Case Note & Summary
The case involved a dispute under a family trust, the Alimchandani Family Trust, created by a deed dated 24th March 1982. The settlor was Indira Bihari Ahuja, and the trustees were the respondents, who were also the parents of the petitioner and respondent no. 3. The petitioner and respondent no. 3 were beneficiaries with 50% share each, entitled to the trust corpus after 25 years, i.e., from 25th March 2007. The trust held shares in a company, and the petitioner alleged that despite requests, the trustees failed to transfer his share of the corpus, leading to disputes. The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 on 18th November 2009, seeking interim measures: appointment of a receiver for original share certificates and an injunction restraining the respondents from exercising voting rights at the upcoming AGM. On 24th November 2009, the court admitted the petition but refused to grant the voting injunction, noting the trustees’ resolution dated 12th January 2007 extending the trust period till 24th March 2017. Subsequently, the petitioner applied under Section 11 for appointment of an arbitrator as the respondents failed to do so. By order dated 21st October 2010, an arbitrator was appointed. At the final hearing on 16th December 2010, the respondents raised a preliminary objection that the petitioner, not being a signatory to the trust deed, could not invoke the arbitration clause under Section 7, and thus the Section 9 petition was not maintainable. They relied on SBP & Co. v. Patel Engineering Ltd., Vijay Kumar Sharma v. Raghunandan Sharma, and Chhaya Shriram v. Deepak C. Shriram. The petitioner countered that clause 20 of the trust deed provided for arbitration of disputes between trustees and beneficiaries, establishing privity. The court examined the interplay of Sections 9, 11, and 16 of the Act and held that since an arbitrator had already been appointed, it would be inappropriate for the court to decide the existence or validity of the arbitration agreement in the Section 9 petition, as any such objection could be raised before the arbitrator under Section 16, in keeping with the principle of Kompetenz-Kompetenz and to avoid conflicting decisions. The court relied on its earlier decisions in Sandip Industries v. Superpack and Perma Container Line Ltd. v. Perma Container Line (India) Pvt. Ltd. The court also found no change in circumstances since the earlier refusal of interim relief and held that no case was made out for granting the reliefs sought. Accordingly, the petition was dismissed with no order as to costs. The legal position thus clarified that once an arbitrator is appointed, the court’s role under Section 9 does not extend to adjudicating on the fundamental question of the arbitration agreement’s existence, leaving it to the arbitral tribunal’s competence under Section 16.
Headnote
A) Arbitration Law - Section 9, Arbitration and Conciliation Act, 1996 - Preliminary Objection to Maintainability - Existence of Arbitration Agreement - Where an application under Section 11 has been allowed and an arbitrator appointed, any objection regarding the existence or validity of the arbitration agreement should be raised before the arbitral tribunal under Section 16, and the court in a Section 9 petition ought not to adjudicate on such objection, as it would risk conflicting decisions. Held that the petition cannot be dismissed on the ground that the petitioner, a beneficiary of a trust, was not a signatory to the trust deed containing the arbitration clause, because the arbitrator is competent to decide that issue. (Paras 8-17) B) Interim Relief - Section 9, Arbitration and Conciliation Act, 1996 - Repetition of Refused Relief - Absence of Changed Circumstances - Where the court had earlier refused to grant an injunction restraining voting rights after considering the trustees’ resolution extending the trust period, and no material change in facts occurred, the same relief could not be granted again. The petitioner’s remedy lay before the arbitrator under Section 17. Petition dismissed. (Paras 2-3)
Issue of Consideration
Whether in a petition under Section 9 of the Arbitration and Conciliation Act, 1996, the court can determine the maintainability of the petition based on the existence of an arbitration agreement when an arbitrator has already been appointed under Section 11, and whether the petitioner, a beneficiary not signatory to a trust deed, can invoke the arbitration clause; and whether interim relief can be granted when similar relief was earlier refused.
Final Decision
The petition under Section 9 was dismissed. The court held that after an arbitrator had been appointed, the question of existence/validity of the arbitration agreement should be left to the arbitrator under Section 16 and not decided in the Section 9 petition. The court also found no changed circumstances since the earlier refusal of interim relief, and thus no case was made out for granting the reliefs sought. No order as to costs.
Law Points
- In a petition under Section 9 of the Arbitration and Conciliation Act
- 1996
- when an arbitrator has already been appointed
- the court should not adjudicate on objections regarding the existence or validity of the arbitration agreement
- leaving such issues to the arbitrator under Section 16 to avoid conflicting decisions. The principle of Kompetenz-Kompetenz is relevant. Interim relief already refused cannot be re-agitated without changed circumstances.
