This article is written by K Veena Pranathi, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.com.
Arbitration is an alternate dispute resolution for settling a dispute with the help of an arbitrator. There are various steps involved in Arbitrational proceedings. The Arbitration will usually end with an award.
Sometimes, under some circumstances the court or the arbitral tribunal may give an interim relief to the claimant under section 9 and 17 of the act respectively before giving a ﬁnal award in case of an emergency.
Types of arbitration proceedings
The parties may either go for an institutional arbitration or an ad hoc arbitration according to their own convenience for the arbitration proceedings.
An ad hoc arbitration is a type of arbitration where the parties are at liberty to decide some of the matters in arbitration such as appointment of an arbitrator, rules applicable for ﬁlling various documents etc. whereas in institutional arbitration it is the opposite. A set of rules are already given in an institutional arbitration and the parties should proceed according to those rules.
There are various advantages of institutional arbitration. The main advantage is that the institutional arbitration will give assistance to the parties in each and every step of the proceedings.
There are also certain special provisions like appointment of an emergency arbitrator, and giving an emergency award etc. according to the rules of the institute.
For example Rule 14 of the MCIA provides that the parties can appoint an emergency arbitrator in case of an emergency and rule 14.6 talks about the power of an emergency arbitrator to order or award any interim relief that he deems necessary.
Rule 14.8 states that the award or order given by the emergency arbitrator for an interim relief shall be deemed to be an award or order given by a tribunal and that the parties shall comply with it.
A lot of industries and companies developed signiﬁcantly in today’s world. As a result of that commercial disputes have also increased between the companies. For the resolution of disputes between the parties, arbitration plays a crucial role because it is a fast track process when compared to the court proceedings and also a civilized way of resolving issues.
Sometimes there can be some urgency in a case. For instance, if a claimant is under a threat from the defendant, then the claimant cannot wait until the actual arbitral tribunal is constituted. To secure the efficiency of arbitration, it is of utmost importance that the claimant has sufﬁcient means to prevent the defendant’s threatening action. For instance, the defendant could transfer a property or damage a property or destroy the evidence etc. Therefore to secure the claimant, it is necessary to appoint an emergency arbitrator in case of urgency and grant an emergency award or order. However, while granting such awards, the arbitrator has to be very careful and he shall also consider the defendant’s points before granting.
It is a quick mechanism for parties to seek interim reliefs from the arbitrators. Institutional rules like MCIA, SIAC and some of the conventions provide for such proceedings. Though India took a great step in reshaping its arbitration law by amending the Arbitration and Conciliation act, 1996 the Act does not recognize emergency awards.
The recent verdict in Mr.Ashwani Minda & Anr. V. U-Shin Ltd. & Anr. (Ashwani Minda) from Delhi High Court can be analyzed in this regard.
Brief facts of the case
In this case, the applicant is an Indian partnership ﬁrm and the respondent no.1 is a company incorporated in Japan. Applicant no.1 is a managing director in the joint venture and also a controlling shareholder with 30.33% Shares. 26% shares were held by respondent no.1 and the remaining shares were held by the public.
To enable a smooth transfer of technical information an agreement was executed by the parties in 2014.
At a later date, respondent no.1 removed their shares from the Tokyo stock exchange and integrated into its Japanese afﬁliate which is respondent no. 2 .Respondent no. 2 offered in consonance with the SEBI to their existing shareholders.
Because of this, the aggrieved applicants felt threatened by the possibility of the decrease in number of shareholders and thereby losing control. Therefore, the applicants claimed that the respondent violated the terms of the agreement. Thereafter, the parties tried to negotiate between them but all the negotiations failed. Therefore, the applicant no. 1 invoked the Arbitration clause under the agreement. But, as there is urgency in the case, the applicant no. 1 invoked the emergency Arbitration provision under the rules of Japan Commercial Arbitration Association (JCAA) prior to the constitution of the tribunal. Therefore an emergency arbitrator was appointed for this purpose. But the emergency arbitrator rejected the application.
