This article has been written by Harshala Keny pursuing a Diploma in Domestic & International Commercial Arbitration from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction 

“Justice delayed is justice denied”. A proverb that highlights the importance of time in Justice. With the increasing population and subjects of dispute and violations, the judicial bodies attained more and more complex structures to deal with it, with inevitable delays in their procedural regulations. Needless to say, new methods were searched for efficient handling of disputes. One tool is the Alternative Dispute Resolution System, which has several mechanisms under it like mediation, conciliation, Lok Adalat, etc. to efficiently cut delays in dispute resolution. Arbitration is one of the mechanisms under the Alternative Dispute Resolution System. The traces of the arbitration mechanism can be seen right from the Brihadaranyaka Upanishad in India. In ancient times, there were arbitration bodies like Sreni, Puga, and Kula known as Panchayats.  

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Arbitration, being part of the Alternative Dispute Resolution System, is a mechanism to resolve disputes without the courts. The parties agree to resort to this mechanism for their current or future disputes arising out of their commercial or any other contractual transactions and submit their disputes before an amicably selected body called an Arbitrator or an arbitral tribunal, if in plural. Arbitration has several types based on the style of conducting the arbitration as well as the enforceability of the arbitral awards. Arbitration, apart from being a speedy tool of dispute resolution, transcends jurisdiction issues in international commercial transactions and thus is one step ahead of the courts in dealing with international commercial disputes efficiently. 

Interim relief is another arena in arbitration worth navigating. This present article attempts to shed light on the available provisions and existing lacunae when it comes to seeking interim reliefs in arbitration. 

What is arbitration and arbitral awards

In the words of Halsbury, ‘Arbitration’ means “the reference of dispute or difference between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a Court of competent jurisdiction.”

The key element in this is that in arbitration, the arbitrator judicially hears the matter, evaluates its merits, and does not play the role of a negotiator. The judgement that the arbitrator or arbitral tribunal arrives at is called an arbitration award.

What are interim awards

Arbitration serves as an alternative to traditional court proceedings by offering a court-like setup. However, to be effective, it must incorporate provisions for granting interim relief. Interim relief plays a pivotal role in preserving the intended outcome of dispute resolution.

Interim relief is granted during the arbitration process to address immediate and pressing issues that arise before a final decision is reached. It is a temporary measure designed to prevent irreparable harm to either party involved in the dispute.

There are several reasons why interim relief is essential in arbitration:

  1. Preserving the subject matter of the dispute: Interim relief helps maintain the status quo of the subject matter in dispute. It prevents one party from taking actions that could irreparably harm or moot the final outcome of the arbitration.
  2. Preventing irreparable harm: In situations where immediate action is necessary to prevent significant and irreversible harm to a party, interim relief can be granted to mitigate the potential damages.
  3. Maintaining the balance of power: Interim relief can address imbalances in the parties’ positions, ensuring that neither party has an undue advantage during the arbitration process.
  4. Enforcing arbitral awards: Interim relief can be used to enforce arbitral awards if a party fails to comply with the final decision. It ensures that the outcome of the arbitration is implemented promptly.

The scope and nature of interim relief may vary depending on the specific circumstances of the dispute and the governing laws and rules of arbitration. Common examples of interim relief measures include:

  1. Injunctions: Interim injunctions can be granted to restrain a party from taking specific actions that could harm the other party.
  2. Preservation of assets: The arbitral tribunal may order the preservation of assets relevant to the dispute to prevent their dissipation or concealment.
  3. Discovery and production of documents: Interim measures can facilitate the exchange of information and documents between the parties to ensure transparency and fairness.
  4. Security for costs: The tribunal may require a party to provide security for costs to ensure that the other party is not left without recourse if the arbitration concludes in their favour. It is necessary that, until a tribunal arrives at a final award, harm should not have already been caused during the proceedings to any of the parties. Hence, an award that grants interim relief is called an interim award. 

