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TMI Blog2004 (3) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... orm acceptable to the petitioner which could be enforced for recovering the aforesaid amount pending disposal of the arbitral proceedings and also an order of interim injunction restraining the said company from removing any records, papers and documents from the petitioner's factory premises situated in Mettur Dam, Salem District, Tamil Nadu, pending disposal of the arbitral proceedings. 3. For convenience, we shall refer the parties as referred to before the District Court. The case of the petitioner is as follows : The petitioner, Madras Aluminium Company Limited carries on business in the manufacture and sale of aluminium rods and ingots at its plant in Mettur. In 1998 in view of steep competition, the petitioner intended to moderniseits plant. The respondent who is based in Italy, promised to bring about an over all improvement in the performance of the petitioner's plant, including increase in out-put and favourable environmental impact. On inspecting the petitioner's plant, the respondent submitted a proposal. The said proposal was accepted by the petitioner. An Agreement was entered into between the petitioner and the respondent on 16-2-1999. Thereafter, on 8-6-2000 an Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated under the arbitration agreement set out in the agreement between the parties. Both parties have already appointed their respective arbitrators. The petitioner has not taken any steps at all to make its claim/counter claim in the arbitral proceedings that have commenced. The respondent is entitled to reliefs and security, as also for injunction. The petitioner by its letter dated 13-6-2003, applied that the time limit for filing its answer/reply be extended for two months, i.e., till 20th August, 2003. The ICC Secretariat had by its letter dated 18-6-2003, granted a preliminary extension of time till 21st July, 2003. Again the petitioner has sought for further time until 20th August, 2003. Finally, the ICC by its letter dated 2-7-2003, granted time until 14-8-2003 to file its answer/reply. The petitioner is trying to protract the proceedings and delay the matter. There is no provision in the Act to file a petition in the nature of the above petition filed by the petitioner. After wrongly invoking the bank guarantees furnished by the respondent and obtaining Rs. 3,10,20,000, the petitioner is not entitled to make a prayer again before this Court seeking direction to direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extends, subject to the rules contained in the Code of Civil Procedure, to all original suits and proceedings of a civil nature. Accordingly, as rightly claimed, inasmuch as the petition under section 9 having been filed on 12-3-1993 i.e., prior to Act 1/2004, the proper Court is either the District Court or the Subordinate Judge's Court concerned. However, as per section 15 of the Code of Civil Procedure, suit shall be instituted in the Court of the lowest grade competent to try it. Accordingly, at the relevant time, Subordinate Judge's Court is the competent Court to try the petition filed under section 9 of the Act. As per section 19 of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal shall not bound by the Civil Procedure Code, 1908 or the Indian Evidence Act, 1872. The said provision cannot come into operation when a petition under section 9 is filed before the competent Civil Court. These aspects were not at all considered by the learned District Judge. We sustain the objection raised regarding jurisdiction and hold that the Additional District Judge, Salem who passed the impugned order was not having jurisdiction on the date on which the petition was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1940, the Court could grant the interim order while there was some proceeding or during the pendency of the suit and while that was not so, there could not be the maintenance of the application under section 41. As far as the present Act of 1996 is concerned, the court under section 9 shall have as regards the interim measures the same powers for making orders on it as it has for the purpose of and in relation to any proceeding before it. In order to get an interim injunction, the principle is that existence of a prima facie case must be shown that no grant of injunction must result in irreparable injury to the party seeking relief. Therefore, the burden is on the petitioner by evidence or by affidavit or otherwise that there is "a prima facie case" in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction. The Court has to satisfy that non-interference by the Court would result in "irreparable injury" to the party seeking relief and that there is no other remedy available to the party except one to grant injunction or direct to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n power to exercise discretion it has to be used for public good. When it is found that no right thinking or conscientious person would have exercised the discretion in the manner it was exercised, the action will have to be quashed. The power is to use the discretion and not abuse it. The authority granted discretion has to exercise power in a fiduciary capacity. As said earlier, section 9 of the Act deals with interim measures. 10. In the light of the above back ground, let us consider various decisions cited on either side with reference to "prima facie case" an ingredients to be followed while granting interim order under section 9 of the Act. Mr. A.L. Somayaji, learned senior counsel for the petitioner, at the foremost relied on a decision of the Bombay High Court in Newage Fincorp (India) Ltd. v. Asia Corp. Securities Ltd. 2000 (3) Arbitration Law Reporter 687. While considering the prayer for grant of interim measure under section 9 of the Act, the Bombay High Court has enunciated the following principles : "31. The principles of granting interim reliefs can very well be applied while considering the prayer for grant of interim measures under section 9 of the Act. The disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, I am of the opinion that a building contract of the instant nature cannot be specifically enforced by granting interim relief under section 9 of the Act. If there is a breach of such a con tract, the appropriate remedy is to compensate the party damnified in damages. That apart, the granting of an injunction in favour of the petitioner will further delay the construction work considered very urgent by the respondent No. 3. Thus, the balance of convenience also