This article is written by Soumya Nandi who is pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Table of Contents
Introduction
Arbitration has become the most preferred method of alternative dispute resolution which parties resort to for resolution of any commercial dispute in a contract which contains an arbitration clause or an arbitration agreement that exists between the parties. Although it is well known that the time required for resolution of disputes through arbitration is much lesser than the time required by any court of law, still it takes considerable time to complete the entire process of arbitration – right from invocation of arbitration to enforcement of award.
Further, in some cases, it is seen that one of the parties deliberately prolong the time for the arbitration proceedings to prejudice the rights of the other party or for some other reason beneficial to them or to delay the pronouncement of the arbitral award against them and thereby delay the enforcement of the award. Such tactics by one party may render meaningless the final arbitral award for the aggrieved party unless the arbitral tribunal and/or the court safeguards the rights of the aggrieved party before, during and after the arbitral proceedings till the award is enforced.
Therefore, it is imperative that some interim measures or interim relief be granted by the arbitral tribunal or the court in order to protect the rights of the aggrieved party. In some particular instances, the interim relief may involve directives to some third parties also. Interim relief is like an urgent remedy granted in exceptional circumstances.
Generally, interim relief is granted when:
- prima facie there is a case;
- the balance of convenience lies with the aggrieved party who is seeking the relied; and
- irreparable damage or injury may be caused if the interim relief is not granted.
There are certain provisions in the Arbitration and Conciliation Act, 1996 (Amended 2015 and 2019) [hereinafter called the Act], which safeguard the interest of one party over the other. Section 9 and Section 17 of the A&C Act enable any party to any arbitration agreement to file an application for interim relief from the court or arbitral tribunal respectively.
Interim relief under Section 9 of the Act
Section 9 of the Act mentions that a party may put up an application for interim relief to the court before the commencement of arbitration proceedings, during arbitration proceedings or at any point of time before the enforcement of the arbitral award. However, generally, courts do not allow a petition for interim relief after the arbitral tribunal has been constituted unless the aggrieved party proves beyond doubt that the interim relief that has been / may be provided by the arbitral tribunal under Section 17 of the Act is/shall be futile.
Nevertheless, the power to grant interim relief to the aggrieved party before the arbitral tribunal is constituted and after the arbitral award is passed lies with the courts only. Further, Section 9 also states that in case the court passes an order for interim relief before the commencement of arbitral proceedings, then the arbitral proceedings shall have to be commenced within 90 days from the date of the interim relief order or within such further time that the court may grant.
Interim relief that can be sought under Section 9
Section 9 of the Act describes the type of interim relief that may be sought by a party. Application for interim relief may include the following:
- Appointment of guardian for a minor or person of unsound mind;
- Preservation, interim custody or sale of goods (if the goods are of perishable nature) for any goods related to the arbitration agreement;
- Securing the amount of claims;
- Allowing the detention, preservation or inspection of any property or thing, authorizing any person to enter upon any land or building, authorizing any samples to be taken or observations to be made or experiments to be tried in order to expedite the process and obtain accurate & complete information or evidence;
- Allowing interim injunction or appointment of receiver;
- Any other reliefs which the court considers proper taking into account the facts and circumstances of the case.
Any party to the arbitration agreement may file an application to the concerned court under Section 9 before or during the course of the arbitration. However, after the pronouncement of the arbitral award only the successful party, who is entitled to seek enforcement of the arbitral award, may file an application for interim relief under Section 9. The unsuccessful party of an arbitral proceeding would not be entitled to file an application for interim relief under Section 9 because there is no award which is to be enforced in its favour.
Furthermore, in case the arbitral award has been set aside, the unsuccessful party, i.e. the party whose claims were rejected vide the award, cannot apply to a court for interim relief under Section 9.
Jurisdiction of court for the application of Section 9
The court of the seat of arbitration has exclusive jurisdiction over the arbitration proceedings under the Act. Therefore, Section 9 application by any party has to be made in the relevant district court or High Court.
