BRUS CHAMBERS, Solicitors
: INTERIM RELIEF FROM COURT
Brus Chambers arbitration services include interim measures under the Indian Arbitration and Conciliation Act, 1996.
Indian courts cannot order interim relief in support of foreign seated arbitrations therefore interim relief from Indian court can made where arbitration is seated in India ;
Traditionally, parties to arbitration in India frequently use procedures before the courts, such as application for injunctive relief, and challenge adverse awards on technical grounds. Section 9 of India's Arbitration and Conciliation Act permits a party to petition a court of competent jurisdiction for interim relief, even before an arbitration proceeding is initiated; to restrain the opposing party from selling its property in India during the course of the arbitration proceeding; and possibly even staying the arbitration proceedings on the grounds of 'arbitrability' of the issue on hand. Foreign arbitration clauses in contracts involving parties in India are routinely challenged by Indian parties under Section 9 on the basis that Section 2(2) of Part I of the act confers powers on the Indian courts to grant interim measures applied even to arbitrations being held outside India.
Interim Measures under the Indian Arbitration and Conciliation Act, 1996
In arbitral proceedings, the need often arises for provisional remedies or other interim measures of reliefs because, in reality, arbitral proceedings are no less adversarial than litigation in public courts. When a dispute arises, aggrieved party is always concerned with protecting his interest either in movable or immovable properties. Party is always interested in taking timely action against another party or parties so that his or her interest in the properties is protected. This prompt and timely action makes other party or parties unable to play any sort of mischief by way of tampering with properties. Thus Arbitration and Conciliation Act, 1996, under Section 9 gives parties power to approach Courts for seeking interim measures. Often it sounds against the basic philosophy of Arbitration for allowing Court's intervention, but for many reasons such judicial interventions are inevitable.
INTERIM MEASURES: CONCEPT
Interim Measures are granted during the pendency of adjudication of a dispute and are usually in the form of injunctions, specific performance, pre-award attachments etc. By definition, 'interim reliefs' are temporary or interim in nature and are granted in advance of the final adjudication of the dispute by the arbitral tribunal.
(A) Types of interim measures:
Provisional remedies and interim relief come in many forms, depending on the parties involved and context of the dispute. Interim reliefs may be broadly classified into the following categories:
(a) Reliefs which are procedural in nature e.g., inspection of property in possession with third parties or compelling the attendance of a witness.
(b) Reliefs which are evidentiary in nature and are required to protect any document or property as evidence for the arbitration; and
(c) Reliefs which are interim or conservatory in nature and are required to preserve the subject matter of the dispute or the rights of a party thereto or to maintain the status quo and to prevent one party from doing a particular act or from bringing about a change in circumstance pending final determination of the dispute by the arbitrators.
These reliefs can be provided by granting an interim injunction, appointing a receiver, making of an attachment order or any other interim order for securing the amount in dispute or for the preservation, custody or sale of the property in dispute. During the pendency of a proceeding in a court, a party may make an application for grant of an interim measure(s) and the court may grant such measure(s) as permitted under the procedural rules governing the powers of the court or those that it may derive through its inherent powers.
The principle governing the grant of interim measures is the use of judicial discretion by a Court while taking into consideration questions pertaining to balance of convenience, the applicant's ability to make out a prima facie case and most importantly the irreparable harm that would be caused in the event the measure is not granted.
Under Indian Law, court's have both the express power of granting interim measures under Order 39 Rule 1 and Rule 2 of the Civil Procedure Code as well as their inherent power under section 151 to grant an interim measure other than that specified under Order 39, Rule 1 and 2.
(B) Interim measures under Arbitral Proceedings:
Arbitration is a forum for adjudication that is a departure away from courts and in fact, court interference has been considered a bane to its development.4 However, under arbitration procedural statutes and rules, courts not only have the power to grant interim measures but this power, in most cases, is wider than that of a Tribunal.
Though, it has been realised that a total curtailment of the court's power to grant interim measures during the pendency of arbitration cannot be envisaged and it is necessary to allow the court to grant interim measures, courts have, keeping in mind the new changes in legislative thinking, reduced their interference in arbitration proceedings. However it is not possible to completely do away with the role of the court as the nature of interim injunctions make it necessary to go to a court of law and it is possible that the very purpose of seeking an interim measure may be defeated.
INTERIM MEASURES GRANTED BY COURTS UNDER SECTION 9 OF THE ACT
(A) Section 9 of the Indian Act:
It appears that the scope for application of an interim measure under section 9 of the Indian Act is as wide as the scope under Article 9 of the UNCITRAL Model Law. Section 9 allows a party to seek those interim measure laid down under sub-clause (a) to (d) as well as 'any other measures' a court deems appropriate under sub-clause (e).5 Moreover, section 9 does not limit the grant of interim measures to the subject matter of the dispute and secondly, sub-clause (e) grants courts the discretionary power to grant such interim measures as appears just and convenient.
The interesting difference between Article 9 and Section 9 is that Article 9 states that it shall not be incompatible for a party to apply to a court, leading to the inference that the UNCITRAL Model did not really encourage applications to courts but just held that such applications did not suffer from incompatibility. Section 9, on the other hand, does not read on the road of incompatibility but, in effect, grants leave to the parties to apply to a court for seeking an interim measure.
