Allahabad High Court has announced a very analytical and detailed judgement in the case of M/s Rohtas Projects Limited and others Vs. M/s Decathlon Sports India Private Ltd. where in the Petitioner has filed petition under Article 227 of the constitution of India, challenging the validity of an order dated 15.07.2022 passed by the sole arbitrator in the arbitration proceeding invoked by the Petitioner against Respondents. The Arbitrator vide his above referred order allowed the application filed under section 16(2) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) and dropped the Arbitration proceeding for the want of jurisdiction. 

Facts of the case:

Facts of the case is as follows

• The Insolvency and Bankruptcy code, 2016 – Section 14 – Stay of proceeding during Period of Moratorium:

Petitioner submitted that the Respondent in his application under section 16(2) of the Arbitration Act has prayed stay of the proceedings, as per moratorium imposed on the institution of any proceedings as per Section 14 of the IBC. However, the learned Arbitral Tribunal has committed an error in dropping the proceedings, instead of staying the same till lifting of the moratorium. Further, moratorium has already seized to be in force with effect from 13.12.2021 i.e. prior to passing of the order dated 15.07.2022. Thus the learned Arbitrator was not justified in dropping the proceedings on the ground of moratorium.

• Transfer of Property Act, Section 109

Petitioner submission was as follows

Supreme Court has observed that “ a transferee of the landlord’s rights steps into the shoes of the landlord with all the rights and of the transferor landlord in respect of the subsisting tenancy”[1]. It was submitted that this Section does not require that the transfer of the right of the landlord can take effect only if the tenant attorns to him and attornment is not necessary to confer validity to the transfer of the landlord’s rights.

Rebuttal by Respondent’s Counsel

Lease deed dated 07.04.2017 executed by M/s Rohtas Projects Limited in favour of the respondent no. 1 mentions that the “Lessor” which expression means and includes its successors and permitted assigns. Since the lessor transferred the rights without permission of lessee, the lessee was entitled to hold the monthly rentals of the lessor till execution of proper legal documents. Further, Respondent has already deposited the claimed arrears of rent and other amounts claimed in this regard with NCLT and vacated the premises and these contentions are not disputed by Petitioner.

In this connection the Court also viewed that the proceedings under the IBC have been initiated against the lessor M/s Rohtas Projects Limited. A Resolution Professional has already been appointed by the NCLT, New Delhi. The respondents have deposited the entire arrears of rent and damages etc. in the National Company Law Tribunal and they have already vacated the premises in dispute.

 Hon’ble Court’s observation in respect of section 109

Section 109 provides that if the lessor transfers the property leased, in the absence of a contract to the contrary, the transferee shall possess all the rights of the lessor and, if the lessee so elects, the transferee shall be subject to the liabilities of the lessor as to the property or part transferred. However, in the instant case Clause 19 of the lease deed prohibits transfer of any part of the leased property without prior permission of the lessee. In these circumstances, the rights of the lessor shall not stand transferred to the petitioners by virtue of Section 109 of the Transfer of Property Act. Further, Section 109 makes the transferees subject to all the liabilities of the lessor as to the property transferred, at the option of the lessee. Here the lessee has not exercised this option and in fact lessee has objected to the transfer made in favour of the petitioners in violation of the conditions contained in the lease deed.

Further, the Hon’ble Court also observed that the decision in Ambica Prasad (supra) will not apply to the facts of the present case as the words “in the absence of a contract to the contrary” and “if the lessee so elects”, occurring in Section 109 of the Transfer of Property Act was neither considered nor decided in this judgment. It is settled law that while interpreting a provision of any Statute, any word used by the Legislature cannot be ignored. It is also a settled law that a judgment is an authority for what it actually decides.

• Arbitration and Conciliation ACT, 1996
• Section 7 –Arbitration Agreement

The existence of an arbitration agreement between the parties is the prerequisite for initiating arbitration proceedings. It is observed by the Hon’ble court that the Arbitration clause contained in Clause 23 of the lease deed dated 07.04.2017 has been executed by M/s Rohtas Projects Limited in favour of M/s Decathlon Sports India Private Ltd. (respondent no. 1). However, there is no arbitration agreement between petitioners and respondents.

