SUBMITTED BY
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
VIKAS KUMAR
BLI 976
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
TABLE OF CASES..............................................................................................3
Introduction........................................................................................................ 5
Methodology.......................................................................................................7
Chapter I: Interim Orders under section 9 of the Act.......................................8
Chapter II........................................................................................................... 11
Chapter III
CONCLUSION.........................................................................42
BIBLIOGRAPHY...............................................................................................44
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
TABLE OF CASES
Banwari Ial Radhey.Mohan v. Punjab State Co-op Supply and Mktg Fedn.
Ltd., AIR 1983 Delhi 402.
Binny Ltd. v. Nizam sugars Ltd, (1997) 88 Comp Case 741 at 746 (AP).
Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd., 1993 1 All ER
664 at 683
East Coast Shipping Ltd. v. M.J. Scrap Pvt. Ltd., AIR 1997 Cal 168.
Global Co. v. National Fertilizers Ltd, AIR 1998 Delhi 397 at 400.
H.M. Kamatuddin Ansari & Co. v. Union of India., AIR 1984 SC 29.
Hindustan Steel Works Construction Lid. v. Tarapore & Co., (1996) 87 Comp
Case 344.
Keventer Agro Ltd. v. Seagram Co. Ltd, AIR 1997 Cal 200.
Marriott
International
Inc.
&
Ors.v.
Ansal
Hotels
Limited
&
Anr,
MANU/DE/0013/2000.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
Mohinder Singh & Co. v. Executive Engineer, AIR 1971, J&K 130.
National Building Construction Corpn. Ltd. v. IRCON Intl Ltd., (I998) 1 Raj
500
National Thermal Power Corpn Ltd. v. Flowmore P Ltd., AIR 1996 SC 445.
NEPC India Ltd v. Sundaram Finance Ltd, (1998) 2 Arb. LR 446 (Mad).
Newabgani Sugar Mills Co. lid. v. Union of India, AIR 1976 SC 1152.
Roussel-Uclaf v. CD. Searle C5 Co. Ltd and G. D. Searle & Co. [1978] 1
Lloyd's Rep. 225
Sha Vaktavarmal Sheshmull v. Nainmull Umaji & Co., AIR 1962 Mad 436.
Sundaram Finance Ltd. v. NEPC India Ltd., (1999) 1 SLT 179 (SC)(1999).
Union of India v. Om Construction and Supply Co., AIR 1994 All 334.
Union of India v. Raman Iron Foundry, (1974) Supp SCC 556 at pp. 561.
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
Introduction
An arbitration agreement is a contractual undertaking by which the parties
agree to settle certain disputes by way of arbitration rather than by proceedings in
court. When a dispute arises however one of the parties may nevertheless
commence court proceedings either because he challenges the existence or validity
of the arbitration agreement or because he means to breach it.
This paper dwells therefore on the issues arising when a party approaches the
courts for interim measures.
Article 9 relates to the recognition and effect of the arbitration agreement by
laying down the principle, disputed in some jurisdictions, that resort to a court and
subsequent court action with regard to interim measures of protection are compatible
with an arbitration agreement. It must be accepted that negative effect of an arbitration
agreement, which is to exclude court jurisdiction, does not operate with regard to such
interim measures. The main reason being that the availability of such measures is not
contrary to the intentions of parties agreeing to submit a dispute to arbitration and the
measures themselves are conducive to making arbitration efficient and to securing its
expected results.
The critical question with regard to interim relief in arbitration is Who provides
interim measures of protection? Shall it be the courts, the arbitrators or both?
The answers given in national arbitration legislation and in arbitration rules have
changed over the years. Some time ago it seemed to be a common understanding that
only courts provide any provisional relief. This was reflected in international instruments
such as the 1961 European Convention on International Commercial Arbitration which
in Article VI, paragraph 4 stated that a request for interim measures to the courts is not a
waiver of the arbitration agreement. Similar provisions are found in arbitration rules.
They ensure that a party can have recourse to the courts without fearing to chance the
track of dispute settlement by making such an application. No mention was made of an
arbitrator's competence to grant interim measures of protection. However, later, a trend
in favor of such an arbitrator's competence emerged. This was first reflected in
arbitration rules such as the 1976 UNCITRAL Arbitration Rules for International
Commercial Arbitration (henceforth UNCITRAL Rules), which provide for a choice of
application. Article 26, paragraph 3 of the UNCITRAL Rules refers to court applications
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and deems them to be compatible with the arbitration agreement. This reiterates the
established view. But in paragraphs 1 and 2 of the article, the UNCITRAL Rules go
further when making clear that arbitrators have contractual power to order certain special
kinds of interim measures such as the sale of perishable goods.
