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REPORTABLE

  IN THE SUPREME COURT OF INDIA                CIVIL APPELLATE JURISDICTION                              CIVIL APPEAL NO.8720 OF 2017        (Arising out of S.L.P.(Civil) No.3576 of 2016)

                                                    Alka Chandewar ..    Appellant(s)                   

  Versus Shamshul Ishrar Khan ..    Respondent(s)                                                      J U D G M E N T

R.F. NARIMAN, J.

Leave granted.

The present appeal arises from the judgment of the Bombay High Court dated 27th October, 2015, in which the High Court has construed Section 27(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”)  in  a  somewhat  restrictive  manner.   The  facts necessary to appreciate the point involved in this appeal are that on 7th October, 2010, the sole Arbitrator appointed by the parties passed an interim order under Section 17 of the said Act, in which it was mentioned that no further flats  were  to  be  disposed  of  without  the  leave  of  the Arbitral Tribunal.  In breach of this order, it is alleged that  on  14th October,  2010  the  respondent  in  fact

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transferred five such flats.  By the order passed on 22nd

March, 2012, it was held by the learned Arbitrator that the order of 7th October, 2010 had, in fact, been breached by the respondent and certain other interim directions were made by the aforesaid order.  Ultimately, by an order dated 5th May, 2014, the learned Arbitrator referred the aforesaid contempt of the order dated 7th October, 2010 to the High Court to pass necessary orders thereon under Section 27(5) of the Act.

In the judgment under appeal, the High Court held:

“In  view  of  the  above  discussion,  Section 27(5) of the Arbitration and Conciliation Act, 1996 does not empower the Tribunal to make representation to the Court for contempt if the orders including the interim  orders  passed  by  the  Arbitrator  except  in respect of taking evidence are violated by the party. The Contempt Petition being the representation made by the Tribunal is beyond the period of limitation and is not maintainable in law.  Moreover, the final award  of  Rs.8  crores  is  granted  in  favour  of  the petitioner by the Arbitrator.”

We have heard learned counsel for the parties.  Shri B.H. Marlapalle, learned senior counsel appearing on behalf of the appellant, has argued that Sections 9 and 17 being alternative remedies available to the parties before the Tribunal,  if  orders  made  under  Section-17  were unenforceable, they would be mere ropes of sand as a result of which the provision would be rendered otiose.  He also argued that Section 27 of the Act does not leave any doubt as to the scope and ambit of the Court's power to punish

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for contempt of orders made by the Arbitral Tribunal.  He relied upon a Delhi High Court judgment, and a judgment delivered by this Court reported in 2007 (13) SCC 220.

On  the  other  hand,  Shri  Rana  Mukherjee,  learned senior counsel appearing on behalf of the respondent, has supported the High Court judgment.  However, he very fairly states before us that he does not support the High Court judgment on the aspect of limitation.  According to him, the marginal note of Section 27 makes it clear that Section 27(5) would only apply to assistance in taking evidence and not to any other contempt that may be committed.  According to him, this lacuna in the law has now been filled pursuant to the 246th Law Commission Report, which he has referred to and  relied  upon,  after  which  Section  17(2)  has  been inserted by the Amendment Act of 2015.

Having  heard  learned  counsel  for  the  parties,  we first set out the relevant statutory provisions as under:

9.  Interim measures, etc. by Court  –(1) 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 section 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;

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(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. [(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure  of  protection  under  sub-section  (1),  the arbitral  proceedings  shall  be  commenced  within  a period of ninety days from the date of such order or within such further time as the Court may determine. (3) Once the arbitral tribunal has been  constituted, the Court shall not entertain an application under sub-section  (1),  unless  the  Court  finds  that circumstances exists which may not render the remedy provided under section 17 efficacious.] 17.Interim  measures  ordered  by  arbitral  tribunal- [(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal- (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:-

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(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  arbitral  tribunal  to  be  just  and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it. (2)  Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.] 27.  Court assistance in taking evidence –(1) The arbitral tribunal, or a party with the approval of the arbitral tribunal,   may apply to the court for assistance in taking evidence. (2) the application shall specify- (a) the names and addresses of the parties and the arbitrators; (b) the general nature of the claim and the relief

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sought; (c) the evidence to be obtained, in particular, - (i) the name and address of any person to be heard as witness or  expert  witness  and  a  statement  of  the subject-matter of the testimony required; (ii) the description of any document to be produced or    property to be inspected. (3)  The  Court  may,  within  its  competence  and according to its rules on taking  evidence, execute the request by ordering that the evidence be provided directly to the arbitral tribunal. (4)  The  Court  may,  while  making  an  order  under sub-section  (3),  issue  the same  processes  to witnesses as it may issue in suits tried before it. (5) Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt  to the arbitral tribunal during the conduct of arbitral proceedings,  shall  be  subject  to  the  like disadvantages, penalties and punishments by order of the  court  on  the  representation  of  the  arbitral tribunal as they would incur for the like offences in suits tried before the Court. (6) In  this  section  the  expression  “Processes” includes  summonses  and commissions  for  the examination  of  witnesses  and  summonses  to  produce documents.

