Proceedings Under Section 9 Of A&C Act Cannot Be Used For Enforcement Of The Conditions Of A Contract: Gujarat High Court

[17 June 2022] The Gujarat High Court has ruled that issues involving enforcement of the conditions of a Franchise Agreement cannot be the subject matter of an application for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Bench, consisting of Justices N.V. Anjaria and Samir J. Dave, held that conditions of a contract can be enforced only when the rights of the parties are finally adjudged and crystallised by the Arbitrator. The Court ruled that proceedings under Section 9 of the A&C Act are only for interim measures and that they cannot be converted into proceedings where a party can indirectly seek the final relief.
The Court ruled that if the said reliefs were granted by the Court to the appellant, it would bring the business of the respondent to a complete halt. The Court ruled that such a relief cannot be the subject matter of interim measures.
The Court held that issues involving enforcement of the conditions of the Franchise Agreement should be resolved in the arbitral proceedings. The Court held that proceedings under Section 9 of the A&C Act cannot be used for enforcement of the conditions of a contract since the said conditions can be enforced only when the rights of the parties are finally adjudged by the Arbitrator. The Court added that proceedings under Section 9 are only for interim measures and that they cannot be converted into proceedings where a party can indirectly seek the final relief.
“The contentions raised by the appellant with regard to the enforcement of conditions of the franchisee agreement and the applications of the parties arising therefrom, are the issues to be decided and resolved in the arbitration proceedings. These issues are in the nature of arbitrable disputes, to be tried and decided by the Arbitral Tribunal. Proceedings of section 9 are not meant for enforcement of conditions of the contract as it could be done only when the rights of the parties are finally adjudged or crystlised by the Arbitrator. Section 9 proceedings which are for interim measures, cannot be converted into the proceedings where a party may seek indirectly the final relief.”