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Arbitral Tribunal have same Power as Court to grant Interim Relief

April 22, 2022

By Nihit Nagpal and Devika Mehra

Arbitration is the preferred method of resolution for disputes arising from commercial contracts bearing the arbitration clause and commercial transactions. At times, access to interim relief becomes critical to safeguard the parties interests, such as when one of the parties attempts to alienate the assets which form the subject matter of the dispute.. Therefore, the Arbitration and Conciliation Act, 1996 (Hereinafter, “A&C Act) allows parties to obtain interim relief from the courts[1] or their arbitral tribunal[2], as the case may be. The Arbitration and Conciliation (Amendment) Act, 2015 which came into force on 23 October, 2015, has brought the powers of arbitral tribunals and courts at par when it comes to awarding interim relief.

246th Report of the Law Commission and the 2015 Amendment

In 2014, the Law Commission of India submitted its 246th Report, recommending amendments to the Arbitration and Conciliation Act. The Commission noted that while Section 17 of the Act authorizes arbitral tribunals to grant interim relief, the statutory instrument to enforce these interim orders is absent[3]. Therefore, as a means of penalizing disobedience of interim orders under Section 17, Courts had been resorting to holding defaulters liable for “making any other default” or “contempt to the arbitral tribunal” under Section 27(5) of the Act[4]. The Commission was of the view that this was an inadequate solution, and endorsed bringing the powers of the Tribunal at par with those of the Court, in correspondence with the amended Article 17 of the UNCITRAL Model Law an International Commercial Arbitration[5].

In accordance with the Commission’s endorsements, Section 17 was amended via the 2015 Amendment, and now states:

17. Interim measures ordered by arbitral tribunal – (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal –

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings, or

(ii) for an interim measure of protection in respect of any of the following matters, namely

(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration:

(c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence:

(d) interim injunction or the appointment of a receiver,

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under Section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.

Therefore, Arbitral Tribunals now hold the same powers as the Courts while granting interim relief, and their interim orders are enforced as orders of Courts under the Code of Civil Procedure, 1908 (Hereinafter, “CPC”).

Appeals from Orders of Arbitral Tribunals under Section 17

The Arbitration and Conciliation Act is a self-contained code, Section 37 of which provides for appealable orders. However, the amendment of Section 17 created some obscurity about appeals from orders of Tribunals granting interim relief. The amended Section 17(2) equates them with orders of Courts under CPC. Should this imply that these orders are also to be appealed according to the appeal provisions in CPC? The law on this point was clarified by the Hon’ble Supreme Court of India in Amazon.com Investment Holdings LLC v Future Retail Ltd[6].

The parties in this case had entered into an Agreement which provided for dispute resolution by arbitration seated in New Delhi, and conducted in Singapore as per the rules of the Singapore International Arbitration Centre (SIAC). The appellant obtained an emergency award from an emergency arbitrator appointed according to the SIAC rules. A single judge of the Delhi High Court later enforced this award as an interim award under section 17(2) of the Arbitration and Conciliation Act. The Respondents sought to appeal the order of the Hon’ble Delhi High Court under Order XLIII, Rule 1(r) of CPC, arguing that Section 17(2) of the Arbitration and Conciliation Act treats interim awards from Tribunals as orders of courts under CPC for all purposes.

 

The Hon’ble Supreme Court rejected the argument of the Respondents, and held that as the Single Judge’s order could be referred to Section 17 of the Arbitration and Conciliation Act, it could only be appealed in accordance with Section 37 of the Act. As section 37 does not include orders passed in enforcement proceedings as appealable orders, the order of the Single Judge of the High Court could not be – appealed. Hon’ble Court based this decision on the reasoning that Section 17(2) creates a limited legal fiction by equating orders of arbitral tribunals to orders of civil courts. This fiction is only for the purpose of enforcement, and cannot be extended to appeals.

 

In a recent judgment of the Hon’ble Supreme Court of India, Arcelor Mittal Nippon Steel India Ltd. vs. Essar Bulk Terminal Ltd.[7], the Apex Court further laid emphasis on the Arbitral Tribunal’s power to adjudicate and handle interim reliefs further clarifying on the Hon’ble Court’s interference under Section 9 of the Act. The Apex Court held that once a Tribunal is constituted, the Court could not entertain, take up for consideration, or apply its mind to an application for interim relief under Section 9. However, if the date of Section 9 application before the Court precedes the constitution of the arbitral tribunal, the Court may adjudicate the Section 9 application.

 

Conclusion.

The overarching scheme of the Arbitration and Conciliation Act is to minimize judicial intervention in arbitral proceedings. This promotes its twin objectives of ensuring timely dispute resolution, and decongesting the Indian court system. Bringing the arbitral tribunals’ power to grant interim relief on par with that of the courts and enforcing their interim orders as orders of courts ensures that the relief granted by tribunals is efficacious, and not illusory. Parties no longer have to approach the courts for effective interim relief, which contributes to increasing the appeal of arbitrating in India.

1 Section 9 of the Act

  1. Section 17 of the Act
  2. P 33

[4] Sri Krishan v Anand (2009) 3 Arb LR 447 (Del) ; Indiabolls Financial Services Jubilee Plots, OMP Nos 452 453/2009, Delhi High Court

[5] LAW COMMISSION OF INDIA, Report on Amendments to the Arbitration and Conciliation Act, 1996, Report No. 246, 5 August, 2014, available at https://lawcommissionofindia.nic.in/reports/reports246.pdf

[6]  2021 SCC Online SC 557

[7] Civil Appeal No. 5700 of 2021 (Judgment dated 14 September 2021)

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