Table of Contents

Table of

Cases…………………………………………………………………………………………. 1

Arbitration

Introduction...........................................................................................................2

Meaning & Scope...................................................................................................2

Advantages of Arbitration......................................................................................4

Disadvantages of Arbitration.................................................................................5

Interim Measures

Introduction...........................................................................................................6

Interim Measures: The Concept.............................................................................7

Interim Relief u/s 9................................................................................................8

Scope of the section.................................................................................................................10

Factors influencing interim relief.........................................................................................12

Purpose of interim Measures................................................................................................13

Effect of Interim Measures.....................................................................................................14

Drawbacks of the Provision...................................................................................................14

Interim Relief u/s 17............................................................................................16

Scope of the Section................................................................................................................17

Drawbacks of the Provision...................................................................................................19

Comparison between Both the Sections..............................................................20

Conclusion...........................................................................................................21

Bibliography

Books & Acts........................................................................................................23

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Web Links............................................................................................................23

Table of Cases

Collins v.

Collins………………………………………………………………………… 3

Daulatram v.

Shriram……………………………………………………………… 17

Delta Construction Systems Ltd., Hyderabad v. Narmada Cement

Company Ltd.,

Bombay…………………………………………………………… 17

Dominant Offset (P) Ltd v. Adamovske Strojirny SA…………….. 11

Firm Ashok Traders v. Gurumukh Das Saluja……………………. 14,

20

Marriott International Inc. v. Ansal Hotels Ltd. ………………………

17

Sharma Prathishthanam v. Madhok Construction (P) Ltd. ……… 3

Sundaram Finance v. NEPC India Ltd. ……………………………… 12,

18

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Arbitration

Introduction

Arbitration, a form of alternative dispute resolution

(ADR), is a technique for the resolution of disputes outside the

courts, where the parties to a dispute refer it to one or more

persons by whose decision (the "award") they agree to be bound.

It is a resolution technique in which a third party reviews the

evidence in the case and imposes a decision that is legally

binding for both sides and enforceable. Other forms of ADR

include mediation (a form of settlement negotiation facilitated by

a neutral third party) and non-binding resolution by experts.

Meaning & Scope

Arbitration is a proceeding in which a dispute is resolved

by an impartial adjudicator whose decision the parties to the

dispute have agreed, or legislation has decreed, will be final and

binding. There are limited rights of review and appeal of

arbitration awards. In the terms of section 2(1)(a) of the

Arbitration & Conciliation Act, 1996, “arbitration means any

agreement whether or not administered by permanent arbitral

institution.”

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Law encourages parties, as far as possible, to settle their

differences privately either by mutual concessions or by the

mediation of the third person. When the parties agree to have

their disputes decided with the mediation of a third person, but

with all the formality of a judicial adjudication, that may be,

speaking broadly, called arbitration. An arbitration, therefore,

means the submission by two or more parties of their dispute to

the judgment of a third person, called the arbitrator and who is to

decide the controversy in a judicial manner.1

Arbitration has been defined by ROMILLY MR in the well-

known case of Collins v. Collins2. It was held that “………An

arbitration is a reference to the decision of one or more persons,

either with or without an umpire3, of a particular matter in

difference between the parties………”

In the recent case of Sharma Prathishthanam v. Madhok

Construction (P) Ltd.4, Supreme Court held that “………An

arbitration is the reference of the dispute or difference between

not less than two parties for determination, after hearing both

sides in a judicial manner, by a person or persons other than a

court of competent jurisdiction………”

1 Dr. Avtar Singh, Law of Arbitration & Conciliation, 10th Ed., Eastern Book Company, Lucknow, 2013, p. 14.2 28 LJ Ch 186.3 The institution of umpire has been replaced by the 1996 Act with that of presiding arbitrator.4 AIR 2005 SC 214.

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Arbitration is often used for the resolution of commercial

disputes, particularly in the context of international commercial

transactions. The use of arbitration is also frequently employed in

consumer and employment matters, where arbitration may be

mandated by the terms of employment or commercial contracts.

The main characteristics of arbitration are as follows:-

1. Arbitration is consensual.

2. The parties choose the arbitrator(s).

3. Arbitration is neutral.

4. Arbitration is a confidential procedure.

5. The decision of the arbitral tribunal is final and easy to enforce.

Advantages of Arbitration

Parties often seek to resolve their disputes through

arbitration because of a number of perceived potential

advantages over judicial proceedings. Some of them are given

below:-

1. When the subject matter of the dispute is highly technical,

arbitrators with an appropriate degree of expertise can be

appointed (as one cannot "choose the judge" in litigation).