Aggrieved by this, the claimant approached the Delhi High Court under the section 9 of the Arbitration and Conciliation Act, 1996 seeking a similar relief that was asked before the emergency arbitrator. As a result, the respondents challenged the maintainability of the petition under the doctrine of election. That is, the respondents contended under the doctrine of election that the applicant cannot approbate and reprobate at the same time since a similar remedy has already been sought by the applicant before the emergency arbitrator.
Decision by Delhi High Court
The court came to a conclusion that the seat of the Arbitration was in Japan after examining the Arbitration clause in the agreement. The court opined that the section 9 of the Act would be applicable to the international commercial arbitration if the contrary is not provided in the agreement between the parties. The court also looked for the intention of the party to analyze the maintainability of the section 9 petition. The court also examined that the agreement clearly speciﬁed that the type of Arbitration will be an institutional arbitration and the rules for the proceedings would be according to the JCAA rules and also that if the parties want to seek relief before the constitution of the arbitral tribunal, the parties can seek relief by appointing an emergency arbitrator and the clause also provided that an emergency Arbitration is the only mechanism that is provided for seeking relief under the article 77 of the JCAA rules.
The agreement did not have the provisions for other mechanisms like approaching the domestic courts or application for an interim relief under section 9 of the Act etc. Thus it was held that, while drafting the clause the parties did not have intention to approach the courts and thus excluded the applicability of section 9 of the Act impliedly.
As the applicant already invoked an emergency Arbitration the court stated that it also amounted to doctrine of election. Therefore, in this case, the court decided the judgement based on two points mainly, they are:
- The agreement itself did not include a provision for approaching the domestic courts either expressly or impliedly.
- The court examined the choice of the institutional rules, which did not allow the parties to approach the court for interim relief under section 9.
Therefore, the court dismissed the petition under section 9 as not being maintainable.
High court’s view on enforcement of emergency award in India
The Supreme Court never adjudicated the Indian position with respect to emergency arbitration. But the High Court dealt with three important judgements with regarding to this issue, they are:
- HSBC PI Holdings (Mauritius) Limited v. Avitel post studioz ltd.,(HSBC)
- Raffles Design International India Pvt. Ltd.& Anr. v. Educomp Professional Education Ltd.& Ors.
- Plus Holdings Limited v. Xeitgeist Entertainment Group Limited & Ors., (Plus Holdings) Both HSBC and Plus Holdings judgements were passed by the Bombay High Court.
From the Ashwani Minda, it is clear that, once the parties approached the emergency arbitrator for an emergency relief or emergency award, the parties have no authority to approach the domestic courts for seeking the same relief.
On the other hand, rafﬂes case is materially different where the courts stated that although an emergency arbitration or an emergency award is not enforceable in India, claimants can ﬁle a petition under sec 9 of the Arbitration and Conciliation act, 1996 seeking similar reliefs. However, the court will decide whether to accept or reject such an application. The major factor for coming to this conclusion is that the UNCITRAL rules are quite similar to the SIAC rules, which allows the parties to approach the domestic courts for relief.
That said, the applicant can go impliedly for an interim relief under the section 9 of the Arbitration and Conciliation Act, 1996 provided that, the rules of the institution also has a provision for the same. Thus, section 9 of the Act acts as an indirect mechanism for the emergency awards.
Therefore, when we talk about the enforcement of emergency awards in India, it is consistent that the emergency awards cannot be enforced under the Act and the only method for seeking an interim relief would be to ﬁle an application under section 9 of the Arbitration and Conciliation Act, 1996.
In HSBC, the Bombay High Court stated that an emergency award cannot be enforced using Section 9 of the Act. Instead, the parties shall approach the court for an interim relief by ﬁling an application under sec 9 of the Act.
Therefore, in case of any emergency during the pendency of the Arbitration proceedings, the only remedy available for the parties is to ﬁle an application under the section 9 of the Arbitration and Conciliation Act, 1996 for an interim measure because there is uncertainty in the enforcement of emergency award in India and also because of the absence of a conclusive judgement from the Supreme Court.
However, as held in the Rafﬂes case, the court will review the merits and then decide whether to accept or deny the application for an interim relief.
Lastly, it would be interesting to see how the issue will be dealt by the Supreme Court with respect to treatment of emergency awards in India.
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