Delhi High Court decides on whether the remedy of approaching the court for interim measures with respect to disputes subsequently arising from the same agreement or set of agreements is barred by Section 9(3) of the A&C Act

The Delhi High Court on July 7, 2020 in the case of Hero Wind Energy Limited v. Inox Renewables Limited , while deciding an appeal under Section 37 of the Arbitration and Conciliation Act (‘the Act’) answered an interesting question of law qua interpretation of Section 9(3) of the Act i.e. if an arbitral tribunal has already been constituted to adjudicate the disputes which have arisen out of an agreement or set of agreements containing an arbitration clause, whether the remedy of approaching the court for interim measures with respect to disputes subsequently arising from the same agreement or set of agreements is barred by Section 9(3) of the Act. Brief facts of the case Hero Wind Energy Limited (‘Appellant’) desirous of owning one of the wind farms in the wind park developed by Inox Group of companies, in or about the year 2014, entered into, inter-alia, three agreements with Inox Wind Limited (IWL), IRL (Inox Renewables Limited ) and Inox Wind Infrastructure Services Limited (WISL) (‘Respondents’), such agreements were wrap agreement, shared services contract and operation and maintenance (‘Oand M’) agreement. All the three agreements contained identical arbitration clauses. The Appellant being aggrieved by the non-fulfilment of obligations under the Oand M agreement by the Respondent group companies, sent a notice calling upon IWL and IWISL to cure such breaches and make payment of compensation. Subsequently, vide notice dated February 28, 2020, the Appellant invoked the arbitration clause and called upon IWL and IWISL to nominate their arbitrator within 30 days. While the appointment was pending, on May, 2018, the Appellant filed a petition for interim measures praying for two reliefs i.e. (i) direct IWISL to hand over control over the Oand M of the project to the Appellant or its agents; and, (b) restrain IWISL from interfering in the Appellant or its agents carrying on the Oand M of the project or from accessing project premises and shared infrastructure. During the pendency of the petition, the arbitral tribunal having been constituted, the Appellant on October 10, 2018 withdrew the petition with liberty to approach the arbitral tribunal under Section 17 of the Act. After withdrawal of the petition, on October 22, 2019, the Appellant issued another notice to IWISL terminating the Oand M agreement and called upon IWISL to hand over the possession of project site to the Appellant with full control. As was stated in the Oand M agreement, the Appellant and IWISL were required to mutually arrive at an agreement qua the Oand M charges payable by the Appellant to IWISL for Oand M of shared infrastructure. Though several meetings were held, the negotiation did not fructify. Hence, another Section 9 petition under the Act was filed by the Appellant. The trial court held in favour of the Respondents and held that the disputes indeed had arisen out of the Oand M agreement and having held so, proceeded to hold that since an arbitral tribunal had already been constituted with respect to disputes arising from the Oand M agreement, Section 9(3) of the Act would come into play. Section 9(3) of the Act states that once an arbitral tribunal has been constituted, the court shall not entertain an application for granting of interim reliefs, unless the court finds that circumstances exist which may not render the remedy provided under Section 17 of the Act, efficacious. However, the question, that even if the disputes had arisen out of Oand M agreement, whether the arbitral tribunal constituted to adjudicate the disputes which had earlier arisen from the Oand M agreement, would be the arbitral tribunal within the meaning of Section 9(3) of the Act, was not addressed before the trial court. Observations of the court The Respondents contended that the cause of action for the disputes qua which the second Section 9 petition has been filed subsequently had indeed arisen at the same time when the cause of action for the disputes for adjudication of which arbitral tribunal has already been constituted. Therefore, the second Section 9 petition filed under the Act was barred by Order II Rule 2 of the Code of Civil Procedure, 1908 (“CPC”) or principles thereof. The appellate court was of the view that while exercising jurisdiction under Section 9 of the Act, the court need not enter into the question whether the principles of Order II Rule 2 of the CPC, would be applicable or not. Such a plea would be for the arbitral tribunal to adjudicate, if raised before it. The appellate court held that the interim measures sought for in the second Section 9 petition arose only after the termination of the Oand M Agreement on October 22, 2019 i.e. after the constitution of arbitral tribunal. The cause of action for the disputes (as contended in the second Section 9 petition) arose after the constitution of the arbitral tribunal. Further, on an analysis of the language of Section 9(1) of the Act, the Delhi High Court opined that the said Section entitles a party to apply to court for interim measures “before or during arbitral proceedings......”. Any reference to arbitral proceedings has to be to the arbitral proceedings for adjudication of a “particular dispute”. The ‘particular dispute’ in hand between the parties was of the right of the Appellant to use shared infrastructure, which had arisen after the termination of the Oand M agreement and parties’ failure to mutually agree on Oand M charges for shared services. The arbitral proceedings would commence on the date when request for this dispute to be referred to arbitration is made by either party on other. As there was no request by either parties, to refer the parties to arbitration with respect to any dispute arising out of termination for the Oand M agreement, the arbitral proceedings with respect to such dispute had not commenced. The appellate court also observed that the words ‘arbitral tribunal’ in Section 9(3) of the Act have to be interpreted in light of few other provisions of the Act (being Section 11(2), Section 21, Section 23, Section 29A) and thus, have to be interpreted as arbitral tribunal constituted to adjudicate the disputes which have arisen and had been referred to arbitration. The power conferred on an ‘arbitral tribunal’ under Section 17 of the Act and the power conferred on the court under Section 9 of the Act, may overlap to some extent but insofar as the period ‘before’ and ‘after’ the arbitral proceedings is concerned, the party requiring an interim measure will have to approach only the court. In the instant case, the High Court observed that the arbitral tribunal constituted with reference to the disputes which had earlier arisen, even though from the same agreement, cannot be the arbitral tribunal within the meaning of Section 9(3) of the Act, even if it were to be of the same composition. Section 9(3) of the Act does away with the jurisdiction of the court with respect to interim measures also, once the arbitral tribunal is constituted. However, if a separate arbitral tribunal, even if of same composition, is constituted for disputes arising out of successive causes of action, the arbitral tribunal constituted for adjudication of disputes arisen from an earlier cause of action cannot be the arbitral tribunal constituted for the disputes arising from a subsequent cause of action and qua which interim measures are sought. As facts stood, the High Court observed that disputes in the instant case had arisen from a subsequent cause of action and the Appellant was entitled to interim reliefs under Section 9 of the Act and would not be barred under Section 9(3) of the Act. With such observations, the appellate court disagreed with the view taken by the trial court. Finally, the Delhi High Court even granted interim reliefs in favour of the Appellant owing to the urgency in the proceeding under Section 9 of the Act. The court used its appellate powers under Order XLI Rules 24 and 33 read with Order XLIII Rule 2 of the CPC and proceeded to decide on the merits, even though it was not decided by the trial court. This update has been contributed by Pooja Chakrabarti (Partner) and Debjyoti Saha (Associate). Download Pdf