1. Heard Sri Vinay Khare, learned Senior Advocate, assisted by Ms. Aarushi Khare, learned counsel for the appellant and Sri Rishabh Agarwal, learned counsel for the respondents.
2. This appeal, filed under Section 37(1) of Arbitration and Conciliation Act, 1996,1 is directed against the judgment and order dated 05.03.2021, passed by the Commercial Court, Jhansi, in Misc. Case No. 16 of 2020 (Ramesh Kumar Agarwal Vs. Naresh Kumar Agarwal and another) holding that the Commercial Court would lack jurisdiction under Section 9 of Act, 1996, on the Arbitrator being appointed, accordingly, ordered to return the record under Order 7 Rule 10 of Code of Civil Procedure, 19082.
3. The respondents executed a partnership deed to constitute a firm in the name and style, "M/s Shanti Construction", for the business of stone crushing or any other business as agreed. As per the deed, the profit amongst partners was to be divided at 33.34 per cent to appellant and 33.33 per cent to each respondent. A dispute arose with regard to share of profit, non payment of salary, denial to access books of accounts, stock material and not allowing the appellant to be involved in the day to day working of the firm. The appellant invoked the arbitration clause of the deed. Respondents did not agree to the Arbitrator proposed by the appellant and also failed to propose an Arbitrator. The appellant approached this Court for appointment of an Arbitrator under Section 11 of the Act, 1996, by filing Arbitration Application No. 57 of 2020. During pendency of the application under Section 11, appellant filed a petition under Section 9 before Commercial Court, Jhansi, for interim measure to protect the interest of the appellant. The respondents filed written statement. The Commercial Court adjourned the matter for 05.03.2021. In the meantime, this Court appointed an independent Arbitrator vide order dated 23.02.2021. On the matter being taken up, Commercial Court passed the impugned order holding therein that on appointment of an Arbitrator, Commercial Court would lack jurisdiction to proceed under Section 9 of Act, 1996, accordingly, ordered return of the record under Order 7 Rule 10 CPC relegating the parties to take remedy before the Arbitrator under Section 17.
4. The order is being assailed, inter alia, on the ground that the Commercial Court committed an error in holding that it lacks jurisdiction upon appointment of an Arbitrator; impugned order is illegal and against the provisions of Section 9 of the Act, 1996; an application for interim relief is maintainable before the Commercial Court, before or during the pendency of arbitral proceedings or at any time after the making of the arbitral award till it is enforced; Commercial Court failed to exercise jurisdiction vested in it under Section 9 of Act, 1996.
5. The learned counsel for the appellant has placed reliance on Benara Bearing and Pistons Ltd. Vs. Mahle Engine Components India Pvt. Ltd.3
6. Learned counsel appearing for the respondents opposed the appeal and submits that the order is in accordance with the law; once the arbitral tribunal has been constituted, the Court shall not entertain an application for interim measures under Section 9 of Act, 1996; the appellant has not pleaded before the Court below or before this Court that the circumstances existed which may not render the remedy provided under Section 17 efficacious. It is urged that appeal being devoid of merit, is liable to be dismissed at the admission stage itself.
7. Learned counsel for the respondents has placed reliance on Tufan Chatterjee Vs. Rangan Dhar4.
8. The short question, that arises for determination in this appeal, is whether Commercial Court was justified in not entertaining the petition under Section 9 filed for interim measure on constitution of the arbitral tribunal.
9. Before examining the rival submissions advanced by learned counsels for the parties, it would be apposite to consider the relevant provisions of Act, 1996.
10. Section 9, provides for "Interim measure, etc. by Court". It reads thus:
"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 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 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." (emphasis added)
11. Sub-Section (3) came to be inserted by Act No. 3 of 2016, with effect from 23.10.2015. On plain reading of the provision, Section 9 mandates a party to approach the Court before or during arbitral proceeding or at any time after giving of arbitral award but before it is enforced, for interim measure in respect of preservation of the subject matter, interim custody or sale of any goods, appointment of a receiver or other interim measures for protection as may appear to the Court to be just and convenient,
12. Sub-Section (3) of Section 9 provides that upon constitution of arbitral tribunal, Court shall not entertain an application for interim measure under Sub-Section (1) unless the Court finds that the circumstances exist which may not render the remedy provided under Section 17 efficacious.
