Unsuccessful Party Can Invoke S. 9 Arbitration Act Post-Award: Supreme Court Settles Conflicting HC Views

The Supreme Court has held that an unsuccessful party in arbitration may invoke Section 9 of the Arbitration and Conciliation Act, 1996 even after the arbitral award is passed. However, the Court cautioned that courts must exercise care, caution and circumspection while considering such applications filed by unsuccessful parties.A Bench of Justices Manoj Misra and Manmohan made this important clarification while deciding a batch of appeals arising from disputes between commercial parties concerning the maintainability of post-award interim relief petitions filed by parties who had failed in arbitration. The question before the Court was "whether a petition under Section 9 of the Arbitration and Conciliation Act at the post-award stage, by a party that has lost in the arbitral proceedings and has no enforceable award in its favour, is maintainable in law."BackgroundThe case arose from a set of commercial disputes in which arbitral proceedings had culminated in awards against certain parties. After the awards were passed, the unsuccessful parties challenged them under Section 34 of the Arbitration and Conciliation Act and simultaneously sought interim protection under Section 9 of the Act pending adjudication of the challenge.In one of the matters, the Bombay High Court dismissed the Section 9 application filed by the unsuccessful party, relying on its earlier decision in Dirk India Pvt. Ltd. v. Maharashtra State Electricity Generation Co. Ltd., which held that only a successful party could seek interim measures at the post-award stage to protect the “fruits of the award”. Appeals under Section 37 of the Act were also dismissed on the same reasoning. However, other High Courts, including the Telangana, Gujarat and Punjab and Haryana High Courts, had taken a contrary view and held that even an unsuccessful party could maintain a petition under Section 9 if interim protection was necessary to safeguard the subject matter of the dispute pending challenge to the award.In view of these conflicting judicial precedents, the issue reached the Supreme Court for authoritative determination. No Distinction Between Successful and Unsuccessful PartiesThe Court held that Section 9 uses the expression “a party”, which is defined as a party to an arbitration agreement, and does not distinguish between successful and unsuccessful parties. It observed that introducing such a limitation would amount to rewriting the statute.The Bench stated that the right to seek interim measures continues until the judicial process has reached its culmination, including the period after the award but before its enforcement."Moreover, to assign a different meaning to the same expression, namely 'a party', in the context of interim measures sought after the arbitral award has been rendered but prior to its enforcement, would result in an anomalous situation. Such an approach would imply that before the award is delivered, the term 'a party' encompasses all parties to the arbitration agreement, whereas after the award, the same expression would acquire a narrower connotation, referring only to the successful party in the arbitration. This Court is of the view that the statutory framework does not prescribe any qualification that would confine the availability of post-award relief under Section 9 solely to award-holders," the judgment authored by Justice Manmohan observed.The Court observed that accepting the Bombay High Court's view would deprive a party of a statutory remedy.Section 9 Serves a Distinct PurposeRejecting the argument that remedies under Sections 34 and 36 are sufficient, the Court held that those provisions deal with setting aside or staying the award, whereas Section 9 is intended to protect the subject matter of the dispute or the amount in controversy.The Court observed that denying interim protection to an unsuccessful party solely because it lost in arbitration could leave such a party remediless, particularly where the award is under challenge and assets may be dissipated pending adjudication."Sections 34 as well as 36 provide remedies against an award or a stay thereof, whereas Section 9 ensures protection of the subject matter or the amount in dispute. An unsuccessful party cannot secure protection of its claim under Section 34 or Section 36. To deny interim relief under Section 9 would leave such a party remediless. In fact, if the Court declines to entertain an application of a losing party for interim relief, there would be no forum available for protection of the subject matter, even where the award under challenge is stayed and potentially liable to be set aside. Moreover, the ultimate outcome may alter the rights of parties and, therefore, distinction between a 'winning' and a 'losing' party cannot govern access to the remedy under Section 9 of the Act."At the same time, the Court clarified that interim relief should not be granted routinely to unsuccessful parties. It held that the threshold for such relief would be ...

Unsuccessful Party Can Invoke S. 9 Arbitration Act Post-Award: Supreme Court Settles Conflicting HC Views

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The Court held that Section 9 Arbitration Act is open to any party to the arbitration, and is not qualified by success in the arbitral proceedigs.

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Unsuccessful Party Can Invoke S. 9 Arbitration Act Post-Award: Supreme Court Settles Conflicting HC Views

LIVELAW NEWS NETWORK

The Court held that Section 9 Arbitration Act is open to any party to the arbitration, and is not qualified by success in the arbitral proceedigs.

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

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This is a premium content
Available exclusively to
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