In view of the discussion with regard to questions 1 and 2 above, it
becomes clear that the Intervenor has no privity of contract with NHAI.
It is also clear that the Intervenor is not a party to the arbitration
proceedings. Section 9 of the Act is with reference to arbitral
proceedings just as the Intervenor cannot be a party in the arbitral
National Highways Authority Of India (Nhai) vs China Coal Construction Group Corpn. on 23/1/2006
Badar Durrez Ahmed, J
1. This order shall dispose of IA Nos.6880/2005, 6881/2005 and OMP 351/2004. The said OMP has been filed by the petitioner--National Highways Authority of India (hereinafter referred to as 'NHAI') under section 9 of the Arbitration and Conciliation Act, 1996 praying for an order of interim injunction restraining the respondent China Coal Construction Group Corporation (hereinafter referred to as 'China Coal') from interfering in the utilisation by the petitioner of the equipment, temporary works and material lying on the site. It is also prayed by NHAI that in the event China Coal contests the grant of the aforesaid interim injunction and prays for Page 0493maintenance of status quo, the said China Coal be ordered to bear all the costs for watch and ward, protection of the properties on the site, loss and damage that may occur by way of pilferage, theft and the like during the operation of the order of status quo if passed by this court. IA No.6880/2005 is an application filed on behalf of SREI International Finance Limited (hereinafter referred to as 'the Intervenor') under Order 1 Rule 10 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as the 'CPC') for being imp leaded as a party respondent in the said OMP. IA No.6881/2005 is another application moved on behalf of the Intervenor under Section 151 of the CPC seeking clarification of the order dated 25.01.2005 passed by this court in the said OMP.
2. The learned counsel for China Coal has raised a preliminary objection to the maintainability and continuance of the present petition (i.e., OMP No.351/2004) under Section 9 inasmuch as an application under Section 17 is pending before the Arbitral Tribunal. Therefore, the questions which arise for consideration in this petition and the two applications are as under:-
1) Whether an application under Section 9 of the Arbitration and Conciliation Act, 1996 would be maintainable during the pendency of an application under Section 17 of the said Act before an Arbitral Tribunal seized of the disputes between the same parties ?
2) If the answer to the first question is in the affirmative (i.e., the Section 9 application is maintainable), is NHAI entitled to the reliefs and orders claimed in the OMP ?
3) Whether the Intervenor can be imp leaded as a party in the petition (OMP 351/2004) ?
4) Whether the Intervenor is entitled to seek clarification of the order dated 25.01.2005 passed by this court ?
3. Before I consider these questions, a brief resume of the factual position is necessary. On 28.03.2002, a contract was entered into by and between NHAI and China Coal for four laning and strengthening of the existing two lane Section between Km 250.500 and Km 307.500 NH-2 subject to the terms and conditions contained in the contract. Clause 67 of the contract dated 28.03.2002 provides for referring all disputes and difference between the parties arising out of the said contract to arbitration in accordance with the procedure prescribed therein. Both, NHAI and China Coal invoked clause 63.1 of the contract and purported to terminate the contract by their letters dated 09.06.2004. Thereafter, China Coal filed a suit being CS (OS) 679/2004 against NHAI for permanent injunction restraining NHAI from encashment of the bank guarantee furnished by China Coal in terms of the contract. The suit came up for the first time before this court on 14.06.2004. NHAI entered appearance as caveator and in the Order 39 Rules 1 and 2 application moved on behalf of China Coal, a statement was made by the learned counsel for NHAI (caveator / defendant No.1) to the following effect:-
Learned counsel for the caveator/defendant No.1 states that matter be heard next week and defendant No.1 shall not enforce bank guarantee till Page 0494then. Defendant No.2 is also directed not to make payment under the Bank guarantee.
On 28.06.2004, this court passed the following orders:-
The statement made by the counsel for the defendant No.1 and the direction passed against the defendant No.2 shall continue till the next date of hearing. It may be noted that none has entered appearance for defendant No.2 despite service.
Till the next date of hearing, the machinery shall not be removed from the site by any of the parties.
