Recently, the Supreme Court held that even an unsuccessful party in arbitration can invoke Section 9 of the Arbitration and Conciliation Act, 1996 at the post-award stage, thereby settling a long-standing judicial conflict on the maintainability of such applications. Clarifying the scope of interim relief, the Court underscored that access to statutory remedies cannot be curtailed by judicial interpretation, while cautioning that such relief must be granted with “care, caution and circumspection.”
Brief Facts:
The dispute arose from a batch of commercial matters where arbitral awards had been rendered against certain parties. Aggrieved by the outcomes, these unsuccessful parties initiated challenges under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside the awards. Simultaneously, they filed applications under Section 9 seeking interim protection to preserve the subject matter of the dispute pending adjudication of their challenges. However, conflicting judicial approaches emerged. The Bombay High Court, relying on its precedent in Dirk India Pvt. Ltd. v. Maharashtra State Electricity Generation Co. Ltd., held that only a successful party could seek post-award interim relief to secure the “fruits of the award,” leading to dismissal of such petitions and subsequent appeals under Section 37. In contrast, other High Courts, including Telangana, Gujarat, and Punjab & Haryana, permitted such applications by unsuccessful parties. This divergence in judicial opinion ultimately necessitated authoritative adjudication by the Supreme Court.
Contentions:
The counsel for the petitioner contended that Section 9 explicitly uses the expression “a party,” which under the Act refers to any party to the arbitration agreement without distinction. It was argued that reading a limitation into the provision to exclude unsuccessful parties would amount to judicial legislation. The petitioner further submitted that Sections 34 and 36 operate in distinct spheres—dealing with setting aside and enforcement of awards, and do not provide any mechanism to secure the subject matter of the dispute, thereby necessitating recourse to Section 9 even post-award.
The counsel for the respondent, on the other hand, argued that post-award interim relief is intended only to protect the enforceability of an award and therefore should be confined to successful parties. Relying on precedents of certain High Courts, it was contended that allowing unsuccessful parties to seek such relief would undermine the finality of arbitral awards and open the floodgates to abuse of process. It was further submitted that adequate remedies already exist under Sections 34 and 36, rendering Section 9 intervention unnecessary at the instance of a losing party.
Observations of the Court:
The Court undertook a purposive and textual interpretation of Section 9, decisively rejecting any distinction between successful and unsuccessful parties. It emphasized that the phrase “a party” must be given a uniform meaning across stages of arbitration, observing that, “to assign a different meaning to the same expression… would result in an anomalous situation.” The Court reasoned that importing such a restriction would effectively rewrite the statute, which contains no such limitation.
Further, the Court delineated the distinct functions of Sections 9, 34, and 36, clarifying that while Sections 34 and 36 address challenges to awards and their enforcement, Section 9 serves the independent purpose of preserving the subject matter of the dispute. In a significant observation, the Court held: “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.”
The Bench also highlighted the practical implications of denying such relief, noting that assets or subject matter could be dissipated during the pendency of a challenge, thereby frustrating the ultimate outcome. At the same time, the Court introduced a calibrated safeguard, holding that the threshold for granting interim relief to an unsuccessful party must be higher, requiring strict scrutiny of prima facie case, balance of convenience, and irreparable harm. This balanced approach ensures that while statutory access is preserved, misuse is effectively curtailed.
The decision of the Court:
The Supreme Court allowed the appeals and held that any party to an arbitration agreement, including an unsuccessful party, may invoke Section 9 of the Arbitration and Conciliation Act, 1996 at the post-award stage. It further declared that contrary judgments of the Bombay, Delhi, Madras, and Karnataka High Courts do not lay down good law, while affirming the correctness of the views taken by Telangana, Gujarat, and Punjab & Haryana High Courts. The ratio of the judgment firmly establishes that statutory remedies under Section 9 cannot be restricted based on the outcome of arbitration, though courts must exercise heightened scrutiny and caution while granting such relief to unsuccessful parties.
Case Title: Home Care Retail Marts Pvt. Ltd. Vs. Home Care Retail Marts Pvt. Ltd.
Case No.: SLP (C) NO. 29972/2015
Coram: Hon’ble Mr. Justice Manoj Misra, Hon’ble Mr. Justice Manmohan
Advocate for the Petitioner: Sr. Adv. Abhimanyu Bhandari, Sr. Adv. Menaka Guruswamy, AOR Rooh-e-hina Dua, AOR N. Visakamurthy, A.S.G. K.m.nataraj, Adv. Arav Pandit, Adv. Shreya Arora, Adv. Yashika Kapoor, Adv. Piyush Jain, Adv. Riccky Chaudhary, Adv. Vinayak Sharma, Adv. Sharath Nambiar, Adv. Satvika Thakur, Adv. & Ors.
Advocate for the Respondent: Sr. Adv. Dama Seshadri Naidu, AOR Kaushal Yadav, AOR P. N. Puri, AOR . Amarjit Singh Bedi, AOR. Nidhi Mohan Parashar, AOR. Ram Kishor Singh Yadav, Adv. Nandlal Kumar Mishra, Adv.Naina Garg, Ad. vriyanka, Adv. Ritul Tandon, Adv. Onkar Nath Sharma, Adv. Nandlal Kumar Mishra, Adv. . Ajay Kumar, Adv. Tuhin Lavania, & Ors.
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