Which interim reliefs can be granted

Section 17 of the Act, enlists the interim reliefs that can be granted by an Arbitrator. In other words, Interim awards can be granted on these subjects that have been enlisted. They are:

  1. appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings
  2. the preservation, interim custody, and sale of any goods that are the subject matter of the arbitration agreement;
  3. securing the amount in dispute in the arbitration;
  4. the detention, preservation, inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
  5. interim injunction or the appointment of a receiver;
  6. other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

What are the criteria for granting interim reliefs

In the landmark case of Shabnam Dhillon vs. Zee Entertainment Enterprise Ltd., (2019), the Delhi High Court established clear criteria for granting interim reliefs in arbitration proceedings. According to the court, an arbitrator must carefully evaluate the following prerequisites before deciding whether to grant interim relief:

Setting out a case of irreparable harm:

  • The party seeking interim relief must demonstrate that they will suffer irreparable harm if the relief is not granted.
  • Irreparable harm refers to significant, long-term damage that cannot be adequately compensated through monetary damages alone.

Urgency in seeking relief:

  • The party must establish that there is an urgent need for interim relief to prevent imminent harm.
  • Factors such as the time-sensitive nature of the dispute and the potential consequences of delay will be considered.

Non-prejudice to the subject matter of the final dispute:

  • The interim relief should not prejudice or determine the outcome of the final dispute.
  • The arbitrator must ensure that the interim relief does not create a fait accompli or make it difficult for the tribunal to reach a fair and impartial decision.

Prima facie case established in favour of the party seeking interim relief:

  • The party seeking interim relief must establish a prima facie case, meaning they must provide sufficient evidence to support their claims and show a likelihood of success on the merits.
  • The arbitrator will assess the strength of the evidence and the overall merits of the case.

5. Balance of convenience in favour of the party seeking interim relief:

  • The arbitrator must consider the balance of convenience, weighing the potential harm to the party seeking interim relief against the potential harm to the other party if the relief is granted.
  • Factors such as the relative strength of the parties’ cases, the potential impact on third parties, and the public interest will be taken into account.

The Delhi High Court’s criteria provide a structured and balanced approach for arbitrators to evaluate requests for interim reliefs in arbitration. By considering these factors, arbitrators can ensure that interim reliefs are granted fairly and in a manner that protects the rights and interests of all parties involved.

Enforcement of domestic interim award

As per Section 17(2) of the Arbitration and Conciliation Act, 1996, interim awards that grant interim relief on the subjects mentioned in Section 17(1) of the Act enjoy the status of a court order. This means that interim awards are legally binding and have the same effect as orders issued by a court of law.

The procedure for enforcing interim awards is the same as that for enforcing court orders. In India, the Code of Civil Procedure, 1908 governs the enforcement of court orders and interim awards. The enforcement process involves filing an execution petition with the appropriate court and requesting the court enforce the award. The court may then issue an execution order, which authorises the court bailiff to take steps to enforce the award, such as attaching and selling the assets of the party against whom the award has been made.

It is important to note that interim awards are not final and binding decisions. They are intended to provide temporary relief to the parties while the arbitration proceedings are ongoing. The final and binding decision in an arbitration is the arbitral award, which is issued by the arbitral tribunal after the completion of the arbitration proceedings.

Which court to approach

In its judgement in Jaycee Housing (P) Ltd. v. High Court of Orissa (2023), the Indian Supreme Court clarified the procedure for enforcing domestic arbitration awards in India. The Court held that for domestic awards not arising out of international commercial arbitration as defined under Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 (the “Act”), the enforcement petition must be filed before the commercial court exercising jurisdiction.

Key points of the judgement

  • Jurisdiction: The Act establishes commercial courts to handle arbitration-related matters, including the enforcement of domestic awards.
  • Principal civil court of original jurisdiction: In districts without a commercial court, the Principal Civil Court of Original Jurisdiction will exercise jurisdiction over the enforcement of domestic awards.
  • Commercial division of the high court: In cases where the amount in dispute exceeds the pecuniary jurisdiction of the principal civil court, the enforcement petition may be filed before the commercial division of the high court concerned.

Significance of the judgement

The judgement provides clarity on the procedure for enforcing domestic awards, ensuring a streamlined and efficient process. Here are the key implications:

  • Consistency: It establishes a uniform approach for enforcing domestic awards, avoiding variations in practices across different courts.
  • Legal certainty: The judgement provides legal certainty and predictability for parties involved in domestic arbitration, promoting the effective resolution of disputes.
  • Dispute resolution efficiency: By designating specific courts to handle domestic arbitration matters, the judgement aims to facilitate quicker dispute resolution and reduce delays.

