S.17 Of Arbitration Act Casts Weighty Burden On Party To Persuade Court To Hold Onto S.9 Proceedings After Formation Of Tribunal: Telangana HC

The Telangana High Court has held that the 2015 amendment to the Arbitration and Conciliation Act grants a bouquet of protections to a party during the course of arbitral proceedings. It clarified that section 9 (3) restricts a party from seeking interim protection before a Court, once a tribunal has been constituted. After the amendment, once the Tribunal has been constituted, the parties can avail of the protection under section 17 by applying to the Tribunal.The Bench further explained that the only exception to the rule under section 9(3) would be if the Court had already dealt with an application under section 9(1) on merits. “Section 9(3) aims to prevent multiple levels of adjudication for the same relief and encourages a forward-looking momentum for dispute-resolution after constitution of the Arbitral Tribunal. The only break in that momentum is where the section 9 Court has already dealt with the application under section 9(1) on merits. This creates an exception to the bar under section 9(3) – that the Court shall not entertain the 9(1) petition once the Arbitral Tribunal has been constituted.”Going further, the Division Bench, comprising Justice Moushumi Bhattacharya and Justice B.R. Madhusudhan Rao, relying on Lakshmi Rattan Engg. Works Ltd. Vs. CST and Hindusthan Commercial Bank Ltd. Vs Punnu Sahu explained that the word 'entertain' does not mean only admitting the matter, but it should be read to mean 'considering the matter on merits' or to 'proceed on merits' The Bench elucidated that the onus was cast on the applicant to prove that the trial court had entertained the claim on merits. Only then, could the company file for protection before the trial court after constitution of the Arbitral Tribunal. “Therefore, the revitalized section 17(1) and (2), post-amendment, casts a weighty burden on the party to persuade the Court to hold on to the Section 9 petition despite formation of the Arbitral Tribunal. The burden of making out a case for the Court to hear the matter, even after constitution of the Arbitral Tribunal, rests on the party who resists being relegated to arbitration. The party seeking to put the breaks on arbitration, at least for a limited period of time, must discharge the onus of proving the existence of factors which would render the relief under section 17(1) inadequate or inefficacious.”In the present case, the Bench appraised that the petitioners failed to file any order to prove that the Company Petition filed before the trial court was 'entertained' on merits. Even the trial court, in its orders, made it clear that it had not entertained the case on merits. Background:The present Company Court Appeal arose when the Company Court dismissed an application filed by the applicants herein. Praying to suspend the accounts of the respondents, ex-parte in September.The appellant filed a Revision against the said order, in the same month and the High Court, granted temporary interim suspension. Meanwhile, the High Court appointed an Arbitrator in the matter in November, 2024. The appellant herein, applied to the Commercial Court, seeking extension of the interim protection granted in September.The Commercial Court dismissed the application, challenging the same, the present Commercial Court Appeal was filed. After examining section 9, section 17 and the orders passed by the Commercial Court. The Division Bench concluded that it was not in a position to determine whether or not the Commercial Court had entertained the matter. That no evidence was placed on record to prove that the claim was entertained and contradict the orders of the Commercial Court. “The High Court in the present Appeal is not competent or armed with the necessary facts to arrive at an opinion on whether the Commercial Court has entertained the C.O.P. or not. We are simply not in a position to take a different view of the matter i.e., that the Commercial Court had “entertained” the C.O.P. in view of the categorical recording of the Commercial Court/Trial Court.. Even if we were to assume that the impugned order contains an incorrect recording and that the Commercial Court had indeed dealt with the merits of the section 9 petition filed by the appellant, the orders on record show otherwise.”The Bench concluded that the appellant failed to carve out a case for himself, and failed to discharge the onus cast on him under section 9 of the A&C Act. Thus, the revision petition was dismissed. M/s. Corvine Chemicals and Pharmaceuticals Private Limited vs. Srinivasulu KandayCounsel for petitioner: M.Ravindranath Reddy, Senior Counsel representing B.Srinarayana.Counsel for respondent: Sunil B. Ganu, Senior Counsel representing Smt.Manjari S. Ganu.Click Here To Read/Download Order

S.17 Of Arbitration Act Casts Weighty Burden On Party To Persuade Court To Hold Onto S.9 Proceedings After Formation Of Tribunal: Telangana HC

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