INTERIM MEASURES UNDER ARBITRATION AGREEMENT

This article is written by Saloni Sharma of Chanderprabhu Jain College of Higher Studies and School of Law, New Delhi, an intern under Legal Vidhiya

ABSTRACT

Unlike other tribunals, where statutes serve as the final decision-making body, parties to an arbitration process designate the arbitrator with their cooperation. Arbitration is an approach of conflict resolution in which parties consent to submit to an impartial third party rather than the court and accept binding decisions made. Although an award is the final result of arbitration, there are situations when it is necessary to issue specific orders prior to or during arbitration in order to protect the arbitration’s subject matter. These specific orders are called interim measures. Interim measures are urgent remedies given to the parties awaiting the final decision/judgment of the court/tribunal. This research article analyzes the concept of interim measures under Section 9 and 17 of the Arbitration and Conciliation Act, 1996 with the help of judicial references. This article will also analyze the history of arbitration law in India with their relevant judgments.

KEYWORDS

Interim measures, dispute, arbitration, award, arbitral tribunal, court, judgment, decision, parties, enforcement of awards, power to grant interim measures, Arbitration and Conciliation Act.

INTRODUCTION

Arbitration is a dispute resolution process which has been preferred by the parties lately. In this process, whenever a dispute arises it is generally solved not in the court but by an independent third party known as “arbitrator”. An arbitrator is the neutral third party which helps the parties in dispute to resolve their problems in an amicable way. If you talk about commercial disputes, whenever two parties agree to be in a contract they sign an arbitration agreement along with that which showcases all the possible options which must be adopted to solve any kind of dispute arising between the same parties.

Arbitration method is generally preferred over the normal court settlement process because of many reasons but one of the most important reasons is that arbitration is less time consuming as compared to the court settlement method of resolution of the disputes.

The new Act i.e Arbitration and Conciliation Act, 1996 was passed to ensure a just and speedy resolution of disputes arising from international business contracts, following the model of the United Nations commission on international trade law (UNCITRAL). Our courts have applied UNCITRAL norms to interpret and apply the terms of new acts whenever there is uncertainty in arbitration issues.

The courts and the arbitral tribunal are authorised to provide interim remedy under sections 9 and 17 of the Arbitration and Conciliation Act, 1996. The court’s authority as per section 9 is greater than the tribunal’s authority under section 17. The UNCITRAL Model Law’s Article 9, which likewise proposes temporary measures, serves as the main basis for Section 9 of the Act. On the other hand, Section 9 of the Act allows for interim remedies in three different situations: (i) prior to the start of the arbitral procedures, (ii) during the processes, and (iii) after the arbitral judgement is granted but before it is enforced. Furthermore, the argument over whether or not section 9 of the Act limits the court’s authority has been resolved by the Arbitration and Conciliation (Amendment) Act, 2015, or “2015 Amendment.” Thus, section 9 does not in any way limit the court’s extensive authority to give interim relief.

MEANING OF ARBITRATION

The process of arbitration starts when parties in the agreement fail to resolve their disputes of differences and the aggrieved party issues a notice to refer the dispute/claim to the arbitrator. [1](Section 21). After the arbitral Tribunal is constituted, the claimant will state facts of his case, submit his claim and seek relief. Respondent will file his counterclaim or his defence to the claim. Arbitrator passes an award on completion of arbitration proceedings.

HISTORY OF ARBITRATION LAW IN INDIA

Arbitration in India has developed since the nineteenth century. With the enactment of the Indian Arbitration Act, 1899, arbitration was recognized as a means of dispute resolution in India for the first time, but only in the three respected administrative districts of Madras, Bombay and Calcutta. The decision was made under [2]Section 89 and Schedule II of the Code of Civil Procedure, 1908, where provisions of arbitration were extended to various parts of British India which had not been extended by the 1899 Act. It was further modified in the chart. The provisions of Code of Civil Procedure, 1908 were considered cumbersome and multi-disciplinary and hence the Arbitration Act, 1940 was born and repealed the relevant provisions of the 1899 Act and the Code of Civil Procedure, 1908. The Act of 1940 similar to the English Arbitration Act 1934 but it related only with the domestic awards as it had no rules on the administration of foreign arbitral awards. The 1940 Act failed to achieve its objectives due to its unsatisfactory performance. Judge Advocate Desai noted the weakness of the Indian courts and the ineffectiveness of the 1940 Act in [3]Guru Nanak Foundation v Rattan Singh, (1981), where he succinctly observed:

They sidestep and evade the major process that led to the passage of the Arbitration Act, 1940. It has been a court battle that has made lawyers laugh and legal academics cry, without exception. “

Although the 1940 Act was subjected to serious criticism and negative comments from the courts, no changes have been proposed that would improve the performance of the 1940 Act. After the liberalization of trade in 1991, measures were taken to attract foreign investment, which required a good business environment. Thus, the Arbitration and Conciliation Act of 1996 came into force and repealed the law of 1940. Interestingly, the 1996 Act was based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and covered domestic and international arbitration. The main reason for the enactment of the 1996 law was to reduce the time consumption during the arbitration process.