However, it is unfortunate that neither the New York Convention of 10 June 1958
on the Recognition and Enforcement of Foreign Arbitral Awards (henceforth New York
Convention) nor any other international instrument deals with interim measures of
protection granted by the arbitrator or their enforcement. Probably the solution might be
concretely provided suitably only by national legislation by providing decisive provisional
remedies namely within the framework of court assistance, fall-back statutory
provisions and laying down the preconditions for the enforcement of arbitrator-granted
interim measures of protection.
The issue in interim order further gets complicated when the interim measures
are sought against International arbitrations or when the seat of arbitration falls outside
the country where interim relief is sought. This issue is of considerable importance in
India due to the conflicting judgements by various High Courts. Though the Supreme
Court in India has decided this question finally yet it raises quite interesting propositions
and is worth examining.
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
METHODOLOGY
The topic of this seminar paper is Interim Relief under Section 9 of the
Arbitration and Conciliation Act, 1996 (henceforth referred to as the Act) and
accordingly dwells upon some of the various issues raised in the context of grant of
interim orders by the courts with regard to the contractual disputes wherein the
agreement also provides for a settlement through arbitration proceeding.
The introduction to the paper provides the background to the concept of
arbitration as has evolved in the jurisprudential framework, with regard to the specific
needs of the commercial world.
This seminar paper then broadly discusses the general law regarding interim
orders given by the national courts, as contemplated under the Act. This section is
illustrative in nature and brings out the various instances gleaned from the case laws.
This paper also compares the position of English law in this regard. The scope
and the ambit of the English law are of considered significance, since both the Indian
and the English laws of arbitration are based on the UNCITRAL model law on arbitration.
The last important section dwells upon the existing controversy in the Indian
courts, on the point whether the national courts in India have the jurisdiction to grant
interim orders with regard to foreign arbitral proceedings.
Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
(i)
(ii)
(a) the preservation, interim custody or sale of any goods which are the
subject-matter of the arbitration agreement;
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
a given legal system the granting of such measure by a court of this State was
compatible with the fact that the parties had agreed to settle their dispute by
arbitration.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
Chapter II
PART A:SCOPE OF SECTION 9 OF THE ACT
The scope of the section was examined in a vast survey of cases and
authorities by the Madras High Court in NEPC India Ltd v. Sundaram Finance Ltd.3
This case arose out of a hire-purchase transaction, which carried an arbitration
clause and the buyer defaulted with an installment. The owner moved the court and
obtained an order under S. 9, without resort to the arbitration clause, for direct
seizure of the machinery with the help of police. The order was set-aside in an
appeal against it.
The Madras High Court was of the view that a request for
arbitration for substantive relief should be there before S. 9 could be used for interim
relief whether or not an arbitrator has been appointed or proceedings commenced
and not before that.
In another case, Harbhajan Singh Kaur v. Unimode Finance, (1997) 2 Cal LT
414, the Court observed as follows
Clause (ii) to section 9(a) of the said Act begins with a prefix, namely, for an
interim measure of protection in respect of the measures that may be
taken by the court and the same are catalogued in Clauses (a) to (d) of
section 9(ii) of the Act. The court is made to ponder over the proposition
used in the expression 'interim measure' by insertion of 'an' and, at the same
time, a catena of matters has been elicited thereunder. The expression used
is in the midst of pendency of an arbitral proceeding in between making of
the arbitral award and enforcement in accordance with section 36.
Therefore, the expression an is one of the alternative; and it has to be rated
as in the midst of possibility of many during the pendency of an arbitral
proceeding as indicated in section 9 itself.
This decision of the Madras High Court was reversed by the Supreme Court
on appeal Sundaram Finance Ltd. v. NEPC India Ltd., 4 where the Supreme Court
held that the court has jurisdiction under Section 9 to pass interim orders even
3 (1998) 2 Arb. LR 446 (Mad) To the same effect was National Building Construction Corpn.
Ltd. v.
IRCON Intl Ltd., (I998) 1 Raj 500, 543 that foundation for arbitration must be laid before claiming relief
under S.2. An interim measure cannot be provided where there is no prayer for some substantive relief,
Ashok Chazvia v. Rakesh Gupta, (1996) 2 Arb LR 255 (Delhi).
4(1999) 1 SLT 179 (SC)1999) 1 JT 49 (SC)
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Ltd. v.
