India: Interim Measures Of Protection In Arbitral Proceedings: No Longer A Tug Of War?

Introduction and Backdrop

From a party's perspective, seeking an interim measure of protection may be priority over commencement of arbitration proceedings or constitution of an arbitral tribunal and Indian law does consider this situation. Section 9(1) of the Arbitration and Conciliation Act, 1996 (the “Act”) empowers parties to an arbitration agreement to seek interim measures of protection by applying to a Court¹ before or during arbitral proceedings or at any time after making of the arbitral award, but prior to the enforcement of the arbitral award². To give effect to the words “before or during arbitral proceedings” occurring in Section 9 of the Act, Courts have held that an application under Section 9 of the Act is maintainable even before the commencement of the arbitral proceedings³ and that a Court is not debarred from dealing with an application under Section 9 of the Act merely because a party has not commenced arbitral proceedings in accordance with Section 21 of the Act⁴. Similarly, Section 17 of the Act empowers parties to an arbitration agreement to apply for interim measures of protection “during the arbitral proceedings”. The expression “during the arbitral proceedings” is elastic enough to also include emergency arbitration proceedings under the rules of an arbitral institution⁵.

A concern prior to 2015 was the possibility of party securing interim measures of protection from a Court and delaying the commencement and/or constitution of an arbitral tribunal. To address this concern, the Arbitration and Conciliation (Amendment) Act, 2015 (the “Amendment Act”), inserted Section 9(2) and Section 9(3) of the Act. Section 9 (2) requires that in the event a Court passes an order for any interim measure of protection under Section 9(1) of the Act before the commencement of arbitral proceedings⁶, then arbitral proceedings shall commence within a period of (90) ninety days from the date of such order or within such time as the Court may determine. Section 9(3) is a general rule that curtails the power of a Court to entertain an application under Section 9(1) of the Act once an arbitral tribunal is constituted, the exception to this rule being extra-ordinary circumstances which render the remedy under Section 17 of the Act inefficacious⁷. The object of introducing Section 9(3) of the Act was to avoid Courts being flooded with applications under Section 9 of the Act⁸.

The Amendment Act has also amended Section 17 of the Act to give teeth to the interim orders of an arbitral tribunal. Section 17(1) of the Act redefined the scope of reliefs that may be granted by an arbitral tribunal and the amended Section 17(1) of the Act now empowers arbitral tribunals with powers identical to that of a Court as provided under Section 9(1) of the Act.

In this backdrop, an interesting question that arises is---What happens if the arbitral tribunal is constituted during the pendency of the application under Section 9(1) of the Act seeking interim measure(s) of protection?

The intent of this article is to examine this question based on the approach adopted by the High Court of Delhi.

Scope of a Court's Power

In Velugubanti Hari Babu v. Parvathini Narasimha Rao and Another⁹, the High Court of Andhra Pradesh held that courts are empowered to grant interim measure of protection till an award is passed, and the arbitral proceedings are concluded. The relevant paragraph of the decision in this regard is extracted below:

[Emphasis supplied]

Further, the Gujarat High Court in Kirtikumar Futarmal Jain v. Valencia Corporation¹⁰, has affirmed the decision in Velugubanti Hari Babu (supra) and held that:

[Emphasis supplied]

Although, a Court may be empowered to grant interim measure of protection till an arbitral award is passed and the arbitral proceedings are concluded, the author believes that such a discretionary power should be exercised sparingly only in exceptional circumstances pursuant to Section 9(3) of the Act, which intends to empower arbitral tribunals in relation to interim measures of protection.  The author is of the view that Courts should ideally adopt a pro-arbitration approach with a view to ensure that the arbitral tribunal is empowered to decide on interim measures of protection once the tribunal is constituted and that the arbitral tribunal must also be empowered to apply its own mind to the facts and circumstances. If required, the arbitral tribunal should also be empowered to modify, vacate, or extend any interim order that may be passed by a Court. This pro-arbitration approach has been adopted by the Delhi High Court in various cases, some of which are discussed below.

Pro-Arbitration Approach of the High Court of Delhi

In B. E. Billimoria and Co. Limited & Another v. Supertech Limited¹¹, the Petitioner filed an application seeking interim measures of protection under Section 9 of the Act, however, the parties consented to refer the disputes to arbitration and the High Court of Delhi not only appointed an arbitrator while disposing the application under Section 9 of the Act, but also directed the application under Section 9 of the Act to be treated as an application under Section 17 of  the Act for adjudication by the sole arbitrator that was appointed by the court.

Similarly, in MX Media & Entertainment Pte. Ltd v. Sapna¹², during the pendency of the application under Section 9 of the Act before the High Court of Delhi, an order appointing an arbitrator was passed by the same bench. In these circumstances, the High Court of Delhi disposed the application under Section 9 of the Act and directed the arbitral tribunal to consider the petition under Section 9 of the Act as an application under Section 17 of the Act, as the pleadings in the  said petition were complete.

Extension of Interim Order of the Court

Another question that arises for consideration is--What happens if an interim measure of protection has already been granted by way of an interim order during the pendency of the proceedings under Section 9 of the Act?

From the orders that the author has examined, the general trend of the High Court of Delhi seems to suggest that the Court directs the pending application under Section 9 of the Act to be treated by the arbitral tribunal as an application under Section 17 of the Act and the Court may also extend the interim order passed in the proceedings either until the application under Section 17 of the Act is disposed or for a period of 3- to 8 weeks. 

