Failure to comply with statutory obligations under the Arbitration and Conciliation Act, 1996 results in the expiration of interim orders, necessitating the appointment of an Arbitrator for dispute resolution.

JUDGMENT :

Moushumi Bhattacharya, J.

1. The present Appeal has been filed from an order dated 28.03.2022 passed by the Commercial Court at Hyderabad.

2. The appellant was the respondent No.1 in an application filed under section 9 of the Arbitration and Conciliation Act, 1996 which resulted in the impugned order. The respondent No.1 before us was the petitioner in the section 9 proceeding.

3. By the impugned order, the respondent No.1 (the petitioner before the Trial Court) was granted the relief sought for and the appellant was directed to extend the 3 Bank Guarantees furnished by the appellant to the respondent No.1 for 1 year from the date of the order. The respondent No.2 (then IDBI Bank and now Canara Bank) was directed not to release the security furnished by the appellant (respondent No.1 before the Trial Court).

4. The factual position is that the respondent No.1 herein has a back to back contract with its Algerian buyer and the appellant. The appellant is a supplier of the respondent No.1. The appellant approached the Commercial Court at Gujarat with a Suit for restraining the respondent No.1 from invoking the Bank Guarantees furnished by the appellant. The respondent No.1 filed an application in the Suit before the Commercial Court for referring the parties to arbitration under section 8(1) of the 1996 Act which was allowed by the Commercial Court. The Gujarat High Court closed the proceedings in 2022.

5. The respondent No.1 thereafter filed an application under section 9 of the 1996 Act before the Commercial Court at Hyderabad for interim protection for a direction on the appellant to extend/renew the performance of the Bank Guarantees pending disposal of the arbitration proceedings. By the order impugned in the present Appeal, the application filed by the respondent No.1 was partly allowed and the appellant was directed to extend the 3 Bank Guarantees forming the subject matter of section 9 proceedings. The order of the Trial Court however states that the direction on the appellant was only for a period of one year from the date of the order i.e., till 27.03.2023.

6. Learned Senior Counsel appearing for the appellant as well as the respondent No.1 have argued on the contractual obligations of the parties in respect of renewal of the Bank Guarantees.

7. We do not find any reason to go into the rival factual contentions since what is admitted before us is that the respondent No.1 obtained interim protection by way of the impugned order dated 28.03.2022. This order was passed under section 9(1) of the 1996 Act.

8. Section 9(2) of the said Act casts a statutory obligation on the parties to commence arbitration within 90 days from the date of the order under section 9(1) of the 1996 Act or within further time as may be directed by the Court.

9. This was admittedly not done. The 90 days expired on 27.06.2022. Therefore, as on date, there is an undisputed non- compliance of section 9(2) of the 1996 Act.

10. Second, the impugned order passed by the Commercial Court at Hyderabad makes it clear that the interim order was to subsist till 1 year from the date of the order i.e., till 27.03.2023. Therefore, there is no interim order subsisting in favour of the respondent No.1 as on date.

11. The fact whether the Trial Court could have passed the impugned order in the nature of perpetual injunction is a matter of law which may be agitated at the relevant point of time. We do not consider it relevant to go into these details at this stage of the proceedings. As of now, the respondent No.1 must comply with the statutory mandate of section 9(2) of the 1996 Act in terms of constituting an Arbitral Tribunal. Although that date has long passed, we deem it prudent to constitute the Arbitral Tribunal in this proceeding itself for early resolution of the disputes between the parties. We had asked learned Senior Counsel for suitable names of Arbitrators. The parties have agreed for appointing Sri Justice B.Sudershan Reddy, retired Supreme Court Judge,