IRCON Intl Ltd., (I998) 1 Raj 500, 543 that foundation for arbitration must be laid before claiming relief
under S.2. An interim measure cannot be provided where there is no prayer for some substantive relief,
Ashok Chazvia v. Rakesh Gupta, (1996) 2 Arb LR 255 (Delhi).
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
The 1996 Act is very different from the Arbitration Act, 1940. The provisions
of this Act have; therefore, to be interpreted and construed independently
and in fact reference to 1940 Act may actually lead to misconstruction. In
other words, the provisions of 1996 Act have to be interpreted being
uninfluenced by the principles underlying the 1940 Act. In order to get help
in construing these provisions it is more relevant to refer to the UNCITRAL
Model Law rather than the 1940 Act.
Section 9 of the said Act corresponds to article 9 of the UNCITRAL model
Law, this article recognizes, just like Section 9 of the 1996 Act, a request
being made before a Court for an interim measure of protection before
arbitral proceedings. It is possible that in some countries if a party went to
the Court seeking interim measure of protection that might be construed
under the local law as meaning that the said party had waived its right to take
recourse to arbitration. Article 9 of the UNCITRAL Model law seeks to clarify
that merely because a party to an arbitration agreement requests the Court
for an interim measure before or during arbitral proceedings such recourse
would not be regarded as being incompatible with an arbitration agreement.
To put it differently the arbitration proceedings can commence and continue
not with standing one party to the arbitration agreement having approached
the Court for an order for interim protection. The language of Section 9 of
the 1996 Act is not identical to Article 9 of the UNCITRAL Model Law but the
expression before or during arbitral proceedings used in Section 9 of the
1996 Act seems to have been inserted with a view to give it the same
meaning as these words have in Article 9 of the UNCITRAL Model Law. It is
clear, therefore, that a Party to an arbitration agreement can approach the
Court for interim relief not only during the arbitral proceedings but even
before the arbitral proceedings. To that extent Section 9 of the 1996 Act is
similar to Article 9 of the UNCITRAL Model Law.
It will also be useful to refer to a somewhat similar provision in the Arbitration
Act, 1996 of England. Section 44 of this Act gives the Court powers, which
are exercisable in support of the arbitral proceedings. Sub-section (3) of
Section 44 permits, in the case of urgency, the Court to make an order
contemplated by Sub-section (2) even on an application by a proposed party
to the arbitral proceedings. The expression used in this Sub-section party
or proposed party to the arbitral proceedings shows that where arbitral
proceedings have commenced then the application will obviously be of a
party to the said proceedings but where the arbitral proceedings have not
commenced a "proposed party' has been given the right to approach the
Court. A proposed party to the arbitral proceedings would, therefore, be one
who is party to an arbitration agreement and where disputes have arisen but
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The Court also considered the decision in Channel Tunnel Group and France Manche SA v.
Balfour Beatty Construction Ltd., (1992) WLR 741 (CA), on appeal, 1993(2) WLR 262 (H12)
wherein construing section 12 (6) of the UK Arbitration Act 1950, STRAUGHTON, LJ observed as
under:
In my view this power can be exercised before there has been any request for arbitration or the
appointment of Arbitrators, provided that the applicant intends to take the dispute to arbitration in due
course. Whatever the meaning of reference to Section 12(6)(h) (and it is not always easy to
determine the precise meaning of the word in arbitration statutes). I would hold that the power of the
Court in such a case would be exercised for the purpose of and in relation to a reference.
10 Ranjit Chandra Mitter v. Union of India, AIR 1963 Cal 594.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
13 Per Lord Mustill in Coppee-Lavalin SA/NV v. Ken-Ren Chemicals and Fertilizers Ltd. (in
Liquidiation) (1994) 2 All E.R. 449 at 466 HL.
14 [1994] 2 All E.R. 449.
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The English Courts may intervene while arbitration proceedings are pending
and its powers to do so. They include power to extend time limits for commencing
the arbitral proceedings and for making the award, power to appoint arbitrators, to
decide disputes about the arbitrator's jurisdiction and to determine points of law. The
court also has power to remove an arbitrator and to appoint a replacement. The
court may also make other orders during the reference, and these are also
examined.
