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  INTERIM RELIEF FROM COURT  
 
CAEFA related services include interim measures under the Indian Arbitration and Conciliation Act, 1996.
 
Indian courts cannot order interim relief in support of foreign seated arbitrations therefore interim relief from Indian court can made where arbitration is seated in India ;
 
Traditionally, parties to arbitration in India frequently use procedures before the courts, such as application for injunctive relief, and challenge adverse awards on technical grounds. Section 9 of India’s Arbitration and Conciliation Act permits a party to petition a court of competent jurisdiction for interim relief, even before an arbitration proceeding is initiated; to restrain the opposing party from selling its property in India during the course of the arbitration proceeding; and possibly even staying the arbitration proceedings on the grounds of “arbitrability” of the issue on hand. Foreign arbitration clauses in contracts involving parties in India are routinely challenged by Indian parties under Section 9 on the basis that Section 2(2) of Part I of the act confers powers on the Indian courts to grant interim measures applied even to arbitrations being held outside India.
 

 
Interim Measures under the Indian Arbitration and Conciliation Act, 1996

INTRODUCTION

In arbitral proceedings, the need often arises for provisional remedies or other interim measures of reliefs because, in reality, arbitral proceedings are no less adversarial than litigation in public courts. When a dispute arises, aggrieved party is always concerned with protecting his interest either in movable or immovable properties. Party is always interested in taking timely action against another party or parties so that his or her interest in the properties is protected. This prompt and timely action makes other party or parties unable to play any sort of mischief by way of tampering with properties. Thus Arbitration and Conciliation Act, 1996, under Section 9 gives parties power to approach Courts for seeking interim measures. Often it sounds against the basic philosophy of Arbitration for allowing Court’s intervention, but for many reasons such judicial interventions are inevitable.

INTERIM MEASURES: CONCEPT

Interim Measures are granted during the pendency of adjudication of a dispute and are usually in the form of injunctions, specific performance, pre-award attachments etc. By definition, ‘interim reliefs’ are temporary or interim in nature and are granted in advance of the final adjudication of the dispute by the arbitral tribunal.

(A) Types of interim measures:

Provisional remedies and interim relief come in many forms, depending on the parties involved and context of the dispute. Interim reliefs may be broadly classified into the following categories:

(a) Reliefs which are procedural in nature e.g., inspection of property in possession with third parties or compelling the attendance of a witness.

(b) Reliefs which are evidentiary in nature and are required to protect any document or property as evidence for the arbitration; and

(c) Reliefs which are interim or conservatory in nature and are required to preserve the subject matter of the dispute or the rights of a party thereto or to maintain the status quo and to prevent one party from doing a particular act or from bringing about a change in circumstance pending final determination of the dispute by the arbitrators.

These reliefs can be provided by granting an interim injunction, appointing a receiver, making of an attachment order or any other interim order for securing the amount in dispute or for the preservation, custody or sale of the property in dispute. During the pendency of a proceeding in a court, a party may make an application for grant of an interim measure(s) and the court may grant such measure(s) as permitted under the procedural rules governing the powers of the court or those that it may derive through its inherent powers.

The principle governing the grant of interim measures is the use of judicial discretion by a Court while taking into consideration questions pertaining to balance of convenience, the applicant’s ability to make out a prima facie case and most importantly the irreparable harm that would be caused in the event the measure is not granted.

Under Indian Law, court’s have both the express power of granting interim measures under Order 39 Rule 1 and Rule 2 of the Civil Procedure Code as well as their inherent power under section 151 to grant an interim measure other than that specified under Order 39, Rule 1 and 2.

(B) Interim measures under Arbitral Proceedings:

Arbitration is a forum for adjudication that is a departure away from courts and in fact, court interference has been considered a bane to its development.4 However, under arbitration procedural statutes and rules, courts not only have the power to grant interim measures but this power, in most cases, is wider than that of a Tribunal.

Though, it has been realised that a total curtailment of the court’s power to grant interim measures during the pendency of arbitration cannot be envisaged and it is necessary to allow the court to grant interim measures, courts have, keeping in mind the new changes in legislative thinking, reduced their interference in arbitration proceedings. However it is not possible to completely do away with the role of the court as the nature of interim injunctions make it necessary to go to a court of law and it is possible that the very purpose of seeking an interim measure may be defeated.