(B) Time for invoking the Court's jurisdiction (under the Indian Act):
One of the controversies that emerged after the passing of the Indian Act was with regard to the point of time when an application could be made to a court for granting interim relief. This controversy was finally settled by the Indian Supreme Court in its high-water mark judgment in Sundaram Finance vs. NEPC.6 The Madras High Court while interpreting Sec. 9 had ruled that in cases of prior referral under section 9 at least a notice for commencement of Arbitration was necessary.
Justice B.N. Kripal ruling on behalf of the Court overruled the judgment of the High Court and held that an application under section 9 could be made even prior to sending notice for commencement of the Arbitration to the other party. Holding otherwise, according to Kripal J. would be rendering the meaning of the words 'before ... the arbitral proceeding' otiose. In his judgement, Kripal J. keeping in view, Article 9 of the UNCITRAL Model Law opined that Article 9 clarifies the mere request to a court by a party to an arbitration agreement for an interim measure 'before or during arbitral proceedings' and it would not be incompatible with the arbitration agreement, meaning thereby that the arbitration proceedings could commence after a party had approached the court for an order for interim protection.
The Supreme Court, in Sunderam Finance Ltd. v. NEPC India Ltd., held that Section 9 is available even before the commencement of the arbitration. It need not be preceded by the issuing of notice invoking the arbitration clause. This is in contrast to the power given to the arbitrators who can exercise the power u/s 17 only during the currency of the Tribunal. Once the mandate of the arbitral tribunal terminates, Section 17 cannot be pressed into service.
(C) The UNCITRAL Model Law - Article 9:
Article 9 of the UNCITRAL Model Law dealing with arbitration agreements and interim measures granted by courts lays down as under:
'It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure'.
Article 9, as can be seen, is expansive for it allows a party to request from a court an interim measure of protection, without limiting such measures to 'the subject matter of the dispute', as in the case of Article 17 meaning thereby that under the UNCITRAL Model Law courts may order any measures including pre-award attachments, third party compliance etc. Article 9, also lays down that granting of an interim measure by a court does not negate the applicability of an arbitration agreement and is not contrary to the intention of parties agreeing to submit a dispute to arbitration. Thus no party can turn around and nullify an arbitration agreement on the ground that a court taken on the dispute for the limited purpose of granting interim measures under Article 9.
However, unlike the Indian Act, Article 9 does not provide for a specific time prior to the commencement of the arbitration when a dispute may be referred to a court. But being a facilitating provision, it must be interpreted in such manner as would assist its operation and not be so construed as to debar such prior referrals as allowed under the Indian Act.
(D) The need for balanced intervention by Courts:
Arbitration procedural rules contain provisions by which a party may seek recourse to courts for grant of interim measures. The need for the court's role is felt in relation to enforcement of interim measures granted by Arbitral Tribunals, as well as, granting those interim measures that were beyond the scope of the Tribunal. The reason for expressly allowing parties to take recourse to courts is on account of the fact that constitution of an arbitral tribunal can be a time consuming process.
The Court will generally take into account the following considerations while granting interim relief under section 9:
1. The party applying for interim relief must establish a prima-facie case.
2. The balance of convenience should be in its favour.
3. The party will suffer irreparable loss or injury if the interim measure is denied to it.
4. The exercise of discretion has to be in beneficial manner depending upon the circumstances of each case.
(E) General factors for interim relief:
A party seeking to obtain an interim measure (particularly before the arbitral tribunal has been constituted) must ensure that by taking steps in a court and thereby submitting to the jurisdiction of the domestic court it does not waive any rights it has under the arbitration agreement. The ability to obtain an interim measure will generally depend upon the procedural law governing the arbitration and the law in the jurisdiction in which the interim measure is sought to be enforced.
Generally, an applicant party needs to establish the following factors:
o There is an 'urgent need' for the interim measure;
o Irreparable harm will result if the measure is not granted;
o The potential harm if the interim measure is not granted substantially outweighs the harm that will result to the party opposing the measure if the measure is granted; and
o There is a substantial possibility that the applicant will ultimately prevail in the dispute.
SCOPE OF COURTS' JURISDICTION TO GRANT INTERIM RELIEF
Sub section (2) of section 2 provides in a clear and unambiguous language that Part I shall apply where the place of Arbitration is in India. However, the Delhi High Court, Dominant Offset (P) Ltd vs. Adamovske Strojirny where the arbitration took place at London, held that Part I also applies to International Commercial Arbitration conducted outside India.
However, the Division Bench of Delhi High Court in Marriott International Inc. vs. Ansal Hotels Limited, where arbitration proceedings were held at Kuala Lumpur in Malaysia, held that Part I of the Act shall apply to all arbitrations where the place of arbitration is in India.
Moreover, in Max India Ltd v General Binding Corp. The Division Bench of the Delhi High Court upheld the decision of the Single Bench of the High Court regarding the jurisdiction of Indian courts to grant interim relief in international commercial arbitrations. The division bench uphold the judgment of single judge and came to the conclusion that as per the decision in Bhatia International v. Bulk Trading Co. it was settled law that Part 1 of the Arbitration and Conciliation Act would apply to all arbitrations, including international commercial arbitrations held outside India, unless the parties by express or implied agreement excluded all or any of its provisions.
