“We cannot allow the transfer of any application from Court to the Tribunal. The Courts have some sanctity” said the Bench while reserving its judgment after hearing the arguments on the scope of Section 9(3) of the Arbitration & Conciliation Amendment Act, 2015 in the case of Benara Bearings & Pistons Ltd. v. Mahle Engine Components India Pvt. Ltd. FAO(OS) (Comm) 66/2012 ("Benara'). The moot question before the Delhi High Court was whether a pending interim measures application can be transferred to the Arbitral Tribunal? This article favours this proposition. Though the Act does not provide any express provisions for transfer or relegation of pending application for interim measures but the harmonious interpretation of the word “entertain” used in Section 9(3) and analysing amended powers of the Arbitral Tribunal evidences that the intent of the Legislature was to reduce the burden of Court flooded with application for interim measures and relegate the same to the Tribunal at any stage if the Court is of the opinion that efficacious remedy is available with the Arbitral Tribunal.
I.
Background
Arbitration &
Conciliation Amendment Act, 2015 (“Amendment Act”) came into force to rectify
the infirmities of the Arbitration & Conciliation Act, 1996 (“1996
Act”) discovered in the due course of time. One of the phenomenal amendments
introduced is in the law of Arbitration is giving the Arbitral Tribunal equal
powers of that of the Court while deciding the application of interim measures.
Under the 1996 Act, Arbitral Tribunal’s order under Section 17 was not
enforceable and hence unlike the order for interim relief by a Court under
Section 9, the orders by the Tribunal were virtually ‘toothless’. The
Legislature, therefore, introduced amendments to Section 17. Certain new
provisions are added to existing Section 9 to compliment the amendment of
Section 17. For instance, Section 9(3) is introduced which bars the Court from
entertaining the interim measures application once the Arbitral Tribunal is constituted.
Only if Court is of the opinion that an efficacious remedy may not be available
with the Arbitral Tribunal then only it can entertain the interim measures
application.
The moot question which
arises is that Whether the Court during the pendency interim measures
application can relegate the matter to the Tribunal for deciding the interim
measures application? As after the amendment, the powers under Section 17 are
now same of that under S. 9, the Tribunal is now vested with powers to
adjudicate all such applications.
Since the Amendment Act does
not contain any express provision permitting the transfer or relegation of the
cases, an exhaustive interpretation of Section 9(3) considering Legislature’s
intent must be looked into. Currently, the Division Bench of Calcutta High
Court in the case of Tufan Chatterjee v. Rangan Dhir[2] has held that an
interim measures application under S. 9(1) can be transferred to the Arbitral
Tribunal and be decided under Section 17. However, the Division Bench of the Delhi
High Court in Case of Benara Bearing and Pistons Ltd. v. Mahle Engine
Components Private Ltd. FAO 66/2016 has set out clear that it shall not allow
transfer of such applications since there is no express provision under the Act
to transfer the pending application from Court to the Tribunal. Although Delhi
High Court did not refer to the Tufan Chatterjee judgment in its decision or
discussed the relevant precedents in this regard. Delhi High Court emphasized
on the interpretation of work “entertain” as used in section 9(3). It is
necessary to discuss the relevant precedents interpreting the word “entertain”
as mentioned below.
II.
Whether pending Application under S. 9 be transferred to Tribunal to be
considered as S. 17 as per the Amendment Act
Courts while deciding
whether to transfer a pending application to the Tribunal have put a strong
emphasis on interpreting the word “entertain” as used in Section 9(3) to
determine the legislative intent. Section 9 opening lines are “Once the
arbitral tribunal is constituted, the Court shall not entertain”.
The word “entertain” has
been interpreted by the Courts earlier. A full bench of the Supreme Court in
the case of Lakhmiratan Engineering Works v. Assistant Commissioner (Judicial)
I, Sales Tax[3] held that the expression ‘entertain’ does not mean the same
thing was the filing of the application or admission of the application by the
Court. The word “entertain” meant not “receive” or “accept” but “proceed to
consider on merits” or “adjudicate upon”.
The aforesaid interpretation
of the word “entertain” may suggest that a pending interim measures application
which is already admitted by the Court but not decided may fall within Section
9(3). Since the Court has not decided the matter on merits it is refrained from
further adjudicating the matter. The only option left with the Court is to
either justify that “efficacious remedy” is not available with the Tribunal to
continue adjudicating the matter or transfer it to the Arbitral Tribunal by the
effect of bar u/s 9(3). This interpretation was followed in Tufan Chatterjee as
well.
