Civil Appeal No. 5700 of 2021

On 14 Septmeber 2021, a Bench of the Hon’ble Supreme Court of India comprising Justices Indira Banerjee, and J.K. Maheshwari decided  the scope of a Court’s power to adjudicate applications for interim relief when an arbitral tribunal has been constituted during the pendency of the application.

Facts 

Arcelor Mittal Nippon Steel India Ltd. (“Arcelor”) and Essar Bulk Terminal Ltd. (“Essar”) entered into an Cargo Handling Agreement (“Agreement”). The Agreement provided that all disputes would be settled in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (“The Act”). Subsequently, a dispute arose between the parties and the arbitral clause was invoked. Pending constitution of the Tribunal, both parties filed Applications for Interim Relief (“Applications”) under Section 9 of the Act before the Commercial Court in Surat (Gujarat).

The Hon’ble High Court of Gujarat constituted a three member arbitral tribunal to resolve the dispute between the parties while the Applications were pending disposal. Arcelor filed an interim application praying for reference of both the applications to the newly appointed arbitral tribunal.

Vide 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. It 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 High Court’s order before the Supreme Court.

Holding

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.” This can continue till the pronouncement of judgment. Once the arbitral tribunal is constituted, the Court cannot take up an application under Section 9 of the Act for consideration, unless the remedy under Section 17 is inefficacious.

The Court held that intent behind Section 9(3) is not to turn back the clock and require a matter already reserved for orders, to be considered afresh by the arbitral tribunal under Section 17 of the Act. 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 Court also 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 court.

The Supreme Court held that since the application under Section 9 of the Act had already been entertained and considered by the Commercial Court, it was not necessary for the Commercial Court to consider the efficacy of relief under Section 17 of the Act.

Comment

Through this decision, the Supreme Court clarified that when an Application under Section 9 of the Act has been “entertained” by the Court, and the application has been reserved for orders, the bar under Section 9(3) cannot be said to be applicable.