4. On 16.07.2004, in view of the said arbitration clause contained in the contract between NHAI and China Coal, NHAI nominated its Arbitrator. On 07.10.2004, NHAI filed the present OMP under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the said Act') seeking the reliefs mentioned above. In this petition, it was specifically stated by and on behalf of NHAI that the suit filed by China Coal [CS (OS) 679/2004] was not maintainable in view of the provisions of Section 8 of the said Act. It was also mentioned that the entire dispute would, therefore, be before the Arbitral Tribunal and it is under these circumstances that the present OMP was filed. It is the contention of NHAI that in view of clause 63.1 of the contract, upon termination of the contract, the employer (NHAI) is entitled to keep and utilize the equipment, temporary works and the material of the contractor (China Coal) for completion of the works. Since something turns upon this clause, it would be pertinent to set out the same:-
Remedies Default of Contractor 63.01
If the Contractor is deemed by law unable to pay his debts as they fall due, or enters into voluntary or involuntary bankruptcy, liquidation or dissolution (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), or becomes insolvent, or makes an arrangement with, or assignment in favor of, his creditors, or agrees to carry out the Contract under a committee of inspection of his creditors, or if a receiver, administrator, trustee or liquidator is appointed over any substantial part of his assets, or if, under any law or regulation relating to reorganization, arrangement or readjustment of debts, proceedings are commenced against the Contractor or resolutions passed in connection with dissolution or liquidation or if any steps are taken to enforce any security interest over a substantial part of the assets of the Contractor, or if any act is done or event occurs with respect to the Contractor or his assets which, under any applicable law has a substantially similar effect to any of the foregoing acts or events, or if the Contractor has contravened Sub-Clause 3.1, or has an execution levied on his goods, or if the Engineer certifies to the Employer, with a copy to the Contractor, that, in his opinion; the Contractor:
(a) has repudiated the Contract,
(b) without reasonable excuse has failed
(i) to commence the Works in accordance with Sub-Clause 41.1, or
(ii) to proceed with the Works, or any Section thereof, within 28 days after receiving notice pursuant to Sub-Clause 46.1,
(c) has failed to comply with a notice issued pursuant to Sub-Clause 37.4 or an instruction issued pursuant to Sub-Clause 39.1 within 28 days after having received it,
(d) despite previous warning from the Engineer, in writing, is otherwise persistently or flagrantly neglecting to comply with any of his obligations under the Contract, or
(e) has contravened Sub-Clause 4.1,
then the Employer may, after giving 14 days' notice to the Contractor, terminate the contract or a part thereof without thereby releasing the Contractor from any of his obligations or liabilities under the Contract, or affecting the rights and powers conferred on the Employer or the Engineer by the Contract, and recover the possession and enter upon the Site and the Works and may himself complete the Works or may employ any other contractor to complete the Works. The Employer or such other contractor may use for such completion so much of the Contractor's Equipment, Temporary Works and materials which have been deemed to be reserved exclusively for the execution of the works, under the provisions of the contract, as he or they may think proper, and the Employer may, at any time, sell any of the said Contractor's Equipment, Temporary Works, and unused Plants and materials and apply the proceeds of sale in or towards the satisfaction of any sums dues or which may become due to him from the Contractor under the Contract.
5. The expression "contractors equipment" appearing in the aforesaid clause 63.1 has been defined in clause 1.1 (v) as under:-
(v) "Contractor's Equipment" means all appliances and things of whatsoever nature (other than Temporary Works) required for the execution and completion of the Works and the remedying of any defects therein, but does not include Plant, materials or other things intended to form or forming part of the Permanent Works.
A plain reading of the said definition would show that the same is couched in very wide terms and does not at all speak of ownership of the equipment. This definition would be relevant to deal with the submissions raised by the Intervenor which I shall deal with in a short while.
6. Thereafter, the Arbitral Tribunal which had been constituted, held its first sitting on 01.11.2004. A Section 17 application had been filed by the claimant (China Coal) and notice on the said application was issued by the Arbitral Tribunal. Thereafter, Chinas Coal filed an application being IA No.532/2005 in its suit [CS (OS) 679/2004)] under Order 23 Rule 1 seeking unconditional withdrawal of the suit. The said application came up for disposal on 24.01.2005 when the following order was passed by a learned Single Judge of this court:-
This is an application under Order 23 Rule 1 read with Section 151 CPC made on behalf of the plaintiff seeking unconditional withdrawal of the suit.