13. Section 17 provides for "Interim measures ordered by arbitral tribunal". Sub-Section (1) provides that a party may, during the arbitral proceedings, apply to the arbitral tribunal for an interim measure of protection. Sub-Section (2) of Section 17 provides that any order issued by the arbitral tribunal under this Section (Section 17) shall be deemed to be an order of the Court for all purposes and shall be enforceable under the provisions of CPC. Section 17 is extracted:
"17. Interim measures ordered by arbitral tribunal.--(1) A party may, during the arbitral proceedings, apply to the arbitral tribunal--
(i) ....
(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.
(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."
14. Sub-Section (3) of Section-9, inserted by Amendment Act of 2016, mandates that once an arbitral tribunal has been constituted, the Court shall not entertain an application under Sub-Section (1) of Section 9. After amendment, the scope of Section 17 has considerably been widened and the arbitral tribunal has expressly been conferred the same power, as the Court under Section 9. An order of the tribunal under Section 17 is enforceable in the same manner as an order of Court under Section 9, under the provisions of CPC. In other words, the Court and the arbitral tribunal has been conferred same power to grant interim measure of protection and enforcement of the order.
15. Even though an application for interim measure may have been filed in the Court, once arbitration proceedings has commenced and an arbitral tribunal has been constituted, interim relief would have to be sought before the arbitral tribunal, as mandated under Sub-Section (3) of Section 9. The Court would be precluded of its power to grant interim measure unless the Court is satisfied that the circumstances exist which may not render the remedy provided under Section 17 efficacious. In other words, though the jurisdiction of the Court has not been ousted completely on the constitution of arbitral tribunal, but has been considerably restricted. Sub-Section (1) of Section 9 has to be read with Sub-Section (3). The party pressing for interim measure upon constitution of the arbitral tribunal must impress upon the Court that ''circumstances' exist which may not render the remedy under Section 17 efficacious. The circumstances could be several which a party has to plead, and, prima facie, prove. But where such ''circumstances' do not exist then in that event the Court is precluded to entertain the application instituted for interim measure of protection.
16. The introduction of the word ''circumstances exist' is intended to restrict the power of the Court under Sub-Section (1) of Section 9 to grant interim measure. And although it is not easy to define what the ''circumstances' that may exist rendering Section 17 inefficacious. It would depend upon the particulars and/or surroundings or accompanying act.
17. The expression ''entertain' and ''institute' are not synonymous. The expression ''entertain' means to admit a thing/petition for consideration. In other words, it means entertaining the ground for consideration for the purpose of adjudication on merits and not any stage prior thereto. (Refer: Martin & Harris Ltd. Vs. 6th Additional District Judge5. When a suit or proceeding is not thrown out in limine but the Court receives it for consideration and disposal according to law, it must be regarded as entertaining the suit or proceeding. The expression/phrase ''shall not entertain', in Sub-Section (3) means not to proceed to consider on merit and/or to receive and take into consideration for adjudication. The word ''institute' in respect of legal proceedings means, commenced; to begin an action. On conjoint reading of Sub-Section (1) and (3) of Section 9, it follows that a party to an agreement may file/institute a petition for interim measure but upon appointment of an arbitral tribunal, the Court shall not entertain the petition or proceed to consider on merit until the condition provided therein [Sub-Section (3)] is satisfied.
18. In the facts of the instant appeal, on specific query, learned counsel for the appellant failed to show that circumstances exist that would have persuaded the Court to grant interim relief on the constitution of the arbitral tribunal. The application was filed and notices were issued, respondents put in appearance by filing written statement and the matter was fixed thereafter. In the meantime, arbitral tribunal came to be constituted. The Court, in the circumstances, was justified in declining to entertain the application for interim measure. The parties were rightly relegated to the Arbitrator.
19. The learned counsel for the appellant failed to point out any illegality, infirmity or jurisdictional error.
20. The appeal, being devoid of merit, is, accordingly dismissed.
21. No cost.
Order Date :- 19.08.2021 P.Sri.
(Suneet Kumar, J.)