Bar Under S.9(3) Of Arbitration Act Not Applicable If Application was taken up by Court before Constitution of Arbitral Tribunal

Case Title

Arcelor Mittal Nippon Steel India Ltd. vs Essar Bulk Terminal Ltd.

Key Takeaways

• This case was heard by the bench of Justices Indira Banerjee and JK Maheshwari
• The party in arbitration agreement can apply for interim relief before or during the proceedings or even after the award is published.
• Once the arbitral tribunal is constituted, the court cannot take up such applications under section 9 for consideration.

Background Of The Case

• The parties entered in agreement for handling cargo at Hazira port. The agreement was amended from time to time.
• Article 15 of the agreement stated that any dispute relating to the cargo handling agreement shall be resolved in court and, in accordance of the arbitration clause a sole arbitrator shall be appointed mutually.
• The appellant sent the notice of arbitration but the respondent did not respond.
• The appellant approached the High Court under Section 11 for appointment of the Arbitral Tribunal. The respondent after some days replied to the notice and said that the disputes where not arbitrable and mentioned that the total amount the appellant needs to pay is Rs.673.84 crores inclusive of interest of Rs.51.11 crores.
• The appellant filed a Commercial Civil Miscellaneous Application in the commercial court. The respondent also filed the Commercial Civil Miscellaneous Application under section 9 of Arbitration Act in commercial court.
• The commercial court heard the applications and appointed a three-member Arbitral Tribunal.
• The power of the commercial court to entertain the applications is challenged in the High Court.
• The High Court held that the commercial court has the power to pass such orders.

Issue

The issue in this case was whether the court has the power to entertain an application after the arbitral tribunal has been constituted under Section 9(1).

Section 9(1) Of The Arbitration Act

According to Section 9(1) of the Arbitration Act, the parties in the arbitration agreement can apply in the court for interim relief before or during the proceedings of arbitration or after the award is published.

Section 9(3) provides that once the arbitral tribunal is appointed then such applications shall not be entertained by the courts except in the certain circumstances.

Even after the constitution of the arbitral tribunal there are reasons why the tribunal may not be effective alternative to section 9(1). It can be because of unavailability of any one arbitrator from the tribunal which is appointed due to the reason of travelling or illness etc.

In case where the members of the arbitral tribunal which is appointed are located far from each other and they cannot be gathered at one place to pass the order then the application for interim relief may not be entertained by the court.

Principles To Grant Interim Relief

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.

Findings Of Court

• According to Section 9(1), the parties to the arbitral agreement can file an application for interim relief before the constitution of the Arbitral Tribunal or during the proceedings or any time after the establishment of the award but before it is enforced.
• Even though the application is entertained before the constitution of the tribunal, the court can direct the parties to approach the Arbitral Tribunal.
• When there is a big time gap between the application and the hearing and it needs to be heard again, in such case the High Court can direct the commercial court to proceed with the case.

The appeal was allowed only to the extent that the commercial court does not need to consider the reliefs when application under Section 9 is entertained by the court.

Hope you find the snippet informative.

Questions
1) What powers do the commercial courts have?
2) What do you mean by interim relief?