Mr.Sandeep Sethi, learned senior counsel appearing for the defendants has opposed the application primarily on the ground that the plaintiff has enjoyed an interim relief for a period of about six months against the Page 0496enforcement of bank guarantees furnished by the plaintiff under the orders of this Court and, therefore, unless the plaintiff relegates the defendants to their original position or the plaintiff is called upon to pay or deposit the amount in question, the plaintiff should not be allowed to withdraw the present suit even unconditionally. In support of his submissions, he sought support from two decisions of the Supreme Court; one reported as State of Orissa Vs. Bhagaban Barik, ; and the other in the case of Executive Officer, Arthanareswarar Temple R.Sathyamoorthy and others, .
On the other hand, Mr.Tikku, learned senior counsel appearing for the plaintiff submits that there is no question of any conditions being imposed on the plaintiff while permitting him to withdraw the present suit because the plaintiff is not seeking any protection from this Court and wants to approach the Arbitral Tribunal already set up to decide the disputes/differences between the parties.
This Court has considered the matter. There is no denial of the position that to begin with on statement made / undertaking given by the defendants that they will not enforce/ encash the bank guarantees in question and later under the orders of the Court made from time to time, the plaintiff has enjoyed a temporary relief against the enforcement/encashment of the bank guarantees furnished by them, but one aspect is clear that at the time of filing of the present suit there was no Arbitral Tribunal in position, which has now been set up and is very much seized of the entire disputes/differences between the parties. Besides the defendants are contesting the suit of the plaintiff, inter alia, on the grounds of its maintainability as also on several other counts.
Having regard to the scheme and object of the Arbitration and Conciliation Act, 1996, it cannot be denied that once the parties have decided to resolve their disputes/differences through the mechanism of arbitration for all intent and purposes, it is that forum alone which must be invoked for settlement of the disputes/differences between the parties.
Keeping in view these essential elements and the fact that the plaintiff is not seeking any interim protection from this Court and wants to withdraw the suit unconditionally, this Court is of the view that there cannot possibly be any objection to the withdrawal of the suit. Consequently, the application is allowed and the plaintiff's suit is hereby dismissed as withdrawn. All pending applications shall also stand disposed of accordingly.
A plain reading of the above order discloses that the court had recognised the fact that once the parties had decided to resolve their disputes or differences through the mechanism of Arbitration, for all intents and purposes, it was that forum alone which must be invoked for settlement of the disputes / differences and in this view of the matter, the court permitted China Coal to withdraw the suit unconditionally. All pending Page 0497applications were also disposed of meaning thereby that the earlier orders passed in the said suit CS (OS) 679/2004 also stood vacated.
7. On the same day, i.e., 24.01.2005, in the 4th meeting held before the Arbitral Tribunal, inter alia, the following order was passed:-
4.1 At the outset, the Claimants filed an affidavit dated 24.01.2005 to the effect that the Hon'ble Delhi High Court vide its order dated 24.01.2005 has allowed the I.A. No.532 of 2005 in Civil Suit bearing No. CS (OS) 679 of 2004 thereby dismissing the said civil suit, as withdrawn forthwith. They have pleaded before the AT that the protection earlier given by Delhi High Court should be granted in the same manner by the AT also. This prayer has been opposed by the Respondents.
4.2 The AT has carefully considered the matter and it passes the following orders:-
(a) The Respondents will not encash the Bank Guarantee till the Application under Section 17 is heared by the AT in detail and decided on merits. At the same time, the Claimants will undertake to keep alive the Bank Guarantees during the pendency of the dispute.
(b) The Claimants will not remove any machinery from the site during the pendency of the dispute. This order shall not, however, in any manner effect the orders in respect of the said machinery by the Hon'ble Kolkata High Court.
