“An ounce of mediation is worth a pound of arbitration and a ton of litigation!”

— Joseph Grynbaum

The purpose of this article is to discuss and analyze the provisions related to Interim measures under The Arbitration and Conciliation Act, 1996 (herein after referred to as ‘The Act’). The relevance and importance of Arbitration and Conciliation in the Indian Legal scenario in the past two decades is undisputed, an ever evolving field, arbitration even after decades remain a riveting subject to discuss and deliberate upon.

While many people understand the concept of Arbitration and Conciliation and realize that it ultimately leads to an Arbitral Award, only a certain few, who are students of law, are aware that certain interim measures may be adopted by the Tribunal or the Court themselves to meet the ends of justice.

Interim measures by Court and Tribunal are given in The Act under Section 9 and Section 17 respectively. Such relief becomes necessary in certain situations where the party may suffer irreparable harm or damage if some immediate actions are not taken. The language of these sections is simple enough however the courts have laid down a set of principles governing them or has construed them in such a manner to limit their scope.

Section 9 of The Act is reproduced below:

9. Interim measures etc. by Court.—

[(1)] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court-
(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 authorising 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 Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

1[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub- section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.][1]

Section 9 uses the term ‘A party’ which has been defined under Section 2(1)(h) of The Act, where “party” means a party to an arbitration agreement. Therefore, the qualification which the person invoking jurisdiction of the Court under Section 9 must possess is of being a ‘party’ to an arbitration agreement, A person not party to an arbitration agreement cannot enter the Court for protection under Section 9[2].

Section 9 continues to state that a party may ‘before… arbitral proceedings… apply to court’, however in order to give full effect to the words “before or during arbitral proceedings” occurring in Section 9 the courts have held that it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 is filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal, but a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration.[3] Thus the courts must be satisfied that exists a valid arbitration clause, the party is willing to be bound by it and also that the applicant is willing to start the process of arbitration.

As previously mentioned, the courts have discussed, at length the general principles regarding the exercise of discretionary power in granting interim measures under Section 9 of The Act. Order XXXVIII Rule 5 and Order XXXIX Rule 1 & 2 of The Code of Civil Procedure, 1908 relates to furnishing security for the disputed amount and granting of injunctions, similar reliefs which may be granted under this section. The courts have held that, at the highest what could be said is that the provisions of XXXVIII Rule 5 would serve as the guiding principle for the Court to exercise its discretion while dealing with a petition requiring the respondent to furnish security for the amount in dispute. Since the letter of the law per se is not applicable, the requirements set out in XXXVIII Rule 5 need not strictly be satisfied, and so long as the ingredients of the said provision are generally present, the Court would not be unjustified in exercising its jurisdiction to require the respondent to furnish security.[4]

In another Supreme Court case, the Hon’ble court was inclined to the view that exercise of power under Section 9 of The Act must be based on well recognized principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver.[5]

Thus, it would not be correct to say that the power under Section 9 of The Act is totally independent of the well-known principles governing the grant of an interim injunction that generally govern the courts in this connection[6]

Section 17, prima facie appears to be a similar provision to Section 9 with the Arbitration tribunal being the authority granting the interim measure, however it has been construed in a more strict manner as compared to Section 9.

Section 17 of The Act is reproduced below:

17. Interim measures ordered by arbitral tribunal.—
(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, 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 authorising 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.[7]

Similar to Section 9, Section 17 uses the term ‘A party’ which has been defined under Section 2(1)(h) of The Act, where “party” means a party to an arbitration agreement, Therefore even though a third party may be adversely affected if such measure is not granted, he cannot ask for an interim measure, since he is not a party to the arbitration. Moreover under Section 17 of The Act, an interim order must relate to the protection of subject matter of dispute and the order may be addressed only to a party to the arbitration. It cannot be addressed to other parties.[8]

Section 17 provides for Interim Measures, however prior to the Arbitration and Conciliation (Amendment) Act, 2015 remained silent on the enforcement of said measures.

The pre-amendment phase of Section 17 was riddled with enforcement problems, with the courts observing that even though Section 17 gives the arbitral tribunal the power to pass orders the same cannot be enforced as orders of a Court. It is for this reason that Section 9 admittedly gives the Court power to pass interim orders during the arbitration proceedings[9], thus making enforcement of the interim measures a painstaking task for the parties.

Furthermore, in the Army Welfare Case, it was held that “Even under Section 17 of the 1996 Act, no power is conferred upon the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof”[10].

However, the Arbitration and Conciliation (Amendment) Act, 2015, solved all such issues and now such orders would be deemed to be orders of the Court for all purposes and would be enforced under the Civil Procedure Code, 1908 in the same manner as if they were orders of the Court. [11] Thus, if a party doesn’t follow or comply with order of the tribunal, he may attract the penalty for contempt of court.

The jurisprudence in India relating to the standards to be applied by an arbitral tribunal while granting interim reliefs under Section 17 of The Act is sparse at best. The standards applied by national courts while granting interim measures would have no bearing on arbitral tribunals. [12]

Arbitral tribunals have normally required a party to prove

A.   irreparable harm

B.    urgency; and

C.    no prejudgment of the merits of the case, to award interim measures.

In some cases tribunals have also considered whether the party has established a prima facie case and that the balance of convenience weighed in favour of the party.

In plethora of cases such as Adhunik Steels Ltd. v. Orissa Manganese and Minerals Pvt. Ltd. AIR 2007 SC 2563, Steel Authority of India v AMCI Pty Ltd (2011) 3 Arb LR 502, Delta Construction Systems Ltd., Hyderabad v. M/S Narmada Cement Company Ltd, Mumbai, (2002) 2 BomLR 225, National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd. AIR 2004 Bom136, the Courts have shied away from importing principles contained in Order XXXVII Rule 5 and Order XXXIX Rule 1 & 2 to the grant of interim reliefs under Section 9.

When such principles are not necessarily applicable in proceedings before a court; it is inconceivable for the same to apply to flexible and tailor-made dispute resolution process like arbitration[13].

However, recent developments in this regard are quite intriguing. In a recent Delhi High Court Judgement, the Hon’ble Court held that

“Where even the Court exercising power under Section 9 of The Act has to be guided by the principles of the CPC then a fortiori an interim order by a Tribunal requiring furnishing of security for the monetary amount of claim by one party had to satisfy the requirement of Order XXXVIII Rule 5 CPC.”[14]

The Hon’ble court in simple terms laid down that principles governing grant of relief under Section 9 will also apply to Section 17. This marks a positive development in the growth and development of Arbitral laws in India.

Hon’ble Delhi High Court further held that, the grant of interim relief under Section 17 of The Act was required to be preceded by a determination that the party seeking interim relief has a prima facie case.[15]

A keen understanding of these provisions makes it amply clear that even though an Arbitration was decided upon by the parties to save time and money, however, there may arise certain situations which necessitates immediate interference by the Tribunal or the Court to meet the ends of justice and save a party from irreversible damage.