As far as the position of the Indian Law is concerned, this decision seeks to clarify the scope of the powers of an Indian court to grant interim relief in international commercial arbitration. The rule that seems to emerge is that when the parties have specifically intended that: (a) the law governing the contract; (b) the rules governing the arbitration; and (c) the court's jurisdiction and the place of arbitration are outside India, then it would signify that the Indian court's jurisdiction and applicability of Part 1 of the Act (which contains the power of the Indian courts to provide interim measures) are excluded.
(A) Sec. 9 as an exception to Sec. 5:
Section 5 of the Act no doubt forbids any intervention by any judicial authority, but any such exclusion of jurisdiction is only in matters, which are not otherwise specifically provided for. Section 9 of the Act is, however, an exception to the general rule contained in Section 5 in as much as the former specifically empowers the Civil Court concerned to pass suitable orders on the subject and in relation to matters stipulated therein. There is, therefore, no merit in the contention that Section 5 would exclude the jurisdiction of the Civil Court otherwise competent to entertain applications and pass orders in regard to the stipulated matters under Section 9 of the Act.
(B) Circumstances preventing court from granting interim relief:
The Bombay High Court in Nimbus Television & Sports Vs D G Doordarshan opined that if the interim relief prayed for u/s 9 would amount to granting final relief frustrating the arbitration proceedings such a relief cannot be granted by the court.
In Navbharat Ferro Alloys Ltd. vs. Continental Glass Ltd., the Delhi High Court held that when the claim is for money, the sale of materials cannot be ordered as an interim relief. However, it is submitted that an order of interim measure of protection can be passed by a competent court for sale of property where such property forming the subject matter of the dispute is perishable in nature.
The Bombay High Court, in Anil Construction vs. Vidharbha Irrigation Dev. Corpn19, held that the benefit of section 9 cannot be availed of by a party, which has no intention to appoint the Arbitral Tribunal. The provision cannot be availed by a party for restraining the other party from approaching the Arbitral Tribunal.
The Delhi High Court, in Arun Kapur v. Vikram Kapoor and others, after considering the decision of an English court in Channel Tunnel group Ltd. vs. Balfour Beatty construction Limited observed as follows:
'It is cardinal rule that if the party invokes preliminary alternative remedy before the Arbitral Tribunal, it is debarred from invoking the jurisdiction of the court under Section 9 of the Act. Ordinarily if the arbitrator is seized of the matter the interim relief should not be entertained and the parties should be advised to approach the arbitrator for interim relief unless and until the nature of relief intended to be sought falls outside the jurisdiction of the arbitrator or beyond terms of the agreement or reference of disputes. Otherwise, the very object of adjudication of disputes by arbitration would stand frustrated. A party should always be discouraged to knock the door of the Court particularly when the arbitrator is seized of all the relevant or even ancillary disputes.'
(C) Is parallel application u/s 9 as well as u/s 17 possible?
The Court can exercise power under section 9 to grant interim measures even during the pendency of application under section 17 before the Arbitral Tribunal. Remedy available to a party under section 17 is an additional remedy and is not in substitution of section 9.
Recently, a two-member bench of the Supreme Court, in the case of Firm Ashok Traders vs. G.D Saluja held that
(1) An application under Section 9 is neither a suit nor an application for enforcing a right arising from a contract - Prima facie the bar enacted by Section 69 of the Partnership Act, 1932 is not attracted to an application under Section 9 of the Act.
(2) Only a party to an arbitration agreement is qualified to make an application under Section 9. A person not a party to an arbitration agreement cannot make an application under Section 9.
(3) When application under Section 9 is filed before the commencement of arbitral proceedings, the applicant must be able to satisfy the Court that arbitral proceedings are positively going to commence within a reasonable time. There should be proximity between the application and the arbitral proceedings.
DRAWBACKS EXPERIENCED IN THE PROVISIONS FOR INTERIM RELIEF
The Law Commission of India in its 176th report published in 2001 noted a number of loopholes in the provisions for interim relief in the 1996 Act which were exploited by the parties after the Act came into force.
Provisions contained in section 9 regarding the availability of interim relief even before the arbitration proceedings commence had been misused by parties. It so happened that after obtaining an interim order from the court, parties did not take initiative to have an arbitral tribunal constituted. This allowed them to reap the benefits of the interim order without any time limit.
The Law Commission in its 176th report, observed that very often, in the past, Parties had used underhand means to destroy evidence which they felt could go against them during the Arbitral Proceedings or had attempted to concoct witnesses and tamper with evidence, in the possession of a third party. As a result, there is an immediate need to change the provisions of the existing section, so that the Tribunal could get more powers to deal with such situations.
(A) Difficulties in granting interim measures in Arbitration:
The contractual nature of arbitration gives rise to several unique difficulties.
1. Non-enforceable nature of interim measures granted by an arbitral tribunal is an accepted disadvantage that an Arbitral Tribunal faces when granting interim relief and without any coercive enforcement powers
2. A common difficulty in arbitration occurs when resolution of the dispute involves a third party against whom no order of the Tribunal shall be valid for the reason of lack of jurisdiction.
3. When interim measures of protection are needed against one of the parties to the arbitration, issues arise as to the availability of such remedies when they are sought at early stages in an arbitral proceeding.
4. Parties to arbitration also face difficulties when one party seeks interim relief at an early stage of the proceeding. In arbitration, it is typically difficult to obtain such relief expeditiously, because the Arbitral Tribunal has not yet been constituted. Thus, most parties in need of this immediate assistance seek the aid of national courts for this emergency relief.28 If a party seeks to delay the opposing party's request for an injunction or attachment, that party can slow the process considerably by taking a long time to select an arbitrator.