•  Section 11 –Appointment of arbitrators

The learned Counsel of petitioner had placed reliance on Mayavati Trading (P) Ltd. versus Pradyuat Deb Burman[2], Duro Felguera, S.A. versus Gangavaram Port Ltd.,[3] Vidya Drolia and Others Vs. Navrang Studios[4], wherein the Hon’ble Supreme Court observed that the scope of judicial intervention, as per under Section 11(6-A) is confined to examination of the existence of Arbitral Agreement and is to be understood in the narrow sense. if the validity of the Arbitration agreement cannot be determined on a prima facie. The Rule for the Court is “when in doubt, do refer”.

The Hon’ble Allahabad High Court also stated that as per the Hon’ble Supreme Court the Court has to appoint an arbitrator even if there is a doubt

regarding existence of an arbitration agreement. Thus the appointment of an arbitrator does not require a conclusive finding by the Court that there is an arbitration agreement between the parties.

• Section 16- Competence of arbitral tribunal to rule on its jurisdiction

The Petitioner’s Counsel relied on the decision of Delhi High Court in Surender Kumar Singhal v. Kumar Bhalotia[5] in which court outlined the well settled principles in respect of the scope of interference under Article 226/227 in cases of challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act. The Court stated that “Following the principle of kompetenze-kompetenze, an Arbitral Tribunal has the power to rule on its own jurisdiction. However, Section 16(5) requires that the Tribunal ought to decide the plea. The reference was also made to ONGC Ltd. v. Discovery Enterprises (P) Ltd.[6]

In view of above the Court in the instant case observed that the transfer of property made by M/s Rohtas Projects Ltd. in favour of Petitioners are

in violation of the terms and conditions of lease deed executed by M/s Rohtas Projects Limited in favour of the respondent no. 1 and, therefore, none of the obligations contained in the lease deed dated 07.04.2017 by M/s Rohtas Projects Limited stood transferred to the petitioners, including the right to initiate the arbitration proceeding under Clause 23 of the lease deed. Therefore, there is no arbitration agreement between the petitioners and the respondent no. 1.

In view of the above Court decided not to interfere in the order dated 15.07.2022 passed by the sole Arbitrator dropping the arbitration proceedings for want of jurisdiction, although for different reasons.

[1] Hon’ble Supreme Court in the case of Ambica Prasad Vs. Alam and others: (2015) 13 SCC 13

[2] Mayavati Trading (P) Ltd. versus Pradyuat Deb Burman^[2] (2019) 8 SCC 714

[3] Duro Felguera, S.A. versus Gangavaram Port Ltd., (2017) 9 SCC 729

[4] Vidya Drolia and Others Vs. Navrang Studios: (1981) 1 SCC 523

[5] Surender Kumar Singhal v. Arun Kumar Bhalotia, 2021 SCC OnLine Del 3708

[6] ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8 SCC 42,

AUTHOR: KESHVANI BEN

The case filed u/s 138 of the N. I. Act has become most popular means amongst the finance companies, private traders, public limited company, private limited company, merchants etc. However, the only hitch which comes in the way of the public at large is high pendency of the cases filed u/s 138 of the N.I. Act. Because of high pendency of the cases, it takes very long time to get the result and, therefore both, Supreme Court and the Govt. of India have become very vigilant on the issue of long pendency of the cases and they are taking proper actions, from time to time, with the issue of long pendency of

the cases.

❖RECENT AMENDMENT IN THE N. I. ACT

The N. I. Act has been amended from time to time, to ensure trust of the people in the entire system. The latest amendment is provided by “The Negotiable Instruments (Amendment) Act, 2018” wherein several new amendments are brought into implementation. All these amendments are brought in with a view to avoid undue delay in adjudication of the matter and to bring efficacy and efficiency in the cases related to dishonor of the cheques. Two important amendments to the N. I. Act are: Section 143 (a) and Section 148. These Sections empower the Hon’ble Courts to make the Drawer of the cheques to pay interim compensation to the Complainant during the pendency of the complaint and also at the time of filing of the appeal against the judgment delivered in the cases of dishonor of the cheques.

❖SECTION 143 (A) – POWER OF THE COURT TO

DIRECT INTERIM COMPENSATION

Because of insertion of Section 143 (a) in the N. I. Act, now the Courts are empowered to direct the Drawer of the cheque to pay interim compensation to the Complainant on two occasions.