      If Section 27(5) is read literally, there is no difficulty in accepting the plea of learned senior advocate for  the  appellant,  because  persons  failing  to  attend  in accordance  with  the  court  process  fall  under  a  separate category from “any other default”.  Further, the Section is not confined to a person being guilty of contempt only when failing  to  attend  in  accordance  with  such  process.  The Section  specifically  states  that  persons  guilty  of  any

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contempt to the Arbitral Tribunal during the conduct of the Arbitral  proceedings  is  within  its  ken.   The  aforesaid language  is,  in  fact,  in  consonance  with  the  Chapter heading of Chapter V, “Conduct of arbitral proceedings”. Further, it is well settled that a marginal note can be used as an internal aid to interpretation of statutes only in order to show what is the general drift of the section. It may also be resorted to when the plain meaning of the section is not clear. In the present case we must go by the plain meaning of sub-section (5). This being the case, we find it difficult to appreciate the reasoning of the High Court.  Also,  in  consonance  with  the  modern  rule  of interpretation of statutes, the entire object of providing that a party may approach the Arbitral Tribunal instead of the  Court  for  interim  reliefs  would  be  stultified  if interim orders passed by such Tribunal are toothless.  It is to give teeth to such orders that an express provision is made in Section 27(5) of the Act.

In fact, the Delhi High Court by the judgment dated 18th August, 2009, reported in 2009 (112) Delhi Reported Judgments 657, has correctly construed Section 27(5) of the Act. Further, it must be remembered that this Court in M/s Ambalal Sarabhai Enterprises vs. M/s Amrit Lal & Co. & Anr. (2001)  8  SCC  397  has  held  that  parties  to  arbitration proceedings are put to an election as to whether to apply for interim relief before the Tribunal under Section 17 or

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before the Court under Section 9.  Such election would be meaningless  if  interim  orders  passed  by  the  Arbitral Tribunal were to be written in water, as all parties would then go only to the Court, which would render Section 17 a dead letter.

Coming  to  Shri  Rana  Mukherjee's  submission  that sub-section  (2)  of  Section  17  introduced  by  the  2015 Amendment Act now provides for the necessary remedy against infraction  of  interim  orders  by  Tribunal,  suffice  it  to state that the Law Commission itself, in its 246th report, found  the  need  to  go  one  step  further  than  what  was provided in Section 27(5) as construed by the Delhi High Court (supra).  The Commission, in its report, had this to say:

POWERS OF TRIBUNAL TO ORDER INTERIM MEASURES  

46. Under section 17, the arbitral tribunal has the power to  order  interim  measures  of  protection  unless  the parties have excluded such power by agreement.  Section 17 is an important provision, which is crucial to the working of the arbitration system, since it ensures that even for the purposes of interim measures, the parties can  approach  the  arbitral  tribunal  rather  than  await orders from a Court.

The  efficacy  of  section  17  is  however, seriously compromised given the lack of any suitable statutory  mechanism  for  the  enforcement  of  such interim orders of the arbitral tribunal. 47.  In  Sundaram Finance Ltd. v. NEPC India Ltd., (1999) 2 SCC 479, the Supreme Court observed that though section 17 gives the arbitral tribunal the power to pass orders, the same cannot be enforced as orders of a court and it is for this reason only that section 9 gives the court power to pass interim orders  during  the  arbitration  proceedings. Subsequently,  in  M.D.  Army  Welfare  Housing

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Organisation v.  Sumangal Services Pvt. Ltd., (2004) 9 SCC 619 the Court had held that under section 17 of the Act no power is conferred on the arbitral tribunal to enforce its order nor does it provide for judicial enforcement thereof. 48.   In  the  face  of  such  categorical  judicial opinion, the Delhi High Court attempted to find a suitable legislative basis for enforcing the orders of  the arbitral  tribunal under  Section 17  in the case of  Sri Krishan v. Anand, (2009) 3 Arb LR 447 (Del) (followed in Indiabulls Financial Services v. Jubilee  Plots,  OMP  Nos.452-453/2009  Order  dated 18.08.2009).   The  Delhi High  Court held  that any person  failing  to  comply  with  the  order  of  the arbitral tribunal under section 17 would be deemed to be “making any other default” or “guilty” of any contempt to the arbitral tribunal during the conduct of the proceedings” under section 27(5) of Act.  The remedy of the aggrieved party would then be to apply to the arbitral tribunal for making a representation to  the  Court  to  mete  out  appropriate  punishment. Once such a representation is received by the Court from  the  arbitral  tribunal,  the  Court   would  be competent to deal with such party in default as if it is in contempt of an order of the Court, i.e., either  under  the  provisions  of  the  Contempt  of Courts Act or under the provisions of Order 39 Rule 2A Code of Civil Procedure, 1908. 49.   The  Commission  believes  that  while  it  is important to provide teeth to the interim orders of the  arbitral  tribunal  as  well  as  to  provide  for their enforcement,  the judgment of the Delhi High Court  in    Sri  Krishan  v.  Anand   is  not  a  complete solution. The Commission has, therefore, recommended amendments to section 17 of the Act which would give teeth to the orders of the Arbitral Tribunal and the same would be statutorily enforceable in the same manner as the Orders of a Court.  In this respect, the  views  of  the  Commission  are  consistent  with (though do not go as far as) the 2006 amendments to Article 17 of the UNCITRAL Model Law.

Pursuant to this report, sub-section(2) to Section 17 was added by the Amendment Act 2015, so that the cumbersome procedure  of  an  Arbitral  Tribunal  having  to  apply  every time to the High Court for contempt of its orders would no

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longer be necessary.  Such orders would now be deemed to be orders of the Court for all purposes and would be enforced under the Civil Procedure Code, 1908 in the same manner as if they were orders of the Court.  Thus we do not find Shri Rana Mukherjee's submission to be of any substance in view of the fact that Section 17(2) was enacted for the purpose of providing a “complete solution” to the problem.  

Accordingly, we allow the appeal and set aside the judgment of the Bombay High Court.  The matter is remanded to decide the alleged contempt on facts. It would be open for the respondent to argue before the High Court that he has, on the facts of the case, not committed any contempt.

                                 .....................J.                [ROHINTON FALI NARIMAN]                                 

                                        ....................J.                  [SANJAY KISHAN KAUL]  NEW DELHI, JULY 06, 2017.