Even if an application under Section 9 of A&C Act, 1996 had been entertained before the constitution of the tribunal, the court retains discretion to direct the parties to approach the arbitral tribunal

While deciding the matter of Arcelor Mittal Nippon Steel India v. Essar Bulk Terminal Ltd. the Hon’ble Supreme Court on 14.09.2021 has further clarified the scope of court’s power to entertain and adjudicate applications for interim relief, when the arbitral tribunal has been constituted during the pendency of parties’ applications for interim relief before the court.

 

Factual matrix

Arcelor Mittal Nippon Steel India Limited/ Appellant (Arcelor) and Essar Bulk Terminal Limited/ Respondent (Essar) entered into an agreement for cargo handling at Hazira Port (Agreement). Article 15 of the Agreement provided that all disputes arising out of the Agreement would be settled in accordance with the provisions of the Act. Subsequently, certain disputes arose between the parties and the arbitration clause in the Agreement was invoked. Meanwhile, both Arcelor and Essar sought interim relief under Section 9 of the Act before the Commercial Court in Surat, Gujarat on 15 January 2021 and 16 March 2021, respectively (Interim Relief Applications). The Commercial Court heard the Interim Relief Applications and reserved the matter for orders on 7 June 2021 (Order).

 

While the judgement was still reserved, the High Court of Gujarat constituted a three-member arbitral tribunal to resolve the disputes between the parties. Basis this, Arcelor filed an interim application, praying for reference of the Interim Relief Applications filed by the parties, to the newly appointed arbitral tribunal. However, by an order dated 16 July 2021, the Commercial Court dismissed the said interim application. This was challenged by Arcelor before the High Court of Gujarat. However, the High Court also dismissed the challenge and held that the Commercial Court has the power to consider whether the remedy under Section 17 of the Act is inefficacious and pass necessary orders under Section 9 of the Act. Arcelor challenged the High Court’s order before the Supreme Court, which was disposed of vide the present judgment under discussion.

Issues

  • Whether the court has the power to entertain an application under Section 9(1) of the Act, once an arbitral tribunal has been constituted and if so, what is the true meaning and purport of the expression “entertain” in Section 9(3) of the Act ?

 

  • Whether the court is obliged to examine the efficacy of the remedy under Section 17, before passing an order under Section 9(1) of the Act, once an arbitral tribunal is constituted ?

Analysis of the Judgement

The Supreme Court held that the expression “entertain” in Section 9(3) of the Act means to consider, by application of mind to the issues raised. The court entertains a case when it takes a matter up for consideration. The process of consideration could continue till the pronouncement of judgment. Thus, in terms of Section 9(3), once the arbitral tribunal is constituted and is in seisin of the dispute between the parties, the court cannot take up an application under Section 9 of the Act for consideration, unless the remedy under Section 17 is inefficacious.

 

It was clarified by the Supreme Court that the bar of Section 9(3) of the Act would not operate, once an interim relief application had already been entertained and taken up for consideration, as in the instant case, where the hearing has been concluded and judgment had been reserved. The Supreme Court held that when an application has already been taken up for consideration and is in the process of consideration or has already been considered, the question of examining whether remedy under Section 17 is efficacious or not, would not arise. The requirement to conduct the exercise arises only when the application is being entertained and/or being taken up for consideration by the arbitral tribunal.The Supreme Court held that even if an application under Section 9 had been entertained before the constitution of the tribunal, the court retains discretion to direct the parties to approach the arbitral tribunal.