Delhi High Court: In an application filed under Section 9 of the Arbitration and Conciliation Act, 1996 (‘Act’) by the petitioner seeking interim relief while disputes between the parties were already being adjudicated by a tribunal of 3 arbitrators involving a dispute arising from a Construction, Procurement of Materials and Equipment Contract dated 06-08-2021 alleging multiple defaults constituting a material breach of the contract., C. HARI SHANKAR, J., dismissed the petition and observed that when disputes are already being adjudicated upon by an Arbitral Tribunal, Court should interfere by granting interim reliefs only if urgency of the situation could be demonstrated satisfactorily.
The Court remarked that “the situation that exists today is not so emergent as to justify a parallel adjudication, by this Court, of the issues raised in this petition, even while the Arbitral Tribunal continues to remain in seisin of the disputes between the parties. The grant of any interim relief involves considerations of the existence of a prima facie case, balance of convenience and irreparable loss, among others. Thus, if this Court were to adjudicate on the present application, it would have to examine the existence of a prima facie case in respect of one party or the other. That is an exercise which this Court would normally abjure from doing when the Arbitral Tribunal is in seisin of the disputes between the parties, as there is the pernicious possibility of any observation being made by this Court influencing the proceedings before the Arbitral Tribunal”
Background
A contract for construction, procurement of materials and equipment was executed between the petitioner and respondent. As per the contract, the respondent was required to complete four laning of a section of NH 45A in the State of Tamil Nadu.
It was contended by the petitioner that the respondent had defaulted several times resulting in material breaches of the contract, making the respondent liable to pay damages to the petitioner.
The petitioner further claimed the respondent should be injuncted from hindering the petitioner from using an equipment, plant and machineries available on the contract site, as well as from settling all outstanding dues of workers, labours, staff, suppliers, sub-contractors and vendors, and terminate all other sub-contracts executed by the respondent or any other contracts in relation to the work forming subject matter of the contract.
When the matter came up for preliminary hearing, the Court, while issuing notice, restrained parties from removing any equipment from the site till next date of hearing by an order dated 19-04-2023.
The Court was informed that the parties had appointed their respective arbitrators, and that the presiding arbitrator was yet to be appointed. At this point, Yes Bank moved an application under Section 151 of the Civil Procedure Code, 1908 (‘CPC’), claiming that some of the properties which were present at the site had been hypothecated by the respondent to Yes Bank and therefore, praying that the injunction granted by the order dated 19-04-203 not be extended to the said properties.
During the pendency of the proceedings, the Court appointed a presiding arbitrator as the parties could not reach a consensus, and thus the 3-member Arbitral Tribunal was constituted, which is currently adjudicating upon the disputes between the parties.
Decision and Analysis
The Court said that once an Arbitral Tribunal was in place, judicial interference should be limited even for passing of interlocutory orders, unless the order was such that could not be kept pending for adjudication by the tribunal, as in cases of invocation of bank guarantee or a threat of dispossession.
The Court referred to Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, wherein it was held that once an Arbitral Tribunal was constituted, the Court should not take up for consideration and apply its mind to an application for interim measure, unless the remedy under Section 17 was inefficacious, even though the application may have been filed before the constitution of the Arbitral Tribunal.
The Court observed that for grant of an interim relief, it was crucial to consider whether there existed a prima facie case against either party, the balance of convenience and irreparable loss among other factors, an exercise it would normally refrain from doing when the disputes were already in seisin, as there was a possibility that the observations made by the Court would influence proceedings before the tribunal.
The Court said that the respondent had not been able to demonstrate satisfactorily the urgent nature of the situation in the present matter that would warrant adjudication by the Court, when the same could be relegated before the arbitrator to be decided in form of an application under section 17 of the Act. Further, the Cour opined that the application for intervention filed by Yes Bank could be adjudicated upon by the Tribunal, as well.
The Court, therefore, disposed of the petition, requesting the Arbitral Tribunal to decide expeditiously the instant petition as an application under Section 17 of the Act.
The Court further refrained from expressing any opinion regarding the entitlement of Yes Bank to intervene in the proceedings or as to the other reliefs sought by Yes Bank in its application and requested the Arbitral Tribunal to decide the same.
[Welspun Enterprises v. Kasthuri Infra Projects, 2024 SCC OnLine Del 4849, decided on 15-07-2024]
Advocates who appeared in this case :
Advocates for the petitioner: Dayan Krishnan, Sr Adv., Aman Gandhi, Parthsarathy Bose, Panchi Agarwal, Advocates
Advocates for the Respondent: Sunita Ojha, Vasudha Priyansha, Advocates
Advocates for Yes Bank: Rajat Katyal, Mayank Punia, Advocates
Buy Arbitration and Conciliation Act, 1996 HERE
