This article has been written by Sarthak Mittal, a student at the Vivekananda Institute of Professional Studies of Indraprastha University, Delhi. This article elucidates upon the interim orders passed by the arbitral tribunal.
it has been published by Rachit Garg.
Introduction
Arbitration tribunals are not like other tribunals where the statutes constitute the adjudicating authority; rather, in the arbitration process, it is the parties who consent to the arbitrator. Providing powers for granting interim orders seems reasonable when it is an authority constituted by a statute, but is it safe to grant such wide powers to any random person to whom the parties consent to be an arbitrator?
In the case of Srei Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd. (2018), the Supreme Court of India held that there may be some leeway provided to the parties in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” for brevity) are provided with some leeway to select the arbitrator, however, the functioning of an arbitral tribunal always remains in strict adherence to the Act and thereby, statutory tribunals and arbitral tribunals are to be seen in the same This article aims to expound upon the powers of the arbitral tribunal to pass interim measures, the scope of such powers, the rationale behind the widening of such powers through recent amendments, and the considerations that guide the use of such powers. The main purpose behind the enactment of the Arbitration and Conciliation Act, 1996 is to have an efficacious, efficient, and equitable legal framework for domestic and international commercial arbitration. The Act has been based on the United Nations Commission on International Trade Law (UNCITRAL) as per the recommendations of the United Nations General Assembly.
Powers of interim measures under Section 17 of the Act
Powers to grant interim measures
Arbitration is a process where parties come to a consensus with respect to the arbitrators who constitute the arbitration tribunal, and parties simultaneously agree through an arbitration agreement to accept the binding nature of the tribunal’s decision. This Arbitration Tribunal has been conferred powers under Section 17 of the Act to pass interim orders during the arbitral proceedings.
Section 17 and Section 9 of the Act deal with matters of interim measures, whereby a party seeking to get an interim order passed in his favour can file an application with the court under Section 9 and apply to the tribunal under Section 17. The purpose behind interim measures in such cases is to preserve, examine, inspect, sell, and detain the subject matter of the proceedings. All the interim orders come to an end on final adjudication by the tribunal or the court. Some of the interim measures that can be taken by the arbitral tribunal are as follows:-
- Appointment of guardian for a party suffering from any legal disability.
- The subject matter is to be when preserved, kept in interim custody, or had to be sold.
- Depositing of the amount in court with respect to which dispute has arisen.
- Detention, preservation, and inspection of any immovable property.
- Allow any person to enter upon any land or building in possession of any party for collection of samples, conducting experiments, or making observations.
- Interim injunctions.
- Appointment of receiver.
The following list of measures is not exhaustive, as Section 17(1)(e) provides for a residuary clause whereby the tribunal can order any other interim measures in relation to the proceedings. Further, Section 17(2) carves out a legal fiction whereby, all the interim orders passed by the tribunal are deemed to be orders of the court and should be made enforceable in the same way through the Code of Civil Procedure, 1908.
When to file an application
The next question that arises is when an application can be filed by the party. It is pertinent to note that an application can be filed before a court under Section 9 before arbitration proceedings and also after the award has been passed by the tribunal, given that the award shouldn’t have been enforced. Through the 2015 amendment, it was made mandatory that the arbitration proceedings be initiated within a period of 90 days from the date of such order or within the time provided by the court when an interim order has been passed by the court before the initiation of arbitral proceedings. This was done in order to prevent delay by unscrupulous litigants after getting an interim order in their favour. An application can also be filed before an arbitration tribunal during the arbitration proceedings.
Further, it is important to understand that for the effective functioning of the tribunals, the supervisory role of the courts is to be reduced, and the same is the case with arbitration tribunals. Even the legislature has tried time and again with amendments to reduce the supervisory role of the courts, and even Section 5 of the Act provides for minimal judicial intervention. It is essential to make the arbitration proceedings expeditious. This is the reason that the legislature, through the 2016 amendment, provided that an application during the pendency of arbitration proceedings will be filed before the civil court only when the court is of the opinion that the provisions of Section 17 may not be effective enough to remedy the situation and not otherwise. Thereby, the courts still have jurisdiction to pass the interim orders during the arbitration proceedings, but only if the applicant is able to prove that remedies under Section 17 fall short of doing complete justice. The intent was to stop parties from delaying the arbitration proceedings by filing applications for interim measures before the court. The civil courts still have the jurisdiction to pass interim orders, but they will be reluctant.