2. Arbitration is often faster than litigation in court.

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3. Arbitration can be cheaper and more flexible for businesses.

4. Arbitral proceedings and an arbitral award are generally non-

public, and can be made confidential.

5. In arbitral proceedings the language of arbitration may be

chosen, whereas in judicial proceedings the official language of

the country of the competent court will be automatically

applied.

Disadvantages of Arbitration

1. Arbitration may be subject to pressures from powerful law

firms representing the stronger and wealthier party.

2. If the arbitration is mandatory and binding, the parties waive

their rights to access the courts and to have a judge or jury

decide the case.

3. In some arbitration agreements, the parties are required to pay

for the arbitrators, which add an additional layer of legal cost

that can be prohibitive, especially in small consumer disputes.

4. There are very limited avenues for appeal, which means that

an erroneous decision cannot be easily overturned.

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5. Although usually thought to be speedier, when there are

multiple arbitrators on the panel, juggling their schedules for

hearing dates in long cases can lead to delays.5

Interim Measures

Introduction

In arbitral proceedings, the need often arises for

provisional remedies or other interim measures of reliefs

because, in reality, arbitral proceedings are no less adversarial

than litigation in public courts. When a dispute arises, aggrieved

party is always concerned with protecting his interest either in

movable or immovable properties. Party is always interested in

taking timely action against another party or parties so that his or

her interest in the properties is protected. This prompt and timely

action makes other party or parties unable to play any sort of

mischief by way of tampering with properties. Thus Arbitration

and Conciliation Act, 1996, under Section 9 gives parties power to

approach Courts for seeking interim measures. Often it sounds

against the basic philosophy of Arbitration for allowing Court’s

5 http://en.wikipedia.org/wiki/Arbitration#Advantages_and_disadvantages as accessed on 19/10/2013

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intervention, but for many reasons such judicial interventions are

inevitable.6

Interim Measures: The Concept

Interim Measures are granted during the pendency of

adjudication of a dispute and are usually in the form of

injunctions, specific performance, pre-award attachments etc. By

definition, ‘interim reliefs’ are temporary or interim in nature and

are granted in advance of the final adjudication of the dispute by

the arbitral tribunal.

Under the Arbitration Act, 1940, a party could commence

proceedings in a court by moving an application under section 20

for appointment of an arbitrator and simultaneously it could move

an application for interim relief under the Second Schedule read

with Section 41(b) of the old Act. Under the New Act of 1996,

Section9 empowers the court to order a party to take interim

measure or protection when an application is made. Besides this

section 17 gives power to the Arbitral Tribunal to order interim

measures unless the agreement prohibits such power.7

6 http://www.ophiuchus.co.in/global/relief.htm as accessed on 19/10/2013.7 http://www.caclubindia.com/articles/-analysis-of-interim-measures-u-s-9-and-17-of-arbitration-and-conciliation-act-1996-17637.asp#.UmwPtCftuHC as accessed on 19/10/2013

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Interim Relief u/s 9

Section 9 of the Arbitration and Conciliation Act, 1996

reads as follows:

“9. Interim measures, etc., by Court .A party may,

before or during arbitral proceedings or at any time after

the making of the arbitral award but before it is enforced

in accordance with section 36, apply to a Court:

(i) for the appointment of a guardian for a minor or a

person of unsound mind for the purposes of arbitral

proceedings; or

(ii) for an interim measure of protection in respect of any

of the following matters, namely:

(a) the preservation, interim custody or sale of any goods

which are the subject-matter of the arbitration

agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property

or thing which is the subject-matter of the dispute in

arbitration, or as to which any question may arise therein

and authorising for any of the aforesaid purposes any

person to enter upon any land or building in the possession

of any party, or authorising any samples to be taken or any

observation to be made, or experiment to be tried, which

may be necessary or expedient for the purpose of obtaining

full information or evidence;

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(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear

to the Court to be just and convenient, and the Court shall

have the same power for making orders as it has for the

purpose of, and in relation to, any proceedings before it”.8

This section provides for the making of orders for interim

measures to provide interim relief to the parties in respect of

arbitrations. The power of the court includes an order in respect

of the following matters:

1. The prevention, interim custody or sale of any goods which are

the subject matter of the reference.

