Introduction
Alternative Dispute Resolution has gained tremendous popularity over the years due to its various advantages over the traditional court system as well as its success rate in terms of the duration for the actual resolution of disputes, which is far less as compared to Courts. Amongst the various dispute resolution mechanisms available, arbitration has emerged as the most preferred means to resolve commercial disputes. One of the primary reasons for this is the flexibility it offers to parties, the thumb-rule being party autonomy, which allows parties to not only choose the arbitrators and the venue of arbitration, but also the procedure to be followed in
Arbitral proceedings are accompanied by various procedural safeguards, including interim measures, to protect the rights of parties. In order to ensure that courts and tribunals are able to safeguard the rights of parties starting from the point where the dispute arose, through the commencement of arbitral proceedings, and till the execution of the award, certain provisions have been included in the Arbitration and Conciliation Act, 1996 (“Act”). The 2015 Amendment to the Act has widened the power of tribunals with respect to the grant of interim relief.
Overview of Interim Measures
The Arbitration and Conciliation Act, 1996 provides for interim measures by courts under section 9 and by tribunals under section 17. These measures are ordinarily granted for the purpose of preserving the status of the property in dispute and preventing prejudice to any party before the commencement or during the pendency of the arbitration proceedings.
- Interim Relief under Section 9
Section 9 of the Act provides for the grant of interim measures by court. This provision offers protection to the parties’ rights before the commencement of arbitral proceedings, during arbitral proceedings, as well as after the arbitral award is passed but before it is enforced in accordance with section 36 of the Act.
The various interim measures available under section 9 include:
- Appointment of a guardian for a minor or person of unsound mind.
- Detention, preservation or interim custody or sale of goods of any property or thing forming the subject matter of dispute.
- Inspection, interim injunction, or appointment of a receiver.
- Any other relief as the court may in its discretion deem proper considering the circumstances of the case.
Section 9 confers wide powers on courts throughout the duration, including before and after the arbitral proceedings, to grant interim relief to parties. However, the 2015 amendment, in an attempt to equate the authority of arbitral tribunals with the domestic courts in terms of granting interim relief brought certain changes to this provision in terms of the time frame post the filing of an application under section 9 within which arbitral proceedings must start, i.e. ninety days. This amendment recognized the independence of arbitral tribunals under section 17, which it did not earlier have. Moreover, subsection (3) was inserted, which reduces the intervention of the judiciary in terms of interim measures by stating that the court shall not entertain any application under section 9(1) once the arbitral tribunal has been constituted, unless circumstances exist which render the remedy provided under section 17 ineffective.
- Interim Relief under Section 17
Section 17 of the Act provides for the grant of interim relief by an arbitral tribunal. Relief under this provision can be sought by a party once the arbitral tribunal has been constituted, up to the point an arbitral award is made. Even so, this provision until the 2015 amendment only allowed the Arbitral tribunal to pass interim order with no statutory mechanism for its enforcement, reducing it to a mere toothless tiger. The 2015 amendment gave more teeth to this provision by deeming any order passed under Section 17 enforceable as a decree of court under the CPC.
However, this provision still confers minimal authority on arbitral tribunals for issuing of interim measures and reads as under:
“17. Interim measures ordered by arbitral tribunal –
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.
(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).
Although the 2015 amendment to Section 17 brought an order of Tribunal at par with an order of court allowing Tribunals to enforce it as a decree, the scope of operation of this provision continues to be highly limited since it can only be invoked during the pendency of proceedings before the tribunal, unlike in case of Section 9.
Overlap of Power of Courts and Tribunals
It is pertinent to note that while both sections 9 and 17 both provide a separate set of remedies in terms of the grant of interim relief by courts and arbitral tribunals respectively, the language of these provisions invariably points to an overlap of power between courts and arbitral tribunals as recognized by the Supreme Court in Firm Ashok Traders and Another, v. Gurumukh Das Saluja and Others.
While the Arbitral Tribunal was conferred with identical power as the Court to grant interim measures by the Amendment Act of 2015, the jurisdiction of Court to grant interim relief does not automatically get barred once the arbitral tribunal is constituted. Section 9 provides a much wider remedy as compared to section 17 which is only applicable so long as the arbitral tribunal is in existence. However, even during the pendency of arbitral proceedings, parties have the option of seeking interim relief from the Court in addition to the Tribunal. This is because sub-section (3) of section 9 confers power on the Court to interfere in case the circumstances exist which render the remedy under section 17 ineffective, though courts have begun to refrain themselves from making orders under Section 9 in order to avoid prejudice to any party subsequent to the constitution of the arbitral tribunal.Be that as it may, the Act in no way defines the circumstances under which the Court may be allowed to intervene under this sub-section. However, various Courts have tried to interpret the meaning and level of overlap allowed by these provisions.
The Delhi High Court in IntertollIcsCecons. O & M Co. Pvt. Ltd. v. National Highways Authority of India,while dealing with the scope of powers under Sections 9 and 17 of the Act expressed the view that the powers of an arbitral tribunal under Section 17 are much narrower than that of a Court under Section 9, although there may be some overlap. It held that an arbitral tribunal can only protect the subject matter of the dispute, which must be a tangible property.
