Wide Powers of Court under Section 9 of the A&C Act: Calcutta High Court Clarifies the Burden of Proof in Interim Relief Applications

Introduction

In a recent judgment, the Calcutta High Court shed light on the scope of powers conferred upon a court under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) and distinguished them from the provisions of Order XXXVIII Rule 5 of the Code of Civil Procedure (CPC). The court held that an applicant seeking interim relief under Section 9 of the A&C Act is not burdened with the strict requirements of Order XXXVIII Rule 5 of the CPC, particularly the necessity to establish the dissipation of assets. 

This article analyzes the court's ruling in the case of Uphealth Holdings Inc v. Glocal Healthcare Systems Pvt Ltd, highlighting the implications of the decision.

Factual Background

The dispute arose from a Share Purchase Agreement between the Petitioner and Respondent. The agreement contained an Arbitration Clause with the seat in the US. After the Respondents failed to transfer control and management of Respondent no.1, the Petitioner invoked arbitration proceedings. The Arbitrator issued an award in favor of the Petitioner, directing the Respondents to pay a substantial amount.

The Petitioner approached the Calcutta High Court under Section 9 of the A&C Act, seeking the deposit of the awarded amount with the court or the provision of bank guarantees. Additionally, the Petitioner requested the court to order the Respondents to file an affidavit declaring their assets and liabilities.

Submissions and Court's Analysis

The Respondents raised various objections, including lack of jurisdiction, prematurity of the affidavit of assets request, ongoing bankruptcy proceedings in the USA, and the alleged unenforceability of the award under Section 48 of the A&C Act. Additionally, they argued that the interim relief application did not fulfill the requirements of Order XXXVIII Rule 5 of the CPC since no allegation of asset dissipation was made.

The Calcutta High Court rejected the objection regarding the non-fulfillment of Order XXXVIII Rule 5 of the CPC. It clarified that the powers of the court under Section 9 of the A&C Act are broader than those available under Order XXXVIII Rule 5 of the CPC. The court emphasized that applicants under Section 9 should not be burdened with the rigorous requirements of the CPC.

Moreover, the court dismissed the objection regarding the award's validity due to the time limit and held that the award was passed within the permissible period under the ICC Arbitration Rules.

The court further opined that the ease of doing business in India is a matter of public policy, and the Respondents' actions, including defiance of tribunal and court orders and fraudulent conduct, undermined this policy.

Considering the quantum of damages awarded, the Respondents' conduct in avoiding liability, and the risk of asset dissipation, the court found it necessary to order the Respondents to file an affidavit of their assets. It held that such an order facilitates the enforcement of the award, which the court can grant in a Section 9 application. The court was satisfied that the Respondents had failed to establish any grounds under Section 48 of the A&C Act.

Conclusion

The judgment of the Calcutta High Court in Uphealth Holdings Inc v. Glocal Healthcare Systems Pvt Ltd clarifies the expansive powers of a court under Section 9 of the A&C Act. The ruling confirms that applicants seeking interim relief under Section 9 are not burdened with the requirements of Order XXXVIII Rule 5 of the CPC. This decision provides clarity and facilitates the effective enforcement of arbitral awards, ensuring that the objectives of the A&C Act, including ease of doing business, are upheld.