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LOCUS STANDI OF 3rd PARTIES IN ARBRITRATION
1) WHAT DO YOU MEAN BY LOCUS STANDI?
Locus standi means the right or capacity to bring a legal action.
2) WHAT DO YOU MEAN BY THE THIRD PARTY?
A third party is an individual or entity that is involved in a transaction but is not one of the principals and has lesser interests.
3) LOCUS STANDI OF THIRD PARTIES IN COURTS AS COMPARED TO IN ARBITRATION.
In courts, the right of locus standi can be given to any public member acting bonafide and sufficient interests in instituting an action to seek redressal against any pubic harm. It might not be necessary that the party is the party to the contract or a direct party.
While a 3rd party to an arbitration agreement has no locus standi to seek a remedy from the court under section9 of the act since it is not the party to the Arbitration agreement in the first place.
4) WHAT DOES SECTION -9 STATES?
Section-9 of arbitration and conciliation act reads as-
"A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it's enforced in accordance with section 36, apply to a court—
(i) for the appointment of a guardian for a minor or an individual of unsound mind for the needs of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the subsequent matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the main object of the arbitration agreement;
(b) securing the quantity at issue within the arbitration;
(c) the detention, preservation or inspection of any property or thing which is that the subject-matter of the dispute in arbitration, or on which any question may arise therein and authorizing for any of the aforesaid purposes a person to come upon any land or building within the possession of any party or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which can be necessary or expedient for the aim of obtaining full information or evidence;
(d) an interim injunction or the selection of a receiver;
(e) such other interim measures of protection as may appear to the court to be fair and convenient, and therefore the Court shall have an equivalent power for creating orders as it has for the focus on, and in reference to, any proceedings before it."
5) QUALIFICATION FOR INVOKING JURISDICTION
On observation of section 9 of the act, it can be concluded that the section has a limited scope and is only restricted to the parties to the arbitration agreement. The rights are given only to the parties which are part of arbitral proceedings.
We shall understand it more clearly by observing the following judgments given by the hon'ble high court of Madras in Harita finance ltd. v. ATV projects India ltd.
The right conferred by this section-9 cannot be one arising out of a contract. It is a right conferred on a party to an Arbitration Agreement. Thus, only an individual who may be a party to an Arbitration Agreement can invoke the jurisdiction of the Court. A person who isn't a party to the Arbitration Agreement cannot enter the Court for cover because a "Party" means a person to the "Arbitration Agreement". The relief sought under Section 9 of the Act is meant to safeguard the justice to the aggrieved party until the eventual enforcement of the award.
The significant qualification which the person invoking the jurisdiction of the Court under Section 9 must possess is of being a 'party' to an arbitration agreement. In short, filing of an application by a person by virtue of its being a party to an Arbitration Agreement is for securing a relief which the Court has the power to grant before, during or after arbitral proceedings by virtue of Section 9 of the Act.
The Hon'ble Supreme Court in the matter of Ashok Traders vs. Gurumukhi Das Saluja (A.I.R. 2004 SC 1433) held the same decision regarding the qualification of parties for invoking the jurisdiction of the court under section -9 of Arbitration and Conciliation act.
6) CONCLUSION
Hence, we conclude that the sole qualification for using the benefits of arbitration agreement lies with the parties who are the direct parties to the arbitration agreement and not any party who has an indirect interest in the dispute. The Courts shall take extra caution while adjudicating upon the applications filed under Section 9 of the Act and always ensure that the interim orders are issued to facilitate the arbitration and not otherwise
- what is locus standi? what is a third party?
- Qualification for invoking jurisdiction of the court under section 9
- Conclusion
