ALTERNATIVE DISPUTE RESOLUTION

Project topic:
INTERIM RELIEF IN ARBITRATION

Submitted By
Kritika Singh
Roll no. 1216
th
3 Year , 6 Semester, B.B.A.LL.B (Hons.)

Submitted to
Mr. Hrishikesh Manu
Faculty of Alternative Dispute Resolution

Chanakya National Law University, Patna

October, 2016
ACKNOWLEDGEMENT
 Writing a project is one of the most significant academic challenges I have ever faced.
Though this project has been presented by me but there are many people who remained in
veil, who gave their all support and helped me to complete this project.

First of all I am very grateful to my subject teacher Mr. Hrishikesh Manu without the kind
support of whom and help the completion of the project was a herculean task for me. He
donated his valuable time from his busy time to help me to complete this project and
suggested me from where and how to collect data.

I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice which was very
useful and could not be ignored in writing the project.

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INDEX
Introduction............................................................................................................... 4
Background to arbitration legislation................................................................................6
Scheme of the Act.................................................................................................... 6
Provisions on Interim Relief before 2015 amendment...........................................................8
Effect of 2015 amendment........................................................................................... 10
Extension of interim measures under Section 9 to international commercial arbitrations............10
Fixed timelines for initiating an arbitration after obtaining an interim relief under Section 9.......12
Bar on parties to approach a court for interim reliefs during the pendency of the arbitration.......12
Interim reliefs are now enforceable as decrees of courts....................................................13
Conclusion.............................................................................................................. 15
Bibliography.......................................................................................................... 16

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 INTRODUCTION

Among various dispute resolution mechanisms, arbitration has emerged as the preferred
mechanism for the resolution of commercial disputes. One of the reasons for the proliferation
of arbitration has been the flexibility provided to parties to conduct arbitral proceedings as
per the law selected by them, arbitrators of their choice and at a venue and place convenient
to parties, as opposed to a proceeding before a court. Moreover, party autonomy being the
thumb rule in arbitral proceedings, parties are also generally permitted to agree upon the
procedure governing the resolution of disputes. The arbitral process is normally accompanied
by certain procedural safeguards such as interlocutory or interim measures that safeguard
parties during the pendency of proceedings. It has been observed that parties engage in
dilatory tactics to delay proceedings or prejudice rights of opposite parties by inter alia
dissipating assets or interfering with the functioning of bodies. (In case of a company where
both parties are stakeholders). In such a situation, the final relief granted by a tribunal may be
rendered nugatory or meaningless unless the arbitral tribunal or court is able to safeguard the
rights of parties during the pendency of the arbitral proceedings. Therefore, in the intervening
period between juncture at which the dispute arose (in certain circumstances even before the
commencement of arbitration) and till the execution of the award, certain interim measures
may be necessary to protect a partys rights and ensure that justice is done before court or
arbitral tribunal.

In furtherance of the new economic policy, the Arbitration & Conciliation Act, 1996 (the
Act) was first promulgated about 20 years back by way of an ordinance as part of urgent
economic reforms. It is no surprise then that another ordinance *the Arbitration &
Conciliation (Amendment) Ordinance, 2015; hereinafter the Ordinance has now amended
that same law to bring it in sync with the times, as part of the current governments push
towards ease of doing business in India. Over the years, arbitration has become the default
choice for adjudication of commercial disputes. In India, this is true even with respect to
purely domestic disputes, as trials in courts take significantly longer due to huge pendency.
However, over the last two decades, the process of arbitration in particular in ad hoc
domestic disputes had come to look more like the traditional court proceedings in India.
Combined with high costs due to a small pool of qualified and trusted arbitrators, there has
been a growing sense of exasperation amongst the users of the process.

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An amendment to the law to remedy some of these issues, and others such as
misinterpretation of certain provisions that invariably crop up in the life of any legislation had
been on the cards for quite some time. After two aborted attempts one in 2001 and the other
in 2010 the law has finally been amended. The Ordinance carries forward most proposals of
the 246th Law Commission Report released last year, but also introduces some unique
provisions not hitherto seen in any leading arbitration statute.

