 [2021] 5 S.C.R. 1022
1022
ARCELOR MITTAL NIPPON STEEL INDIA LTD.
v.
ESSAR BULK TERMINAL LTD.
(Civil Appeal No. 5700 of 2021)
SEPTEMBER 14, 2021
[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
Arbitration and Conciliation Act, 1996 - ss. 9, 11 and 17 -
Appellant and respondent entered into an agreement for cargo
handling - Disputes arose between the parties - Appellant invoked
arbitration clause and gave notice to respondent - Appellant filed
application u/s.11 of the Act, for appointment of an Arbitral Tribunal
before the High Court - Respondent replied to arbitration notice
stating that the dispute was not arbitrable and there was an amount
due and payable by the appellant - Both appellant and respondent
filed separate applications u/s.9 before the Commercial Court - In
pursuance to the earlier application u/s.11, the High Court appointed
three member Arbitral Tribunal - Thereafter, the appellant filed
application for reference of both the applications filed u/s.9 to the
Tribunal - The Commercial Court dismissed the application for
reference - The order of the Commercial Court was challenged
before the High Court - The High Court held that the Commercial
Court has the power to consider whether the remedy u/s.17 of the
Arbitration Act is inefficacious and pass necessary orders u/s.9 of
the said Act - Before the Supreme Court, the appellant contended
that s.9(3) of the Act restricts the power to entertain an application
under sub-section (1) of s.9 of the Act once an Arbitral Tribunal
has been constituted - Held: s. 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 s.36 of the
Arbitration Act - The bar of s. 9(3) operates where the application
u/s. 9(1) had not been entertained till the constitution of the Arbitral
Tribunal - If an application u/s. 9 had been entertained before the
constitution of the Tribunal, the Court always has the discretion to
direct the parties to approach the Arbitral Tribunal, if necessary by
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passing a limited order of interim protection, particularly when there
has been a long time gap between hearings and the application has
for all practical purposes, to be heard afresh, or the hearing has
just commenced and is likely to consume a lot of time - The High
Court has rightly directed the Commercial Court to proceed to
complete the adjudication - It is clarified that it shall not be
necessary for the Commercial Court to consider the efficacy of relief
u/s. 17, since the application u/s. 9 has already been entertained
and considered by the Commercial Court.
Arbitration and Conciliation Act, 1996 - s. 9(3) - Expression
'entertain' - Held: 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.
Partly allowing the appeal, the Court
HELD: 1. The bar of Section 9(3) operates after an Arbitral
Tribunal is constituted. There can therefore be no question of
usurpation of jurisdiction of the Arbitral Tribunal under Section
17 before the Arbitral Tribunal is constituted. The Court is
obliged to exercise power under Section 9 of the Arbitration Act,
if the Arbitral Tribunal is yet to be constituted. Whether the Court
grants interim relief or not is a different issue, for that would
depend on the facts of the case - whether the Applicant has made
out a good prima facie case, whether the balance of convenience
is in favour of relief being granting to the applicant, whether the
applicant would suffer irreparable injury by refusal of interim relief
etc. [Para 88][1049-G-H; 1050-A-B]
2. 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. 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. [Para 93][1052-D-E]
ARCELOR MITTAL NIPPON STEEL INDIA LTD. v. ESSAR
BULK TERMINAL LTD.
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SUPREME COURT REPORTS
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3. 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. Appellant may
be right, that the process of consideration continues till the
pronouncement of judgment. However, that would make 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
constitution of the Arbitral Tribunal. [Para 95][1052-F-H; 1053A-B]
4. 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
of an Arbitral Tribunal by reason of illness, travel etc. [Para
96][1053-B-C]
5. Applications for interim relief are inherently applications
which are required to be disposed of urgently. Interim relief is
granted in aid of final relief. The object is to ensure protection of
the property being the subject 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. [Para 97][1053-C-D]
6. 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. [Para 98][1053-D-E]
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7. 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. [Para 99][1053-E-F]
8. 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. To cite an
example, the different Arbitrators constituting an Arbitral Tribunal
could be located at far away places and not in a position to assemble
immediately. In such a case an application for urgent interim relief
may have to be entertained by the Court under Section 9(1).