The Arbitral Tribunal has by the said order dated 24.01.2005 in effect granted the very interim orders which were granted by this court in the suit which stood withdrawn. NHAI was directed not to encash the bank guarantee till the application under Section 17 of the said Act was heard by the Arbitral Tribunal. China Coal was required to undertake to keep the bank guarantee alive during the pendency of the dispute and China Coal was also directed not to remove any machinery from the site during the pendency of the dispute. However, the Arbitral Tribunal also directed that this order "shall not, however, in any manner affect the orders in respect of the said machinery by the Hon'ble Kolkata High Court". The reference to the orders of the High Court of Calcutta passed in respect of the said machinery lying at the site is what is causing concern to the petitioner (NHAI). NHAI is not a party to the proceedings which are pending before the Calcutta High Court. Those proceedings are between China Coal on the one hand and, the Intervenor, on the other. The background of that dispute is that China Coal and the Intervenor purportedly entered into six Hire-Purchase and two Loan Agreements whereby several equipments claimed to be owned by the Intervenor were taken on Hire-Purchase by China Coal. It is alleged by the Intervenor that China Coal failed to keep up with the installments of monthly hire charges and committed defaults. The agreements between China Coal and the Intervenor apparently contained arbitration clauses. It is alleged by the Intervenor that on 24.06.2004, notices were issued by the Intervenor to China Coal terminating the agreements and calling upon China Coal to make payment of all the dues as also to surrender / deliver possession of all the equipments. On 25.06.2004, Page 0498the Intervenor purportedly invoked the arbitration clauses and filed its claim before the Arbitral Tribunal. The Intervenor also moved different petitions under Section 9 of the said Act (AP 191 to AP 198/2004) before the High Court at Calcutta seeking, inter alia, various interim orders, such as appointment of Receiver to take over possession of the equipment forming subject matter of the Hire-Purchase Agreements. By an order dated 30.06.2004, the High Court of Calcutta was pleased to appoint Receivers to take possession of the equipments and by an order dated 14.07.2004, the said Receivers were granted liberty to appoint an agent for the purposes of execution of the said order dated 30.06.2004. By an order dated 25.08.2004, the High Court at Calcutta, inter alia, passed the following order:-
I, accordingly, direct that the receivers appointed in the above matters through their common agent should take actual physical possession of the equipments which are the subject matter of the above applications forthwith.
However, the Receivers could not take possession of the equipments at the site, various contempt proceedings were initiated before the Calcutta High Court with which were are not concerned. It must be remembered that in China Coal's suit [CS(OS) 679/2004] before this court in the order dated 14.06.2004 it was recorded that NHAI's counsel had stated that the matter be heard next week and till then NHAI would not enforce the bank guarantee. On 28.06.2004 when this court heard the matter, this court continued the operation of the statements made by NHAI counsel qua non-encashment of the bank guarantee. This court, by the order dated 28.06.2004 also directed that "the machinery shall not be removed from the site by any of the parties." It is clear that the order passed by the High Court at Calcutta on 30.06.2004 whereby receivers were appointed was subsequent to the orders passed by this court. When the matter was heard by that court, the counsel for China Coal ought to have pointed this court.
8. I now come to the orders passed in the present petition (OMP 351/2004). On 25.01.2005, while issuing notice on the petition (the said OMP), this court directed as under:-
In the meanwhile, the respondents shall not remove the machinery and equipment lying at the site till the next date of hearing.
The Intervenor is claiming to be added as a party respondent in the present petition because, according to it, the orders passed in this petition would vitally affect its rights. It is also seeking clarification of the above order dated 21.05.2005 to the extent that the said order be made applicable only to the equipments of which China Coal is a owner. The position that emerges from this resume of facts is that some of the equipments employed by China Coal at the site pursuant to the contract between China Coal and NHAI were apparently taken on Hire-Purchase from the Intervenor under separate agreements. Under the contract between the NHAI and China Coal and in particular in terms of clause 63.1 thereof, NHAI claims a lien on the equipments. On the other hand, by virtue of Hire-Purchase Agreements entered into between the Intervenor and China Coal, the Intervenor claims possession of the very same equipments. The former dispute is pending arbitration Page 0499between NHAI and China Coal and in respect of which the present OMP under Section 9 of the Act has been filed. The latter dispute is pending arbitration between China Coal and the Intervenor in respect of which Section 9 applications are pending before the High Court at Calcutta. While the Intervenor is not privy to the arrangement and contractual relationship between NHAI and China Coal, similarly, NHAI is not privy to the relationship between China Coal and the Intervenor. It is the interlinking of these two contracts which is the cause of dispute in the present proceedings.
