Case Note & Summary
The Appellant, Aniket SA Investments LLC, a foreign investor and shareholder in Respondent No. 1 (Janapriya Engineers Syndicate Private Limited), filed a Section 9 petition under the Arbitration and Conciliation Act, 1996, seeking urgent interim relief to prevent the Respondents from diluting its shareholding and removing its nominee director from the board. The dispute arose out of a Securities Subscription and Shareholders Agreement. The Learned Single Judge rejected the petition on the ground that the arbitral tribunal, once constituted, would have the power to grant interim relief under Section 17 of the Act. The Appellant appealed under Section 37. The Division Bench of the Bombay High Court allowed the appeal, holding that the court's jurisdiction under Section 9 is not ousted by the existence of Section 17. The court found that the Appellant had made out a strong prima facie case, balance of convenience was in its favor, and irreparable injury would be caused if relief was not granted. The court directed the Respondents to maintain status quo regarding the Appellant's shareholding and board composition, and restrained them from taking any steps to dilute the Appellant's shareholding or remove its nominee director, pending the constitution of the arbitral tribunal. The court also directed that the arbitral tribunal be constituted within a specified period.
Headnote
A) Arbitration Law - Interim Relief under Section 9 - Jurisdiction of Court - Section 9, Arbitration and Conciliation Act, 1996 - The court has the power to grant interim relief under Section 9 even if the arbitral tribunal may later be constituted and have power under Section 17. The existence of Section 17 does not oust the court's jurisdiction under Section 9. The court must consider the urgency and the fact that the tribunal is not yet constituted. (Paras 10-15) B) Arbitration Law - Prima Facie Case - Balance of Convenience - Irreparable Injury - Section 9, Arbitration and Conciliation Act, 1996 - The Appellant, a foreign investor, made out a strong prima facie case that the Respondents were attempting to dilute its shareholding and remove its nominee director. The balance of convenience was in favor of granting interim relief to protect the Appellant's investment and rights under the Shareholders Agreement. Irreparable injury would be caused if the relief was not granted. (Paras 16-25) C) Arbitration Law - Interim Relief - Status Quo - Section 9, Arbitration and Conciliation Act, 1996 - The court directed the Respondents to maintain status quo with respect to the shareholding of the Appellant and the composition of the board of directors, and restrained the Respondents from taking any steps to dilute the Appellant's shareholding or remove its nominee director, pending the constitution of the arbitral tribunal. (Paras 26-30)
Issue of Consideration
Whether the Learned Single Judge erred in rejecting the Appellant's Section 9 petition on the ground that the arbitral tribunal, once constituted, would have the power to grant interim relief under Section 17 of the Arbitration and Conciliation Act, 1996, and whether the Appellant is entitled to interim relief pending the constitution of the arbitral tribunal.
Final Decision
The appeal is allowed. The Impugned Order dated 22nd October 2019 is set aside. The Respondents are directed to maintain status quo with respect to the shareholding of the Appellant and the composition of the board of directors of Respondent No. 1. The Respondents are restrained from taking any steps to dilute the Appellant's shareholding or remove its nominee director, pending the constitution of the arbitral tribunal. The arbitral tribunal shall be constituted within a period of four weeks from the date of this order.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- Section 17 of the Arbitration and Conciliation Act
- Section 37 of the Arbitration and Conciliation Act
- Prima facie case
- Balance of convenience
- Irreparable injury
- Interim relief pending arbitration
- Jurisdiction of court under Section 9 not ousted by Section 17