2. Securing the amount in dispute in the reference.

3. The detention, preservation or inspection of any property or

thing which is the subject of the reference or as to which any

question may arise therein and authorizing for any of the

aforesaid purposes any person to enter upon or into any land

or building in the possession of any party to the reference, or

authorizing any samples to be taken, or any observation to be

made, or experiment to be tried, which may be necessary or

expedient for the purpose of obtaining full information or

evidence.

8 S. 9 of the Arbitration and Conciliation Act, 1996.

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4. Interim injunctions or the appointment of a receiver.

5. The appointment of a guardian for a minor or person of

unsound mind for the purpose of arbitration proceedings.9

Scope of the section

It appears that the scope for application of an interim

measure under section 9 of the Indian Act is as wide as the scope

under Article 9 of the UNCITRAL (United Nations Commissions

International Trade Laws) Model Law. Section 9 allows a party to

seek those interim measure laid down under sub-clause (a) to (d)

as well as ‘any other measures’ a court deems appropriate under

sub-clause (e). Moreover, section 9 does not limit the grant of

interim measures to the subject matter of the dispute and

secondly, sub-clause (e) grants courts the discretionary power to

grant such interim measures as appears just and convenient.10

Sub section (2) of section 2 of Act of 1996 provides in a

clear and unambiguous language that Part I shall apply where the

place of Arbitration is in India. However, the Delhi High Court, in

Dominant Offset (P) Ltd v. Adamovske Strojirny SA,11 where the

arbitration took place at London, held that Part I also applies to

9 Dr. Avtar Singh, Law of Arbitration & Conciliation, 10th Ed., Eastern Book Company, Lucknow, 2013, p. 96.10 http://www.ophiuchus.co.in/global/relief.htm as accessed on 19/10/201311 1991 Arb LR 335 (Del).

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International Commercial Arbitration conducted outside India. As

far as the position of the Indian Law is concerned, this decision

seeks to clarify the scope of the powers of an Indian court to

grant interim relief in international commercial arbitration. The

rule that seems to emerge is that when the parties have

specifically intended that: (a) the law governing the contract; (b)

the rules governing the arbitration; and (c) the court’s jurisdiction

and the place of arbitration are outside India, then it would signify

that the Indian court’s jurisdiction and applicability of Part 1 of

the Act (which contains the power of the Indian courts to provide

interim measures) are excluded.

One of the controversies that emerged after the passing

of the Indian Act was with regard to the point of time when an

application could be made to a court for granting interim relief.

This controversy was finally settled by the Indian Supreme Court

in its landmark mark judgment of Sundaram Finance Ltd. v. NEPC

India Ltd12. The Supreme Court held that Section 9 is available

even before the commencement of the arbitration. It need not be

preceded by the issuing of notice invoking the arbitration clause.

This is in contrast to the power given to the arbitrators who can

exercise the power u/s 17 only during the currency of the

12 AIR 1999 SC 565.

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Tribunal. Once the mandate of the arbitral tribunal terminates,

Section 17 cannot be pressed into service.

The period for purpose of appeal against orders granting

of refusing to grant interim relief is 90 days from the date of

decree or order as per article 116(a) of the Limitation Act.

Factors influencing interim relief

A party seeking to obtain an interim measure

(particularly before the arbitral tribunal has been constituted)

must ensure that by taking steps in a court and thereby

submitting to the jurisdiction of the domestic court it does not

waive any rights it has under the arbitration agreement. The

ability to obtain an interim measure will generally depend upon

the procedural law governing the arbitration and the law in the

jurisdiction in which the interim measure is sought to be

enforced. Generally, an applicant party needs to establish the

following factors:

1. There is an “urgent need” for the interim measure.

2. Irreparable harm will result if the measure is not granted.

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3. The potential harm if the interim measure is not granted

substantially outweighs the harm that will result to the party

opposing the measure if the measure is granted.

4. There is a substantial possibility that the applicant will

ultimately prevail in the dispute.

Purpose of interim Measures

The purpose of enacting section 9, read in the light of

model law and UNCITRAL rules is to provide a relief in the nature

of an interim measure of protection. The order of the court should

fall in the category of interim measures of protection as

distinguished from an all time or permanent protection. The

purpose is to protect the rights of the parties which are under

adjudication from being frustrated.13

Effect of Interim Measures

An interim measure does not put to rest the rights of the

parties. The rights of the parties are required to be adjudicated

finally when a reference is made. The court has the authority and

jurisdiction to pass interim orders for protection and preservation

of rights of the parties during the arbitration proceedings but that

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

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does not necessarily mean that if a party has availed of a benefit

under this jurisdiction, the other party cannot put his claim in the

main proceedings which is before the arbitrator. The interim

arrangement made by the court has to e given the interim

status.14

Drawbacks of the Provision

The Law Commission of India in its 176th report

published in 2001 noted a number of loopholes in the provisions

for interim relief in the 1996 Act which were exploited by the

parties after the Act came into force.