Whether an application under Section 9 of the Arbitration and Conciliation Act, 1996 would be maintainable during the pendency of an application under Section 17 of the said Act before an Arbitral Tribunal seized of the disputes between the same parties ?
9. Mr Amit Chadha, the learned senior counsel appearing on behalf of China Coal, submitted that the present application under Section 9 is not maintainable when the application under Section 17 is being pursued before the Arbitral Tribunal. He further submitted that once an arbitration proceeding has commenced, then courts should not interfere with those proceedings. And, if an order passed under Section 17 by an Arbitral Tribunal is not to the liking of a party to the proceedings, the same can be appealed against under Section 37(2)(b). In the context of the present case, Mr Chadha submitted that the Arbitral Tribunal has passed an order on 24.01.2005 while considering the application under Section 17 moved by China Coal. This order is an appealable order under Section 37(2)(b) but the petitioner has not chosen to file any appeal. Furthermore, it was submitted by him that the present OMP was filed prior to the passing of the order dated 24.01.2005. He drew my attention to paragraph 13 of the OMP wherein it was stated that the civil suit No.679/2004, having regard to the provisions of Section 8 of the said Act, was not likely to be listed and the matters were to be referred to the Arbitral Tribunal for adjudication and, therefore, there was a fear that the order dated 28.06.2004 passed in that suit would stand automatically vacated and China Coal may succeed in taking over the possession of the property during the vacuum that may be caused by the vacation of the said order. In this context, Mr Chadha submitted that the OMP was filed for interim directions to take care of the period of vacuum, i.e., the period between which the suit No. CS (OS) 679/2004 would be disposed of and interim orders were passed by the Arbitral Tribunal. He submitted that now that the period of vacuum is over inasmuch as the suit was withdrawn unconditionally on 24.01.2005 and on the same day the Arbitral Tribunal passed the interim orders indicated above, the very basis for filing the present petition has gone.
10. On the other hand, Mr Sandeep Sethi, the learned senior counsel appearing on behalf of the petitioner NHAI, submitted with reference to the Supreme Court decision in the case of MD Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. that orders passed under Page 0500Section 17 of the said Act by an Arbitral Tribunal are virtually 'toothless' inasmuch as the same are incapable of being enforced. In particular, he referred to paragraph 58 of the said decision which reads as under:-
58. A bare perusal of the aforementioned provisions would clearly show that even under Section 17 of the 1996 Act the power of the arbitrator is a limited one. He 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 Section 17 of the 1996 Act, an interim order must relate to the protection of the 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 Section 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, was a nullity. [See Kiran Singh v. Chaman Paswan, Kaushalya Devi v. K.L. Bansal, Union of India v. Tarachand Gupta and Bros. (SCC at p. 496), Sushil Kumar Mehta v. Gobind Ram Bohra and Kanak v. U.P. Avas Evam Vikas Parishad.
11. He referred to the decision of the Supreme Court in the case of Sundaram Finance Ltd v. NEPC India Ltd. to indicate that because orders under Section 17 passed by an Arbitral Tribunal cannot be enforced, the legislature provided specific powers to the Court under Section 9 to pass such orders. In the said decision, the Supreme Court observed as under:-
11. The reading of Section 21 clearly shows that the arbitral proceedings commence on the date on which a request for a dispute to be referred to arbitration arbitration is received by the respondent. It is in this context that we have to examine and interpret the expression "before or during arbitral proceedings" occurring in Section 9 of the 1996 Act. We may here observe that though Section 17 gives the Arbitral Tribunal the power to pass orders, the same cannot be enforced as orders of a court. It is for this reason that Section 9 admittedly gives the court power to pass interim orders during the arbitration proceedings.
