Examining the Extent of Interim Reliefs under Section 9 Following the Commencement of Arbitration Proceeding

Introduction

Arbitration, recognized for its efficiency in resolving disputes, offers a streamlined alternative to lengthy court litigation. However, there are instances where urgent matters require prompt action to prevent irreparable harm to parties involved in the dispute. In such circumstances, interim reliefs play a critical role by providing temporary remedies and injunctions to address immediate concerns. Section 9 of the Arbitration and Conciliation Act of 1996[i] is dedicated to interim measures in arbitration and outlines the statutory requirements for obtaining such relief. This article aims to examine the extent of interim reliefs under Section 9, with a particular focus on their application following the commencement of arbitration proceedings. By delving into significant judicial precedents, this study sheds light on the scope of Section 9 and its interaction with the Civil Procedure Code (CPC). Notably, Section 9(1)[ii] of the Act empowers the court or adjudicative authority to exercise discretion in granting interim relief. It encompasses various measures such as preserving, holding, or selling goods subject to the arbitration agreement, securing disputed amounts, authorizing entry to property, granting interim injunctions, appointing receivers, and providing other discretionary interim protections.

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Additionally, the article explores the applicability of the CPC principles in granting interim reliefs post-commencement of arbitration proceedings. Past cases have acknowledged the influence of CPC principles, emphasizing that the criteria for granting reliefs under Section 9 cannot be entirely detached from the principles enshrined in the CPC. While a Section 9 application shares similarities with an application made under Order XXXIX Rules 1 and 2 of the CPC, it is crucial to recognize that it serves as a means to address interim issues without substituting the need for actual arbitration proceedings to reach a final resolution.

Examining the Extent of Interim Reliefs under Section 9 Following the Commencement of Arbitration Proceeding

Arbitration, renowned for its expeditious nature compared to the protracted litigation process in Indian courts, is widely regarded as a highly efficient means of resolving disputes. However, it is not impervious to situations where expediency demands swift action to address urgent matters, the neglect of which may lead to irreparable harm to a party that is involved in the dispute. In such circumstances the crucial role of interim reliefs becomes apparent.

Overview on Section 9 of the Arbitration and Conciliation Act, 1996

Interim reliefs, in their essence, embody temporary remedies or injunctions that are designed to tackle exigent situations. Whether it be stopping an ongoing breach of contract or safeguarding valuable assets, these measures serve the paramount purpose of upholding the efficacy and integrity of the arbitration process while also protecting the interest of the parties involved. Section 9 of the Arbitration and Conciliation Act (henceforth referred to as “the Act” for brevity) provides provisions for interim measures in arbitration. It also lays down the statutory requirements that needs to be met in order to obtain an interim relief. Article 9 of the UNCITRAL Model Law on interim protection measures influenced Section 9 of the Arbitration and Conciliation Act of 1996[iii]. However, Article 9 of the UNCITRAL Model Law limits interim court protection to before or during arbitration. Section 9 of the Act allows persons to approach the court after the arbitral award, thereby broadening its scope. The scope of section 9 in arbitration has been explored with detail in Vidya Drolia and Ors v. Durga Trading Corporation[iv]. In Vidya Drolia, it was held that Section 9 of the Arbitration and Conciliation Act, 1996 serves the exclusive purpose of granting interim relief, and while it has the power to impact the rights of the parties involved, it does not influence the progression of the arbitration proceedings.

Scope of Section 9(1): situations wherein an interim relief is granted

As mentioned above, a party can seek interim relief after the commencement of arbitration proceedings to prevent further damage, breach or any other events that may compromise the best interests of the parties involved. However, there exists certain pre-requisites and conditions in order to file an application for an interim relief. Such pre-requisites, conditions and outcomes are outlined in sections 9(1), 9(2) and 9(3) of the Act. Specifically, section 9(1) of the Arbitration and Conciliation Act of 1996 addresses interim measures[v]. It provides the Court or adjudicative authority with discretionary authority to grant interim relief. This section is divided into two sections: 9(1)(i) and 9(1)(ii). Individuals may apply under Section 9(1)(i) for the appointment of a guardian for minors or mentally incompetent parties to arbitration proceedings. Section 9(1)(ii) provides the Court or appointing authority with broad authority to grant interim measures. This includes preserving, holding, or selling goods subject to the arbitration agreement (Section 9(1)(ii)(a)), securing the disputed amount (Section 9(1)(ii)(b)), authorising entry to property for necessary actions (Section 9(1)(ii)(c)), granting interim injunctions or appointing a receiver (Section 9(1)(ii)(d)), and providing other discretionary interim protections deemed fit by the Court (Section 9(1)(ii)(e)). Similar to other legal proceedings, the Court has the authority to issue orders as it considers suitable, just, and expedient when exercising these powers. The interim relief issued by the court must be executed in the same manner as any other court order. Deliberate noncompliance or disobedience to an interim relief order may be considered contempt of court.

