Background and Introduction
In an arbitral proceeding, interim measures can often be the difference between an effective arbitration and an illusory final award. Whether it's securing assets, maintaining status quo, or preventing frustration of the proceedings, interim reliefs are the imperative for effective arbitral proceedings. Section 9 and Section 17 of the Arbitration and Conciliation Act 1996 ("Arbitration Act" / "1996 Act"), provide for the power to grant interim measures or reliefs by the court or an arbitral tribunal, respectively. This article examines the development of the mechanism of interim reliefs in the context of Indian Arbitration law, its present outlook as well as the future ahead.
Historical Perspective: Evolution of Interim Reliefs in India
The 1996 Act marked a significant shift in India's arbitration landscape, particularly with regard to interim reliefs. Prior to the 1996 Act, the Arbitration Act, 1940 ("1940 Act") governed the arbitration proceedings in India. However, the 1940 Act had limited scope with respect to interim reliefs. The courts often intervened excessively, leading to delays and undermining the efficacy of arbitration proceedings. The 1996 Act introduced Section 9, which empowers courts to grant interim measures before or during arbitral proceedings. The principle of party autonomy, coupled with the goal of minimal judicial intervention, is a cornerstone of the 199 Act. This was judicially reinforced in the Hon'ble Supreme Court's landmark decision in Sundaram Finance Ltd. v. NEPC India Ltd.1 where the central issue was whether courts could grant interim relief even before the commencement of arbitral proceedings. Answering the said question in the affirmative, the Hon'ble Supreme Court held that Section 9 of the Arbitration Act empowers the courts to grant interim measures irrespective of whether the arbitration has commenced, so long as the party demonstrates a clear intention to initiate arbitration. Further, the Hon'ble Supreme Court underscored that the 1996 Act is distinct and should be interpreted independently, drawing parallels with the UNCITRAL Model Law rather than the outdated 1940 Act. This decision not only aligns Indian arbitration law with international standards but also ensures that parties can protect their interests promptly, thereby fostering a more arbitration-friendly environment. The judgment established that the judiciary's should facilitate arbitration, and not control it, thereby contributing to the robustness and credibility of India's arbitration framework.
Interim Reliefs under Section 9 and Section 17 of the Arbitration Act
The Arbitration Act provides a dual framework for the grant of interim reliefs, through courts under Section 9 and through arbitral tribunals under Section 17 of the Arbitration Act.
Under Section 9 of the Arbitration Act, the court is vested with power to grant interim measures before, during or after the commencement of arbitral proceedings but prior to the enforcement of the arbitral award. The scope of reliefs under Section 9(ii) of the Arbitration Act, includes, inter alia, the preservation, interim custody, or sale of goods related to the arbitration agreement, securing the amount in dispute, detention of inspection of property, and interim injunctions or appointment of receivers. Such reliefs can be sought regardless of whether the arbitral tribunal has been constituted, or proceedings have commenced, provided the court is satisfied that it is just and convenient to grant such measures. By providing this mechanism, Section 9(ii) enables parties to protect their interests through urgent interim relief pending arbitration.
While exercising the jurisdiction under Section 9 of the Arbitration Act, courts are expected to exercise restraint and refrain from examining the merits of the dispute, as doing so may prejudice the arbitral tribunal and encroach upon its domain. In the case of National Highways Authority of India v. Bhubaneshwar Expressway Private Limited, the Hon'ble High Court of Delhi observed that the court should not consider the legal merits of the dispute as the same may create prejudice in the minds of the arbitral tribunal.2 Additionally, an appeal against the interim measure order of the court under Section 9 lies under Section 37 (1)(b) of the Arbitration Act.
