In business contracts incorporating arbitration clauses or agreements, arbitration has been the most popular alternative dispute resolution mechanism used by the parties. Although arbitration is widely acknowledged to be more efficient than formal court processes, there is still a considerable amount of time involved in the process, from the beginning of arbitration to the implementation of the verdict.
Furthermore, in some cases, it is evident that one party purposefully prolonged the arbitration process in order to harm the other party’s rights or for personal benefit. This calculated delay is frequently used to obstruct the arbitral award’s prompt issuance and enforcement. Such strategies may lessen the impact of the final arbitral award for the aggrieved party without proper safeguards from the arbitral tribunal and/or the court, requiring preservation of their rights throughout the arbitration procedure until the award is successfully enforced.
Therefore, in order to protect the rights of the harmed party, it is imperative that the arbitral tribunal or the court grant interim measures or relief. Such temporary remedy may, under certain circumstances, include giving orders to other parties. Considered an urgent remedy in exceptional circumstances, interim relief is typically granted under the following conditions:
1. Establishing a prima facie case.
2. The balance of convenience favoring the aggrieved party seeking relief.
3. The potential for irreparable damage or injury if interim relief is not granted.
The Arbitration and Conciliation Act, 1996 (Amended 2015 and 2019), referred to as the Act, includes provisions, notably Section 9 and Section 17, that protect the interests of one party over the other. These sections empower any party to an arbitration agreement to submit an application for interim relief to either the court or the arbitral tribunal, respectively.
UNDERSTANDING OF INTERIM RELIEF UNDER THE ARBITRATION
Interim, provisional, and conservatory measures are legal interventions available prior to arbitrators addressing the substance of a case and delivering a final decision. These measures aim to safeguard a party’s interests throughout the arbitration process, ensuring a substantive and meaningful resolution in the end.
Interim Relief under Section 9 of the act
According to Section 9 of the Act, a party can request interim relief from the court before arbitration begins, during arbitration, or anytime before the arbitral award is enforced. However, courts typically reject such requests after the arbitral tribunal is formed, unless the party demonstrates that relief from the tribunal, as per Section 17 of the Act, would be ineffective.
Notably, the authority to grant interim relief before the tribunal’s constitution and after the arbitral award rests solely with the courts. Additionally, Section 9 specifies that if the court issues an interim relief order before arbitration begins, the proceedings must commence within 90 days from the date of that order, or within an extended period granted by the court
Section 9 of the Act outlines the various forms of interim relief that a party can request. The application for interim relief may encompass the following:
1. Nomination of a guardian for a minor or an individual of unsound mind.
2. Preservation, temporary custody, or sale of goods, particularly if they are perishable and relate to the arbitration agreement.
3. Assurance of the claim amount.
4. Authorization for the detention, preservation, or inspection of any property or item, allowing entry onto land or buildings, permitting the collection of samples, or conducting observations and experiments to expedite the process and acquire accurate and comprehensive information or evidence.
5. Granting interim injunction or the appointment of a receiver.
6. Any other remedies deemed suitable by the court, considering the specific facts and circumstances of the case.
Jurisdiction of court for the application of Section 9
The court where the arbitration is taking place has special authority over the proceedings under the Act. So, if a party wants to make a Section 9 application, they should do it in the relevant district court or High Court.
For international commercial arbitration involving at least one non-Indian party, the Section 9 application is exclusively made in the High Court. Since the 2015 amendment, a foreign party in an international arbitration seated in India can seek interim relief under Section 9 in Indian courts, unless they’ve explicitly or implicitly agreed to exclude Section 9.
If an interim relief application is already with a court, and the arbitral tribunal forms later, the court can still handle the pending application. The Act doesn’t require an automatic transfer to the tribunal when it’s constituted.
Importantly, any subsequent applications under Part I of the Act must be made at the same court where the Section 9 application was initially filed
Interim Relief under Section 17 of the act
Let’s explore the authority of the Arbitral Tribunal under Section 17. If the arbitration agreement doesn’t forbid it, the Arbitral Tribunal can, upon a party’s request, instruct the other party to implement interim protective measures regarding the dispute’s subject matter. This may include issuing orders for suitable security. However, this power must align with the terms of reference or the arbitration agreement. Notably, while Section 17 allows the Arbitral Tribunal to issue interim orders, it doesn’t grant the tribunal the authority to enforce its orders. Curiously, the new Arbitration Act lacks a provision ensuring the enforcement of interim orders or treating them as enforceable decrees, unlike the final award. Essentially, the tribunal’s power is confined, and any interim decision must merge with the final award to gain enforceability. In the UNCITRAL model law, a comparable authority is bestowed upon the arbitral tribunal through Article 16 and 21 of the Arbitration Rules.
Section 9 & Section 17
Analysis of Section 9 and Section 17 would lead us to the following conclusions:-
– The new arbitration Act empowers the arbitral tribunal to pass orders for giving interim relief while such power is not vested under the Old Act.
– Powers under Section 17 can be exercised only after the arbitral tribunal is constituted and it starts functioning.
– Powers of court under section 9 are wide as the words “before, during or after indicate so. A party can approach the court to seek interim measures of protection even before the arbitration commences.
– Court’s powers are wide and have supremacy in granting interim relief. However interference of court when Tribunal is constituted is minimum
Enforceability of and appeal against interim relief granted under Section 9
The court-issued interim relief must be enforced just like any other court order. Deliberate non-compliance or disobedience of the interim relief order can be considered contempt of court, subject to the prevailing laws. If dissatisfied, an appeal against the interim order can be lodged with the appropriate court under Section 37(1)(b) of the Act
Enforceability of and appeal against interim relief granted under Section 17
The interim relief decisions made by the arbitral tribunal carry equivalent authority and are considered as if they were court orders, akin to the court’s powers under Section 9. These decisions are enforceable in the same manner as court orders. Failure to comply with an interim relief decision by the arbitral tribunal is treated as contempt of court and can be addressed in accordance with the existing legal framework. However, if there is a disagreement with an interim relief decision under Section 17, an appeal can be pursued as outlined in Section 37(2) of the Act.
Interim measure u/s 9 and u/s 17 are distinguishable
In the case of Firm Asok Traders vs. Gurumukhdas Saluja (AIR 2004 SC 1433), the Supreme Court highlighted that Section 17 is applicable only while the Arbitral Tribunal is active. During this duration, the authority granted to the Arbitral Tribunal under Section 17 and the court’s power under Section 9 might coincide to some extent. However, when it comes to the periods before and after the arbitral proceedings, any party seeking interim protective measures should approach the court exclusively.
Conclusion
While drafting an arbitration clause, consider whether you want to empower the arbitral tribunal to provide interim relief. If the arbitration clause grants this authority, there’s no need to seek court intervention for such relief. However, there’s uncertainty regarding the enforceability if a party doesn’t comply. Courts can only be approached if the requested interim relief is denied under Section 37(2)(b), not for enforcing interim relief granted by the arbitrator.
In conclusion, it’s crucial to carefully design arbitration clauses, specifying the tribunal’s power for interim relief. While courts can be sought if relief is denied, enforcing tribunal-granted relief may pose challenges outside this scope.