Case Note & Summary
The case involves two arbitration appeals filed by the Deputy Chief Engineer (Construction), Central Railway, Bhusawal (appellant) against orders passed under Section 9 of the Arbitration and Conciliation Act, 1996 by the learned Principal District Judge, Jalgaon. The respondent in Arbitration Appeal No.26 of 2021 is M/s B. N. Agrawal, and in Arbitration Appeal No.25 of 2021 is M/s I. S.C. Projects – BNA Infra (JV). Both appeals challenge the judgment dated 11.05.2021 in CMA No.34 of 2021, whereby the effect, operation and execution of the impugned notice dated 02.01.2021 issued by the appellant was stayed till the constitution of the arbitral tribunal, and the respondent was directed to take appropriate steps within 90 days for commencement of arbitral proceedings, failing which the order would stand vacated. The facts and legal position in both appeals are identical except for certain dates and figures. The appellant argued that the District Judge erred in granting interim relief without considering that the contract had been validly terminated due to the respondent's failure to complete the work. The respondent contended that the termination was arbitrary and that the court had wide powers under Section 9 to grant interim measures. The High Court, after hearing arguments, dismissed the appeals, holding that the District Judge had correctly exercised discretion in granting the interim stay to protect the subject matter of the arbitration pending constitution of the tribunal. The court noted that the respondent had made out a prima facie case and that the balance of convenience was in its favour. The appeals were dismissed with no order as to costs.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Stay of Termination Notice - The court upheld the order granting stay of termination notice issued by the appellant, pending constitution of arbitral tribunal, as the respondent had made out a prima facie case and balance of convenience was in its favour. Held that Section 9 confers wide power on courts to grant interim measures to protect the subject matter of arbitration (Paras 1-3).
Issue of Consideration
Whether the learned District Judge was justified in granting interim relief under Section 9 of the A&C Act, 1996, staying the termination notice dated 02.01.2021, pending constitution of the arbitral tribunal.
Final Decision
Both arbitration appeals are dismissed. The order dated 11.05.2021 passed by the learned Principal District Judge, Jalgaon in CMA No.34 of 2021 is upheld. No order as to costs.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- interim measures
- stay of termination notice
- prima facie case
- balance of convenience
- irreparable loss
- arbitral tribunal constitution
Case Details
2021 LawText (BOM) (07) 2
Arbitration Appeal No.26 of 2021 and Arbitration Appeal No.25 of 2021
Mr. Sanjeev B. Deshpande for appellant; Mr. R.S. Deshmukh, Senior Counsel i/by Mr. Nirmal Rajendra Dayama for respondents
Dy. Chief Engineer (Construction) Central, Central Railway, Bhusawal, on behalf of Union of India
M/s B. N. Agrawal (in Appeal No.26/2021) and M/s I. S.C. Projects – BNA Infra (JV) (in Appeal No.25/2021)
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Nature of Litigation
Arbitration appeal challenging an order under Section 9 of the Arbitration and Conciliation Act, 1996 granting interim stay of termination notice.
Remedy Sought
The appellant (Railway) sought to set aside the order dated 11.05.2021 passed by the learned Principal District Judge, Jalgaon in CMA No.34 of 2021.
Filing Reason
The appellant challenged the interim order staying the termination notice dated 02.01.2021 issued by the appellant.
Previous Decisions
The learned Principal District Judge, Jalgaon, by judgment dated 11.05.2021 in CMA No.34 of 2021, stayed the effect, operation and execution of the impugned notice dated 02.01.2021 till constitution of arbitral tribunal and directed the respondent to take steps within 90 days for commencement of arbitral proceedings.
Issues
Whether the learned District Judge was justified in granting interim relief under Section 9 of the A&C Act, 1996, staying the termination notice dated 02.01.2021, pending constitution of the arbitral tribunal.
Submissions/Arguments
Mr. Sanjeev Deshpande, learned Counsel for the appellant, argued that the District Judge erred in granting interim relief without considering that the contract had been validly terminated due to the respondent's failure to complete the work.
Mr. R.S. Deshmukh, learned Senior Counsel for the respondent, contended that the termination was arbitrary and that the court had wide powers under Section 9 to grant interim measures to protect the subject matter of the arbitration.
Ratio Decidendi
Section 9 of the Arbitration and Conciliation Act, 1996 confers wide power on courts to grant interim measures to protect the subject matter of arbitration. The court may stay a termination notice pending constitution of the arbitral tribunal if the applicant makes out a prima facie case and the balance of convenience is in its favour.
Judgment Excerpts
The arbitration appeal no.26 of 2021 raises challenge to the judgment dated 11.05.2021, passed by the learned Principal District Judge, Jalgaon, in CMA No.34 of 2021 under Section 9 of the Arbitration and Conciliation Act, 1996...
Learned Counsels for the parties, submit that the facts and the legal position in Arbitration Appeal No.25 of 2021 are identical except for certain dates and figures...
Procedural History
The respondent filed CMA No.34 of 2021 under Section 9 of the Arbitration and Conciliation Act, 1996 before the Principal District Judge, Jalgaon, seeking interim relief against the termination notice dated 02.01.2021. The learned District Judge, by judgment dated 11.05.2021, granted stay of the termination notice till constitution of the arbitral tribunal and directed the respondent to take steps within 90 days. The appellant filed Arbitration Appeal No.26 of 2021 and Arbitration Appeal No.25 of 2021 before the Bombay High Court, Bench at Aurangabad, challenging the said order. The appeals were heard and dismissed on 30.07.2021.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9