swings against the grant of injunction sought by the petitioner." (p. 119) 13. In Olex Focas Pty Ltd. v. Skodaexport Co. Ltd. AIR 2000 Delhi 161, the following observation/conclusion is relevant : "67. The question which now arises for consideration is whether the petitioner is entitled to get the relief on the strength of the facts and circumstances of this case? In my view, though the Court is vested with the powers to grant interim relief, but the Court's discretion must be exercised sparingly and only in appropriate cases. The Courts should be extremely cautious in granting interim relief in cases of this nature. The Court's discretion ought to be exercised in these exceptional cases when there is adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to pass order to secure the petitioner before it. The discretion to be exercised would be based as set out earlier on the material before it and the petitioner making out a case that there is need for an interim measure of protection..." 15. In J&K State Forest Corpn. v. Abdul Karim Wani AIR 1989 SC 1498, while considering relevant provisions in the Jammu and Kashmir Arbitration Act, 2002, the Supreme Court has held that "the interim direction can be issued only for the purpose of arbitration proceedings and not to frustrate the same." 16. Mr. C.A. Sundaram, learned senior counsel for MALCO, has pressed into service the following conclusion reached in the case of Ganesh Benzoplast Ltd. v. Sundaram Finance Ltd. 2002 (2) CTC 238 (paras 10, 11, 16, 18 and 19): "10. Coming to the obligation of the applicant/first respondent herein to satisfy the requirement as contemplated under order 38, Rule 5, C.P.C. is concerned at the outset, we have to point out that all the judgments cited by the learned senior counsel deals with the application filed either under Order 38 Rule 5 C.P.C. or under section 18 of the Arbitration Act, 1940. If we look at the provision of section 18 of the Arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings commence on the date on which a request for a dispute to be referred to arbitration is received by the respondent. It is in this context that we have to examine an interpret the expression 'before or during arbitral proceedings' occurring in section 9 of the 1996 Act. We may here observe that though section 17 gives the arbitral tribunal the power to pass orders the same cannot be enforced as orders of a Court. It is for this reason that section 9 admittedly gives the Court power to pass interim orders during the arbitration proceedings. ****** 17. In our opinion this view correctly represents the position in law, namely, that even before the commencement of arbitral proceedings the Court can grant interim relief. The said provision contains the same principle which underlies section 9 of the 1996 Act. ****** 20. ...If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under section 9 giving such interim protection as the facts and circumstances warrant. While passing su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion." 20. It is true that in Ganesh Benzoplast Ltd.'s case (supra), the Division Bench has observed that section 9 would make it clear that it is neither similar to Order 38 Rule 5 nor section 18 of the Arbitration Act, 1940. However, it is to be noted that while considering the application for interim measure filed by any one of the parties, the Court having jurisdiction shall have the same power for making orders as it has for the purpose of and in relation to any proceedings before it. This is clear from section 9 of the 1996 Act. It is also clear that a party to arbitration agreement can approach the Court for interim relief not only during the arbitral proceedings, but even before the arbitral proceedings. This is clear from the decision of the Supreme Court in Sundaram Finance Ltd.'s case (supra) as well as in Bhatia International's case (supra). It is further clear that normally the appellate court will not interfere with the exercise of discretion of the Court of first instance and substitute its own discretio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent to the petitioner, for which they relied on the letter dated 29-1-2003. They also contended that in any event, the petitioner's alleged claim is the very issue in dispute both on facts and law and the same as also the quantum if any, thereof is to be ascertained only if and when the petitioner succeeds before the Arbitral Tribunal on merits. 22. No oral evidence was let in by both parties before the District Court. However, the petitioner has filed 17 documents-Exs. A-1 to A-17 and the respondent has filed 6 documents-Exs. B-1 to B-6 to support their respective contentions. It is seen from the impugned order that the petitioner has very much relied on Ex. A-10 which is the expenses list prepared by a Chartered Accountant and it refers that the petitioner has incurred Rs. 27,28,89,898 by way of purchase of equipments etc. It is also seen that the counsel for the respondent objected to rely on Ex. A-10 by saying that it is only a self serving document. Though the learned District Judge has observed that there is no specific denial with regard to the expenses, as seen from Ex. A-10, the perusal of the entire counter would go to show that the respondent is disputing the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Arbitral Tribunal an, as rightly argued by Mr. A.L. Somayaji, learned senior counsel for the petitioner/Appellant, the question of interim measure would have been more appropriate for the Arbitral Tribunal to consider, as provided under section 17 of the Act rather than the Court under section 9 of the Act. As observed earlier the party coming to the Court must show that if it is not secured, the award which it may obtain would result in a paper decree or a decree which cannot be enforced on account of acts of a party pending arbitral process. These aspects have not been substantiated by placing acceptable material for an order under section 9 of the Act. Though the Court is vested with powers to grant interim relief, but the Court's discretion must be exercised sparingly and only in appropriate cases. The Court's discretion ought to be exercised in exceptional cases when there is adequate material on record, leading to a definite conclusion that the respondent is likely to render the entire arbitral proceedings infructuous by disposing of the properties or funds either before or during the pendency of the arbitral proceedings. We are also satisfied that in view of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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