INTERIM MEASURES GRANTED BY COURTS UNDER SECTION 9 OF THE ACT

(A) Section 9 of the Indian Act:

It appears that the scope for application of an interim measure under section 9 of the Indian Act is as wide as the scope under Article 9 of the UNCITRAL Model Law. Section 9 allows a party to seek those interim measure laid down under sub-clause (a) to (d) as well as ‘any other measures’ a court deems appropriate under sub-clause (e).5 Moreover, section 9 does not limit the grant of interim measures to the subject matter of the dispute and secondly, sub-clause (e) grants courts the discretionary power to grant such interim measures as appears just and convenient.

The interesting difference between Article 9 and Section 9 is that Article 9 states that it shall not be incompatible for a party to apply to a court, leading to the inference that the UNCITRAL Model did not really encourage applications to courts but just held that such applications did not suffer from incompatibility. Section 9, on the other hand, does not read on the road of incompatibility but, in effect, grants leave to the parties to apply to a court for seeking an interim measure.

(B) Time for invoking the Court’s jurisdiction (under the Indian Act):

One of the controversies that emerged after the passing of the Indian Act was with regard to the point of time when an application could be made to a court for granting interim relief. This controversy was finally settled by the Indian Supreme Court in its high-water mark judgment in Sundaram Finance vs. NEPC.6 The Madras High Court while interpreting Sec. 9 had ruled that in cases of prior referral under section 9 at least a notice for commencement of Arbitration was necessary.

Justice B.N. Kripal ruling on behalf of the Court overruled the judgment of the High Court and held that an application under section 9 could be made even prior to sending notice for commencement of the Arbitration to the other party. Holding otherwise, according to Kripal J. would be rendering the meaning of the words ‘before ... the arbitral proceeding’ otiose. In his judgement, Kripal J. keeping in view, Article 9 of the UNCITRAL Model Law opined that Article 9 clarifies the mere request to a court by a party to an arbitration agreement for an interim measure ‘before or during arbitral proceedings’ and it would not be incompatible with the arbitration agreement, meaning thereby that the arbitration proceedings could commence after a party had approached the court for an order for interim protection.

The Supreme Court, in Sunderam Finance Ltd. v. NEPC India Ltd., held that Section 9 is available even before the commencement of the arbitration. It need not be preceded by the issuing of notice invoking the arbitration clause. This is in contrast to the power given to the arbitrators who can exercise the power u/s 17 only during the currency of the Tribunal. Once the mandate of the arbitral tribunal terminates, Section 17 cannot be pressed into service.

(C) The UNCITRAL Model Law – Article 9:

Article 9 of the UNCITRAL Model Law dealing with arbitration agreements and interim measures granted by courts lays down as under:

‘It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure’.

Article 9, as can be seen, is expansive for it allows a party to request from a court an interim measure of protection, without limiting such measures to ‘the subject matter of the dispute’, as in the case of Article 17 meaning thereby that under the UNCITRAL Model Law courts may order any measures including pre-award attachments, third party compliance etc. Article 9, also lays down that granting of an interim measure by a court does not negate the applicability of an arbitration agreement and is not contrary to the intention of parties agreeing to submit a dispute to arbitration. Thus no party can turn around and nullify an arbitration agreement on the ground that a court taken on the dispute for the limited purpose of granting interim measures under Article 9.

However, unlike the Indian Act, Article 9 does not provide for a specific time prior to the commencement of the arbitration when a dispute may be referred to a court. But being a facilitating provision, it must be interpreted in such manner as would assist its operation and not be so construed as to debar such prior referrals as allowed under the Indian Act.

(D) The need for balanced intervention by Courts:

Arbitration procedural rules contain provisions by which a party may seek recourse to courts for grant of interim measures. The need for the court’s role is felt in relation to enforcement of interim measures granted by Arbitral Tribunals, as well as, granting those interim measures that were beyond the scope of the Tribunal. The reason for expressly allowing parties to take recourse to courts is on account of the fact that constitution of an arbitral tribunal can be a time consuming process.

The Court will generally take into account the following considerations while granting interim relief under section 9:

1. The party applying for interim relief must establish a prima-facie case.

2. The balance of convenience should be in its favour.
3. The party will suffer irreparable loss or injury if the interim measure is denied to it.
4. The exercise of discretion has to be in beneficial manner depending upon the circumstances of each case.

(E) General factors for interim relief:

A party seeking to obtain an interim measure (particularly before the arbitral tribunal has been constituted) must ensure that by taking steps in a court and thereby submitting to the jurisdiction of the domestic court it does not waive any rights it has under the arbitration agreement. The ability to obtain an interim measure will generally depend upon the procedural law governing the arbitration and the law in the jurisdiction in which the interim measure is sought to be enforced.

