Arcelor Mittal Nippon Steel India Ltd. Versus Essar Bulk Terminal Ltd., AIR 2021 SC 4350
The Supreme Court on application under section 9 of Arbitration Act in Arcelor Mittal Nippon Steel India Ltd. Versus Essar Bulk Terminal Ltd., AIR 2021 SC 4350 held that: “It is now well settled that the expression “entertain” 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 as argued by Khambata. Once an Arbitral Tribunal is constituted the Court cannot take up an application Under Section 9 for consideration, unless the remedy Under Section 17 is inefficacious. However, once an application is entertained in the sense it is taken up for consideration, and the Court has applied its mind to the Court can certainly proceed to adjudicate the application.
94. Mr. Sibal rightly submitted that the intent behind Section 9(3) was not to turn back the clock and require a matter already reserved for orders to be considered in entirety by the Arbitral Tribunal Under Section 17 of the Arbitration Act.
95. On a combined reading of Section 9 with Section 17 of the Arbitration Act, once an Arbitral Tribunal is constituted, the Court would not entertain and/or in other words take up for consideration and apply its mind to an application for interim measure, unless the remedy Under Section 17 is inefficacious, even though the application may have been filed before the constitution of the Arbitral Tribunal. The bar of Section 9(3) would not operate, once an application has been entertained and taken up for consideration, as in the instant case, where hearing has been concluded and judgment has been reserved. Mr. Khambata may be right, that the process of consideration continues till the pronouncement of judgment. However, that would make no difference. The question is whether the process of consideration has commenced, and/or whether the Court has applied its mind to some extent before the constitution of the Arbitral Tribunal. If so, the application can be said to have been entertained before constitution of the Arbitral Tribunal.
96. Even after an Arbitral Tribunal is constituted, there may be myriads of reasons why the Arbitral Tribunal may not be an efficacious alternative to Section 9(1). This could even be by reason of temporary unavailability of any one of the Arbitrators of an Arbitral Tribunal by reason of illness, travel etc.
96. Even after an Arbitral Tribunal is constituted, there may be myriads of reasons why the Arbitral Tribunal may not be an efficacious alternative to Section 9(1). This could even be by reason of temporary unavailability of any one of the Arbitrators of an Arbitral Tribunal by reason of illness, travel etc.
97. Applications for interim relief are inherently applications which are required to be disposed of urgently. Interim relief is granted in aid of final relief. The object is to ensure protection of the property being the subject matter of Arbitration and/or otherwise ensure that the arbitration proceedings do not become infructuous and the Arbitral Award does not become an award on paper, of no real value.
98. The principles for grant of interim relief are (i) good prima facie case, (ii) balance of convenience in favour of grant of interim relief and (iii) irreparable injury or loss to the applicant for interim relief. Unless applications for interim measures are decided expeditiously, irreparable injury or prejudice may be caused to the party seeking interim relief.
99. It could, therefore, never have been the legislative intent that even after an application Under Section 9 is finally heard relief would have to be declined and the parties be remitted to their remedy Under Section 17.
100. 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 taken up for consideration. As observed above, there could be numerous reasons which render the remedy Under Section 17 inefficacious. To cite an example, the different Arbitrators constituting an Arbitral Tribunal could be located at faraway places and not in a position to assemble immediately. In such a case an application for urgent interim relief may have to be entertained by the Court Under Section 9(1).
101. As pointed out by Mr. Khambata, the 246th Report of the Law Commission, submitted in August 2014 states that Section 9(3) seeks to reduce the role of the Court in relation to grant of interim measure, once the Arbitral Tribunal has been constituted. This is also in keeping with the UNCITRAL Model Law which discourages Court proceedings in relation to disputes arising out of an agreement which contains a Clause for arbitration.
102. As held by this Court in Amazon.com NV Investment Holdings LLC v. Future Retail (supra), the object of introducing Section 9(3) was to avoid Courts being flooded with applications Under Section 9 of the Arbitration Act.
103. Negative Kompetenz-Kompetenz is a sequel to the Rule of priority in favour of the Arbitrators, that is, the requirement for parties to an arbitration agreement to honour their undertaking to submit any dispute covered by such an agreement to arbitration. This entails the consequence that the Courts are prohibited from hearing such disputes.
104. In Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. MANU/SC/0803/2012 : (2013) 1 SCC 641, this Court observed that majority of the countries admit to the positive effect of kompetenz-kompetenz principle, which requires that the Arbitral Tribunal must exercise jurisdiction over the dispute under the arbitration agreement. Thus, challenge to the existence or validity of the arbitration agreement would not prevent the Arbitral Tribunal from proceeding with the hearing and ruling upon its jurisdiction. If it retains jurisdiction, it may make an award on the substance of the dispute, without waiting for the outcome of any court action aimed at deciding the issue of jurisdiction.
105. As held by this Court in Vidya Drolia and Ors. v. Durga Trading Corporation MANU/SC/0939/2020 : (2021) 2 SCC 1 at page 98:
129. Principles of competence-competence have positive and negative connotations. As a positive implication, the Arbitral Tribunals are declared competent and authorised by law to Rule as to their jurisdiction and decide non-arbitrability questions. In case of expressed negative effect, the statute would govern and should be followed. Implied negative effect curtails and constrains interference by the court at the referral stage by necessary implication in order to allow the Arbitral Tribunal to Rule as to their jurisdiction and decide non-arbitrability questions. As per the negative effect, courts at the referral stage are not to decide on merits, except when permitted by the legislation either expressly or by necessary implication, such questions of non-arbitrability. Such prioritisation of the Arbitral Tribunal over the courts can be partial and limited when the legislation provides for some or restricted scrutiny at the “first look” referral stage. We would, therefore, examine the principles of competence-competence with reference to the legislation, that is, the Arbitration Act.
106. As held in Vidya Drolia (supra), the Courts do not decide on merits except when permitted by legislation either expressly or by necessary implication. Prioritisation of the Arbitral Tribunal over the Courts can be partial and limited when the legislation so provides. Vidya Drolia (supra) was referred to a larger Bench, but on a different issue.
107. It is reiterated that Section 9(1) enables the parties to an arbitration agreement to approach the appropriate Court for interim measures before the commencement of arbitral proceedings, during arbitral proceedings or at any time after the making of an arbitral award but before it is enforced and in accordance with Section 36 of the Arbitration Act. The bar of Section 9(3) operates where the application Under Section 9(1) had not been entertained till the constitution of the Arbitral Tribunal. Of course it hardly need be mentioned that even if an application Under Section 9 had been entertained before the constitution of the Tribunal, the Court always has the discretion to direct the parties to approach the Arbitral Tribunal, if necessary by passing a limited order of interim protection, particularly when there has been a long time gap between hearings and the application has for all practical purposes, to be heard afresh, or the hearing has just commenced and is likely to consume a lot of time. In this case, the High Court has rightly directed the Commercial Court to proceed to complete the adjudication.
108. For the reasons discussed above, the appeal is allowed only to the extent of clarifying that it shall not be necessary for the Commercial Court to consider the efficacy of relief Under Section 17, since the application Under Section 9 has already been entertained and considered by the Commercial Court. The judgment and order under appeal does not, otherwise, call for interference.
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