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Understanding Section 9 Arbitration Act

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asmita sharma

on 31 May 2014

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Transcript of Understanding Section 9 Arbitration Act

Understanding Section 9,Arbitration and Conciliation Act 1996
Section 9
A party
may, before or during arbitral proceedings
or
at any time after
the making of the arbitral award
but before it is enforced
in accordance with section 36 (enforcement), apply to a court: -

(i) For the
appointment of a guardian
for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

ii. For an interim measure
of protection in respect of
any of the following matters, namely: -
(a) The
preservation, interim custody or sale of any goods
, which are the subject matter of the arbitration agreement;
(b)
Securing the amount in dispute
in the arbitration;

Jurisdiction Of the Court
When can section 9 Petition be Filed
1. Before the arbitration proceedings initiate
2. During the arbitration Proceedings
3. After the Award has been pronounced but before enforcement u/ s.36
Sundaram Finance Ltd. Vs NEPC India Ltd. 1999
SC adopted the view that u/s.9 the court has jurisdiction to pass interim orders even before the commencement of arbitration proceedings and appointment of arbitrator. Necessary- there must be satisfaction at the part of the court that the applicant will take necessary steps for commencing arbitral proceedings.
Section 9 and 17 of the act. (Comparison)
Points of difference:
SC in
MD Welfare Housing Organistaion vs. sumangal Services,(2006)
stated:
The Power of the arbitrator is limited one. He cannot issue any direction which would go beyond the reference of the arbitration agreement. An interim order must relate to the protection of the subject matter of dispute and the order may be addressed only to a party to the arbitration. It cannot be addressed to other parties...no power is conferred upon the arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof.
Certain Limitations
1. The power can be exercised by the court to the same extent and in the same manner as it could for the purpose of in relation to any proceeding before it.
2. Exercise of the power should not go against any power vested in an Arbitral tribunal.
As per Section 2(e) The act defines court as-
the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes
Ashok Traders vs. Gurumukh Das Saluja
Court explained that-
the word before means, inter alia 'ahead of; in presence or sight of; under the consideration or cognizance of'
The party invoking s.9 may not have actually commenced arbitral proceedings but must be able to satisfy the court that the arbitral proceedings are actually contemplated or manifestly intended..and are positively going to commence within reasonable time
BALCO vs. Kaiser Aluminum
Over ruled the position established by Bhatia International vs. Bulk Trading S. A & Anr.. The court stated that- the Principle of territoriality is the governing principle of the Arbitration Act. Accordingly, the seat of Arbitration determines the jurisdiction of courts. The Indian courts can only supervise the arbitration process when the seat of the arbitration is in India. It cannot intervene in, or supervise, arbitrations seated offshore.
Section 17
Section 9
1. Can be claimed only
after Arbitral tribunal has
been constituted upto
termination of the proceeding
1. can be claimed Before, During the arbitral proceedings and even after the award but before enforcement.
2. Parties have to Provide the
power to arbitrate in the
agreement.
Parties may take away the tribunal's
Power to grant an interim
relief via an agreement.
2. Courts have inalienable Powers.
5. No specific Provision for
enforcement of Interim
relief.
5.Enforcement under CPC.
3. Scope- Power is restricted
to Only subject matter of
dispute
3. Court has wide range of
Power.
4.Interim Relief Affects only
Parties to the suit
4. It may affect third parties
as Well
Grounds For Interim Relief
S.M. Dyechem Ltd. v. m/s. Cadbury ltd, 2000

Grant of temporary injunction, is governed by three basic principles, i.e.
1. Prima facie
2. irreparable injury
3. Balance of convenience
which are required to be considered in a proper perspective in the facts and circumstances of a particular case. But it may not be appropriate for any court to hold a mini trial at the stage of grant of temporary injunction.

Provisional remedies and interim relief come in many forms, depending on the parties involved and context of the dispute. Interim reliefs may be broadly classified into the following categories:

(a) Reliefs which are procedural in nature e.g., inspection of property in possession with third parties or compelling the attendance of a witness.

(b) Reliefs which are evidentiary in nature and are required to protect any document or property as evidence for the arbitration; and

(c) Reliefs which are interim or conservatory in nature and are required to preserve the subject matter of the dispute or the rights of a party thereto or to maintain the status quo and to prevent one party from doing a particular act or from bringing about a change in circumstance pending final determination of the dispute by the arbitrators.
Interim Measure: Concept
Interim Measures are granted during the pendency of adjudication of a dispute and are usually in the form of injunctions, specific performance, pre-award attachments etc. By definition, 'Interim Relief' are temporary or interim in nature and are granted in advance of the final adjudication of dispute.
Interim measure is
the use of judicial discretion
by a court and is not a right available to the parties.
General Factors:
Generally, an applicant party needs to establish the following factors:
1. there is an "urgent need" for the interim measure;
2. Irreparable Harm will result if the measure is not granted;
3.Potential harm if the interim measure is not granted substantially outweighs the harm that will result to the party opposing the measure if the measure is granted;
4. There is substantially possibility that the applicant will ultimately prevail in the dispute.

