Case Note & Summary
The petitioners, Ashok Kumar Goel and Vyoman India Private Limited, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking security for an enhanced call price of INR 145 crore arising from a Shareholders Agreement (SHA) dated 12th May 2017. The dispute originated from the respondents' failure to purchase the petitioners' shares in Respondent No. 4 company as per the SHA. An arbitral tribunal had passed a First Award on 1st June 2023 upholding the termination of the SHA and directing a fresh valuation. Subsequently, the petitioners appointed PwC as valuer, which determined the enhanced call price at INR 181 crore. The respondents refused to pay, leading the petitioners to invoke arbitration under SIAC Rules and seek emergency interim relief. The emergency arbitrator on 14th March 2024 directed the respondents to furnish an irrevocable bank guarantee of INR 145 crore within 14 days. The respondents failed to comply, citing difficulties due to a Delhi High Court order restraining their assets. The respondents later obtained modification of that order but still did not furnish the bank guarantee. The petitioners then filed the present Section 9 petition seeking various forms of security, including deposit of INR 145 crore, bank guarantee, appointment of receiver, attachment of assets, and injunction. The court dismissed the petition, holding that the emergency arbitrator's decision was binding and the petitioners could not bypass it by seeking parallel relief from the court. The court noted that the emergency arbitrator's order had been reviewed and upheld by the arbitral tribunal, and the petitioners had not challenged it. The court emphasized that granting the relief sought would undermine the arbitral process and lead to conflicting orders. The court also found that the petitioners had not made out a case for any additional relief beyond what was already granted by the emergency arbitrator. The petition was dismissed with no order as to costs.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Maintainability - The court held that a Section 9 petition seeking security for an enhanced call price was not maintainable as the emergency arbitrator had already passed an interim order directing the respondents to furnish a bank guarantee for the same amount. The court found that the petitioners were attempting to circumvent the emergency arbitrator's decision by seeking a different form of security or additional relief, which would undermine the arbitral process. The court emphasized that the principle of comity requires courts to respect interim measures granted by an emergency arbitrator and that the court's power under Section 9 is not ousted but must be exercised with caution to avoid conflicting orders. (Paras 1-41) B) Arbitration - Emergency Arbitrator - Binding Nature - The court held that an emergency arbitrator's decision is binding on the parties and the arbitral tribunal, and the court should not interfere with it unless there are exceptional circumstances. The court noted that the emergency arbitrator's decision had been reviewed and upheld by the arbitral tribunal, and the petitioners had not challenged it. Therefore, the court declined to grant any relief that would modify or supplement the emergency arbitrator's order. (Paras 1-41) C) Arbitration - Interim Measures - Test for Grant - The court reiterated the test for granting interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, which includes a prima facie case, balance of convenience, and irreparable loss. The court found that the petitioners had not made out a case for any additional relief beyond what was already granted by the emergency arbitrator, as the emergency arbitrator's order adequately protected the petitioners' interests. (Paras 1-41)
Issue of Consideration
Whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking security for an enhanced call price, is maintainable when an emergency arbitrator has already passed an interim order directing the respondents to furnish a bank guarantee for the same amount, and the petitioners seek a different form of security or additional relief.
Final Decision
The court dismissed the Commercial Arbitration Petition (L) No. 25579 of 2024 with no order as to costs.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- cannot be used to circumvent or modify an emergency arbitrator's decision
- the principle of comity requires courts to respect interim measures granted by an emergency arbitrator
- the court's power under Section 9 is not ousted but must be exercised with caution to avoid conflicting orders
- the test for granting interim measures under Section 9 includes a prima facie case
- balance of convenience
- and irreparable loss.