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 BACKGROUND TO ARBITRATION LEGISLATION

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act).
The Act is based on the 1985 UNCITRAL Model Law on International Commercial
Arbitration and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and
Reasons of the Act recognises that Indias economic reforms will become effective only if the
nations dispute resolution provisions are in tune with international regime. The Statement of
Objects and Reasons set forth the main objectives of the Act as follows:
i) to comprehensively cover international and commercial arbitration and conciliation as
also domestic arbitration and conciliation;
ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting
the needs of the specific arbitration;
iii) to provide that the arbitral tribunal gives reasons for its arbitral award;
iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
v) to minimise the supervisory role of courts in the arbitral process;
vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the
arbitral proceedings to encourage settlement of disputes;
vii) to provide that every final arbitral award is enforced in the same manner as if it were a
decree of the court;
viii) to provide that a settlement agreement reached by the parties as a result of conciliation
proceedings will have the same status and effect as an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal; and
ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made
in a country to which one of the two International Conventions relating to foreign arbitral
awards to which India is a party applies, will be treated as a foreign award.

SCHEME OF THE ACT

The Act is a composite piece of legislation. It provides for domestic arbitration; international
commercial arbitration; enforcement of foreign award and conciliation (the latter being based
on the UNCITRAL Conciliation Rules of 1980). The more significant provisions of the Act
are to be found in Part I and Part II thereof. Part I contains the provisions for domestic and
international commercial arbitration in India. All arbitration conducted in India would be

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governed by Part I, irrespective of the nationalities of the parties. Part II provides for
enforcement of foreign awards. Part I is more comprehensive and contains extensive
provisions based on the Model Law. It provides inter alia for arbitrability of disputes; non-
intervention by courts; composition of the arbitral tribunal; jurisdiction of arbitral tribunal;
conduct of the arbitration proceedings; recourse against arbitral awards and enforcement. Part
II on the other hand, is largely restricted to enforcement of foreign awards governed by the
New York Convention or the Geneva Convention. Part II is thus, (by its very nature) not a
complete code. This led to judicial 3 innovation by the Supreme Court in the case of Bhatia
International v. Bulk Trading.1 Here the Indian courts jurisdiction was invoked by a party
seeking interim measures of protection in relation to an arbitration under the ICC Rules to be
conducted in Paris. The provision for interim measure (section 9) was to be found in Part I
alone (which applies only to domestic arbitration). Hence the Court was faced with a
situation that there was no proprio vigore legal provision under which it could grant interim
measure of protection. Creatively interpreting the Act, the Supreme Court held that the
general provisions of Part I would apply also to offshore arbitrations, unless the parties
expressly or impliedly exclude applicability of the same. Hence by judicial innovation, the
Supreme Court extended applicability of the general provisions of Part I to off-shore
arbitrations as well. It may be stated that this was premised on the assumption that the Indian
Court would otherwise have jurisdiction in relation to the matter (in the international sense).
This became clear in a subsequent decision of the Supreme Court in Shreejee Traco (I) Pvt.
Ltd. v. Paperline International Inc.2 Here the Courts assistance was sought for appointing an
arbitrator in an offshore arbitration. The power of appointment by court exists under Section
11 of Part I of the Act. The Court declined to exercise jurisdiction. It found that the arbitration
was to be conducted in New York and that the law governing the arbitration proceedings
would be the law of seat of the arbitration. Hence, the extension of Part I provisions to
foreign arbitrations sanctified by Bhatia4 could not be resorted to in every case. The Indian
Courts would have to first determine if it has jurisdiction, in the international sense.

1 (2002) 4 SCC 105 (Bhatia).

2 (2003) 9 SCC 79.

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 PROVISIONS ON INTERIM RELIEF BEFORE 2015 AMENDMENT

The provisions on Interim Relief in Act, 19963 are under Sec 9 and Sec 17 of the Act. The
existence of arbitration agreement or an arbitral clause is sine qua non for contracting parties
to refer their disputes to arbitration or avail relief from Court in terms of Section 9. In the
case of Sundaram Finance Limited v. M. K. Khunhabdulla 4, the Honble High Court of
Madras highlighted the following requisites for filing an application under section 9 of the
Act:

