At what stage can a Section 9 petition be filed and maintained by the Petitioner has been a question that has often been raised in several litigations and arbitration claims decided by the courts. Historically, under the conventional Code of Civil Procedure, 1908 context, an application for interim relief can only be raised when the underlying substantive proceedings have been filed and is pending before the adjudicating forum. Therefore, in classic civil suits, the application under Order 39, Rule 1 and 2 cannot be maintained or decided unless the court has on its record the Civil Suit in which the final substantive reliefs have been prayed for. This is also important for the reasons that any adjudication forum will be better equipped to deal and adjudicate the prayers for interim relief when it is privy to the context of the substantive claim along with final reliefs which have been raised by the Plaintiff/Claimant.
For instance, a suit is filed by the plaintiff seeking declaration that a particular sale deed is null and void owing to the seller not having any title over the suit property at the time of the sale. In such a case, the plaintiff also seeks interim relief that the defendant cannot create any third-party interest in the suit property during the pendency of the suit. The fact that a substantive suit containing elaborate pleadings and final reliefs is before the Hon`ble Court will only mean that the Hon`ble Court is in a better position to be able to assess the overall context of the case and decide on the interim application seeking interim relief of non-creation of any third party interest by the defendant. The substantive suit shall provide a complete chronology of facts and also other ancillary details relating to the claim.
However, the above-mentioned is not the norm or the law when it comes to Section 9 remedy under the Arbitration Act, 1996. As per Section 21 of the Arbitration Act, 1996, an arbitral proceeding commences on the issuance of Section 21 notice by the claimant to the respondent. It will be appropriate to reproduce the text of Section 21 of the Act here:
“21. Commencement of arbitral proceedings.—Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”
Therefore, it can be said that unless and until the Section 21 notice has been issued detailing in brief about the substantive claims of the claimant, the arbitral proceeding is deemed not to commence. The question which begs an answer in such a situation is:
- Whether a Section 9 petition can be filed before the Hon`ble District Court/ High Court seeking interim relief in relation to the subject matter of the claim even before the issuance of notice under Section 21 by the Claimant to the Respondent?
- Whether a Section 17 petition can be filed and maintained before the Arbitral Tribunal seeking interim relief even before the filing of the Statement of Claim by the Claimant?
A. Whether a Section 9 petition can be filed before the Hon`ble District Court/ High Court seeking interim relief in relation to the subject matter of the claim even before the issuance of notice under Section 21 by the Claimant to the Respondent?
It will be appropriate to reproduce Section 9 at this stage to highlight the key phrases in the same to answer the above question.
“9. Interim measures, etc., by Court.—1[(1)] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely: —
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
2[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.]”
The text of Section 9(1) is clear and unequivocal. It says that “A party may, before or during arbitral proceedings or at any time after the making of the arbitral award” may apply to the court for interim reliefs seeking preservation, interim custody or sale of any goods/interim injunction or other interim measures. From a bare perusal of the text of this Section, it is amply clear that Section 9 petition can be moved before the notice is sent under Section 21 of the Arbitration Act, 1996 thereby invoking arbitration. This is in stark contrast to the principles governing substantive and interim reliefs claimed under the suits filed in accordance with the provisions of the Code of Civil Procedure, 1908.
It is important to analyze the reasons why the arbitration law in India has departed from the conventional principles enshrined under the Code of Civil Procedure, 1908.
One of the reasons as cited by the Hon`ble Supreme Court in the matter of Sundaram Finance v NEPC India, Manu/SC/0012/1999 in support of the above mentioned proposition was that it is a known fact that it is difficult to sometimes serve the respondent with the Section 21 notice and hence, in all such cases, the prayer for interim relief under Section 9 cannot be made to wait till the time the Section 21 notice has been served on the Respondent. The relevant portion of this judgment is reproduced as under:
“It is not unknown when it becomes difficult to serve the respondents. It was, therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it’s interest. Reading the section as a whole it appears to us that the Court has jurisdiction to entertain an application under Section 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act.”
Furthermore, in the same judgment, the Hon`ble Supreme Court also held that the invocation of Section 9 itself is prima facie proof of the fact that there does exist an arbitration agreement and the arbitration proceedings will be starting sometime in the future. Therefore, prima facie, the Section 9 relief is premised on some sort of underlying substantive claim which will be coming in the future. The relevant portion of the judgment is reproduced below:
“20. When a party applies under Section 9 of the 1996 Act it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties.”
