India: Caution: Disobeying Orders Of An Arbitral Tribunal May Land You In Jail!

  • Supreme Court clarifies that parties can be punished for contempt for any action/default in complying with Tribunal's order or during the conduct of the proceedings and not merely restricted to taking evidence

Introduction

The Supreme Court ("Court"), in Alka Chandewar ("Appellant") v Shamshul Ishrar Khan ("Respondent") recently held that under Section 27(5) of the Arbitration and Conciliation Act, 1996 ("Act") any non-compliance of an arbitral tribunal's order or conduct amounting to contempt during the course of the arbitration proceedings can be referred to the appropriate court to be tried under the Contempt of Courts Act, 1971.

Facts

The Sole Arbitrator passed an interim order dated October 7, 2010 ("Order") under Section 17 of the Act directing the Respondent not to dispose any further flats without the leave of the Arbitral Tribunal. The Respondent allegedly was in breach of the said Order. The Arbitral Tribunal by an order dated May 5, 2014 referred the aforesaid contempt of the Order to the High Court to pass necessary orders under Section 27(5) of the Act. The High Court held that Section 27(5) of the Act does not empower an Arbitral Tribunal to make a representation to the Court for contempt of interim orders unless it relates to taking of evidence.

Issue

The Supreme Court in the present case dealt with the scope and ambit of Section 27 (5) of the Act, specifically whether non-compliance with any order/direction of an Arbitral Tribunal would fall within its scope.

Arguments

The Appellant argued that Sections 9 and 17 being alternative remedies available to the parties during the conduct of arbitration proceedings, if orders made under Section 17 were deemed unenforceable or unactionable then the same would be rendered otiose. They also argued that Section 27 of the Act does not leave any doubt as to the scope and ambit of the Court's power to punish for contempt of orders made by the Arbitral Tribunal.

The Respondent contented that the marginal note of Section 27 made it clear that Section 27(5) would only apply to assistance in taking evidence and not to any other contempt that may be committed. It was further highlighted that this lacuna in the law has now been filled pursuant to the 246th Law Commission Report, inserting Section 17(2) by the Amendment Act of 2015.

Judgment

The Court held that:

  1. A literal interpretation of Section 27(5) would show that there are different categories of actions which can be referred to a court by a tribunal for contempt proceedings. One of those categories is the general and wide category of "any other default". Further, the Section is not confined to a person being guilty of contempt only when failing to attend in accordance with the process of taking evidence as the Section specifically states that persons guilty "of any contempt to the Arbitral Tribunal during the conduct of the Arbitral proceedings" shall be subject to contempt proceedings.
  2. It is well settled that a marginal note in a statute was used to understand the general drift of the section only when the plain meaning of the words of the statute were ambiguous. This was not the case in the present situation and therefore the marginal note in section 27 would not alter the purport of the section.
  3. Per the modern rule of interpretation of statutes, the object of providing a party with the right to approach an Arbitral Tribunal instead of the Court for interim reliefs would be stultified if interim orders passed by such a Tribunal are deemed toothless. It is to give teeth to such orders that an express provision has been made in Section 27(5) of the Act.
  4. The Court observed that the Supreme Court in M/s Ambalal Sarabhai Enterprises vs. M/s Amrit Lal & Co. & Anr.1 had held that parties to arbitration proceedings had to choose between applying for interim relief before the Tribunal under Section 17 or before the Court under Section 9. Such an election would be meaningless if interim orders passed by the Arbitral Tribunal were held to be unactionable, as all parties would then go only to the Court, which would render Section 17 a dead letter.
  5. However, since an order passed by an arbitral tribunal was unenforceable therefore sub-section (2) to Section 17 was added by the Amendment Act of 2015, so that the cumbersome procedure of an Arbitral Tribunal having to apply every time to the High Court for contempt of its orders would no longer be necessary. Such orders would now 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.

Analysis

One of the major lacunas existing in the Act prior to the commencement of the Amendment Act of 2015 was the unenforceability of order/directions passed by a tribunal. Under section 17, the arbitral tribunal has the power to order interim measures of protection, unless the parties have excluded such power by agreement. Prior to amendment, the section was quite open-textured in the scope of reliefs that could be provided; it permitted the tribunal to issue any interim measure of protection. However, courts and arbitral tribunals took the view that the scope of the interim measures that may be granted under Section 17 was more limited than that under Section 9. Despite the arbitral tribunal's power to issue interim measures, the fact that the Act did not provide for a method of enforcing any interim relief granted meant that there were doubts regarding efficacy of the arbitral process.2 Therefore parties chose to approach the courts rather than continue with the arbitration proceedings. The Amendment Act has introduced much needed changes with respect to grant of interim reliefs by an arbitral tribunal and has brought clarity on the kind of reliefs that may be granted.

The Delhi High Court had attempted to find a suitable legislative basis for enforcing the orders of an arbitral tribunal under section 17 of the Act. In the judgment of Sri Krishan v. Anand,3 (followed in Indiabulls Financial Services v. Jubilee Plots and upheld by the Court in the present judgment)4 the Delhi High Court held that any person failing to comply with the order of the arbitral tribunal under section 17 would be deemed to be "making any other default" or "guilty of any contempt to the arbitral tribunal during the conduct of the proceedings" under section 27 (5) of Act, being the only mechanism for enforcing its orders.

The Supreme Court has through the present judgment confirmed the above position of law (in relation to arbitrations being conducted under the regime as applicable prior to 2015 amendment).

It is pertinent to note that under Section 12 of the Contempt of Courts Act, 1971, any person found guilty of contempt would be liable to be punished with imprisonment upto 6 months along with fine.5

Footnotes

1 (2001) 8 SCC 397

2 M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd., (2004) 9 SCC 619, Sri Krishan v. Anand (2009) 3 Arb LR 447 (Del)

3(2009) 3 Arb LR 447 (Del)

4 OMP Nos 452-453/2009 (Order dated 18.08.2009).

5Section 12 - Punishment for contempt of court
(1) Save as otherwise expressly provided in this Act or in any other law, a contempt of court may be punished with simple imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both:

Provided that the accused may be discharged or the punishment awarded may be remitted on apology being made to the satisfaction of the court.

Explanation.--An apology shall not be rejected merely on the ground that it is qualified or conditional if the accused makes it bona fide.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Payel Chatterjee
Moazzam Khan
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions