This article has been written by Abhishek Narsing pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho. This article has been edited by Aatima Bhatia (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho).
Arbitration revolves around the agreement entered into between the parties and the process of arbitration commences from the agreement to arbitrate and ends with the award passed by the arbitral tribunal. All disputes arising out of contract are referred to the arbitration. Arbitration has been a more preferred mode of dispute resolution to resolve commercial disputes, this is majorly due to the overburdening of the Indian court system, and also because of the following aspects:
(i) governing law,
(ii) supervisory jurisdiction of the court,
(iii) constituting arbitral tribunals,
(iv) and the procedure to be adopted for the arbitration.
Thus, the bedrock principle of party autonomy being the building block of the law of arbitration. Recently, in the case of Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd the Supreme Court underlined the importance of party autonomy in assessing the validity of arbitration agreements and noted that ‘party autonomy is virtually the backbone of arbitrations’ and that in its opinion ‘parties to an arbitration agreement have the autonomy to decide not only on the procedural law to be followed but also the substantive law’. Thus, in order to protect to the interest of the disputing parties, interim measures of protection may be sought either from the arbitral tribunal or a court of law, under Section 9 and Section 17 of arbitration and conciliation Act, 1996, the protection may be sought before or during arbitration and even after the completion of the arbitral proceedings.
Power of an Arbitral tribunal to order Interim measures under Section 17
For the arbitrations seated in India, Section 17 of the act empowers the arbitral tribunal to grant interim relief to the contracting parties. Prior to the 2015 amendment Act (the 2015 amendment), the types of interim reliefs that could be granted by the arbitral tribunal were not illustrated, it was simply stated that the arbitral tribunal upon its discretion, order a party to take any interim measure of protection that the arbitral tribunal considered necessary in respect of the subject matter of the Dispute. In the case of Gulmali Amrullah Babul v. Shabbir Salebhai Mahimwala, it was held that party seeking enforcement of the order made under Section 17 would subsequently file a Section 9 petition for the same reliefs, on the basis of the order made by the arbitral tribunal. Thus, proceeding under section 9 is not enforcement proceedings made by the arbitral tribunal. This does not mean that the order passed by an arbitral tribunal cannot be enforced in any manner whatsoever, even the court can take the same view under section 9 proceedings.
But, the 2015 amendment ensures that the powers of the arbitral tribunal under Section 17 are aligned with the powers of the court under Section 9 of the act, the tribunal is empowered to grant all measures which can be granted by under section 9(1) of the act. Subsequently, subsection (3) has been inserted in Section 9 that states once an arbitral tribunal has been constituted; a court shall not entertain an application for interim measures, which may render the remedy under Section 17 inefficacious. Through the 2015 amendment, the arbitral tribunal under Section 17 could grant interim measures not only during the arbitral proceedings but also at any time after the making of the award but before its enforcement. But, the words “at any time after the making of the arbitral award but before it is enforced” have been omitted by the 2019 amendment (2019 amendment act) of the act, as it was inconsistent with Section 32 of the Arbitration Act, which provided that the mandate of the arbitral tribunal shall be terminated with the termination of the arbitral proceedings. An order under Section 17 of the act, passed by the arbitral tribunal granting or refusing to grant interim measure may be appealed under Section 37(2)(b) of the act. However, no second appeal is allowed, but the parties can still invoke the Supreme Court’s extraordinary jurisdiction under the Article 136 of the Constitution of India, making a special leave to appeal.
However, after the 2015 amendment, the powers vested under section 17 cannot supersede the legislative intent of section 9 and the courts from time to time made it clear that, an arbitral tribunal cannot make all the orders that a court can normally make, which has been discussed in the case of Pradeep K.N. v. The Station House Officer, that an arbitral tribunal, ordered repossession of a vehicle as an interim measure under section 17 of the act, the court held that the order of repossession can only be made through a civil court. Conferring the power of a civil court to an arbitral tribunal for passing an interim order does not mean that the arbitral tribunal is conferred with the power of enforcement.
Power of a Court to order interim measures under Section 9
Interim measures play an important remedy in domestic as well as international arbitration, due to the time duration between the arising of the dispute and the passing of the award. However, in certain circumstances, the recourse to the arbitral tribunal to receive an order of the interim measure may not be possible or efficacious; due to the institution of the arbitral tribunal or the powers vested with the arbitral tribunal is limited. Under such circumstances, the party had to make an application under Section 9 of the act, to apply to the court for interim measure before or during the arbitral process or at any time after the making of the arbitral award. But, the person who is not a party to the arbitration agreement cannot apply to the court for interim measures. However, after the 2015 amendment, Sub-section (2) and (3) were introduced to section 9 of the act, in the intent that the court does not entertain an application under Section 9 of the act after the institution of the arbitral tribunal.
The words introduced under Section 9 “the court shall not entertain” which expressly clear the terms that the parties have agreed to invoke the arbitration and arbitral tribunal have been instituted. It is pertinent to mention here that the ‘doctrine of clean hands’ which means the intention of the person approaching the court should be good and not malafide plays an important role in securing the protection of interim measures under Section 9 of the act, as Section 9 allows a party to apply for the protection of the interim measures which is a discretionary remedy and appears to the court to be just and convenient to do so. In the case of Uppal Eng. Co. (P) Ltd. v. Cimmco Birla Ltd., where the petitioner had failed to disclose that they had filed an application under Section 17 for seeking similar reliefs from the arbitral tribunal, the court held that since the petitioner had suppressed material facts, it was not entitled to relief under Section 9 on this ground alone. In another case of S. Raminder Singh v. NCT of Delhi, the petitioner had failed to disclose the fact that he had instituted other legal proceedings (including a civil suit and writ proceedings) for claiming similar reliefs and that his request for relief in these other proceedings was denied by the respective courts where the proceedings were instituted The court held that the Section 9 petition was liable to be dismissed on this ground alone since the petitioner had not approached the court with clean hands.