There must be a dispute which has arisen with respect to the subject matter of the
agreement and referable to arbitration.
There must be a manifest intention on the part of applicant to take recourse to the
arbitral proceedings at the time of filing of an application under section9 of the Act.
The application must be for an urgent relief which is asked for as necessary to
preserve the final relief.
Section 9 of the Act only permits applications for interim measures mentioned in clauses (i)
and (ii) thereof. Thus there cannot be applications under section 9 for stay of arbitration
proceedings or to challenge the existence or validity of arbitration agreements or the
jurisdiction of the Arbitral Tribunal. Courts have been very stringent in granting relief to
parties for an application filed under Section 9. In the case of Biz Solutions Chennai v.
Cascade Billing Center Incorporated, Honble High Court of Madras held that in granting
injunction or passing any order under Section 9, the Courts must ensure (i) prima facie case
(ii) balance of convenience and (iii) irreparable loss and injury. In the following cases the
courts have refused to grant relief:
An application seeking direction against the Opposite Party for refunding the amount
of Bank Guarantee encashed was rejected by the Honble High Court of Madras, when the
Application was unable to establish fraud and irretrievable injury.

3 Arbitration and Conciliation Act, 1996.

4 2014 (3) C.T.C. 159 (India).

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 An application was rejected in appeal on ground of absence of any specific averment
that Appellant was having obstructive conduct or that the Appellant was acting in a manner to
defeat award.
Article 9, UNCITRAL Model Law, 1985 reads:"Arbitration Agreement and Interim Measures
by Court - It is not incompatible with an arbitration agreement for a party to request, before
or during arbitral proceedings, from a court an interim measure of protection and for a court
to grant such measure." The Arbitration and Conciliation Act of 1996 (1996 Act) was
Indias moment of adopting the 1985 UNCITRAL Model Law on International Commercial
Arbitration (Model Law).5

With a view to comprehensively cover international commercial arbitration as also domestic

arbitration, the objects and reasons for its enactment was framing an arbitration system that
empowered a tribunal, therefore, ensuring speedy disposal with the least court intervention.
Section 17 of the 1996 Act is one such integral provision that grants an arbitral tribunal the
power to order interim measures of protection, critical for the efficacy of an arbitration
system. It ensures that for the purposes of interim reliefs parties can approach the arbitral
tribunal rather than anticipating orders from a court. The real value in section 17, however,
was seriously compromised under the old regime given the lack of any suitable statutory
mechanism for the enforcement of such interim orders issued by an arbitral tribunal. The
advent of the new regime through the Amendment6 changed the fate of interim orders in the
domestic context, giving them the sanctity of a courts decree. The Amendment had a
celebrated entry into the Indian law of arbitration with its high definition international
standards. It is true that the Amendment delivered a solution for an immediate enforceability
of interim orders passed by an arbitral tribunal, nevertheless, there are questions, essential
dimensions, that linger unanswered what about the sanctity of an interim order issued by a
arbitral tribunal seated outside India? What about its recognition and enforceability within
India? Is not this one of the cornerstones of building a pro-Arbitration jurisdiction?

Section 17 of the old regime under the 1996 Act was a concern which was commented upon
by the Supreme Court of India on several occasions. Each time it was felt that though the said
provision gives the arbitral tribunal the power to pass orders, the same could not be enforced

5 24 I.L.M. 1302 (1985).

6 Arbitration and Conciliation (Amendment) Act, 2015.

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as orders of a court. For this reason, it was understood that the 1996 Act also gave powers to
the court to pass interim orders during ongoing arbitration proceedings which filled-in the
gaps to a certain extent. It was undoubtedly clear that no power was conferred on a tribunal.

EFFECT OF 2015 AMENDMENT

There are four major changes with respect to the interim reliefs made to
the Arbitration Act after the passing of the Arbitration and Conciliation (Amendment) Act,
2015. Interim reliefs are one of the first provisions where changes made by the Amendment
Act will be caused to parties initiating arbitrations.

Interim reliefs are contained under Sections 9 and 17 of the Arbitration and Conciliation Act,
1996 (the, Arbitration Act). Both are contained in Part I of the Arbitration Act and were
applicable to domestic arbitrations, i.e. arbitrations seated in India. While Section 9 contains
the power of a court to grant interim measures, Section 17 is a similar power conferred to an
arbitral tribunal. Interim measures are generally granted to preserve the status of the property
in dispute, or to prevent prejudice to any party before the commencement or during the
pendency of the arbitration. Several defects were noticed in the practical implementation of
these remedies that resulted in several amendments being made to them.