5. The Tribunal's jurisdiction to grant interim measures may be limited by the governing law of the arbitration.
It is submitted that lacunas in the provisions of interim measures should be set right by legislative initiation. Six years have passed but the Amendment Bill, 2003 has not been made into law because the Legislature feels that there are many other important issues like enforcement of interim orders and Costs of proceedings which need to be taken care of before making these Amendments to Ss.9 & 17.
The system of dual agency for providing relief needs to be abolished or otherwise some enforcement mechanism be provided for enforcement of the interim measures of protections ordered by the Arbitral Tribunal. It would be better that application of interim measures is put to the Arbitral Tribunals as they are seized of the subject matter under dispute. Only when a party is not able to get relief from the Arbitral Tribunal, it should be allowed to knock the doors of the Court. This will be in line with the objectives of the Act to minimise the intervention of the Court in arbitral proceedings.
One aspect in all the statutes /rules is common: they follow the policy of minimal role to be played by Courts. Thus, one of the ways by which courts may determine whether they are required to interfere in granting an interim measure is by keeping in mind the powers exercisable by the Tribunal, thereby ascertaining whether in a given case the interim relief claimed by the applicant can be granted by the Arbitral Tribunal. If held in the affirmative, the next question they would be required to answer is whether the said relief can be granted quickly and effectively as the situation demands and herein unless the applicant is able to demonstrate that the delay will cause irreparable hardship or injury, in which case the court may intervene in order to meet the ends of justice, the court should, in all other circumstances, refrain from interfering and direct the parties to seek relief from the Arbitrators.
Arbitration has emerged as the preferred mechanism for the resolution of commercial disputes amongst various dispute resolution mechanisms available. One of the reasons for proliferation of arbitration has been the flexibility provided to the parties to conduct arbitral proceedings as per the law chosen by them, along with arbitrators of their choice
and at a venue and place convenient to parties, as opposed to a court proceeding. Moreover, party autonomy being the thumb rule in arbitral proceedings, parties are also generally permitted to agree upon the procedure governing the resolution of disputes.
The arbitral process is normally accompanied by certain procedural safeguards such as interlocutory or interim measures that safeguard parties during the pendency of proceedings.
It has been observed that parties engage in dilatory tactics to delay proceedings or prejudice rights of opposite parties by inter alia dissipating assets or interfering with the functioning of bodies. (In case of a company where both parties are stakeholders). In such a situation, the final relief granted by a tribunal may be rendered nugatory or meaningless unless the arbitral tribunal or court is able to safeguard the rights of parties during the pendency of the arbitral proceedings. Therefore, in the intervening period between juncture at which the 'dispute' arose (in certain circumstances even before the commencement of arbitration) and till the execution of the award, certain interim measures may be necessary to protect a party's rights and ensure that justice is done.
The nature of interim relief sought by the parties may vary based on the facts and circumstances of the dispute. In certain situations the effective provision of interim reliefs may involve directions to third parties also. With the recent changes in the Arbitration and Conciliation Amendment Act, 2015 ('Amendment Act') and wider powers vested with arbitral tribunals, interim reliefs should be made easy and accessible to parties to secure the ultimate arbitral award. In this backdrop, it is of paramount importance to understand
the nature of interim reliefs which can be granted by courts and arbitral tribunals and their respective limitations.
Any party to the arbitration agreement can make an application for interim measures in the course of the arbitral proceedings. However, after making of the arbitral award, only a successful party which is entitled to seek the enforcement of the award can apply to the court under Section 91 of the Arbitration & Conciliation Act, 1996 ('Act') for protection
in terms of Section 9 (ii) of the Act.
This emanates from the understanding that the scheme of Section 9 postulates an application for the grant of an interim measure of protection after the making of an arbitral award and before it is enforced for securing the property for the benefit of the party which seeks enforcement of the award.2 As was observed by the Bombay High Court (quoted below), an unsuccessful party would not be, in any event, entitled to enforcement for the simple reason that there is no award in its favour, to be enforced:
'If an application is made at the instance of such an unsuccessful party under section 9, there will not be any occasion to grant any interim measure which will be in the aid of the execution of the arbitral Award as such a party will not be entitled to seek enforcement under section 36.'
Consequently, even on the award being set aside, the party whose claim has been rejected vide the said award, cannot apply for interim measures under Section 9 of the Act. This is premised on the understanding that the court, under Section 34 of the Act does not act as a court of appeal, and not capable of granting any further relief to the party which challenges the award.
Interim measures in Arbitration
In India, the Act which was formulated on the basis of UNCITRAL Model Law on International Commercial Arbitration, 1985 ('Model Law'), provides for interim measures under Sections
9 and 17 by courts and arbitral tribunals respectively.
Section 9 of the Act is broadly based on Article 9 of Model Law and provides for the grant of interim measures by a court. Unlike Model Law, Section 9 provides for interim measures
of protection not just before the commencement of arbitral proceedings5 and during the arbitral proceedings but also post the arbitral award has been delivered (but prior to its enforcement).
The Amendment Act has introduced certain changes to the provisions on interim reliefs with respect to kind of reliefs available and the time-frame for seeking such reliefs before
courts. In case of arbitrations commenced on or after October 23, 2015, if an order of interim reliefs has been granted by a court prior to the constitution of the arbitral tribunal, parties are required to initiate arbitral proceedings within a period of ninety days.