Appeal against interim orders
Section 37(2)(b) provides for the provision of the first appeal from the order of the arbitration tribunal passed under Section 17 of the Act. The right to a second appeal is, however, contradicted by Section 17(3). The issue that arose was whether the appellant could further appeal to the High Court under Articles 227 and 226 from the order of the first appeal. In the case of Deep Industries Ltd. v. ONGC (2020), the Hon’ble Supreme Court has held that if the following proposition is allowed, it will be used to delay the arbitration proceedings, and the purpose of arbitration will be defeated, which is to have expeditious proceedings. However, the court also remained cognizant of the fact that Section 5 cannot circumvent the powers of the High Court provided under Articles 226 and 227. Thereby, the Supreme Court held that appeals can be allowed under Articles 227 and 226. However, the High Court will be reluctant to entertain the appeal before it unless there is a case of patently inherent lack of jurisdiction.
Amendments to Section 17
2015 Amendment Act
The 2015 amendment substituted the entire Section 17, which had made the powers of the tribunal to pass interim orders equivalent to those of civil courts in Section 9. Also, the powers are better well-defined now and can be enforced by their own independent force. Earlier, the powers were only limited to ordering deposits of security, but now tribunals have wide powers, which have been supplemented by the use of the residuary clause in the provision, which provides the tribunal with the power to pass all such orders that appear to the tribunal to be just and convenient.
The amendment of 2015 also amended the provisions of Section 9 so as to reduce the supervisory role of the courts and make the arbitration proceedings more expeditious. The parties are now obligated to file the application for seeking interim reliefs during the proceedings to the arbitral tribunal only. This has made the proceedings of arbitration smooth, as they do not get hampered by various adjournments that were to be granted to wait for the adjudication of the court on the application for interim relief. However, the right of the parties to approach courts during the pendency of arbitration proceedings has not been curbed completely, as the parties can still approach courts if they prove that the arbitral tribunal is bereft of powers to provide the proper and adequate remedy in the case.
2019 Amendment Act
Before the Amendment of 2019, the tribunal could have passed an interim order even after the passing of the award but before the enforcement of the award, however, the same power was restricted as the tribunal became functus officio after the passing of the award, which means that an adjudicating authority cannot review its own order once it has been passed. Thereby, now the interim orders can be passed by the tribunal only on an application made by the party during the pendency of proceedings.
Principle for granting interim measures
Interim injunctions
It is pertinent to note that all the adjudicating authorities are governed by the same principles when granting interim relief in a civil case. The statutes might change, but the principles that are to be considered for interim measures are pari materia to all such statutes.
The Supreme Court, in Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. (2007), held that in Sections 9 and 17 of the Act, the legislature cannot have intended to ignore the well-defined principles for the grant of injunctions and the appointment of receivers during the adjudication of matters. The principles talked about in the following judgement have been expounded in the case of Gujarat Bottling Co. Ltd. v. Coca-Cola Co., (1995) where the Hon’ble Supreme Court held that while granting an interlocutory order the court is going to consider that:-
- Whether the applicant has a prima facie case or not,
- Whether the applicant has the balance of convenience in his favour or not, and
- Whether any irreparable damage will be caused to the applicant if the interlocutory order is not passed in his favour.
The Court also in the following cases provided that the court in such cases has to be cognizant of the fact that the party claiming the interim relief had not acted negligently or in a mala fide manner and without any latches or delay. While deciding upon the issue of interim relief, the court is not to go into the merits of the case but has to adjudicate upon what it can gather from a prima facie understanding. Thereby, the same principles are to be followed by the civil court and arbitration tribunal while adjudicating the issue of the granting of an interim injunction.