The power of the Court to grant interim measures where the place of arbitration seated outside India
The interim measure protection under section 9 of the act provides the legal framework for both domestic arbitration and international commercial arbitration seated in India, although the provisions of part 1 of the act are now also available in respect of international commercial arbitration outside India. The provision confers the wide power on the court to order interim measures in respect of :
(i) preservation and custody of goods which are the subject matter of the arbitration agreement;
(ii) securing the amount in the dispute;
(iii) detention or preservation of moveable or immovable property;
(iv) Obtaining evidence which may arise in the arbitration proceedings.
The arbitration and conciliation act purports to consolidate and amend the law relating to “Domestic arbitration”, “international commercial arbitration” and “enforcement of foreign arbitral awards”. Part I of the act will apply “where the place of arbitration is in India”, and where all the parties to a dispute are Indian nationals and the place of arbitration is in India, it will be a “domestic arbitration”. Contrary, the definition of “international commercial arbitration” Section 2(1) (f) of the act focuses on two elements (i) the arbitration must be relating to the dispute arising out of a legal relationship considered as commercial under the law in force in India and (ii) at least one of the parties to the agreement falls under any one of the categories listed in Section 2 (1) sub clause (f) (i) to (iv) of the act.
A single Judge of Delhi High Court in the case of Dominant offset pvt. Ltd v. Adamovske strojirny, “held that, even if the place of arbitration is outside India, the provisions of section 9 of the act will apply and the court has jurisdiction to order interim measures of protection. It also held that a plain reading of Sub section (2) of Section 2 is an inclusive definition and that it does not exclude the applicability of Part-1 of the act to those arbitration which are not being held in India. In Summary, the aforementioned interpretation gets support from the provisions of Sub-section 5 of Section 2 which states that part 1 shall apply to all the arbitrations and to all the proceedings relating thereto which would also, in my considered opinion, include an international commercial arbitration.”
However, the extent of application of Part I provisions to international commercial arbitration seated outside India, has been the subject of much debate and criticism.
Following the extent of the part I applicability to those of international commercial arbitration seated outside India, this has been first recognized in the case of Bhatia International v. Bulk Trading S.A, where the Hon’ble Supreme court held that the provision of part 1 of the act would also apply to international commercial arbitration outside India. The brief facts of the case were that as per the arbitration agreement, the proceedings for the arbitration were as per the rules of the international chamber of commerce, and the seat of arbitration was Paris. The petitioner to the case filed the petition under Section 9 of the act, before an Indian court seeking interim measures of protection. The contention made by the respondent that the application under section 9 of the act was not maintainable, because under Section 2(2) of the arbitration act the part I of the act is only applicable to domestic arbitration or Indian-seated arbitration. The Hon’ble supreme court rejected the contention and interpreted the Section 2 (2) of the act, to mean that it will compulsorily apply to the arbitration taking place in India, regardless of the agreement between the parties, it will also apply to the international commercial arbitration outside India. It will be at the liberty of the parties sitting outside India to expressly or impliedly exclude the application of Part I provision by agreement, if they failed to do so, part I of the act will apply.
However, the decision of the Bhatia international was overruled by the Constitutional bench of five judges of the Supreme Court in Bharat Aluminium Company (BALCO) v. Kaiser Aluminium Technical Services Inc, and held that the part I of the act would have no application to international commercial arbitration held outside India and no application under Section 9 of the act for interim measure would be maintainable.
Interim reliefs aims to provide the remedies to the disputing parties under the arbitration act, but from the time to time, Indian courts had clearly made it visible that the power to grant interim measures is discretionary in nature, and implied that the parties to the agreement is required to establish (i) a prima facie case in its favour (ii) the balance of convenience in favour to grant of interim measures, (iii) and lastly, that there is an irreparable injury would be caused if such request is not granted.
Further, in the conclusion of the aforementioned requirements, the law commission of India presented its 246th report proposing the amendments to address the concern following the BALCO CASE, proposed that Section 2(2) be amendment to the state that part I shall apply “only” where the seat of arbitration is in India. This will enable a party to a foreign-seated international commercial arbitration to obtain interim measures in India. Moreover, the 2015th amendment empowers the arbitral tribunal under Section 17 of the act to align with the power of the court under Section 9 of the act. However, presently, the definition of the arbitral tribunal is not amended under Section 2(d) of the act to include emergency arbitration, even after the recommendation of the law commission of India in its 246th report. The said proposal was not accepted and no changes were made by the 2015 amendment act. As such, if arbitration is seated in India, the provision of Part 1 of the arbitration act, including Section 17 which related to the enforcement of orders and awards of the arbitral tribunal, retrospectively, would apply to the emergency arbitration and any order passed by the emergency arbitration would be deemed to be the order of an arbitral tribunal under Section 17 of the Arbitration Act.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA