JUDGEMENT :-
V.V.S.Rao, J.
1 This appeal under Sec.37 of arbitration and Conciliation Act, 1996 (Aandc act, for short), involves an interesting question regarding the power of Civil Court under Sec.9 of Aandc Act to pass orders as an interim measure during arbitral proceedings when arbitral tribunal has already passed an order in respect of subject matter of the dispute.
2 The appellant herein, namely, M/s. SPA agencies (India) Private Limited (hereafter, spa) is an incorporated entity engaged in the business of distributor/agency of various artefacts, porcelain and glassware manufactured by Villeroy and Boch. To open their showroom in Hyderabad, they took three shops bearing door Nos.6-3-680/b/1, 2 and 3, forming part of premises bearing no.6-3-680/b admeasuring 1020 Sq. yards (hereafter, petition schedule premises ). It is a double storeyed building situated in punjagutta road, Hyderabad. Respondent, namely, Harish Rawtani, entered into three franchise agreements with SPA on 15.5.2006. As stipulated therein, SPA deposited Rs.88,20,000/- as non-forfeitable, non-refundable and interest free deposit. Be it noted that Rawtani himself is a lessee of petition schedule premises under lease deed dated 11.5.2005 and he is in the business of running franchise showrooms of various companies. In 2007, respondent instituted o. S. No.438 of 2007 for cancellation of franchise agreements and for recovery of possession of petition schedule premises. SPA filed application being I. A. No.5401 of 2007 under Sec.8 of Aandc Act. In view of the arbitration clause in franchise agreement, the Court of III Additional Chief judge, City Civil Court, Hyderabad, referred the matter to sole arbitrator (hereafter, arbitral tribunal ). SPA filed three applications under Sec.17 of Aandc Act offering to deposit certain amounts. The arbitral tribunal considered the matter and passed orders on 20.9.2008 directing SPA to deposit an amount of Rs.13,18,590/- upto the month of September 2008 on or before 15.10.2008 in respect of premises No.6-3-680/b/1. A direction was also issued to deposit Rs.2,19,765/- per month duly remitting the same through arbitral tribunal on or before 7th of every month commencing from October 2008 till the termination of arbitration. Five months thereafter, Rawtani filed application under section 9 of the aandc act before the Court of iii Additional Chief Judge, praying for a direction to SPA to deposit with sole arbitrator Rs.44,25,000/- as well as rs.18,97,155/- due and payable for the months from December 2008 to February 2009 and continue to deposit Rs.6,32,385/-every month. In the said application, respondent, inter alia, pleaded that SPA disobeyed the orders of arbitral tribunal, while enjoying petition schedule premises, and alleged that there is possibility of SPA vacating the premises without paying the amounts due to respondent. The case was opposed by SPA alleging that petition is not maintainable as arbitration is pending, that they have kept non-forfeitable and nonrefundable amounts deposit with respondent and that respondent has no cause of action for filing the O. P. Learned iii Additional Chief Judge by impugned order dated 09.9.2009 allowed the petition directing SPA to deposit Rs.44,26,695/- and another sum of Rs.18,97,155/-, which is due from SPA for the months of December 2008 to February 2009 and to continue to deposit rs.6,32,385/- every month on or before 7th of every month with sole arbitrator.
3 Senior Counsel for SPA submits that there are three franchise agreements in respect of three separate premises belonging to respondent and, therefore, the Court below could not have passed order in one o. P. filed under Sec.9 of Aandc Act. Secondly, he submits that respondent filed petition by way of enforcing order passed by arbitrator under Sec.17 of Aandc Act and such jurisdiction does not vest in the civil Court. Lastly he submits that after the sole arbitrator passed orders on 20.9.2008 on the interim application made by SPA, appellant paid certain amounts and all the subsequent events have been erroneously ignored by the Court below. He relied on md. Army Welfare Housing Organisation V/s. Sumangal Services (P) Ltd. (1) (2004) 9 SCC 619 = AIR 2004 SC 1344 and Adhunik Steels Ltd. V/s. Orissa Manganese and Minerals (P) Ltd. (2) (2007)7 SCC 125 = AIR 2007 SC 2563.
4 Learned Counsel for respondent submits that an order passed by the arbitrator as an interim measure does not bar an application under Sec.9 (ii) (b) and (e) of Aandc Act. According to Counsel, Civil court's jurisdiction to incidentally consider a petition for seeking order as an interim measure is always maintainable as the Civil court has the same powers for making orders like in any proceedings pending before it. He nextly contends that SPA itself admitted and accepted to deposit the amount and, therefore, balance of convenience is in favour of respondent for passing an order under Sec.9 of Aandc Act.
