Business Laws

Interplay of powers between courts and arbitral tribunals: SC settles issue

Vasanth Rajasekaran | Updated on October 03, 2021

Any unnecessary delay due to the juggling of a matter between the court and arbitral tribunal frustrates the very object of arbitration   -  Getty Images/iStockphoto

A lot of judicial time of the parties is spent in agitating the Section 9 applications

The Supreme Court, in Arcelor Mittal Nippon Steel (India) Ltd Vs Essar Bulk Terminal Ltd has settled the position on the interplay of the powers to grant interim reliefs between the courts under Section 9, and arbitral tribunals under Section 17 of the Arbitration and Conciliation Act, 1996 (Arbitration Act).

The Section 9 of the Arbitration Act empowers the courts to grant interim reliefs in arbitration matters to protect the subject matter of the dispute. Such orders include only temporary measures to guard the rights of the parties from being frustrated. Section 17 of the Arbitration Act empowers the arbitral tribunals with powers akin to Section 9. Thus, arbitral tribunals can grant interim reliefs under Section 17 to protect the rights and interests of the arbitrating parties.

The moot question in the matter was whether a court could entertain applications under Section 9 of Arbitration Act once the arbitral tribunal had been constituted. The Apex Court held that the court would not take up an application under Section 9 for consideration unless similar reliefs granted by the arbitral tribunal under Section 17 would be rendered inefficacious.

However, such bar on taking up applications under Section 9 (3) would not operate once the court had already taken up the application and applied its mind.

The appellant (Arcelor) had filed an application for the appointment of an arbitral tribunal before the Gujarat High Court. Thereafter, in January 2021, Arcelor filed an application for the grant of interim reliefs under Section 9 before the Commercial Court at Surat.

The Commercial Court heard Arcelor and listed the matter for pronouncement of an order on July 20, 2021. Meanwhile, on July 9, 2021, the High Court allowed Arcelor’s application and constituted an arbitral tribunal. Consequently, the company prayed before the Commercial Court that the Section 9 application filed seeking the grant of interim reliefs be referred to the arbitral tribunal.

The Commercial Court refused to refer appellants Section 9 application to the arbitral tribunal. A series of litigation followed and the matter reached the Supreme Court. The question for the consideration of Apex Court was whether the courts could entertain a Section 9 application once the arbitral tribunal was constituted.

Settling the conundrum

The Supreme Court upon hearing the parties held that the courts were not denuded of their powers to grant interim relief under Section 9 even after the constitution of an arbitral tribunal. The Apex Court held that the intention of the legislature in imposing the bar under Section 9 (3) of the Arbitration Act was not to turn the clock back and require a matter reserved for orders to be considered afresh by an arbitral tribunal.

The Apex Court reiterated that applications for interim reliefs by their very nature had to be disposed of urgently. It was observed that the legislature could have never intended that once an application under Section 9 was finally heard, the relief would be declined due to the constitution of an arbitral tribunal.

Accordingly, the Supreme Court concluded that where a Section 9 application was already taken up by the court, the constitution of an arbitral tribunal would not bar the court from deciding the application.

This judgment plays a fine balance between protecting the interests of the party seeking interim reliefs and ensuring minimal intervention of the courts in the arbitral process. There is no doubt that when a party approaches a court for interim reliefs under Section 9, a lot of judicial time and cost of the parties are spent in agitating the Section 9 applications.

Any unnecessary delay or expense caused due to the juggling of a matter between the court and the arbitral tribunal frustrates the very object of arbitration. Therefore, it would be in interest of justice that a court is allowed to continue adjudication of an ongoing Section 9 application.

This is more so in the absence of any provision allowing for the relegation of a pending application under Section 9 to the arbitral tribunal upon its constitution. The decision of the Supreme Court is a welcome development given that it adds the much-needed clarity to the scope of operation of Section 9 and Section 17 of the Arbitration Act.

(The author is a Partner at Phoenix Legal)

Published on October 03, 2021

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