The Madras High Court has clarified that the existence of a valid arbitration clause does not strip civil courts of their inherent power to grant limited interim relief in disputes involving possession and enjoyment of property. This ruling reinforces the principle that courts must act in the interest of justice even when parties have agreed to arbitrate, particularly where urgent equitable relief is sought.
Background & Facts
The Dispute
The dispute arose from a lease agreement dated December 12, 2018, between the plaintiff, M/s. MKB Life Styles, and the defendants, Mr. P. Venkadachalam and Mr. V. Balasubramaniam, for commercial premises in Puducherry. The plaintiff alleged that the defendants interfered with its peaceful possession by cutting power, blocking access, and distributing defamatory pamphlets. The plaintiff filed a suit for permanent injunction, seeking only to restrain such interference pending resolution of the underlying dispute.
Procedural History
- December 2018: Lease agreement executed between parties
- 2021: Plaintiff filed Original Suit No. 2465 of 2021 for permanent injunction
- 2021: Defendants filed I.A. No. 1403 of 2021 under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference to arbitration
- July 18, 2022: Trial Court allowed the Section 8 application and referred the matter to arbitration, while simultaneously ordering limited interim relief: no disruption of power, lift, parking, or pamphleteering
- 2022: Defendants filed this Civil Revision Petition under Article 227 challenging the interim relief component of the order
- 2026: Respondent failed to appear before the High Court
Relief Sought
The petitioners sought to set aside the Trial Court’s order granting interim relief, arguing that once a matter is referred to arbitration under Section 8, the civil court loses all power to issue any interim injunction. They contended the Trial Court acted beyond its jurisdiction.
The Legal Issue
The central question was whether a civil court, while referring a dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, retains the power to grant limited interim injunctions to preserve the status quo, or whether such relief is exclusively within the domain of the arbitral tribunal.
Arguments Presented
For the Petitioner
The petitioners argued that Section 8 mandates the court to refer the matter to arbitration upon finding a valid arbitration clause, and that once such a reference is made, the court’s jurisdiction is extinguished. They relied on the principle that arbitration is a consensual dispute resolution mechanism and that any interim relief must be sought from the arbitral tribunal under Section 9. They contended that the Trial Court’s order granting interim relief was ultra vires and rendered the arbitration process ineffective.
For the Respondent
The respondent did not appear or file any written submissions. The High Court noted the absence of any opposition, but proceeded to examine the matter on its merits due to the importance of the legal issue.
The Court's Analysis
The Court examined the interplay between Section 8 and the inherent jurisdiction of civil courts under Section 151 of the Code of Civil Procedure. It held that Section 8 does not oust the court’s power to grant interim relief where necessary to prevent irreparable harm or maintain the status quo pending arbitration.
"The civil court has inherent jurisdiction to pass such interim orders as are necessary to ensure that the subject matter of the dispute is not tampered with or rendered useless before arbitration commences."
The Court emphasized that the interim relief granted was narrow, temporary, and aimed solely at preserving the plaintiff’s ability to operate its business. It further noted that the defendants, despite the referral order, took no steps to appoint an arbitrator. Instead, they filed a petition under the Pondicherry Buildings (Lease and Rent Control) Act, 1969, indicating their intent to pursue an alternative remedy rather than arbitration.
The Court distinguished this case from those where parties actively pursue arbitration. Here, the defendants’ inaction rendered the arbitration clause effectively dormant. The Court concluded that the civil court’s interim order did not prejudice the arbitration process but merely prevented harm during the delay.
The Verdict
The petitioners partially succeeded. The Madras High Court held that while the reference to arbitration was legally valid, the Trial Court’s interim injunction was lawful and necessary. The Court modified the interim order to continue for two months from January 23, 2026, and directed the parties to approach the Rent Control Authority for further relief.
What This Means For Similar Cases
Interim Relief Is Permissible Under Section 8
- Practitioners may seek and obtain limited interim injunctions in civil courts even after a Section 8 application is admitted
- Courts are not required to remain passive; they may act to preserve the subject matter pending arbitration
- The relief must be narrowly tailored and not determine the merits of the dispute
Inaction Undermines Arbitration Agreements
- Parties cannot use Section 8 as a tactical delay tactic while pursuing parallel remedies
- Courts will scrutinize conduct: failure to initiate arbitration may lead to judicial intervention to prevent abuse
- The doctrine of election of remedies applies; choosing one forum may bar reliance on another
Civil Courts Retain Inherent Jurisdiction
- Section 151 CPC remains operative even when arbitration is invoked
- The existence of an arbitration clause does not extinguish the court’s power to prevent injustice
- Courts must balance party autonomy with the duty to ensure equitable outcomes
