Introduction

Over the past few years, Indian courts have actively taken a
pro-arbitration stance and emphasised on minimum judicial
interference in arbitral processes or awards. Recently, the Supreme
Court of India in Arcelor Mittal Nippon Steel India Ltd v Essar
Bulk Terminal Ltd¹, has further clarified the scope of
the courts’ power to “entertain” and adjudicate
applications for interim relief, when the arbitral tribunal has
been constituted during the pendency of parties’ applications
for interim relief before the court.

The Supreme Court held that once an arbitral tribunal is
constituted, the court could not entertain, take up for
consideration or apply its mind to an application for interim
relief under Section 9 of the (Indian) Arbitration and Conciliation
Act, 1996, (Act) except in cases where the remedy under Section 17
of the Act is rendered inefficacious. However, if the date of the
Section 9 application before the court precedes the constitution of
the arbitral tribunal, the court may adjudicate the Section 9
application, in certain circumstances. The present article provides
a quick snapshot of the Supreme Court’s verdict.

Background Facts

Arcelor Mittal Nippon Steel India Limited/ Appellant (Arcelor)
and Essar Bulk Terminal Limited/ Respondent (Essar) entered into an
agreement for cargo handling at Hazira Port (Agreement). Article 15
of the Agreement provided that all disputes arising out of the
Agreement would be settled in accordance with the provisions of the
Act. Subsequently, certain disputes arose between the parties and
the arbitration clause in the Agreement was invoked. Meanwhile,
both Arcelor and Essar sought interim relief under Section 9 of the
Act before the Commercial Court in Surat, Gujarat on 15 January
2021 and 16 March 2021, respectively (Interim Relief Applications).
The Commercial Court heard the Interim Relief Applications and
reserved the matter for orders on 7 June 2021 (Order).

While the judgement was still reserved, the High Court of
Gujarat constituted a three-member arbitral tribunal to resolve the
disputes between the parties. Basis this, Arcelor filed an interim
application, praying for reference of the Interim Relief
Applications filed by the parties, to the newly appointed arbitral
tribunal. However, by an order dated 16 July 2021, the Commercial
Court dismissed the said interim application. This was challenged
by Arcelor before the High Court of Gujarat. However, the High
Court also dismissed the challenge and held that the Commercial
Court has the power to consider whether the remedy under Section 17
of the Act is inefficacious and pass necessary orders under Section
9 of the Act. Arcelor challenged the High Court’s order before
the Supreme Court, which was disposed of vide the present
judgment under discussion.

Issues

The two issues framed by the Supreme Court are:

1. Whether the court has the power to entertain an application
   under Section 9(1) of the Act, once an arbitral tribunal has been
   constituted and if so, what is the true meaning and purport of the
   expression “entertain” in Section 9(3) of the Act?




2. Whether the court is obliged to examine the efficacy of the
   remedy under Section 17, before passing an order under Section 9(1)
   of the Act, once an arbitral tribunal is constituted?

Since the decision of the Supreme Court interprets Section 9(3)
of the Act, the provision is reproduced below for convenience:

“(3) Once the arbitral tribunal has been constituted,
the Court shall not entertain an application under
sub-section (1), unless the Court finds that circumstances exist
which may not render the remedy provided under section 17
efficacious.”

Arguments by the Parties

Arcelor argued that once the arbitral tribunal has been
constituted, the Commercial Court cannot proceed further with
entertaining the Interim Relief Applications, owing to Section 9(3)
of the Act. Section 9(3) is a measure of negative
Kompetenz-Kompetenz and it restricts the role of the court
once the arbitral tribunal has been constituted. It was argued that
the term ‘entertain‘ under Section 9(3) of the
Act, meant not just admitting for consideration but also the entire
adjudication process, until passing of an order on merits.
Accordingly, Arcelor argued that even if the Order was reserved,
the Commercial Court’s conduct was against the mandate of
Section 9(3) of the Act, since the Commercial Court was
entertaining the Interim Relief Applications at a time when the
arbitral tribunal was in existence.

Essar argued that Section 9(3) of the Act would not be
attracted as the Interim Relief Applications were fully heard on
merits, entertained, and reserved for orders on 7th June 2021,
before the constitution of the Arbitral Tribunal on 9th July 2021.
According to Essar, the term ‘entertain’ meant “admit
into consideration” or “admit in order to deal
with”. It was further argued that Section 9(3) of the Act was
neither non-obstante nor an ouster clause, such that it would
render the courts coram non judice, immediately upon the
constitution of the Arbitral Tribunal. Lastly, Essar argued that a
lot of judicial time, cost and resources of the parties had been
spent in agitating the Interim Relief Applications, and thus, the
purpose of arbitration would be frustrated if the Interim Relief
Applications were to be relegated to the arbitral tribunal.

The Supreme Court’s view

With respect to Issue (i), the Supreme Court held that the
expression “entertain” in Section 9(3) of the
Act means to consider, by application of mind to the issues raised.
The court entertains a case when it takes a matter up for
consideration. The process of consideration could continue till the
pronouncement of judgment. Thus, in terms of Section 9(3), once the
arbitral tribunal is constituted and is in seisin of the
dispute between the parties, the court cannot take up an
application under Section 9 of the Act for consideration, unless
the remedy under Section 17 is inefficacious.

In the present case however, the Supreme Court agreed with
Essar’s submission that the intent behind Section 9(3) cannot
be to turn back the clock and require a matter already reserved for
orders, to be considered afresh by the arbitral tribunal under
Section 17 of the Act. Thus, it was clarified by the Supreme Court
that the bar of Section 9(3) of the Act would not operate, once an
interim relief application had already been entertained and taken
up for consideration, as in the instant case, where the hearing has
been concluded and judgment had been reserved.

With respect to Issue (ii), the Supreme Court held that when an
application has already been taken up for consideration and is in
the process of consideration or has already been considered, the
question of examining whether remedy under Section 17 is
efficacious or not, would not arise. The requirement to conduct the
exercise arises only when the application is being entertained
and/or being taken up for consideration by the arbitral
tribunal.

Thus, in the present case, the Supreme Court held that since the
application under Section 9 of the Act had already been entertained
and considered by the Commercial Court, it was not necessary for
the Commercial Court to consider the efficacy of relief under
Section 17 of the Act.

Conclusion

In conclusion, the Supreme Court has confirmed that
prioritisation of the arbitral tribunal over courts can be partial
and limited, when the legislation so provides. Through this
decision, the Apex Court has carefully balanced the arbitral
procedure in the hands of both courts and arbitral tribunals.

Section 9(1) provides for clear stages where parties may
approach a court for interim measures. This may be: (a) before the
commencement of arbitral proceedings, (b) during arbitral
proceedings or (c) at any time after the making of an arbitral
award, but before it is enforced in accordance with Section 36 of
the Act. If the interim relief application has already been
entertained, i.e., the order is reserved or judgement is
pronounced, it would mean that immense time and resources have been
spent on it. Thus, it would not be viable to then send the case for
fresh consideration before the arbitral tribunal. However, where
the interim relief application, although filed, is yet to be
considered by the court and meanwhile, the arbitral tribunal gets
constituted, the courts must not take up the interim relief
application, basis the bar under Section 9(3) of the Act.

Regardless, the Supreme Court held that even if an application
under Section 9 had been entertained before the constitution of the
tribunal, the court retains discretion to direct the parties to
approach the arbitral tribunal. If necessary, while making such
reference, it may pass a limited order of interim protection,
particularly when there has been a long gap between the hearings
such that a party’s application has to practically be heard
afresh, or the hearing has just commenced and is likely to consume
a lot of time.

Footnote

1. Civil Appeal No. 5700 of 2021
(Judgment dated 14 September 2021).

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