Kerala High Court
M.Ashraf vs Kasim.V.K on 22 November, 2018
Equivalent citations: AIR 2019 (NOC) 252 (KER.), AIRONLINE 2018 KER 1029
Author: V.Chitambaresh
Bench: V.Chitambaresh
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE V.CHITAMBARESH
&
THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI
THURSDAY ,THE 22ND DAY OF NOVEMBER 2018 / 1ST AGRAHAYANA, 1940
Arb.A.No. 53 of 2018
AGAINST THE ORDER DATED 11.10.2018 IN I.A.NO.2260/2018 IN
CM(ARBITRATION)NO.205/2018 of DISTRICT COURT, KOZHIKODE
APPELLANT/PETITIONER:
M.ASHRAF
AGED 50 YEARS
S/O AHAMMED, MARUTHERI HOUSE, P.O. CHEKKUNNUMMAL,
NARIPATTA AMSOM AND DESOM, VADAKARA TALUK,
KOZHIKODE DIST
BY ADV. SRI.C.P.MOHAMMED NIAS
RESPONDENT/RESPONDENT:
KASIM.V.K, AGED 52 YEARS
S/O KUNHABDULLA HAJI, VATTAKUTTYADI HOUSE, P.O.
CHEKKUNNUMMAL, NARIPATTA AMSOM AND DESOM, VADAKARA
TALUK, KOZHIKODE DIST - 673506
BY ADV. SRI.C.UNNIKRISHNAN (KOLLAM)
THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 13.11.2018,
THE COURT ON 22.11.2018 DELIVERED THE FOLLOWING:
Arb.Appeal No.53/2018
2
"CR"
V.CHITAMBARESH
&
R.NARAYANA PISHARADI, JJ.
**************************
Arb.Appeal No.53 of 2018
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Dated this the 22nd day of November, 2018
JUDGMENT
R.Narayana Pisharadi, J Is an application under Section 9(1)(ii) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act'), seeking an interim measure of protection, maintainable before the Court, after passing of the award by the Arbitral Tribunal but before it is enforced, in view of the provision contained in Section 9(3) of the Act? This question essentially falls for consideration in this appeal.
2. The facts of the case are not very much relevant here. Suffice it to state that, on reference of the dispute between the appellant and the respondent over dissolution of a partnership firm, an award was passed by the Arbitrator in favour of the Arb.Appeal No.53/2018 3 appellant. Before initiating steps for enforcement of the award, the appellant filed an application under Section 9(1)(ii) of the Act before the District Court, seeking an order of injunction restraining the respondent from alienating or encumbering five items of properties. The appellant alleged that the respondent was taking expeditious steps for alienation of the properties with a view to evade payment of money awarded to the appellant.
3. When the application came up for consideration before it, the District Court suo motu raised a question regarding the maintainability of it before the Court. Learned District Judge found that the appellant has got efficacious remedy under Section 17 of the Act and therefore, the application filed before it under Section 9(1)(ii) of the Act is not maintainable in view of the bar contained in Section 9(3) of the Act. Learned District Judge also found that as the appellant has got equally efficacious remedy under Section 17 of the Act, the relief of injunction sought by him is barred under Section 41(h) of the Specific Relief Act, 1963. Learned District Judge further found that there is also bar under Section 38 (3) (b) and (c) of the Specific Relief Act in Arb.Appeal No.53/2018 4 granting injunction since the amount due is quantified as per the award. The District Court rejected the application filed by the appellant holding that it is not maintainable before the Court.
4. We have heard learned counsel for the appellant and also the respondent.
5. Section 9(1)(ii) of the Act provides that a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court, for an interim measure of protection in respect of any of the matters provided thereunder. Section 9 (3) of the Act states that once the Arbitral Tribunal has been constituted, the court shall not entertain an application under sub-section (1), unless the court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.
6. Section 17(1)(ii) of the Act, after amendment by Act 3 of 2016, provides that a party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to the arbitral Arb.Appeal No.53/2018 5 tribunal, for an interim measure of protection in respect of the matters provided thereunder. Section 17(2) of the Act states that, subject to any orders passed in an appeal under Section 37, any order issued by the Arbitral Tribunal under Section 17 shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court.
7. Learned counsel for the appellant contended that after signing the award and communicating it to the parties, the Arbitrator becomes functus officio and thereafter, he is not empowered to pass any order granting interim relief. True, it has been the well-settled principle that once an award is made and signed, the Arbitrator becomes functus officio (See Satwant Singh Sodhi v. State of Punjab : AIR 1999 SC 2040). But, this principle now stands diluted by the amended provision contained in Section 17(1) of the Act, which empowers the Arbitral Tribunal to pass orders even after the making of the award.
