Enforcement of Foreign Emergency Awards during COVID-19 in India

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We all have heard Mr Gary Born speaking as a President of Singapore International Arbitration Centre (‘SIAC’) in his fabulous webinar “An Evening with SIAC Court President” that SIAC has recently attended atleast 2 emergency arbitration in the times of COVID-19. However, the biggest question, besides the looming uncertainty on the recognition of emergency arbitration in India, is the enforcement of an interim emergency award especially in these unprecedented conditions when courts in most Indian states have limited their functioning and restricted it to hearing on extremely urgent matters. Let us examine the nuances pertaining with enforcement of interim emergency award in India.

Legal Framework In Respect Of Interim Relief Under The Arbitration & Conciliation Act, 1996

Section 2(1)(c) of the Arbitration & Conciliation Act, 1996 (‘Act’) defines ‘arbitral award’ to include an ‘interim award’ but interestingly it does not include an ‘order’ or an ‘interim measure’. The terminology used carry immense importance as Section 17 of the Act which empowers a tribunal to grant interim measures incorporates the words ‘order’ or ‘interim measures’ and not ‘arbitral award’ or ‘interim award’. In addition, Section 17 of the Act is not applicable in respect of arbitral proceedings held outside India[1] which clearly phases out the possibility of seeking interim an emergency relief under Section 17 of the Act coupled with Section 2(1)(d) which defines ‘arbitral institution’ as an institution designated by the Supreme Court or a High Court under the Act  and does not seems to include emergency arbitrator.

To cure this lacuna, the Law Commission of India, in its 246th Report proposed to amend Section 2(d) of the Act and recommended that the definition of ‘arbitral tribunal’ under Section 2(d) should include emergency arbitrator to give it the statutory recognition.

However, absent any direct recourse to enforce an interim emergency award, refuge can be taken to Section 9 of the Act, which confers jurisdiction upon the court to make orders by way of interim measures, so as to assist the arbitral tribunal in cases of urgency before there is an arbitration or during arbitral proceedings or at any time after the making of an arbitral award but before its enforcement.[2] Post Arbitration & Conciliation (Amendment) Act, 2015, remedy under Section 9 is made available to foreign seated international commercial arbitrations subject to the agreement between the parties. However, since Section 9 covers ‘interim measures by Court’, on literal interpretation, a typical interim order/award passed by a foreign seated arbitral tribunal may not appear to be enforceable directly under Section 9 of the Act.

In view thereof, a party seeking an interim measure in a foreign seated arbitration may lack efficacious remedy. In such condition, such party may have two possible remedies, but neither will be efficacious.

First, such party can obtain an interim emergency order/award from a foreign arbitral tribunal itself and file a civil suit to enforce the right created by the interim order. The interim order would not be enforceable directly by filing an execution petition as it would not qualify as a “judgment” or “decree” for the purposes of sections 13 and 44A of the Code of Civil Procedure, 1908 of India (which provide a mechanism for enforcing foreign judgments). Similarly, no suit for interim injunction simpliciter would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.[3] Secondly, in the event that the opposite party does not adhere to the terms of the foreign order, the latter party can initiate proceedings for contempt in the foreign Court and enforce the judgment of the foreign Court under sections 13 and 44A of the Code of Civil Procedure. However, in doing so, the urgency of the relief will lose its nature. Neither of these remedies is likely to provide a practical remedy to the party seeking to enforce the interim relief obtained by it through emergency arbitration.

Thus, the question arises under which provision does an interim emergency relief be recognized in India? Answer may be available in authority of cases discussed hereinafter.

Present authorities of HSBC v Avitel Post Studioz Ltd & Raffles Design International India Pvt. Ltd

On this issue, first in line is the case of HSBC v Avitel Post Studioz Ltd.[4] wherein the enforcement of an order passed by a SIAC emergency arbitrator was sought under Section 9 of the Act before the Bombay High Court. The Court while recognising the concept of emergency arbitration and granting interim relief inter alia held that the award-holder has not bypassed any mandatory conditions of enforceability since, in view of the Court, it was not trying to obtain a direct enforcement of the interim award.

Subsequently, similar issue came before the Delhi High Court in Raffles Design International India Private Limited v Educomp Professional Education Ltd[5]. In that case, the question before the Court was whether an award creditor can be granted interim reliefs under Section 9 of the Act when it had already been granted interim emergency relief by the arbitral tribunal constituted under the SIAC Rules. The Delhi High Court inter alia held that an emergency award in an arbitration seated outside India is not enforceable in India and the only method of enforcing the same would be for the petitioner to file a suit. At the same time, the Court also observed that the question whether the interim orders should be granted under Section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.

