This appeal was submitted in accordance with Section 37 of the Arbitration and Conciliation Act, 1996 (Arbitration Act), and it challenges a decision made ex-parte by the learned Sole Arbitrator in response to a Section 17 application submitted by the Respondent. By the contested order, the learned Sole Arbitrator granted ex-parte ad-interim reliefs in accordance with the respondent’s application’s plea paragraphs (a), (b), (c), and (d).
According to the argument, the parties had a legitimate expectation that the arbitral tribunal would hear them out before making a decision on any new Section 17 applications when they were already in front of it. This is especially true for the appellant in the circu mstances at hand. It is argued that reading the respondent’s claims in the second Section 17 application would make it abundantly evident that the respondent never prayed for any ex-parte ad-interim orders.
Issue Raised: The question that has to be answered is whether the learned Arbitrator had the right to issue an ex-parte ad-interim order on the Respondent’s Section 17 application given the circumstances of the case.
According to the Appellant, Section 18 read with Section 24 (2) of the Act’s requirements, the parties had a legal right to a hearing before the Arbitral Tribunal made any decisions about any new applications filed under Section 17 of the Act.
The Respondent never requested for an ex-parte ad-interim Order, the Appellant further argued. It was claimed that the Respondent had only asked the Arbitral Tribunal to set a date for hearing the Section 17 application by emailing the Arbitrator.
The Appellant claimed that it was against arbitration law and/or not customary in India for an arbitral tribunal to issue decisions without informing the parties involved in the dispute. In 2006, the Indian legislature made a clear break from the UNCITRAL Model Law on International Commercial Arbitration by including Section 2’s provisions for interim measures and preliminary orders and inserting Article 17B. When the Act was amended in 2015 and 2019, the Indian legislature acknowledged a deviation from these clauses.
The Appellant further cited the Madras High Court decision in Vendhar Movies v. S. Mukundchand Bothra[1], which said that the parties to an arbitration must be given a fair hearing.
It was also emphasised that even if ex-parte ad-interim reliefs were presumed to be sought, Order 39 Rule 3 of the Civil Procedure Code, 1908 (“CPC”) must be complied with. The Supreme Court’s ruling in Shiv Kumar Chadha v. Municipal Corporation of Delhi was used in support of this claim. [2]
The appellant also cited a passage from Michael W. Buchler and Thomas H. Webster’s Commentary from the Handbook of ICC Arbitration whereby the introduction of UNCITRAL Model Law Article 17B was criticised for not being enforceable and for lacking a similar provision in the majority of arbitration statutes.
The Appellant further argued that ex-parte orders should not be made without the parties’ agreement if they have major impact.
The Respondent contended that the reason the Application was made under Section 17 of the Act was to stop the Appellant from defying any orders the Arbitral Tribunal might issue in pending proceedings.
He further argued that the averments in the application, which state that if the requested reliefs are not granted by the Arbitral Tribunal and an award is made, it will be rendered a paper award and there is likely to be more than one proceeding, satisfied the requirements of sub-rule (3) of Order 39 of the CPC.
He said that after reviewing the grievance, the arbitrator had stated that the facts presented in the application called for the status quo to be preserved until the case was considered.
The Respondents further argued that the parties would be given the opportunity to present their own unique petitions to the Arbitral Tribunal when it heard the parties on the delayed date.
The Bombay High Court (“Court”) noted that section 18 of the Act requires the parties to be treated fairly while granting the section 37 application and vacating the ex-parte ad-interim order in favour of Goldbricks Infrastructure Pvt. Ltd. To separate the tribunal from the court, Section 19 of the Act allows parties to agree on a process that the tribunal will follow. Additionally, according to section 24(2), all parties “must be” given adequate notice of “any hearing.”
According to the Court, the caveat regarding the Court’s ability to issue ex-parte orders cannot be applied to arbitral proceedings due to the crystal-clear language of Section 24’s sub-section (2) when read in conjunction with Section 18 of the Act.
Comment: By ensuring that parties receive adequate notice of proceedings, the court has reinforced the fundamentals of natural justice in this ruling.