5 The rival contentions lead to two questions for consideration: Whether the power vested in Civil Court under Sec.9 of Aandc Act is barred when the arbitrator exercises powers under Sec.17 and/or 30 of Aandc Act before passing final award? and Whether the Court of III Additional chief Judge, City Civil Court, Hyderabad, was justified in passing the impugned order?
6 First question requires reading of sections 9 and 17 of aandc act, which are as below. Interim measures, etc. , by Court.9. 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 Sec.36, apply to a Court- (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: - (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (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; (d) interim injunction or the appointment of a receiver; (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 to, any proceedings before it. Interim measures ordered by arbitral tribunal.
17. (1) Unless otherwise agreed by the parties; the arbitral Tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral Tribunal consider necessary in respect of the subject-matter of the dispute. (2) The arbitral Tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1 ).
7 The Aandc Act confers power on the civil Court, inter alia, to pass an order for an interim measure (i) before, (ii) during arbitral proceedings, and (iii) at any time before enforcement of the award. Such interim order can be for appointment of a guardian for a minor or person of unsound mind for the purpose of arbitral proceedings. Such an order as interim measure can also be for the purpose of preservation, interim custody or sale of any goods, securing any amount in dispute in arbitration, detention or preservation or inspection of any property and/or interim injunction or appointment of receiver. sec.9 (ii) (e) of aandc act is residuary power conferred on the Civil Court. In addition, under section 9 (ii) (e) Civil Court can pass any interim order which "may appear to be just and convenient. " Furthermore, under Sec.9 (ii), the Civil Court, "shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it. " Principal civil Court of original jurisdiction in the district or High Court exercising original jurisdiction are included in the definition of "court" in Sec.2 (e ). Needless to mention that Civil Court is given power and jurisdiction to try all suits of civil nature unless such jurisdiction is expressly or impliedly barred under Sec.9 of Code of civil Procedure, 1908 (CPC ). Civil Court has also got incidental powers (under sections 75 to 78 of cpc) and supplemental powers (under sections 94 and 95 of cpc ). A cursory look at Sec.94 of CPC would reveal that all those powers are mentioned even in section 9 (ii) of aandc act, which is almost similar to former. Therefore, there cannot be any doubt that in an appropriate arbitration case like a dispute between landlord and tenant, in petition under section 9, a Civil Court can pass an order directing the tenant to deposit the admitted rent or licence fee pending arbitral proceedings.
8 Section 17 (1) of Aandc Act is couched in broad language and confers power on arbitral tribunal to pass interlocutory orders as may be considered necessary. In our considered opinion, having regard to the phraseology in Sec.17 (1), an arbitrator can pass all orders as may be necessary. These orders may include an order - for injunction, to furnish security, to appoint commissioner to take evidence (in addition to Sec.27), to appoint experts etc. But any such interim order shall be directed only to parties to arbitral proceedings and not to third party, and any interim order by the arbitrator cannot go beyond the reference of arbitration agreement. Be it also noted that a petition under Sec.9 is not a suit before a Civil court, but a remedy provided to party to an arbitration agreement to seek interim order in relation to subject matter of the arbitration pending adjudication.
9 In Sundaram Finance Ltd. V/s. NEPC India ltd. (3) (1999) 2 SCC 479 = AIR 1999 SC 565 = 1999 (1) ALT 22.2 (DNSC), the apex Court considered the question whether under section 9 of aandc act, the Court has jurisdiction to pass interim orders even before arbitral proceedings commenced and before an arbitrator is appointed. While holding that UNCITRAL Model Law is relevant in construing provisions of Aandc act, the scope of the provision, was adverted to by the Court in the following manner: this clearly contemplates two stages when the Court can pass interim orders, i. e. , during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why sec.9 of the 1996 act should not be literally construed. Meaning has to be given to the word "before" occurring in the said section. The only interpretation that can be given is that the Court can pass interim orders before the commencement of arbitral proceedings. Any other interpretation, like the one given by the High Court, will have the effect of rendering the word "before" in Sec.9 as redundant. This is clearly not permissible. Not only does the language warrants such an interpretation but it was necessary to have such a provision in the interest of justice. But for such a provision no party would have a right to apply for interim measure before notice under Sec.21 is received by the respondent. It is not unknown when it becomes difficult to serve the respondents. It was, therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it's interest. Reading the section as a whole it appears to us that the court has jurisdiction to entertain an application under Sec.9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with section 36 of the Act.
10 In Firm Ashok Traders V/s. Gurumukh Das saluja (4) (2004) 3 SCC 155 = AIR 2004 SC 1433, a question arose as to whether an unregistered firm, which cannot maintain a suit for enforcing a right arising out of the contract, under Sec.69 (2) of the partnership Act 1932, can maintain an application under Sec.9 of Aandc Act. The apex Court ruled that,
"the bar enacted under
section 69 (2) of Partnership Act does not affect maintainability of application under Sec.9 of aandc Act."