Under section 9 of the English Act, a stay must be granted unless the court is
satisfied that the arbitration agreement is null and void, inoperative, or incapable of
being performed. The court also has an inherent jurisdiction to grant a stay in
certain circumstances like stay proceedings brought in breach of an agreement to
decide disputes by arbitration.15 It is rarely necessary to invoke this power in view of
the statutory jurisdiction. The inherent jurisdiction may be appropriate though where
there is no arbitration agreement within the meaning of section 6 of the Arbitration
Act 1996 or where the arbitration clause is not immediately effective 16 or for some
other reason the Application falls short of the requirements for a stay under the
Arbitration Act 1996.
A stay based on the inherent jurisdiction may also be appropriate where there
are two defendants to the court proceedings, one of whom is not a party to the
arbitration agreement but claims through or under the other defendant by virtue of a
contract of agency.17 This touches on a particularly difficult issue in relation to
arbitration agreements. It most frequently arises in the context of groups of
companies, where for example one in the group has signed a contract containing an
arbitration clause or Group Company has performed the contract.
Under the English Law there is no requirement that the reference to
arbitration must have been started. Indeed, the fact that the dispute cannot
15 Channel Tunnel Group Ltd and Others v. Balfour Bveaty Construction Ltd and Others, [1993] 1
Lloyds Rep.291.
16 Id.
17
Roussel-Uclaf v. CD. Searle C5 Co. Ltd and G. D. Searle & Co. [1978] 1 Lloyd's Rep. 225 at 229
30. The court in that case was prepared to grant a stay based both on its inherent jurisdiction and on its
finding that one of the group companies was claimine through or under the other Rithin the mcaning
of s.1 of the Arbitration Act 1975. The words quoted do not appear in the Arbitration Act 1996 and the
decision has been criticised.
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18 Arbitration Act 1996, s.9(2) which followed the decision in Channel Tunnel Group Ltd and Olhers v.
Balfour Beatty Construction Ltd and Others [19931 1 Lloyds 1 Rep. 291, HL.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
PART A:
Under this heading the Courts are empowered to order sale of goods, the
goods being defined under section 2 of the Sale of Goods Act, 1930 and moreover
so, in case where the goods are of a perishable nature.
PART B:
In Global Co. v. National Fertilizers Ltd., the Delhi High Court held that a petitioner
cannot seek an interim order or the sole ground of protection of his financial
interests. The awardee has to prove the respondent's intention to effect, delay or
obstruct execution of the award. The court said19 It is true that the said Arbitration Act, 1940 stands repealed by the Act of
1996 and the provisions contained in the Code of Civil Procedure are not
applicable to the proceedings under the Act. Still, in the absence of
guidelines how the power for grant of relief under section 9(ii)(b) is to be
exercised by, the Court, the principles underlying the aforesaid sections are
to be applied. It is only on adequate material being supplied by the petitioner
that the Court can form opinion that unless the jurisdiction is exercised under
the said Section 9(ii) there is real danger of the respondent defeating,
delaying or obstructing the execution of the award made against it. On the
basis of the only ground of protection of financial interest of the petitioner, the
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
In case of security for costs, the courts will usually require a claimant, if it is a
foreign company out of India or a person out of India who does not possess
sufficient immovable property in India, to furnish security for all the costs incurred or
likely to be incurred by the respondent.21
The arbitral tribunal may ask for deposit by way of security for costs. The
deposit in advance may be supplemented afterwards according to exigencies. A
separate cost may be fixed linking it with the claim and counter claim. The deposit
has to be paid by the parties in equal share, though one party may pay the share of
the other in case of default. Where deposit is not made by a party in respect of a
particular claim or counter-claim, the tribunal may suspend or terminate the arbitral
process in respect thereof. At the end of the proceedings, the tribunal has to give an
account of the money in deposit and return the unused amount to the parties.
On of the effects of the provision is that the power of the court to order
security for costs becomes vested in the arbitral tribunal to the exclusion of the
court. This reform has been effectuated by the English Arbitration Act, 1996 also.
There also earlier the power was vested in the court. 22 The English Arbitration Act,
1996 does not specify the basis on which the security for costs should or should not
be granted. The tribunal has a broad discretion.
20 Union of India v. Om Construction and Supply Co., AIR 1994 All 334.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
An
application for the same was filled under S. 41(1)(b) read with Sch II, 1940 Act.
Section 41, 1940 Act stated that the court had the same power of making orders in
respect of any of the matters set out in Sch II as it would have in all civil
proceedings. One of the matters set out in Sch II was interim injunction. Thus it
was abundantly clear that the court had the power under S. 41(1)(b) read with Sch
II, 1940 Act to issue interim Injunctions with only this restriction that such injunctions
could be issued for the purpose and in relation to arbitration proceedings.
