Interim Relief under Arbitration and Conciliation Act, 1996

INTRODUCTION:

"An act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto", as the preamble reads, of the Arbitration and Conciliation Act, 1996 that came into force on 25th January, 1996, formulated on the lines of the UN Model Law, to be in consonance with the United Nations Commission on International Trade Law (UNCITRAL).

Few objectives behind the enaction of the legislation are, to fairly reach a peaceful conclusion to a dispute without any delay or unnecessary expense and to safeguard the interests of the parties, subject to public interests and justice.

Even though, one of the characteristics of the ADR is the non-interference by the courts, but in adherence with the principles of justice, parties to the dispute have the right to protect their interests at any time but before the final enforcement of resolution award. Consequently, interim relief can be sought under the Arbitration and Conciliation Act, 1996 by the parties, by filing an application before the jurisdictional court/ tribunal. The article shall discuss the relevant sections, purpose of such relief and other commensurate subject matter.

INTERIM RELIEF:

While the proceedings before the tribunal subsist, there may arise a situation wherein, either party can, to protect its interests/ claims with respect to representation before the tribunal/property that forms the subject matter to the case or incidental thereto, which has the likelihood of deterioration or any other harm arising due to passage of time or for want of justice, can seek interim relief under the Arbitration and Conciliation Act, 1996, where the court is vested with the powers of granting such interim measures as it has for the purpose of any other proceedings before it.

POWERS OF THE COURT TO GRANT INTERIM RELIEF:

Section 9(1) of the act provides for interim relief measures that parties are entitled during subsisting arbitration proceedings. The powers of the court to order interim relief are with respect to the following matters:

1. The appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings.

2. To preserve and provide interim custody or sale of the goods under dispute in the arbitration.

3. To secure the amount under dispute between the parties.

4. To detain, preserve or order for inspection of the property under dispute which may be under the possession of any party and authorise any person to enter the building for the above mentioned reasons or for obtaining such evidence or proof which may substantiate the claim of any of the parties to the dispute and help in resolution of the dispute.

5. Interim injunctions or the appointment of a receiver.

6. Any other measure as the Court may deem just and convenient.

The section seeks to protect the rights of the parties under adjudication from being frustrated. Additionally, in the case of Ashok Traders v Gurumukh Das Saluja (2004(1)SCR 404), the court observed that party seeking protection under section 9(1)(ii) must bring before court in addition to the merits of the claim, some proof showing that an order under the provisions is needed as there was a likelihood of or an attempt to defeat the outcome of the award.

Section 9 can elaborated through the case, Industrial Development Corpn of Orissa Ltd v. Utkal Moulders Ltd(AIR 2004 Ori 63),where an agreement for establishment of a coke oven plant was under dispute and was referred to arbitration. The only outcome seemed to be that one of them should take over the operation of the plant but the parties sought protection against such take over. While the dispute was still pending in arbitration, the court permitted continued operation of the plant to secure ends of justice and equality.

It has been laid down that the interim measures provided by the courts does not put an end to the rights of the parties. The court passes interim orders to preserve rights of the parties during arbitral proceedings but it does not mean that the other party cannot lay claim in the main proceedings before the arbitrator. Therefore, the interim measures provided by the court has to be given the interim status.

APPLICATION OF SPECIFIC RELIEF ACT:

Supreme Court has observed that section 9 is not independent of the Specific Relief Act, 1963. The power under section 9 must be based on principles governing grant of interim injunctions or other orders of interim protection. As in the case, Adhunik Steels Ltd v. Orissa Manganese and Minerals (P) Ltd((2007) 7 SCC 125), a party to the suit was a company possessing a lease to mine and had assigned the right to raise minerals to another company. As per the terms of the agreement, in case of termination of the assignment, the assignee would be compensated by the company. While the arbitral proceedings were going on and plea for injunction by the assignee to keep the assignment alive during the pendency of the arbitral proceedings was denied by the High Court, which was upheld by the Supreme Court. The Court reasoned that the assignee could not injunct the assignor company under the termination of the assignment, to prevent the assignor from entering into agreement with any other person.

PRIMA FACIE PROOF OF THE AGREEMENT:

An application for interim relief under section 9 becomes maintainable only if there is a prima facie evidence that an arbitral agreement exists. As it has been mentioned before, under section 9 such an application for interim relief can be made:

1. Before the commencement of the arbitral proceedings, or

2. During the proceedings before arbitration tribunal, or

3. After the arbitral award has been granted but before it is enforced under section 36.

The ‘before’ refers to the period between the request for arbitration and the actual reference.

However, if a situation so demands that a party applies for interim relief before issuing a request for arbitration as per section 21. Then the court, has to be satisfied with regard to the fact that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration.

While the powers under section 9 are the general powers to grant interim relief to protect interests in the light of justice and fairness of the jurisdictional court. Section 17 confers power to the arbitral tribunal to take any interim measure of protection as may be necessary with respect to the matter before the it.

S.17. Interim measures ordered by arbitral tribunal:

The arbitral tribunal may, during the arbitral proceedings, on the request of a party to the dispute, subject to prior agreement between the parties, may grant such interim relief of protection as the tribunal may deem necessary with regard to subject matter of the dispute. Same relief can be granted by the tribunal as a Court under section 9.

Consequently, the tribunal may ask the party to provide a security with respect to the interim measure granted under sub-section 1 of section 17.

In the case of M.D. Army WHO V. Sumagal Services ltd(AIR 2004 SC 134), the Supreme Court observed that, under section 17 of the 1996 Act the powers of the arbitrator are limited. It cannot give out any direction beyond the terms of the agreement.

Even the award under section 17 should be to protect the subject matter of the dispute. Similarly, arbitral tribunal does not have the power to enforce its order under section 17 and nor does it provide for judicial enforcement.

