Case Note & Summary
The appellant, M/s. Ambarwadikar and Company, a registered partnership firm engaged in infrastructure business, filed a commercial appeal against a common order dated 01.11.2023 passed by the Commercial Court/District Judge-2, Aurangabad in Commercial Suit No.1/2023. The impugned order rejected the plaintiff's applications (Exhs.5, 6, and 7) seeking interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. The plaintiff had executed various government projects and in 2010, defendant No.2 floated a tender for construction work. The plaintiff was awarded the contract and executed substantial work. Disputes arose regarding payments and termination of the contract. The plaintiff filed a suit seeking interim relief to restrain the defendants from encashing bank guarantees and from terminating the contract. The Commercial Court rejected the applications holding that the disputes are arbitrable and the plaintiff has an alternative remedy of arbitration. The High Court allowed the appeal, setting aside the impugned order and remanding the matter back to the Commercial Court for fresh consideration of the applications on merits. The Court held that the mere existence of an arbitration agreement does not bar the grant of interim relief under Section 9 of the Act. The Court must examine whether the applicant has made out a prima facie case, balance of convenience, and irreparable loss. The Court directed the Commercial Court to decide the applications afresh within a period of four weeks from the date of receipt of the order.
Headnote
A) Arbitration and Conciliation Act, 1996 - Section 9 - Interim Measures - Grant of interim relief under Section 9 is not barred merely because the disputes are arbitrable; the court must consider prima facie case, balance of convenience, and irreparable loss. The Commercial Court erred in rejecting the applications solely on the ground of arbitrability without examining the merits of the interim relief sought. (Paras 1-10) B) Arbitration and Conciliation Act, 1996 - Section 9 - Prima Facie Case - The plaintiff made out a prima facie case for interim relief as there was a valid arbitration agreement and the plaintiff had executed substantial work under the contract; the court ought to have granted interim protection to prevent further loss. (Paras 11-15) C) Arbitration and Conciliation Act, 1996 - Section 9 - Balance of Convenience - The balance of convenience was in favor of granting interim relief as the plaintiff would suffer irreparable loss if the defendants were allowed to encash bank guarantees or terminate the contract without due process. (Paras 16-20)
Issue of Consideration
Whether the Commercial Court was justified in rejecting the plaintiff's applications for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 on the ground that the disputes are arbitrable and the plaintiff has an alternative remedy of arbitration.
Final Decision
The appeal is allowed. The impugned order dated 01.11.2023 is set aside. The matter is remanded back to the Commercial Court for fresh consideration of the applications (Exhs.5, 6, and 7) on merits, in accordance with law, within a period of four weeks from the date of receipt of the order. All pending civil applications are disposed of.
Law Points
- Interim measures under Section 9 of the Arbitration and Conciliation Act
- 1996 can be granted even if disputes are arbitrable
- provided there is a valid arbitration agreement and the applicant makes out a prima facie case
- balance of convenience
- and irreparable loss
- the court must examine the existence of an arbitration agreement and the need for interim protection
- the court cannot decide the merits of the dispute at the interim stage.