The
injunction was held to be rightly granted. 23 No injunction was allowed to prevent sale
of stock at the instance of a party who had failed to take off the stock and pay for it
in time.24
The word property is not defined in the Act. But in other relevant statutory
provisions, it is defined broadly to include any land, chattel or other corporeal
property of any description. The concept of property would appear to be wider than
goods.. An order under this section was refused where the applicant sought
inspection of an industrial process. The court said that such process could not be
regarded as a property.25
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Where a contract for sale of timber was cancelled and trees already felled were
seized by the collector, an injunction was issued to prevent sale of such timber and
to preserve status quo.26 The court referred to Mustill and Boyd, Commercial
Arbitration27 and the decision in Food Corporation of India v. P. A. Ahammed
lbrahim28 to find support for the proposition that the censor of the jurisdiction of the
court on reference of the dispute to arbitration is only provisional and until a valid
award is passed the court retains its underlying jurisdiction which in certain
circumstances it will be entitled to assume. The court also had inherent power in the
matter,29 which can be exercised in the absence of any express or implied
prohibition in the underlying enactment.30 Hence the courts which are seized of
applications under the Arbitration Act can in the exercise of inherent jurisdiction pass
appropriate orders consistent with the procedural rules of CPC as may be necessary
for the ends of justice.
The court cited the following passage from Russell on Arbitrartion
Quite apart from these express powers (ie. Statutory powers similar to those
under the Arbitration Act) the court has always been willing to assist in this
way in proper cases.
The court, in order to preserve the status quo, in a case where one of the
parties to a contract had given a notice, purporting to dismiss the contractor,
restrained the party from acting on the notice until judgment or further order, or until
a references to arbitration provided for by the contract had been made.31
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Section 9(ii)(c) permits the court to make orders for preservation of evidence.
Such orders are frequently made for protection of intellectual property rights. Such
an order is commonly known as Anton Piller order.32 This order is a type of search
and seize order. It became necessary in the context of intellectual property rights
because the offending material was often destroyed by the infringing parties in order
to defeat the plaintiffs claim.
PRODUCTION OF DOCUMENTS
In a dispute between partners regarding partnership business, there were
claims and counter-claims between them about the custody of the documents. A
partner applied to the court under S. 9 of the Arbitration and Conciliation Act, 1996
for an order for production of documents. The court refused to pass any such order
because such an application is not maintainable under S. 9.33
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arbitration, there would seem to be no reason to read the preceding elements of that
sub-section as necessarily requiring that the properly of which detention or
inspection, etc., is sought must be in the possession or control of a party. The DAC
Report refers to the possibility of orders under section 44 of the Act having an effect
on third parties, and so supports an extended construction of section 44(2)(c). As
far as it may be relevant, it appears to have been assumed that the parallel
provisions of the 1950 Act permitted orders to be made directed at third parties. But
the position is not entirely clear, since in legal proceedings the power to make orders
for the detention and inspection, etc., of property in the hands of third parties is
exercisable only if the claim relates to personal injury or death; [see section 34(3) of
the Supreme Court Act 1981 and RSC Order 29, r.7(A)(2)]. The power in relation to
arbitration proceedings may be similarly confined.
assumption that the well established principles governing the grant of temporary
injunctions, like prima facie case, balance of convenience and irreparable injury are
not applicable to the exercise of the power of under this section. In Binny Ltd. v.
Nizam sugars Ltd34 on the facts and circumstances of this case, the High Court
refused to grant an injunction in respect of bank guarantees.
regard, relied upon the well established principles as reiterated by the Supreme
Court in Hindustan Steel Works Construction Lid. v. Tarapore & Co.35 An injunction
restraining encashment of bank guarantees can be granted by the court only in case
of fraud or in case where irretrievable injustice would be done if the bank guarantee
is allowed to be en-cashed. The apex court further held that the existence of a
serious dispute on the question who had committed breach of the contract or that
the contractor had a counterclaim against the beneficiary or that the disputes
between the parties had been referred to the arbitrators, etc., are not valid grounds
for granting an injunction restraining the enforcement of bank guarantees. It was
also held that the contract of bank guarantee between the bank and the beneficiary
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is independent of the primary contract between the party furnishing the bank
guarantee and the beneficiary and, therefore, encashment of an unconditional bank
guarantee does not depend upon adjudication of the dispute between the parties to
the primary contract.36
Where claims and counter-claims of the appellant and the respondent for
damages arising out of a contract were referred to arbitration, the court could during
the pendency of the arbitration proceedings grant an injunction restraining the
appellant from effecting recovery of the amounts claimed in the arbitration
proceedings from pending bills for amounts due from the appellants to the
respondent under other contracts. Such an order is negative not only in form but in
substance. It has no positive content. 37 Following this ruling, the M P High Court
held that even if an authority has terminated the contract wrongfully, it can not be
prevented from inviting fresh tenders for the same project.