Applicability of Civil Procedure Code in granting interim reliefs after the commencement of arbitration proceedings:

In addition to Section 9(1), past judicial precedents have considered the principles of the Civil Procedure Code (CPC) in determining the grant of interim relief, such as injunctions, to prevent further harm resulting from a continuing breach of contract. The application of CPC principles in arbitration disputes has been acknowledged. Notably, in the case of Adhunik Steels Ltd v. Orissa Manganese and Minerals Pvt Ltd,[vi] while providing interim reliefs under Section 9 of the Arbitration and Conciliation Act, the rules under the CPC were taken into account. Similarly, in Nimbus Communications Limited v. Board of Control for Cricket in India and Another[vii], the Bombay High Court emphasized that the criteria for granting reliefs under Section 9 of the Act cannot be entirely detached from the principles enshrined in the CPC, specifically Order 38 Rule 5 and Order 39 Rules 1 and 2. The Supreme Court, in the case of ITI v Siemens Public Communication (ITI)[viii], clarified that although the Arbitration and Conciliation Act does not explicitly mention the application of the CPC to arbitral proceedings, the court overseeing any proceedings arising from the Act possesses the authority to incorporate the provisions of the CPC as part of its powers.

A Section 9 application is comparable to an application made under Order XXXIX Rule 1 and Rule 2 of the Code of Civil Procedure, 1908 (CPC) in a court case. It is essential to note, however, that an application under Order XXXIX Rules 1 and 2 pertains solely to interim relief and is intended to aid in reaching a final resolution in the underlying matter. In determining whether an injunction can be granted to prevent the ongoing breach, the provisions of the Civil Procedure Code (CPC) are taken into account. To assess the case, the Court considers three critical aspects, as prescribed by the CPC: (i) the existence of a prima facie case, (ii) the balance of convenience, and (iii) the presence of irreparable injury[ix]. If the Court determines that the party has a prima facie case, the balance of convenience favours the applicant, and irreparable harm is suffered by the applicant, the Court may grant the requested interim relief in accordance with Section 9 of the Act.

Similarly, a Section 9 application should not be viewed as a substitute for the actual arbitration proceedings. Its purpose is to resolve interim issues and facilitate the arbitration process, but it does not replace the need for the actual arbitration proceedings to result in a final resolution.

Conclusion

In conclusion, Section 9 of the Arbitration and Conciliation Act, 1996 plays a vital role in providing interim relief during arbitration proceedings. It ensures that urgent matters, such as ongoing breaches of contract or the need to safeguard assets, can be addressed promptly to prevent irreparable harm to the parties involved. The scope of Section 9(1) covers various situations where interim relief may be granted, including the appointment of a guardian, preserving goods, securing disputed amounts, authorizing property entry, granting injunctions, and other discretionary measures deemed necessary by the court. Moreover, the applicability of the Civil Procedure Code (CPC) in granting interim relief has been acknowledged by judicial precedents. The court considers factors such as the existence of a prima facie case, the balance of convenience, and the presence of irreparable injury when determining whether to grant interim relief. It is important to note that a Section 9 application should not be seen as a substitute for the actual arbitration proceedings but as a means to address interim issues. By applying for interim relief, parties can effectively prevent the continuing breach of a contract, provided the court, based on CPC requirements, deems it appropriate.

Author: Sanjana S, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

Footnotes:

[i] Arbitration and Conciliation Act, 1996, § 9.

[ii] Arbitration and Conciliation Act, 1996, § 9(1).

[iii] Bansal, A.K., 1995. Towards a new law on international arbitration in India. J. Int’l Arb.12, p.67.

[iv] AIR (2019) SC 3498

[v] Supra note, 2

[vi] Appeal (Civil) 6569 of 2005

[vii] Arbitration petition No. 167 of 2012

[viii] AIR 2002 SC 2308

[ix] Code of Civ il Procedure, 1908, O. 39, r. 1 and 2

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