Once arbitral proceedings have commenced, the parties would have to seek interim reliefs before the arbitral tribunal. A court would ordinarily not entertain a petition for interim
reliefs in such a situation unless the party is able to prove the existence of circumstances that make a relief granted by an arbitral tribunal insufficient. However, in certain situations including where the interim relief sought affects third party rights such as an injunction against the encashment of bank guarantees, an application for interim reliefs
would lie only before a court even if an arbitral tribunal is constituted.
After an award has been rendered by the arbitral tribunal, the successful party may also choose to approach courts for interim reliefs to safeguard the validity and effectiveness of the arbitral award prior to its enforcement. The application would generally have to be made before a court prior to the enforcement of the award in case of both domestic and international commercial arbitrations. It is also a corollary that the unsuccessful party may not seek to stall the enforcement of the award by filing an application under Section 9.
Interim measures ordered by arbitral tribunal set out in Section 17 of the Act, are also essentially based on Article 17 of the Model Law.
Previously, there was a debate whether the powers of an arbitral tribunal to grant interim reliefs were narrower compared to the power of a court under Section 9 of the Act. However,
with the amendments in place, the powers of an arbitral tribunal to grant interim reliefs have been made at par with those of the court under Section 9 of the Act.
The operation of this provision is triggered only at the request of a party to the arbitral proceedings, only after the constitution of the tribunal. A party may seek interim reliefs up to the point in time at which an award is made by the tribunal.
Reliefs under Section 9
For assessing the powers of the court to grant interim measures under Section 9 of the Act vis-a-vis powers of the arbitral tribunal under Section 17 of the Act, the introduction of the following clause to Section 9 of the Act merits discussion:
'(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.'
Thus, to avoid prejudice to any party subsequent to the constitution of the arbitral tribunal, courts have begun to refrain themselves from making orders under Section 9 of the Act.
However, subsequent to the amendments in Section 9 of the Act, the court can grant interim measures in the following circumstances:
Prior to the constitution of the tribunal
After the award has been made and prior to its enforcement
In the course of the arbitral proceedings, after the constitution of the tribunal, when an interim measure granted by the tribunal would not be efficacious. In granting interim reliefs in such cases, courts assess the relevant facts and circumstances with precision including instances like the lethargic manner of arbitrators in granting interim reliefs in respect of assets rendering the remedy inefficacious.
Further, unless the parties have agreed otherwise, a court in India can pass orders for interim measures of protection even if the place or seat of arbitration is outside India.
In a recent case before the Delhi High Court, it was disputed as to whether the court before which an application for interim measures is pending, would have to relegate the same
to the arbitral tribunal upon its constitution. Upholding the finding of the Single Judge, the Division Bench of the Delhi High Court observed that:
'If the argument'were to be accepted that the moment an Arbitral Tribunal is constituted, the Court which is seized of a Section 9 application, becomes coram non judice, would create a serious vacuum as there is no provision for dealing with pending matters. All the powers of the Court to grant interim measures before, during the arbitral proceedings or at any time
after the making of the arbitral award but prior to its enforcement in accordance with Section 36 are intact (and, have not been altered by the amendment) as contained in Section 9(1) of the said Act. Furthermore, it is not as if upon the very fact that an Arbitral Tribunal had been constituted, the Court cannot deal with an application under sub-section (1) of Section 9 of the said Act. Section 9(3) itself provides that the Court can entertain an application under Section 9(1) if it finds that circumstances exist which may not render the remedy provided under Section 17 efficacious'.there is no provision under the said Act which, even as a transitory measure, requires the Court to relegate or transfer a pending Section 9(1) application to the Arbitral Tribunal, the moment an Arbitral Tribunal has been constituted.'
Thus, to avoid a situation where a party is left without an interim order in respect of proceedings for interim measures pending before a court which have not been transferred to the tribunal after its constitution, the court may continue with the same and grant appropriate reliefs, where necessary.
As mentioned above, another significant aspect is that of the time-lines introduced vide the amendments. Section 9(2) of the Act provides that:
'Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.'
The insertion of such a time-bound mechanism aims at regulating of the role of the courts in granting interim measures once the arbitral tribunal has been constituted as it was deemed
suitable to empower the tribunal to hear all interim applications, upon its constitution. After all, once the Tribunal is seized of the matter it is most appropriate for the Tribunal
to hear all interim applications.
Reliefs generally sought from courts
A reading of various decisions suggests that parties generally approach courts for securing the amount in dispute and preventing the alienation or dissipation of property. The following are indicative of the reliefs generally sought and granted by courts under the Act :
i. Under Section 9(ii)(b) parties have sought to protect their financial interests by securing the amount in dispute, courts have directed parties to furnish guarantees.
ii. Under Section 9(ii)(c) courts have allowed parties to take symbolic possession of properties. Courts have also appointed a receiver to take possession of property not being the subject matter of the dispute.
iii. In exercise of the wide powers available under Section 9(ii)(e) courts have directed parties to disclose the properties owned by them. Courts have found that an order of
attachment may be passed against a third party respondent as well as directing parties to not dispose of their properties.
