This article has been authored by Dhruv Srivastava, a final year student at Lloyd Law College, Greater Noida and Arindam Bharadwaj final year student at O.p. Jindal Global University, Sonepat
Arbitration is the go to modern mode of adjudication mechanism when it comes to commercial disputes of domestic and international stature. Fair, speedy and inexpensive trials by an Arbitral Tribunal are the first and paramount principle of arbitration. Arbitration, also being a flexible forum, gives the parties the choice to select applicable substantive as well as procedural laws, especially when the arbitration between the parties is international in nature.
Speaking of flexibility much like every other legislation there are certain safeguards in place to better serve the parties in dispute. Interim relief or measures are one of these safeguards mentioned in the Arbitration and Conciliation Act, 1996 (“The Arbitration Act) which is the governing legislation on arbitration in India. Interim relief has been provided for by the Arbitration Act in Section 9 and Section 17 of the Arbitration Act to the courts and arbitral tribunal respectively. The objective of interim measures is to provide for certain precursory measures to better protect the interest of one or both the parties; prevent misuses and interference pursuant to the assets in questions. Relief bestowed by the courts and tribunals are inefficient if the main purpose of the relief which is to safeguard the rights of the parties in dispute is not protected.
Section 9 initially had a much wider ambit of granting an interim relief as compared to that of Arbitral Tribunal. However The Arbitration and Conciliation Amendment Act, 2015 (“Amendment Act 2015”) brought about some major changes wherein Section 17 was conferred with a much wider ambit as well as application as compared to what was initially circumscribed by the Indian parliament. In this milieu, this paper will illuminate on the scope of Section 9 and 17 with their correlation and differences.
Scope of Section 9
The Arbitration Act was formulated on the basis of the UNCITRAL Model Law in International Commercial Arbitration, 1985 (“Model Law”) and both Section 9 of the Arbitration Act and Article 9 of the Model law provide for interim relief by the Court. Article 9 of the Model law only allows for the Court to grant interim measures requested by a party before or during the arbitration proceedings, conversely Section 9 of the Arbitration Act allows for the Court to grant interim measures requested by a party before or during the arbitration proceedings or even after the making of the arbitral award but before the same is enforced in accordance the Arbitration Act.
For an interim measure under Section 9, the party has to apply before a ‘Court’, as per the scheme of Section 9 of the Arbitration Act. Now the term ‘Court’ has been defined under Section 2(1)(e) of the Arbitration Act which in cases of domestic arbitration includes a District Court and the High Court and in cases of international commercial arbitration, where at least one of the parties in non-India, only the High Court having jurisdiction on the subject matter will have power to grant interim relief. In this regard, reference could be drawn from the judgement of tThe Hon’ble Supreme Court of India in the case of Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc., where the court held that the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India and the Courts where the arbitration takes place would have supervisory control over the arbitral proceedings.
Section 9 of the Arbitration Act presents a wide range of reliefs that a party to an arbitration proceeding can apply ranging from appointment of a guardian for a minor or a person of unsound mind for the purpose of the arbitral proceedings to securing the amount on dispute or any such interim measures that the Court may deem just and convenient. In exercise of the wide powers available under Section 9, the Courts may also direct parties to disclose the properties owned by them, appoint receivers to take possession of property not being the subject matter of the dispute, issued attachment orders against third party respondents as well as direct parties to not dispose their properties.
The Amending Act of 2015 brought significant changes to the purview of Section 9 of the Arbitration Act as the same minimised the role of the courts in an arbitral proceeding making it consistent with the scheme of Section 5 of the Arbitration Act which states that no judicial authority shall intervene in an arbitral proceeding except when required under this Act. The Amending Act of 2015 inserted sub-sections (2) and (3) to Section 9, which provides that when a court passes an order for any interim measure under Section 9, the arbitration proceedings shall commence within a period of 90 days from the date of such order and once the arbitral tribunal has been constituted, the Court shall not entertain an application under Section 9 unless the Court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious. Post the 2015 amendment, it can be said that any application for an interim measure, after the arbitral tribunal has been established, can only be adjudicated by the arbitral tribunal under Section 17 of the Arbitration Act unless the competent court is of the opinion that the remedy sort by the tribunal may not be efficacious.
