Before the Delhi High Court, a petition was filed under Article 227 of the Constitution of India, challenging the impugned orders disposing of 16 petitions filed by the Respondent herein under Section 9 of the Arbitration and Conciliation Act against the petitioner herein.
A Single Judge Bench of Justice Prathiba M Singh has passed the judgment stating that,
“The power to pass ad-interim orders under Section 9 of the (Arbitration) Act are not in doubt. However, disposal of the petitions, without issuing notice and hearing the respondent as well as directing coercive orders of possession would be violative of the principles of natural justice.”
On the first day of hearing, these petitions were disposed of, without notice being issued to the petitioner. The impugned orders also permitted the respondent to take possession of the vehicles of the petitioner. The Court has held that, when coercive orders are being passed, a petition under section 9 of the Arbitration and Conciliation Act, 1996 cannot be disposed of ex-parte.
The dispute between the two parties arose out of a loan-cum-hypothecation agreement which contained an arbitration clause. Section 9 petitions were filed following a default by the petitioners in payment of certain instalments of the loan to the respondent. The primary grievance of the petitioner was the Section 9 petitions were disposed of without notice and coercive orders of possession were passed ex parte.
After perusing the impugned orders, the Court stated that Section 9 petitions cannot be disposed of ex-parte, without giving notice to the other party, especially when coercive orders are being passed.
Considering that the vehicles involved in the present case were luxury buses and that the trial court could not have presumed that the petitioner would not be willing to make the payment, the Court held that the trial court ought to have issued notice to the petitioner, afforded a hearing, and then passed appropriate orders in accordance with the law. Hence, the impugned orders were thus set aside by the court.