Unwinding and Rewinding the Clock: Revisiting Interim Reliefs under Section 9 of the Arbitration Act

[Sumit Chatterjee is an Advocate at Arista Chambers, Bangalore]

Interims reliefs under the Arbitration and Conciliation Act, 1996 (“Act”) underwent a significant change following the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”). Under the Act, parties can approach the Court under section 9 of the Act to seek interim reliefs before, or during the arbitral proceedings, or at any time after the passing of the award but before it is enforced. Interim reliefs are an essential safeguard provided under the Act to ensure that any claims which a party wishes to raise in the arbitration are protected in the form of security, guarantees or other measures as the Court may deem fit, based on a case-to-case assessment. Post the constitution of the arbitral tribunal, the tribunal itself is also empowered to grant interim reliefs to parties under section 17 of the Act.

The 2015 Amendment brought a number of changes which were aimed at reducing judicial interference in the arbitral process. One of these changes was the amendment to section 9 of the Act. Through the addition of sub-section (3) to section 9, the court’s powers to grant interim reliefs were truncated, once the arbitral tribunal had been constituted. The 2015 Amendment also introduced a deeming fiction in section 17, to ensure that orders of the arbitral tribunal in respect of interim reliefs would have the same effect as, and could be enforced on the same strength as, orders of the competent Court under section 9. The addition of sub-section (3) to section 9 recognised that since the powers to grant interim reliefs had effectively been made equal for both courts and arbitral tribunals after the 2015 Amendment, parties should raise their claims for such interim reliefs before the tribunal, once it is constituted.

Section 9(3) thus flowed from the principle of minimal judicial interference in arbitral proceedings, as also enshrined in section 5 of the Act. However, the restriction placed on the Court’s scope under section 9 by sub-section (3) is based on two assertions. First, on its power to ‘entertain’ an application under sub-section (1), and second, qualified by an assessment of whether there exist circumstances which may render the remedy of interim relief under section 17 inefficacious. Therefore,  a section 9 court does not become coram non judice as soon as the arbitral tribunal is constituted. Further, its jurisdiction is also not completely taken away through sub-section (3), as it is not meant to operate as an ouster clause.

The Supreme Court’s Current Legal Position

The court’s jurisdiction would remain intact under section 9 in cases where it came to the conclusion that the interim relief sought would become inefficacious under section 17 of the  Act. As was explained by the Supreme Court in Arcelor Mittal Nippon Steel India Ltd. v Essar Bulk Terminal Ltd., such a situation could arise in circumstances where the arbitral tribunal is unavailable due to reasons of illness etc., where members of the arbitral tribunal cannot congregate on short notice to decide the urgency in the interim application, or where the constitution of the tribunal itself is under challenge on grounds of bias etc. inter alia. Since interim reliefs are, by their very nature, urgent and require immediate intervention, the Supreme Court in Arcellor Mittal held that the intention of the legislature under section 9 would therefore not be to denude the court’s powers – particularly in situations where the tribunal’s indisposition would render availing such remedy under section 17 inefficacious.

While the Supreme Court’s observations of the conditional clause in sub-section (3) in Arcellor Mittal were helpful in clarifying its scope (yet fairly uncontroversial), it was the its interpretation of ‘entertain’ which made for interesting reading – and laid down the law for section 9 courts to follow in the future. In Arcellor Mittal, the Supreme Court held that the word ‘entertain’ under section 9(3) means when a court under section 9 has applied its mind to the issues raised in the application, and has considered it on merits. It concluded that while such a process might even extend till the pronouncement of the order on such an application, it would not preclude the court from exercising its powers under section 9 even if the tribunal was constituted during this stage.

Such an interpretation is premised on the fundamental policies underlying the arbitral process – time-effective dispute resolution and efficiency. The Supreme Court’s interpretation of ‘entertain’ in section 9(3) ensures that parties do not have to undergo a redundant process of having to re-agitate their claim for interim relief before the arbitral tribunal, even after such a claim was taken up and considered (albeit not fully – as was the case in Arcellor Mittal) by the court under section 9. The intent was never, as the Supreme Court observed, to “turn back the clock” and require the arbitral tribunal to re-consider an application for interim relief which has already been seized of by the section 9 court.

Calcutta High Court Relied Upon the Supreme Court’s Position

This policy-based interpretative approach in Arcellor Mittal continues to hold the field in the interpretation of section 9(3) of the Act, and was recently relied upon by the Calcutta High Court in its decision in Jaya Industries v Mother Diary Calcutta and another . In Jaya Industries, the High Court had issued a show cause notice on Mother Diary to show cause as to why it should not be directed to deposit an amount towards Jaya Industries’ claim in the arbitration before the Court. While the parties filed affidavits towards their respective positions in the section 9 proceedings, the arbitral tribunal was constituted in the interregnum. The High Court, applying the ratio in Arcellor Mittal, held that while the level of a court’s engagement with an application may be subjective depending on each case (and at which point the tribunal stood constituted), it was clear that in the present case that the High Court had effectively ‘entertained’ the said application when the tribunal was constituted. The intention under section 9(3), the High Court reiterated, was not to “rewind the clock”. It was to prevent multiple hearings on the same relief claimed by the parties, as a result of which once the Court has ‘entertained’ the application – by applying its mind to the issues at hand and considering it on merits – the hands of the metaphorical clock under section 9, and sub-section (3) specifically, stop to tick.

Conclusion

The Calcutta High Court’s decision in Jaya Industries provides another example of the policy-based interpretive approach under section 9(3) being used to good effect by the court in preventing parties from having to undergo multiple hearings on interim relief applications under the Act. While the Supreme Court’s ratio in Arcellor Mittal continues to remain the leading precedent on the issue, it will be interesting to see how future courts apply the same in cases where the timelines between the constitution of the tribunal, and the section 9 Court’s ‘entertaining’ the application, are not as straightforward and distant as in the cases discussed in this post.  

– Sumit Chatterjee