The most important and fundamental reason behind advancing the proposition that Section 9 claims should be allowed to be filed before the Court of Original Jurisdiction even when the arbitral proceedings have not commenced is that the entire regime of Arbitration jurisprudence as per international model laws and framework is to give primacy to the urgent interim relief so that under no circumstances whatsoever the underlying claims of the Arbitral proceedings gets frustrated. Reliance is drawn on the following observations made by the Hon`ble Delhi High Court in Sanjay Arora & Ors v Rajan Chadha & Ors, MANU/DE/2643/2021:
“55. 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 raison d’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.”
Having laid out the reasons behind the position of law that Section 9 petitions can be maintained even before the commencement of the Arbitral proceedings, it would be apposite to mention that the Claimant seeking relief under Section 9 would have to prove that the petition is bona fide by prima facie suggesting the following:
- That it has a manifest intention to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act.
- That there does exist a valid arbitration agreement and the applicant intends to take the dispute to arbitration.
- That the Court adjudicating the Section 9 application may pass conditional orders to put the Claimant to such terms as it may deem fit with a view to see that the effective steps are taken by the Claimant for commencing the arbitral proceedings.
The above-mentioned pointers can be gathered from the observations made by the Hon`ble Supreme Court in Sundaram Finance v NEPC India, Manu/SC/0012/1999.
Therefore, it is clear that while the norm and the advisable route to take is to first commence the arbitral proceedings by serving a Section 21 notice on the Respondent by the Claimant. However, in cases of grave emergency and especially when the Claimant is hard-pressed for time to draft and send a substantive Section 21 notice detailing all the claims, the Claimant may file a Section 9 petition directly without sending a Section 21 notice. Needless to mention here is that if the Claimant takes the latter path, it will have to observe and be bound by directions of the Section 9 court as mentioned in the three pointers above.
B. Whether a Section 17 petition can be filed and maintained before the Arbitral Tribunal seeking interim relief even before the filing of the Statement of Claim by the Claimant?
The case of Section 17 is different from the case of Section 9 as under Section 17, the words used are “during the arbitral proceedings” and not “before or during the arbitral proceedings”. Therefore, on a plain reading of the text of Section 17, it becomes clear that a Section 17 petition can only be moved after Section 21 notice has been issued and the arbitral proceedings have been started. However, what is not very clear from the provision is as to whether Section 17 petition can be filed and maintained before the substantive Statement of Claim is filed before the Arbitral Tribunal/ Sole Arbitrator.
An answer to this question is much desirable under Arbitration Law as there are multiple cases in which the solicitors/advocates contesting an Arbitration proceeding do not have enough time and resources to file the substantive Statement of Claim before the Section 17 application is filed seeking interim relief from the constituted Arbitral Tribunal/Sole Arbitrator. In such cases, an option for filing the Statement of Claim post the filing of the Section 17 application for interim relief will go a long way for the Claimant and Claimant`s team of lawyers in filing a well-researched and strategized Statement of Claimant after having taken its own sweet time once the Section 17 petition has been filed and possibly argued.
This question has been dealt with recently in a judgment pronounced by the Hon`ble Delhi High Court in Sanjay Arora & Ors v Rajan Chadha & Ors, MANU/DE/2643/2021 wherein the Court held that a Section 17 petition can be filed and maintained even before the claimant has filed the substantive Statement of Claim before the Arbitral Tribunal/Sole Arbitrator. Noteworthy to mention here is that, the Hon`ble Delhi High Court has disagreed with a view taken by the Bombay High Court in Tasty Korner v. Merwan’s Confectioners Pvt., Arbitration Petition (L) 1300/2019, 6th January 2020 wherein the Hon`ble Bombay High Court held that no Section 17 petition can be filed and maintained unless and until the claimant has filed the substantive Statement of Claim before the Arbitral Tribunal/Sole Arbitrator. The relevant portions of this judgment as pronounced by the Hon`ble Delhi High Court are:
“53. 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. Ltd6, 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”.
54. Despite the high estimation in which I hold Patel, J., I regret my inability to agree with this proposition.
55. 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 raison d’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.”
The rationale of the above-mentioned is absolutely clear that primacy needs to be accorded to saving/preserving the subject matter/property of the substantive claim in an arbitration proceeding. Under no cost or situation can and should the substantive arbitration proceedings be rendered infructuous owing to the underlying subject matter/property being destroyed or alienated by the respondent or any other third party as the same would lead to the frustration of the entire mandate of the arbitral tribunal.
In light of the above-mentioned conflict in the ratio as observed by the Hon`ble Bombay High Court and the Hon`ble Delhi High Court, it is desirable that the Hon`ble Supreme Court settles the position of law on this issue. Meanwhile, till the same is done, the Hon`ble Delhi High Court being a later judgment can be considered to have a higher persuasive value thereby suggesting that the Section 17 application for interim relief can be filed before the filing of the Statement of Claim in an arbitral proceeding.