The changes to these provisions include, (1) extension of interim measures under Section 9 to
international commercial arbitrations; (2) fixed timelines for initiating an arbitration after
obtaining an interim relief under Section 9; (3) bar on parties to approach a court for interim
reliefs during the pendency of the arbitration; (4) interim reliefs are now enforceable as
decrees of courts. Each change with its intended effect is explained below.

EXTENSION OF INTERIM MEASURES UNDER SECTION 9 TO INTERNATIONAL COMMERCIAL

ARBITRATIONS

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A proviso has been added to section 2 of the Principal Act, which now makes Section 9 of the
Arbitration applicable to international commercial arbitration even if the place of arbitration
is not in India. The arguments are that Section 2(2) of the Arbitration and Conciliation Act,
1996 mentioned in Part I of the Act, earlier used to state that, [t]his Part shall apply where
the place of arbitration is in India. In comparison, article 1(2) of the UNCITRAL Model
Law, which had been mentioned in the preamble of the Act, stated that the provisions of this
Lawapply only if the place of arbitration is in the territory of this State. The preamble of
the Act mentions that it is expedient to frame laws regarding arbitration and conciliation
keeping the Model Law in regard.

The fact that the word only was not included in the Indian statute despite being mentioned
in the Model Law, which the Indian statute seeks to implement, has raised some confusion
whether this leads to a conclusion that the Indian Act is applicable for even those arbitration
proceedings for which the seat is not India. This issue has been dealt with in two significant
Supreme Court cases. These are Bhatia International vs. Interbulk Trading 7 and Bharat
Aluminum and Co. vs. Kaiser Aluminium and Co. (BALCO).8

The Supreme Court in Bhatia, held that Part I mandatorily applied to all arbitrations held in
India. In addition, Part I applied to arbitrations conducted outside India unless it was
expressly or impliedly excluded. This position was followed in several cases until
the BALCO judgment. The Supreme Court in BALCO decided that Parts I and II of the Act
are mutually exclusive of each other and the intention of Parliament was that the Act is
territorial in nature and sections 9 and 34 will apply only when the seat of arbitration is in
India.

Though the BALCO judgment was although for the favourable purpose of reducing judicial
interference but it also led to certain unwanted results. The Law Commission has provided
certain instances to illustrate this point. For example, when the assets of a party are located in
India, and there is likelihood that that party will dissipate its assets in the near future, the
other party will lack an efficacious remedy if the seat of the arbitration is abroad. It is a
possibility that a foreign party would obtain an arbitral award in its favour only to realize that
7 (2002) 4 SCC 105.

8 (2012) 9 SCC 552.

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the entity against which it has to enforce the award has been stripped of its assets and has
been converted into a shell company. Due to this the Amendment Act has made changes and
now parties to arbitration proceedings taking place outside of India will be able to approach
Indian courts for interim measures even before the commencement of arbitration proceedings.

FIXED TIMELINES FOR INITIATING AN ARBITRATION AFTER OBTAINING AN INTERIM

RELIEF UNDER SECTION 9

The amendment has inserted sub-sections (2) and (3) to the original section 9 which has been
renumbered as section 9(1) now. Section 9(2) states that if a court passes an interim order
under section 9(1) before the commencement of arbitral proceedings, the arbitral proceedings
shall commence within a period of 90 days of the passing of such order. The contentions are
that prior to the amendment there was no express duty on a party approaching a court for
interim relief (usually prior to the commencement of the arbitration) to initiate arbitration.
This resulted in a situation that a party would obtain interim reliefs and would prolong
intiating the arbitration given that its interests were protected. This would not only pose risks
of abuse of process but also delay the initiation and the determination of the dispute through
arbitration. The insertion of timelines is a positive change made overall in the scheme of the
act to ensure discipline and speedy resolution of disputes through arbitration.

BAR ON PARTIES TO APPROACH A COURT FOR INTERIM RELIEFS DURING THE PENDENCY
OF THE ARBITRATION

The insertion of Section 9(3) reduces the amount of intervention by the judiciary in terms of
interim measures. It states that the after the arbitral tribunal has been constituted, the court
shall not entertain any application under section 9(1) unless there are circumstances which
can render remedy provided under section 17 ineffective. The reasoning are that the position
in the amended statute was largely being followed by courts however there still remained a
fear of forum shopping by parties. This danger was given the powers under Section 9 and 17
could be exercised concurrently. Given an express change ordinarily Section 9 proceedings
now will not be available to parties during the pendency of the arbitration. Such measures
though may be resorted to when Section 17 proceedings are ineffective. This will now be

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required to be specifically pleaded by a party which prefers such an application seeking
interim measures from the Court under Section 9. One instance where such an application can
be made, and such an exemption may be availed is when the interim measure concerns a third
party which is not before the Arbitral Tribunal. Given that the Arbitral Tribunal is a creature
of specific agreement between parties, it can only pass interim orders under Section 17,
which bind persons before it. This limitation of jurisdiction does not apply to interim
measures that can be granted by Courts under Section 9.