During the implementation of the 1996 Act, in the Supreme Court of [4]India Bhatia International v. Bulk Trading S.A. and Another (2002) held that Part I of the 1996 Act applies even to an award made outside India unless expressly stated or excluded. Similarly, the Supreme Court gave its verdict in the case of [5]Venture Global Engineering v. Satyam Computer Services td (2008). The decisions have been widely criticized for their regression. The issue then went to [6]Bharat Aluminum and Co. v. Kaiser Aluminum and A.Ş. (2012), wherein the Supreme Court held that Part I of the Act is incompatible with Part II of the Act. It decided that it was not valid for part of it. According to the decision in BALCO, Indian courts cannot deal with the applications for interim measures under [7]Section 9 in Part II of the Act. It cannot accept provisional applications within the scope of this section.

In order to resolve these issues, the Ministry of Law and Justice on 8 April 2010 invited leading domestic lawyers, jurists and lawyers to submit comments explaining the operation of the 1996 Act. Subsequently, the Arbitration and Conciliation (Amendment) Act, 2015 was passed with some amendments to the 1996 Act. Interestingly, a proviso has been inserted into section 2(2) which provides that in the event of an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of Section 37 set to be used in international commercial decisions. In addition, Section 9 has been amended to reduce the influence of the court by providing that when the arbitral tribunal is established, the court will not accept the petition unless the conditions require so. In addition, Section 17 was amended and power was given to the arbitral tribunal to pass orders. The amendment gives the arbitral tribunal all the powers given to the courts under Section 9. The time limit for the arbitration court was set at 12 months after the composition of the tribunal, and this was included in Section 29A of the act through the Amendment of[8] 2015.

INTERIM MEASURES

Interim measures and reliefs are passed by the court or arbitral tribunal so as to protect the rights of the aggrieved party from the unfair tactics used by other parties deliberately to infringe the rights of another.

Thus, the court or a tribunal ensures this by passing measures during the proceeding of the dispute by refraining or abstaining from any act of the other party. The party could be the interested party or any other third party.

Under the Arbitration and Conciliation (Amendment) Act 2015, there have been significant changes to the provision of interim measures under the act. According to the law, the parties may request interim measures from the court in accordance with Section 9 of the act before, or during the arbitration or after the award is given but before its enforcement. Interim relief is an important safeguard provided in the Act to ensure that any claim that a party wishes to make in an arbitral proceeding is protected by security, or other measures if the court approves.

Interim relief is typically given when there appears to be a prima facie case;

1. The aggrieved party requesting relief has the advantage of convenience;
2. If the interim relief is denied, irreversible harm or damage may result.

There are provisions given under the arbitration and conciliation act, 1996 to safeguard the interest of the aggrieved party.

Section 9 and 17 talk about the same. Section 9 mentions “interim measures etc passed by the court” whereas section 17 mentions “interim measures by the arbitral tribunal.”

SECTION 9

In accordance with Section 9 of the Act, a party is entitled to seek interim relief from the court prior to the initiation of arbitration proceedings, during the arbitration process, or at any time before the arbitral award is enforced. However, courts typically decline to entertain petitions for interim relief once the arbitral tribunal has been established, unless the aggrieved party convincingly demonstrates that the interim relief available or potentially available from the arbitral tribunal under Section 17 of the Act would be ineffective.

Addition of subsection (3) to Section 9 to confirm that the parties must apply to the arbitral tribunal for interim relief once the award is made, as courts and arbitration tribunals have the same authority to grant interim relief after the 2015 amendment.

Section 9(3) derives from the principle of minimal judicial interference in judicial process, which is also included in Section 5 of the Act. However, the court’s limitation in Section 9(3) is based on two theories. Firstly, it has the power to “pursue” the application under subsection (1) and, secondly, it has the power to consider whether there are circumstances that might give rise to interim relief because Section 17 was ineffective. Therefore, according to the rules of the court of appeal, the Section 9 Court has not become a neutral institution.

Additionally, Section 9 stipulates that if the court issues an interim relief order before the initiation of arbitral proceedings, the arbitration must commence within 90 days from the date of the interim relief order, or within any additional period that the court may allow.

SECTION 17

[9]Section 17 and 9 of the act deal with issues of interim measures and the party wishing to obtain an interim decision in its favor may apply to the court under Section 9 and to the tribunal under Section 17. In such cases, the purpose of interim order is to store, examine analyze, sell and hold the content of transactions. All interim orders, after final adjudication, are the final decisions of the court or the tribunal. Some of the interim measures that the arbitral tribunal can give are:-

1. Appointing a guardian for the injured party due to legality.
2. Content must be recorded, stored temporarily or sold.
3. Take the money complaint to court.
4. Allowing a person to enter land or a building occupied by a party for the purpose of collecting samples, performing tests, or making observations.
5. Temporary restrictions.

The following list of measures is not exhaustive in accordance with Section 17(1)(e) for it provides a residuary clause where the arbitral tribunal decides on other interim measures affecting the proceedings. In addition, Section 17(2) provides for the clear facts that any provisional order passed by the arbitral tribunal shall be deemed to be an order of the court and shall be enforceable in accordance with the Code of Civil Procedure, 1908.

