Alpha Tiger Cyprus Investments ... vs Shakti Nath & Ors.
2015 Latest Caselaw 1241 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

                         O.M.P.(I) 17/2015
       ALPHA TIGER CYPRUS INVESTMENTS
       LTD. & ANR                     ..... Petitioners
                                  Through: Mr. Sanjeev Puri, Senior
                                  Advocate with Mr. Ruchin Midha,
                                  Advocate.
                         versus

       SHAKTI NATH & ORS                          ..... Respondents
                                  Through: Mr. Rajiv Nayar, Senior
                                  Advocate with Mr. Abhishek Sharma,
                                  Mr. Atul Sharma, Mr. Milanka
                                  Choudhary and Mr. Yash Srivastava,
                                  Advocates.
       CORAM: JUSTICE S. MURALIDHAR

                         ORDER

11.02.2015 IA No. 3016 of 2015 (for exemption)

1. Exemption allowed subject to all just exceptions.

2. The application is disposed of.

OMP (I) No. 17 of 2015

3. Notice. Mr. Abhishek Sharma, learned counsel accepts notice on behalf of the Respondents.

4. Mr. Rajiv Nayar, learned Senior counsel appearing for the Respondents, referred to the decision of the Supreme Court in National Aluminium Co. Limited v. Pressteel & Fabrications (P) Limited (2004) 1 SCC 540 to urge that the present petition under

Section 9 of the Arbitration and Conciliation Act, 1996 („Act‟) cannot be entertained in view of the clear observations in the said case. He also placed reliance on the decision of this Court in Sterling & Wilson Electricals Pvt. Ltd. v. Silicon Graphics Systems (India) Pvt. Ltd. (2009) 159 DLT 634.

5. Mr. Sanjeev Puri, learned Senior counsel appearing for the Petitioners on the other hand points out that the relief under Section 9 of the Act can be sought at any stage even after making of the arbitral award "but before it is enforced in accordance with Section

36." Mr. Puri points out that the stage for enforcement of the award under Section 36 of the Act has not yet been reached.

6. Mr. Nayar, on instructions, states that the Respondents‟ petition under Section 34 of the Act challenging the Award dated 20th January 2015 of the Arbitral Tribunal („AT‟), which is in favour of the Petitioner and against the Respondents, is expected to be filed very shortly.

7. The question that first arises before the Court is whether pending the enforcement of the arbitral Award, which is proposed to be challenged under Section 34 of the Act, can the Court exercise jurisdiction under Section 9 of the Act?

8. The facts in National Aluminium Co. Ltd. (supra) will have to be

noticed in order to appreciate what was precisely held in the said case. In the said case an Award had already been made by the sole Arbitrator and was challenged even before the case was heard by the Supreme Court. This fact is noticed in para 3 of the said judgment, which reads as under:

"3. It is to be noted at this stage that the Respondent in this application was the Appellant in CA No. 2522 of 2009. The said Respondent being aggrieved by this award, has itself filed objections to the said award before the appropriate civil Court under Section 34 read with Section 2 (e) of the 1996 Act."

9. The questions that arose before the Supreme Court were:

"(i) Whether the proceedings in which the impugned award has come to be made, are governed by the 1940 Act or the 1996 Act?

and

(ii) whether the appropriate Court for the purpose of challenging the said award or seeking modification of the said award is this Court, being the court which appointed the arbitrator or an appropriate court as contemplated under Section 34 of the 1996 Act read with Section 2 (e) of the said Act which contemplates the said Court to be principal civil court of original jurisdiction?"

10. The above questions were answered as follows:

(i) The parties by consent had agreed that the 1996 Act would apply to the proceedings.

(ii) The Court which could entertain an application for modifying or setting aside the award could only be the principal civil court of original jurisdiction as contemplated under Section 2 (e) of the Act. Therefore, such an application was not maintainable before the Supreme Court.

11. Thereafter, the Supreme Court in National Aluminium Co. Ltd. (supra) considered the submission of learned counsel for the Appellant that "at least the amount representing that part of the award which is in its favour should be directed to be deposited in the competent civil court by the Respondents herein so that the applicant could enjoy the fruits of the said award during further proceedings." In rejecting the said plea the Supreme Court referred to the mandatory language of Section 34 of the Act and noted that once the award was challenged under Section 34 of the Act within the time stipulated therein, it becomes „unexecutable‟. The Supreme Court proceeded to observe that "there is no discretion left with the Court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the Applicant therein." The Supreme Court also rejected the plea that it should exercise its extraordinary jurisdiction under Article 142 of the Constitution. It was observed that "there being no exceptional situation which would compel us to ignore such statutory provision, and to use our jurisdiction under Article 142, we restrain ourselves from passing any such order as prayed for by the appellants."