Its liability to
36 See also National Thermal Power Corpn Ltd. v. Flowmore P Ltd., AIR 1996 SC 445, effect upon the
right of encashment where invocation has certain conditions to fulfill.
37 Union of India v. Raman Iron Foundry, (1974) Supp SCC 556 at pp. 561, 562.
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Seminar on Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996
43 Mohinder Singh & Co. v. Executive Engineer, AIR 1971, J&K 130.
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44 Dashmesh Academy Trust v. V.K. Consttruction Works P. Ltd. (1988) 1 Arb LR 172 P&H.
The court
showed its agreeemnt with the rulling of the Allahabad High Court in Sunderlal Haveliwala v. Bhawati
Devi, AIR 1987 All 400 to the effect that a proceeding under S.20, 1940 Act (deleted from the 1996 Act)
was a part of arbitration proceedings.
45 Vinit Manchandra v. Rishi Co-op Group Housing Society (1987) 2 Arb LR 10 Delhi, the allotment of
contract was concelled on the allegation that it was a collusive affair
46 Indian Tourism Development Corpn. Ltd. v. Airport Authority of India (1997) 2 Arb LR 609, 620
(Delhi).
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partnership property.
transferring or in any other way disposing them off pending dispute between the
parties in regard to them.47
Under Section 41(b), 1940 Act [as now in Sec. 9(ii)(d) of 1996 Act], the court
had power to pass an interim order of injunction or appointment of receiver. Where
a suit was pending before the court the court had power to appoint a receiver or
issue an interim injunction apart from the section.48 The power of appointing receiver
could be exercised even in a case where references to arbitration had been made
without the intervention of the court and no proceedings were pending in any court.
The court said that it would not seem proper that the court after being satisfied on
Prima facie evidence should be powerless in the matter of preservation or safety of
the property in dispute. The court could simultaneously appoint a receiver and stay
the suit under Section 34, 1940 Act [S. 8 of the 1996 Act].49
The fact that the arbitrator had no power to grant an injunction was a matter
which the court could take into account in exercising its discretion to stay the suit
under Section 34, 1940 Act.50 A car parking lot contractor whose term had expired
wanted to remain in possession for recouping losses caused by the conduct of the
owner.
maintenance of status quo. The court said that such injunction could not be allowed
to him. The effect of such an injunction would be that the owner would be prevented
from handing over the lot to the successful bidder, the contractor would enjoy quiet
possession without having to pay anything, though his period had expired.51
PART G:ANY OTHER MEASURE: JUST AND CONVENIENT [S. 9 (ii) (e)]
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52 State of Rajasthan v. Bharat Construction Co-, 1998 3 RAJ 7 at p. 11. The court refused in this case
to interfere in two orders, namely, that the State shall withhold the security deposit but shall not
withhold payment of running bills.
53 Suzuki Motor Corp. v. Union of India (1997) 2 Arb LR 477 (Delhi).
54 Escotel Mobile Communications Ltd. v. Union of India, (IM) 3 RAJ 307 Delhi: (1998) 2 Arb LR 384.
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55 Mahanagar Telephone Nigam Ltd. v. Vichitra Construction Pvt. Ltd., (1995) 2 Arb LR 479 (Delhi).
56 AIR 1984 SC 29. Followed in Sant Ram & Co. v. State of Rajasthan, AIR 1997 SC 2557 (1997) 1
Arb LR 209. The applicant here was seeking to restrain the Government from adjusting amounts due
to him under other contracts, relief not allowed.
57 Vashdev Bheroomal Pamnani v. M. Bipin Kumar, AIR 1987 Bom 226.
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appeal maintainable. Bench observed that when the court passes an order under
39 of CPC during the pendency of any proceedings commenced under any of the
provisions of the arbitration Act, 1940, the court was in effect exercising jurisdiction
under S. 41 of t e Arbitration Act 1940 read with the Second Schedule, of that Act.
Section 39 of the Arbitration Act 1940 clearly specified what were appealable orders.
