Writ Petition Can Be Entertained When Order U/S 9 Of Arbitration Act Neither Grants Nor Refuses Relief: Kerala HC

The Kerala High Court bench of Justice Harisankar V. Menon has held that a writ petition under Articles 226/227 of the Constitution of India can be entertained against an order passed by the Commercial Court under Section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) when such an order neither grants nor refuses to grant relief, thereby not making it appealable under Section 37 of the Arbitration Act. Brief Facts: Flemingo (DFS) Private Limited (Petitioner) has filed this writ petition under Article 226/227 of the Indian Constitution seeking a declaration that the invocation of the bank guarantees by Airports Authority Of India (Respondent) was illegal. The petitioner has also sought restoration of the bank guarantees or, in the alternative, a direction to the respondent authority to deposit the amounts realized from the bank guarantees in an interest-bearing fixed deposit account, pending adjudication of the disputes through arbitration. Contentions: The Petitioner submitted that the respondent authority acted unfairly despite being aware of the pending dispute in W.P.(C) No. 24021 of 2023 and the stay orders issued by the Court. The petitioner was not solely responsible for the matter not being listed after the Court's order dated 26.09.2024. It was further submitted that in view of the appointment of a new sole Arbitrator on 21.06.2024 in A.R. No. 139 of 2023, the invocation of the bank guarantees has caused irreparable harm to the petitioner. Per contra, the Respondent submitted that W.P(C) No.24021 of 2023 against the orders of the Commercial Court itself is not maintainable. Insofar as there is an alternate remedy under the Arbitration Act, the writ petition is not entertainable. Observations: The court at the outset noted that an appeal under Section 37 of the Arbitration Act is maintainable only when the order under Section 9 either grants or refuses relief. In the present case, the Commercial Court, by its order dated 20.07.2023, did not "refuse" the relief sought under Section 9 but merely "closed" the petition based on the petitioner's submission that arbitration proceedings had already commenced. Based on the above, it held that the order at Ext. P8 cannot be treated as one refusing relief under Section 9 of the Arbitration Act. The Commercial Court appears to have proceeded under the mistaken belief that the Arbitrator had already begun functioning, directing the petitioner to seek relief under Section 17 of the Arbitration Act. As a result, the order is not appealable under Section 37 of the Act. The court further observed that in all fairness, the respondent authority ought to have considered that, if not for the stay order issued by the Apex Court, the petitioner could have approached the sole Arbitrator under Section 17 of the Arbitration Act. It was held that, under these circumstances, the respondent authority's action in seeking to encash the bank guarantee cannot be regarded as fair. The Supreme Court in Asian Resurfacing of Road Agency Private Limited and Another v. Central Bureau of Investigation (2018) held that without application of mind, an order of interim stay cannot be vacated only on the ground of lapse of time when the litigant is not responsible for the delay. An interim order lawfully passed by a court after hearing all contesting parties is not rendered illegal only due to the long passage of time. Based on the above, the court held that in the present case,the stay was extended for only two weeks on 26.09.2024, since the matter was "avoided," as noted earlier. While it is true that the petitioner should have acted diligently to seek a posting within that period, the subsequent appointment of the sole Arbitrator an order later stayed by the Apex Court suggests that the petitioner cannot be held entirely responsible for the lapse of the stay. The court also noted that the Apex Court in Asian Resurfacing of Road Agency Private Limited and Another (supra) held that a stay, if not specifically time-bound, would continue until the final decision. However, this observation must be viewed in the context of the broader facts and circumstances of the case. Therefore, it was held that there is merit in the petitioner's contention that the bank guarantees should not have been encashed. The court concluded that in view of the overall factual matrix discussed above, and particularly considering the appointment of the sole Arbitrator pursuant to the order dated 21.06.2024 in A.R. No.139 of 2023 an order whose validity is currently under consideration by the Apex Court the first respondent in W.P(C) No.7025 of 2025 is directed to retain the amounts realized from the invocation of the two bank guarantees in an interest-bearing fixed deposit account. Accordingly, the present petition was disposed of. Case Title: Flemingo (DFS) Private Limited Versus...

Writ Petition Can Be Entertained When Order U/S 9 Of Arbitration Act Neither Grants Nor Refuses Relief: Kerala HC

Mohd Malik Chauhan

Tags