Nelson Health Spa Pvt. Ltd. vs I.T.D.C. Ltd.

Rajiv Sahai Endlaw, J.—This appeal u/s 37 of the Arbitration and Conciliation Act, 1996 is preferred against the order of the Arbitral Tribunal (Sole Arbitrator) in exercise of powers u/s 17 of the Act. The appellant had entered into an agreement with the respondent for running the health club in hotel Samrat of the respondent. The said agreement is stated to have been renewed from time to time. Disputes and differences having arisen between the parties relating to further renewal of the agreement, the appellant invoked the arbitration clause and filed petitions in this Court for interim relief. The respondent made a statement in the said proceedings that the appellant shall not be dispossessed save by due process of law. Arbitrator was also appointed and arbitration proceedings are underway.

This appeal is preferred against the order dated 27.5.2008 of the Arbitral Tribunal. The appellant applied before the Arbitral Tribunal u/s 17 of the Act stating that the appellant had learnt that the respondent had initiated the process of inviting tenders for running the health club in hotel Samrat and sought order from the Arbitral Tribunal to restrain the respondent from doing so. The respondent resisted the said prayer of the appellant.

The Arbitral Tribunal has by the order impugned in this appeal inter alia held that the jurisdiction u/s 17 of the Act is only to protect the interest of both the parties; that the agreement of the respondent with the appellant had admittedly expired; that allowing the prayer of the appellant would mean binding the respondent with the appellant perpetually and as such no case was made out for restraining the respondent from inviting tenders. The Arbitral Tribunal, however, further ordered that the appellant will not be dispossessed from the premises without following the due process of law, as already undertaken by the respondent and that by the respondent so inviting tenders, no prejudice shall be caused to the appellant and to the arbitration proceedings. With these directions, the application of the appellant u/s 17 was dismissed.

Though, numerous grounds have been taken by the appellant in the memorandum of appeal, but upon inquiry from the counsel for the appellant as to what prejudice the appellant will suffer, if the respondent so invites the tender or processes or finalizes the same, the counsel fairly stated that if that was to be permitted, immediately upon the award of the Arbitrator, if against the appellant, the respondent shall award the contract to the new party, even before the appellant has had a chance to prefer the objections against the said award.

In my view, the aforesaid reasoning of the appellant cannot stand in law. The appellant has remedies available to it for the fears expressed. However, the appellant as a litigant has no right to delay. The appellant cannot be permitted to take advantage of the inherent delays in the functioning of the respondent which is a public sector undertaking. It is common knowledge that the process of inviting tenders, selection and finalization of the agreement is fraught with sanctions of different authorities and takes several months. Unless such process is allowed to be initiated now itself, the respondent even in the event of succeeding in the arbitral proceedings will have to necessarily either be compelled to allow the appellant to function or be forced to shut down the health club, till the time the new contract is finalized, if the process thereof is to take only after the conclusion of the arbitral proceedings. This would amount to giving the appellant an undue advantage over the respondent.

On the contrary, the appellant shall not suffer in any manner, if the tender process is permitted to commence. In the event of the appellant succeeding in the arbitral proceedings, the only consequence would be that the time, money and effort put by the respondent in the tender process would be wasted and the respondent may also become liable, if finalizes the contract with another party to such party. The Arbitral Tribunal has protected the appellant by providing that the tender process initiated by the respondent shall not affect the appellant or arbitral proceedings.

I do not find any merit in other submission also of the counsel for the appellant that the respondent having on an earlier occasion stated before the Arbitrator that it had no intention of initiating the tender process, was not entitled to change its stand. The respondent, if finding arbitral proceedings to be nearing close, decides to now commence the tender process, it cannot be prevented from doing so for the reason of having not earlier shown an inclination for the same.

The grant/non-grant of interim measures u/s 17 necessarily involves the exercise of discretion and such exercise of discretion by the Arbitral Tribunal is not to be lightly interfered in appeal unless the exercise of such discretion is shown to be wholly unjust or arbitrary. In my view, the same principle as in appeals against the orders of courts with respect to orders of interim relief are to apply to orders of the Arbitrator with respect to the interim relief. The Arbitral Tribunal is but a court/Judge of the choice of the parties.

In the present case, I do not find the refusal of the Arbitrator to grant interim relief claimed by the appellant to be unjust or arbitrary. The appeal has no merit and is dismissed.

This Court vide order dated 11.6.2008 while issuing notice of the appeal had directed the respondent to hold back the issuance of tender. The appeal having failed, the said interim order stands vacated. However, in the circumstances of the case, the parties are left to bear their own costs.