13. Under the 1996 Act, the court can pass interim orders under Section 9. Arbitral proceedings, as we have seen, commence only when the request to refer the dispute is received by the respondent as per Section 21 of the Act. The material words occurring in Section 9 are "before or during the arbitral proceedings". 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 Section 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 Page 0501High Court, will have the effect of rendering the word "before" in Section 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 Section 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 its interest. Reading the section as a whole it appears to us that the court has jurisdiction to entertain an application under Section 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.
12. Mr Sethi also referred to the decision of a Single Judge of this court in CREF Finance Ltd. v. Puri Construction Ltd and Ors. 2000 (55) DRJ 730 in support of his submissions. He referred to the decision of the Supreme Court in the case of Firm Ashok Traders and Another v. Gurumukh Das Saluja and Others: and in particular paragraph 18 thereof which reads as under:-
18. Under the A&C Act, 1996, unlike the predecessor Act of 1940, the Arbitral Tribunal is empowered by Section 17 of the Act to make orders amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during the existence of the Arbitral Tribunal and its being functional. During that period, the power conferred on the Arbitral Tribunal under Section 17 and the power conferred on the court under Section 9 may overlap to some extent but so far as the period pre- and post- the arbitral proceedings is concerned, the party requiring an interim measure of protection shall have to approach only the court. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplate" or "manifestly intended" arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order under Section 9, the relationship between the order under Section 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made "before" i.e. In contemplation of arbitral proceedings. The court, approached by a party with an application under Section 9, is justified in asking the party and being told how and when the party approaching the court proposes to commence the arbitral proceedings. Rather, the scheme in which Section 9 is placed obligates the court to do so. The court may also while passing an order under Section 9 put the party on terms and may recall the order if the party commits breach of the terms.
In sum and substance, the submission of Mr Sethi was that Section 9 permitted any party to an Arbitration Agreement to approach the Court for appropriate orders as provided therein. The Court could be approached in three distinct periods, i.e., pre-arbitration, during arbitration and post-arbitration but before the award is enforced in accordance with Section 36 of the Act. He submitted that the powers under Section 9 given to the court were wide and were to be the same as the court had for the purpose of and in relation to any proceedings before it.
13. On the other hand, Section 17 provided for interim measures to be ordered by the Arbitral Tribunal. Under Section 17, the Arbitral Tribunal can only order a party to take an interim measure of protection and to provide appropriate security in connection with such measure. There are various limiting factors. Therefore, Mr Sethi submitted that although there may be some degree of overlap between the provisions of Section 17 and 9, there is no bar to an order being made under Section 9 by a court of competent jurisdiction during the pendency of arbitration proceedings before an Arbitral Tribunal. To counteract these submissions, Mr Chahda submitted that the order passed by the Arbitral Tribunal and particularly the order passed on 24.01.2005 is not "toothless" as suggested by the learned counsel for NHAI. He submitted that if China Coal violated that order, it stood to loose much more. The bank guarantees would then immediately become encashable. He submitted that while the bank guarantees were approximately for an amount of Rs.51 crores, the equipments that were lying at site were worth only about Rs.8 crores. He further submitted that he was willing to give an undertaking to abide by the Arbitral Tribunal's orders in order to allay any fears that the petitioner (NHAI) may have with regard to enforceability of the order dated 24.01.2005 passed by the Arbitral Tribunal. He also referred to a decision of a Constitution Bench of the Supreme Court in the case of S.B.P. & Co. v. Patel Engineering Ltd. And Another: 2005 (3) Arb. I.R. 285 (SC) and in particular he referred to paragraph 46 of the majority opinion which was a summation of the court's conclusions. In that case, the Supreme Court was considering the nature of the function of the Chief Justice or his designate under Section 11 of the said Act. Essentially, the court concluded that the power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the said Act was not an administrative power, but, a judicial power. While considering this aspect of the matter, the court made certain observations with regard to Section 9 and 17 of the said Act and the same would be worth reproducing:-
4. ...Section 9 deals with the power of the Court to pass interim orders and the power to give interim protection in appropriate cases. It gives a right to a party, before or during arbitral proceedings or at any time after the making of the arbitral award but before its enforcement in terms of Section 36 of the Act, to apply to a Court for any one of the orders specified therein...