Depositing of security
Further, in order to understand the extent of powers of the courts or arbitral tribunal to grant interim reliefs within Section 9 or 17 of the Act we have to also understand that what are the principles of granting interim measures in the Code of Civil Procedure, 1908 as the same principles are to be followed under Section 9 and 17 of the Act, the same proposition of law has been held in the case of DLF Ltd. v. Leighton India Contractors Private Ltd., (2021) wherein, in the matter of passing an interim order with respect to the furnishing of security under Section 9 of the Act considered the principles enunciated in Order XVIII Rule 5 of the Civil Procedure Code, 1908 which again deals with the furnishing of security where there is an apprehension that the defendant may harm the subject matter.
Another interesting question arose in the case of Evergreen Land Mark (P) Ltd. v. John Tinson & Co. (P) Ltd., 2022), wherein the issue was whether the Tribunal can pass an interim order under Section 17 regarding the deposit of security before adjudicating the applicability of a force majeure clause in the contract, which would absolve the depositor of such an order completely from his liability. The Supreme Court in the following case held that such an order cannot be passed by the Tribunal as it is one of the major issues in the case and it would be erroneous to pass such an order before adjudication of the issue on its merits.
In the following case, the Court also relied on the case of Dorab Cawasji Warden v. Coomi Sorab Warden, (1990) wherein, the apex court held that the main objective behind granting interim relief is to restore the status quo, whereby if there has been an act done by a party that could not have been done legally, the court can remedy the situation by passing interim orders, wherein the court has to make sure that the party who has suffered any loss is restored to his original position.
Decision on merits of the case by the court
Furthermore, in the case of National Highways Authority of India v. Bhubaneswar Expressway Private Limited (2021), the Supreme Court held that in the case of Section 9, the court should not consider the legal merits of the arguments while granting interim relief as it would be a disservice to the parties who have agreed to get their dispute settled by an arbitration tribunal, and apart from that, there can be chances that the decision of the court on the basis of the merits may prejudice the tribunal.
Exercise of powers to enforce interim measures
Enforcement of order
Section 17(2) of the Act provides that the order of the Arbitration Tribunal is enforceable in the same way as if it had been an order of the court, which means that it can be enforced by the Civil Procedure Code, 1908. Before the 2016 amendment, the interim orders of the court were not enforceable by their independent force, but the arbitration tribunal had to approach the courts under Section 27(5) of the Act for the initiation of contempt proceedings against the party, to get the order enforced. This led to an unnecessary delay in the culmination of such proceedings. However, now that legal fiction has been carved, all the consequences will follow axiomatically as they do in the case of disobedience of the order of the civil court, which can be like proceedings under the Contempt of Courts Act, 1971, or an application being filed under Order XXXIX Rule 2A in the case of non-compliance with an injunction order.
Order against a third party
Further, it is pertinent to note that the arbitration tribunal cannot pass an interim order against any third party who is not subject to the arbitration proceedings while adjudicating the claim between the parties. The same proposition of law has been held in the case of the SBI v. Ericsson (India) (P) Ltd. (2018) wherein the Hon’ble Supreme Court held that in a case where an arbitration dispute is between the unsecured creditors and debtors, no interim orders can be passed in order to effect the rights of the secured creditors.
Conclusion
The passing of interim measures is an important power that lies with any authority during the adjudication of disputes as it helps in safeguarding the interests of the party during the pendency of proceedings by the preservation of the subject matter property or by even providing immediate relief to the applicant so as to restore him back to his original position. Section 17 of the Act has helped in making arbitration proceedings more convenient and expeditious as now the tribunal in itself is able to remedy any exigent situation which may arise during the pendency of the proceedings with as much ease as any other civil court and also whilst following the same principles of law. The supervisory role of the court, which used to prolong the arbitral proceedings, is also curtailed by the legislative amendments in Sections 9 and 17 and also by various well-articulated judgments of the Supreme Court.
References
- https://www.mondaq.com/india/arbitration-dispute-resolution/1029922/a-temporary-sigh-of-relief-section-17-of-the-arbitration-conciliation-act-1996-
- Avtar Singh, Law of Arbitration and conciliation (11th Edition)
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