Author: AMLEGALS
INTRODUCTION
Alternate Dispute Resolution, in the form of Arbitration and Conciliation, has always existed as the preferred mode of commercial dispute resolution within India’s legislative framework. Prior to India’s independence, the Arbitration Act, 1940 and the Arbitration Act (Protocol and Convention) Act, 1937 governed Arbitration proceedings in India. Similarly, foreign Arbitral awards were legitimised and enforced under the Foreign Awards (Recognition and Enforcement) Act, 1961.
These enactments were subsequently consolidated into the Arbitration and Conciliation Act, 1996 (“the Act”), which is the current law in force for Arbitration and Conciliation proceedings in India. The Act is based on the United Nations Commission on International Trade Law (UNCITRAL) Model on International Commercial Arbitration, 1985.
The term ‘award’ has not been defined under the Act. An award is the determination reached by Arbitral Tribunal or Sole Arbitrator on merits, in an Arbitration proceeding referred to by the parties to an Arbitration agreement for resolution of dispute. An award is analogous to a decree, judgement or order of the Court of law.
An interim award, on the other hand, refers to a determination of some part of the dispute referred to Arbitration. Interim awards are to be made in the same manner as an award, as held in Tamil Nadu Water Supply and Drainage Board, Chennai v. Abhan Constructions [2002 (4) RAJ 575 (Mad)].
The Arbitral Tribunal may pass an interim award for those disputes which are defined in the Arbitration agreement between the parties. Similarly, the Tribunal can pass an interim award on a subject matter over which it has the power to pass final awards, as held in Deepak Mitra v. District Judge, Allahabad [2000 (2) RAJ 112 (All)].
INTERIM AWARDS UNDER THE ARBITRATION AND CONCILIATION ACT, 1996
Interim Measures ordered by the Arbitral Tribunal
Interim measures may be granted by the Arbitral Tribunal on an application made by a party to the Arbitration during the Arbitral proceedings under Section 17 of the Act. Section 17(1)(ii) of the Act enables the party to make an application to the Tribunal for an interim measure of protection for the following matters:
- Prevention, interim custody or sale of any goods being subject matter of the Arbitration agreement;
- Securing the amount in dispute in the Arbitration;
- Detention, preservation or inspection of any property or thing which is the subject matter of the dispute in Arbitration;
- Authorising any person for the aforesaid purpose to enter upon any land or building in possession of any party, or authorising samples to be taken, observation to be made, experiment to be tried, which may be necessary or expedient for obtaining full information or evidence;
- Interim injunction or appointment of receiver; and
- Other interim measure of protection deemed just and convenient by the Arbitral Tribunal.
According to Section 17(1) of the Act, the Arbitral Tribunal may exercise the power to grant interim measures only after its constitution, and not before its constitution. However, as an exception to the said condition, if the parties by agreement prefer the proceedings to be conducted under the rules of specific institutional Arbitral Tribunal, and if such institutional rules allow for the conduct of Emergency Arbitration before the constitution of Arbitral Tribunal, then the Institution may allow the appointment of an Emergency Arbitrator for interim measure(s) before the constitution of the Tribunal.
A similar view was taken by the Supreme Court, in the case of Amazon.Com NV Investment Holdings LLC v. Future Retail Ltd., [(2022) 1 SCC 209], wherein the Supreme Court held that the interim measures passed by the Emergency Arbitrator under the Singapore International Arbitration Centre Rules (“SIAC Rules”) would be covered by Section 17 of the Act.
The powers of the Arbitral Tribunal under Section 17(1)(ii) of the Act are limited to passing interim measures against parties to the Arbitration. The Supreme Court in MD Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. [(2004) 9 SCC 619] held that the Arbitral Tribunal does not have the jurisdiction under Section 17 of the Act to pass interim measures against a third party.
Key Considerations for the Grant of Interim Measures by Arbitral Tribunal
In accordance with the accepted international principles of Arbitration Law, Arbitral Tribunals while granting interim measures rely upon existing Arbitral case laws, Institutional Arbitral Rules and scholarly opinions, along with the existing legal framework.
