Firm Ashok Traders v. Gurumukh Das Saluja

Facts

Disputes arose in connection with a partnership/firm, and a party sought interim measures under Section 9, including reliefs in the nature of appointment of a receiver over a running business. A question arose as to the locus of the applicant and the principles on which the court should exercise its discretion in granting such interim relief.

Issues

• Who may invoke Section 9 of the Arbitration and Conciliation Act 1996 for interim measures of protection.
• What principles govern the court's discretion in appointing a receiver as an interim measure under Section 9.

Arguments

The applicant contended it was entitled to interim protection, including a receiver, to safeguard the subject matter pending arbitration. The opposing party challenged the maintainability and contended that appointment of a receiver over a running business was a serious matter not warranted on the facts.

Held

The Supreme Court held that a person who is not a party to the arbitration agreement cannot apply to the court for interim measures under Section 9. On the question of receivers, the Court held that the most basic principle governing the discretion to appoint a receiver is whether it is just and convenient to do so, and emphasised that appointment of a receiver for a running business is a serious matter which could potentially affect the day-to-day activities of the business. The discretion must therefore be exercised with caution.

Ratio decidendi

Section 9 may be invoked only by a party to the arbitration agreement; the appointment of a receiver as an interim measure is governed by the 'just and convenient' standard and is to be approached cautiously, especially for a running business.

Significance

Frequently-cited authority defining the locus to seek Section 9 relief and setting the standard for appointment of receivers, applied in later decisions such as Shin Satellite v. Jain Studios. It is read alongside the developing case law on whether interim measures under Section 9 may affect third parties who derive rights from a party to the arbitration agreement.

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