In parallel, under Section 17 of the Arbitration Act, the arbitral tribunal is empowered to issue interim measures once it is constituted. Such reliefs include, inter alia, restraining a party from dissipating assets, preserving the subject matter of the dispute, or maintaining the status quo to prevent any action that may render the arbitral proceedings ineffective. The Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment Act") granted arbitral tribunal powers akin to those of courts of under Section 9 of the Arbitration Act and made their orders enforceable as if they were orders of the court, thereby significantly strengthening the effectiveness of arbitral tribunal issued interim relief. Further, the 2015 Amendment Act inserted subsection (2) to Section 17 of the Arbitration Act which gave the interim orders passed by the arbitral tribunal the same force and would now be deemed to be orders of the court for all purposes and would be enforced under the Civil Procedure Code, 1908. Further, the 2015 Amendment Act inserted sub-section (2) to Section 17 of the Arbitration Act which conferred binding and enforceable status upon interim orders passed by arbitral tribunals. These orders are now deemed to be orders of the court for all purposes and are enforceable under the Code of Civil Procedure, 1908, in the same manner as civil court orders. In Alka Chandewar v. Shamshul Ishrar Khan,3 the Hon'ble Supreme Court clarified that this amendment was intended to ensure that the interim orders issued by the arbitral tribunal carry the same force as court orders, thereby eliminating the need for the arbitral tribunal to move to the High Court for contempt proceedings in case of non-compliance. Additionally, under Section 37(2)(b), a party aggrieved by an interim order passed by the arbitral tribunal under Section 17 may prefer an appeal. Furthermore, The Arbitration and Conciliation (Amendment) Act, 2019 reaffirmed further emphasized the importance of minimizing court intervention and enhancing the powers of arbitral tribunals.
Importance of Interim Reliefs
The role of interim reliefs in arbitration is multifaceted and crucial for protecting the interests of parties involved. By granting interim measures, courts and arbitral tribunals can prevent the dissipation of assets, thereby preserving the subject matter of the dispute. Additionally, interim reliefs help maintain the status quo, preventing actions that could potentially prejudice the arbitration process or render its outcome ineffective. This not only ensures the efficacy of the arbitration but also provides parties with prompt access to protective measures, reinforcing the judiciary's supportive role in arbitration. Furthermore, the availability of interim reliefs aligns Indian arbitration law with international standards, enhancing India's appeal as a hub for arbitration. By providing a structured mechanism for interim reliefs, the legal framework reduces the likelihood of parties bypassing arbitration in favor of court interventions, thereby streamlining the dispute resolution process.
Recent Developments
Recent judgments and amendments have clarified and expanded the scope of interim reliefs in Indian arbitration. The Hon'ble Supreme Court in Amazon.com NV Investment Holdings LLC v. Future Retail Limited4 further illustrated the application of interim reliefs in complex arbitration cases wherein the award has been passed by an Emergency Arbitrator with seat in India by declaring them to be interim orders under Section 17(1) and enforceable under Section 17(2) of the Act. However, in the instance of providing interim measures against the third parties, there still needs a development in the powers of the arbitral tribunal under Section 17, which is in contrast to the powers conferred to the courts under Section 9 of the Act, whereby, interim measure can be provided against third party, with a caveat of judicious application as observed by the Hon'ble High Court in the case of Value Advisory Services v ZTE Corporation &Ors. 5
Similarly, the Hon'ble High Court of Delhi in Blue Coast Infrastructure Development (P) Ltd. v. Blue Coast Hotels Ltd6 held that the arbitrator is a creature of the contract and it cannot pass interim measures against a non-party to the contract. For an effective remedy, it is most appropriate that interim measures against third parties be sought under Section 9 of the Arbitration Act.
Conclusion & Way Forward
Indian arbitration law has progressively moved away from excessive judicial intervention, placing greater autonomy in the hands of arbitral tribunals. This shift reflects a growing recognition that interim reliefs are vital for protecting the interests of the parties and ensuring that the arbitral process remains fair, efficient, and effective. However, the challenges remain. The arbitral tribunal's inability to grant interim measures against third parties, despite the increasing complexity of commercial relationships, shines light on a structural limitation that warrants legislative reconsideration. It is therefore important for legislature to reconsider the scope of Section 17 of the Arbitration Act and expand the powers of arbitral tribunals to grant interim relief against third parties where appropriate. This reform would help reduce delays and streamline the arbitral process of arbitration in India.
Footnotes
1. (1999) 2 SCC 479.
2. FAO(OS)(COMM) 66/2020
3. (2017) 16 SCC 119
4. (2022) 1 SCC 209
5. 2009 SCC OnLine Del 1961
6. 2020 SCC OnLine Del 1897
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