The Supreme Court in S.B.P. & Co vs Patel Engineering Ltd. &Anr., held that:
“once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.”
In M/S Dhir International Pvt Ltd vs Jitender Lalwani And Ors, the Punjab and Haryana High Court while interpreting the findings of the aforementioned judgment, held that even during arbitral proceedings, interim measures can be passed by a court.
In SREI Equipment Finance Limited (Sefl) v. Ray Infra Services Private Limited &Anr., it was held that in granting interim relief in cases where the interim measure granted by the tribunal is not effective, courts must 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.
While dealing with the issue of the circumstances under which court can apply its power under section 9(3) when remedy under section 17 is ineffective, a Division Bench of the Kerala High Court observed that when an application is made before a court under Section 9(1) of the Act after the award is made but yet to be enforced, the court shall bear in mind that it is a stage where the arbitral tribunal has ceased to function. It further held that the court has to adopt a liberal approach in such circumstances. At the same time, it was stated that courts would be required to adopt a strict approach in entertaining such applications under Section 9, in the course of the arbitral proceedings.
More recently, on 7 May 2020 the Hon’ble High Court of Delhi delivered two important judgments on the position of application under Section 9 of the Act for seeking interim reliefs from Courts. In Ashwani Minda And M/S Jay Ushin Limited v. M/S U-Shin Limited And M/S Minebea Mitsumi Inc, the High Court while extending the applicability of section 9 to foreign-seated arbitrations, held that no application under this provision will lie in the event that the arbitral tribunal has been constituted, unless the applicant is able to demonstrate to the Court that it does not have an efficacious remedy before the tribunal. Next, in the case of Hero Wind Energy Private Ltd. v. Inox Renewables Limited &Anr. The Delhi High Court held that jurisdiction of an arbitral tribunal under section 17 to grant interim measures in relation to certain disputes does not extend to additional disputes arising out of a subsequent cause of action, even if they are pertaining to the same agreement, and therefore, in such a situation, a party may only invoke section 9 for seeking interim relief.
Conclusion
While both Sections 9 and 17 of the Arbitration and Conciliation Act, 1996 provide for interim measures, their scope of operation inherently differs on account of the power conferred on Courts and Tribunals respectively, as well as the duration in which such powers can be exercised. However, as has been pointed out before, the unclear language of the two provisions leads to an overlap of power between courts and tribunals.
The objective behind the 2015 amendment to the Act was to expedite the arbitration process and reduce courts’ intervention in arbitration proceedings. Subsequently, the amendment did increase the power of Tribunal to issue and enforce interim relief orders under section 17 by enlarging its scope. Even the addition of sub-section (3) to section 9 was done with the motive of reducing judicial intervention by restricting courts from accepting applications for interim measures once the arbitral tribunal has been constituted. Yet a window was left open which allowed the court to intervene in circumstances where remedy under Section 17 is insufficient and the party is able to convince the court of the same. This not only leaves a wide room for interpretation, but also creates a great deal of confusion and ambiguity considering that such circumstances are not defined anywhere in the Act, nor interpreted by any court of law. Accordingly, the power conferred on the Tribunals under section 17 continues to be limited, while the power of Court under section 9 is much wider, hence defeating the very purpose behind the amendment.
Many Courts have time and again recognized an overlap between the two provisions and attempted to clarify the position regarding the same; however, the position remains ambiguous. There still lacks clarity as to the extent of overlap of the powers conferred on courts and tribunals by these provisions and the test to determine the circumstances under which courts are permitted to overshadow the power of tribunals, despite the remedy under section 17.
Considering the objective of the 2015 amendment, one possible solution to the issue of overlapping is to remove the power conferred on Courts to intervene in arbitral proceedings and grant interim measures during the course of the arbitration proceedings. However, it is understandable that in order to avoid prejudice to any party once the arbitral tribunal has been constituted, while also keeping a check on the power of the arbitrator, a provision for the intervention of Court where a remedy is granted under section 17 is imperative. Accordingly, the only way to end this overlap is to draw a line of distinction between the respective powers of Courts and tribunals to grant interim measures. While this line does exist to the extent that sub-section (3) to section 9 prohibits the Court from entertaining any application under section 9(1) once the arbitral tribunal has been constituted, it becomes blurry when the proviso “unless circumstances exist which render remedy provided under section 17 ineffective” comes into play. Therefore, there is a need for Courts to interpret the law and categorically define the ‘circumstances’ mentioned in section 9(3), which if fulfilled, would render the remedy provided by the tribunal under section 17 ineffective. It is imperative that a test to determine what amounts to an ‘ineffective remedy’ under this provision is well-defined in order for arbitral tribunals to be able to function independently of undue court intervention. Additionally, just as the recent judgment of the Delhi High Court has successfully demarcated a particular scenario where only one of the two provisions can be availed for seeking interim relief thereby creating a distinction between their respective applicability, other Courts may follow suit in order to develop a separate set of situations for invoking the these provisions so as to end the overlap of power of Courts and Tribunals.
By Meher Bhatia
Via Lex Jura Law Journal