[The Viewpoint] Interim measures of protection in arbitral proceedings: No longer a tug of war?

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 empowers parties to an arbitration agreement to seek interim measures of protection by applying to a court before or during arbitral proceedings or at any time after making of the arbitral award, but prior to the enforcement of the arbitral award.

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 proceedings 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 Act. 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 institution.

A concern prior to 2015 was the possibility of a 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 inserted Sections 9(2) and 9(3).

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 proceedings, then arbitral proceedings shall commence within a period of 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 extraordinary circumstances which render the remedy under Section 17 of the Act inefficacious. The object of introducing Section 9(3) of the Act was to avoid courts being flooded with applications under Section 9 of the Act.

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 measures of protection?

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

In Velugubanti Hari Babu v. Parvathini Narasimha Rao and Another, the High Court of Andhra Pradesh held that courts are empowered to grant interim measures 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:

“The language of Section 9(2) of the Act does not limit the operation of interim measure till appointment of arbitrator only. On the contrary, a party can seek interim measure at three stages, viz., before, during the pendency of arbitral proceedings and after passing of the award, but before it is enforced under Section 36 of the Act. The fact that a party can approach the Court even during the pendency of the arbitral proceedings and seek interim measure, clearly shows that the legislature clearly intended to empower the court to grant interim measure to last till the arbitral proceedings conclude and an award is passed. As noted above, the Court is empowered to grant such measures even after an award is passed, but before it is enforced.”

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

“It, however, may be noted that section 9 of the Arbitration Act does not limit the operation of any order passed by the court granting any relief thereunder by way of an interim measure till the constitution of the arbitral tribunal. The order passed by a court under section 9 of the Arbitration Act would continue to remain in force till the arbitral proceedings come to an end…”

Although a court may be empowered to grant interim measures 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, and 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.

In BE Billimoria and Co. Limited & Another v. Supertech Limited, 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 Delhi High Court not only appointed an arbitrator while disposing of 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. Sapna, during the pendency of the application under Section 9 of the Act before the High Court, an order appointing an arbitrator was passed by the same bench. In these circumstances, the High Court disposed of 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 Delhi High Court seems to suggest that it 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 of or for a period of 3-8 weeks.

The High Court in IRB Ahmedabad Vadodara Super Express Tollway Pvt. Ltd v. National Highways Authority of India had passed interim orders dated October 14, 2019 and June 30, 2020. The interim order dated June 30, 2020 restrained the respondent therein from taking any coercive action against the petitioner until the next date of hearing. 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 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 of the application under Section 9 of the Act and directed that the interim orders passed by it on October 14, 2019 and June 30, 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.

In Shapoorji Pallonji & Co Pvt Ltd v. Sinnar Thermal Power Limited & Another, the High Court had passed an interim order dated August 20, 2019 restraining the respondent therein from encashing the bank guarantee, and thereafter, a 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 August 20, 2019, the Court directed that it would remain in operation for a period of three weeks from the order disposing of the application under Section 9 of the Act.

In Vineet Bansal v. M/s Golf Green Infra Private Limited, the High Court had passed an interim order dated November 5, 2020 restraining the respondent therein from cancelling the allotment of a flat. On July 9, 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 of the application under Section 9 of the Act directing that the interim order dated July 9, 2021 shall continue to operate for a period of eight weeks. It also recorded that the petitioner was free to approach the arbitral tribunal under Section 17 seeking continuation/modification of the order dated November 5, 2020.

In Sterlite Technologies Limited v. Union of India, the High Court had passed an interim order dated November 25, 2020 directing the respondent therein to not take any coercive action pursuant to certain impugned communications till the next date of hearing. 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 of 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 November 25, 2020, the Court directed that it would continue for a period of eight weeks subject to extension/vacation/modification of the interim order by the arbitral tribunal.

A court may be empowered to grant interim measures 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 Delhi High Court 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. Further, the Court has been reluctant to extend an interim order granting protection until the arbitral proceedings are concluded. This approach adopted by the High Court avoids a tug-of-war with arbitral tribunals 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, making Delhi a more attractive seat/place for arbitral proceedings.

Pranav V Kamnani is a lawyer with the Dispute Resolution Practice at Dua Associates.