Case Note & Summary
The case involves an appeal filed by Bharat Sanchar Nigam Limited (BSNL) under Section 37 of the Arbitration and Conciliation Act, 1996, against a judgment of a learned Single Judge of the Bombay High Court. The Single Judge had allowed a Section 9 petition filed by Siemens Financial Services Ltd. (Siemens) and directed BSNL and Sai Infosystem (India) Ltd. (SIS) to jointly and severally handover possession of certain equipment to Siemens. BSNL was a third party to the arbitration agreement between Siemens and SIS. The equipment had been leased by Siemens to SIS under a Master Lease Agreement dated 5 January 2012, which contained an arbitration clause. The equipment was installed at BSNL's premises. Siemens filed the Section 9 petition seeking interim relief pending arbitration, alleging that SIS had defaulted on lease payments. The Single Judge passed an order directing both SIS and BSNL to handover possession. BSNL appealed, contending that it was not a party to the arbitration agreement and could not be subjected to Section 9 proceedings. The Division Bench of the Bombay High Court allowed the appeal, holding that Section 9 of the Arbitration and Conciliation Act, 1996, only applies to parties to the arbitration agreement. The Court set aside the direction against BSNL, but the order against SIS remained unaffected. The Court clarified that the Section 9 petition could proceed against SIS, but BSNL, being a third party, could not be compelled to handover possession under Section 9.
Headnote
A) Arbitration Law - Interim Measures - Section 9 of Arbitration and Conciliation Act, 1996 - Third Party - The issue was whether a third party (BSNL) not party to the arbitration agreement could be directed under Section 9 to handover possession of equipment to the petitioner (Siemens). The Court held that Section 9 relief is only available against parties to the arbitration agreement and cannot be invoked against a third party. The impugned order directing BSNL to handover possession was set aside. (Paras 1-10) B) Arbitration Law - Jurisdiction - Section 9 of Arbitration and Conciliation Act, 1996 - The Court held that the scope of Section 9 is limited to parties to the arbitration agreement and the subject matter of the dispute. A third party cannot be subjected to interim measures under Section 9. (Paras 5-8)
Issue of Consideration
Whether a third party to an arbitration agreement can be directed to handover possession of equipment under Section 9 of the Arbitration and Conciliation Act, 1996?
Final Decision
The appeal is allowed. The impugned judgment and order dated 28 October 2014 is set aside insofar as it directs the appellant (BSNL) to handover possession of the equipment. The Section 9 petition may proceed against the other respondent (SIS).
Law Points
- Section 9 of Arbitration and Conciliation Act
- 1996 cannot be invoked against a third party who is not a party to the arbitration agreement
- Interim relief under Section 9 is only available against parties to the arbitration agreement
- A third party cannot be directed to handover possession of property under Section 9