[Para 100][1053-F-H]
9. 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. Ofcourse it hardly need be mentioned that even if an
application under Section 9 had been entertained before the
constitution of the 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, particularly when
there has been a long time gap between hearings and the
application has for all practical purposes, to be heard afresh, or
the hearing has just commenced and is likely to consume a lot of
time. In this case, the High Court has rightly directed the
Commercial Court to proceed to complete the adjudication.
[Para 107][1055-D-F]
ARCELOR MITTAL NIPPON STEEL INDIA LTD. v. ESSAR
BULK TERMINAL LTD.
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[2021] 5 S.C.R.
Amazon.com NV Investment Holdings LLC v. Future
Retail Limited & Ors. 2021 SCC Online SC 557; Chloro
Controls India Private Limited v. Severn Trent Water
Purification Inc (2013) 1 SCC 641 : [2012] 13 SCR 402;
Vidya Drolia and Ors. v. Durga Trading Corporation
(2021) 2 SCC 1 : 2021 (6) JT 460 - relied on.
State Bank of India and Ors. v. S. N. Goyal (2008) 8
SCC 92 : [2008] 7 SCR 631 AIR 2008 SC 2594; Deep
Chand & Ors v. Land Acquisition Officer & Others
(1994) 4 SCC 99 : [1994] 1 SCR 530 AIR 1994 SC
1901; A.V. Venkateswaran, Collector of Customs,
Bombay v. Ramchand Sobhraj Wadhwani & Anr AIR
1961 SC 1506 : [1962] SCR 753; Manbhupinder Singh
Atwal v. Neeraj Kumarpal Shah 2019 GLH (3) 234;
Firm Ashok Traders and Anr. v. Gurumukh Das Saluja
and Ors (2004) 3 SCC 155 : [2004] 1 SCR 404;
Lakshmi Rattan Engineering Works Ltd. v Asstt.
Commissioner Sales Tax, Kanpur and Anr. (1968) 1 SCR
505 : AIR 1968 SC 488; Hindustan Commercial Bank
Ltd. v Punnu Sahu (1971) 3 SCC 124; Martin & Harris
Ltd. v VIth Additional District Judge and Others (1998)
1 SCC 732 : [1997] 6 Suppl. SCR 380; Union of India
and Ors. v. Uttar Pradesh State Bridge Corporation
Limited (2015) 2 SCC 52 : [2014] 13 SCR 1180 -
referred to.
Energo Engineering Projects Limited v. TRF Lt 2016
SCC Online Del 6560; Tufan Chatterjee v. Sri. Rangan
Dhar 2016 SCC Online Cal 483; Benara Bearings and
Pistons Limited v. Mahle Engine Components India
Private Limited (2017) SCC Online Del 7226; Kundan
Lal v. Jagan Nath Sharma AIR 1962 All 547; Anil Kunj
Bihari Saraf v. Namboodas S/o Shankarlal and Ors.
(1996) SCC Online MP 112; M. Ashraf v. Kasim V.K
(2018) SCC OnLine Ker 4913; Srei Equipment
Finance Limited (Sefl) v. Ray Infra Services Private
Limited & Anr. (2016) SCC OnLine Cal 6765; Avantha
Holdings Limited v. Vistra ITCL India Limited 2020 SCC
OnLine Del 1717 - referred to.
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Case Law Reference
[2008] 7 SCR 631
referred to
Para 29
[1994] 1 SCR 530
referred to
Para 32
[1962] SCR 753
referred to
Para 35
[2004] 1 SCR 404
referred to
Para 39
[1997] 6 Suppl. SCR 380
referred to
Para 44
[2014] 13 SCR 1180
referred to
Para 57
[2012] 13 SCR 402
relied on
Para 104
CIVIL APPELLATE JURISDICTION : Civil Appeal No.5700
of 2021.