II. Standards applicable to the grant of interim reliefs by the Court under Section 9
There are no standards prescribed under the Act for grant of interim reliefs by a court under Section 9 of the Act. Some courts have sought to apply standards under the Code of Civil Procedure, 1908 ('CPC') such as Order XXXVIII and Order XXXIX. Courts have held that standards prescribed in the CPC would not be applicable to proceedings under Section 9 of the Act and have held that if a party can merely show that it has a good case on merits, it would be likely to succeed. In these situations courts have been guided by the principle that denial of the grant of such interim reliefs would lead to injustice to the applicant or that the resultant award would be rendered unenforceable/ un-executable if such reliefs are not granted.
The degree of the applicability of the provisions of the CPC to proceedings under Section 9 of the Act remains unsettled in light of the divergent opinions by various high courts.
Further, the Supreme Court in Arvind Constructions v. Kalinga Mining Corporation and Others, despite recognising that there were divergent decisions by various high courts, left this question open to be considered in an appropriate case. The Amendment Act does not address this lacunae and remains silent with respect to standards that may be applicable in case of grant of interim reliefs by courts.
From a reading of various decisions we have distilled two lines of reasoning: an exclusive approach and an inclusive approach. The former line of reasoning suggests that the rigours of
every provision in the CPC cannot be put into place to defeat the grant of relief provided under Section 9 of the Act. Whereas the latter line of reasoning considers proceedings under
Section 9 of the Act to be akin to proceedings under Order XXXVIII Rule 5 and Order XXXIX Rule 1 and 2 of the CPC and consequently the principles contained therein would have to be
considered for the grant of interim reliefs.
Courts regulate the grant of temporary injunction in accordance with the procedure laid down in Order XXXVIII and Order XXXIX of the CPC. Order XXXVIII of the CPC pertains to certain reliefs that may be available at any stage of the suit prior to judgment including arrest of defendant as well as furnishing security, if a court is convinced that defendant intends
to delay or obstruct the execution of a decree passed against it by disposing of its property or poses a threat to the property in dispute.
Under Order XXXIX of the CPC, the Court may grant temporary injunctions and interlocutory orders if in any suit it is proved that any property in dispute is in danger of being damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or defendant threatens, or is about to remove or dispose of his property with intent to defraud his creditors. Courts in such cases may grant temporary injunction to restrain such act, or give such other order for the purpose of staying and preventing the damaging, alienation, sale, removal or disposition of the property provided the party can satisfy the three requirements in relation to:
(i) Prima facie (ii) Balance of convenience
(iii) Irreparable injury.
A. Exclusive Approach
Order XXXVIII Rule 5 of the CPC provides for certain kinds of reliefs in the nature of grant of security, attachment of property or arrest of the defendant that are akin to the reliefs under Section 9(ii) (b) and (c) of the Act.17 These reliefs are granted only if the Court is satisfied that the respondent with an intention to obstruct or delay the execution of a decree is about to:
i. dispose of the whole or part of its property or
ii. remove the whole or any part of its property from the local limits of the civil court having jurisdiction.
Order XXXIX of the CPC provides for temporary injunctions which are akin to the reliefs under Section 9(ii) (d) and (e) of the Act. The standards to be shown by an applicant under Order XXXIX in order to successfully secure an injunction are that:
i. any property in dispute is in danger of being wasted, damaged or alienated by the respondent, or wrongfully sold in execution of a decree, or
ii. the respondent threatens, or intends, to remove or dispose of its property with a view to defrauding its creditors, or
iii. the defendant threatens to dispossess the applicant or otherwise cause injury to the applicant in relation to any property in dispute in the suit.
Various High Courts have taken the view that principles/standards contained in Order XXX-VIII Rule 5 and Order XXXIX mentioned above need not be strictly applied for the grant of interim measures under Section 9 by a court. Such strict application would defeat the very purpose of having an alternative mechanism of dispute resolution.
i. The Bombay High Court in Delta Construction Systems Ltd., Hyderabad v. M/S Narmada Cement Company Ltd, Mumbai ('Delta Construction') held that court would not be bound by the provisions contained in the Order XXXVIII Rule 5 while granting a relief under Section 9 of the Act.
ii. Adverting to Delta Constructions the Bombay High Court in National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd.19 ('National Shipping'), held that while seeking an order for securing the amount in dispute, the petitioner would not need to satisfy the requirements of Order XXX-VIII Rule 5.
a. Instead a party applying for interim reliefs would only have to make a clear case regarding the merits of the claim for interim reliefs and establish that the denial of such reliefs would lead to injustice to the applicant.
b. Further, the applicant would have to make averments regarding the obstructive conduct of the opposite party or attempts to defeat the award thereby requiring the grant of interim relief.
iii. Similarly, in Steel Authority of India v. AMCI Pty Ltd20 ('SAIL') the Delhi High Court took the view that principles contained in Order XXXVIII Rule 5 would only serve as guiding principle for the exercise of power by the court. A party seeking reliefs under Section 9 would essentially have to satisfy the court that the furnishing of security was paramount
to safeguard its interests.
iv. Interestingly in Adhunik Steels Ltd. v. Orissa Manganese and Minerals Pvt. Ltd. ('Adhunik Steels'), the Apex Court was of the opinion that 'well known rules' of the CPC would have to be kept in mind while granting interim reliefs under Section 9. Therefore, the principles such as (i) prima facie case, (ii) balance of convenience, and (iii) irreparable injury would have to be kept in mind while granting an injunction. The Apex Court stopped short of stating that specific standards under Order XXXVIII Rule 5 and Order XXXIX Rule 1 and 2 would apply. However, the Bombay High Court in Nimbus Communications Limited v. Board of Control for Cricket in India and Another22 ('Nimbus') interpreted Adhunik Steels to come to the
conclusion that standards set out in Order XXXVIII Rule 5 would have to be fulfilled.