INTERIM RELIEFS ARE NOW ENFORCEABLE AS DECREES OF COURTS

Section 17 of the principal Act has been replaced with a new section that gives more teeth to
interim measures by arbitral tribunals. Under the old section, the tribunal could pass interim
measures but such measures could not be implemented, as they were not treated at par with
an order of court. The new section lays down that any order passed by the arbitral tribunal
under section 17 will be deemed to be an order of the court for all purposes and be
enforceable under CPC as if it were a on order of the court. The contentions are that under
section 17, the arbitral tribunal has the power to order interim measures of protection, unless
the parties have excluded such power by agreement. But section 17 of the principal Act
lacked effectiveness due to the absence of statutory mechanism for the enforcement of
interim orders of the arbitral tribunal.

In Sundaram Finance Ltd v. NEPC India Ltd.9, the Supreme Court held that though section 17
gives the arbitral tribunal the power to pass orders, the same cannot be enforced as orders of a
court. In M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd.10, the
Court had held that under section 17 of the Act no power is conferred on the arbitral tribunal
to enforce its order nor does it provide for its judicial enforcement.

The Delhi High Court tried to find a solution to this problem in the case of Sri Krishan v.
Anand.11 The 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

9 (1999) 2 SCC 479.

10 (2004) 9 SCC 619.

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contempt to the arbitral tribunal during the conduct of the proceedings under section 27 (5)
of Act. The remedy of the aggrieved party would then be to apply to the arbitral tribunal for
making a representation to the Court to mete out appropriate punishment. Once such a
representation is received by the Court from the arbitral tribunal, the Court would be
competent to deal with such party in default as if it is in contempt of an order of the Court,
i.e., either under the provisions of the Contempt of Courts Act or under the provisions of
Order 39 Rule 2A Code of Civil Procedure, 1908.

The Law Commission in its report felt that the judgment of the Delhi High Court in Sri
Krishan v. Anand is not a complete solution and recommended amendments to section 17 of
the Act which would make orders of the Arbitral Tribunal enforceable in the same manner as
the Orders of a Court. Keeping these suggestions in mind the Arbitration Act remedies the
enforceability of interim measures under Section 17.

11 2009) 3 Arb LR 447 (Del).

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 CONCLUSION

The tribunals powers to grant interim measures have been clarified by the Ordinance and
aligned with those of the Court under section 9. This would have been necessary inlight of
the new provision which makes the tribunal the default forum for granting interim measures
once the tribunal is in place. Some courts have been following this as a practice and have
directed parties to approach the tribunal, if the tribunal has already been constituted, instead
of contending applications for interim measures before the court. This approach makes sense
since the tribunal is best placed being seized of the dispute. It is not uncommon for parties to
obtain urgent interim measures prior to commencement of arbitration and then drag their feet
in commencing the arbitral proceedings. Since the interim measures are meant to be in aid of
arbitration, it is sensible that interim measures are granted only in cases where parties have
real intention to pursue an arbitration. However, by omitting the sentence recommended by
the Law Commission stating that the interim measures would lapse on the expiry of the said
period, the Ordinance has taken the teeth out of this clause. Though, it is likely that even
though it has not been specifically included, courts might interpret the provision such that
non-adherence will amount to vacation of the interim protection. The Ordinance and the Law
Commission have failed to take into account the development of provisions with respect to
emergency arbitrators in many institutional rules. In the recent amendment to the Singapore
law, the definition of arbitrator was amended to provide for this. It would have been helpful
if section 17 had provided that interim measures by emergency arbitrators will also be
enforceable in the same manner as orders of the tribunal. This will now have to await
interpretation by the courts, and it is likely that courts will recognize emergency arbitrators
orders in the same manner.

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BIBLIOGRAPHY

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