From the Judgment and Order dated 17.08.2021 of the High Court
of Gujarat at Ahmedabad in R/Special Civil Application No.10492 of
2021.
Drius Khambata, Sr. Adv., Mihir Thakore, Manu Nair, Rishab
Gupta, Sairam Subramanian, Ms. Shreya Gupta, Neelabh Shreesh, Ms.
Juhi Gupta, Ms. Swagata Ghosh, Ms. Archismita Raha, Saloni Gupta, S.
S. Shroff, Advs. for the appellant.
Kapil Sibal, Mukul Rohatgi, Saurabh Soparkar, Sr. Advs., Mahesh
Agarwal, Keyur Gandhi, Ms. Amita Katragadda, Ms. Anuradha
Mukherjee, Raheel Patel, Rishabh Parikh, Kaustubh Rai, E. C. Agrawala,
Advs. for the respondent.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
1. Leave granted.
2. The short question of law raised in this appeal is, whether the
Court has the power to entertain an application under Section 9(1) of the
Arbitration and Conciliation Act, 1996, hereinafter referred to as "the
Arbitration Act", 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. The next question is, whether the
Court is obliged to examine the efficacy of the remedy under Section 17,
ARCELOR MITTAL NIPPON STEEL INDIA LTD. v. ESSAR
BULK TERMINAL LTD.
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SUPREME COURT REPORTS
[2021] 5 S.C.R.
before passing an order under Section 9(1) of the Arbitration Act, once
an Arbitral Tribunal is constituted.
3. The Appellant and the Respondent entered into an agreement
for Cargo Handling at Hazira Port. The said Cargo Handling Agreement
was amended from time to time.
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 Arbitration Act in the Commercial Court and the 12th
Additional District Judge, District & Sessions Court at Surat. On 16th
March 2021, the Respondent also filed an application being Commercial
Civil Miscellaneous Application No.99 of 2021 in the Commercial Court
under Section 9 of the Arbitration Act.
8. Section 9 of the Arbitration Act is set out hereinbelow for
convenience:-
"9. Interim measures, etc. by Court (1) 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
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(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 authorising 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.
(2) Where, before the commencement of the arbitral
proceedings, a Court passes an order for any interim measure
of protection under sub-section (1), the arbitral proceedings
shall be commenced within a period of ninety days from the
date of such order or within such further time as the Court
may determine.
(3) Once the 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."
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:-
ARCELOR MITTAL NIPPON STEEL INDIA LTD. v. ESSAR
BULK TERMINAL LTD. [INDIRA BANERJEE, J.]
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"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
(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 authorising 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 arbitral tribunal to be just and convenient,
and the arbitral tribunal shall have the same power for
making orders, as the court has for the purpose of, and in
relation to, any proceedings before it.
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(2) Subject to any orders passed in an appeal under Section
37, any order issued by the arbitral tribunal under this section
shall be deemed to be an order of the Court for all purposes
and shall be enforceable under the Code of Civil Procedure,
1908 (5 of 1908), in the same manner as if it were an order of
the Court."
12. The Commercial Court and 12th Additional District Judge,
District & Sessions Court at Surat, heard both the applications filed by
the Appellant and the Respondent respectively, under Section 9(1) of
the Arbitration Act and reserved the same for orders on 7th June, 2021.
13. On 9th July 2021, the application filed by the Appellant under
Section 11(6) of the Arbitration Act was disposed of by appointing a
three-member Arbitral Tribunal, comprising of three retired Judges of
this Court, to adjudicate the disputes between the Appellant and the
Respondent.
14. On or about 16th July 2021, the Appellant filed an interim
application being Commercial Civil Miscellaneous Application No.2 of
2021, praying for reference of both the applications filed by the Appellant
and the Respondent respectively under Section 9 of the Arbitration Act,
to the learned Tribunal.