The High Court of Delhi in IRB Ahmedabad Vadodara Super Express Tollway Pvt. Ltd v. National Highways Authority of India¹³, had passed interim orders dated 14.10.2019 and 30.06.2020. The interim order dated 30.06.2020 restrained the Respondent therein from taking any coercive action against the Petitioner until the next date of hearing and thereafter, the arbitral tribunal was constituted during the pendency of the application under Section 9 of the Act. The Petitioner submitted that it would file an application within two (2) weeks of the arbitral tribunal entering upon reference. The Petitioner also prayed that the interim orders be continued till the disposal of the application under Section 17 of the Act. The court disposed the application under Section 9 of the Act and directed that the interim orders passed by it on 14.10.2019 and 30.06.2020 shall remain in force until the decision of the arbitral tribunal on the application proposed to be filed under Section 17 of the Act.

The High Court of Delhi in Shapoorji Pallonji & Co. Pvt. Ltd. v. Sinnar Thermal Power Limited & Another¹⁴, had passed an interim order dated 20.08.2019 restraining the Respondent therein from encashing the bank guarantee and thereafter, tribunal was constituted during the pendency of the application under Section 9 of the Act. The Court permitted the Petitioner to withdraw its application under Section 9 of the Act and directed that the pleadings in the Section 9 proceedings would be treated as pleadings in the application under Section 17 of the Act. With respect to, the interim order dated 20.08.2019, the Court directed that the interim order would remain in operation for a period of three (3) weeks from the order disposing the application under Section 9 of the Act.

In Vineet Bansal v. M/s Golf Green Infra Private Limited¹⁵, the High Court of Delhi had passed an interim order dated 05.11.2020 restraining the Respondent therein from cancelling the allotment of a flat. On 09.07.2021, which was during the pendency of the application under Section 9 of the Act, an order appointing an arbitrator was passed by the same bench. The Court disposed the application under Section 9 of the Act directing that the interim order dated 09.07.2021 shall continue to operate for a period of eight (8) weeks and recording that the Petitioner was free to approach the arbitral tribunal under Section 17 seeking continuation/modification of the order dated 05.11.2020.

In Sterlite Technologies Limited v. Union of India¹⁶, the High Court of Delhi had passed an interim order dated 25.11.2020 directing the Respondent therein to not take any coercive action pursuant to certain impugned communications till the next date of hearing and thereafter, the arbitral tribunal was constituted by the order of a coordinate bench of the same Court during the pendency of the application under Section 9 of the Act. The Court disposed the application under Section 9 of the Act and directed that the application under Section 9 of the Act be treated as an application under Section 17 of the Act by the arbitral tribunal. With respect to the interim order dated 25.11.2020, the Court directed that the interim order passed in the petition to continue for a period of eight (8) weeks subject to extension/vacation/modification of the interim order by the arbitral tribunal.

To sum up the analysis basis the judicial trend of the High Court of Delhi, if no interim orders are passed in an application pending under Section 9 of the Act, then a Court could dispose of the Section 9 application with a direction that the application under Section 9 of the Act be treated as an application under Section 17 of the Act before the arbitral tribunal. Whereas, if an interim order granting protection has been ordered, then Courts could extend the interim order passed in the proceedings either till the application under Section 17 of the Act is disposed of or for a period of 3 to 8 weeks (subject to extension/vacation/modification of the interim order by the arbitral tribunal) depending on the facts and circumstances of the particular case in question. 

Conclusion

A Court may be empowered to grant interim measure of protection until an award is passed and the arbitral proceedings are concluded, however, this may have the effect of stepping on the powers conferred on an arbitral tribunal under Section 17 of the Act and defeat the purpose of Section 9(3) of the Act.

The above analysis of the orders passed by the High Court of Delhi also seems to suggest that courts have consistently adopted a trend that empowers arbitral tribunals to adjudicate on the merits of the pending proceedings under Section 9 of the Act and that the Court is reluctant to extend an interim order granting protection until the arbitral proceedings are concluded. This approach adopted by the High Court of Delhi avoids a tug of war with arbitral tribunal(s) vis-a-vis interim measures of protection, and in certain cases the Court has also empowered the arbitral tribunal to modify, vacate or extend any interim order that may have been passed in proceedings under Section 9 of the Act.

The author's personal view is that the approach discussed in the aforesaid orders evidences the pro-arbitration approach adopted by the High Court of Delhi making Delhi a more attractive seat/place for arbitral proceedings.

Originally Published by Bar and Bench

Footnotes

1 Section 2(e) of the Act.

2 Section 9 (1) of the Act.

3 Firm Ashok traders v. Gurumukh Das Saluja, (2004) 3 SCC 155.

4 Sundaram Finance Limited v. NEPC India Limited, AIR 1999 SC 565.

5 Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others, (2022) 1 SCC 209.

6 ArcelorMittal Nippon Steel (India) Limited v. Essar Bulk Terminal Limited, (2022) 1 SCC 712.

7 Hero Wind Energy Pvt. Ltd. v. Inox Renewables Limited and Others, 268 (2020) DLT 64.

8 Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others, (2022) 1 SCC 209

9 2017 SCC OnLine (Hyd) 469.

10 Special Civil Application No. 15145 of 2019, decided on 13.09.2019.

11 OMP (I) (Comm.) No. 320 of 2020, Order dated 07.10.2020.

12 OMP (I) (Comm.) No. 423 of 2020, Order dated 04.06.2021.

13 OMP(I) (Comm) 247 of 2019, Order dated 23.10.2020

14 OMP(I) (Comm) 262 of 2019, Order dated 05.12.2019

15 OMP(I) (Comm) 358 of 2020, Order dated 09.07.2021

16 OMP(I) (Comm) 357 of 2020, Order dated 14.07.2021

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