Failure To Commence Arbitration Within 90 Days Does Not Vitiate Interim Proceedings: Kerala High Court

The Kerala High Court on 23 February, observed that interim relief granted under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) does not automatically get vitiated merely because arbitral proceedings were not commenced within 90 days as required under Section 9(2) of the Act.

Justice T.R. Ravi clarified that proceedings to enforce the interim relief would also constitute proceedings under Section 9, and therefore the 90-day calculation is not limited to the original interim relief order.

The Bench held:

“Going by the judgment in Amazon.com(supra), even orders for enforcement of a protection order given under Section 9(1) would continue to be an order under Section 9(1). The statutory provision does not say that arbitral proceedings should be started within 90 days of the first order issued under Section 9(1).”

The dispute between the petitioner, God's Own Country Health Resorts International Pvt Ltd. (GOCH Resorts), and the respondent, Marriot Hotels India Pvt Ltd. (Marriot), arose from an operating agreement dated 11 November 2012 regarding the running of a hotel.

Marriot had filed an application under Section 9 of the Arbitration and Conciliation Act, before the Commercial Court, Thiruvananthapuram seeking interim protection measures. On 4 May 2023, the Commercial Court passed interim orders prohibiting the transfer of shares of GOCH Resorts and the alienation of the property.

However, subsequently, on 20 May 2023, GOCH Resorts allegedly began taking steps to rebrand the hotel. Marriot moved the court again and obtained a status quo order on 3 June 2023. An interlocutory application was filed by GOCH Resorts challenging the maintainability of the Section 9 petition. When the status quo order was violated, Marriot initiated contempt proceedings. GOCH Resorts filed the present petition seeking to set aside the entire Section 9 proceedings.

GOCH Resorts contended that since even 90 days after the passing of the interim order, no arbitral proceedings were initiated, and since the court had not granted any extension for commencing the proceedings, the entire proceedings could not be continued.

It relied on Archer Power Systems Private Limited v. Kohli Ventures Company (2017 SCC OnLine Mad 36458) and M/s Manosh Elias Constructions Pvt. Ltd. v. Manuel John [Kerala High Court, Arbitration Appeal No. 75/2017 dated 18 January 2018]. In these cases, it was observed that arbitral proceedings have to be initiated within 90 days after the initial order and that a party moving the court cannot eternally squat on an interim order obtained without commencing the arbitral proceedings.

On the other hand, Marriot submitted that Section 9(2) of the Arbitration and Conciliation Act, does not contemplate the setting aside of the entire proceedings if arbitral proceedings are not initiated within 90 days.

It further pointed out that the proceedings under Section 9 did not stop with the first order and were continuing in the form of petitions alleging violation of the interim order. According to Marriot, the proceedings under different interim applications before the Commercial Court should be treated as an extension of time under Section 9(2).

The Court observed that the only issue before it was whether the failure to commence arbitral proceedings within 90 days after the first order was passed in a petition under Section 9 of the Arbitration and Conciliation Act, would result in the termination of the entire proceedings.

Partly rejecting Marriot's contention, the Court observed that the grant of an interim order would not amount to an extension of the time granted for initiating arbitral proceedings but would amount to a continuation of the interim proceedings initiated under Section 9.

The Court placed reliance on the decision of the Supreme Court in Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others [(2022) 1 SCC 209] (Amazon). The Court held that Section 9(2) only states that arbitral proceedings should be commenced within a period of 90 days from the date of an order granting any interim measure of protection.

The Bench highlighted that the intent of interim protections under the Act is to provide protection in reality. It observed that for this reason, the statute specifically provides that the time can be extended by the Court. It clarified that the provision does not prescribe any limit for such extension. The Court must ensure that real protection is granted, and interpreting the provisions in any other manner would defeat the object of the statutory provision.

Accordingly, it dismissed the petition.