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1998 Supreme(Mad) 825

MADRAS HIGH COURT
S S Subramani
NEPC INDIA LTD. - PETITIONER
v.
SUNDARAM FINANCE LTD. - RESPONDENT.
CRP Nos. 1421 to 1423 of 1998 and CMP Nos. 6698 to 6701 of 1998
Decided on : June 22, 1998.

Advocates appeared:
Sh. Rajagopalan, Sr. Counsel, for the Petitioner.
Sh. P. H. Pandian, Sr. Counsel, for the Respondent.

Section 9 of the Arbitration and Conciliation Act, 1996 contemplates interim measures only during the pendency of arbitral proceedings or at any time after the making of the arbitral award but before it is enforced.

Headnote:

ARBITRATION - INTERIM MEASURES - SECTION 9 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - SCOPE AND APPLICABILITY - COURT'S POWER TO GRANT INTERIM RELIEF - CONDITIONS PRECEDENT - MAINTAINABILITY OF APPLICATION FOR INTERIM RELIEF WITHOUT PENDING ARBITRATION PROCEEDINGS - INTERPRETATION OF SECTION 9 - DISTINCTION BETWEEN SECTION 41 OF THE OLD ACT AND SECTION 9 OF THE NEW ACT - ROLE OF COURTS BEFORE AND DURING ARBITRATION - POWERS OF ARBITRAL TRIBUNAL UNDER SECTION 17 OF THE ACT - EXERCISE OF POWER UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA - JURISDICTIONAL DEFECTS - NATURAL JUSTICE - EXHAUSTION OF ALTERNATIVE REMEDIES.

Fact of the Case:

Petitioner and respondent entered into a hire purchase agreement for the supply of two Wind Turbine Generators. The petitioner defaulted in payment, and the respondent filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act), seeking interim relief, including the appointment of a Commissioner to take possession of the goods with the help of the police. The lower court allowed the application and appointed a Commissioner to take possession of the goods. The petitioner challenged the order, contending that the application under Section 9 was not maintainable as no arbitration proceedings were pending.

Finding of the Court:

The court held that Section 9 of the Act contemplates interim measures only during the pendency of arbitral proceedings or at any time after the making of the arbitral award but before it is enforced. The court found that in the present case, no arbitration proceedings had been initiated, and therefore, the application under Section 9 was not maintainable. The court also held that the lower court erred in passing the impugned order without hearing the petitioner, thereby violating the principles of natural justice.

Issues: 1. Whether an application under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable without pending arbitration proceedings? 2. What is the scope and applicability of Section 9 of the Act? 3. What are the conditions precedent for the exercise of the court's power to grant interim relief under Section 9 of the Act? 4. Whether the lower court erred in passing the impugned order without hearing the petitioner?

Ratio Decidendi: 1. Section 9 of the Arbitration and Conciliation Act, 1996 contemplates interim measures only during the pendency of arbitral proceedings or at any time after the making of the arbitral award but before it is enforced. 2. Section 9 of the Act provides for interim measures such as the preservation, interim custody or sale of goods, securing the amount in dispute, detention, preservation or inspection of property, interim injunction or the appointment of a receiver, and such other interim measures of protection as may appear to the court to be just and convenient. 3. The conditions precedent for the exercise of the court's power to grant interim relief under Section 9 of the Act are: - The existence of an arbitration agreement between the parties; - The initiation of arbitration proceedings or the pendency of an arbitral award; - The absence of any provision in the arbitration agreement or the Act that excludes the court's jurisdiction to grant interim relief. 4. The lower court erred in passing the impugned order without hearing the petitioner, thereby violating the principles of natural justice.

Final Decision: The court allowed the revisions and set aside the impugned order. The court also made it clear that its decision did not affect the respondent's rights under the hire purchase agreement or any other law to take possession of the movable.

ORDER

S. S. Subramani, J. - All these revisions are filed under Art. 227 of the Constitution of India, challenging the order of the lower Court in O.P. No. 137 of 1998 on the file of the X Assistant Judge, City Civil Court, Chennai and four miscellaneous petitions are filed along with these revisions.

2. The relevant facts which are necessary for the disposal of these revisions could be summarised thus. The petitioner and the respondent entered into a hire purchase agreement regarding supply of two Wind Turbine Generators on 25-9-1995 after agreeing to the schedule of repayment and also consequence in case of default. Clause 24-A of the hire purchase agreement provided for an arbitration clause which reads thus :

"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 dying or being unable to act for any reason, the Managing Director of the owner, at the time of such death of the arbitrator on his inability to act as arbitrator, shall appointed another person to act as arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was felt by his predecessor."

3. The petitioner defaulted in payment. Some correspondence followed and finally, the respondent came to know that various litigations were pending against the petitioner and therefore invoking Clause 24-A of the hire purchase agreement, it filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter also referred to as 'the Act'). Though the petition was filed on 3-4-1998, it was taken up and numbered only 7-4-1999. Along with the main application, two other interlocutory applications were also filed; one for appointment of a Commissioner and the other for getting police protection. On 7-4-1998 itself the lower Court passed the impugned order appointing a Commissioner to take possession of the goods with the help of the police. This order is challenged in all these revisions mainly for the reason that the petition in O.P. No. 137 of 1998 itself is not maintainable and therefore, the Court did not have jurisdiction to pass an order.

4. Learned Senior Counsel for the petitioner submitted that Section 9 of the Act only provides for interim measure and that cannot be granted as a substantial relief. Apart from that, it is contended that no arbitration proceedings are pending and without asking for specific relief under the Act, an application for getting the interim relief alone is not maintainable. The impugned order is one without jurisdiction.

5. It is further contended by the learned Senior Counsel that on 7-4-1998 the application was allowed to be numbered and even without notice to the petitioner, an order has been passed as if the respondent has entered appearance and he was ex parte. There is no application of mind. A Civil Court should not pass such an order when the effect of interim itself is grave and serious. It is further stated that by allowing the order, the entire relief in the main petition is granted without hearing the petitioner and therefore, it violates the principles of natural justice.

6. As against the said contention, learned senior counsel for the respondent submitted that the maintainability of these revisions itself is questionable. Against the impugned order a statutory appeal is maintained under Section 37 of the Act. When there is an effective alternative remedy, revisions under Art. 227 of the Constitution of India is not maintainable.

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