Case Note & Summary
The appeals arose from a judgment and order of a learned Single Judge dated 5 February 2013, which granted interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in favor of Tata Capital Financial Services Limited and L & T Finance Limited against Deccan Chronicle Holdings Limited. The appellant had taken credit facilities from the respondents, and the dues amounted to Rs.100.86 crores (Tata Capital) and Rs.25.02 crores (L & T Finance), with interest. Tata Capital had invoked arbitration, which was pending, while L & T Finance had obtained an arbitral award dated 15 March 2013 for its claim with interest at 15% p.a. Both respondents held mortgages over the appellant's properties but had restricted their claims in arbitration to money claims, not seeking enforcement of the mortgage. The learned Single Judge directed the appellant to furnish security, failing which the Court Receiver would take possession of mortgaged properties, and also ordered attachment of bank accounts and disclosure of assets. The appellant challenged these orders on the ground that the respondents had an alternative remedy by enforcing the mortgage, and that the interim relief was granted without proper consideration of urgency and balance of convenience. The High Court allowed the appeals, setting aside the impugned orders, holding that the respondents, as secured creditors with mortgages, should have enforced the mortgage rather than seeking interim relief under Section 9. The court emphasized that Section 9 relief is discretionary and should not be granted when an alternative efficacious remedy exists. The court also noted that in the case of L & T Finance, the award had already been passed, and the appropriate remedy was to enforce the award under Section 36, not seek interim relief under Section 9. The appeals were allowed, and the interim orders were set aside.
Headnote
A) Arbitration Law - Interim Relief under Section 9 - Discretion of Court - The court must exercise discretion judiciously, considering urgency, balance of convenience, and irreparable injury; interim relief should not be granted if the applicant has an alternative efficacious remedy, such as enforcement of a mortgage. (Paras 5-10)
B) Arbitration Law - Secured Creditor - Mortgage - Alternative Remedy - A secured creditor holding a mortgage over property should ordinarily enforce the mortgage rather than seek interim measures under Section 9 of the Arbitration and Conciliation Act, 1996; the court may refuse interim relief if the creditor has not taken steps to enforce the mortgage. (Paras 7-9)
C) Arbitration Law - Section 9 - Post-Award Interim Relief - After an arbitral award is passed, the appropriate remedy is to enforce the award under Section 36 of the Arbitration and Conciliation Act, 1996; interim relief under Section 9 should not be used as a substitute for execution proceedings. (Para 10)
Issue of Consideration
Whether the learned Single Judge was justified in granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in favor of the respondents when the respondents held mortgages over the appellant's properties and had alternative remedies available, and whether the orders were passed without proper consideration of urgency and balance of convenience.
Final Decision
The appeals are allowed. The impugned orders of the learned Single Judge dated 5 February 2013 are set aside. No order as to costs.
Law Points
- Interim relief under Section 9 of the Arbitration and Conciliation Act
- 1996 is discretionary and must be based on urgency
- balance of convenience
- and irreparable injury
- a secured creditor with a mortgage should ordinarily enforce the mortgage rather than seek interim measures in arbitration
- the court must consider whether the applicant has an alternative efficacious remedy
- the existence of an arbitral award does not automatically justify interim relief under Section 9 if the award can be enforced under Section 36.
Case Details
2013 LawText (BOM) (08) 193
Appeal (Lodging) No.130 of 2013 in Arbitration Petition No.1095 of 2012 and Appeal (Lodging) No.131 of 2013 in Arbitration Petition No.1321 of 2012
Dr. D.Y. Chandrachud, S.C. Gupte
Mr. Gaurav Joshi with Mr. Samsher Garud, Mr. Agasti Vibhute and Mr. Vivek Deo i/by M/s. Jayakar & Partners for Appellant; Mr. Dinyar Madon, Sr. Counsel with Ms. Shakuntala Joshi, Anand Poojari i/by S.I. Joshi & Co. for Respondent in Appeal (L) No.130 of 2013; Mr. Shailesh Shah, Sr. Counsel with Ms. Leena Desai and Mr. Nilesh Gala i/by MDP and Partners for Respondent in Appeal (L) No.131 of 2013
Deccan Chronicle Holdings Limited
L & T Finance Limited (and Tata Capital Financial Services Limited in connected appeal)
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Nature of Litigation
Appeals against orders granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 in arbitration-related disputes.
Remedy Sought
The appellant sought to set aside the orders of the learned Single Judge directing furnishing of security, appointment of receiver, attachment of bank accounts, and disclosure of assets.
Filing Reason
The appellant challenged the interim orders on the ground that the respondents had alternative remedies by enforcing their mortgages and that the orders were passed without proper consideration of urgency and balance of convenience.
Previous Decisions
The learned Single Judge had passed orders on 5 February 2013 granting interim relief in favor of Tata Capital and L & T Finance.
Issues
Whether the learned Single Judge was justified in granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 when the respondents held mortgages over the appellant's properties and had alternative remedies available.
Whether the orders were passed without proper consideration of urgency, balance of convenience, and irreparable injury.
Submissions/Arguments
The appellant argued that the respondents, being secured creditors with mortgages, should have enforced the mortgage rather than seeking interim relief under Section 9, and that the court should not exercise its discretion in favor of a party that has an alternative efficacious remedy.
The respondents argued that the interim relief was necessary to protect their interests pending arbitration and that the mortgages did not preclude them from seeking relief under Section 9.
Ratio Decidendi
Interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 is discretionary and should not be granted when the applicant has an alternative efficacious remedy, such as enforcement of a mortgage. A secured creditor holding a mortgage should ordinarily enforce the mortgage rather than seek interim measures under Section 9. After an arbitral award is passed, the appropriate remedy is to enforce the award under Section 36, not seek interim relief under Section 9.
Judgment Excerpts
The claim of Tata Capital Financial Services Limited (`Tata Capital') is Rs.100.86 crores on which interest would be liable to be paid.
The dues of L & T Finance Limited (`L & T Finance') are Rs.25.02 crores together with interest.
Although the creditors have mortgages in their favour, the claim in the arbitral proceedings has been restricted to a money claim.
The court must exercise discretion judiciously, considering urgency, balance of convenience, and irreparable injury.
A secured creditor holding a mortgage over property should ordinarily enforce the mortgage rather than seek interim measures under Section 9.
Procedural History
The learned Single Judge passed orders on 5 February 2013 on two petitions under Section 9 of the Arbitration and Conciliation Act, 1996 filed by Tata Capital Financial Services Limited and L & T Finance Limited against Deccan Chronicle Holdings Limited. The appellant filed two appeals against those orders. The appeals were admitted and taken up for final disposal by consent.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 36
