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Court can set aside the trial court’s order U/S 9 Arbitration Act on the ground of perversity, when the appellant’s case is a case of admitted liability: High Court of Delhi

Section 9 of Act, 1996 should be exercised in exceptional cases when there is adequate material on record leading to a definite conclusion that the respondent is likely to render the entire arbitration proceedings infructuous or where there is an admitted liability. This was held in SAVITA JAIN SOLE PROPRIETOR OF M S NAVKAR SALES v.  M/S KRISHNA PACKAGING [FAO (COMM) 62/2021] in the High Court of Delhi by division bench consisting of JUSTICE MANMOHAN and MS. JUSTICE ASHA MENON

Facts are that the appellant has filed an appeal challenging the order passed by the trial court whereby the petition filed by the appellant under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the „Act, 1996‟) was dismissed with costs.

The counsel for the appellant submits that discretionary relief enshrined under Section 9 of the Act, 1996 should have been exercised as there was adequate material on record leading to a definite conclusion that the respondent had “admitted its liability”. He placed reliance on Rajendran and Others Vs. Shankar Sundaram and Others.

The for the respondent stated that the appellant had failed to establish urgency in this matter and that there was no admitted liability. The appellant had failed to establish that the respondent was frittering away/disposing of his assets so as to defeat the very purpose of Arbitration.

The court referred to the order of the Coordinate Bench of the Court in the case of Ajay Singh v. Kai Airways Private Limited, wherein the following observations were made,  “Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the weight to be given to the materials on record, a fact-dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be principled, premised on some known guidelines – therefore, the analogy of Orders 38 and 39. Equally, the court should not find itself unduly bound by the text of those provisions rather it is to follow the underlying principles.”

Considering the facts of the case and keeping in mind the provisions of law applicable. The Court held that the trial court in the present case had acted contrary to the settled principles of law as well as facts, it set aside the trial court‟s order on the ground of perversity as the appellant‟s case is a case of admitted liability. Thus the respondent was directed to furnish a bank guarantee while disposing of the appeal.

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