Thus, albeit the Delhi High Court entertained an interim emergency relief as a fresh application filed under Section 9 of the Act, it made it clear that such awards are not directly enforceable by the national courts and parties have to file a separate suit.

Therefore, the question arises what is proper recourse available to an award holder of such emergency award?

Options For Enforcement Of A Foreign Seated Interim Emergency Award

Filing an application under Section 9 of the Act   

As noted in the cases of HSBC and Raffles, such party make take recourse to Section 9 of the Act and file an independent application seeking interim measures basis such interim emergency award. However, proceedings under Section 9 are in no way an ‘enforcement’ of interim emergency award and the court would independently assess the claims and grant interim measures of protection based on the three-prong test of prima facie case, balance of convenience and irreparable harm.

File a Civil Suit relying on the dictum of Raffles

Under this recourse, the award creditor may institute a fresh suit seeking recovery of money awarded which can be filed anywhere in India where the Award debtor may have money[6] on the basis of the foreign interim emergency award to enforce the right created by the interim order. However, this will entail fresh adjudication and time-consuming process.

Taking recourse of Section 27(2) of the Act

By virtue of the Arbitration & Conciliation (Amendment) Act, 2015, Section 27 has been made applicable to international commercial arbitrations seated outside India subject to agreement between the parties. Under sub-clause 5 of Section 27, persons guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court. Relying on Section 27(5) of the Act, an award creditor may consider approaching the arbitral tribunal and requesting it to make a representation to the court to penalise the person violating the tribunal’s order i.e. interim emergency award.

In addition, enforcement of such interim emergency award may not be feasible under Part II of the Act since the definition of foreign award (or New York Convention Award) under Section 44 of the Act does not include an interim award whereas nature of emergency award is only an interim measure or relief and not final award. Since interim emergency award are subject to moderation by final award, enforcement under Part II of such award may not be feasible.

Comments

Thus, an award creditor may adopt either of the aforesaid recourses to ‘enforce’ an interim emergency award in India. However, as apparent, neither of these courses will be in the nature of ‘enforcement’ per se. In an application under Section 9, such an award will be tested on the parameters as propounded by Indian courts in respect of Section 9 of the Act and one cannot rule out the possibility of an Indian Court giving a divergent relief in contrast to what has been granted in an interim emergency award or in worst case granting no relief at all. Further, filing a fresh suit basis such an award, may result in prolonged litigation leading to the interim emergency award losing its purpose. In respect of Section 27(5) reliance may be placed on the decision of Alka Chandewar vs. Shamshul Ishrar Khan[7] wherein the Supreme Court interpreted Section 27(5) of the Act to mean that the persons guilty of any contempt to the arbitral tribunal during the conduct of the arbitral proceedings is within its ken. The Court further noticed that the entire object of providing that a party may approach the arbitral tribunal (under Section 17) instead of the Court (under Section 9) for interim reliefs would be stultified if interim orders passed by such tribunal are toothless. It is to give teeth to such orders that an express provision is made in Section 27(5) of the Act. However, this recourse may not be full proof reason being Section 27(5) is interpreted to inter alia supplement the interim relief granted by tribunal under Section 17 of the Act which appears in Part I of the Act and is therefore, may not be available in respect of foreign seated international commercial arbitrations. The Court may adopt the reasoning that a remedy which is not available directly under Section 17 of the Act cannot be sought indirectly from the channel of Section 27(5). Thus, absent an equivalent of Section 17 in Part II of the Act, this recourse may also have it counter arguments. In view thereof, the most efficacious course amongst the aforesaid and as also taken in HSBC and Raffles appears to be Section 9 whilst as stated earlier, it is not an enforcement mechanism per se. On the contrary, the Court will apply the yardstick of Section 9 to consider granting any interim remedy afresh.

[1] Raffles Design International India Private Limited and Ors. vs. Educomp Professional Education Limited and Ors. (07.10.2016 – DELHC) : MANU/DE/2754/2016

[2] The Indian Golf Union and Ors. vs. West Bengal Golf Society and Ors. (19.02.2020 – CALHC) : MANU/WB/0300/2020

[3] Sasan Power Limited vs. North American Coal Corporation India Private Limited (24.08.2016 – SC) : MANU/SC/0940/2016

[4] 2014 SCC OnLine Bom 929

[5] (2016) 234 DLT 349

[6] Brace Transport Corporation of Monrovia Bermuda v. Orient Middle East Lines Ltd. Saudi Arabia and Ors., 1993(4) Scale 33

[7] (2017) 16 SCC 119.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

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