Delhi High Court: Bar Under Section 9(3) Of The Indian Arbitration Act And Its Applicability On The Foreign Seated Arbitration

Delhi-High-Court

Section 9(3) of the Arbitration & Conciliation Act, 1996 (‘Indian Arbitration Act’) as inserted via Arbitration & Conciliation (Amended) Act, 2015 inter alia creates a bar on the Court to entertain application seeking interim measures once the arbitral tribunal has been constituted (‘the bar’) except in cases where ‘circumstances exist which may not render the remedy provided under section 17 efficacious.’ Pertinently, Section 17 which appears in Part I of the Indian Arbitration Act (the part applicable on domestic arbitrations) deals with interim measures ordered by arbitral tribunal. The question thus arises as to whether the reference of Section 17 in Section 9(3) of the Indian Arbitration Act implies that the said bar is only applicable to India-seated arbitrations and not to foreign seated arbitrations? In other words, whether an application under Section 9 seeking interim measures from the court can be entertained by the Court in foreign seated arbitrations even after the constitution of the arbitral tribunal. This question was decided by the Delhi High Court recently in Ashwani Minda & M/S Jay Ushin vs M/S U-Shin Limited and M/S Minebea FAO(OS)(COMM) 65/2020 decided on 7 July 2020.

It all began from 246th Report of the Law Commission (‘LCR’) which paved way for the Arbitration & Conciliation (Amendment) Act, 2015 and inturn insertion of Section 9(3) in the Indian Arbitration Act amongst various other major reforms. In LCR, Section 9(3) in its present form was suggested to be inserted with the intention to reduce the role of the Court in relation to grant of interim measures once the Arbitral Tribunal has been constituted. After all, once the Tribunal is seized of the matter it is most appropriate for the Tribunal to hear all interim applications. This also appears to be the spirit of the UNCITRAL Model Law as amended in 2006.

Thus, taking into account, the very roots of amendment by which Section 9(3) of Indian Arbitration Act was introduced, the Court observed that although the said provision, on its terms, expressly relatable to India-seated arbitrations, as evidenced by the reference to Section 17 of the Indian Arbitration Act, the principle thereof is equally applicable when interim measures are sought in the Indian courts in connection with a foreign-seated arbitration. Resolution of disputes by a tribunal of the parties’ choice, and reduced interference by courts, are amongst the central features of arbitration. Section 9(3) reflects that understanding, and manifests a legislative preference that the grant of interim measures ought to be considered by the arbitral tribunal, once constituted, rather than by the courts. It is only when the remedy before the tribunal lacks efficacy, that a party can seek interim measures from the court under Section 9.

The Court further remarked that the primary purpose of Part I of the Indian Arbitration Act (which inter alia includes Section 2, 9 and 17) is to govern India-seated arbitrations. The reference in Section 9(3) to Section 17 alone, cannot therefore be dispositive of the question as to whether the same principle applies where the arbitration is seated outside India. Thus, the absence of a specific reference to foreign-seated arbitrations in Section 9(3) ought not to be construed as a widening of the Section 9 power, to cover cases where the arbitral tribunal has been constituted, and is capable of granting efficacious relief. Such an interpretation would not just extend the scope of Section 9, but would amount to the provision being available in the Indian courts in connection with foreign-seated arbitrations, but not in connection with India-seated arbitrations.

In view thereof, the Court held that, although an application under Section 9 is maintainable in connection with a foreign-seated arbitration, an application thereunder would not lie after the constitution of the arbitral tribunal, unless the applicant demonstrates that it does not have an efficacious remedy before the tribunal.

Test for determining the ‘Efficacy of Remedy’

In considering an application under Section 9(3) for interim measures in foreign seated arbitration, the Court would have regard to the question as to whether the remedy before the arbitral tribunal would be efficacious or not. This caveat is incorporated in Section 9(3) and in court’s view, would turn upon the facts and circumstances of each case, including the amplitude of the power conferred upon the arbitral tribunal. In making this assessment, the manner in which the applicant has framed the relief sought cannot be determinative; the more appropriate test is whether the tribunal is sufficiently empowered to grant effective interim measures of protection.

Whether interim measures of protection from the Court should be granted to a party which has failed in obtaining similar relief from the emergency arbitrator under the rules of institutional arbitration even after the constitution of the arbitral tribunal?

After the amendment of Section 2(2) by the Arbitration and Conciliation (Amendment Act), 2015 a party to a foreign-seated arbitration has the option of seeking interim measures of protection in the Indian courts, or of going to the seat court or the tribunal for interim relief. The question then arises as to whether having chosen to invoke the procedure provided in the institutional rules and go to the emergency arbitrator, and having failed in its endeavor to obtain interim relief, the party can then seek the self-same relief in Section 9 proceedings? In response to this question, the Court has made a categorical observation that neither a purposive interpretation nor the legislative history of the 2015 Amendment reveal an intention to permit such a course. The legislative intent was to provide an efficacious alternative means for seeking relief in the Indian courts, where the arbitral tribunal is either not constituted or otherwise unable to grant efficacious relief. Having chosen the tribunal, the seat, the applicable rules and the forum from which to seek interim measures, such party cannot revise that choice in Section 9 proceedings.

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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