Article Title: On 4th October, 2021, the Supreme Court of India in a judgement, ruled that the interlocutory appeal filed by Bharathi Cement Corporation Pvt. Ltd. is not maintainable.

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On 4th October, 2021, the Supreme Court of India in a judgement, ruled that the interlocutory appeal filed by Bharathi Cement Corporation Pvt. Ltd. (hereinafter referred to as Bharathi Cement') filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act') seeking to challenge an order dated 7th July, 2021 passed by the learned single judge of the Madras High Court, is not maintainable. In its judgement, the Supreme Court held that an appeal under Section 37 of the Act can only be filed against a final order passed under Section 34 of the Act, and cannot be filed against an order passed under Section 9 of the Act.

The present appeal arose from a petition filed by Bharathi Cement under Section 9 of the Act seeking various interim reliefs, and the learned single judge of the Madras High Court had passed an interim order directing the respondent, Union of India, to furnish a bank guarantee and directed Bharathi Cement to furnish a counter-guarantee. Aggrieved by this order, Bharathi Cement filed an appeal under Section 37 of the Act before the division bench of the Madras High Court. The division bench then dismissed the appeal on the grounds of maintainability, which was subsequently challenged before the Supreme Court.

The Supreme Court, in its judgement, noted that the history of jurisprudence dealing with interlocutory appeals under Section 37 of the Act, which initially allowed such appeals, but was later overruled by the larger bench of this Court in Fiza Developers, Civil Appeal No. 4041 of 2019, after which a similar position was reiterated in Krishna Prased v. Sri Jagannath, (2017) 9 SCC 426, which followed the ratio in the case of Anshul Exim & Ors. v. Bhanu Construction, (2019) 12 SCC 438.

The Apex Court observed that both Krishna Prased and Anshul Exim, dealt with the issue, whether an appeal under Section 37 of the Act was maintainable only against a final order under Section 34 of the Act, or whether such an appeal would also lie against an order passed under Section 9 of the Act, but the Court did not examine the scope of the frame of questions, in view of the conflicting decisions in the case of State Bank of India v. Dyna Priya Manufacturing Co. (P) Ltd., (2021) 2 SCC 725, and Parineeta Construction v. Satish Kharbanda, (2021) 5 SCC 161.

The present judgement of the Supreme Court is significant and it settles the law with respect to the maintainability of an appeal under Section 37 of the Act against an order passed under Section 9 of the Act. The Court, in its observation, recognized that with the deletion of Section 6 of the Act, which earlier allowed judicial review of an interim order passed in an arbitration proceeding, Section 9 has become the only source for seeking interim relief.

The Court further noted that any interpretation other than the exclusion of the jurisdiction of Section 37 of the Act would be a direct violation of Article 8 of United Nations Commission on International Trade Law – Model Law on International Commercial Arbitration (hereinafter referred to as 'UNCITRAL Model Law') and would also violate the principle of minimal judicial interference enshrined under Section 5 of the Act.

The Apex Court reiterated that an appeal under Section 37 of the Act is maintainable only against a final order passed by the court under Section 34 of the Act. It was also noted that if the interpretation given by the Appellant were to be accepted that if a civil court has no jurisdiction to entertain an appeal against an interim order passed in a suit and the High Court does not have the jurisdiction, in view of the specific provision in the Code of Civil Procedure (Section 104 and Section 105), as held by a three-judge bench of the Supreme Court in Shanti Kumar case, (1995) 5 SCC 749, it would have an impact on the maintainability of an appeal against an order passed under Section 9 of the Act as well.

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On 4th October, 2021, the Supreme Court of India in its judgement ruled that the appeal filed by Bharathi Cement Corporation Pvt. Ltd. (hereinafter referred to as Bharathi Cement') under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act'), seeking to challenge the order passed by the learned single judge of the Madras High Court dated 7th July, 2021, is not maintainable. The Supreme Court clarified that an appeal under Section 37 of the Act can only be filed against a final order passed under Section 34 of the Act and not against an order passed under Section 9 of the Act.

The present appeal was filed by Bharathi Cement seeking various interim reliefs under Section 9 of the Act, and the learned single judge of the Madras High Court had passed an interim order directing the respondent, Union of India, to provide a bank guarantee and also directed Bharathi Cement to furnish a counter-guarantee. The appeal was then dismissed by the division bench of the Madras High Court on the grounds of maintainability, which was subsequently challenged before the Supreme Court.

The Supreme Court, in its judgement, noted that there has been a progression of jurisprudence concerning interlocutory appeals under Section 37 of the Act, which were initially permissible but later overruled by a larger bench of the Court in Fiza Developers, Civil Appeal No. 4041 of 2019. This position was reiterated in Krishna Prased v. Sri Jagannath, (2017) 9 SCC 426, and again followed in the case of Anshul Exim & Ors. v. Bhanu Construction, (2019) 12 SCC 438.

The Apex Court observed that both the Krishna Prased and Anshul Exim cases dealt with the question of whether an appeal under Section 37 of the Act could be filed only against a final order under Section 34 of the Act, or whether such an appeal could also be made against an order passed under Section 9 of the Act. However, the constitutional Court did not examine the scope of the frame of questions, in light of the conflicting decisions in the case of State Bank of India v. Dyna Priya Manufacturing Co. (P) Ltd., (2021) 2 SCC 725, and Parineeta Construction v. Satish Kharbanda, (2021) 5 SCC 161.

The present judgement of the Supreme Court is crucial as it sets out the law on the maintainability of an appeal under Section 37 of the Act against an order passed under Section 9 of the Act. The Court recognized that with the removal of Section 6 of the Act, which previously permitted judicial review of an interim order passed in an arbitration proceeding, Section 9 has become the sole source for seeking interim relief.

The Court highlighted that any interpretation other than the exclusion of the provisions of Section 37 of the Act would violate Article 8 of the United Nations Commission on International Trade Law – Model Law on International Commercial Arbitration (hereinafter referred to as 'UNCITRAL Model Law') and the principle of minimal judicial interference enshrined under Section 5 of the Act.

The Apex Court reiterated that an appeal under Section 37 of the Act can be maintained only against a final order passed by the court under Section 34 of the Act. It was also observed that if the interpretation given by the Appellant were to be accepted, that the civil court has no jurisdiction to entertain an appeal against an interim order passed in a suit and the High Court does not have the jurisdiction, in view of the specific provision in the Code of Civil Procedure (Section 104 and Section 105), as held by a three-judge bench of the Supreme Court in the Shanti Kumar case, (1995) 5 SCC 749, it would have an impact on the maintainability of an appeal against an order passed under Section 9 of the Act as well.