Overall, the Supreme Court’s decision in Jaycee Housing (P) Ltd. vs. High Court of Orissa is a significant step in strengthening the enforcement of domestic arbitration awards in India, contributing to a more efficient and reliable dispute resolution system.

The provision for appeal

Section 37 (2)(b) enables a party to seek an appeal against the orders passed under Section 17(2). A second appeal cannot be sought; however, nothing stops a party from appealing to the Supreme Court.

Limitation period

Section 2(1)(c) of the Act states that the term arbitral award includes interim awards as well. So, in the absence of special provisions for interim awards, the provisions for arbitral awards shall apply. Thus, the limitation period to file an appeal is 3 months, as per Section 34 (3) of the Act.

Enforcement of foreign interim arbitration awards

Enforcement of foreign interim arbitration awards is still a blurry path in India. There is no provision for enforcement of foreign interim awards analogous to Section 17(2), which can help in enforcing the same. The Delhi High Court in Raffles Design vs. Educomp also acknowledges this issue. The Act has been made in parity with the UNCITRAL Model Law on International Commercial Arbitration. However, no provision in pari materia to Article 17 H has been provided in the Act. It is thus evident that an amendment is necessary for this purpose. 

To deal with such issues, though, Section 9 comes in handy and acts as a temporary solution. As suggested by the Bombay High Court in Hsbc Pi Holdings (Mauritius) Limited vs. Avitel Post Studioz Limited (2014):

“In the absence of a direct enforcement mechanism under the Act, parties must approach an Indian court by filing an application under Section 9 of the Act to seek relief in terms of the interim orders granted by the foreign seated tribunal.” 

Section 9 of the Act gives the court the power to grant interim relief to the parties. But it is important to note that if an arbitral tribunal is already constituted, special reasons need to be provided to the court to justify why the parties did not seek the remedy under Section 17(2) before the arbitral tribunal. In the case of foreign interim awards, the special reason is that there is no provision for such a remedy.

Once an interim order is granted by the court, it will be enforced in accordance with the enforcement procedures of an order given in the Code of Civil Procedure, 1908.

Which court to approach

The case of Jaycee Housing (P) Ltd. vs. High Court of Orissa (2023) dealt with the issue of which court has jurisdiction to grant interim reliefs in cases of international commercial arbitration. The court held that the High Court, in exercise of its ordinary original civil jurisdiction, would be the proper court to seek such reliefs.

This decision is significant because it provides clarity on the issue of jurisdiction in international commercial arbitration cases. Prior to this decision, there was some uncertainty as to which court had jurisdiction to grant interim relief in such cases. The court’s decision in Jaycee Housing provides a clear answer to this question and will help to ensure that parties to international commercial arbitration agreements have access to effective and timely remedies.

The court’s decision is also consistent with the principles of international arbitration law. One of the key principles of international arbitration is that parties should be able to choose the forum for their arbitration. This principle is reflected in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which provides that parties to an arbitration agreement can choose the place of arbitration.

The court’s decision in Jaycee Housing is also consistent with the principle of party autonomy. This principle allows parties to an arbitration agreement to make binding decisions about the conduct of the arbitration. The court’s decision respects the parties’ choice of the High Court as the forum for seeking interim relief.

Overall, the court’s decision in Jaycee Housing is a positive development for international commercial arbitration in India. It provides clarity on the issue of jurisdiction and respects the principles of party autonomy and international arbitration law.

The provision for appeal

Section 37(1)(b) enables a party to seek an appeal against the order passed under Section 9 of the Act. A second appeal cannot be sought, however, nothing stops a party from appealing to the Supreme Court.

Limitation period

There is no direct provision stating the limitation period. However, since it is a court order, the Limitation Act, 1963 would apply. Thus, as per Article 116 of the Limitation Act, 90 days is the limitation period to seek an appeal against a court order. 

Conclusion

The provisions for the domestic interim arbitral award are quite elaborate, however, the foreign interim arbitral award needs a smoother route. Moreover, it is important to note that even in enforcing the domestic interim awards, one has to move the court. The execution part is ultimately handed over to the court itself. Arbitration is in the budding stage currently and has a promising future for efficient dispute settlements. Though there is a lot of scope for the arbitration mechanism to improve, nevertheless, it has solved and is solving several complex issues in world transactions and has made a notable contribution to easing the weight of pending cases before the Indian courts. 

References

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