Section 9(3) of the AA is not absolute bar – Application for interim measures against third party even after appointment of Arbitrator under Section 11 between the parties is maintainable

On 8.5.2017, there was Letter of Intent between the applicant and the respondent no.1 to enable the applicant to run hospital on lease.   Thereafter certain events took place.   Subsequently, by the MOU of 19.5.2019, the appellant was to purchase the hospital of the respondent no.1 for Rs.80 crores.  However, due to disputes between the parties, a retired District Judge was appointed as Arbitrator by the High Court.

In the meanwhile, the respondent no.2 issued E-auction notice on 8.4.2021.

The application of the applicant for interim measures for direction to the third party to bring on record its charge over the property of the respondent and to secure its interest to the tune of Rs.3,13,84,043/- with interest at 18% per annum.

The learned Single Judge dismissed the application with liberty to move the Arbitrator under Section 17 of the AA.   In appeal, the Division Bench allowed the appeal.

HELD that the sub-section (3) of Section 9 of AA provides that once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1) unless the Court finds that the circumstances exist which may not render the remedy provided under Section 17 efficacious.  The powers under Section 17 can be only between the parties to the agreement and not again the third party.   The parties can invest the power in the Arbitrator to pass an order against third party also.   Thus, the Arbitrator cannot pass order against third party.  As a result, the remedy of Section 17 of the AA is not efficacious for the appellant to seek interim relief against third party.    It was, therefore, held that the application for interim measures under Section 9 of the AA is maintainable.