(a) In a summary trial or summons case, where the drawer is found not

guilty to the accusation made in the complaint, and

(b)In any other case, upon framing charges.

The main intention behind this provision is to provide great help to the Complainant during the pendency of the matter. It is important to mention that the quantum of such interim compensation can be maximum up to 20 % of the amount of the cheque. The law is also further simplified. The interim compensation shall be paid within 60 days from the date of the order under sub section (1), or within such further period not exceeding 30 days as may be directed by the court on sufficient cause being shown by the drawer of the cheque. Thus, upper time limit for payment of interim compensation is also

fixed by the Legislature.

If the accused is found guilty u/s 138 of the N. I. Act, the amount of interim compensation would be deductible from the final compensation payable to the Complainant and if the Drawer of the cheque is acquitted, the Court shall order the Complainant to return the amount of interim compensation to the Drawer with interest at the bank rate as published by the R.B.I, within the time limit of 60 days from the date of the order , or within such further period not exceeding 30 days as may be directed by the court on sufficient cause

being shown by the complainant.

❖IMPORTANT RESERCH

● WHETHER SECTION 143(A) CAN BE IMPLEMENTED RETROSPECTIVELY?

Many a times, the question arises whether the Section 143 (a) can be implemented with retrospective effect or not. The Hon’ble Supreme Court gives answer of this question in the matter of G. J. Raja v/s Tejraj Surana, reported at 2019 SCC online SC 989. It was held in this case that Section 143

(a) has two dimensions. Firstly, the Section creates a liability in as much as, Drawer of the cheque can be directed to pay up to 20 % of the cheque amount to the Complainant. Secondly, it is observed that the said Section makes available machinery for the recovery as if the interim compensation were the arrears of the land revenue. Thus, it is clear that recovery of the interim compensation can also be made through the machinery of the State as if was

arrears of the land revenue.

Further, the Supreme Court very clearly clarifies that the Section 143 (a) of N. I. Act must be held to be prospective in the nature and confined to the cases where offences were committed after the introduction of the Section 143

(a) and not before that.

❖SECTION 148

Power of the appellate court to order payment pending appeal against the

conviction.

Section 148 has been introduced in the N. I. Act for the cases where the appeal has been filed against the conviction of the Drawer. It empowers the Appellate Court to direct the appellant to deposit such amount which shall be minimum of 20 % of the fine or compensation awarded by the Trial Court. Very significantly, the same is to be treated as an addition to the payment of

interim compensation u/s 143 (a) of the N. I. Act.

This provision is again very encouraging step and would give boost to the Complainant even if the appeal is preferred. Such provision would discourage the Drawer of the cheque from benefiting from long period taken for the

adjudication of the matter.

If the appellate court acquits the Drawer of the cheque, the court shall direct the Complainant to refund the amount  to the appellant with interest.

❖WHETHER SECTION 148 IS PROSPECTIVE OR RETROSPECTIVE?

While dealing with G. J. Raja’s case, the Hon’ble Supreme Court clarified that the Section 148 is retrospective in the nature despite of the fact that both the

Sections i.e. Sections 143 (a) and 148 were introduced by the Amendment Act 20 of 2018, from 01-09-2018 & there is no provision in section 148 of the Act

which is similar to sub section (5) of the section 143 A of the Act.

However , as a matter of fact no such Provision akin to sub section (5) of section 143 A was required as section 421 & 357 of the code, which apply post-conviction, are adequate to take care of such requirements. In that sense said Section 148 depends upon the existing machinery and principles already in existence and does not create any fresh disability of the nature similar to that created by Section 143A of the Act. Therefore, the decision of this Court in Surinder Singh Deswal5 stands on a different footing.

❖ANALYSIS OF THE AMENDED LAW

The Hon’ble Apex Court while analyzing the amendment brought by Section

143 (A) and 148 of N. I. Act delivered landmark judgment in Criminal Appeal No. 1160/2019 in the matter of G. J. Raja V/s Tejpal Surana and analyzed very minutely the amendments brought in the N. I. Act. This judgment deals with all the aspects pertaining to the amendments brought in the N. I. Act. After detailed analysis, the Hon’ble Supreme Court very clearly held that provisions contained in the Section 143 (A) will have prospective effect while Section 148 will have retrospective effect. This is the sum and substance of the aforesaid judgment for the common people and it has

removed all the doubts regarding “retrospectivity of the legislation”.

