Despite India’s long history of arbitration laws, the scope of powers of the courts and arbitral tribunals under Section 9 and Section 17 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) is still being debated, and the jurisprudence is evolving.
The Arbitration Act’s Sections 9 and 17 give courts and tribunals the authority to provide parties to a dispute that is subject to arbitration with an interim remedy. The goal of obtaining interim relief is to keep arbitration from becoming a pointless process while simultaneously safeguarding and preserving the parties’ rights. The Court’s authority under Section 9 of the Arbitration Act is equivalent to the arbitrator’s authority under Section 17 to grant interim measures.
When awarding temporary relief, the balance of equities between the parties is typically taken into account, along with the convenience factor, irreparable harm, and the prima facie case. Nonetheless, to give specific interim relief, some court rulings need more stringent adherence to the requirements outlined in the Code of Civil Procedure, 1908 (Code). However, some sensible and progressive court rulings lean towards broadening the scope of authority while providing temporary relief following the Arbitration Act’s design to uphold the interests of justice.
This contradiction suggests a weakness in the standardised test that arbitrators can use as a reference when considering applications for temporary relief. Due to this gap, parties are left to rely on the arbitrator’s judgement as to whether or not to adhere to the Code during the arbitral procedures. A defining court statement that resolves the dispute over the criteria that arbitrators must take into account when determining applications for interim relief is required to close this gap.
Typically, the parties ask for various forms of temporary remedy, including attachment before judgment, interlocutory injunctions, temporary injunctions, and arrests of the defendants. Orders XXXVIII and XXXIX of the Code, in conjunction with Sections 38 and 39 of the Specific Relief Act, 1963, control the courts under original procedures for the granting of temporary relief; however, the arbitration proceedings are not subject to these same regulations.
The parties frequently request the above interim remedy in these actions, and the arbitral proceedings are not exempt from this requirement. Depending on whether the arbitral proceedings have started, ended, or are still ongoing, Sections 9 and 17 of the Arbitration Act allow applicable courts and tribunals broad authority to grant interim relief. Even though the Arbitration Act is self-contained legislation, courts and arbitrators look to it and court rulings for direction when awarding relief to parties. Even though some judges believe that temporary relief granted under the Arbitration Act should be granted after a liberal exercise of authority and not be overly constrained by the Code’s language, the courts have inadvertently observed that the principles under the Code will be a guiding factor. Several arbitrators have interpreted this viewpoint in a way that supports the rigorous application of the Code because the fundamental ideas of the Code apply to the arbitral procedures. Court decisions, meanwhile, also provide credence to the other viewpoint. Because of this, the Courts and Arbitral Tribunals can’t invariably give interim relief.
According to the Bombay High Court’s ruling in Jagdish Ahuja, Section 9 of the Arbitration Act has a fairly broad definition, and the court is free to award any kind of temporary protection “as may appear to the court to be just and convenient.” The Court does, however, issue a warning, stating that this power must be used carefully and not arbitrarily. The Bombay High Court further requires the Courts to consult Order XXXIX Rules 1 and 2 of the Code for guidance. In a similar vein, the Delhi High Court in Ajay Singh adopted the stance that the courts ought to adhere to the “underlying principles” as opposed to being unnecessarily constrained by the Code’s wording.
When parties are trying to obtain the disputed amount in the meantime, the discrepancy is glaringly obvious. A ‘attachment before judgment’ order is essentially one for securing the sum claimed before an arbitral ruling. The Delhi High Court has ruled that relief granted under Section 9(1)(ii)(b) or 17(1)(ii)(b) of the Arbitration Act shall also be granted under the same grounds that underpin the granting of such orders under Order XXXVIII Rule 5 of the Code. The Delhi High Court acknowledges in the same ruling that as the orders made under the Arbitration Act are discretionary, equitable considerations would be relevant. It is noteworthy that, despite establishing the requirements for a strict and mechanical application of the provision, the High Court has not pursued further action. Instead, it has mandated that, as a prerequisite to Order XXXVIII Rule 5 of the Code, (i) the plaintiff establish a reasonably strong prima facie case, and (ii) the court is prima facie satisfied that the defendant is acting in a way that will impede the realisation of the decree. The Madras High Court asserts that the guiding principles of the Code’s provisions will be applied by citing M/s. I.T.I. Ltd. v. M/s Siemens Public Communications Network Ltd.
Additionally, the Supreme Court has not been able to offer a conclusive ruling that would have guided the debate and put an end to it. In the judgment of the Essar House Case delivered on 14 September 2022, the Supreme Court of India ruled that in deciding an application for interim relief like attachment before judgment, all that the court is required to see is
(i) whether the applicant for the interim measure has a good prima facie case,
(ii) whether the balance of convenience is in favour of interim relief as prayed for being granted, and
(iii) whether the applicant has approached the court with reasonable expedition. Evidence of genuine attempts to remove or dispose of the property to thwart or postpone the realisation of an impending arbitral award (as in Order XXXVIII Rule 5) is not necessary for grant of relief under Section 9/ Section 17 of the Arbitration Act.
As a counterview to the Essar House Case, the Supreme Court, however, immediately after the above judgement on September 30, 2022, in the case of Sanghi Industries Ltd., declared that Order XXXVIII Rule 5 of the Code applies to any application filed under Section 9, which seeks interim relief against the defendant in the form of an attachment before judgement.
Therefore, the arbitrators find it simple to rely on the stringent rigours of the Code to decide applications for interim relief because there is still no standardised test for the granting of interim relief. This has led to an unfair, time-consuming, inconvenient, and laborious procedure.
An application under Section 9 of the Arbitration Act does not operate as a lawsuit because the purpose of arbitration is to provide a different means of conflict settlement between parties. The provision’s clear language gives the courts broad and recursive authority to award “(e).such another interim measure of protection as may appear to the Court to be just and convenient.”
Consequently, putting the requirements of the Code into practice would be unduly restrictive and go against the intent of the Arbitration Act, which is to do away with the formalities, complexities, and complexity of litigation.
The effectiveness of arbitration must be protected and maintained. To do this, the courts and tribunals must properly apply their authority under the Arbitration Act to shape the relief in relevant instances to uphold the integrity of the arbitral process and ensure the goals of justice. The effectiveness of the Arbitration Act in achieving the goals of justice would be destroyed if the Code’s harsher requirements and technicalities were applied beyond what was decided in the Essar House Case.
Organisations like the Delhi International Arbitration Centre (“DIAC”) can think about issuing rules that comply with the ruling of the Essar House. This would significantly contribute to achieving the goal of maintaining arbitration’s effectiveness as a substitute for other forms of conflict resolution. resolution.
Adv. Khanak Sharma