Important Point
A party to an arbitration agreement can approach Court for interim relief even before arbitration proceedings commence and Court can pass interim orders. Notice to opposite party invoking arbitration clause is not a must to invoke Section 9; but the application under section must manifest intention of applicant to take recourse to arbitral proceedings.

Headnote:(i) The Arbitration and Conciliation Act, 1996-Section 9-Scope of provision - Interim order by Court even before arbitral proceedings commence-A party to an arbitration agreement can approach Court for interim relief not only during arbitral proceedings but even before arbitral proceedings-Notice to opposite party invoking arbitration clause not necessary before application under Section 9-Intention on part of applicant to take recourse to arbitral proceedings must be manifested-Court can pass conditional order-Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21.
       Held : The reading of Section 21 clearly shows that the arbitral proceedings commence on the date on which a request for a dispute to be referred to arbitration is received by the respondent. It is in this context that we have to examine and interpret the expression “before or during arbitral proceedings” occurring in Section 9 of the 1996 Act. We may here observe that though Section 17 gives the arbitral tribunal the power to pass orders the same cannot be enforced as orders of a Court. It is for this reason that Section 9 admittedly gives the Court power to pass interim orders during the arbitration proceedings. (Para 12)
       The position under the Arbitration Act, 1940 was that a party could commence proceedings in Court by moving an application under Section 20 for appointment of an arbitrator and simultaneously it could move an application for interin relief under the Second Schedule read with Section 41(b) of the 1940 Act. The 1996 Act does not contain a provision similar to Section 20 of the 1940 Act. Nor is Section 9 or Section 17 similar to Section 41(c) and the Second Schedule to the 1940 Act. Section 8 of the new Act is not in pari materia with Section 20 of the 1940 Act. It is only if in an action which is pending before the Court that a party applies that the matter is the subject of an arbitration agreement does the Court get jurisdiction to refer the parties to arbitration. The said provision does not contemplate, unlike Section 20 of the 1940 Act, a party applying to a Court for appointing an arbitrator when no matter is pending before the Court. Under the 1996 Act appointment of arbitrator/s is made as per the provision of Section 11 which does not require the Court to pass a judicial order appointing arbitrator/s. The High Court was, therefore, wrong in referring to these provisions of the 1940 Act while interpreting Section 9 of the new Act. (Para 13)
       Under the 1996 Act the Court can pass interim orders under Section 9. Arbitral proceedings, as we have seen, commence only when the request to refer the dispute is received by the respondent as per Section 21 of the Act. The material words occurring in Section 9 are “before or during the arbitral proceedings”. This clearly contemplates two stages when the Court can pass interim orders, i.e., during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why Section 9 of the 1996 Act should not be literally construed. Meaning has to be given to the word “before” occurring in the said section. The only interpretation that can be given is that the Court can pass interim orders before the commencement of arbitral proceedings. Any other interpretation, like the one given by the High Court, will have the effect of rendering the word “before” in Section 9 as redundant. This is clearly not permissible. Not only does the language warrants such an interpretation but it was necessary to have such a provision in the interest of justice. But for such a provision no party would have a right to apply for interim measure before notice under Section 21 is received by the respondent. It is not unknown when it becomes difficult to serve the respondents. It was, therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it’s interest. Reading the section as a whole it appears to us that the Court has jurisdiction to entertain an application under Section 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act. (Para 14)
       Article 9 of the UNCITRAL recognises, just like Section 9 of the 1996 Act, a request being made before a Court for an interim measure of protection before arbitral proceedings. It is possible that in some countries if a party went to the Court seeking interim measure of protection that might be construed under the local law as meaning that the said party had waived its right to take recourse to arbitration. Article 9 of the UNCITRAL Model Law seeks to clarify that merely because a party to an arbitration agreement requests the Court for an interim measure “before or during arbitral proceedings” such recourse would not be regarded as being incompatible with an arbitration agreement. To put it differently the arbitration proceedings can commence and continue notwithstanding a party to the arbitration agreement having approached the Court for an order for interim protection. The language of Section 9 of the 1996 Act is not identical to Article 9 of the UNCITRAL Model Law but the expression “before or during arbitral proceedings” used in Section 9 of the 1996 Act seems to have been inserted with a view to give it the same meaning as those words have in Article 9 of the UNCITRAL Model Law. It is clear, therefore, that a party to an arbitration agreement can approach the Court for interim relief not only during the arbitral proceedings but even before the arbitral proceedings. To that extent Section 9 of the 1996 Act is similar to Article 9 of the UNCITRAL Model Law. (Para 15)
       When a party applies under Section 9 of the 1996 Act it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Therefore, when an application under Section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act. In order to give full effect to the words “before or during arbitral proceedings” occurring in Section 9 it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal. But a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section 9 can pass conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act. (Para 20)
       (ii) The Arbitration and Conciliation Act, 1996-Section 82-High Court’s power to make Rules -All High Courts not so for made rules-Direction to High Courts to frame rules as expeditiously as possible. (Para 21)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