An order passed under S. 41 of the Arbitration Act, 1940 read with the Second
Schedule and Order 29, Rules I and 2, CPC was not an appeal able order. 60
Revision was also not maintainable because interim orders did not finally adjudicate
or dispose of any claim or dispute between the parties.
The Arbitration and Conciliation Act, 1996 expressly provides in S.37 that
interim orders under S. 9 shall be appeal able.
60 The Bench relied on Banwari Ial Radhey.Mohan v. Punjab State Co-op Supply and Mktg Fedn. Ltd.,
AIR 1983 Delhi 402.
Submitted by Vikas Kumar
Page 33 of 42
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approaching Indian Courts for interim relief. Do our Courts have this power under the
new Act of 1996?
This apparently simple question on has given rise to conflicting judgments of
various High Courts.61
background of the UNCITRAL Model Law and the Law in various other countries. First,
though, it would be necessary to refer to the relevant provisions in the Arbitration &
Conciliation Act, 1996.
Under the English Law an application for a stay of legal proceedings is made
under section 9 of the English Arbitration Act 1996, whose provisions are
mandatory.62 Section 9 will apply even if the seat of the arbitration is abroad or no
seat has been designated or determined.63
At this juncture, attention should be adverted to Section 2, contained in Part I of the Act
and particularly to sub-section 1(f) that defines international commercial arbitration as
an arbitration relating to disputes arising out of legal relationships, whether contractual,
or not, considered as under the law in force in India when at least one of the parties is
61 Though the issue has now been settled by the Supreme Court, yet the propositions are indeed worth
examining.
62 See section 4 if the Arbitration Act 1996 and Sch. 1 to the Act for the mandatory provisions.
63
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an individual who is a national of, or habitually resident, any country other than
India; or
Section 2(5) defines the scope of Part I of the Act. In view of the particular relevance of
Sections 2(2) and 2(5), they are set out below: -
"2 (12) This Part shall apply where the place of arbitration is in India.
It may be noticed that Section 9 titled 'Interim Measures etc. by Court' finds place
in Part I of the Act. No such provision is to be found in any other Part of the Act. The
question, which, therefore, arises, is whether or not Part I of the Act applies where the
place of arbitration is outside India.
ultimate analysis, depend on the true construction of the provisions extracted above.
However, before doing so, it is instructive to look at how the UNCITRAL Model Law, as
also other countries, have tackled the issue.
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"The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the
place of arbitration is in the territory of this State".
Article 9, which is referred to in Article 1.2, is also set out below:
"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 measures of protection and for a court to
grant such measures.
As a matter of history, it is interesting to note that Article 1.2 did not find place in the draft
Model Law.64 There was wide support for the so-called strict territorial criterion,
according to which the Law would apply where the place of arbitration was in that
State.65 Even while so deciding, the Commission was clear that the Court functions
envisaged in Articles 8, 9, 35 and 36 were to be entrusted to the Courts of the particular
State adopting the Model Law irrespective of where the place of arbitration was located
or under which law the arbitration was to be conducted. In view of this, Article 1(2) was
adopted in its final shape.
Thus, under the Model Law, i-n view of the specific exceptions to the principle of strict
territoriality, a Court would have the power under Article 9 to give interim directions,
irrespective of the place of arbitration.
64 The report of UNCITRAL on the adoption of the Model Law (paragraphs 72 to 81 of the Report) is set out
in The Arbitration and Conciliation Act, 1996 - A Commentary by P. Chandrasekhara Rao at pages 349351
65 This also appears to be the genesis of Section 2(2) of the Indian Arbitration and Conciliation Act Act,
1996.
Submitted by Vikas Kumar
Page 36 of 42
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(1) The provision of this part applies where the seat of the arbitration is in
England and Wales or Northern Ireland.
(2) The following sections apply even if the seat of the arbitration is outside
England and Wales or Northern Ireland or no seat has been designated or
determined
PART D:
In a decision by Calcutta High Court in East Coast Shipping Ltd. v. M.J. Scrap Pvt.
Ltd.,66 the Applicants moved the Calcutta High Court for Interim protection and other
relief under section 8 and 9 of the 1996 Act.