APPEAL AGAINST INTERIM ORDER

[10]Section 37(2)(b) provides for an initial appeal against the interim order of the tribunal made under Section 17 of the Act. However, the second right of appeal does not fall within the scope of Section 17(3). The question that arose was whether the appellant could appeal to the High Court under Article 227 and 226 of the first order. In [11]Deep Industries Ltd. v. ONGC (2020) case, the Supreme Court said that the appeal can be accepted under Articles 227 and 226. However, the High Court will not re-evaluate the objection unless there is a lack of jurisdiction.

CASE LAWS RELATING TO INTERIM MEASURES

1. Is the court’s exercise of power under Section 9 of the A&C Act subject to the provisions of the CPC?

[12]Essar House Pvt Ltd v. Arcellor Nippon

The Supreme Court said that the court cannot ignore the fundamental provisions of the CPC in exercising its powers under Section 9 of the Act, but the provisions of the CPC are not binding upon the court. The court said the power to grant interim relief under Section 9 is broader than Procedure Code.

[13]Dorab Cawasji Warden v. Coomi Sorab Warden & Ors

The SC set out general guidelines for interim relief:

• The petitioner has sufficient grounds to proceed with the hearing. That is, it must be held to a higher standard than the prima facie case normally required for conviction.
  • Irreparable or serious injuries that cannot usually be paid for with money must be prevented.
  • The balance of simplicity attracts those seeking relief.

[14]Union of India v. Varindera Constructions Ltd

The Supreme Court said that appeal under Section 37 cannot be filed after 120 days. The court’s decision not to delay more than 120 days in accordance with the decision given under Section 34.

CONCLUSION

The adoption of interim measures is the fundamental strength of any law in the dispute resolution process, as it helps protect the interests of both parties during the pendency of the case and even provides legal assistance. Section 17 of the Act makes the trial process easier and faster because the arbitral tribunal can now resolve any situation that may arise during the trial process as easily as other civil courts and at the same time following the same instructions. The supervisory role of the courts, which can lead to long-term decisions, has also been limited by the amendments made to Sections 9 and 17 of the act and various decisions of the Supreme Court.

REFERENCES

1. Indiacorplaw, https://indiacorplaw.in/2023/09/unwinding-and-rewinding-the-clock-revisiting-interi m-reliefs-under-section-9-of-the-arbitration-act.html (visited on February 2, 2024)
2. Blog.ipleaders, https://blog.ipleaders.in/section-17-of-the-arbitration-and-conciliation-act/ (visited on February 2, 2024)
3. Mondaq.com, https://www.mondaq.com/india/arbitration–dispute-resolution/1029922/a-temporary-s igh-of-relief-section-17-of-the-arbitration–conciliation-act-1996- (visited on February 2, 2024)
4. Bar and bench, https://www.barandbench.com/columns/30-important-judgments-on-arbitration-by-in dian-courts-june-december-2022 and https://www.barandbench.com/columns/history-and-development-of-arbitration-law-i n-india (visited on February 2, 2024)
5. Scc online, https://www.scconline.com/blog/post/2021/08/30/appeal-under-section-37-of-the-arbit ration-and-conciliation-act-1996-to-condone-or-not-to-condone-delay-beyond-120-da ys-that-was-the-question/ (visited on February 2, 2024)
6. Indiacorplaw.in https://indiacorplaw.in/2021/10/interim-relief-against-third-parties-under-the-arbitration-act-a-never-ending-saga.html (visited on March 2, 2024)

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[1] Arbitration and Conciliation Act, 1996, § 21, No. 26, Acts of Parliament, 1996 (India).

[2] Code of Civil Procedure, 1908, § 89, No. 5, Acts of Parliament, 1908 (India).

[3] Guru Nanak Foundation v Rattan Singh, (1981), 4 SCC 634.

[4] India Bhatia International v. Bulk Trading S.A. and Another (2002) 4 SCC 105

[5] Venture Global Engineering v. Satyam Computer Services td (2008) 4 SCC 190.

[6] Bharat Aluminum and Co. v. Kaiser Aluminum and A.Ş. (2012) 9 SCC 552

[7] Arbitration and Conciliation Act, 1996, § 9, No. 26, Acts of Parliament, 1996 (India).

[8] Arbitration and Conciliation Act, 1996, § 29A, No. 26, Acts of Parliament, 1996 (India).

[9] Arbitration and Conciliation Act, 1996, § 17, No. 26, Acts of Parliament, 1996 (India).

[10] Arbitration and Conciliation Act, 1996, § 37, Cl. 2, No. 26, Acts of Parliament, 1996 (India).

[11] Deep industries Ltd. Vs. ONGC & ANR., (2020), 15 SCC 706

[12] Essar House Pvt Ltd v. Arcellor Nippon, (2022), SLP (C) No. 3187 of 2021)

[13] Dorab Cawasji Warden v. Coomi Sorab Warden & Ors, (2004), S.L.P. (C) No. 1610 of 2004

[14] Union of India v. Varindera Constructions Ltd, (AIR 2018) SC/ CA NOS. 3994-3995 OF 2018

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