Litigation Arbitration



September 17, 2021
Bar under Section 9(3) of the Arbitration Act is not applicable when the application under Section 9 is taken up by the Court before the constitution of arbitral tribunal: Supreme Court
Arcelor Mittal Nippon Steel India Limited (“AMNSIL”) and Essar Bulk Terminal Limited (“EBTL”) had filed the applications (“interim proceedings”) before the Commercial Court in Surat under Section 9 of the Arbitration and Conciliation Act, 1996 (“the arbitration act”) seeking various interim reliefs pending the constitution and hearing of dispute by the arbitral tribunal. Post the completion of hearing, the court therein reserved the orders in the respective applications.

Whilst the orders were reserved, the Arbitral Tribunal was constituted by Gujarat High Court. Pursuant to which, AMNSIL filed an application before the Surat’s Commercial Court seeking transfer of pending interim proceedings before the Arbitral Tribunal. The said application was filed on the premise that sub-Section (3) of Section 9 of the arbitration act mandates that once an Arbitral Tribunal has been constituted, the Court shall not entertain any interim application, unless the Court finds that circumstances exist which may not render, the remedy provided under Section 17 efficacious.

The Commercial Court dismissed the transfer application filed by AMNSIL and therefore, an application under Article 227 was filed before the Gujarat High Court challenging the order of Commercial Court. the High Court dismissed the application filed by the AMSIL under Article 227 of the Constitution of India, holding that the Commercial Court has the power to consider whether the remedy under Section 17 of the Arbitration Act is inefficacious and pass necessary orders under Section 9 of the Arbitration Act.

AMNSIL assailed the order of Gujarat High Court by way of appeal before the Supreme Court of India. In the said appeal, the Court confronted with a question of law on power to entertain an application under Section 9(1) of the Arbitration Act, once an Arbitral Tribunal has been constituted and if so, what is the true meaning and purport of the expression “entertain” in Section 9(3) of the Arbitration Act. The next question was whether the Court is obliged to examine the efficacy of the remedy under Section 17, before passing an order under Section 9(1) of the Arbitration Act once an Arbitral Tribunal is constituted.

The Supreme Court of India rejected the appeal of AMNSIL with the observation that the bar of Section 9(3) operates where the application under Section 9(1) had not been entertained till the constitution of the Arbitral Tribunal and even if an application under Section 9 had been entertained before the constitution of the Tribunal, the Court always has the discretion to direct the parties to approach the Arbitral Tribunal, if necessary by passing a limited order of interim protection, particularly when there has been a long time gap between hearings and the application has for all practical purposes, to be heard afresh, or the hearing has just commenced and is likely to consume a lot of time. The Court also noted that when an application has already been taken up for consideration and is in the process of consideration or has already been considered, the question of examining whether remedy under Section 17 is efficacious or not would not arise.

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Can plea of Res Judicata be decided as a preliminary issue? Supreme Court answered
The Supreme Court of India in the case of The Jamia Masjid versus KV Rudrappa, Civil Appeal No. 10946 clarified that the plea of res judicata may in an appropriate case be determined as a preliminary issue when neither a disputed question of fact nor a mixed question of law or fact has to be adjudicated for resolving it. In certain cases, particularly when a mixed question of law or fact is raised, the issue should await a full fledged a trial after evidence is adduced.

The three judges’ bench of Dr. Chandrachud, Vikram Nath and Hima Kohli while answering the present question of law observed that:

Issues that arise in a subsequent suit may either be questions of fact or of law or mixed questions of law and fact. An alteration in the circumstances after the decision in the first suit, will require a trial for the determination of the plea of res judicata if there arises a new fact which has to be proved. However, the plea of res judicata may in an appropriate case be determined as a preliminary issue when neither a disputed question of fact nor a mixed question of law or fact has to be adjudicated for resolving it.”

