Maintaining the balance of power by allowing interim relief cases to be heard by the court following the establishment of an arbitral tribunal.

1. ArcelorMittal Nippon Steel India Ltd v. Essar Bulk Terminal Ltd
Maintaining the balance of power by allowing interim relief cases to be heard by the court
following the establishment of an arbitral tribunal
Indian courts have developed a
pro-arbitration posture in recent years,
emphasising the importance of minimal
judicial involvement in arbitral proceedings
or decisions. The Supreme Court of India
recently 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 in
ArcelorMittal Nippon Steel India Ltd v
Essar Bulk Terminal Ltd.
The Supreme Court ruled that once an
arbitral tribunal has been established, the
court cannot entertain, consider, or decide
on an application for interim relief under
Section 9 of the (Indian) Arbitration and
Conciliation Act, 1996 (Act), unless the
remedy under Section 17 of the Act has been
rendered ineffective. In certain
circumstances, the court may adjudicate the
Section 9 application if the date of the
Section 9 application before the court
precedes the formation of the arbitral
tribunal. The following article gives a short
overview of the Supreme Court's decision.
Background 一
ArcelorMittal Nippon Steel India Limited
(Appellant) and Essar Bulk Terminal
Limited (Respondent) engaged into a cargo
handling arrangement at Hazira Port
(Agreement). All issues arising out of the
Agreement were to be resolved in line with
the Act's requirements, according to Article
15 of the Agreement. Following that, some
disagreements occurred between the parties,
prompting the parties to activate the
arbitration clause in the Agreement.
Meanwhile, on 15 January 2021 and 16
March 2021, Arcelor and Essar sought
interim relief from the Commercial Court in
Surat, Gujarat, under Section 9 of the Act
(Interim Relief Applications). The Interim
Relief Applications were heard by the
Commercial Court, which adjourned the
case until June 7, 2021. (Order).
While the decision was pending, the Gujarat
High Court established a three-member
arbitral panel to address the parties'
differences. Arcelor then filed an interim
application, requesting that the parties'
Interim Relief Applications be sent to the
newly formed arbitral panel. The
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2. Commercial Court, however, rejected the
stated interim application in a decision dated
July 16, 2021. Arcelor filed a lawsuit in
Gujarat's High Court challenging this. The
High Court, on the other hand, dismissed the
appeal, holding that the Commercial Court
has the authority to examine whether the
remedy under Section 17 of the Act is
ineffective and to make appropriate
directions under Section 9 of the Act.
Arcelor appealed the High Court's decision
to the Supreme Court, which was resolved in
the current case under debate.
Issues 一
The Supreme Court has posed two issues:
1. If so, what is the real meaning and
intent of the word "entertain" in
Section 9(3) of the Act?
2. Whether, once an arbitral tribunal
has been established, the court must
evaluate the efficacy of the remedy
under Section 17 before making an
order under Section 9(1) of the Act?
Because the Supreme Court's ruling
interprets Section 9(3) of the Act, it is
reprinted here for your convenience:
“(3) The Court must not hear an application
under sub-section (1) once the arbitral
tribunal has been established, unless the
Court determines that circumstances exist
that render the remedy afforded under
section 17 ineffective.”
Arguments 一
Due to Section 9(3) of the Act, Arcelor
contended that after the arbitral panel has
been established, the Commercial Court
cannot continue to hear the Interim Relief
Applications. Section 9(3) is a negative
Kompetenz-Kompetenz provision that limits
the court's involvement once the arbitral
tribunal has been established. It was claimed
that the phrase "entertain" as used in Section
9(3) of the Act meant not just admitting for
consideration, but also the whole
adjudication procedure until a decision on
the merits was reached. As a result, Arcelor
contended that, even if the Order was
reserved, the Commercial Court's actions
were inconsistent with Section 9(3) of the
Act, because the Commercial Court was
hearing the Interim Relief Applications
while the arbitral tribunal was still in
operation.
Section 9(3) of the Act would not be used,
according to Essar, because the Interim
Relief Applications were fully heard on the
merits, entertained, and reserved for
decisions on June 7, 2021, prior to the
formation of the Arbitral Tribunal on July 9,
2021. According to Essar, the phrase
"entertain" means "take into account" or
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3. "take into consideration in order to deal
with." It was further contended that Section
9(3) of the Act was neither non-obstante nor
an ouster provision, rendering the courts
coram non judice as soon as the Arbitral
Tribunal was established.
Finally, Essar claimed that the parties had
spent a significant amount of court time,
money, and energy agitating the Interim
Relief Applications, and that relegating the
Interim Relief Applications to the arbitral
tribunal would defeat the purpose of
arbitration.
The Apex Court 一
In response to Issue I the Supreme Court
concluded that the term "entertain" in
Section 9(3) of the Act implies "to examine"
the problems posed by applying one's
intellect. When a case is taken up for
consideration by the court, it is referred to as
a "encounter." The deliberation process
might continue until a decision is reached.
Thus, under Section 9(3), after the arbitral
tribunal has been established and has
custody of the parties' dispute, the court
cannot hear an application under Section 9
of the Act unless the remedy under Section
17 is ineffective.
In this instance, however, the Supreme
Court agreed with Essar that the object of
Section 9(3) cannot be to turn back the clock
and force an arbitral tribunal to reconsider a
subject that has already been reserved for
orders under Section 17 of the Act. As a
result, the Supreme Court emphasised that
the bar of Section 9(3) of the Act would not
apply once an interim relief application had
been received and considered, as in the
current instance, where the hearing had been
completed and judgement had been
reserved.
Concerning Issue (ii), the Supreme Court
concluded that where an application has
already been brought up for consideration
and is in the process of being examined or
has already been considered, the question of
whether or not the remedy under Section 17
is effective does not arise. Only when the
application is being entertained and/or taken
up for consideration by the arbitral tribunal
is it necessary to undertake the exercise.
In the current instance, the Supreme Court
concluded that because the Commercial
Court had already heard and reviewed the
application under Section 9 of the Act, it
was unnecessary for the Commercial Court
to assess the efficacy of relief under Section
17 of the Act.
Conclusion 一
Finally, the Supreme Court has confirmed
that an arbitral tribunal can be given partial
and limited priority over courts where the
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4. legislation permits it. With this judgement,
the Apex Court has delicately balanced the
arbitral procedure in the hands of both
courts and arbitral tribunals.
Section 9(1) establishes distinct phases at
which parties may seek interim relief from
the court. This can happen:
(a) before the start of arbitral proceedings,
(b) during arbitral proceedings, or
(c) at any point after an arbitral award is
made but before it is enforced under Section
36 of the Act.
If the interim relief application has already
been considered, that is, if an order has been
reserved or a judgement has been issued, it
means that a significant amount of time and
resources have been invested in it. As a
result, sending the matter back to the arbitral
tribunal for a new hearing would be
impossible. However, if the interim relief
application has been submitted but has yet to
be reviewed by the court, and an arbitral
tribunal has been established in the
meanwhile, the courts shall not take up the
interim relief case because of the bar
imposed by Section 9 (3) of the Act.
Regardless, the Supreme Court concluded
that even if an application under Section 9
had been entertained before the creation of
the tribunal, the court maintains authority to
instruct the parties to approach the arbitral
tribunal. If required, while making such
reference, it may grant a limited order of
interim protection, particularly when there
has been a considerable interval between the
hearings such that a party’s application
needs to virtually be considered afresh, or
the hearing has just begun and is expected to
take a lot of time
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material is intended for general information purposes only and does not constitute legal advice.
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