However, in Tata Capital Financial Services Ltd. v. Unity Infraprojects Ltd. & Ors the Bombay High Court held that the Court will broadly bear in mind the fundamental principles of Order XXXVIII Rule 5 and Order XXXIX Rules 1 and 2, but at the same time, will have the discretion to mould the relief on a case by case basis with a view to secure the ends of justice and preserve the sanctity of the arbitral process. The Bombay High Court, herein, followed the ratio in the Division Bench's judgment in Deccan Chronicle Holdings Limited v. L&T Finance Limited that the underlying basis of Order XXXVIII Rule 5 would have to be borne in mind while making relevant orders under Section 9, however, the rigors of every procedural provision of the CPC cannot be put into place to defeat the grant of relief which would subserve the paramount interests of the justice.
v. In maintaining an exclusive approach, the Delhi High Court25 has continued to recognise that the powers of courts to grant interim reliefs under Section 9 of the Act is considerably wide, as is apparent from its text. Nevertheless, such power should be exercised in a principled manner, premised on some known guidelines - hence, the reference to Orders XXXVIII and XXXIX of the CPC. It has further clarified that the court should not find itself unduly bound by the text of those provisions rather it is to follow the underlying principles.
Further, relying on the Supreme Court's finding in Indian Telephone Industries v. Siemens Public Communication, the Delhi High Court concluded that though there is no textual basis in the Act, linking it with provisions of the CPC, nevertheless, the principles underlying exercise of power by courts in the CPC are to be kept in mind, while making orders under Section 9.
vi. A Division Bench of the Madras High Court chose to take up a firmer approach in holding that in a matter pertaining to Section 9 of the Act, CPC would have no application; rather a real, imminent danger of removal or disposal of the properties for such an extreme measure is to be proven.
B. Inclusive Approach
The following are indicative of judgments where the courts have taken the view that the principles/standards contained in the CPC under Order XXXVIII Rule 5 and Order XXXIX Rules 1 & 2 as specified above in Point 4.1 would apply to the grant of interim measures under Section 9 of the Act.
i. The Supreme Court in ITI v Siemens Public Communication29 ('ITI'), held that though there was no mention of applicability of the CPC to arbitral proceedings in the Act, the provisions of the CPC could be read in by a court exercising its powers during any proceedings arising out of the Act.
ii. In deference to the decision of the Apex Court in ITI, various High Courts had found that principles of Order XXXVIII Rule 5 and Order XXXIX Rules 1 and 2 of the CPC would have be read into when the court exercised its powers under the Act to grant interim reliefs.
iii. The Bombay High Court in Nimbus interpreted Adhunik Steel to state that the principles contained in Order XXXVIII Rule 5 i.e.
a. the conduct of the defendant indicated that it intended to alienate its property or to remove its properties from the jurisdiction of the court; and
b. the defendant intended to obstruct or delay the execution of a decree that may be passed against it;
would have to be kept in mind while determining an application under Section 9 (ii)(b). This approach has also been followed in various decisions subsequent to Nimbus
iv. Similarly, the Division Bench of the Delhi High Court in Anantji Gas Service v. Indian Oil Corporation32 interpreted Adhunik Steeel and Arvind Constructions to conclude that
the power granted to the court under Section 9 of the Act is akin to Order XXXIX Rules 1 and 2 of CPC. Thus, the court has to satisfy itself that the petitioner has established the
three cardinal principles, i.e. prima facie case, balance of convenience and irreparable loss in case no protection is extended by way of interim measure under Section 9 of the Act.
The same was reiterated by the Delhi High Court in V.K. Sood Engineers and Contractors v. Northern Railways.
v. The Calcutta High Court in Star Track Agency Pvt. Ltd v. Efcalon Tie Up Pvt. Ltd. noted - it is well-established that the principles for grant of interim order applied by Courts would also apply to proceedings under Section 9 of the Act for grant of interim reliefs.
vi. The High Court of Hyderabad has adopted a relatively strict approach in observing that the Court is under obligation to act in a fair manner, even while dealing with applications under a special enactment, such as the Act, consistent with the procedure being followed by it while disposing of applications under Order XXXIX of CPC.
This approach does strike as an unwarranted inclusion of formalism and technicality to the arbitral process.
a. Under The Arbitration Act, 1940 ('1940 Act'), the grant of interim measures36 was limited to only the post-award stage and was granted by courts only if it was satisfied that a party was taking steps to defeat delay or obstruct an award. Therefore, the standard similar to that in Order XXXVIII or Order XXXIX was already incorporated in the 1940 Act. However,
in the corresponding Section 9 of the Act, these wordings are absent in the Act. Therefore, it may be argued that the intention of the legislature was to depart from the standards pre-scribed earlier which were similar to Order XXXVIII or Order XXXIX standards.
b. It was specifically stated in the 1940 Act that provisions of the CPC would apply to all proceedings before a Court. This provision has not been retained in the Act; on the contrary Section 19 of the Act specifically excludes the applicability of pro-visions of the CPC. This also suggests that the legislature may have never intended to make standards set out in the CPC under Order XXXVIII or Order XXXIX applicable to proceedings under Section 9 of the Act.
c. Article 17 J of the Model Law as amended in 2006 ('Amended Model Law') provides that a court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration. However India has not made suitable amendments to the Act to give effect to Article 17 J. Therefore, the present sentiments of the courts may need to be re-evaluated while granting interim reliefs.
