New Delhi, May 26 (KNN) In an important judgement, The Calcutta High Court held that the present application under Section 9 of the Arbitration and Conciliation Act, 1996, is not maintainable as the mandatory conciliation process under the MSMED Act, 2006, has not yet been concluded.
The court observed that while Section 9 does allow interim relief, it is available only to parties to an arbitration agreement.
In the absence of such an agreement, and with the conciliation process ongoing, the petitioner could not invoke this provision.
It emphasized that Section 77 of the Arbitration Act prohibits judicial proceedings during conciliation, except in exceptional circumstances—which did not apply here.
In a dispute involving a registered MSME engaged in textile manufacturing and a respondent company that failed to make payments for supplied garments, the petitioner had sought interim relief under Section 9 of the Arbitration Act.
The petitioner feared that the respondent might dissipate assets or siphon funds, especially after a cheque issued by the respondent was dishonoured.
The petitioner argued that as an MSME, it was entitled to protections under both the MSMED and Arbitration Acts, asserting that interim measures should be allowed during conciliation under Section 18 of the MSMED Act.
The respondent contended that Section 9 of the Arbitration Act could only be invoked after conciliation fails and arbitration proceedings commence.
Since no arbitration agreement existed between the parties, and conciliation had not yet concluded, the petitioner could not seek relief under the Arbitration Act at this stage.
Concluding that the legislature intended conciliation to precede arbitration to avoid adversarial proceedings, the court held that Section 9 reliefs are unavailable during conciliation. It dismissed the application as premature and legally unsustainable.
Interim relief under Section 9 serves as a crucial safeguard to prevent a party from taking steps that might undermine the arbitration process or render the final award ineffective. It may include injunctions, preservation of assets, or securing the amount in dispute.
(KNN Bureau)