6. ...Section 17 confers powers on the arbitral tribunal to make interim orders....
12. ...It has to be noted that under Section 9 of the Act, the District Court or the High Court exercising jurisdiction, has the power to make interim orders prior to, during or even post-arbitration....
18. ...Similarly, Section 9 enables a Court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief as contemplated by the section. When a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the Court which was approached had no jurisdiction to pass any order in terms of Section 9 of the Act, that Court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. There is no indication in the Act that the powers of the Court are curtailed on these aspects. On the other hand, Section 9 insists that once approached in that behalf "the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceeding before it"....
The Supreme Court, inter alia, concluded that:-
(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.
Mr Chadha relied heavily on the above conclusion to submit that once the Arbitral Tribunal is seized of the dispute and in particular for considering an application under Section 17 of the Act for interim measures, a petition under Section 9 would not be maintainable. I am unable to agree with this submission of Mr Chadha. The aforesaid conclusion has to be reconciled with the earlier observations noted above in the said judgment itself which clearly show that the court can pass interim orders during the pendency of arbitral proceedings. The aforesaid conclusion does not impinge upon the powers of the court under Section 9 of the said Act. In fact, it does not deal with the question of interim measures at all. What the Supreme Court has concluded is in essence what Section 5 of the Act itself provides and that is that notwithstanding anything contained in any other law for the time being in force in matters governed by Part-I of the Act, no judicial authority shall interfere except where so provided in the said Part-I. Section 9 falls within Part-I and, therefore, falls within the exception carved out in Section 5 of the said Act. Therefore, even during arbitral proceedings, interim measures can be passed by a court provided the same fall within the measures specified under Section 9(ii). In the present case, NHAI claims a lien on the equipments brought by China Coal to the site for the project. That forms the subject matter of the Arbitration Agreement and, therefore, an application seeking interim measures of protection pertaining to the preservation, interim custody or sale of the said equipments would be covered under Section 9(ii)(a) of the Act as also under Section 9(ii) (c), (d) and (e) of the said Act.
14. Mr Chadha next contended that the observations contained in the judgment of the Supreme Court in MD Army Welfare Housing Organisation Page 0504(supra) and referred to above are obiter inasmuch as those observations are with regard to the Indian Arbitration Act, 1940 and not the present Act of 1996. He also submitted that, in any event, the decision in the case of S.B.P. and Co v. Patel Engineering (supra) holds the field. I am unable to agree with these submissions. Firstly, the conclusion in S.B.P. and Co (supra) does not run counter to the decision in the case of M.D. Army Welfare Housing Organisation (supra). In my view, the powers under Section 9 available to the court and the powers under Section 17 available to the Arbitral Tribunal to make interim measures are independent. There may be some degree of overlap between the two provisions but the powers under Section 9 are much wider inasmuch as they extend to the period pre and post the award as well as with regard to the subject matter and nature of the orders. The pendency of an application under Section 17, therefore, does not denude the court of its powers to make an order for interim measures under Section 9 of the said Act. Obviously, the court being higher in the hierarchy and being a judicial forum, would have primacy insofar as overlapping orders are concerned. Another reason for this is that the orders passed by an Arbitral Tribunal granting or refusing to grant an interim measure under Section 17 are appealable under Section 37(2)(b) of the said Act. So, any order that may be passed by an Arbitral Tribunal is always subject to orders that may be passed by a Court in an appeal preferred thereagainst.
15. In this view of the matter, the question has to be decided by holding that the present application under Section 9 is maintainable.
15.1 Question No.2:
If the answer to the first question is in the affirmative (i.e., the Section 9 application is maintainable), is NHAI entitled to the reliefs and orders claimed in the OMP ?