Generally, an applicant party needs to establish the following factors:

o There is an “urgent need” for the interim measure;
o Irreparable harm will result if the measure is not granted;

o The potential harm if the interim measure is not granted substantially outweighs the harm that will result to the party opposing the measure if the measure is granted; and
o There is a substantial possibility that the applicant will ultimately prevail in the dispute.

SCOPE OF COURTS’ JURISDICTION TO GRANT INTERIM RELIEF

Sub section (2) of section 2 provides in a clear and unambiguous language that Part I shall apply where the place of Arbitration is in India. However, the Delhi High Court, Dominant Offset (P) Ltd vs. Adamovske Strojirny where the arbitration took place at London, held that Part I also applies to International Commercial Arbitration conducted outside India.

However, the Division Bench of Delhi High Court in Marriott International Inc. vs. Ansal Hotels Limited, where arbitration proceedings were held at Kuala Lumpur in Malaysia, held that Part I of the Act shall apply to all arbitrations where the place of arbitration is in India.

Moreover, in Max India Ltd v General Binding Corp. The Division Bench of the Delhi High Court upheld the decision of the Single Bench of the High Court regarding the jurisdiction of Indian courts to grant interim relief in international commercial arbitrations. The division bench uphold the judgment of single judge and came to the conclusion that as per the decision in Bhatia International v. Bulk Trading Co. it was settled law that Part 1 of the Arbitration and Conciliation Act would apply to all arbitrations, including international commercial arbitrations held outside India, unless the parties by express or implied agreement excluded all or any of its provisions.

As far as the position of the Indian Law is concerned, this decision seeks to clarify the scope of the powers of an Indian court to grant interim relief in international commercial arbitration. The rule that seems to emerge is that when the parties have specifically intended that: (a) the law governing the contract; (b) the rules governing the arbitration; and (c) the court’s jurisdiction and the place of arbitration are outside India, then it would signify that the Indian court’s jurisdiction and applicability of Part 1 of the Act (which contains the power of the Indian courts to provide interim measures) are excluded.

(A) Sec. 9 as an exception to Sec. 5:

Section 5 of the Act no doubt forbids any intervention by any judicial authority, but any such exclusion of jurisdiction is only in matters, which are not otherwise specifically provided for. Section 9 of the Act is, however, an exception to the general rule contained in Section 5 in as much as the former specifically empowers the Civil Court concerned to pass suitable orders on the subject and in relation to matters stipulated therein. There is, therefore, no merit in the contention that Section 5 would exclude the jurisdiction of the Civil Court otherwise competent to entertain applications and pass orders in regard to the stipulated matters under Section 9 of the Act.

(B) Circumstances preventing court from granting interim relief:

The Bombay High Court in Nimbus Television & Sports Vs D G Doordarshan opined that if the interim relief prayed for u/s 9 would amount to granting final relief frustrating the arbitration proceedings such a relief cannot be granted by the court.

In Navbharat Ferro Alloys Ltd. vs. Continental Glass Ltd., the Delhi High Court held that when the claim is for money, the sale of materials cannot be ordered as an interim relief. However, it is submitted that an order of interim measure of protection can be passed by a competent court for sale of property where such property forming the subject matter of the dispute is perishable in nature.

The Bombay High Court, in Anil Construction vs. Vidharbha Irrigation Dev. Corpn19, held that the benefit of section 9 cannot be availed of by a party, which has no intention to appoint the Arbitral Tribunal. The provision cannot be availed by a party for restraining the other party from approaching the Arbitral Tribunal.

The Delhi High Court, in Arun Kapur v. Vikram Kapoor and others, after considering the decision of an English court in Channel Tunnel group Ltd. vs. Balfour Beatty construction Limited observed as follows:

“It is cardinal rule that if the party invokes preliminary alternative remedy before the Arbitral Tribunal, it is debarred from invoking the jurisdiction of the court under Section 9 of the Act. Ordinarily if the arbitrator is seized of the matter the interim relief should not be entertained and the parties should be advised to approach the arbitrator for interim relief unless and until the nature of relief intended to be sought falls outside the jurisdiction of the arbitrator or beyond terms of the agreement or reference of disputes. Otherwise, the very object of adjudication of disputes by arbitration would stand frustrated. A party should always be discouraged to knock the door of the Court particularly when the arbitrator is seized of all the relevant or even ancillary disputes.”

