Kiran Raj

The Telangana High Court, comprising Justice Moushumi Bhattacharya and Justice B.R. Madhusudhan Rao, has dismissed an appeal filed by M/s. Corvine Chemicals and Pharmaceuticals Private Limited seeking to continue interim protections in an arbitration dispute. The court held that the Commercial Court had not entertained the application under Section 9 of the Arbitration and Conciliation Act, 1996, on its merits and that the appellants had not demonstrated the inefficacy of relief under Section 17 of the Act before the arbitral tribunal.

The dispute arose from a commercial arbitration matter involving real estate projects—“SreeSumeru” and “SreeTatva.” M/s. Corvine Chemicals and Pharmaceuticals Private Limited filed a petition before the Commercial Court in Hyderabad under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim relief against Srinivasulu Kanday and others to prevent changes affecting their rights in these projects.

Also Read: 'Extrajudicial confession Lacks Credibility, Circumstances Not Proved' : Supreme Court Acquits Murder Accused

The appellants initially secured limited interim protection from the High Court on September 11, 2024, which was subsequently modified by orders on September 27, 2024, and October 1, 2024. The High Court permitted the respondent entity to withdraw funds for statutory dues and staff salaries while requiring transparency in financial transactions. The Commercial Court later closed the Section 9 application, directing the appellants to seek relief from the arbitral tribunal, which had been constituted on November 27, 2024. The appellants then approached the High Court, arguing that the Commercial Court should have continued interim protections until the tribunal ruled on the matter.

The High Court examined whether the Commercial Court had “entertained” the Section 9 application and whether the appellants had demonstrated the inefficacy of relief under Section 17 of the Act. The court observed:

"The Commercial Court makes a categorical statement that it has not entertained the petition filed by the appellants under Section 9 of the Act (C.O.P.No.100 of 2024)."

It further held:

"The High Court in the present Appeal is not competent or armed with the necessary facts to arrive at an opinion on whether the Commercial Court has entertained the C.O.P. or not. We are simply not in a position to take a different view of the matter, i.e., that the Commercial Court had entertained the C.O.P. in view of the categorical recording of the Commercial Court/Trial Court."

The judgment referred to the Supreme Court’s decision in Arcelor Mittal Nippon Steel India Limited v. Essar Bulk Terminal Limited (2022) 1 SCC 712, which held that a court can continue hearing a Section 9 application only if it had already “entertained” the matter before the arbitral tribunal was constituted. The High Court ruled that the Commercial Court had not adjudicated the application on its merits and was therefore correct in declining to proceed further.

The court also examined the second requirement under Section 9(3) of the Act, which allows a court to retain jurisdiction if it finds that relief under Section 17 before the arbitral tribunal would be inefficacious. It stated:

"The burden of making out a case for the Court to hear the matter, even after constitution of the Arbitral Tribunal, rests on the party who resists being relegated to arbitration. The party seeking to put the brakes on arbitration must discharge the onus of proving the existence of factors which would render the relief under Section 17(1) inadequate or inefficacious."

The court found that the appellants had not demonstrated any such factors. It rejected the argument that the respondents might withdraw funds to render arbitration infructuous, noting that sufficient mechanisms existed within the arbitration framework to address financial concerns.

Also Read: Consent Vitiated If Promise To Marry Was Made With Intent To Deceive Into Sexual Relations: Bombay High Court

The High Court dismissed the appeal, holding that the Commercial Court was correct in directing the appellants to seek interim relief before the arbitral tribunal. The judgment concluded:

"We are firmly of the view that there is no reason to doubt the effectiveness of a Section 17 application before the Arbitral Tribunal at this point in time. We have carefully considered each and every aspect of the matter, including balancing the interest of the parties before us. We do not find any grounds to interfere with the impugned order or correct the course of action taken by the Commercial Court. In fact, there is no error in the reasons given by the Commercial Court which requires correction."

Accordingly, the High Court dismissed the appeal and vacated any interim orders in the case.

Advocates Representing the Parties

• For the Appellants: Sri M. Ravindranath Reddy, Senior Counsel, representing Sri B. Srinarayana

• For Respondents 1, 2, and 4 to 7: Sri Sunil B. Ganu, Senior Counsel, representing Smt. Manjari S. Ganu

Case Title: M/s. Corvine Chemicals and Pharmaceuticals Private Limited v. Srinivasulu Kanday
Case Number: COMCA No. 40 of 2024
Bench: Justice Moushumi Bhattacharya, Justice B.R. Madhusudhan Rao

[Read/Download order]