❖CITATION

The Following Judgments are very Important and throw light on the

details of the Amendment brought forth in N.I Act.

1. G. J. Raja v/s Tejraj Surana, reported at 2019 SCC online SC 989.
2. Sh. Shyam Lal v/s Sh. Diwan Chand and another reported at 2019

Lawsuit (HP) 1084.

• Hitendra Vishnu Thakur v/s. State of Maharashtra reported at 1994 SCC (4) 602
• Anil kumar Goel v/s. Kishan chand kaura reported at 2007 Lawsuit (SC) 1334.

❖CONCLUSION

Both the Amendments in the N. I. Act are great efforts aimed at strengthening conviction and expediting of the cases. It will discourage unnecessary and frivolous litigation. It protects the interest of the Complainant by providing interim compensation. Such amendment is a positive step which enhances the credibility of the cheques and would encourage trade and commerce.

AUTHOR: S B KESHVANI

CO.AUTHOR: KINJAL DAVE

Issues Cropped up during Hearing on Arbitration matter

The law that was deliberated was the one laid down under Section 9 and Section 17 of the Arbitration and Conciliation Act, 1996 (The Act). 

Two fundamental issues which came up for discussion during this Court Hearing were:

1. Whether the Court can entertain the petition for granting interim relief even after the constitution of the Arbitration Tribunal?
2. Whether the Interim directions can be issued against Third Parties?

 Section 9 and Section 17 of the Act

I reproduce both these sections as they stand after the amendments carried out in these Sections in 2015 and 2019:

9. Interim measures, etc., by Court. —1 [(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— 

• for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
• for an interim measure of protection in respect of any of the following matters, namely: —
• the preservation, interim custody, or sale of any goods which are the subject matter of the arbitration agreement;
• securing the amount in dispute in the arbitration; 
• 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; 
• interim injunction or the appointment of a receiver;
• 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 to, any proceedings before it. 

2 [(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.

(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.]

1 [17. Interim measures ordered by arbitral tribunal. — (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal— (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or 

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

• the preservation, interim custody, or sale of any goods which are the subject matter of the arbitration agreement;
• securing the amount in dispute in the arbitration; 
• 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;
• interim injunction or the appointment of a receiver;
• such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders as the Court has for the purpose of, and in relation to, any proceedings before it.

 (2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure,1908 (5 of 1908), in the same manner as if it were an order of the

Court.]

It may be mentioned here that sub-section (2) and sub-section (3) have been introduced to Section 9 by Amendment 2015 (based on the Recommendation of Law Commission in the 246^th Report).

 Sub section (3) to Section 9 provides that the Court will not entertain an application for interim relief once the Arbitration Tribunal has been constituted unless the circumstances render the remedy under section 17 inefficacious.

Further, Section 17 was amended to make it pari materia with Section 9 of the 1996 Act. 

Basic Issues which one should considered while applying relief under Section 9

• WHICH COURT NEEDS TO BE APPROACHED FOR INTERIM RELIEF UNDER SECTION 9?

Section 9 empowers the ‘Court’ as defined by Section 2(1)(e) to grant interim measures of protection. Accordingly, it confines the jurisdiction to the Principal civil Court and includes those High Courts which exercise original jurisdiction. Further, as observed by Apex Court, if the arbitration agreement confers the exclusive jurisdiction on a particular court, all applications under Section 9 would be required to be filed only before that Court, and the jurisdiction of the other Courts would be barred^[1].

It may be pertinent to mention that after the Supreme Court judgment in Bharat Aluminium Company vs. Kaiser Aluminium (BALCO),^[2] the Court of the Seat of Arbitration will have jurisdiction under the Act. Thus Indian Court will not grant interim remedies under Section 9 to the foreign-seated arbitration. 

• WHO CAN APPLY FOR THE INTERIM RELIEF UNDER SECTION 9?

