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M/s Khari Hydro Power Project Pvt. Ltd. v/s Union Territory of J&K & Others

    AA No. 15 of 2021
    Decided On, 02 June 2022
    At, High Court of Jammu and Kashmir
    By, THE HONOURABLE MR. JUSTICE VINOD CHATTERJI KOUL
    For the Applicant: R.A. Jan, Senior Advocate with Shariq R. Jan, Advocate. For the Respondents: Asif Maqbool, Dy. AG.


Judgment Text
1. This petition has been preferred under Section 9 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) for grant of following relief:

(i) Securing the amount in the sum of INR 6,00,56,413.00 (Six Crores Fifty-Six Thousand Four Hundred and Thirteen only) due and payable to the Applicant Company from the Respondents on account of delivered energy/supply of electricity and consumption thereof, necessitated in the wake of breach persisted with by the Respondent in the matter of payment of the dues since the commission of the Hydro-power Project on 27.09.2020;

(ii) With further Orders commanding the Respondents in particular Respondent no.3 to release in due discharge of the Contractual Obligations undertaken by the Respondents under the Power Purchase Agreement dated 21.05.2018, the amount in the sum of INR 6,00,56,413.00 (Six Crores Fifty-Six Thousand Four Hundred and Thirteen only) dues and long overdue and payable to the Applicant Company.

2. The case set up by applicant is that it was allotted Khari-1 Small Hydro Power Development Scheme located at Village Ahama Trigam, Tehsil Banihal-Khari District Ramban, J&K on BOOT (Build Own Operate Transfer) basis, by J&K Energy Development Agency (JAKEDA) vide allotment letter dated 16th September 2013. According to applicant, he availed financial assistance from Indian Renewable Energy Development Agency Limited (IRDA) by way of Term Loan in the sum of Rs.27.25 Crores. It is claimed that aforesaid project was completed and commissioned by applicant company on 27th September 2020 and thereafter commenced supply of electricity to respondent no.2, followed by periodical invoices raised by applicant company for the electricity supplied to respondents and consumed by it/its end consumers. Petitioner claims that respondents have so far consumed electricity supplied worth the sum of Rs.6,00,56,413.00, which is yet to be paid.

3. Objection/counter has been filed by respondents, in which they insist that application does not fulfil the purpose of Section 9 of the Act as there is no immediate cause available to applicant for invoking Section 9. It is also contended that applicant is trying to raise highly disputed questions of facts which can only be adjudicated in case applicant commences arbitration proceedings and that a relief, which may be ultimate and final though not admitted, cannot be granted in the given circumstances.

4. I have heard learned counsel for parties and considered the matter.

5. As is discernible from the file, Clause 10.0 of the Agreement dated 21st May 2018 entered into between the parties, all questions, differences or disputes between the parties arising out of or in connection with this Agreement to the extent of power vested with JKSERC, shall be settled through arbitration in accordance with the provisions of the Jammu & Kashmir Arbitration and Conciliation Act, 1997 and any statutory modifications thereto. It also provides that efforts should be made by parties to settle the dispute through reconciliation before referring the matter to arbitration.

6. In the above backdrop, it would be appropriate to reproduce Section 9 of the Act:

“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 a 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;

(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 exist which may not render the remedy provided under section 17 efficacious.

7. As can be seen from provisions of Section 9 of the Act, a party can apply to a court, before or during arbitration proceedings or at any time after the award is given by arbitrator but before the award is enforced in accordance with Section 36, for preservation of any goods, for interim injunction or appointment of a receiver or for such other interim measure of protection as may appear to the Court to be just and convenient. Pertinent to mention here that Section 9 of the Act permits interim measures and any party to an arbitration agreement can seek relief by way of an interim application from the court under Section 9 before commencement of arbitral proceedings or after pronouncement of award but before its enforcement. Subsections (2) and (3) of Section 9 were introduced by the 2015 amendment. Subsection (3) is a provision in the nature of an exception as the legislature has very clearly communicated its intent that the court does not have the mandate to entertain an application under Section 9 after constitution of the arbitral tribunal. The words being used by the legislature are “the Court shall not entertain”, which makes it crystal clear that once Arbitration has been invoked and the Arbitral Tribunal has been constituted then court shall not entertain applications under Section 9 of the Act. However, an exception to this rule has also been provided, i.e., the court may entertain an application under Section 9 after constitution of arbitral tribunal only under extraordinary circumstances, i.e., when the remedy available under Section 17 can be said to be becoming inefficacious. Otherwise, in other circumstances, remedy in form of an interim relief after the constitution of arbitral tribunal first lies under Section 17 of the Act.

8. It may be added here that the 2015 Amendment substituted the then provisions on the interim measures granted by a tribunal under Section 17 of the Act and replaced it with language that is identical to Section 9 of the Act. As a result, Courts were restrained from usurping the jurisdiction of arbitral tribunal. It is pertinent to mention here that while Section 9 (3) of the Act is only applicable where an arbitral tribunal is constituted, the courts still have to walk a tight rope in granting interim measures and the court, while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot usurp jurisdiction which would otherwise be vested in the arbitrator or the arbitral tribunal.

9. The Court has a duty to ensure that Section 9 of the Act is not misused by litigants who may feel that it is easier to obtain interim relief from a Court, rather than from an arbitrator or arbitral tribunal, to forum shop. The ingredients for obtaining an interim measure under Section 9 of the Act that must be satisfied are: existence of a prima facie case; balance of convenience; and possibility of irreparable loss or prejudice, if interim relief is not granted. However, mere satisfaction of these ingredients does not automatically make out a case for ordering interim measures under Section 9 of the Act.

10. An applicant must also satisfy itself that applicant manifestly intends to initiate arbitral proceedings and circumstances exist, which renders the requirement of ordering interim measures an emergent necessity, which cannot await a Section 17 proceeding, before the arbitrator or arbitral tribunal.

11. In the present case, it is evident that all questions, differences or d

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isputes between the parties arising out of or in connection with the subject-matter of contract is to be settled through arbitration. 12. Interim injunction as provided under Section 9 of the Act is available to the parties. The relief clause (b) prayed for in the instant application to release the amount in favour of applicant, although vehemently exhorted by senior counsel, would amount to deciding the whole case without adjudication of rights, claims and interests of the parties through arbitration. Thus, it would be appropriate to direct respondents to furnish bank guarantee in the amount of Rs.6,00,56,413/-. 13. In view of above, the application is disposed of with a direction to respondents to submit/furnish unconditional and irrevocable Bank Guarantee in the amount of Rs.6,00,56,413/-, before the Registry of this Court. Encashment of Bank Guarantee shall be subject to final outcome of arbitral/arbitration proceedings. 14. Disposed of.
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