Case summary

Case details:

Case name: Sundaram Finance Ltd. V. NEPC India Ltd.

Case no. Civil Appeals no. 141-143 of 1999

Citation: (1999) 2 SCC 479

Judges: Justice Sujata V. Manohar and Justice B.N. Kirpal.

Summary of facts

The facts of the case are that the respondent had entered into purchase agreement with the
appellate in dealing with supply of two wind turbine generators. the terms of the agreements are
contemplated that the payments being made in instalments by the respondent accordingly. Out of 36
instalments in total, only 15 instalments were made and the other were in default, in spite of several
demands requested by the appellant. Though the agreement was prior to the act of 1996, the
arbitration clause was made in accordance with the provision of the Arbitration Act of 1940. The
appellant observed that the other litigation was pending before trial court against the respondent,
filed an application under section 9 of the Arbitration and Conciliation Act of 1996 for the
appointment of the advocate commissioner to take the custody and possession of turbines.

Respondent filed a Writ Petition under Article 227 of the Indian Constitution before Madras High
Court as a matter of non-maintainability of the case as the matter was pending and the arbitrator
was not appointed. High Court observed that section 41 of the Act of 1940 and the relevant provision
of the Act of 1996 are no much difference in dealing with 2nd schedule of the Act of 1940 and interim
4 of the interim injunctions. Along with the observance of no jurisdiction to the trial court to grant
such interim measures.

Issues involved

Whether the application under section 9 is admissible even before the commencement of the
Arbitration Proceedings?

Whether the sections of Arbitration Act of 1940 are same Pari Materia to the Arbitration and
Conciliation Act of 1996?

Arguments from both sides

It is observed that the provisions of the Arbitration Act of 1940, the power of the Court to pass the
Interim Order are through sec 41(b) and 2nd schedule of the Act. The Learned Counsel, Mr. Gopal
Subramaniam, observed that the pendency of any proceedings in the court in dealing the relations to
the Arbitration proceedings, be the preconditional for the exercise of the power of the civil court
under Second Schedule as per the Act.

Before the promulgation of the Act of 1996, there were many statutes governing the Arbitration
laws. The present Act of 1996 is to consolidate and amend the laws related to Domestic,
International and Foreign Arbitration. Along the side, the interpretation of the section 9 of the Act of
1996 in dealing with the Interim measure is also observed in accordance with the section 36 of the
Act and in dealing with the term commencement of the Arbitral proceedings which commences on
the request of the disputes referred to arbitration received by the respondent.

In dealing with the legislative, the Arbitration Act of 1940, the appointment of arbitrator and for the
application for the interim relief is under section 20 along with the 2nd schedule of section 41(b) of
the act. However, in observing the sections of the Arbitration and Conciliation Act of 1996 does not
contain any provisions similar to section 20 nor the section 9 or 17 of the Act.

Therefore, High Court made a wrong decision in referring to the provisions of 1940 Act with the Act
of 1996, while interpreting section 9 of the Act. The observance of the provision signifies that the
court for an interim measure before or during Arbitral Proceedings is not amounting to incompatible
within the definition of an Arbitration Agreement.

Judgement and Reasoning

On the observance made in the case of channel Tunnel Group Ltd. V. Balfour Beatty Construction
Ltd1., even the jurisdiction of England courts observed that the mechanism to grant an Interim
Injunction, in spite of parties have agreed to settle with the dispute through Arbitration. The court
observed that it was rightly argued by the learned counsels that if the court exercise the jurisdiction
under section 9 before the Arbitral proceedings have commenced, the party explicitly manifest the
intention to arbitration.

The Court observed that as per section 82 of the Act of 1996, the High court have the power to make
rules in consistent with the Act. The Supreme Court also observed that the High Courts of the sates
are requested to frame appropriate rules for the quicks and satisfactory disposal of the arbitration
cases. In dealing with the provisions the Act of 1996 is completely different of the Act of 1940 and
have to interpreted independently without any Pari Material. The Act of 1996 have to be interpreted
without any influence of principles of the Act of 1940. In observing all the arguments that are been
put forth, High Court have committed an error in coming conclusion that the trial court had no
jurisdiction. Thus, the court set aside the judgment of High Court and to look into the merits of the
case in deciding the matter for the proper adjudication.

1
(1992) 2 WLR 741