But after the amendment of section 17 in 2015, the arbitral tribunal possesses the power of granting interim measures similar to that of the courts. Additionally, the orders shall have the same enforcing powers as that of the courts. In the case of Alka Chandewar v. Shamshul Ishwar Khan((2017) INSC 502), the Supreme Court observed that, “any party found in non-compliance with the orders of the arbitral tribunal shall be tried under the Contempt of Court Act 1971.”

OVERLAP BETWEEN S.9 AND S.17:

According to the Arbitration and Conciliation Act, 1996, Section 9 lays down the powers of the Court to grant interim measures, “before, during and after” the award by the tribunal. Similarly, section 17 of the Act lays down power of the tribunal to grant interim measures “during” the arbitration proceedings. There is overlap between the two, when the arbitration proceedings are ongoing. Therefore, the Allahabad High Court in Deepak Mitra v. Distt judge, Allahabad(AIR 2000 All 9 at p 20), observed that:

“interim measures can be issued under section 9 only for the purposes of arbitration proceedings and with a view to protect the interest of the parties which otherwise cannot be protected or safeguarded by the arbitral tribunal. The power contemplated under section 9 is not intended to frustrate the arbitration proceeding. This power cannot be exercised by the court if it would prejudice the powers vested in the arbitrator and render him incapable of resolving the dispute.”

The court in the present case, did not impinge upon the rights of the parties. The order only observed a finding that the shareholders did not want the properties of the company to be distributed. However, the Supreme Court noted that, the powers of the arbitral tribunal under section 17 and the power vested with the court by section 9 may overlap, but before the commencement of the arbitration proceedings and after termination of the proceedings, the only help for interim measures is the court.

However, the dispute was laid to rest by the Supreme Court, in the case, ArcelorMittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2021 SCC OnLine SC 718), where while recognising that section 9 and section 17 of the Act stand on the same pedestal wrt meting out interim measures and their enforcement, it was noted that post constitution of tribunal, section 9(1) is not to be used, unless “there is some impediment in approaching the Arbitral Tribunal, or the interim relief sought cannot expeditiously be obtained from the Arbitral Tribunal.” Here, it was also noted that bar of section 9(3) would not hold, if the remedy granted under section 17 is “inefficacious” that may cause prejudice/ injury to party seeking such relief, thereby threatening the legislative intent behind the act.

SUBJECT MATTER OF RELIEF SHOULD BE WITHIN AMBIT OF DISPUTE:

A party to a dispute is entitled to relief under section 9 if it can be interpreted from the terms of the agreement. Any conflict, which is not the subject-matter of the terms of agreement are beyond the ambit of arbitration. A party to a dispute is entitled to interim protection if the action of the other party is in breach of the terms of the agreement or is against the principles of natural justice, equity, fairness. It was laid down by the Delhi High Court in, Baby Arya v Delhi Vidyut Board(AIR 2002 Del 50), where as per the respondents, the dispute arose due to the fraudulent extraction of electricity and not on account of regular bills or actual consumption or any terms of agreement. The petitioner, in its application did not object to the terms of the agreement which had been breached. The dispute was only regarding the bills against fraudulent extraction and that being a crime, was outside the ambit of the agreement under which interim relief could be prayed for.

ONUS OF PROOF:

In Jugal K.P. Sharma v. V.P. Sharma((1993) 1 SCC 114), one of the objections raised was that the arbitrator had wrongly placed the onus of proving the truth, on the entries in the accounts, on the objectors. The argument put forth that the accounts were maintained by the applicants and the burden fell on them to prove the truth of the entries. However, the court did not accept the contention. A perusal of the award showed that the arbitrator had examined the state of the accounts and elaborately discussed the objection put forth by the objectors. The question on whom the burden fell had ceased when the arbitrator had examined the entire material available and based his conclusion on the materials produced by the parties to the conflict. Another contention presented was that some entries were false. The court observed that this was a question of fact and the court could not find a nexus to interfere with the findings of the arbitrator. Despite, the above observing, the court ordered a rectification of the errors.

WRIT REMEDY:

In the case of Ila Mitra v. Amitava Banerji (2003) 4 RAJ 414 (All), a writ petition was not allowed where interim relief could be had under section 9 or final relief under section 34. At the same time, through a writ, an injunction can be granted by the HC in the exercise of its power under article 226. In the case of Transmission Corpn of A.P. Ltd v. Lanco Kondapalli Power ltd ((2006) 1 SCC 540), where the HC exercising its powers under art 226 had issued writ granting injunction which was challenged in the Apex Court under article 136, which observed, “A writ court can also grant injunction in exercise of its power under Article 226 of the Constitution of India. If injunction is refused in the present proceeding, the interim order passed in the writ proceedings shall continue. It may give rise to a stalemate. It may violate the well-known rule of judicial comity.” Therefore, when existence of a prima facie case is established, the court shall consider the other relevant factors, namely, balance of convenience and irreparable injuries, conduct of the parties to decide grant of relief lis pendens.

CONCLUSION:

Section 9 of the Act confers power on the court to grant interim measures while section 17 by the amendment of 2015 confers powers on the arbitral tribunal to grant interim measures with the same enforceability as that of the courts. Appeal against grant/dismissal of relief under section 17 can be made under section 37(2) of the Act. Lastly, there are several drawbacks marring the act as to the procedure for compliance of the order of the arbitrator. With the judicial decision to enforce the Contempt of Court Act, has paved the way for judicial intervention in the arbitration, which can prove counter-productive to the aim of the establishment of arbitration tribunal, which is, to reduce the excessive burden on the judiciary. Nevertheless, the law commission is working towards attaining the goal of realising the objectives of the arbitration act.