C. Enforceability of an interim order granted by a Court
Interim reliefs granted by a court may be enforced like any other order of court. In case of wilful non-compliance/disobedience of the judgment/order, parties may choose to initiate
contempt proceedings for civil contempt under Section 2 (b) of the Contempt of Courts Act, 1971. The parties in wilful non-compliance may be punished with the maximum punishment as provided in terms of Section 12 of the Contempt of Courts Act, 1971
Interim Measures by an Arbitral Tribunal under Section 17
I. Reliefs sought by parties before arbitral tribunals
The power of an arbitral tribunal to grant interim measures is dealt with in Section 17. Prior to amendment, the section was quite open-textured in the scope of reliefs that could
be provided; it permitted the tribunal to issue any interim measure of protection. However, courts and arbitral tribunals took the view that the scope of the interim measures that may
be granted under Section 17 was more limited than that under Section 9.41 Consequently, various arbitral tribunals arrived at the incorrect conclusion that they could not pass orders
such as a grant of security.
The Amendment Act has introduced much needed changes with respect to grant of interim reliefs by an arbitral tribunal and has brought clarity on the kind of reliefs that may be granted, bringing them at par with the interim reliefs that may be granted by courts under Section 9 of the Act. The following are certain reliefs that may be granted by an arbitral tribunal.
i. securing the amount in dispute in the arbitration;
ii. the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration;
iii. interim injunctions and the appointment of a receiver;
iv. any other interim measure which is just and convenient .
However, as has been settled by the apex court in MD. Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. an arbitral tribunal, under Section 17 of the Act, has no jurisdiction to pass any interim measures against a third party.
II. Standards applicable to the grant of interim reliefs by the Arbitral Tribunal under Section 17
The jurisprudence in India relating to the standards to be applied by an arbitral tribunal while granting interim reliefs under Section 17 is sparse at best. International authors have
suggested that an arbitral tribunal should be guided by arbitral case law, comparative analysis of arbitration rules, and scholarly opinions while granting interim measures. The standards applied by national courts while granting interim measures would have no bearing on arbitral tribunals.48 Arbitral tribunals have normally required a party arable harm;
(b) urgency; and (c) no prejudgment of the merits of the case. In some cases tribunals have also considered whether the party has established a prima facie case and that the balance of
convenience weighed in favour of the party.
As discussed, courts in India have at times shied away from importing principles contained in Order XXXVII Rule 5 and Order XXXIX Rule 1 & 2 to the grant of interim reliefs under
Section 9. When such principles are not necessarily applicable in proceedings before a court; it is inconceivable for the same to apply to flexible and tailor-made dispute resolution
process like arbitration. That said, in Intertole ICS (Cecons) O &M Company v. NHAI, the Delhi High Court held that that an arbitral tribunal would have to ascertain whether the petitioner has made out a case as per Order XXXVIII Rule 5, prior to granting an interim relief furnishing security for the amount claimed. However, the interim measures were not granted by the arbitral tribunal solely because the applicant was unable to establish a prima facie case.
In a recent judgment, the Delhi High Court, in observing the similarity between the objects of Sections 9(1)(ii)(b) and 17(1)(ii)(b) of the Act with that of Order XXXVIII Rule 5 of the CPC, held that the arbitral tribunal and court, while granting interim reliefs under the said provisions of the Act, must be satisfied that it is 'necessary' to pass order to secure the amount in dispute.
III. Enforceability of an interim measure granted by an arbitral tribunal
Despite the arbitral tribunal's power to issue interim measures, the fact that the Act did not provide for a method of enforcing any interim relief granted meant that there were doubts
regarding efficacy of the arbitral process in India.
The Delhi High Court in Sri Krishan v. Anand, held that any person failing to comply with the order of the arbitral tribunal under Section 17 would be deemed to be 'making any other default' or 'guilty of any contempt to the arbitral tribunal during the conduct of the proceedings' under Section 27 (5) of Act, being the only mechanism for enforcing its orders.55 Therefore, such party would be in contempt of court. It may come as a measure of relief to parties that the Delhi High Court56 has held that an order passed by an arbitral tribunal that is subsequently upheld by a court in an appeal filed under Section 37 of the Act, would be enforceable as an order of the court.
The amendment to Section 17 of the Act has now clarified that an order of the tribunal would be enforceable like an order of the court in case of interim reliefs granted by arbitral
tribunals. This applies only to arbitrations that commenced post October 23, 2015 (i.e. the date of commencement of the Amendment Act) since Section 26 of the Amendment Act stipulates
that 'nothing in the Amended Act, shall apply to 'arbitral proceedings' commenced as per Section 21 of the Act, before the commencement of the Amendment Act.'
Besides the statutory recognition of enforceability of interim orders granted by the tribunal, the Supreme Court, in a recent case, rendered non-compliance of an arbitral tribunal's order or conduct amounting to contempt during the course of the arbitration proceedings, as triable under the Contempt of Courts Act, 1971