As mentioned in Section 9 quoted above, a Party to the Arbitration Agreement may apply to the Court for Interim relief. A Party can move to the Court for interim measures of protection, either before the arbitral tribunal is constituted or during the pendency of the arbitral proceedings, if the remedy under section

17 is not effective or efficacious, and after the making of the award before it is enforced. In this regard, it would be helpful to refer to the judgment of the

Hon’ble Supreme Court in Firm Ashok Traders V. Gurumukh Das Saluja, (2004) 3 SCC 155, wherein it is held as follows:

“the right conferred by Section 9 cannot be said to be one arising out of a contract. The qualification which the person invoking the jurisdiction of the Court under Section 9 must possess is of being a “party” to an arbitration agreement. A person not a party to an arbitration agreement cannot enter the Court for protection under Section 9. This has relevance only to his locus standi as an applicant. This has nothing to do with the relief which is sought for from the Court or the right which is sought to be canvassed in support of the relief.”^[3]

Thus, as per the above dictum of the Hon’ble Supreme Court, only the party as defined under Section 2(1)(h) of the 1996 Act can invoke the jurisdiction of the Court seeking interim relief under Section 9 of the said Act. When the applicant is not capable of referring the matter for arbitration, it cannot seek remedy under Section 9, which is an interim measure contemplated under the Act before or during the course of the Arbitral proceedings or after making of the Arbitral Award, but before it is enforced^[4].

It is pertinent to mention here that once the arbitral award is made only the successful party, who is entitled to approach the court for enforcement of award can apply to the court for protection in terms of section 9(ii) of the Act.

• CAN AN AWARD DEBTOR INVOKE SECTION 9?

This issue has been examined by the Division Bench of Bombay High Court in the case of Dirk India Private Limited v. Maharashtra State Generation Company Ltd⁵. The Court, after consideration, held that the interim orders are intended to safeguard the subject matter of the dispute. However, after the Arbitration Award has been issued, the application under section 9 is made with the intention to protect the subject matter of the award till the enforcement takes place. Under the circumstances, the award-debtor cannot make an application to obtain interim order after the award was passed. 

• WHICH INTERIM RELIEF CAN BE SOUGHT UNDER SECTION 9 ?

Under Section 9 (1)(i) of the Act, a Party may apply to the Court for an interim measure of protection in respect of any of the following matters, namely: —

• the preservation, interim custody, or sale of any goods which are the subject matter of the arbitration agreement;
• securing the amount in dispute in the arbitration; 
• 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; 
• interim injunction or the appointment of a receiver;
• 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 to, any proceedings before it. 
• CRITERIA FOR GRANTING INTERIM RELIEFS BY THE COURT

The Act has not specified any standard or principles to be followed for granting interim relief under Section 9 of the Act. However, the Supreme court in Gujarat Bottling Co. Ltd.& others vs. Coca-Cola Co.& Ors. held that the power to grant an interlocutory injunction is discretionary and would be granted if the plaintiff has made out a prima facie case; the balance of convenience is in favour of the plaintiff, and the plaintiff has to suffer an irreparable injury if his prayer for interlocutory injunction is disallowed. In addition, some courts have sought to apply standards under the Code of Civil Procedure, 1908, such as Order XXXVIII24 and Order XXXIX, to consider the Application under Section 9 of the Act. But few Courts do not favour strictly applying these standards though they are of the view that these standards do need to be kept in mind while deciding the application under section 9. 

The Supreme Court, in ITI v Siemens Public Communication, held that though there was no mention of applicability of the CPC to arbitral proceedings in the Act, the provisions of the CPC could be read in by a court exercising its powers during any proceedings arising out of the Act.

• ENFORCEMENT OF INTERIM RELIEF GRANTED UNDER SECTION 9 OF THE ACT

When the Court grants the Interim relief under section 9 of the Act, the same is enforceable like any other order of the Court. The Parties may initiate the Contempt proceedings in case of non-compliance with this order. 

• WHETHER THE ORDERS PASSED UNDER SECTION 9 OF THE ACT APPEALABLE?

 The order passed by the Court granting or refusing to grant an interim measure under Section 9 of the Act is amenable to one Appeal. Such an appeal can be made before the Appellate Court under Section 37(1) (b) of the Act. However, sub-section 37(3) bars the second Appeal. 

Author : Nasim Chandani