While laying down the principle, their Lordships held. In short, filing of an application by a party by virtue of its being a party to an arbitration agreement is for securing a relief which the Court has power to grant before, during or after arbitral proceedings by virtue of section 9 of the A and C Act. The relief sought for in an application under
section 9 of aandc act is neither in a suit nor a right arising from a contract. The right arising from the partnership deed or conferred by the Partnership act is being enforced in the arbitral tribunal; the Court under Sec.9 is only formulating interim measures so as to protect the right under adjudication before the arbitral tribunal from being frustrated. Sec.69 of the Partnership Act has no bearing on the right of a party to an arbitration clause to file an application under Sec.9 of Aandc Act. (emphasis supplied)
11 Yet again, it was held. Sec.9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word 'before' means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of. The two events sought to be interconnected by use of the term 'before' must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or 'within sight' certainty. The party invoking Sec.9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as M/s Sundaram Finance Ltd. puts it)and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of Interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting section 9, read in the light of the Model law and UNCITRAL Rules is to provide 'interim measures of protection'. The order passed by the court should fall within the meaning of the expression 'an interim measure of protection' as distinguished from an all-time or permanent protection.
12 In Sumangal Services (P) Ltd. , (1 supra), while holding that any interim order passed under sec.17 (1) of aandc act shall be directed only to parties to arbitral proceedings and not third parties, the apex court observed as follows:
A bare perusal of the aforementioned provisions would clearly show that even under sec.17 of the 1996 act the power of the arbitrator is a limited one. It cannot issue any direction which would go beyond the reference or the arbitration agreement. Furthermore, an award of the arbitrator under the 1996 Act is not required to be made a rule of court; the same is enforceable on its own force. Even under Sec.17 of 1996 Act, an interim order must relate to the protection of subject matter of dispute and the order may be addressed only to a party to the arbitration. It cannot be addressed to other parties. Even under sec.17 of the 1996 act, no power is conferred upon the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof. The said interim order of the learned Arbitrator, therefore, being coram non judice was wholly without jurisdiction and thus, a nullity. (emphasis supplied)
13 In Adhunik Steels Ltd. (2 supra), the following observations were made by supreme Court, while dealing with the scope of power conferred on the Civil Court under section 9 of aandc act:
It is true that Sec.9 of the Act speaks of the court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory injunction or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the legislature while enacting Sec.9 of the Act intended to make a provision which was de hors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the Section itself brings in, the concept of 'just and convenient' while speaking of passing any interim measure of protection. The concluding words of the Section,
"and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it"
also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under section 9 of the Act. (emphasis supplied)
14 The conspectus of the case law discussed herein above, would lead to the following. Sec.9 of Aandc Act provides an independent remedy to a party to arbitration. The remedy is to seek an interim order from the Principal Civil Court as defined in Sec.2 (e) of Aandc Act. The interim orders can be any as described in section 9 (ii) (a) to (d) or can be any order which appears to the Court as just and convenient. As the Court has same powers as it has for the purpose of other proceedings before it, all the normal rules governing the grant of interim order would apply. But the difference is that the remedy under section 9 is not by way of an appeal against an interlocutory order passed by the arbitrator under Sec.17 of Aandc Act because under Sec.37 (2) (b) of Aandc Act grant or refusal of interim order by the arbitrator is appealable before High Court. In a given case, the remedy provided under section 9 is not barred even if the party moving a petition thereunder has already obtained the relief partly or wholly from the arbitrator and in such an event, the petition for an interim order would be independent and different from the interim order already obtained under Sec.17 of aandc Act.
15 In this case, there is no dispute that spa itself moved an application under section 17 of aandc act before the arbitral tribunal seeking permission to deposit licensee/franchisee fees for April 2008 to July 2008. The learned arbitrator passed order on 20.9.2008 directing SPA to deposit amounts. SPA accepted the order and did not challenge under Sec.37 (2) (b) of Aandc Act. There is some dispute as to whether spa paid certain amounts to Rawtani subsequent to the order of learned arbitrator. Be that as it is, on 26.2.2009, Rawtani again filed O. P. No.408 of 2009 seeking an interim order directing SPA to deposit the arrears towards fee and for payment of monthly fee. Therefore, we are convinced that the plea that the Court below acted beyond jurisdiction cannot prevail and cannot be accepted. We accordingly reject the submission of learned Senior Counsel for SPA.
