Tracking Legal Developments.

Calcutta High Court Clarifies Scope of Section 9: Post-Award Monetary Claims for New Liabilities Not Maintainable

Kolkata: In a significant ruling on the scope of interim measures in arbitration, the Calcutta High Court has held that a post-award petition under Section 9 of the Arbitration and Conciliation Act, 1996, cannot be used to seek reimbursement for a monetary liability that arose after the arbitral award was published.

Justice Gaurang Kanth, while dismissing the petition in Rakesh Kumar Jindal and Anr. v. Anoop Kumar Jindal and Ors. (A.P. 117 of 2022) , clarified that the court's power under Section 9 is ancillary and protective in nature, intended to preserve the subject matter of arbitration or secure the fruits of the award. It does not extend to adjudicating fresh disputes or granting final monetary reliefs that were not part of the original arbitration.

Case Background

The dispute arose between partners of the firm M/s. Chander Niwas, which owns a valuable multi-storied property at Shakespeare Sarani, Kolkata. Following disputes, the matter was referred to arbitration, culminating in an award on December 23, 2019. This award is currently under challenge by both parties in separate petitions under Section 34 of the Act.

Subsequent to the award, the firm faced a substantial property tax liability of over Rs. 1.89 crore to the Kolkata Municipal Corporation (KMC). To take advantage of a limited-period waiver scheme offered by the KMC, which reduced the payable amount to approximately Rs. 44.42 lakh, the petitioners paid the entire sum from their personal funds to protect the firm's primary asset.

Having received only partial reimbursement of Rs. 20 lakh from a court-appointed Receiver, the petitioners filed the present Section 9 application, seeking a direction for the other three respondent partners to pay their respective shares, calculated at Rs. 5,50,108/- each.

Arguments of the Parties

For the Petitioners: Mr. Shreyaan Bhattacharyya, counsel for the petitioners, argued that the payment was made in good faith to secure a substantial benefit for the partnership firm as a whole. He contended that the respondents, being equal partners, reaped the benefits of this action and could not evade their statutory liability to reimburse the petitioners. The action was taken to prevent coercive measures against the firm's property, thus falling within the protective ambit of Section 9.

For the Respondents: Senior Advocate Mr. Sudip Deb, representing the respondents, countered that the petition was not maintainable. He submitted that the KMC tax liability arose after the arbitral award was rendered and was therefore a "post-award event" not contemplated in the award. He argued that the petitioners were essentially seeking enforcement of a fresh monetary claim under the guise of a Section 9 application, which is beyond the court's jurisdiction for interim measures. Such a claim, he asserted, requires factual adjudication of accounts between partners, which is impermissible in a Section 9 proceeding.

Court's Legal Analysis and Ruling

Justice Kanth undertook a detailed analysis of the scope of Section 9, reaffirming its limited and ancillary nature. The court identified the central issue as whether a post-award claim for reimbursement can be entertained under this provision.

The judgment emphasized that the power under Section 9 is not for adjudicating new disputes but for preserving the status quo or ensuring the eventual award is not rendered a paper decree. The court observed:

> "The jurisdiction under Section 9 does not extend to the adjudication of fresh disputes, alteration of substantive rights, or granting of final reliefs that effectively amount to execution of the award."

The court found that the petitioners' claim was not an interim measure "in aid of" the existing award but a fresh claim requiring a factual determination of rights and obligations. Granting such a relief would amount to pre-judging matters that are intrinsically linked to the overall partnership accounts, which are the subject of the pending Section 34 proceedings.

The court also drew support from a prior order of a Division Bench in the same dispute, which had observed that issues of liability and reimbursement among partners should be adjudicated in the proceedings challenging the award itself.

Final Decision

Finding no grounds to entertain the petition, the High Court dismissed it. The court concluded that the claim for reimbursement of a post-award liability falls outside the limited scope of Section 9.

> "The prayer for reimbursement of Corporation Tax, being a post-award liability, falls outside the ambit of Section 9, which is confined to interim and protective measures and does not extend to the adjudication of substantive monetary claims."

However, the court granted liberty to the petitioners to raise their claims and contentions in the pending Section 34 proceedings, ensuring their grievance can be addressed in the appropriate legal forum.