In the case of Shabnam Dhillon v. Zee Entertainment Enterprise Ltd., [(2019) 176 DRJ 429], the Delhi High Court held that for the grant of interim measures in Arbitration, the “well-known rules” or the prerequisites for grant of any interim relief under the Code of Civil Procedure, 1908 (“CPC”) must be satisfied, which include:
- Setting out a case of irreparable harm;
- Urgency in seeking the relief;
- Such relief should not prejudice the subject matter of final dispute;
- Prima facie case established in favour of the party seeking interim relief; and
- Balance of convenience in favour of such party.
The principles and standards for grant of interim relief as provided by the CPC are usually referred by the Arbitral Tribunals in India for grant of interim measures in Arbitration, as such principles and standards are not binding on the Courts itself.
However, in some instances, the principles under CPC have been implemented for the grant of interim measures in Arbitration, such as in Intertole ICS (Crecoms) O&M Company v. NHAI [(2013) ILR 2 Delhi 1018]. In this case, the Delhi High Court held that for the grant of security of amount claimed as interim measure, the Arbitral Tribunal must treat Order XXXVIII Rule 5 of the CPC as guiding principle. That being said, the interim award of the Arbitral Tribunal was set aside not solely due to the absence of a prima facie case, but due to the specific facts and conduct of the Arbitral Tribunal.
ENFORCEMENT OF INTERIM MEASURES ORDERED BY THE ARBITRAL TRIBUNAL
According to Section 36 of the Act, an interim award passed by an Arbitral Tribunal under Section 17 of the Act has the same legal value as an interim award passed by the Court under Section 9 of the Act. Further, Section 27(5) of the Act enables the Court to impose such disadvantages, penalties and punishments on any person for the contempt of Arbitral Tribunal during the conduct of Arbitral proceedings, in a manner similar to suits tried before the Courts.
In the event that any party refuses to comply with the interim award passed by an Arbitral Tribunal under Section 17 of the Act, such person would be deemed “guilty of contempt to the Arbitral Tribunal” under Section 27(5) of the Act, as held by the Delhi High Court in Sri Krishan v. Anand [(2009) 3 Arb LR 447 (Del)]. The Delhi High Court observed that:
“Anyone who fails to comply with the arbitral tribunal’s order is considered “making any other default” or “guilty of any disrespect to the arbitral tribunal during the proceedings.” As a result, the opposing party’s remedy is to seek to the arbitral tribunal for 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.”
Similarly, the Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan [2017 SCC OnLine SC 758] held that any person refusing to comply with the Arbitral Tribunal’s interim award passed under Section 17 of the Act would be considered as contempt during the course of Arbitration proceedings, and an action for civil contempt could be initiated against such person under the Contempt of Courts Act, 1971.
The Delhi High Court in BPTP Limited v. CPI India I Limited and Ors. [2015 (4) Arb LR 410 (Delhi)] held that an interim award of the Arbitral Tribunal, which is upheld by the Court in an appeal under Section 37 of the Act, would have the effect of an order of the Court and would be enforceable in the same manner.
In case of interim awards passed by foreign seated Arbitrators or Emergency Arbitrators, such awards are not directly enforceable before the courts in India and may be enforced through a fresh application under Section 9 of the Act for grant of interim measures by the Court, as held in Raffles India International Private Limited v. Educomp Professional Education Limited [2016 SCC Online Del 5521].
AMLEGALS REMARKS
It is pertinent to note that India has come a long way in its legal framework for Alternate Dispute Resolution. That said, some issues continued to exist which clogged the mechanism of Arbitration and render the provisions of the Act ineffective, such as passing and enforcement of interim measures passed by Arbitral Tribunals.
Previously, interim measures granted by the Arbitral Tribunal were not treated equivalent to those granted by the Court. However, after the amendment of the Act by virtue of the Arbitration and Conciliation (Amendment) Act, 2015, interim awards granted by the Arbitral Tribunal have a level playing field with the interim relief granted by Courts. The legislature incorporated all such provisions which empower Arbitral Tribunals to pass enforceable interim awards.
Interim awards passed by Arbitral Tribunals have now been given the same legal backing as accorded to orders of the Court, including the applicability of contempt of court provisions. The current need of the hour is for Arbitral Tribunals to judiciously grant such relief to bona fide parties having sufficient cause to seek interim relief, ensuring a delicate balance between the “well-known rules” of CPC and the flexibility offered in Arbitration.
