Court Hearing Appeal U/S 37 A&C Act Can Direct Furnishing Of Security Even Without Application U/S 9: Calcutta HC
The Calcutta High Court bench of Justice Arindam Mukherjee has held that while disposing of an appeal under Section 37 of the Arbitration Act, the Court is empowered under Order 41 of the Civil Procedure Code, 1908 (CPC) to impose conditions and direct the respondent to furnish security for the loan as per the Agreement, even in the absence of a formal application under Section 9 of...
The Calcutta High Court bench of Justice Arindam Mukherjee has held that while disposing of an appeal under Section 37 of the Arbitration Act, the Court is empowered under Order 41 of the Civil Procedure Code, 1908 (CPC) to impose conditions and direct the respondent to furnish security for the loan as per the Agreement, even in the absence of a formal application under Section 9 of the Arbitration Act, since such a course does not contravene any of the provisions of the Act.
The present appeal was filed under section 37 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) against an order passed by the Arbitrator by which it attached the property before judgment under section 17 of the Arbitration Act.
The Appellants submitted that the appointment was made in contravention of the law laid down by the Supreme Court in a catena of judgments therefore the impugned order suffers from a lack of jurisdiction.
The Respondent submitted that in view of the default and the stand taken by the appellants that they are not in a position to pay any installment, this Court being the principal Civil Court applying the provisions of Section 9 of the Arbitration Act should direct the appellants not to operate their bank accounts without leaving a substantial balance.
The court noted that the arbitration clause gives exclusive power to the lender to appoint the arbitrator without any participation of the borrower. In the clause, no specific arbitrator has been named granting absolute authority to the lender to appoint the arbitrator through its Principal Officer. However, as per section 12(5) of the Arbitration Act read with fifth schedule and the Supreme Court's judgments in TRF Limited and Perkins, a Principal Officer is ineligible to appoint an arbitrator due to a direct connection with the party. Therefore, the appointment was void.
It further held that the court under section 9 of the Arbitration Act is not barred from granting interim relief even if an order passed by the Arbitrator under section 17 of the Arbitration Act was without jurisdiction.
The court further observed that once the court comes to a conclusion that the mandate of the already appointed arbitrator has to be terminated due to ineligibility under section 12(5) read with fifth schedule of the Arbitration Act, the court can still appoint a substituted arbitrator under section 15 of the Arbitration Act without relegating the parties to file a formal application under section 11 of the Arbitration Act.
It further observed that while the arbitration act excludes applicability of the CPC from the proceedings before the Arbitral Tribunal, its applicability before courts is still not settled.
The court held that clause 3.2 of the Agreement empowers the respondent to demand security for the loan advanced. The Appellants in the present case are seeking stay of the impugned order. Even if the impugned order is set aside for want of jurisdiction, the court is still empowered to impose conditions under Order 41 of the CPC which is not inconsistent with any of the provisions of the Arbitration Act or materials on record. Therefore, the court can direct the Appellants to furnish a security even without an application under section 9 of the Arbitration Act.
It concluded that “In applying the provisions of Section 9 of the 1996 Act, the rigours of Order 38 Rule 5 or Order 39 Rule 1 and 2 of CPC will not come in the way as Section 9 of 1996 Act provides for interim measure, the 1996 Act is a self-contained Code and that the provisions of the 1996 Act are to be applied first as held in Pam Development (supra).”
Accordingly, the present appeal was disposed of.
Case Title: BEEVEE ENTERPRISES & ORS. VERSUS L & T FINANCE LIMITED
Case Number: APOT 208 OF 2025 IA NO. GA 1 OF 2025
Judgment Date: 11/09/2025
For the Appellants : Ms. Kruti Bhavsar (VC), Mr. Jnanada Prosad Roy, Mr. Nepesh Majhi. ...... Advocates
For the Respondent : Mr. Paritosh Sinha Ms. Shrayashee Das, Mr. Rohan Kr. Thakur, ...... Advocate