However, in the case of international commercial arbitration, i.e. when at least one of the parties is non-Indian, then Section 9 application may be made only in the High Court. After the amendment of the Act in 2015, a party of a foreign seated international commercial arbitration may apply for interim relief under Section 9 in Indian courts, provided they have not, in any express or implied way, agreed to exclude the applicability of Section 9 of the Act.
In case an application for interim relief is pending before a court and the arbitral tribunal is constituted in the meantime, it does not imply that the court cannot deal with the pending application. There is no provision in the Act which states that the court is required to relegate or transfer a Section 9 application to the arbitral tribunal the moment it is constituted.
It would also be pertinent to mention here that all subsequent applications under Part I of the Act must be made at the same court in which the Section 9 application has been made.
Enforceability of and appeal against interim relief granted under Section 9
The interim relief granted by a court has to be enforced like any other order of the court. Any willful non-compliance or disobedience of the interim relief order may be treated as contempt of court and dealt with according to the existing laws of the land. However, an appeal against an interim order may be made to the suitable court as per Section 37(1)(b) of the Act.
Enforcing an interim relief granted by an arbitral tribunal seated outside India
As Section 17 falls under Part I of the Act, parties can apply for interim relief under Section 17 only if the seat of arbitration is in India. Any interim relief order passed by an arbitral tribunal seated outside India cannot be directly enforced in India as there are no relevant provisions in the Act which permit the enforceability of interim orders granted by tribunals seated outside India. In order to enforce an interim relief order granted by an arbitral tribunal outside India, the party shall have to file an application under Section 9 of the Act provided the parties to the arbitration agreement have explicitly excluded the applicability of Section 9 from the contract.
Interim relief under Section 17 of the Act
Section 17 of the Act gives the arbitral tribunal the power to pass an order for interim measures if a party applies to the tribunal for such interim relief. A party may apply for interim relief under Section 17 of the Act only after the arbitral tribunal has been constituted till the arbitral award is passed. During this time, generally, the courts do not allow an application for interim relief under Section 9. The arbitral tribunal cannot pass an interim relief order containing directives to some third party. The jurisdiction of the arbitral tribunal is limited to the parties of the arbitration agreement only.
The interim relief that can be sought under Section 17 of the Act is the same as that can be sought under Section 9. Application for interim relief may include the following:
- Appointment of guardian for a minor or person of unsound mind;
- Preservation, interim custody or sale of goods (if the goods are of perishable nature) for any goods related to the arbitration agreement;
- Securing the amount of claims;
- Allowing the detention, preservation or inspection of any property or thing, authorizing any person to enter upon any land or building, authorizing any samples to be taken or observations to be made or experiments to be tried in order to expedite the process and obtain accurate & complete information or evidence;
- Allowing interim injunction or appointment of receiver;
- Any other reliefs which the court considers proper taking into account the facts and circumstances of the case.
Any party to the arbitration agreement may file an application to the arbitral tribunal under Section 17 during the course of the arbitration, i.e. after the arbitral tribunal has been constituted and up to the time the arbitral award has been made.
Enforceability of and appeal against interim relief granted under Section 17
The interim relief orders passed by the arbitral tribunal shall have the same force and shall be deemed to be an order of the court for all purposes similar to the powers of the court under Section 9. The order shall also be enforceable as if it were an order of the court. Further, the non-compliance of an interim relief order by the arbitral tribunal shall be treated as a contempt of court and can be dealt with appropriately as per the prevailing laws of the land. However, an appeal from an order granting or refusing to grant an interim relief under Section 17 may be made as per Section 37(2) of the Act.
Conclusion
Thus, it is clear that the right of the aggrieved party is protected at every stage, i.e. even before the commencement of arbitration, during the arbitration proceedings and even after the passing of the arbitral award. The interim relief orders granted by the court or the arbitral tribunal are enforceable. The provisions of Section 9 and Section 17 are of paramount importance and are an indispensable component of the arbitration mechanism.
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