A party to an arbitration agreement can approach the court for interim relief both before the commencement of arbitral proceedings and during the proceedings. The court has the authority to pass interim orders in either stage (!) (!) .
The initiation of arbitral proceedings is marked by the receipt of a request for dispute resolution by the respondent, and proceedings are considered to commence on that date (!) (!) .
Notice to the opposite party invoking the arbitration clause is not a mandatory requirement for filing an application under Section 9 of the Arbitration and Conciliation Act, 1996. The application must, however, manifest the applicant's intention to pursue arbitration (!) (!) .
The language "before or during arbitral proceedings" in Section 9 allows courts to grant interim relief at two distinct stages: prior to the initiation of arbitral proceedings and during ongoing proceedings. The interpretation of "before" is to be taken literally, permitting courts to issue interim orders even before the arbitration process begins (!) (!) .
The court's jurisdiction under Section 9 is not limited by the absence of an ongoing arbitration or appointment of an arbitrator at the time of the application. The court can exercise its power to grant interim relief to protect the interests of the parties (!) (!) .
While exercising jurisdiction under Section 9, the court must ensure that there is a valid arbitration agreement and that the applicant demonstrates an intention to arbitrate. The court can also impose conditions to ensure the effective initiation of arbitral proceedings (!) .
The provisions of the 1996 Act are to be interpreted independently of the earlier 1940 Act, with reference to the UNCITRAL Model Law, to promote uniform understanding and application of arbitration law (!) (!) .
The High Courts are encouraged to formulate rules to streamline procedures under Section 9 to facilitate quick and effective resolution of arbitration-related applications (!) .
The court's power to grant interim relief is not restricted to ongoing arbitration; it extends to proposed arbitrations where no proceedings have yet commenced, provided the applicant intends to arbitrate (!) (!) .
The court's ability to pass interim orders before arbitral proceedings begin ensures the protection of parties' interests, especially in situations where service or notice might be difficult or delayed (!) .

These points collectively clarify that courts have broad authority to grant interim relief related to arbitration both before and during arbitration proceedings, emphasizing the importance of the applicant's manifest intention to arbitrate and the need for procedural rules to support this process.

Judgment

Kirpal, J.-Leave granted.

2. An important question which arises for consideration in these cases is whether under Section 9 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the 1996 Act’) the Court has jurisdiction to pass interim orders even before arbitral proceedings commence and before an arbitrator is appointed.

3. The relevant facts which are necessary for the consideration of the point in issue are that the respondent had entered into a hire-purchase agreement with the appellant herein in respect of supply of two wind turbine generators along with all accessories. The terms of the agreement contemplated payments being made in instalments by the respondent, the first instalment was payable on 29th September, 1995 and the last was due by 25th August, 1998. In all the payment was to be made by 36 instalments.

4. According to the appellant the respondent paid the first fifteen instalments and thereafter committed default and payment was not made in spite of several demands being made by the appellant. The hire-purchase agreement contained an arbitration clause which reads as follows:

“All disputes, differences and/or claims, arising out of this hire purchase agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provision of Indian Arbitration Act, 1940 or any statutory amendments thereof and shall be referred to the sole arbitration of an arbitrator nominated by the Managing Director of the owner. The award given by such an arbitrator shall be final and binding on all the parties to this agreement.

It is a term of this agreement that in the event of such an arbitrator to whom the matter has been originally referred doing or being unable to act for any reason, the Managing Director of the owner, at the time of such death of the arbitrator or his inability to act as arbitrator, shall appoint another person to sit as arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.”

When the appellant came to know that other litigation was pending against the respondent it filed an application under Section 9 of the 1996 Act before the City Trial Court, Chennai, praying for the appointment of an Advocate Commissioner to take custody of the hire-purchase machinery/equipment and restore the same to the interim custody of the appellant herein. This application was taken up for hearing on 7th April, 1998 and the trial Court passed an interim order appointing a Commissioner to take possession of the turbines with the help of the police.

5. The aforesaid order of the trial Court was challenged with the respondent filing a petition under Article 227 of the Constitution before the High Court at Madras. One of the main contentions urged on behalf of the respondent was that as no arbitration proceedings were pending and even the arbitrator had not been appointed, an application under Section 9 of the 1996 Act for getting interim relief alone was not maintainable. On merits it was contended that the ex parte order which was passed by the trial Court was uncalled for. While supporting the order of the trial Court the appellant herein had submitted before the High Court that interim orders could be passed even before the commencement of the arbitral proceedings.

6. By it’s judgment dated 22nd June, 1998, the High Court allowed the respondent’s petition. In it’s judgment, after referring to the provisions of Section 41 of the Arbitration Act, 1940 and the relevant provisions of the 1996 Act, the High Court observed as follows:

“Second Schedule to the 1940 Act is the powers of the Court and item No. 4 is “interim injunction or the appointment of a receiver”. Therefore, there is no virtual difference between Section 41 read with Schedule 2 and present Section 9 of the Arbitration Act. Moreover, if an interpretation such as the one contended by the Learned Counsel for the appellant is to be given

Click Here to Read the rest of this document

1999 Supreme(SC) 37

Cases Referred (1)