In the said judgement, the Court also reiterated the twin test for the identification of whether an issue has been conclusively decided in the previous suit which are:

  1. The necessity test: Whether the adjudication of the issue was “necessary” for deciding on the principle issues.
  2. The essentiality test: Whether the judgement in the suit is based upon the decision on that issue.
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Moratorium under Section 14 of IBC applies only to corporate debtor, not promoters: SC
In the recent case of Anjali Rathi and Ors. v. Today Homes & Infrastructure Pvt. Ltd. and Ors, the Supreme Court ruled that moratorium declared under Section 14 of the Insolvency and Bankruptcy Code (IBC), wherein the initiation of any fresh proceedings or discontinuance of existing ones is restrained, applies only to the corporate debtor and does not protect the promoters of the stressed company.

In the present case, a group of Homebuyers were aggrieved when a project was abandoned by the developer. As a result, several rounds of litigation ensued amongst the parties, including insolvency proceedings initiated by an operational creditor under Section 9 against the respondent. The National Company Law Tribunal (NCLT) admitted the petition, following which the Corporate Insolvency Resolution Process (CIRP) was initiated and a moratorium was declared under Section 14 of the IBC. The Resolution Plan which has been submitted by the consortium of home buyers stands approved by the CoC and the proceedings are now pending before the Adjudicating Authority, awaiting its approval under Section 31(1) of the under the IBC. The petitioners urged that the Hon’ble Supreme Court should direct that the personal properties of the promoters be attached given the provisions contained in the resolution plan. Hence, the present matter.

The Hon’ble Supreme Court clarified the right of the petitioners to move against the promoters of the first respondent Corporate Debtor, even though a moratorium has been declared under Section 14 of the IBC. They placed reliance to the judgment in P. Mohanraj v. Shah Bros. Ispat (Pvt.) Ltd wherein a three judge Bench of this Court held that the proceedings under Section 138 and 141 of the Negotiable Instruments Act 1881 against the Corporate Debtor would be covered by the moratorium provision under Section 14 of the IBC. However, it clarified that the moratorium was only in relation to the Corporate Debtor and not in respect of the directors/management of the Corporate Debtor, against whom proceedings could continue. Subsequently the court held “It is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.”

However, the Court could not issue any direction relying on the resolution plan, given that it is still pending before the NCLT.

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SC rules: Concurrent life imprisonment is not a subject matter in an appeal before SC
The Hon’ble Supreme Court, in the case of Mahavir v the State of Madhya Pradesh & Ors observed that there is no bar in imposing concurrent life imprisonments on accused convicted for murder of more than one persons,

In the present writ petition, the petitioner had invoked the writ jurisdiction of this Court claiming his release for the reason that he has undergone more than 21 years of sentence including 16 years of actual sentence. He was convicted along with other accused for an offence under Section 302 read with Section 149 of the Indian Penal Code (IPC) for causing murder of two persons

The petitioner’s claim was based on a remission policy wherein sub clause (2) of clause (1) stated that Prisoners sentenced to imprisonment for life after 18th December, 1978 who have undergone 14 years of sentence inclusive of undertrial periods and completed 20 years of sentence including remission on 26th January, 2006, be released unconditionally.” However, in the present case, the petitioner has not completed 20 years of sentence including the remission on 26.01.2006. The court stated that the remission policy applicable had a clause (5) which provided that life convicts who have been sentenced for one or more life imprisonment besides the life imprisonment and who have undergone 20 years’ sentence including the trial period, they will be released after completion of 26 years of sentence including the remission.

It added that in terms of the policy of sentencing, there cannot be consecutive life imprisonment one after the another but the fact remains that for each of the death of the victim, the petitioner had been convicted for an offence under Section 302 of the IPC. Therefore, it would be Clause (5) which will be applicable to consider the premature release case of the petitioner as he has been sentenced for more than one life imprisonment for causing death of two persons. The Competent Authority had therefore rightly declined the case of remission on relying upon Clause (5). It is not a case of imposition of life imprisonment consecutively. It is a case of imposition of concurrent life imprisonment.

Such sentence of imprisonment is not the subject matter in an appeal before the Competent Court.

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