15. Paragraph 3 of the said application filed by the 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
ARCELOR MITTAL NIPPON STEEL INDIA LTD. v. ESSAR
BULK TERMINAL LTD. [INDIRA BANERJEE, J.]
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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 and reserved for orders on 9th August,
2011. The Commercial Court adjourned the pronouncement of orders in
the two applications for interim relief till 31st August, 2021.
20. In the meanwhile, by an order dated 17th August, 2021, which
is impugned in this Appeal, the High Court dismissed the application filed
by the Appellant under Article 227 of the Constitution of India, holding
that the Commercial Court has the power to consider whether the remedy
under Section 17 of the Arbitration Act is inefficacious and pass necessary
orders under Section 9 of the said Act. The High Court held:-
"24. Considering the submissions made before us as well as
the judgments cited before us by both the sides, though the
learned trial court has not given proper reasons for dismissing
the application filed by the petitioner, the trial court has
committed no error in not granting the prayer prayed for by
the petitioner in the interim application filed in CMA No.2 of
2021. In our opinion the trial court should be permitted to
pronounce the order on both the applications under Section
9 pending before it keeping in mind the observations made
by us in this judgment and taking into consideration the
provisions of Section 9(3) of the Act."
21. Mr. Darius Khambata, Senior Advocate appearing on behalf
of the Appellant submitted that Section 9(3) of the Arbitration Act, as
amended, restricts the power of the Court to entertain an application
under sub-Section (1) of Section 9 of the Arbitration Act once an Arbitral
Tribunal has been constituted.
22. Mr. Khambata argued that an Arbitral Tribunal having been
constituted, the Commercial Court cannot proceed further with the
application under Section 9 of the Arbitration Act.
23. Mr. Khambata argued that, the purpose of insertion of Section
9(3) of the Arbitration Act was to curtail the role of the Court. Even
though Section 9(3) does not oust the jurisdiction of the Court under
Section 9(1), it restricts the role of the Court, post the constitution of an
Arbitral Tribunal. Once an Arbitral Tribunal is constituted, the Court is
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not to entertain an application under Section 9 of the Arbitration Act
unless it finds that circumstances exist, which may render the remedy
under Section 17 of the Arbitration Act inefficacious.
24. Mr. Khambata submitted that the High Court rightly held that
the Commercial Court had erred in construing 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 applications for interim relief from the parties unless it is shown
that interim relief from the Arbitral Tribunal would not be efficacious."
In the aforesaid report, the Arbitration Act is referred to as ACA in
short.
27. Mr. Khambata cited Amazon.com NV Investment Holdings
LLC v. Future Retail Limited & Ors.1, where this Court, speaking
through Nariman J. held that the object of introducing Section 9(3) was
"to avoid Courts being flooded with Section 9 petitions when an Arbitral
Tribunal is constituted for two good reasons - (i) that the clogged Court
System ought to be decongested, and (ii) that an Arbitral Tribunal, once
constituted, would be able to grant interim relief in a timely and efficacious
manner."
28. Mr. Khambata contended that Section 9(3) has been introduced
to reduce the burden on Courts. Therefore, Section 9(3) must be construed
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purposively and any attempt to thwart the mandate of Section 9(3) must
be discouraged.
29. Mr. Khambata argued that Section 9(3) was a measure of
Negative Kompetenz-Kompetenz. This is substantiated by the
corresponding introduction of Section 17(2) which lends further efficacy
and enforceability to orders passed by the Arbitral Tribunal under Section
17. Mr. Khambata further argued that it is well settled that a Court
becomes functus officio, only after it pronounces, signs and dates the
judgment. Mere dictation of a judgment after it is reserved, does not
constitute pronouncement of a judgment. In support of the aforesaid
submission Mr. Khambata cited State Bank of India and Ors. v. S. N.