16 Insofar as second point is concerned, we need to consider an incidental question is raised. The plea is that when there are three shops in respect of which there are three separate franchise agreements,, respondent could not have filed one petition under Sec.9 of Aandc Act. The submission cannot be accepted. A perusal of the record would show that the dispute between SPA and Rawtani in relation to three shops and three franchise agreements are referred to arbitration marked as Reference: AC101 by the learned arbitrator. It is no doubt true that SPA in their application under section 17 of aandc act sought a direction to deposit the fee for the months of April 2008 to July 2008 and thereafter from August 2008 regarding premises No.6-3-680/b/1. It is also true that the arbitral tribunal passed order on 20.9.2008 in respect of said premises only. These two factual aspects however do not prohibit filing of one application under section 9 of aandc act as the dispute in relation to all the shops is referred to one arbitration. Furthermore, there appears to be not much difference in the clauses/covenants in the three franchise agreements even though, for reasons best known to the parties, they entered into three separate franchise agreements.
17 In the application before the Court below respondent alleged as below: the petitioner further submits that, thereafter, the petitioner and respondent tried to settle the disputes amicably and had discussions on several occasions. Finally after the accounts were reconciled, the total amount due to the petitioner herein in respect of all the three shops was agreed to be Rs.44,26,695/- i. e. , the amount due for the period September 2007 to March 2008 towards Franchinsee fee after TDS. On such reconciliation, the Hon'ble sole Arbitrator directed the respondent to pay the said amount of Rs.44,26,695/- and to report by 02.01.2009 by an order dated 26.12.2008. But the respondent did not choose to pay the amount as directed by the Hon'ble arbitrator. Therefore, the Hon'ble arbitrator again directed the respondent to pay the amount of rs.44,26,695/- to the petitioner herein immediately. But the respondent again failed to pay the amount till date. Besides the above, the respondent also failed to pay the amounts due to the petitioner for the months of December 2008, January 2009 and February 2009 till date in spite of the direction of the hon'ble Sole Arbitrator. The respondent is liable to pay an amount of rs.6,32,385/- every month for all the three shops after RDS. The respondent failed to pay the same from the month of December 2008. Thus by now an amount of Rs.18,97,155/- is due to the petitioner. Further an amount of rs.6,32,385/- will be due by 07.03.2009.
18 In their counter, SPA made the following averments: in reply to the averments made in para 3 (e) and (f), as per the direction of the Hon'ble Arbitrator both the parties met and discussed the possibilities of settlement and the same was reported to this Hon'ble Tribunal on 22.12.2008 and 26.12.2008. The petitioner and the respondent once again met on 1st week of January 2009 and discussed the issues between them and both the parties had categorically reported to this Hon'ble Tribunal on 09.1.2009 that still there are unresolved issues pending between the parties. The respondent put best of its efforts to resolve the disputes between the parties, but all the efforts went in vain due to the rigid and unreasonable stand taken by the petitioner (claimant) which is beyond the agreed terms of the agreement. As such the settlement and negotiations between the parties had failed. As such the settlement and negotiations between the parties had failed. All this time the respondent anticipating that the disputes may be settled amicably made certain payments to show its bona fide and did not file any statement of defense or counter claim. It is false to say that the respondent is due any amount to the petitioner arising under the agreements, the petitioner is put to strict proof of the same. It is submitted that it is the petitioner who is due and payable more than Rs.3 Crores to the respondent and the respondent has already filed its Statement of Defense and Counter Claim which is much more than the claim of the petitioner. As stated supra the respondent has already filed review petition of the order dated 26.12.2008 before the hon'ble Arbitrator for setting aside the said order and the same is pending before the Arbitrator. In view of the same the present OP is not maintainable.
19 From these pleadings, it is very clear that amounts due as alleged by respondent were not specifically denied by SPA and, therefore, they are deemed to be admitted. In support of petition, Rawtani alleged that there is likelihood of SPA vacating premises without paying amounts and that it would be difficult for him to realise the amount even if he succeeds in the arbitration proceedings. Dealing with this in their counter, SPA alleged that they have a counter claim for more than Rs.3,00,00,000/- and that an amount of about Rs.89,00,000/-towards non-forfeitable and nonrefundable was deposited by them with rawtani. Whether the counter claim for about Rs.3,00,00,000/- made by them before the arbitrator is sustainable or not, is an issue before arbitral tribunal. Insofar as the deposit is concerned, admittedly it is nonforfeitable and non-refundable interest free deposit and, therefore, it may not be a relevant factor in changing the balance of convenience. Admittedly SPA did not pay agreed and admitted monthly franchise fee of Rs.2,45,000/- (SPA alleges that the amount paid through cheques was not accepted by rawtani) as per the agreement dated 15.5.2006 payable from June 2007 onwards. Therefore, we do not find any reason to differ with the Court below in directing SPA to deposit the amount.
20 Learned Senior Counsel for SPA repeatedly urged that subsequent to the order of arbitral tribunal dated 20.9.2008, spa has paid various amounts and the same has not been considered by the Court below. No such plea is taken in the memorandum of grounds and, therefore, in the absence of any material before us, we are not able to accept the submission.
21 In the result, for the above reasons, the civil miscellaneous appeal fails and is accordingly dismissed.