8. After amendment of the Arbitration and Conciliation Act, 1996, by Act 3 of 2016, an Arbitral Tribunal is conferred under Arb.Appeal No.53/2018 6 Section 17(1)(ii) with identical powers as the Court may exercise under Section 9(1)(ii) of the Act. But, there is no absolute bar under Section 9(3) of the Act against entertainment of an application under Section 9(1)(ii) of the Act by the Court after the constitution of the Arbitral Tribunal. Section 9(3) of the Act does not operate as an ouster clause insofar as the power of the court is concerned. The jurisdiction of the Court to grant interim relief does not automatically get barred on constitution of the Arbitral Tribunal. Even after the amendment of the Act by incorporation of Section 9(3), the Court is not denuded of the power to grant interim relief under Section 9(1) of the Act. What is provided under Section 9(3) of the Act is that, after the constitution of the Arbitral Tribunal, the Court shall not entertain an application under Section 9(1) of the Act unless the Court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious. Normally, the Court shall not entertain an application under Section 9(1) of the Act after constitution of the Arbitral Tribunal. But, the Court has the power to entertain an application under Section 9(1) of the Act even Arb.Appeal No.53/2018 7 after the constitution of the Arbitral Tribunal unless the Court finds that in the circumstances of the case the party has got efficacious remedy under Section 17 of the Act. An application for interim relief under Section 9 (1) of the Act shall be entertained and examined on merits, once the Court finds that circumstances exist, which may not render the remedy provided under Section 17 of the Act efficacious.
9. Exercise of power by the Court under Section 9(1) of the Act is contemplated at three stages : (1) before commencement of arbitral proceedings (2) during arbitral proceedings and (3) at any time after passing of the arbitral award but before it is enforced. Exercise of power by the Arbitral Tribunal under Section 17(1) of the Act is contemplated at two stages: (1) during arbitral proceedings and (2) at any time after making of the award but before it is enforced.
10. The approach of the Court in entertaining an application under Section 9(1) of the Act, at the three different stages mentioned above, shall not be the same. At the first stage, that is, before commencement of arbitral proceedings, evidently, the Arb.Appeal No.53/2018 8 restriction provided under Section 9(3) of the Act against entertaining an application under Section 9(1), does not apply. This is for the reason that, at that stage, the Arbitral Tribunal does not exist and no question of exercise of power by it under Section 17(1) of the Act then arises. The decisions of the Apex Court in Sundaram Finance Ltd. v. NEPC India Ltd : AIR 1999 SC 565, Firm Ashok Traders v. Gurumukh Das Saluja : AIR 2004 SC 1433 and the decision of this Court in Board of Trustees of Port of Cochin v. Jaisu Shipping Company : 2012 (1) KLT 217 provide necessary guidelines regarding exercise of power by the Court under Section 9(1) of the Act, before commencement of arbitral proceedings.
11. At the second stage,that is, during arbitral proceedings, the Court shall adopt a strict approach in entertaining an application under Section 9(1) of the Act. The party who approaches the Court at that stage with an application under Section 9(1) of the Act shall be required by the Court to satisfy the court regarding the existence of circumstances which would render the remedy provided to him under Section 17 not Arb.Appeal No.53/2018 9 efficacious. He shall plead the circumstances which may render that remedy not efficacious. He should be able to convince the Court why he could not approach the Arbitral Tribunal and obtain interim relief under Section 17(1) of the Act.
12. When an application under Section 9(1) of the Act is made by a party at the third stage, that is, after the passing of the award but before it is enforced, the Court shall bear in mind that it is a stage where the Arbitral Tribunal has ceased to function. Except in cases provided under Section 33 of the Act, the Arbitral Tribunal would have then ceased to function. The unsuccessful party may then take hasty steps to alienate or dispose of the property which was the subject matter of dispute. The successful party may then approach the Court with an application under Section 9(1) of the Act for granting interim relief. In such circumstances, it would not be proper for the Court to reject the application merely on the ground that he has got efficacious remedy under Section 17 of the Act. The Court has to adopt a liberal approach in such circumstances. When interim relief is sought after an arbitral award is made but before it is Arb.Appeal No.53/2018 10 enforced, the measure of protection is intended to safeguard the subject matter of dispute or the fruits of the proceedings till the enforcement of the award. Interim measure of protection, then sought, is a step in aid of enforcement of the award. It is intended to ensure that the award is not rendered illusory by the opposite party. In such circumstances, when urgent relief is required, especially by a party who is successful in the arbitral proceedings, remedy under Section 17 of the Act may not be efficacious because the Arbitral Tribunal may not be then actually functioning. It may also be possible that the Arbitrator is not readily available. When an application under Section 9(1) of the Act is made by a party after the passing of the award but before it is enforced, the Court has to consider all these circumstances. Of course, the party who approaches the Court has to enlighten the Court with regard to such or similar circumstances.
