[Rohan Tigadi runs an independent dispute resolution & litigation practice in Bangalore, Karnataka. He is an alumnus of National Law University Jodhpur]
Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”) permits a party to arbitral proceedings to seek interim measures from court ‘even after making of the arbitral award but before it is enforced in accordance with Section 36 of the Act’ (“post award interim measures”). A plain reading of the said provision suggests that, both the successful as well as the unsuccessful party can avail post award interim measures. However, the High Courts in India have expressed divergent views on whether a party whose claims have been rejected or who has suffered an arbitral award (“unsuccessful party”) can avail post award interim measures. The High Courts of Bombay, Delhi and Karnataka have held that an unsuccessful party cannot avail post award interim measures. On the other hand, the High Courts of Telangana, Andhra Pradesh and Gujarat have taken a view that even an unsuccessful party can avail post award interim measures. The Supreme Court of India is yet to conclusively adjudicate on the issue of whether an unsuccessful party can seek post award interim measures. In fact, several petitions dealing with this very issue are still pending consideration before the Supreme Court.[1] This post examines the divergent views expressed by the High Courts and thereafter expresses the author’s views on the right of an unsuccessful party to post award interim measures.
High Courts and varied interpretations of post award interim measures to unsuccessful party
In Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited (“Dirk India”), the Bombay High Court opined that section 9 of the Act is intended to protect the fruits of the arbitral award until eventual enforcement of the arbitral award in accordance with the Act. Since enforcement of the arbitral award only enured to the benefit of the party that had succeeded in the arbitral proceedings, the Court concluded that an unsuccessful party cannot seek post award interim measures.
Further, the Court noted that a party aggrieved by the arbitral award, i.e. unsuccessful party, can only seek setting aside of the arbitral award under section 34 of the Act. Therefore, even if the unsuccessful party were to succeed in a petition under section 34 of the Act, the claims rejected by the arbitral tribunal could not be decreed in favor of the unsuccessful party by modifying the arbitral award. Thus, the Court concluded that the post award interim measures cannot be granted in favor of unsuccessful party because such interim measures would not be in aid of the final relief accruing to the unsuccessful party even after favorable disposal of the petition under section 34 of the Act. The Delhi High Court, Karnataka High Court and the subsequent benches of the Bombay High Court have subscribed to the reasons set out in Dirk India and held that an unsuccessful party cannot seek post award interim measures.
On the other hand, the Telangana High Court, the Andhra Pradesh High Court and the Gujarat High Court have held that an unsuccessful party could avail post award interim measures too inter alia on the grounds that (i) a Court under section 34 of the Act can modify or vary the findings of the arbitral tribunal, and not merely set aside the arbitral award; (ii) an unsuccessful party cannot be left remediless during the pendency of a petition under section 34 of the Act; (iii) the plain language of section 9 of the Act does not make any distinction between a successful party and an unsuccessful party. Recently, in Project Director, NHAI v. M Hakeem, the Supreme Court of India held that a court exercising jurisdiction under section 34 of the Act could not modify or alter the arbitral award, but only set it aside. Hence, to that extent the decisions of the Andhra Pradesh High Court and the Telangana High Court are per incuriam.
For reasons detailed in the next section of this post, the author agrees with the views expressed by the Telangana, the Andhra Pradesh and the Gujarat High Courts that even an unsuccessful party is entitled to post award interim measures.
Analysis
Fresh arbitral proceedings on setting aside of award
It is true that a court under section 34 of the Act cannot modify the arbitral award, but only set it aside. But, the setting aside of the arbitral award does not result in the arbitration agreement between the parties coming to an end.[2] On setting aside of the arbitral award, the disputes are required to be referred to fresh arbitration. It is for this reason that section 43(4) of the Act provides that, in case of setting aside of the arbitral award by a court under section 34 of the Act, the period between the commencement of arbitral proceeding and the setting aside of the arbitral award should be excluded while computing limitation in respect of claims submitted to fresh arbitration. Therefore, the Bombay High Court in Dirk India completely misdirected itself by failing to consider the full implication of setting aside of the arbitral award. If the High Court had considered the fact that the unsuccessful party had a right to initiate fresh arbitration on setting aside of the arbitral award, it could not have concluded that an unsuccessful party cannot obtain post award interim measures. This is for the obvious reason that the rights of the unsuccessful party pursuing statutory remedies under sections 34 and 37 of the Act should not be rendered illusionary by permitting the successful party to deal with the subject-matter of arbitration as it deems fit and rendering initiation of fresh arbitration proceedings otiose.
Unsuccessful party will be left remediless
If the interpretation given by the Bombay High Court in Dirk India is accepted, it will result in an unsuccessful party to an arbitral award being left remediless and without any ad-interim protection during the pendency of its petitions under sections 34 and 37 of the Act. The unsuccessful party can neither institute fresh arbitral proceedings nor lodge a suit in relation to the disputes that are the subject matter of the arbitral award under challenge under sections 34/37 of the Act owing to the doctrine of res judicata. Therefore, there is every likelihood that the successful party may render the setting aside proceedings under sections 34 and 37 of the Act illusionary and otiose by disposing off or creating third party interests on the subject matter of the arbitral dispute. Hence, the view that an unsuccessful party cannot seek post award interim measures results in a serious risk of the rights conferred on the unsuccessful party under sections 34 and 37 of the Act being rendered otiose.
Rule of literal interpretation
Further, section 9 of the Act stipulates that any ‘party’ to arbitral proceedings can seek interim measures from court at any time after making of the arbitral award but before it is enforced in accordance with section 36 of the Act. A mere perusal of the said provision makes it abundantly clear that the provision is party neutral, i.e. it does not distinguish between successful party and unsuccessful party. Hence, in the absence of any ambiguity in the language of section 9 of the Act, it will be contrary to scheme of the Act to deny the post award interim measures to the unsuccessful party. Thus, on this count as well, the views of the Bombay High Court, the Delhi High and the Karnataka High Court are bad in law.
Therefore, in the author’s opinion, courts exercising jurisdiction under section 9 of the Act should not denude themselves of the power to grant post award interim reliefs to the unsuccessful party. Instead, while granting post award interim reliefs to the unsuccessful party, the courts should be circumspect and exercise their discretion judiciously. A court seized of an application under section 9 of the Act by the unsuccessful party should prima facie be satisfied that the award challenged under section 34 of the Act is liable to be set aside and therefore there is a need to preserve the subject matter of the dispute for fresh arbitration proceedings that may be initiated after setting aside of the arbitral award. Moreover, in order to safeguard the interest of the successful party in the arbitral proceedings, the courts can even put the unsuccessful party seeking post award interim measures to terms.
– Rohan Tigadi
[1] Organizing Committee, Commonwealth Games 2010 v. Nussli Switzerland Limited SLP (Civil) No. 026876/ 2014; Hoe Care Retail Marts Private Limited v. Haresh N. Sanghvi SLP(Civil) No. 029972/2015; Wind World (India) Limited v. Enercon GMBH, SLP (Civil) no. 015511/ 2017; National Institute of Tourism and Hospitality Management (NITHM) v. Saptarishi Hotels Private Limited SLP (Civil) No. 011139/ 2020; Sierra Constructions Private Limited v. Padma Mahadev, SLP (Civil) No. 005711/2021.
[2] This statement will not hold good in situations wherein the arbitral award is set aside under sections 34(2)(a)(i) & 34(2)(a)(ii) of the Act because in the said situations there was no arbitration agreement in existence between the parties for the arbitral tribunal to assume jurisdiction. Therefore, absent such arbitration agreement, the question of the arbitration agreement continuing to remain intact does not arise at all.