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hear the matter, placing particular emphasis on Section 2(5) of the Act. In reply, the
Respondents urged that if such an interpretation were to be accepted, it would render
section 2(2) otiose. Reference was made to the UNCITRAL Model Law to show that the
legislature had thought it fit to deviate there from and exclude Sections 8 and 9 from
operation of the Part I of the Act. The Learned Judge held that the interpretation as
urged by the Applicants would render section 2(2) otiose and it was well settled that the
Courts must always presume that the legislature in its wisdom intended that every part of
statute should be given effect. The Learned Single Judge also noticed that the global
scope of the relevant provision of the UNCITRAL Model Law was consciously omitted
from the 1996 Act. It was held that deviation from the Model Law revealed the intention
of the legislature to limit the scope of Part I of the Act to arbitration proceedings where
the place of arbitration was in India. It was, therefore, held that as the place of arbitration
was admittedly in London, the application was not maintainable in the Calcutta High
Court.
A similar conclusion was reached by a Division Bench of the Calcutta High Court
in titled Keventer Agro Ltd. v. Seagram Co. Ltd67. That matter concerned a dispute
between the parties arising out of a joint-venture agreement. The Court framed three
issues. Issue No.3 related to the power of the Court to pass interim orders. The Court
observed that power to pass in interim order in connection with a special Act must be
derived from that statute itself. It was held that there was no provision in Part II, chapter
I or any other portion of the 1996 Act applicable to foreign arbitration under the New York
convention which gave the Court such a power. Sections 9 and 17 of the Act were held
to be applicable to domestic arbitrations only, in view of Section 2(2). The Court justified
such exclusion on the policy ground that the main objectives of the 1996 Act were to
minimize the supervisory role of the Courts in arbitral proceedings.. The reliance by
Keventer on Article 8(5) of the International Chamber of Commerce Rules was held to
be- misplaced, since such rules had no statutory force and, in any case, jurisdiction
could not be conferred by consent. In the circumstances, the Court was of the view that
it did not have the power to pass any interim order in cases of foreign arbitration.
A notable decision of the Delhi High Court that was later overruled by the Supreme
Court, the latter decision being the current running view, is nevertheless discussed here.
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In Marriott International Inc. & Ors.v. Ansal Hotels Limited & Anr68, the Delhi High Court
upheld the contention of the respondents that as the arbitration proceedings were being
held before the Kuala Lumpur Regional Centre for Arbitration in Malaysia, section 9 of
the Act had no applicability and the petition of the apaplicant therefore was therefore, not
maintainable.
This decision was upheld by the Supreme Court in Bhatia International v. Bulk Trading
S.A. and Anr.69, wherein the SC held that in case of International commercial arbitration 70
an ouster of jurisdiction cannot be implied but expressed and that the Provisions of Part I
of the Arbitration and Conciliation Act, 1996 are applicable also to international
commercial arbitration which take place outside India unless the parties by agreement
express or impliedly excluded it or any of its provisions. Such an interpretation does not
lead to any conflict between any of the provisions of the Act- Thus Article 23 of the ICC
Rules permits parties to apply to a competent judicial authority for an interim and
conservatory measures and therefore in such cases an application can be made under
Section 9 of the said Act.
68 MANU/DE/0013/2000.
69 MANU/SC/0185/2002.
70 The seat of arbitration in the present case was to be decided in accordance with the rules of International
Chamber of Commerce and Paris was finally agreed upon the Parties as the seat.
Submitted by Vikas Kumar
Page 39 of 42
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CHAPTER V: CONCLUSION
Towards the end it can be surmised that the powers of the Indian Courts with
regard to providing interim relief under Section 9 of the Act are fairly wide and welldefined. The recourse to Courts for obtaining interim injunctions does not in any way
undermine the arbitration provision contained in contractual agreements.
The decision of the Supreme Court in Bhatia International case has also
been quite relieving as it takes care of a lot of exigencies that might have made
impossible for an aggrieved party to obtain interim relief. Mentioned below are some
of the circumstances that might have created confounding situations.
Another problem, which may arise, is that the agreement may not specify the
places of arbitration but leave it to an institutional body such as the ICC to specify
the venue. in such a situation, the party seeking interim protection is left helpless
since it is unclear whether he can proceed under Section 9 which only applies
where the place of arbitration is within India. It is for these reasons that the model
law provided for interim protection irrespective of the venue. This is also the
position in English Law.
The non-applicability of Part I of the 1996 Act to foreign arbitration gives rise to
other piquant situations.
It is unclear what
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Hence in light of the mentioned provisions, the decision in Bhatia International case is
indeed a relieving one and needs to be welcomed.
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BIBLIOGRAPHY
Bachawat, R.S, Law of Arbitration and Conciliation, 3rd Ed.,Wadhwa and Co.,
Agra, 1997.
Rao, P.C, Alternative Dispute Resolution, Universal Law Publishing Co., New
Delhi, 1997.
42