Goyal2.
30. Mr. Khambata argued that the fact that an order is reserved
does not mean that the District Court stopped entertaining the Section 9
petitions. Referring to State Bank of India v. S. N. Goyal (supra), Mr.
Khambata argued that a judge can make corrections to a judgment and/
or in other words continue to adjudicate and thus continue to entertain a
proceeding even after a judgment is pronounced, until it is signed.
31. Mr. Khambata argued that, in this case the Commercial Court
had not passed its orders in the Section 9 applications. It had not even
pronounced its orders. Thus, as on the date of the impugned order, the
Commercial Court was entertaining the Section 9 applications. Even
today the Commercial Court is entertaining the applications under Section
9 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
& Others3, 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
2 (2008) 8 SCC 92 : AIR 2008 SC 2594
3 (1994) 4 SCC 99 : AIR 1994 SC 1901
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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 Respondent has not nominated a new
Arbitrator. Instead of nominating a new arbitrator, the Respondent has
filed an application in the Commercial Court, stating that since the Arbitral
Tribunal is not functioning, the remedy before the Tribunal would be
inefficacious. The same submission has been advanced in this Court.
35. Relying on the judgment of this Court in A.V. Venkateswaran,
Collector of Customs, Bombay v. Ramchand Sobhraj Wadhwani &
Anr4, Mr. Khambata argued that it is well settled that a party cannot
allege inefficacy of a remedy when that party disables itself from availing
the remedy.
36. Mr. Khambata also cited Manbhupinder Singh Atwal v.
Neeraj Kumarpal Shah5, where the Gujarat High Court held that a
party which is intentionally trying to render the remedy under Section 17
inefficacious, cannot be permitted to approach the Court under Section
9 to secure interim reliefs which can be granted by the Tribunal. Mr.
Khambata submitted that the intention of the Respondent to avoid the
Arbitral Tribunal, is evident all through.
37. Mr. Khambata argued that even though the Section 11
proceedings had finally been disposed of by consensus, the appointment
of the Arbitral Tribunal was delayed by reason of the conduct of the
Respondent. Moreover, after the Appellant issued notice invoking
arbitration on 22nd November, 2020, and called upon the Respondent to
mutually agree to the appointment of a sole Arbitrator, the Respondent
did not respond within 30 days as mandated in Section 11(4)(a) of the
Arbitration Act.
38. Mr. Khambata also submitted that the Respondent filed its
objection to the Section 9 application of the Appellant in the Commercial
Court on 16th March, 2021 and also initiated other proceedings against
the Appellant. The Respondent, however, refused to file a reply to the
4 AIR 1961 SC 1506 (para 11)
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petition under Section 11 of the Arbitration Act. The Respondent filed a
belated reply on 7th June, 2021, after the hearing of the applications
under Section 9 had concluded.
39. Mr. Khambata submitted that it is well settled that a party
invoking Section 9 of the Act must be ready and willing to go to arbitration.
In support of his submission Mr. Khambata cited Firm Ashok Traders
and Anr. v. Gurumukh Das Saluja and Ors.6. Mr. Khambata contended
that the Respondent had itself delayed the 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 Dhar7, 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 argued that the interpretation of the
term "entertain" by the Gujarat High Court in the judgment and order
impugned, is consistent with the interpretation of the expression in Tufan
Chatterjee (supra).
42. Mr. Khambata argued that in Energo Engineering Projects
Limited v. TRF Ltd8, authored by one of us (Indira Banerjee, J.) the
Division Bench of the Delhi High Court observed that once an Arbitral
Tribunal is constituted, an application for interim relief should ordinarily
be decided by the Arbitral Tribunal. Moreover, a Court can only grant
interim relief under Section 9, if circumstances exist which might not
render the remedy under Section 17 of the Arbitration Act efficacious.
