Sunday 23 January 2022

What are essential prerequisites for grant of interim reliefs under the Arbitration Act?

 The legal proposition, as advanced by Mr. Mehta appears, at first blush, to be almost axiomatic. It appears incongruous that, in the absence of a substantive challenge (in the form of a Section 23 Statement of Claim), an application for interlocutory relief would lie. Possibly for this reason, the Bombay High Court, speaking through G.S. Patel, J., has observed, in Tasty Korner v. Merwan's Confectioners Pvt. Ltd.12, that “it also goes without saying that Section 17 Application cannot be disposed of or even taken up unless a statement of claim has (sic been?) filed to begin with”.{Para 55}

56. Despite the high estimation in which I hold Patel, J., I regret my inability to agree with this proposition.

57. Empirically, in ordinary civil law, an application for interlocutory relief would lie only in substantive proceedings, claiming the main relief. The arbitral protocol, under the 1996 Act is, however, somewhat peculiar in its dispensation. Section 9 itself envisages grant of interim protection, by a Court, before institution of arbitral proceedings and can be invoked, in an appropriate case, even before the notice of arbitration, under Section 21, is issued. The reason is that, while considering the prayer for interim protection under the 1996 Act, whether under Section 9 or under Section 17, apart from the troika of a prima facie case, balance of convenience and irreparable loss, the Court, or Arbitral Tribunal, is also required to preserve the sanctity of the arbitral process, which is the very raisond' etre of the 1996 Act. All efforts to foster and promote the arbitral process, and prevent its interception or interdiction have, therefore, to be made. The Court under Section 9, or the Arbitral Tribunal under Section 17 is also, therefore, empowered to grant interim protection where any possibility of the arbitral proceedings being frustrated is found to exist, whether such frustration be before the arbitral process is initiated, during the arbitral process or even after the passing of the Award. If, therefore, before a Statement of Claim is filed, the situation that presents itself is such that interim protection has to be granted, to ensure the preservation of the arbitral process, the Court under Section 9, and the Arbitral Tribunal under Section 17, is empowered to grant such protection. In view of this peculiar dispensation, unique to arbitration, I am of the opinion that the filing of Statement of Claim under Section 23 cannot be treated as a sine qua non for the maintainability of an application for interim protection under Section 17.

Remarkable insight: 
 Interim relief orders under S.9 or S.17 of Arbitration & Conciliation Act, 1996 need a 4th element that the relief be in the aid of the arbitral process. This is in addition to the usual troika required for interim relief: prima facie case, balance of convenience and irreparable loss.

In the High Court of Delhi at New Delhi

(Before C. Hari Shankar, J.)

Sanjay Arora and Another  Vs Rajan Chadha and Others

Arb. A. (COMM.) 15/2020 & IA 6815/2020, IA 6816/2020 IA 6817/2020

Decided on October 5, 2021, 

Citation: 2021 SCC OnLine Del 4619

Read full Judgment here: Click here

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