Scope of Section 17
The power to grant interim relief by arbitral tribunals is governed by Section 17 of the Arbitration Act. Pre-2015 position was considered to be vague and open-ended at best. It provided for tribunal to grant interim relief for protection. As I said, quite open ended and open to misinterpretation. The scope of this Ssection in comparison to section 9 was quite limited. As a result, the tribunals refrained from granting any interim measures.
The 2015 Amendment Act brought some significant changes; putting Section 17 at par with Section 9. The reliefs which may be granted by an arbitral tribunal are as follows:
1. Securing the monetary sum called for in the dispute in Arbitration.
2. Freedom to inspect, preserve and detain any land or property vis-à-vis the subject matter of arbitral dispute.
3. Interim reliefs and nomination of a receiver and;
4. Any interim relief deemed fair.
The Arbitral tribunal, however, has no authority or competency or jurisdiction to pass an interim relief against a third party.( Wind World (India) Limited and Ors. v. Enercon GmbH and Anr. 2016 SCC OnLine Bom 1404)
Enforceability Apropos Interim Relief By Arbitral Tribunals
It’s advocated that tribunals should do a bare-bones analysis of applicable rules, juristic ideas and adjudicated case laws whilst vouchsafing interim relief. Judicial minds or merit applied by National Courts whilst according interim relief has no comportment on tribunals.
In order to seek recourse under Ssection 17, the seat of the arbitration shall be in India. Section 17 falls under Part I of the Arbitration Act. The power to grant an interim relief was provided for by the Arbitration Act, however it failed to provide for any provision which detailed its execution or which shed clarity on the interim relief so awarded by the tribunal. This poised serious issues on the potency of the arbitration mechanism in the country. Furthermore, the enforceability of interim relief awarded by an arbitral tribunal outside India was a serious question mark. Just recommending them to be unenforceable would be out rightly wrong.
In Raffles Design International, the proceedings were conducted in consonance of the Singapore International Arbitration Center (“SIAC”) Rules. The petitioner appointed an emergency arbitrator in lieu of Rule 26.2. Subsequently, the emergency arbitrator passed an interim award. The respondent however acted in contrast to the interim relief. Petitioner aggrieved by the aforementioned fact, approached the Delhi High Court. The question of law before the High Court was if an application under Section 9 could be entertained where an interim measure has already been awarded under the SIAC rules. The Court held the emergency award to be unenforceable and the only possible remedy for the petitioner was to file a regular civil suit. It was further observed:
“a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order from an arbitral tribunal. Needless to state that the question whether the interim orders should be granted under section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.”
In Conclusion, a party would have to approach the Court under Ssection 9 even if an interim award has been awarded in a foreign seated arbitration. If a party is seeking its enforcement, a fresh civil suit would have to be filed before the courts.
In Sri Krishan v. Anand, which came before the 2015 Amendment Act, the Delhi High Court in this case held that any person ex-facie blemishing to adhere to the edict of Arbitral tribunal under Section 17 would be guilty of default or contempt under Section 27(5) of the Arbitration Act; meaning which the party would be in contempt. Section 27 sates “Courts assistance in taking evidence” and sub-clause (5) talks about contempt. The Delhi High Court in the said case went ahead to state that an interim relief under Section 17 can be enforced as a decree of the court which was a deviation from the decisions of the Supreme Court in Army Welfare Housing and Sundaram Finance.
Markedly, The Supreme Court in Alka Chander v. Shamshul Ishrar Khan upheld the decision in Sri Krishan Case (Supra) and observed that Section 17 would be tendered ineffectual if the interim relief were passed to no effect.
We have seen that both Section 9 and Section 17 of the Arbitration Act deal with interim measures of protection however it is pertinent to note that both the provisions do not conflict with each other as Section 9 provides for the interim relief by the court whereas Section 17 provides for the interim relief by the tribunal. However the powers afforded to the tribunal under Section 17 is narrower that what is vested in the Courts under the scheme of Section 9 primarily because the powers of the Court is in no way controlled or limited by the tribunal whereas the opposite may true in limited circumstances. Further the Court can grant interim measure before or during the arbitration proceedings or even after the making of the arbitral award whereas the tribunal can only grant an interim measure during the pendency of the arbitral proceeding before it. The Delhi High Court in the case of Atul Limited vs. Prakash Industries Ltd., further enhancing the powers of the Court to grant interim measures, held that the recourse under Section 17 is an additional recourse and is not in substitution of Section 9 of the Arbitration Act and the Court can exercise its powers under Section 9 to grant interim measures even during the pendency of the arbitral proceeding.