S. 9 Petition for Interim Relief in International Commercial Arbitration Not Classified as 'Arbitration Case', Must Be Filed as 'Miscellaneous Civil Case': Madhya Pradesh High Court

Brief Facts:

Ilwonhibrand Co. Ltd. (“Petitioner”) entered into a sale contract with Mahakali Foods Pvt. Ltd. (“Respondent”) for the supply of 2014 MT of 'Full-Fat Soya Grits'. However, the Respondent breached the contract by delivering inadequate goods, bypassing the quantity and quality requirements of the contract. When the governmental authorities conducted a raid, they sealed the Petitioner's premises due to the substandard materials supplied by the Respondent. The Petitioner promptly notified the Respondents of the breach, to which the Respondent admitted its fault. The Respondent also promised to pay compensation for the breach. However, it was never initiated.

Subsequently, another sale contract was entered between the Petitioner and the Respondent, wherein the Respondent demanded an increased rate, issued a proforma invoice, and received payment from the Petitioner. Nevertheless, the Respondent breached this contract as well, failing to supply the materials within the specified timeline. Despite receiving an advance payment of $375,000, the Respondent only delivered goods worth $1,42,500, thereafter ceasing all communication and avoiding further obligations.

Feeling aggrieved, the Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) in the Commercial Court, trying to invoke the arbitration clause stipulated under the sale contract. However, the petition was dismissed due to jurisdictional issues. Therefore, the Petitioner filed a petition under Section 9 of the Arbitration Act and Section 10 of the Commercial Courts Act, 2015 in the High Court of Madhya Pradesh (“High Court”). The Petitioner sought an interim measure of protection to secure the amount involved in the arbitration process.

Contentions of the Petitioner:

The Petitioner contended that the petition fell under the classification of arbitration cases, aligning with Rule 3 of Chapter II of the M.P. High Court Rules, 2008. It referred to Sections 2(e) and (f) of the Arbitration Act to argue that the High Court held original civil jurisdiction to hear the petition as it pertained to international commercial arbitration.

Contentions of the Respondent:

The Respondent contended that the petition was not maintainable because according to Chapter 2 Rule 3 of the Arbitration and Conciliation (Conduct of Arbitral Proceedings) Rules, 2008 (“2008 Rules”), applications under Section 11 of the Arbitration Act are registered as 'Arbitration Cases', dealing with the appointment of arbitrators. The Respondent further contended that the Petitioner could have filed a 'Miscellaneous Civil Case' under sub-rule 8 of Rule 10 Chapter 2 of the 2008 Rules for seeking interim protection. Miscellaneous Civil Cases can be registered for matters not falling under specified categories and which are not interlocutory to any proceedings.

Observations of the High Court:

The High Court noted that the Petitioner, by availing the liberty granted by the Commercial Court, filed the current petition under Section 9 of the Act seeking interim protection. However, the High Court agreed with the reasoning provided by the Respondent that as per Chapter 2 Rule 3 of the 2008 Rules, applications under Section 11 of the Arbitration Act are registered as 'arbitration cases' dealing with the appointment of arbitrators.

In the High Court's opinion, it was evident that the nature of the case and the relief sought by the Petitioner did not align with the characteristics of an arbitration case. Instead, the High Court asserted that the petition should have been filed as a 'Miscellaneous Civil Case', falling under the broader category of civil applications not specified elsewhere, as stipulated by sub-rule 8 of Rule 10 of Chapter 2 of the 2008 Rules.

Consequently, the High Court dismissed the petition, while simultaneously granting the Petitioner the liberty to file a miscellaneous civil case under sub-rule 8 of the 2008 Rules.

Case Title: Ilwonhibrand Co. Ltd. vs Mahakali Foods Pvt. Ltd. and Others

Case No.: A.C. No. 18 of 2023

Advocate for the Petitioner: Shri Amit Dubey

Advocate for the Respondents: Shri Aniket Naik (Amicus Curiae)

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