Interim reliefs play a crucial role in arbitration, providing parties with essential protections while they await a final resolution of their disputes. Under the Arbitration and Conciliation Act, 1996, courts and arbitral tribunals are empowered to grant interim measures that safeguard the rights and interests of parties involved in arbitration. The 2015 amendments to the Act have refined these provisions, outlining the circumstances under which interim relief can be sought and the processes involved.
This article delves into the framework of interim reliefs in Indian arbitration, exploring the specific powers granted to courts and arbitral tribunals under Section 9 and 17 of the Arbitration and Conciliation Act, 1996, the conditions necessary for granting such measures, and the significant impact of recent judicial interpretations on the efficacy of these interim provisions.
Introduction to Interim Measures in Arbitration
In arbitration, parties can request interim measures (temporary reliefs to protect their assets or rights) while waiting for the final decision. These requests can be made either to a court or an Arbitral Tribunal under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996.
What Are Interim Measures?
Interim measures are temporary protections that help parties safeguard their position while the main arbitration case is being decided. These can include:
- Securing money or property.
- Preventing someone from selling assets.
- Managing disputed property.
Purpose and Role of Interim Reliefs
The primary purpose of interim measures is to maintain the status quo and protect the subject matter of the dispute, ensuring that the final arbitral award holds practical value. For interim relief to be granted, the applicant must satisfy three conditions:
- Prima facie case: The applicant must show a strong case on the merits.
- Balance of convenience: The relief should be more convenient to the applicant than to the respondent.
- Irreparable harm: The applicant must demonstrate that, without the relief, they will suffer irreparable damage.
Section 9: Interim Measures from Courts
There can be a considerable delay between the initiation of arbitration and the appointment of an arbitral tribunal by the Court. During this gap, if urgent relief is required and waiting is not a feasible option, Section 9 allows a party to seek immediate intervention from the Court. The core purpose of Section 9 is to provide timely relief when the arbitral tribunal has not yet been constituted, ensuring that parties are not left without recourse during this period.
When Can a Party Apply for Interim Reliefs?
Under Section 9(1), a party can apply to a court for interim relief in the following situations:
- Before arbitration proceedings begin.
- During the arbitration proceedings.
- After the arbitral award is made, but before it is enforced according to Section 36.
This allows parties to secure their rights or protect property at any stage of the arbitration process. In Ultratech Cement Ltd. V. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (2018), the Supreme Court held that interim arrangement can be made under section 9 not only before and during the pendency of the arbitral proceedings but also after the arbitral award has been pronounced.
Section 17: Interim measures ordered by arbitral tribunal
Section 17 of the Arbitration and Conciliation Act, 1996 provides for Interim measures ordered by arbitral tribunal.
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. A party may, during the arbitral proceedings apply to the arbitral tribunal for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or for an interim measure of protection such as the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; securing the amount in dispute in the arbitration, etc.
Additionally, any order issued by the arbitral tribunal under this section 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, subject to any appeal under Section 37.
What Can a Party Request as Interim Measures Under Section 9?
Under Section 9(i) & (ii), the Parties may apply to a court:
- for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
- 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.
The 2015 Amendments: Sections 9(2) and 9(3)
Subsections (2) and (3) of Section 9 were introduced through the 2015 amendment of the Act, imposing restrictions on seeking interim relief from the Court once arbitration proceedings have commenced.
Section 9(2): Time Limit for starting arbitration after the order of Interim Measure
(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.
Section 9(2) sets a Time Limit for starting arbitration after the court grants interim measures before the commencement of the arbitral proceedings.
Under Section 9(2), if a party approaches the court before the arbitration process starts and the court grants interim protection (e.g., freezing assets, securing property), the party receiving this protection must then commence arbitration within 90 days or the court may allow more time if it feels that circumstances justify extending the period.
The purpose of this provision is to ensure that a party doesn’t just secure interim relief from the court and then delay the actual arbitration process. It enforces a sense of urgency and commitment to resolving the dispute through arbitration.
Section 9(3): Limitation on Court’s Power After Tribunal Is Constituted
(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.