12. The Supreme Court in National Aluminium Co. Ltd. (supra) also noted that there was a recommendation made by the Ministry concerned to Parliament to amend Section 34 of the Act to empower the civil court to pass suitable interim orders in such cases. The Supreme Court recommended that necessary steps would have to be taken to bring about the required change in law so that there is no automatic suspension of the execution of the award when an application to challenge the award is filed under Section 34 of the Act.

13. Consistent with the above observations of the Supreme Court in National Aluminium Co. Ltd. (supra) the Law Commission of India in its 246th Report titled "Amendments to the Arbitration and Conciliation Act, 1996" submitted to the Government of India in August 2014 has recommended the insertion of the sub-Section (3) in Section 36 of the Act and a proviso so that the Court, while considering the grant of stay of the execution of the award, shall have due regard to the provisions for grant of stay of money decrees under the Code of Civil Procedure 1908.

14. The Court finds that the situation in the present case is different. The case is at a stage post the making of the arbitral award but before its enforcement under Section 36 of the Act. Added to this is the fact that as of date there is no petition under Section 34 of the Act to challenge the award dated 20th January 2015. The second point to be noted is that for some reason the attention of the Supreme Court in

National Aluminium Co. Ltd. (supra) was not drawn to Section 9 of the Act. In the entire judgment there is no discussion of Section 9 of the Act. The said decision cannot, therefore, be stated to be a binding authority, on the question whether at a stage after the pronouncement of the award and prior to its enforcement the power of the Court under Section 9 of the Act can be exercised to grant interim relief?

15. In Sterling & Wilson Electricals Pvt. Ltd. (supra) the petition being considered by this Court was under Section 9 of the Act but the petition was filed after the award stood challenged under Section 34 of the Act. Referring to the decision of the Supreme Court in National Aluminium Co. Ltd. (supra), the Court was of the view that since the award when challenged under Section 34 of the Act within the time stipulated therein becomes „unexecutable‟, there was no discretion left with the Court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the Applicant therein. The Court finds that even the decision in Sterling & Wilson Electricals Pvt. Ltd. (supra) does not address the question concerning the power of the Court under Section 9 of the Act. It also fails to notice that this question was also not addressed in National Aluminium Co. Ltd. (supra) as well.

16. The words in Section 9 of the Act "the 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", has to be given full effect. It cannot be overlooked

while discussing the powers of the Court in the context of Sections 34 and 36 of the Act. While there may be a restriction on the Court passing an "interlocutory order in regard to the said award", the Court is not denuded of the power under Section 9 to pass an order granting any other appropriate interim relief. One situation might be like the present one, where the party in whose favour the award has been made, and who is precluded from filing a petition under Section 36 of the Act since the limitation period for a challenge to the award is not over or the petition challenging the award has not been disposed of, is anxious that its attempt in future to have the award enforced is not frustrated by the opposite party. The Court might, if satisfied, pass an interim order under Section 9 of the Act not in regard to the award itself but by restraining the person against whom the award is made from removing its assets or preserving their status quo pending the disposal of the petition challenging the award. The words of Section 9 of the Act quoted hereinbefore permit such an order to be made by the Court. The legislative intent is clear from the very wording of Section 9 of the Act.

17. It might be different where the award has been challenged and there is no petition under Section 9 of the Act and when the petition under Section 34 of the Act is taken up for consideration the Respondent in such petition (in whose favour the award has been made) seeks some interim relief qua the automatic stay of enforcement of the award, by insisting on deposit of part or whole of the awarded amount. It is in that situation the decision of the Supreme

Court in National Aluminium Co. Ltd. (supra) would apply precluding the Court from passing such an interlocutory order. In such event, the party resisting the challenge to the award will have to wait till the petition challenging the award is disposed of before seeking to enforce the award.

18. The Law Commission‟s report does not suggest modification to the existing scheme of Section 9 of the Act. In other words, the power of the Court to grant interim relief at a stage after making of the award but before it is enforced under Section 36 of the Act is not sought to be altered.

19. In the present case, as will be noticed hereafter, the Petitioner is seeking an interim order requiring the Respondents to maintain status quo in relation to an immoveable property and is not praying for the deposit of the whole or part of the awarded amount. In that view of the matter, the Court is of the view that the present petition under Section 9 of the Act filed by a party in whose favour award is made and prior to the enforcement of the award under Section 36 of the Act, is maintainable.

20. It is next contended by Mr. Nayar, on the strength of the decision of this Court in Intertoll ICS Cecons O & M Co. Pvt. Ltd. v. National Highways Authority of India 2013 (4) RAJ 733 (Del) that no case has been made out by the Petitioner for grant of any interim

relief of requiring the Respondents to deposit the amount awarded in favour of the Petitioner by the AT. According to him the relief sought in the petition is akin to seeking the relief of attachment before judgment under Order XXXVIII Rule 5 CPC and has to therefore satisfy the basic ingredients of that provision. In other words, it is submitted that no relief can be claimed even qua the properties of the Respondents till the Petitioners are able to show from its pleadings that the Respondents are trying to remove the properties from the jurisdiction of the Court. Referring to the pleadings in the petition it is submitted that no case has been made out for grant of interim relief.