However, Lakhmiratan
Engineering Works (Supra) and cases affirming it do not deal with a situation
wherein the word “entertain” is to be interpreted in light of the pending
applications after enactment of a new legislation as the case is in Section
9(1) after the introduction of Section 9(3). Such situation arose before
another Supreme Court full bench in Dewaji v. Ganpati.[4] The Apex Court held
that if the term “entertain” is used in the statute then it has no effect on
the pending suit/application (similar to section 9(3) of the Amendment Act) as
entertain means bar on entertaining new application only. The Court observed
that had the legislature used the term “entertain or try any suit” then bar
could have been on the pending application as well. Thus, use of “entertain”
shall have only prospective effect. Therefore, if the provisions of S. 9(3) are
strictly interpreted then pending applications under the S. 9(1) cannot be
transferred to the Arbitral Tribunal. The division bench of the Delhi High
Court in Benara has drawn the same conclusion but instead relied on the meaning
provided in the Legal Glossary[5] and not on the Dewaji v. Ganpati case.
However, the Delhi High Court has not recorded the legal glossary meaning in
the judgment in Benara case.
III.
Need for Harmonious interpretation of 9(3) and its distinction from a usual
ousting jurisdiction clause
If the strict interpretation
is given to S. 9(3) prohibiting the transfer of pending application to the
Arbitral Tribunal, then the whole object bringing Arbitral Tribunal’s powers at
par with the Court would become impuissant. Opinions favouring the strict
interpretation of S. 9(3) often assert that S. 9(3) is not ouster jurisdiction
clause and has no express provision for transfer of cases. The Delhi High Court
has also observed the same. In my humble suggestion, instead of comprehending
Section 9(3) as an ousting clause to circumvent judicial powers, the provision
must be interpreted to reduce the burden of the Courts.
Erstwhile Chief Justice of
India, Mr T.S Thakur, in his address at the Arbitration Conference expressed
his concerns over the avalanche of cases Judiciary is handling.[6] If some
volume of these cases which form interim measures applications are conveniently
routed to Arbitral Tribunal, then it would certainly compliment the act and
vision of the former Chief Justice. Further not in only the Amended Act but on
several earlier occasions the Indian judiciary has supported the view that its
role in the arbitration process is minimal and only of supervisory nature. This
was in-fact one of the objects of the 1996 Act too.
In Sundaram Finance Ltd. v.
NEPC India Ltd., the Supreme Court held that while passing any order under Section
9, courts must be satisfied that applicant will take effective steps for
commencing arbitral proceedings.[7] The Delhi High Court in Softline Media Ltd.
and Shalimar Advertisers v. Delhi Transport Corporation[8] held that the Courts
must refrain from making observation on merits and Arbitrator must take a fresh
look into the matter on the basis of pleadings, documents and other materials
placed before him without in any way being influenced by the observations made
by the Court.
An instance of Court relegating
the interim measures application to the Arbitral Tribunal even under the old
act is way back in 2002 when the Delhi High Court in India Financial Services
Pvt.Ltd v. Jairaj Shetty (2004 (1) ARBLR 280 Delhi) exercised its discretionary
power and converted the section 9 to section 17 Application . The Court
transferred the Section 9 Application to the Arbitral Tribunal to be considered
as Section 17. Similar view has been taken by Justice Manmohan Singh in
Aquatech Systems (Asia) Pvt. Ltd. v. SKS Power Generation O.M.P. No. (I) No.
446/2015. However, the case of Aquatech does hold the binding value since
appeal was filed before the same bench where case of Benara was pending and
subsequently it was also withdrawn. Intention to refer the aforesaid cases is
that the Court in past has taken such steps to relegate the application to the
Tribunal since it lessens the Court burden.
IV.A
pragmatic view towards Section 9(3)
Considering the aforesaid
discussions, it is suggested that relegating the interim measures application
to Arbitral Tribunal does not seem to be an absurd thought. This gives rise to
another question i.e. Whether the interim protection order of the Court stays
or gets vacated?
In any dispute involving an
arbitration, parties often approach the Court before invoking the Arbitration
clause and the whole process of getting an interim protection is so swiftly
done, the other side is often not required to be served with the Section 9
Petition if no caveat is filed or arbitration is not invoked. It’s a common
practice to secure an ex parte ad interim protection of the matter before
invocation of the Arbitral clause. If the interpretation that upon the
constitution of Arbitral Tribunal, the petition is to be transferred from the
Court is accepted then it would limit the Court’s role to a body that only
provides interim protection at the first instance. The situation would be
similar to the admission of PIL or SLP wherein Court has to act with due care.