Section 9(3) imposes a limitation on the court’s power to grant interim relief after the Arbitral Tribunal has been established. The court can only intervene after the tribunal is formed if it finds that the interim relief available under Section 17 is not effective.
Interpretation of Section 9(3) and Judicial Clarification
The key purpose of introducing Section 9(3) was to reduce judicial intervention in arbitration proceedings. Under the present legal framework, the Arbitral Tribunal has the same powers as the court to grant interim relief, making the remedy under Section 17 equally effective as that under Section 9(1). As a result, once the Arbitral Tribunal is constituted and addressing the dispute, courts should refrain from considering applications for interim measures, except in situations where it is difficult to obtain relief from the Tribunal.
Section 9(3) of the Arbitration Act does not operate as an exclusionary clause regarding the powers of the courts to grant interim reliefs. If the legislature had intended to wholly exclude the courts from acting under Section 9 in the existence of an Arbitral Tribunal, it would undoubtedly have explicitly stated so. It is a recognised principle that whenever the legislature intends an exclusion, it articulates it explicitly.
The Arcelor Mittal Case: Clarifying “Entertain”
With the introduction of Section9(3), the courts grappled with the issue whether courts could still grant interim relief under Section 9, even after an arbitral tribunal had been constituted. The Court in Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd. (2022) observed, held that the word ‘entertain’ under section 9(3) means when a court under section 9 has applied its mind to the issues raised in the application, and has considered it on merits. It concluded that while such a process might even extend till the pronouncement of the order on such an application, it would not preclude the court from exercising its powers under section 9 even if the tribunal was constituted during this stage.
The Court noted that “it was never the legislative intention that even after the conclusion of proceedings on an application under Section 9, relief would be denied, forcing the parties to resort to Section 17 for remedy. It was also held that when an application has already undergone consideration or is in the process of being considered, there is no need to assess the effectiveness of the remedy under Section 17. This assessment is necessary only when the application is yet to be taken up for consideration”.
Reasons for Ineffectiveness of the remedy under Section 17
“There could be various reasons why the remedy under Section 17 might prove ineffective, such as where the arbitral tribunal is unavailable due to reasons of illness etc., where members of the arbitral tribunal cannot congregate on short notice to decide the urgency in the interim application, or where the constitution of the tribunal itself is under challenge on grounds of bias etc. inter alia.”
This highlights the scope of Section 9(3) focusing that:
- No Need for Abandoning the application once the Court Has Considered the Application
- The legislative intent behind Section 9(3) is to streamline arbitration and minimize court interference once the tribunal is constituted. However, the courts observed that this does not mean that if a court has already considered or is in the process of considering an application for interim relief under Section 9, the parties would have to abandon the court process and start fresh before the arbitral tribunal under Section 17.
- If the court has already begun to consider the application, even if the tribunal is subsequently constituted, the court is not required to hand over the matter to the tribunal.
- No Need for Section 17 Assessment Once Court Has Engaged
- The court explained that Section 9(3) requires an assessment of whether the tribunal’s remedy under Section 17 would be effective only when the court has not yet started considering the application.
- This means the court should assess whether applying to the tribunal (under Section 17) would be efficient only when an application is made after the tribunal is already in place, and the court hasn’t yet engaged with the case.
- If the Court Has Already Engaged, Section 17 Becomes Irrelevant
- If the court has already engaged with the application, meaning it has started examining or deliberating on the case, there is no need to assess whether Section 17 remedies would be effective. At that point, the court continues with its process, and the remedy will be granted based on the court’s discretion.
Conclusion
In conclusion, interim reliefs are an integral aspect of the arbitration process, providing timely safeguards that maintain the status quo until a final decision is reached. The Arbitration and Conciliation Act, 1996, along with its amendments, sets a comprehensive legal foundation for seeking such reliefs, enabling parties to protect their assets and rights effectively. With the courts playing a vital role in granting these measures, recent judicial interpretations—particularly regarding the interplay between Sections 9 and 17—have further clarified the scope and limitations of interim reliefs. As arbitration continues to evolve, understanding these interim measures will be crucial for parties seeking to navigate the complexities of dispute resolution effectively.