21. Countering the above submissions it is stated by Mr. Puri that the question of applicability of the principles governing Order XXXVIII Rule 5 CPC does not arise since the case is at a stage after passing of the award. In other words it is not a case of seeking the relief of attachment „before judgment‟ in a suit but post-judgment in the suit. Mr. Puri accordingly submitted that as long as the Petitioners have been able to establish a prima facie case and show that the balance of convenience is in its favour there cannot be any bar to the grant of interim relief as prayed for. Mr. Puri draws the attention of the Court to its order dated 30th January 2015 in Execution Petition No. 144 of 2014 and states that the interim order restraining the Respondents from creating any third party rights in respect of the property at No. 34, Friends Colony (East), New Delhi - 110 065 may be continued pending disposal of the petition challenging the award and that would sufficiently protect the interest of the Petitioner.

22. Mr. Nayar raised an objection that granting such relief would amount to the enforcement of the award which is impermissible in terms of the law explained by the Supreme Court in National Aluminium Co. Ltd. (supra). He submits that once a petition under Section 34 of the Act challenging the award is filed, the award cannot be executed at all and therefore, there should be no interim order of any kind at this stage pending the challenge to Award under Section 34 of the Court.

23. The Court finds that the decision of this Court in Intertoll ICS Cecons O & M Co. Pvt. Ltd. (supra) would not really apply to the facts of the present case. In that case the situation was that an award had not been made. An interim order passed by the AT in an application under Section 17 of the Act had been challenged in an appeal before the Court. The Court had occasion to discuss in detail the principles governing Order XXXVIII Rule 5 CPC and emphasized that those principles would apply ipso facto while considering an application under Section 17 of the Act seeking similar relief. As far as the present petition is concerned, during the pendency of the arbitral proceedings there was an order passed by this Court on 4th July 2011 in a petition under Section 9 of the Act being OMP No. 99 of 2011 granting an interim injunction in favour of the Petitioners. Upon alleged failure of the Respondent to comply with the said order, the Petitioner filed CCP (OS) No. 67 of 2014 which is pending. Execution Petition No. 144 of 2014 was also filed by the Petitioner seeking execution of the said interim order. In that

execution petition, on 30th January 2015 the following order was passed:

"1. The development subsequent to the previous hearing is that a final Award has now been pronounced by the Arbitral Tribunal by a majority of 2: 1 on 20th January 2015. The Court has been shown a copy of the Award.

2. The present execution petition sought implementation of an order dated 4th July 2011 in OMP No. 99 of 2011 under Section 9 of the Arbitration and Conciliation Act, 1996. In para 45 of the said order a direction was issued to the Judgment Debtors ('JDs') to "continue to make the payment of instalment till the completion of arbitration proceedings ...... "

3. Now that the arbitration proceedings have concluded, the above direction cannot continue. The question whether the Respondents (JDs herein) disobeyed the order for paying the lease rent in respect of Noida property is subject matter of CCP (OS) No. 67 of 2014 and will be examined in those proceedings.

4. The interim order passed by this Court on 27th August 2014 directing the JDs not to create any third party rights in respect of the property, i.e., bearing No. 34, Friends Colony (East), New Delhi - 110 065 is continued for a period of two weeks from today. In the meanwhile, it will be open to Decree Holders ('DHs') to seek any other appropriate remedy as may be available to them in accordance with law.

5. The petition and the pending applications are disposed of in the above terms.

6. Order be given dasti."

24. There has been an interim order in favour of the Petitioners throughout the arbitral proceedings. It does appear that with the award also being in favour of the Petitioners, there is indeed a prima facie case in favour of the Petitioners at this stage. Considering that there has been an interim order which is in favour of the Petitioners, the balance of convenience at this stage also appears to be in favour of the Petitioners. There would be irreparable injury caused to the Petitioner if the interim order in its favour is not continued at this stage. Indeed it would be an anomaly that during the pendency of the arbitral proceedings the Petitioner had interim order but cannot seek its extension after succeeding in the arbitral proceedings. To repeat, what the Petitioner is seeking, and this Court is prepared to grant at this stage is not an order requiring the Respondent to deposit in Court the awarded amount. The interim order which was in favour of the Petitioner and which is continued by this order is one in relation to the Respondents‟ immovable property.

25. Consequently, this Court directs that the interim order passed by this Court to the effect that the Respondents shall not create any third party right interest in respect of the property at No. 34, Friends Colony (East), New Delhi-110065 is directed to continue till either the disposal of the petition under Section 34 of the Act if filed, or, in

the event that petition is dismissed or no such petition is filed in accordance with law, till the enforcement of the award in a petition under Section 36 of the Act.

26. The petition is disposed of in the above terms.

S. MURALIDHAR, J.

FEBRUARY 11, 2015 Rk