This article is written by Yash Kapadia, pursuing a Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from LawSikho.

Introduction

The Arbitration and Conciliation Act, 1996 (1996 Act) contains provision relating to interim measures ordered by an arbitral tribunal under Section 17. Formerly, there was no such provision in the Arbitration Act, 1940 and the said provisions of Section 17 have been inserted in the 1996 Act.  However, analogous provisions in UNCITRAL Model Law (Model Law) are contained in Article 17 and UNCITRAL Arbitration Rules analogous provision is contained in Article 26.

Background

According to the 1996 Act, under Section 17 the arbitral tribunal could, at the request of any party, pass interim measures for protection as it may ponder necessary in respect of the subject matter of the dispute. It was indeed development and a revamped version from the 1940 Act where a similar power like the above was not conferred on the arbitral tribunal. However, even this provision had its shortcomings. 

The 2015 Amendment brought about the much-needed changes to Section 17 with respect to the grant of interim reliefs and the various kinds of the reliefs that can be granted by the arbitral tribunal keeping the section at par with Section 9 where the Court has been empowered to grant interim reliefs. It also introduced that any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court. Section 17 is reproduced under for a bare perusal:

“17. (1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal — 

• for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or 
• for an interim measure of protection in respect of any of the following matters, namely — 

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; 

(b) securing the amount in dispute in the arbitration; 

(c) the detention, preservation or 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 authorising 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; 

(d) interim injunction or the appointment of a receiver; 

(e) such 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.”

(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908, in the same manner as if it were an order of the Court.”

The 2019 Amendment amended this Section by omitting “or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36” from subsection (1) which means that all interim measures after the declaration of an award but prior to its enforcement will be dealt under Section 9 by the concerned Court. This amendment has evidently succeeded in clearing the inconsistency of which authority (Tribunal or Court) is to be approached once an arbitral award has been passed by a tribunal and before it is enforced by one of the parties to the Arbitration. 

Scope and applicability

Once an arbitral tribunal has been constituted, the court will not sustain any application for interim relief unless it comes to the conclusion that the remedies under Section 17 are rendered inefficacious due to any particular circumstances.[1]

In order to consider interim measures, the arbitral tribunal has to consider whether the claimant has laid out a prima facie case or not, that he would be able to succeed finally in arbitration proceedings and if they were able to present a case for the grant of interim measures.

Section 17 hereby provides for taking such interim measures of protections as the arbitral tribunal may deem necessary. The arbitral tribunal is also further authorized to direct a party to provide appropriate security with a measure which is ordered.  It is pertinent to note that such order can be granted only on a formal application by a party and not suo motto.

While comparing this section under the 1996 Act to Section 9, the arbitral tribunal has limited powers of granting interim measures pertaining only to the subject matter of the dispute. An arbitral tribunal is not a court of law and therefore its orders and functions are not judicial in nature. 

The jurisdiction of the arbitrator is confined to the arbitration agreement between the parties. An arbitrator under this section can only pass orders which may be a subject matter of reference. The arbitral tribunal can therefore not exercise its power ex debito justi tiae. 

However, immense progress has been made through amendments over the years, more specifically through the amendment carried out in 2015 to broaden the scope and applicability of the arbitral tribunal for granting interim relief as mentioned above. 

Progress in scope and applicability:

• The Arbitration Act of 1940 did not confer any specific power on the arbitrators to pass any interim directions against a party unless it was done with the consent of the parties to the arbitration. 
• From a bare perusal of Section 17 of the 1996 Act, we learn that the powers of an arbitrator were limited as they could not pass any order which goes beyond the scope and reference of the arbitration agreement and the same must be addressed only to a party to the arbitration. Neither any power was conferred to enforce its orders nor any judicial enforcement of the award were provided back then.[2]
• Under the 2015 Amendment, the parties to the arbitration agreement can exclude the exercise of the tribunal’s power and on the other hand, while passing an order the tribunal may require any party to provide appropriate security with a measure of protection.  The arbitral tribunal also has the power to pass any order under this section till the award by it in the arbitral proceeding is not put forth for execution before the Hon’ble Court. 
• According to the latest amendment to Section 17 in 2019, a party can only apply for interim measures during the arbitral proceedings and not after making of the arbitral award. 

Thus, it is evident that the scope and applicability of arbitral tribunals to arbitration agreements has been widened as compared to the 1996 Act. 