Provisions contained in section 9 regarding the

availability of interim relief even before the arbitration

proceedings commence had been misused by parties. It so

happened that after obtaining an interim order from the court,

parties did not take initiative to have an arbitral tribunal

constituted. This allowed them to reap the benefits of the interim

order without any time limit.

14 Dr. Avtar Singh, Law of Arbitration & Conciliation, 10th Ed., Eastern Book Company, Lucknow, 2013, p. 109.

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The Law Commission in its 176th report, observed that

very often, in the past, Parties had used underhand means to

destroy evidence which they felt could go against them during

the Arbitral Proceedings or had attempted to concoct witnesses

and tamper with evidence, in the possession of a third party. As a

result, there is an immediate need to change the provisions of the

existing section, so that the Tribunal could get more powers to

deal with such situations.

Interim Relief u/s 17

Section 17 the Arbitration & Conciliation Act, 1996 reads

as follows:

“17. Interim measures ordered by arbitral tribunal

.(1) Unless otherwise agreed by the parties, the arbitral

tribunal may, at the request of a party, order a party to

take any interim measure of protection as the arbitral

tribunal may consider necessary in respect of the subject-

matter of the dispute.

(2) The arbitral tribunal may require a party to provide

appropriate security in connection with a measure

ordered under sub-section (1)”.15

15 S. 17 the Arbitration & Conciliation Act, 1996.

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Section 17 of the Act has to read along with section 9 of

the Act 1996 to have a clear picture. While section 9 provides for

the taking of interim measures by the court in certain matters,

section 17 provides for taking of interim measures in respect of

the subject-matter of the dispute by the Arbitral Tribunal. The

essence of section 17 is that the interim order u/s 17 must relate

to the protection of subject-matter of dispute and the order may

be addressed only to a party to arbitration. It cannot be

addressed to other parties and no power is conferred u/s 17 of

the Act of 1996 upon the arbitral tribunal to enforce its order nor

does it provide for judicial enforcement thereof.16 This section of

the act deals with the interim measures ordered by the Arbitral

Tribunal with the consent and agreement of the parties in dispute

within the arbitral jurisdiction of India and not outside India.17

Scope of the Section

In the absence of any power given to the arbitrator under

the arbitration agreement, he had under the statute no power to

pass any interim order by way of injunction.

16 Kohli Hari Dev, New Case Law Reference on Arbitration & Conciliation Act, Universal Law Publication, New Delhi, 2008, p. 175.17 Marriott International Inc. v. Ansal Hotels Ltd., AIR 2000 Del 377.

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The M. P. High Court in the case of Daulatram v.

Shriram18 held: “…….…The arbitrators have not been vested by

the Act19 with any powers to grant interim orders for the

protection and safety of the subject-matter of the dispute. Such

powers had, therefore, to be vested in the court under s. 41(b) of

the Act read with Second Schedule…………”

After passing of Act of 1996, it was held in the case of

Delta Construction Systems Ltd., Hyderabad v. Narmada Cement

Company Ltd., Bombay20: “…………apart from the Court, under

section 17, the Tribunal itself at the request of the party, may

order a party to take any interim measure of protection as the

Tribunal may consider necessary in respect of the subject- matter

of the dispute and for that purpose, may require the party to

provide appropriate security in connection with a measure

ordered under sub-section (1)………”

It will be seen that a Court has been given extensive

powers u/s 9 of the Act to give directions by way of interim

measures. A part of that power has been given to the arbitral

tribunal u/s 17. That power is that an arbitral tribunal may order a

party take any interim measure of protection, as it may be

18 AIR 1964 MP 219.19 Arbitration Act, 1940.20 (2002)2 Arb LR 47 Bom.

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considered necessary, in respect of the subject-matter of the

dispute.21

However it was held that though section 17 gives the

arbitral tribunal the power to pass orders, the same cannot be

enforced as orders of a court. It is for this reason that section 9

admittedly gives the court power to pass interim orders during

the arbitration proceedings.22

Drawbacks of the Provision

The contractual nature of arbitration gives rise to several

unique difficulties.

