Allowed

Regional Manager U.P. State Road Transport Corporation v. M/S Krishna Brothers through Its Proprietor Shri Krishna Jaiswal

Allahabad HC21 Oct 2022ARPL/202/2022

Case brief

AI extract

What is this about?

The High Court allowed an appeal against an order under Section 9 of the Arbitration and Conciliation Act, 1996, holding that the trial court exceeded its jurisdiction by deciding the claim on merits and decreeing the payment. The appeal was allowed, the impugned order set aside, and the appellant directed to pay a specific admission amount and furnish security.

What did the court decide?

Impugned order set aside; Appellant directed to pay Rs. 3,16,363/- and furnish security of Rs. 10 lakhs (other than cash or bank guarantee) within four weeks.

Regional Manager U.P. State Road Transport Corporation Vs M/S… — Arbitration | Allahabad HC (2022)

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AFR

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Court No. - 21

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Case :- APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 202 of 2022

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Appellant :- Regional Manager U.P. State Road Transport Corporation Respondent :- M/S Krishna Brothers Through Its Proprietor Shri Krishna Jaiswal Counsel for Appellant :- Vivek Saran Counsel for Respondent :- Ashish Kumar Dubey,Rajesh Chandra Dwivedi

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Hon'ble Manoj Kumar Gupta,J. Hon'ble Jayant Banerji,J.

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Heard Sri Vivek Saran, learned counsel for the appellant and Sri Rajesh Chandra

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Dwivedi for the respondent. With their consent, the instant appeal is being disposed of finally at this stage itself.

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The instant appeal is directed against the order dated 17.5.2022, passed by Presiding Officer, Commercial Court, Varanasi, in Arbitration Misc. Case No. 4/2022, allowing the application of the respondent, purportedly filed under Section 9 of the Arbitration and Conciliation Act, 1996. The appellant has been directed to pay a sum of Rs. 12,72,783/- to the respondent within one month, along with interest @ 7% per annum, since 24.1.2022, by way of damages. Thereby the application under Section 9 is "decreed with cost".

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The brief facts of the case are that a work order dated 17.12.2018 was issued by the appellant in favour of the respondent for supply of bottles of mineral water. The respondent had deposited Rs. 30,000/- as security money, in terms of the work order. The work order was for limited period, till permanent arrangement in this behalf is made by the Headquarter at Lucknow.

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The case of the respondent is that it had supplied the goods in pursuan ce of the contract, but a sum of Rs. 20,90,744/- was due and payable to it. The appellant

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had declined to pay the same by its letter dated 24.1.2022. The respondent accordingly, approached the Commercial Court by way of an application, praying inter alia for a direction to the appellant to make payment of the remaining sum of Rs. 20,90,744/-, plus interest @ 8% per annum and cost of litigation.

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The application does not specify the provision under which it was filed. However, it seems that it was registered as a miscellaneous case and has been decided, treating it to be an application filed under Section 9 of the Arbitration and Conciliation Act, 1996. The appellant had filed objection to the arbitration application, specifically raising the issue that the rates at which the goods were supplied, were contrary to the rates prescribed by the Headquarter. Consequently, certain deductions were made and that the claim of the respondent for payment of any additional sum is not sustainable. The appellant also mentioned that only a sum of Rs. 3,16,363/- is due and steps were being taken to make payment of the said amount.

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Learned counsel for the appellant submitted that the directions issued by the court below in purported exercise of power under Section 9 of the Act are without jurisdiction. It is urged that the power under Section 9 of the Act, cannot be exercised to allow the entire claim, or to decide the issues on merits. It is also submitted that there is no indication in the application filed by the respondent, nor in the impugned order, that there was any arbitration clause, or any intention on part of the respondent to commence the arbitration proceedings.

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Learned counsel for the respondent fairly stated that he is not in position to

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defend the order.

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Section 9 of the Act relates to interim measures, etc. by Court and reads as follows: -

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9.Interim measures, etc., by Court.— (1)] 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—

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

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

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

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

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

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(d) interim injunction or the appointment of a receiver;

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(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

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to, any proceedings before it.

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(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

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(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.

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The object of the said provision is to invest power in the Court to order interim measures, before or during arbitral proceedings, or at any time after the making of the arbitral award, but before it is enforce d. The interim measure could be in respect of appointment of a guardian for the minor, or a person of unsound mind; for protection, preservation, interim custody or sale of any goods which are subject matter of the arbitration agreement; securing the amount in dispute in the arbitration; the detention, preservation or inspection of any property, etc.; interim injunction or the appointment of a receiver and such other interim measure or protection as may appear to the Court to be just and convenient.

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The Court, while passing the interim measures, has to first examine as to whether there is an arbitral agreement between the parties covering the subject matter of dispute. The interim measure should be of such nature as may preserve the subject matter of the arbitration agreement, or secure the amount, or the property by such measure as may appear to be just and convenient. While exercising power under Section 9, the Court cannot decide the claim on merits,

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or pass an order which has the effect of decreeing the claim of one party or the other. At best, the Court could issue a direction to secure the amount that may prima facie appear to be due or payable to a party and for such purpose, it is vested with power to issue necessary directions. In the instant case, the court below has entered into the merits and has held that the deductions made by the appellant were not permissible under the contract. It has also proceeded to quantify the amount said to be due and payable to the respondent, despite specific plea that only Rs. 3,16,363/- was due and was in process of being paid. This, in our considered opinion, could not have been done.

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The proceeding under Section 9 is not a substitute to the adjudication that has to be made by the arbitral tribunal. While exercising limited power under Section 9, the claim could not be decreed, as has been done in the instant case. We feel that the learned Judge has completely misunderstood the scope of Section 9 and has exceeded its jurisdiction in passing the impugned order.

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Sri Vivek Saran, at this stage, states that payment of Rs. 3,16,363/- which is admittedly due, if not already made, will be made to the appellant within four weeks. He further states that the appellant is ready to furnish security to secure the interest of the respondent.

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In view of the foregoing discussion, the impugned order is hereby set aside, but with direction to the appellant to make payment of Rs. 3,16,363/-, if not already made (as undertaken by counsel for the appellant) and furnish security (other than cash or bank guarantee) in a sum of Rs. 10 lakhs, before the court below, within four weeks from today.

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It is left open to the respondent to initiate arbitral proceedings as per the mandate of Section 9(2) of the Act.

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In the result, the appeal succeeds and is allowed.

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The Registrar General shall call for explanation from the Presiding Officer, in relation to the manner in which the case has been decided and place it before the concerned Administrative Judge for consideration.

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(Jayant Banerji, J.) (Manoj Kumar Gupta, J.)

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Order Date :- 21.10.2022 Jaideep/-

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Digitally signed by JAIDEEP BANERJEE Date: 2022.10.21 17:19:24 IST Reason: Location: High Court of Judicature at Allahabad

Regional Manager U.P. State Road Transport Corporation v. M/S Krishna Brothers through Its Proprietor Shri Krishna Jaiswal

Case brief

What is this about?

What did the court decide?

Regional Manager U.P. State Road Transport Corporation v. M/S Krishna Brothers through Its Proprietor Shri Krishna Jaiswal

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

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