Section 5 of the Act no doubt forbids any intervention by any judicial authority, but any such exclusion of jurisdiction is only in matters, which are not otherwise specifically provided for.

Section 9 of the Act is, however, an exception to the general rule contained in Section 5 in as much as the former specifically empowers the Civil Court concerned to pass suitable orders on the subject and in relation to matters stipulated therein.

There is, therefore, no merit in the contention that Section 5 would exclude the jurisdiction of the Civil Court otherwise competent to entertain applications and pass orders in regard to the stipulated matters under Section 9 of the Act.


The Law Commission of India in its 176th report published in 2001 noted a number of loopholes in the provisions for interim relief in the 1996 Act which were exploited by the parties after the Act came into force.
Provisions contained in section 9 regarding the availability of interim relief even before the arbitration proceedings commence had been misused by parties. It so happened that after obtaining an interim order from the court, parties did not take initiative to have an arbitral tribunal constituted. This allowed them to reap the benefits of the interim order without any time limit.
The Law Commission in its 176th report, observed that very often, in the past, Parties had used underhand means to destroy evidence which they felt could go against them during the Arbitral Proceedings or had attempted to concoct witnesses and tamper with evidence, in the possession of a third party. As a result, there is an immediate need to change the provisions of the existing section, so that the Tribunal could get more powers to deal with such situations.


The contractual nature of arbitration gives rise to several unique difficulties.
1. Non-enforceable nature of interim measures granted by an arbitral tribunal is an accepted disadvantage that an Arbitral Tribunal faces when granting interim relief and without any coercive enforcement powers

2. A common difficulty in arbitration occurs when resolution of the dispute involves a third party against whom no order of the Tribunal shall be valid for the reason of lack of jurisdiction.

3. When interim measures of protection are needed against one of the parties to the arbitration, issues arise as to the availability of such remedies when they are sought at early stages in an arbitral proceeding.
Parties to arbitration also face difficulties when one party seeks interim relief at an early stage of the proceeding. In arbitration, it is typically difficult to obtain such relief expeditiously, because the Arbitral Tribunal has not yet been constituted. Thus, most parties in need of this immediate assistance seek the aid of national courts for this emergency relief. If a party seeks to delay the opposing party’s request for an injunction or attachment, that party can slow the process considerably by taking a long time to select an arbitrator.

4. The Tribunal’s jurisdiction to grant interim measures may be limited by the governing law of the arbitration.

Interim measures ordered by arbitral tribunal.—
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.
(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).
SECTION 17
TYPES OF INTERIM MEASURES:
d) Interim injunction or the appointment of a receiver;

(e) Such other interim measure of protection as may appear to the court to be just and convenient,

And the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.
(c) The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

REJECTION OF APPLICATION FOR APPOINTMENT
If during the Pendency of the application under S. 9, it is brought to the note of the court that an application under S.11 for constitution of the arbitral tribunal has been rejected, then no relief will be granted under S.9 as well.
In such circumstances future arbitration proceedings are clearly not possible and there can therefore be no "proximately contemplated" or "manifestly intended arbitral Proceedings." (Masood Mhd. Husain vs Gulam Rasul Mhd. Ali, 2006)
Nature of Proceeding:
Having regard to the scheme of the act, an application under S. 9 would not be in the nature of a suit or plaint. therefore, order 7, rule 11 of CPC has no application to such proceedings.

An application under Section 9 can be entertained by the court independent of provisions of S. 34
DIFFERENCE BETWEEN INTERIM RELIEF AND INTERIM AWARD
Sec. 9 as an exception to Sec. 5:

An order granting interim relief, unlike an award, does not decide the entitlement or liabilities of the parties.


If an interim award is disguised as an order under S. 17 but does not provide protection for the subject matter rather is an order granting 'claim' of a party, such order cannot be taken as an order of interim relief, even though the arbitrary states that the award is made under S.17 and also awards provision of security, it does not affect the nature of the award as being one made under section 31(6). ( Asian electronics Ltd vs. M.P State Electricity Board, 2007)
- Asmita Sharma

Guided by:
Mr. Kundan Singh Rathore

DRAWBACKS EXPERIENCED IN THE PROVISIONS FOR INTERIM RELIEF
Difficulties in granting interim measures in Arbitration:
SCOPE OF POWER OF COURT UNDER SECTION 9
SBP & Co. Patel Engineering Ltd.
"Section 9 enables a Court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief as contemplated by the Section. When a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the Court which was approached had no jurisdiction to pass any order in terms of Section 9 of the Act, that Court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. There is no indication in the Act that the powers of the Court are curtailed on these aspects. On the other hand, Section 9 insists that once approached in that behalf, "the Court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it". Surely, when a matter is entrusted to a Civil Court in the ordinary hierarchy of Courts without anything more, the procedure of that Court would govern the adjudication."
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