2 October, 2018
The Hon'ble Bombay High Court (“the Court”) in its recent judgment of Prabhat Steel Traders Ltd. vs Excel Metal Processors Pvt. Ltd. & Ors. (Arbitration Petition Nos. 619/2017) along with a batch of appeals has decided on the question as to whether a third party (not party to the arbitration agreement) can le an appeal under section 37 of Arbitration & Conciliation Act 1996 (“the Act”) arising out of interim measures granted by the arbitral tribunal under section 17 of the Act after obtaining the leave of the Court or otherwise.
The Court observed that the third party cannot apply to the arbitral tribunal for modication and for vacating the order of interim measures passed by such arbitral tribunal. However, in the case of a party to the arbitration agreement applying for interim measures under section 9 of the Act before a court, if any third party is likely to be affected by such interim measures as prayed for by a party to the arbitration agreement, no such interim measure can be granted against the third party unless it is impleaded as a party to the proceedings under section 9.
The Court further held that, nonetheless, the third party has an option of being impleaded as party to the section 9 proceedings and can apply for modication and/or variation of the orders for interim measures granted by the Court. In the view of the Court, such third party cannot be asked to le a civil suit and to challenge the order for interim measures granted by the arbitral tribunal.
Moreover, the Court held that in view of the fact that the powers of the Court under section 9 of the Act and powers of the arbitral tribunal under section 17 of the Act to grant interim measures are identical in light of the 2015 amendment to the Act. Therefore, even a third party who is directly or indirectly affected by the interim measures granted by the arbitral tribunal will have a remedy of an appeal under section 37 of the Act. In this regard, the Court observed though a stranger to an arbitration agreement cannot be allowed to be impleaded as a party to the arbitral proceedings before the arbitral tribunal and more particularly under section 17 of the Act nor can such third party seek an impleadment to the proceedings before the arbitral tribunal, he is however not precluded from challenging the said order before the arbitral tribunal under section 17 if he so aggrieved by such order by invoking the remedy of an appeal under section 37 of the Act.
The Court opined that, in its view, section 34 of the Act also refers to the expression “party” which is absent in section 37 of the Act. The fact that the expression “party” is absent in section 37 of the Act makes the legislative intent clear that the said expression “party” deliberately not inserted so as to provide a remedy for an appeal to a third party who is affected by an interim measures granted by the arbitral tribunal or by the Court in proceedings led by and between the parties to the arbitration agreement. A perusal of section 17 and 9 of the Act which provide for interim measures
which can be granted by the arbitral tribunal or the Court respectively clearly indicates that very exhaustive powers are given to the tribunal as well as to the Court for granting interim measures which may be affect a third party. Such party whose interest is prejudiced by such interim measures obtained by the parties to the arbitration agreement cannot be forced to wait till the outcome of the arbitration proceedings culminating into an award and till such time, an execution application is led by a successful party after the other party exhausting all his remedies provided under the Act fails.
In conclusion, the Court granted the third party (Petitioner) the leave to appeal against the impugned order passed by the arbitrator and set aside the interim measures granted by the arbitrator.
For further information, please contact:
Vineet Aneja, Partner, Clasis Law
vineet.aneja@clasislaw.com