(C) Is parallel application u/s 9 as well as u/s 17 possible?

The Court can exercise power under section 9 to grant interim measures even during the pendency of application under section 17 before the Arbitral Tribunal. Remedy available to a party under section 17 is an additional remedy and is not in substitution of section 9.

Recently, a two-member bench of the Supreme Court, in the case of Firm Ashok Traders vs. G.D Saluja held that

(1) An application under Section 9 is neither a suit nor an application for enforcing a right arising from a contract – Prima facie the bar enacted by Section 69 of the Partnership Act, 1932 is not attracted to an application under Section 9 of the Act.

(2) Only a party to an arbitration agreement is qualified to make an application under Section 9. A person not a party to an arbitration agreement cannot make an application under Section 9.

(3) When application under Section 9 is filed before the commencement of arbitral proceedings, the applicant must be able to satisfy the Court that arbitral proceedings are positively going to commence within a reasonable time. There should be proximity between the application and the arbitral proceedings.

DRAWBACKS EXPERIENCED IN THE PROVISIONS FOR INTERIM RELIEF

The Law Commission of India in its 176th report published in 2001 noted a number of loopholes in the provisions for interim relief in the 1996 Act which were exploited by the parties after the Act came into force.

Provisions contained in section 9 regarding the availability of interim relief even before the arbitration proceedings commence had been misused by parties. It so happened that after obtaining an interim order from the court, parties did not take initiative to have an arbitral tribunal constituted. This allowed them to reap the benefits of the interim order without any time limit.

The Law Commission in its 176th report, observed that very often, in the past, Parties had used underhand means to destroy evidence which they felt could go against them during the Arbitral Proceedings or had attempted to concoct witnesses and tamper with evidence, in the possession of a third party. As a result, there is an immediate need to change the provisions of the existing section, so that the Tribunal could get more powers to deal with such situations.

(A) Difficulties in granting interim measures in Arbitration:

The contractual nature of arbitration gives rise to several unique difficulties.

1. Non-enforceable nature of interim measures granted by an arbitral tribunal is an accepted disadvantage that an Arbitral Tribunal faces when granting interim relief and without any coercive enforcement powers

2. A common difficulty in arbitration occurs when resolution of the dispute involves a third party against whom no order of the Tribunal shall be valid for the reason of lack of jurisdiction.

3. When interim measures of protection are needed against one of the parties to the arbitration, issues arise as to the availability of such remedies when they are sought at early stages in an arbitral proceeding.

4. Parties to arbitration also face difficulties when one party seeks interim relief at an early stage of the proceeding. In arbitration, it is typically difficult to obtain such relief expeditiously, because the Arbitral Tribunal has not yet been constituted. Thus, most parties in need of this immediate assistance seek the aid of national courts for this emergency relief.28 If a party seeks to delay the opposing party’s request for an injunction or attachment, that party can slow the process considerably by taking a long time to select an arbitrator.

5. The Tribunal’s jurisdiction to grant interim measures may be limited by the governing law of the arbitration.

CONCLUSION

It is submitted that lacunas in the provisions of interim measures should be set right by legislative initiation. Six years have passed but the Amendment Bill, 2003 has not been made into law because the Legislature feels that there are many other important issues like enforcement of interim orders and Costs of proceedings which need to be taken care of before making these Amendments to Ss.9 & 17.

The system of dual agency for providing relief needs to be abolished or otherwise some enforcement mechanism be provided for enforcement of the interim measures of protections ordered by the Arbitral Tribunal. It would be better that application of interim measures is put to the Arbitral Tribunals as they are seized of the subject matter under dispute. Only when a party is not able to get relief from the Arbitral Tribunal, it should be allowed to knock the doors of the Court. This will be in line with the objectives of the Act to minimise the intervention of the Court in arbitral proceedings.

One aspect in all the statutes /rules is common: they follow the policy of minimal role to be played by Courts. Thus, one of the ways by which courts may determine whether they are required to interfere in granting an interim measure is by keeping in mind the powers exercisable by the Tribunal, thereby ascertaining whether in a given case the interim relief claimed by the applicant can be granted by the Arbitral Tribunal. If held in the affirmative, the next question they would be required to answer is whether the said relief can be granted quickly and effectively as the situation demands and herein unless the applicant is able to demonstrate that the delay will cause irreparable hardship or injury, in which case the court may intervene in order to meet the ends of justice, the court should, in all other circumstances, refrain from interfering and direct the parties to seek relief from the Arbitrators.
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