Tribunal can now file contempt in relevant court against parties violating its orders

News Update

Appeal to the Hon’ble Supreme Court arose from the judgment of the Bombay High Court dated 27 October, 2015 where the issue was that the Hon’ble Bombay High Court had construed section 27(5) of the Arbitration and Conciliation Act, 1996, in a restrictive manner. In the present case, the interim order of the Arbitral Tribunal under section 17 of the Arbitration and Conciliation Act, 1996 had been violated. It was held by the Supreme Court that the Arbitral Tribunal is empowered to make representation to the appropriate court for contempt, if the action of the parties in not complying with the order of the tribunal amounts to contempt of court.

The Hon’ble Supreme Court in the recent case of “Alka Chandewar (Appellant) v Shamshul Ishrar Khan (Respondent) held that the arbitral tribunal in an arbitration is empowered to make a representation/reference to the appropriate court for any action of the parties amounting to contempt to be tried under the Contempt of Courts Act, 1971 if the parties violate the orders, including the interim orders passed by such tribunal during the course of the arbitration proceedings under section 27(5) of the Arbitration and Conciliation Act, 1996.

The present appeal had arisen from the fact that the sole arbitrator appointed by the parties had passed an interim order under Arbitration and Conciliation Act, 1996, s 17 restraining the respondent from disposing of particular flats without taking the leave of the arbitrator however. in breach of the order, the respondent allegedly transferred the flats without taking the leave of the arbitrator. Subsequently the arbitrator, referred the aforesaid contempt of the order to the High Court to pass necessary orders under Arbitration and Conciliation Act, 1996, s 27(5). The High Court had held that, “ In view of the above discussion, Section 27(5) of the Arbitration and Conciliation Act, 1996 does not empower the Tribunal to make representation to the Court for contempt if the orders including the interim orders passed by the Arbitrator except in respect of taking evidence are violated by the party.”

On appeal, the Hon’ble Supreme Court heard the contention of both parties wherein the Appellant had argued that Arbitration and Conciliation Act, 1996, s 9 and Arbitration and Conciliation Act, 1996, s 17 being alternative remedies available to the parties during the conduct of arbitration proceedings, if orders made under Arbitration and Conciliation Act, 1996, s 17 were deemed unenforceable or unactionable then the same would be rendered otiose. It was also argued that Arbitration and Conciliation Act, 1996, s 27 does not leave any doubt as to the scope and ambit of the court’s power to punish for contempt of orders made by the Arbitral Tribunal. On the other hand, the Respondent contented that the marginal note of this section made it clear that Arbitration and Conciliation Act, 1996, s 27(5)would only apply to assistance in taking evidence and not to any other contempt that may be committed. It was further highlighted that this lacuna in the law has now been filled pursuant to the 246th Law Commission Report, inserting Arbitration and Conciliation Act, 1996, s 17(2) by the Amendment Act of 2015.

The Hon’ble Supreme Court, after hearing both the contentions, came to the conclusion that the Arbitral Tribunal had the power to refer to appropriate court for contempt if the parties violated the orders of the tribunal, subsequently the case was sent back to the High Court for fresh consideration.

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