13. In the instant case, there is no finding made by the District Court that there exist circumstances under which the remedy provided under Section 17 of the Act is efficacious. The finding of the Court is only that the remedy provided under Arb.Appeal No.53/2018 11 Section 17 of the Act is efficacious. The District Court has not made any discussion of the circumstances under which the interim relief was claimed by the appellant. The Court has not made any finding with regard to the circumstances under which the remedy provided under Section 17 of the Act would be efficacious to the appellant. The finding of the Court under Section 9(3) of the Act shall be with regard to the circumstances under which the remedy provided under Section 17 of the Act would be efficacious. A mere statement by the Court to the effect that the remedy provided under Section 17 of the Act is efficacious, without reference to the circumstances which make it so, is not sufficient to reject an an application under Section 9(1) of the Act.
14. The District Court has found that the relief of injunction claimed by the appellant is barred under Section 38(3)(b) and (c) of the Specific Relief Act, 1963. Section 38 of the Specific Relief Act deals with granting of perpetual injunction. The relief claimed by the appellant is interim injunction and not perpetual injunction. Therefore, Section 38 of the Specific Relief Act, 1963 Arb.Appeal No.53/2018 12 has no application to the facts of the case. Any order passed by the Court under Section 9 of the Act, whether it is final or interim, is only in the nature of an interim measure. Even the final order under Section 9 of the Act is only in the nature of an interim measure (See Hari Kumar v. M/s Shriram Finance Company : 2018 (1) KHC 658: 2018 (1) KLT 652).
15. The District Court also found that as the appellant has got equally efficacious remedy under Section 17 of the Act, the relief of injunction sought by him is barred under Section 41(h) of the Specific Relief Act, 1963. The aforesaid provision mandates that an injunction cannot be granted when equally efficacious relief can certainly be obtained by any other usual mode of proceedings except in case of breach of trust. In Arvind Constructions Company v. Kalinga Mining Corporation : AIR 2007 SC 2144, the Hon'ble Supreme Court has held that the argument that the power under Section 9 of the Act is independent of the Specific Relief Act or that the restrictions placed by the Specific Relief Act cannot control the exercise of power under Section 9 of the Act cannot, prima facie, be accepted. In the instant case, the Arb.Appeal No.53/2018 13 court below did not dismiss but rejected the application filed under Section 9(1) of the Act. The application should not have been rejected at the threshold on the ground that the interim relief sought for cannot be granted in view of the bar under Section 41(h) of the Specific Relief Act, 1963. The court below should have considered whether the appellant could have approached the Arbitral Tribunal in the usual manner after the passing of the award and he could have obtained an equally efficacious remedy. The relief sought for in an application under Section 9(1) of the Act is neither in a suit nor is it a right arising from a contract. What is intended is only an interim measure of protection of the right being adjudicated or already adjudicated before the Arbitral Tribunal.
16. In the aforesaid circumstances, we find it proper and necessary to remand the application filed by the appellant under Section 9(1) of the Act for fresh consideration by the court below on its merits. We are conscious of the fact that the award passed in favour of the appellant is for payment of money by the respondent. The power under Section 9 of the Act is not totally Arb.Appeal No.53/2018 14 independent of the well known principles governing the grant of an interim injunction (See Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd : AIR 2007 SC 2563). Whether an interim relief of injunction against alienation of the properties of the respondent is the proper interim measure of protection to be claimed in such a situation, is a matter which has to be considered by the court below. We do not express any opinion in that regard.
17. Consequently, we set aside the impugned order passed by the court below and remand the application filed by the appellant under Section 9(1) of the Act for fresh consideration by that court on merits. The parties shall appear before the court below on 01.12.2018. No costs in the appeal.
(sd/-) V.CHITAMBARESH, JUDGE (sd/-) R.NARAYANA PISHARADI, JUDGE jsr/21/11/2018 True Copy PS to Judge