20 January 2022 | Hindustan Cleanenergy Ltd v. MAIF Investments India 2 Pte Ltd. and others & connected matter | OMP (I) (COMM) 308/2020 and OMP (I) (COMM.) 211/2021 | C Hari Shankar J | Delhi High Court

Considering two connected cases, the Delhi High Court ordered interim measures, in one case, subject to orders of the tribunal, and in the other, operative for 90 more days after the tribunal makes any orders.

But while doing so, he has made several significant observations on the scope of Section 9 ACA [except Section 9 (i) (ii) (b), which he noted is “governed by its own set of principles”]. He also noted that different considerations apply at each of the three stages under Section 9 ACA--before arbitration, during, and after the award, but before enforcement.

The court heard two petitions concerning a Singapore seated arbitration against, inter alios, Investment Management Firms incorporated in Singapore.

On the scope of Section 9 ACA, the court said:

1. Section 9 is not a pre-arbitral Section 17 and is not intended to choose between the two provisions. Instead, it is intended to provide interim protection to the parties to ensure that arbitral proceedings are not frustrated or the award is not reduced to a paper decree.
2. The test for determining prima facie case is different for the Section 9 court. If the Section 9 court were to undertake the same exercise as a tribunal, the arbitral proceedings would be frustrated.
3. The usual disclaimer that a Section 9 court gives in its decisions—that its views are only prima facie—is, in practice, more a caveat of form than substance. The arbitral tribunal invariably treats observations and findings of the Section 9 court with due deference, and it colours the tribunal’s subjectivity to a greater or lesser degree.
4. The Section 9 court should only examine whether a dispute worthy of consideration by the tribunal exists? Then, it is for the tribunal (and not the Section 9 court) to enter the intricacies of the matter and the arguments on contractual stipulations and other relevant factors.
5. If the case is entirely ephemeral or moonshine, the test of a prima facie case is not met, and the Section 9 court may decline from examining the matter further.
6. To not divest the tribunal of its jurisdiction under Section 17 ACA, it is appropriate to grant interim protection temporarily, subject to the orders to be passed by the arbitral tribunal.

In this case, applying the delineated scope, the court found that it was not possible without an “in-depth” examination—but which the Section 9 jurisdiction does not permit—to even prima facie give a finding on the issues involved. The issues related to, among others, the nature of the liquidated damages clause, if it was penal or not; the applicability of the contract law provisions; the compliance of contractual obligations; if time was of the essence.

Then, finding that the case was not a moonshine, the court considered the following reasons for granting interim measures:

1. When the arbitral tribunal would enter on reference is anybody's guess because the tribunal’s decision on consolidation has been challenged in Singapore court.
2. There is no reasonable expectation that the tribunal would be constituted at any proximate point of time.
3. Later on, there was a chance that the petitioner might be entitled to INR 95 crores. Respondents No. 1 and 2 are SPVs and do not have the assets to honour an arbitral award that may be passed. They are part of the Macquarie group, one of the world's leading financial institutions and asset management companies. Still, it was not suggested that the Macquarie group has agreed to meet the liabilities of Respondents 1 and 2.

Read the decision here.