15.2 A plain reading of clause 63.1 of the contract between NHAI and China Coal would show that if the said clause is to be attracted, then, NHAI would be entitled to take possession of the equipments brought in by China Coal and utilise the same for completing the works. Throughout the proceedings, orders have been passed restraining NHAI from encashing the bank guarantees on the condition that China Coal keeps the bank guarantees alive and, at the same time, does not remove any machinery / equipment from the site during the pendency of the suit. Such orders, earlier passed by this court and subsequently by the Arbitral Tribunal tend to maintain status quo between the parties and to ensure that the machinery and equipment over which NHAI claims a lien is not removed from its possession. It must be remembered that an Arbitral Tribunal, acting under Section 17 can only order a party to the arbitration to take any interim measure of protection in respect of the subject matter of the dispute. The Arbitral Tribunal is seized with the dispute between NHAI and China Coal. However, the orders passed by the Calcutta High Court are in respect of a dispute between China Coal and the Intervenor with which the present Arbitral Tribunal is not concerned. Yet, in its order dated 24.01.2005, it has, inter alia, ordered that:-
(a) The Respondents will not encash the Bank Guarantee till the Application under Section 17 is heared by the AT in detail and decided on merits. At Page 0505the same time, the Claimants will undertake to keep alive the Bank Guarantees during the pendency of the dispute.
(b) The Claimants will not remove any machinery from the site during the pendency of the dispute. This order shall not, however, in any manner effect the orders in respect of the said machinery by the Hon'ble Kolkata High Court.
15.3 The last portion of the order is causing concern to NHAI inasmuch as NHAI is not privy to the contractual arrangement between China Coal and the Intervenor nor is NHAI a party to the proceedings before the Calcutta High Court. It must also be remembered that this order has been passed by the Arbitral Tribunal in the claim filed by China Coal upon an application moved by China Coal under Section 17 of the Act for interim measures. Essentially, China Coal seeks the restraint or injunction against encashment of the bank guarantees by NHAI. Looking at the totality of circumstances, it does appear to me that it would be unfair to NHAI if on the one hand it is restrained from encashing the bank guarantees and on the other the equipments / machinery over which it has a lien is permitted to be removed from the site and / or from its possession. Whatever may be the relationship between China Coal and the Intervenor, it is of no concern to NHAI. All the equipments brought in by China Coal for the project would fall under the definition "contractor's equipment" which does not speak of ownership at all. Therefore, insofar as the present contract between NHAI and China Coal is concerned, the ownership of the equipment is of no consequence. The equipment would all the same be known as "contractor's equipment" whether it was, in fact, owned by China Coal or it was hired from somebody else, including the Intervenor. It is for China Coal to sort out its disputes with the Intervenor without disturbing the arrangement with NHAI.
15.4 Accordingly, I feel that NHAI is entitled to orders under Section 9 of the said Act to the extent that during the pendency of the arbitral proceedings if NHAI is restrained from encashing the bank guarantees, then, China Coal shall keep the same alive and China Coal will also not be permitted to remove any equipment / machinery from the site.
15.5 Question Nos. 3 & 4.
3) Whether the Intervenor can be imp leaded as a party in the petition (OMP 351/2004) and
4) Whether the Intervenor is entitled to seek clarification of the order dated 25.01.2005 passed by this court ?
In view of the discussion with regard to questions 1 and 2 above, it becomes clear that the Intervenor has no privity of contract with NHAI. It is also clear that the Intervenor is not a party to the arbitration proceedings. Section 9 of the Act is with reference to arbitral proceedings just as the Intervenor cannot be a party in the arbitral proceedings pending between NHAI and China Coal, it has no locus standi in the present proceedings. The interim orders that may be passed under Section 9 or Section 17 are with respect to the parties to the arbitration and in connection with the subject matter thereof. As such, the Intervenor's application under Order 1 Rule 10 cannot be allowed and Page 0506nor can its application for modification of the order dated 25.01.2005, which order, in any event, stands merged in the order being passed herein.
15.6 Accordingly, IA Nos.6880/2005 and 6881/2005 are dismissed. OMP 351/2004 stands allowed to the extent that NHAI is restrained from encashing the bank guarantees and China Coal shall keep the same alive and China Coal will also not be permitted to remove any equipment / machinery from the site. However, if China Coal wishes to remove the machinery and equipment lying at the site, it would be only permitted to do so on the lifting of the restraint / injunction on the petitioner NHAI to encash the bank guarantees.