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12 March 2020
Arbitration is the most accepted mode of settling commercial disputes both nationally and internationally. However, although arbitration is an expeditious way of settling disputes, the significance and importance of interim measures or orders founded on the principles of justice and equity cannot be questioned. Arbitration law grants powers to the national courts to order interim measures of protection in cases of urgency and where the situation so warrants. Even arbitral tribunals are empowered to issue interim orders which remain effective until a dispute has been finally determined by way of an arbitral award.
Section 9 of the Arbitration and Conciliation Act 1996 empowers the courts to grant interim measures before or during arbitral proceedings or at any time after the issuance of an arbitral award. Similar powers have also been granted to arbitral tribunals under Section 17 of the act. Pertinently, both Section 9 and Section 17 are found in Part I of the act (ie, they apply in cases where the place of arbitration is in India).
Prior to the Arbitration and Conciliation (Amendment) Act 2015,(1) the Arbitration and Conciliation Act did not confer on arbitral tribunals the power to enforce orders or provide for judicial enforcement of orders passed under Section 17. The Supreme Court noted these lacunae in various cases, including Sundaram Finance Limited v NEPC India Limited(2) and Army Welfare Housing Organization v Sumangal Services (P) Limited.(3)
To remedy the gap in the law, the Law Commission's 246th Report(4) recommended amendments to Section 17 of the Arbitration and Conciliation Act to make arbitral tribunal orders statutorily enforceable. Accordingly, Section 17(2) as amended specifically provides that arbitral tribunal orders which are passed under Section 17 of the act will be enforceable under the Code of Civil Procedure 1908 as if they were a court order.
However, a party can take advantage of Section 17 only when the arbitration is seated in India, as Section 17 falls under Part I of the act. This raises questions as to the enforceability of interim measures granted by arbitral tribunals which are situated outside India. While the rules of most arbitral institutions worldwide (eg, the Singapore International Arbitration Centre (SIAC)) contain provisions for the granting of interim measures or emergency reliefs, these orders are not directly enforceable in India. There is no similar provision in the Arbitration and Conciliation Act which grants enforceability to the interim orders issued by tribunals outside India.
However, it would be wrong to suggest that interim orders passed by such tribunals cannot be enforced in India. In Raffles Design International India Private Limited v Educomp Professional Education Ltd,(5) the arbitration proceeding was held under the SIAC Rules. Pursuant to Rule 26.2 of the SIAC Rules, the petitioners made a request to appoint an emergency arbitrator. The petitioners' emergency application was allowed and the emergency arbitrator passed an interim emergency award. Since the respondents were acting contrary to the interim measures granted by the emergency arbitrator, the petitioners filed a petition before the Delhi High Court under Section 9 of the act. The issue before the Delhi High Court was whether the petitioner could be granted interim reliefs under Section 9 when it had already been granted reliefs by the arbitral tribunal constituted under the SIAC Rules. The Delhi High Court held that the emergency award passed by the arbitral tribunal could not be enforced under the act and that the only method for enforcing the same would be for the petitioner to file a regular civil suit. The Delhi High Court further clarified that:
a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order from an arbitral tribunal. Needless to state that the question whether the interim orders should be granted under section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.
Thus, as per Raffles, even if interim measures are granted by an arbitral tribunal situated outside India, a party seeking to enforce such measures in India would have to approach the courts in India again by filing a Section 9 petition or a civil suit. In this context, it would be trite to refer to the judgment of the Delhi High Court in Sri Krishan v Anand,(6) which was rendered prior to the enactment of the Arbitration and Conciliation (Amendment) Act. In Sri Krishan, the Delhi High Court took recourse to Section 27(5) of the act and held that:
any person failing to comply with the order of the arbitral tribunal would be deemed to be 'making any other default' or 'guilty of any contempt to the arbitral tribunal during the conduct of the proceedings'. Thus, the remedy of the other party is to apply to the arbitral tribunal for making a representation to the court to meet out such punishment, penalty to the guilty party, as would have been incurred for default in or contempt of the court.
Section 27(5) of the act is entitled "Court assistance in taking evidence" and states as follows:
Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.
In Sri Krishan, the Delhi High Court disagreed with the observations of the Supreme Court in Army Welfare Housing and Sundaram Finance that orders passed by an arbitral tribunal under Section 17 of the act cannot be enforced as orders of a court.
Notably, after the enactment of the amendment act, the Supreme Court issued its decision in Alka Chander v Shamshul Ishrar Khan(7) agreeing with the views of the Delhi High Court in Sri Krishan and observed that Section 17 of the act would be rendered otiose if the orders passed under that provision were toothless.
In view of the proviso(8) to Section 2(2) of the act, Sections 9 and 27 have also become applicable to international commercial arbitrations seated outside India. However, for the proviso to apply, the parties to the arbitration agreement cannot have contracted out of the applicability of Sections 9 and 27.
Hence, in case of arbitrations seated outside India, parties have the following options as regards interim measures:
While under option one orders passed under Section 9 of the act would be enforceable as court orders, under option two, a party seeing enforcement of such an order in India would have two options:
While both options are legally tenable, considering that interim measures are sought in situations of urgency and noting the costs involved in international arbitrations and the time that it takes the Indian courts to resolve disputes, it would be prudent to take advantage of Section 2(2) of the act and directly approach the court under Section 9 for a grant of interim relief. Needless to say, parties seeking interim measures will have to meet the triple test of prima facie case, balance of convenience and irreparable harm.
For further information on this topic please contact Ajay Bhargava, Arvind Kumar Ray or Vansha Sethi Suneja at Khaitan & Co by telephone (+91 11 4151 5454) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Khaitan & Co website can be accessed at www.khaitanco.com.
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