Delhi High Court: Mere Existence of Power Invested in Court by Section 9 of Arbitration Act Not Sufficient to Entertain Petition

Delhi High Court: Mere Existence of Power Invested in Court by Section 9 of Arbitration Act Not Sufficient to Entertain Petition

The Delhi High Court observed that while Section 9(3) of the Arbitration and Conciliation Act, 1996 (A&C Act) may not be an ouster clause, it still bids the court to consider whether its intervention is warranted notwithstanding the Tribunal having been constituted and being in seisin of the entire dispute. The mere existence of the power invested in a court by Section 9 would thus not be sufficient to justify a petition under the said provision being entertained.

The factual matrix of the case was that the dispute between the heirs and descendants of the Late Hakeem Hafiz Abdul Majeed Sahib, relating to the segregation of Hamdard Institute of Medical Sciences and Research (HIMSR) from the Jamia Hamdard (deemed University), was referred to arbitration.

The petitioners prayed for an interim injunction restraining Jamia Hamdard Society (respondent no. 5) from registering the amended and ratified Memorandum of Association of Jamia Hamdard (respondent no. 4), contending that the same was illegally amended to change the legal status of HIMSR from a constituent institution to a school.

According to the petitioners- Asad Mueed and another, the respondents- Hammad Ahmed and others, were acting in breach of the prescriptions relating to HIMSR, as contained in the Family Settlement Deeds executed between the parties.

The petitioner's contended that since the 5th respondent, Jamia Hamdard Society, as well as the 4th respondent, Jamia Hamdard, do not stand arrayed as parties before the Arbitral Tribunal, the petitioners have no other efficacious remedy and are compelled to invoke the Court's jurisdiction under Section 9.

Per Contra, the respondents submitted that the present petition clearly amounts to an abuse of the process of Court since undisputedly all aspects arising out of or relating to the resolution of 05 December 2022, have been duly taken cognizance of and are pending consideration of the Arbitral Tribunal. It was submitted that the petitioners cannot be permitted to agitate identical issues before two forums. According to the respondents, the issue of whether that resolution amounts to a violation of an injunction or a restraint granted is directly engaging the attention of the Arbitral Tribunal and there was thus no justification for the petitioners having invoked the jurisdiction of the Court yet again seeking similar restraints against the Registrar.

It was lastly submitted that while Section 9(3) may not divest this Court from invoking its powers under Section 9 notwithstanding an Arbitral Tribunal having been duly constituted, that power is liable to be invoked only upon the Court finding that the Section 17 remedy was inefficacious.

The single judge Justice Yashwant Varma at the very outset clarified that the amended Section 17 is an embodiment of the legislative intent to arm the Tribunal with powers similar and akin to those conferred upon a court. The provision as it now stands thus enables the Tribunal to frame injunctions and orders of protection in terms identical to those conferred upon a court exercising powers under Section 9.

The Court observed, "Section 9 empowers a court to grant an injunction before, during or even after arbitral proceedings have come to an end or stand terminated. However, Section 9(3) bids courts to exercise restraint and caution in this regard and to step in only in situations where it finds that the Section 17 remedy is inefficacious."

The judge opined that While Section 9(3) may not be an ouster clause, it still bids the court to consider whether its intervention is warranted notwithstanding the Tribunal having been constituted and being in seisin of the entire dispute. The mere existence of the power invested in a court by Section 9 would thus not be sufficient to justify a petition under the said provision being entertained.

The judge further emphasized that the Court would also have to be convinced that its emergent intervention is warranted since the remedy provided by Section 17 would not be efficacious.

"Where such questions are raised, the Court would have to come to the definitive conclusion that the Tribunal would not be an effective remedy and that it would be unjust to relegate parties to follow that route. There would have to be compelling reasons which may persuade a court to arrive at the conclusion that the Tribunal would be unable to either grant effective and emergent relief or for various other reasons it would constitute an inefficacious forum for the purposes of the prayers that may be made," stated the Court.

The Court was of the view that petitioners in the facts of the instant case had woefully failed to meet that test. The Court asserted that, "the argument of an injunction not being liable to be granted against a person who is not a party to the arbitral proceedings also fails to move this Court since the facts of the present case would establish that the restraint in any case operates upon parties from taking steps which may amount to a change of status of HIMSR. This would clearly operate upon parties before the Tribunal. In any case, it would be premature for this Court to return or record any finding with respect to the alleged violation of the injunction which operates since the Tribunal is presently considering the very same issue."

The Court had noted that the Tribunal was presently dealing with the issue whether a representation under Section 27(5) is liable to be made.

It observed that in any case, a Tribunal, by virtue of the powers conferred upon it under the Act would, have the requisite authority and jurisdiction to formulate such interim measures as may be warranted to preserve and protect the subject matter and corpus of the arbitration.

The Court discerned that the perception of the petitioners that the Tribunal does not stand vested with the authority and the power to preserve and protect the subject matter of the arbitration or for such injunctions not obliging third parties to take those restraints into consideration, was clearly misconceived. This more so in light of Section 17(2) which now ordains that the order of the Tribunal is comparable to and commensurate with that of a court and is enforceable under the Code in like manner.

While dismissing the Section 9 petition, the Court ruled that the same shall not preclude the petitioners from pursuing their applications under Section 17, as pending before the Arbitral Tribunal.