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Legal Capsule: Interim Relief in Indian Arbitration Landscape by Economic Laws Practice


With the intent of establishing arbitration as the preferred mode of dispute resolution, the Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”) was passed by Indian parliament to amend the Arbitration and Conciliation Act, 1996 (“the Act”; the Act, as amended by the Amendment Act, has been referred to as the “Amended Act”). The Amendment Act is widely regarded as a positive step by the legislature to remedy the blemishes prevalent in the domestic law of arbitration. Amongst several remarkable changes introduced through the new regime, the legislature has taken steps to streamline the process of seeking interim measures from the courts (under section 9 of the Amended Act) and the arbitral tribunal (under section 17 of the Amended Act).

  • Policy of minimal intervention of courts: The Amendment Act has sought to rule out unnecessary intervention of courts during arbitral proceedings. In its effort to ensure that interim measures can only be granted if parties really intend to pursue arbitration, the legislature has inserted Section 9(2) in the Amended Act, which provides that in the event a petition is filed in courts to obtain interim relief prior to initiation of arbitration, the party filing such petition shall commence the arbitration within a period of 90 days from the date it has obtained an order of interim relief. 
    The courts are now consciously referring applications filed under section 9 of the Amended Act to an arbitral tribunal under section 17 of the Amended Act, and as time is of essence, even appointing the arbitral tribunal with the consent of the parties at the stage of disposal of the application under section 9 of the Amended Act. Furthermore, as per the newly inserted Section 9(3) of the Amended Act, once an arbitral tribunal has been constituted, the court shall not entertain an application for interim relief unless it finds that the interim relief sought from the arbitral tribunal under Section 17 of the Amended Act would not be efficacious. This is a positive step and will enable the courts to intervene in a selective manner based on the particular facts and circumstances of a matter.
  • Applicability of Section 9 to international commercial arbitrations: The well-known Bharat Aluminium judgment had specifically disallowed the availability of provisions of Part I of the Act to foreign seated arbitrations. Since provisions pertaining to interim relief contained in Part I of the Act, this judgment adversely impacted the ability of a foreign party to get interim relief against an Indian party or assets located in India, in support of a foreign seated arbitration. In a significant move, Section 2(2) of the Amended Act has now extended the applicability of Section 9 (interim measures by court) to international commercial arbitrations seated outside India, unless expressly excluded by parties through an agreement. 
  • Interim measures pending enforcement of foreign awards: Through various recent judgments, courts in India have sought to embrace the pro-arbitration spirit of the Amended Act. The Bombay High Court in the case of AirconBeibars , sought to ensure that the interests of foreign award holders are protected pending enforcement and has, by way of an order under Section 9 of the Amended Act, secured the amounts due from a judgment debtor under a foreign award pending enforcement of the award in India. Similarly, in TRAMMO DMCC  , the Bombay High Court allowed the holder of a foreign award to apply for interim relief in the court which enjoyed jurisdiction over the assets of the judgment debtor. The decision saves the award holder from the unnecessary hassle of deciding which court to approach, i.e. the court which enjoys jurisdiction over subject matter of arbitration or the court which enjoys jurisdiction over the location of the assets to be used for enforcement.
  • Powers of the arbitral tribunal to secure interim measures: Prior to the Amendment Act, in the absence of any procedure to enforce an order passed under Section 17 of the un-amended Act, parties often sought intervention of the courts under Section 9 to effectively secure interim relief.  The Amendment Act has now extended the powers of the court to grant interim measures (on matters set out under Section 9 of the Amended Act) to the arbitral tribunal. To fortify the powers of the tribunal, Section 17 has also been amended to provide that an order of interim relief from an arbitral tribunal shall be deemed to be an order of a court and shall be enforceable under the Code of Civil Procedure, 1908 (“CPC”), in the same manner as if it were an order of a court.
Reflecting upon the judicial landscape since the Amendment Act, we find that various High Courts have been forthcoming in upholding the interim reliefs granted by arbitral tribunals in view of Section 17(1) of the Amended Act. In NTPC Limited and Delhi State,   the Delhi High Court upheld the mandatory injunction granted by the tribunal. In Lanco Infrastructure, the Delhi High Court took note of the tribunal’s powers under the amended Section 17 to grant reliefs to secure amounts in disputes. In Enercon GmbH,  the Bombay High Court reiterated that an arbitral tribunal’s power to grant interim relief is akin to that of courts. In its effort to adopt a pro-enforcement approach towards interim measures granted by arbitral tribunals, the Supreme Court in AlkaChandewar, enforced an interim order granted by an arbitral tribunal under the pre-amendment Act. The court observed that a party’s failure to comply with tribunal’s interim order amounted to a contempt of its orders. Hence, courts in India are making significant efforts to embrace the spirit of the Amended Act. 

On 7 March 2018, the Union Cabinet approved the proposed Arbitration and Conciliation (Amendment) Bill, 2018 (“Bill”). The Bill aims to amend the Act to improve institutional arbitrations in India by establishing an independent body to lay down standards, make the arbitration process more party friendly, cost effective, and ensure timely disposal of arbitration cases. Notably, the Bill has also proposed to amend Section 17(1) of the Amended Act to omit the words “or at any time after the making of the arbitral award but before it is enforced in accordance with section 36". If the proposed change is implemented, applications under section 17 of the Act will only be maintainable during the arbitral proceedings and not once the arbitration proceedings have been terminated in terms of sections 32 and 33 of the Act. 

Emergency Arbitrations

While the legislature has made significant efforts to reduce the scope of the court’s role in granting interim relief in relation to arbitrations, the Amendment Act has not codified a globally recognized concept of emergency arbitrations, which, under various institutional arbitration rules, can be approached for interim relief before the arbitral tribunal is appointed.This omission in recognizing emergency arbitrators and the awards granted by them is surprising, given that institutional arbitration rules in India provide for emergency arbitrations (for e.g. Mumbai Center for International Arbitration (“MCIA”) Rules, 2016 and Indian Council for Arbitration Rules, 2005). 

While Indian courts have granted interim reliefs in relation to foreign seated arbitrations under Section 9 of the Act, in cases of enforcement of interim reliefs awarded by the tribunal in a foreign seated emergency arbitration, for example in Raffles Design  and Avitel , the courts till date have ruled that eventually a suit may have to be filed in Indian courts for seeking enforcement of such awards, or the courts may consider granting similar interim relief as the emergency arbitrator, after scrutinizing the merits of the interim relief sought, under a separate Section 9 application filed in Indian courts.

Conclusion

The amendments introduced to the Act, coupled with the efforts of the Indian courts to follow the policy of minimal intervention in arbitral matters, is bolstering India’s image as an arbitration friendly jurisdiction. While it remains to be seen whether the legislature will introduce emergency arbitrations in India, the legislative trend and judicial prudence are encouraging signs towards a healthier and expeditious arbitration environment in the country.

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