Interim Relief U/S 9 Of Arbitration Act Must Be Sought With 'Reasonable Expedition': Bombay High Court

The Bombay High Court bench of Justice A. S. Chandurkar and Justice Rajesh Patil have held that an applicant under Section 9 of the Arbitration and Conciliation Act, 1996 (“the Act”) must approach the court with reasonable expedition. Delay of several years without adequate explanation is a material factor that militates against the grant of such relief. The court observed that relief under Section 9 of the Act is discretionary and must be guided by the settled principles of interim relief, namely the existence of a prima facie case, balance of convenience, and irreparable harm. An appellate court can interfere with the discretionary order of the trial court only if such discretion has been exercised arbitrarily, capriciously, or in ignorance of settled legal principles. Brief Facts: Ashoka Buildcon Limited (“ABL”) filed the Commercial Arbitration Appeal under Section 37 of the Arbitration and Conciliation Act, challenging a common order dated 15.03.2024 passed by the District Judge, Nashik. By that order, the Court allowed an application under Section 9 of the Act filed by Maha Active Engineers India Private Limited (“MAEIPL”) and directed ABL to deposit Rs.63.27 crores in Court. The Court also restrained ABL from dealing with its assets till the commencement of arbitration proceedings and directed it to deposit 20% of the amount received from Maharashtra State Electricity Distribution Company Limited (“MSEDCL”), disclose its assets, and not compromise with MSEDCL without the consent of MAEIPL. The dispute arose out of a contract between MSEDCL and ABL, under which ABL subcontracted certain works to MAEIPL. MAEIPL claims that it completed the work on 31.03.2011. ABL received payments from MSEDCL but did not fully pay MAEIPL. MAEIPL invoked arbitration on 16.12.2019. Meanwhile, ABL secured an award against MSEDCL on 15.02.2020, which MSEDCL partially satisfied through cash deposit and a bank guarantee. MAEIPL again invoked arbitration on 12.01.2024 and filed the Section 9 application. The trial court granted the reliefs. Therefore, ABL filed the appeal. Submissions: Mr. Nikhil Sakhardande, Counsel for ABL submitted that MAEIPL invoked jurisdiction under Section 9 of the Act after an inordinate delay. He argued that a party seeking interim relief under Section 9 must act with reasonable expedition. He pointed out that the relevant contract concluded on 31.03.2011, whereas MAEIPL raised its first claim only on 19.09.2016. He stated that the alleged breaking point i.e. non-payment of the retention amount within seven days, occurred on 19.12.2011. MAEIPL remained silent after 7.12.2016 until it issued a further communication on 12.12.2019. He submitted that the notice invoking arbitration was itself barred by limitation. He relied on B and T AG v. Ministry of Defence to argue that mere exchanges of correspondence or negotiations cannot extend limitation. Mr. Sakhardande submitted that the case merited interference under Section 37 of the Act as the trial court ignored settled principles of law and exercised discretion arbitrarily. He also criticized the absence of reasoning in the impugned order regarding how the figure of Rs. 63.27 crore was arrived at. Mr. Sharan Jagtiani, Counsel appearing on behalf of MAEIPL, submitted that MAEIPL acted without delay in seeking relief under Section 9 of the Act. Upon sending a notice dated 16.12.2019, MAEIPL engaged in continuous discussions with ABL, which repeatedly promised payment of outstanding dues. During a meeting held on 15.07.2023, ABL assured MAEIPL that it would resolve all pending issues as it anticipated receiving funds from MSEDCL pursuant to an arbitral award dated 15.02.2020. When ABL abruptly ended discussions and failed to pay MAEIPL's dues, MAEIPL filed proceedings under Section 9. He also submitted that even in absence of the case being strictly made out under the provisions of Order XXXVIII Rule 5 of the Code, relief could be granted in the interest of justice. Observations: The court observed that the impugned order was passed in exercise of jurisdiction under Section 9 of the Act. It held that if the court of first instance exercises discretion reasonably and judicially, mere difference in opinion by the appellate court does not warrant interference as held in Wander Ltd. v. Antox India Pvt. Ltd. The court reiterated that the scope for interference by appellate court is limited. The court observed that interference with such discretionary orders is permissible only if the first court failed to record satisfaction on the three tests such as the existence of a prima facie case, balance of convenience, and likelihood of irreparable harm. Regarding the delay in seeking relief under Section 9, the court held that an applicant must approach the court with reasonable expedition as held by the Supreme Court in Essar House Private Ltd. Vs....

Interim Relief U/S 9 Of Arbitration Act Must Be Sought With 'Reasonable Expedition': Bombay High Court

Tazeen Ahmed

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