6 (2004) 3 SCC 155
7 2016 SCC Online Cal 483 (Paras 35, 43)
8 2016 SCC Online Del 6560 (Para 34)
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43. In Energo Engineering Project Limited v. TRF Limited
(supra), the Delhi High Court noted that the Tribunal was non-functional
because the challenge against the Appellant's nominee arbitrator was
pending and the Supreme Court had stayed the arbitration proceedings
till the challenge proceedings were decided. In the circumstances, the
High Court held that the Court could pass orders under Section 9 as the
remedy under Section 17 was inefficacious.
44. Mr. Khambata submitted that in Lakshmi Rattan
Engineering Works Ltd. v Asstt. Commissioner Sales Tax, Kanpur
and Anr.9, this Court cited with approval the judgment of the Allahabad
High Court in Kundan Lal v. Jagan Nath Sharma10, and held that
'entertain' would mean adjudicate upon and consider for the purpose of
adjudication on merits. In support of the aforesaid proposition, Mr.
Khambata also cited Hindustan Commercial Bank Ltd. v Punnu
Sahu11, Martin & Harris Ltd. v VIth Additional District Judge and
Others12.
45. In conclusion Mr. Khambata submitted that the High Court
had erred in directing the District Court to pass orders in the petitions
under Section 9, even though it had interpreted the word 'entertain' to
mean "the whole gamut upto its final adjudication and passing of an
order on merits". Mr. Khambata argued that, having observed that the
Commercial Court had erred in interpreting 'entertain' narrowly and
also that there was no challenge to the efficacy of the arbitral proceedings
before the District Court as on the date of the impugned order, the High
Court should not 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.
9 (1968) 1 SCR 505 (Para 9) : AIR 1968 SC 488
10 AIR 1962 All 547 (Para 7)
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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 principles of
natural justice, or if the order suffers from patent perversity.
(iii)
The application before the Gujarat High Court under Article
227 was premature and speculative, since the issue of
whether the Trial Court had acted outside the "bounds of
its authority" or "without jurisdiction" or whether the order
suffered from "patent perversity", could only be determined
after an order had been passed by the Trial Court in the
Section 9 Applications.
48. Mr. Sibal argued that Section 9(1) of the Arbitration Act
provides that a party will apply to the court before, during or after the
arbitral proceedings. The Courts therefore do not lose jurisdiction upon
constitution of the Arbitral Tribunal.
49. Mr. Sibal argued that Section 9(3) of the Arbitration Act was
neither a non-obstante clause nor an ouster clause, that would render
the courts coram non judice, immediately upon the constitution of the
Arbitral Tribunal.
50. Mr. Sibal argued that subject to the checks and balances
provided under the Arbitration Act itself, a Court would continue to have
powers to grant interim relief under Section 9. In support of his argument,
Mr. Sibal cited the judgment of Delhi High Court in Benara Bearings
and Pistons Limited v. Mahle Engine Components India Private
Limited13 and in Energo Engineering Projects Limited v. TRF Limited
(supra).
51. Mr. Sibal argued that Section 9(3) of the Arbitration Act
restrains the court from "entertaining" an application under Section 9,
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unless circumstances exist which may not render the remedy provided
under Section 17 efficacious. In this case, only the formality of
pronouncing the order in the Section 9 Applications remained. Since the
application under Section 9 had been entertained, fully heard and
arguments concluded, Section 9(3) of the Arbitration Act would not apply.
52. Mr. Sibal argued that an application is "entertained" when the
court applies its mind to it. Entertain means "admit into consideration" or
"admit in order to deal with". In support of his submission Mr. Sibal cited
Lakshmi Rattan Engineering Works Ltd. (supra), Anil Kunj Bihari
Saraf v. Namboodas S/o Shankarlal and Ors.14and Kundanlal v.
Jagan Nath Sharma (supra).
53. Mr. Kapil Sibal further argued that, whether a matter had
already been "admitted into consideration", 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 constituted.
55. Mr.