Enforceability of interim measures granted by arbitral tribunal

Under Section 17 of the 1996 Act, the arbitral tribunal was granted the power to issue interim measures during ongoing arbitral proceedings at the request of a party but the power was not as wide as provided to the Hon’ble Courts under section 9. A major flaw in this section was that the arbitral tribunal was granted the power to pass an order but was neither given the power under legislature to enforce its own orders nor issue any orders against third parties or even hear ex-parte applications. Adding to the same, such powers could also be excluded by an agreement between parties. This made the parties hesitant to file an application asking for interim measures before an arbitral tribunal. 

The amendment in 2015 brought significant changes to the wordings of Section 17. The arbitral tribunal now possesses the power to grant all interim measures similar to that which the Hon’ble Courts have the power to grant under Section 9 of the Arbitration Act. It also specified under sub section (2) (as read earlier) that the orders granted shall be enforceable as if they were an order of the Court. Foregoing the statutory recognition provided herein, the Supreme Court in Alka Chandewar v. Shamshul Ishwar Khan[3] took the view that “any party found in non-compliance with the orders of the arbitral tribunal shall be tried under Contempt Of Court Act 1971”. 

The brief facts of this case are as follows: 

1. The Sole Arbitrator had passed an interim order dated 7th October 2010 under Section 17 of the 1996 Act that the Respondent must not dispose of any flats without the leave of the Arbitral Tribunal. 
2. On 5th May 2014, the Tribunal referred to the contempt of its aforementioned interim order to the High Court and requested the Hon’ble Court to pass necessary orders under Section 27(5) of the 1996 Act. 
3. However, the Hon’ble High Court opined that Section 27(5) does not in any manner empower an Arbitral Tribunal to make representations for contempt of any of its interim orders unless the subject relates to taking evidence. 

The issue before the Hon’ble Supreme Court:

• Whether any sort of non-compliance of an interim order or any directions given by an Arbitral Tribunal comes under the scope/ ambit of Section 27(5) of the 1996 Act or not. 

The Judgment passed by the Supreme Court: 

• The Hon’ble Supreme Court while interpreting Section 27(5) held that the said section is not confined to a person being held for contempt for failing to follow due procedure for taking evidence. 
• The Section specifically states a person guilty “of any contempt to the Arbitral Tribunal during the conduct of Arbitral Proceedings” will be subject to contempt proceedings. 
• Relying on M/s Ambalal Sarabhai Enterprises vs. M/s Amrit Lal & Co. & Anr[4[ the SC held that if the parties to an arbitral proceeding were given a choice to choose between applying for interim reliefs under Section 9 or 17, then Section 17 would remain a dead letter as all parties would go to court if any order under Section 9 would be unactionable.  
• It was therefore iterated by the Supreme Court that subsection (2) of Section 17 was added through the 2015 Amendment so that the burdensome procedure of an arbitral tribunal to apply to the High Court for contempt of its orders was done away with. 
• The Supreme Court further held that such arbitral tribunals’ orders would be deemed to be orders of the Court for all purposes and would be enforced under the Civil Procedure Code, 1908 in the same manner as if they were orders of the Court. 

Conclusion

The 2015 Amendment has brought far reaching changes to the Arbitration Act and Conciliation Act 1996. Section 17 of the Act now gives power to the arbitral tribunal to grant interim measures and also enforce the said orders under Section 17(2). 

There are also certain drawbacks which cannot be ignored. As mentioned above, even though the arbitral tribunal has been given the power to enforce their orders, the Act is vague on the procedure which pertains to instances where a party to the arbitration refuses or does not comply with the order voluntarily. The same issue when referred to the Supreme Court, it was asserted that the non- complying party would be tried under Contempt of Court Act 1971. This in turn takes us back to the same door which allows judicial intervention. It is pertinent to mention that the whole purpose of the Arbitration Act is to curb excessive judicial interference and to relieve the judiciary of its excessive workload. Nonetheless, the law commission has been taking steps in order to develop our Act and get closer to achieving its objectives for the Arbitration Act.  

References

1. NGC Network India Pvt. Ltd vs Orange Fish Entertainment Pvt Ltd [2018(5) ArbiLR 247]

2. MD Army Welfare Organisation vs Sumangal Services Pvt. Ltd. [AIR 2004 SC 1344]

3. Civil Appeal No.8720 Of 2017 (Arising out of S.L.P.(Civil) No.3576 of 2016)

4. (2001) 8 SCC 397

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