Ghanshyam Singh Puri and Another vs District Judge and Another

Narayan Shukla, J.—Heard Mr. N.N. Jaiswal, learned Counsel for the petitioners and Mr. Umesh Chandra, Senior Advocate assisted by Mr. Rakesh Srivastava, learned Counsel for opposite parties.

The petitioners have challenged the orders dated 29th of November, 2008, passed by the District Judge, Raebareli in Civil Misc.(NR) Case No. 20 of 2007: Avatar Spun Pipes v. Ghanshyam Puri etc. in writ petition No. 6236 (MS) of 2008 and order dated 29th of November, 2008, passed in Civil Misc. (NR) Case No. 19 of 2009: Ajeet Singh Puri v. Ghanshyam Singh Puri in writ petition No. 6235 (MS) of 2009 as well as the proceedings itself.

Briefly, the facts of the case are that the opposite party No. 2 moved an application u/s 9 of the Arbitration and Conciliation Act, 1996. The petitioners opposed the application by filing objection, mainly, on the ground that once the Arbitrator has passed the interim order in exercise of power provided u/s 17 of the Act, there is no question to proceed further by the District Judge to pass an order on the application moved u/s 9 of the Act.

The Arbitrator by means of order dated 13th of December, 2008 disposed of the application for interim relief with the following operative order:

In such circumstances the limited order is given directing the claimants to run the factory make use of the cement in stock for production of spun pipes after having prepared the inventories of the goods and material available and supplying a copy thereof to the respondent Ajeet Singh Puri as well as to keep accounts of production of goods out of material alleged to be in the stock and of the money or sums, which are earned by production and sale of those pipes and of expenses. The respondents would be entitled to have look of the account and to examine then if and when necessary

In the light of the aforesaid provisions, he submits that the Tribunal is fully empowered to take any interim measure of protection as it may consider necessary in support of the subject matter of dispute. He further submits that under provisions of Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ''Act''), the same very power has been enshrined in the Civil Court and once the order of the same nature has been passed by the Arbitrator, there is no occasion to pass the same order on the application moved in the different nomenclature i.e. application u/s 9 of the Act. He further submits that the same power is vested with the Arbitrator as well as the court. Section 9 of the Arbitration and Conciliation Act, 1996 is reproduced hereunder:

Interim measures etc. by Court.-A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court-

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely.-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter or the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or appointment of a receiver;

(e) such other interim measure of protection as may appear to the court to be just and convenient, and the court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

In this background he submits that the proceedings initiated through the application moved u/s 9 of the Act, is purely an abuse of the process of the court and the order passed by the District Judge on 29th of November, 2008 rejecting the petitioner''s objection is unsustainable and liable to be set aside. In support of his submission he cited some decisions, which are reproduced hereunder:

(1) Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., Relevant paragraph 18 of the aforesaid judgment is reproduced hereunder:

Under the A&C Act, 1996, unlike the predecessor Act of 1940, the Arbitral Tribunal is empowered by Section 17 of the Act to make orders amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during the existence of the Arbitral Tribunal and its being functional. During that period, the power conferred on the Arbitral Tribunal u/s 17 and the power conferred on the court u/s 9 may overlap to some extent but so far as the period pre- and post- the arbitral proceedings is concerned, the party requiring an interim measure of protection shall have to approach only the court. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order u/s 9, the relationship between the order u/s 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made "before" i.e. in contemplation of arbitral proceedings. The court, approached by a party with an application u/s 9, is justified in asking the party and being told how and when the party approaching the court proposes to commence the arbitral proceedings. Rather, the scheme in which Section 9 is placed obligates the court to do so. The court may also while passing an order u/s 9 put the party on terms and may recall the order if the party commits breach of the terms.

(2) BSES Ltd. (Now Reliance Energy Ltd.) Vs. Fenner India Ltd. and Another, . In the said case during the pendency of the Arbitral proceedings one respondent moved a petition u/s 9 of the Act before the District court. The learned District Judge directed the appellant to maintain status quo. The respondents preferred an appeal before the High Court challenging the order passed by the District Judge. Simultaneously application u/s 17 of the Arbitration Act was also pending before the Arbitral Tribunal. Even the High Court made an interim order. Further the High Court allowed the appeal preferred by the respondents and granted an injunction as prayed for and set aside the order of the learned District Judge. The matter went to the Hon''ble Supreme Court. Hon''ble Supreme Court in paragraph 29 and 30 in its judgment has held as under:

There is no dispute that arbitral proceedings are pending. In fact, we were shown that one of the disputes referred to arbitration is whether the bank guarantees are null and void. Further, one of the substantive prayers in the arbitration made on behalf of the first respondent, is to make an award declaring the four bank guarantees unenforceable, illegal, void and liable to be discharged. Further, there is also a prayer for permanent injunction to restrain the appellants from encashing the bank guarantees. Therefore, since this prayer is already pending before the Arbitral Tribunal, we see no situation of "irretrievable injustice" if, at the present moment, the appellant is allowed to encash the bank guarantees. For justice can always be rendered to the first respondent, if it succeeds before the arbitrators. Nor do we see any special equity in favour of the first respondent, when there is in fact a dispute that performance was prima facie not satisfactory, which enabled the appellant to encash all or any of the four bank guarantees.

The Final findings

In this view of the matter, we see no merit in the stand taken by the first respondent. In our judgment, the Madras High Court erred in interfering with the bank guarantees and in granting injunction as sought for. In the result, the impugned judgment of the High Court is set aside and the judgment of the learned District Judge, Madurai is affirmed, except with regard to the maintenance of status quo directed on the encashment of guarantees. It is made clear that the appellant is entitled to encash the bank guarantees and the second respondent Bank shall be free to honour its guarantees, subject to adjustment in the arbitral proceedings.

Mr. Umesh Chandra, Senior Advocate appearing for the respondents submits that the scope of Section 9 of the Act is wide enough than Section 17 as in Section 9 of the Act, the Court has been enshrined enough power to pass an interim measure of protection, for which the power to pass an order for appointment of receiver is included, therefore, Section 17 does not restrict the court from passing any order. He further submits that if the Civil Court or District Judge passes an order for appointment of receiver, that would not be contrary to the order passed by the Arbitration as still it is open for the petitioners to run the factory under the order of the Arbitrator, but that may be under the supervision and control of the Receiver, so that the property may be protected for ultimate decision of the Arbitrator. He further submits that the purpose of passing interim order by issuing direction to any of the parties is to take interim measure of protection of the subject matter of the dispute. Since under the order of Arbitrator the petitioners have been permitted to run the factory, they may misuse it or may operate for their own cause, which may go to the extent of damaging the factory.

After hearing the learned Counsel for the parties as well going through the provisions of the Act and the decision of the Hon''ble Supreme Court, I do not find anywhere that the power of the District Judge in passing an interim order is prohibited in the case where the Arbitrator has passed the order in exercise of power provided u/s 17 of the Act. Section 9 of the Act, says that a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court for an interim measure of protection in respect, in which the appointment of Receiver is also included. Thus the application u/s 9 of the Act, can be instituted before the court, even during the pendency of the Arbitral proceedings, therefore, I am not inclined to interfere in the proceedings in question pending before the District Judge, Raebareli. However, it is provided that if the opposite party''s application for appointment of a Receiver is allowed and Receiver is appointed, he may exercise supervisory power just to protect the interest of the subject matter of dispute, but that shall not cause any interference in running the factory by the petitioners, under the strength of the order passed by the Arbitrator.

With the aforesaid observations and directions both the writ petitions are disposed of finally.