1. Non-enforceable nature of interim measures granted by an

arbitral tribunal is an accepted disadvantage that an Arbitral

Tribunal faces when granting interim relief and without any

coercive enforcement powers.

2. A common difficulty in arbitration occurs when resolution of

the dispute involves a third party against whom no order of the

Tribunal shall be valid for the reason of lack of jurisdiction.

21 Chawla S. K., Law of Arbitration & Conciliation, 3rd Ed., Eastern Law House, New Delhi, 2012, p. 536.22 Sundaram Finance Ltd. v. NEPC India Ltd., AIR 1999 SC 565.

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3. When interim measures of protection are needed against one

of the parties to the arbitration, issues arise as to the

availability of such remedies when they are sought at early

stages in an arbitral proceeding.

4. Parties to arbitration also face difficulties when one party seeks

interim relief at an early stage of the proceeding. In arbitration,

it is typically difficult to obtain such relief expeditiously,

because the Arbitral Tribunal has not yet been constituted.

Thus, most parties in need of this immediate assistance seek

the aid of national courts for this emergency relief. If a party

seeks to delay the opposing party’s request for an injunction or

attachment, that party can slow the process considerably by

taking a long time to select an arbitrator.

5. The Tribunal’s jurisdiction to grant interim measures may be

limited by the governing law of the arbitration.23

Comparison between Both the Sections

Analysis of both the sections would lead us to the

following conclusions:-

23 http://www.ophiuchus.co.in/global/relief.htm as accessed on 19/10/2013.

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1. The new arbitration act enables the arbitral tribunal to pass

orders for giving interim relief while such power is not vested

under the old act.

2. Powers u/s 17 can be exercised only after the arbitral tribunal

is constituted and it starts functioning.

3. Powers of court u/s 9 are wide as the words “before, during or

after” indicate so. A party can approach the court to seek

interim measures of protection even before the arbitration

commences. The Supreme Court in the case of Firm Ashok

Traders v. Gurumukh Das Saluja24, held: “…………section 17

would operate only during the existence of the arbitral tribunal

and its being functional. During that period, the power

conferred on the arbitral tribunal under Section 17 and the

power conferred by the Court under Section 9 may overlap to

some extent but so far as the period pre and post the arbitral

proceedings is concerned the party requiring an interim

measure of protection shall have to approach only the

Court…………”

4. Court’s powers are wide and have supremacy in granting

interim relief. However interference of court when Tribunal is

constituted is minimum.

24 AIR 2004 SC 1433

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5. The Court can exercise power u/s 9 to grant interim measures

even during the pendency of application u/s 17 before the

Arbitral Tribunal. Remedy available to a party u/s 17 is an

additional remedy and is not in substitution of section 9.

Conclusion

While drafting arbitration clause, one should keep in mind

whether the arbitral tribunal should be given the power to grant

interim relief or not. If arbitration clause provides for such power

to arbitral tribunal, then one need not approach the court for such

relief. The system of dual agency for providing relief needs to be

abolished or otherwise some enforcement mechanism be

provided for enforcement of the interim measures of protections

ordered by the Arbitral Tribunal. It would be better that

application of interim measures is put to the Arbitral Tribunals as

they are seized of the subject matter under dispute. Only when a

party is not able to get relief from the Arbitral Tribunal, it should

be allowed to knock the doors of the Court. This will be in line

with the objectives of the Act to minimize the intervention of the

Court in arbitral proceedings.

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Bibliography

Books & Acts:-

Chawla S. K., Law of Arbitration & Conciliation, 3rd Ed., Eastern

Law House, New Delhi, 2012.

Kohli Hari Dev, New Case Law Reference on Arbitration &

Conciliation Act, Universal Law Publication, New Delhi, 2008.

Dr. Avtar Singh, Law of Arbitration & Conciliation, 10th Ed.,

Eastern Book Company, Lucknow, 2013.

Basu N. D., Law of Arbitration & Conciliation, 12th Ed., Orient

Publishing House, New Delhi, 2013.

The Arbitration and Conciliation Act, 1996

Web Links:-

http://www.caclubindia.com/articles/-analysis-of-interim-

measures-u-s-9-and-17-of-arbitration-and-conciliation-act-

1996-17637.asp#.UmwPtCftuHC

http://en.wikipedia.org/wiki/Arbitration

http://www.ophiuchus.co.in/global/relief.htm