This should not be construed as taking away the power of the Court as even then
discretionary power is given to the Court to grant interim measures if it is of
the opinion that an efficacious remedy may not be available with the Arbitral
Tribunal.
Further, If protection order
of the Court is not stayed till the disposal of interim measures application by
Tribunal once it is relegated by the Court then it would defeat the whole
purpose of the relegation. Following is a brief illustration in this regard:
V.
Brief Illustration in support
A and B have a business
relationship. The Parties enter a dispute. A is aggrieved by the fact that B
may dispose of the assets. The arrangement provides that all issues are to be
decided by Tribunal. However, since the Tribunal is not constituted, A due to
urgency approached the Court under Section 9. Court issues notice and before
the next date of hearing, Tribunal is constituted. B approaches the Court
stating that Court has no jurisdiction since Tribunal is constituted.
Three
scenarios:
1. Court finds that efficacious remedy not
available with Tribunal thus invokes its discretionary power and decided the
matter under Section 9. (Note- Court must provide reasoning as to why it efficacious
remedy not available with Tribunal)
2. The court finds that
there is an efficacious remedy available under Section 17 and therefore it
relegates the matter to Tribunal. However, Court does not grant any interim
relief. (Note- In this case since A has no interim protection, its remedy under
Section 17 before Tribunal would become infructuous and grave prejudice be
caused)
3. The court finds that
there is an efficacious remedy available under Section 17 and therefore it
relegates the matter to Tribunal. Court makes no observation to merits of the
matter and only takes a prima facie view and grants interim measures which are
to be looked into by Tribunal on merits under Section 17. No prejudice caused
to either party) (Note- This illustration suggests the harmonious
interpretation of Section 9(3), 9(2) and Section 17 of the amended Act.)
VI. CONCLUSION
In my opinion, while
interpreting any provision of a statute, it is imperative to first analyse the
object and intent of the statute and then interpret the statute using principle
rather than just a precedent. Interpretation of the word “entertain” through
the prism of precedents will not fulfil the primary aim and objectives of the
1996 Act which is to minimise judicial intervention of Courts.
It is true that Arbitration
in India today is plagued by misconduct and riddled with procedural disputes
which are disrupting the ethos of commercial jurisprudence. Legislature is
putting efforts to remove infirmities and improve the Arbitration law in India.
Therefore, even now the Courts are still proceeding with caution and not too
comfortable giving complete autonomy to the Arbitral Tribunal.
Although division bench of
Delhi High Court has thoughtfully observed in Benara (Supra) at para 24 of the
judgement that:
“We may also note that if
the argument of the appellant were to be accepted that the moment an Arbitral
Tribunal is constituted, the Court which is seized of a Section 9 application,
becomes coram non judice, would create a serious vacuum as there is no
provision for dealing with pending matters.”
However, a blanket ban on
relegation of pending interim measures to the Tribunal may be not a fruitful
solution, the aforesaid issue needs to be addressed with aim to further
interpret term “efficacious” as stated in section 9(3). It will be interesting
to witness the decisions to come when Court will give meaning to “efficacious
remedy” and set parameters and threshold on issues which can be dealt by the
Arbitral Tribunal.
[1] Advocate, Delhi High
Court, B.A LL.B (Hon.) Rajiv Gandhi National University of Law, Patiala, 2014.
The Author was involved in the case Benara Bearings & Pistons Ltd. v.
Mahle Engine Components India Pvt. Ltd. FAO(OS) (Comm) 66/2012, judgment delivered
on 01.03.2017 before the Delhi High Court. The views expressed by the Author
are personal.
[2] FMAT No. 47 of 2016 and
CAN 308 of 2016, ¶¶ 43-45 (“Tufan Chaterjee”)
[3] (1968) 1 SCR 505, ¶¶7-9
[4] (1969) 1 SCR 573, ¶ 12
[5]
http://lawmin.nic.in/olwing/legal%20glossary/D%20to%20G.pdf
[6] Closing Address of the
erstwhile Chief Justice of India Hon’ble Mr. T.S Thakur at the Arbitration
Conference organized by Neeti Ayog
[7] Sundaram Finance Ltd. v.
NEPC India Ltd. 1999 (2) SCC 479, ¶19
[8] 2002 Supp ArbLR 632, ¶¶
15,22
No comments:
Post a Comment