Interim Award On Admitted Liability In Arbitration Proceedings

Under Section 9 of India’s Arbitration and Conciliation Act, 1996 (the Act), Indian courts can
grant interim relief in support of arbitration. Parties can approach courts for interim relief at
any point before the constitution of the arbitral tribunal.

There are four major changes with respect to the interim reliefs made to the Arbitration Act
after the promulgation of the Arbitration and Conciliation (Amendment) Ordinance, 2015
(the, “Amendment Ordinance”). Interim reliefs are one of the first provisions where changes
made by the Amendment Ordinance will be caused to parties initiating arbitrations.

Interim reliefs are contained under Sections 9 and 17 of the Arbitration and Conciliation Act,
1996 (the, “Arbitration Act”). Both are contained in Part – I of the Arbitration Act and were
applicable to domestic arbitrations, i.e. arbitrations seated in India. While Section 9 contains
the power of a court to grant interim measures, Section 17 is a similar power conferred to an
arbitral tribunal. Interim measures are generally granted to preserve the status of the property
in dispute, or to prevent prejudice to any party before the commencement or during the
pendency of the arbitration. Several defects were noticed in the practical implementation of
these remedies that resulted in several amendments being made to them.

The changes to these provisions include, (1) extension of interim measures under Section 9 to
international commercial arbitrations; (2) fixed timelines for initiating an arbitration after
obtaining an interim relief under Section 9; (3) bar on parties to approach a court for interim
reliefs during the pendency of the arbitration; (4) interim reliefs are now enforceable as
decrees of courts. Each change with its intended effect is explained below. Interim Measures
under Section 9 now extend to International Commercial Arbitrations

Amendment A proviso has been added to section 2 of the Principal Act, which now makes
Section 9 of the Arbitration applicable to international commercial arbitration even if the
place of arbitration is not in India.

Reasoning

Section 2(2) of the Arbitration and Conciliation Act, 1996 mentioned in Part I of the Act,
earlier used to state that, “[t]his Part shall apply where the place of arbitration is in India.” In
comparison, article 1(2) of the UNCITRAL Model Law, which had been mentioned in the
preamble of the Act, stated that “the provisions of this Law…apply only if the place of
arbitration is in the territory of this State.” The preamble of the Act mentions that it is
expedient to frame laws regarding arbitration and conciliation keeping the Model Law in
regard.

The fact that the word “only” was not included in the Indian statute despite being mentioned
in the Model Law, which the Indian statute seeks to implement, has raised some confusion
whether this leads to a conclusion that the Indian Act is applicable for even those arbitration
proceedings for which the seat is not India. This issue has been dealt with in two significant
Supreme Court cases.
These areBhatia International vs. Interbulk Trading SA [(2002) 4 SCC 105] and Bharat
Aluminum and Co. vs. Kaiser Aluminium and Co. (BALCO) [(2012) 9 SCC 552].

The Supreme Court in Bhatia, held that Part I mandatorily applied to all arbitrations held in
India. In addition, Part I applied to arbitrations conducted outside India unless it was
expressly or impliedly excluded. This position was followed in several cases until the
BALCO judgment. The Supreme Court inBALCO decided that Parts I and II of the Act are
mutually exclusive of each other and the intention of Parliament was that the Act is territorial
in nature and sections 9 and 34 will apply only when the seat of arbitration is in India.

Though the BALCO judgment was although for the favourable purpose of reducing judicial
interference but it also led to certain unwanted results. The Law Commission has provided
certain instances to illustrate this point. For example, when the assets of a party are located in
India, and there is likelihood that that party will dissipate its assets in the near future, the
other party will lack an efficacious remedy if the seat of the arbitration is abroad. It is a
possibility that a foreign party would obtain an arbitral award in its favour only to realize that
the entity against which it has to enforce the award has been stripped of its assets and has
been converted into a shell company. Due to this the Amendment Ordinance has made
changes and now parties to arbitration proceedings taking place outside of India will be able
to approach Indian courts for interim measures even before the commencement of arbitration
proceedings.

Fixed timelines for initiating arbitration after interim measures under Section 9

Amendment

The amendment has inserted sub-sections (2) and (3) to the original section 9 which has been
renumbered as section 9(1) now. Section 9(2) states that if a court passes an interim order
under section 9(1) before the commencement of arbitral proceedings, the arbitral proceedings
shall commence within a period of 90 days of the passing of such order.

Reasoning

Prior to the amendment there was no express duty on a party approaching a court for interim
relief (usually prior to the commencement of the arbitration) to initiate arbitration. This
resulted in a situation that a party would obtain interim reliefs and would prolong intiating the
arbitration given that its interests were protected. This would not only pose risks of abuse of
process but also delay the initiation and the determination of the dispute through arbitration.
The insertion of timelines is a positive change made overall in the scheme of the act to ensure
discipline and speedy resolution of disputes through arbitration.

Section 9 cannot be availed during the conduct of the Arbitration

Amendment

The insertion of Section 9(3) reduces the amount of intervention by the judiciary in terms of
interim measures. It states that the after the arbitral tribunal has been constituted, the court
shall not entertain any application under section 9(1) unless there are circumstances which
can render remedy provided under section 17 ineffective.

Reasoning

The position in the amended statute was largely being followed by courts however there still
remained a fear of forum shopping by parties. This danger was given the powers under
Section 9 and 17 could be exercised concurrently. Given an express change ordinarily Section
9 proceedings now will not be available to parties during the pendency of the arbitration.
Such measures though may be resorted to when Section 17 proceedings are ineffective. This
will now be required to be specifically pleaded by a party which prefers such an application
seeking interim measures from the Court under Section 9. One instance where such an
application can be made, and such an exemption may be availed is when the interim measure
concerns a third party which is not before the Arbitral Tribunal. Given that the Arbitral
Tribunal is a creature of specific agreement between parties, it can only pass interim orders
under Section 17, which bind persons before it. This limitation of jurisdiction does not apply
to interim measures that can be granted by Courts under Section 9.

Interim Measures under Section 17 now enforceable as decrees

Amendment

Section 17 of the principal Act has been replaced with a new section that gives more teeth to
interim measures by arbitral tribunals. Under the old section, the tribunal could pass interim
measures but such measures could not be implemented, as they were not treated at par with
an order of court. The new section lays down that any order passed by the arbitral tribunal
under section 17 will be deemed to be an order of the court for all purposes and be
enforceable under CPC as if it were a on order of the court

Reasoning

Under section 17, the arbitral tribunal has the power to order interim measures of protection,
unless the parties have excluded such power by agreement. But section 17 of the principal
Act lacked effectiveness due to the absence of statutory mechanism for the enforcement of
interim orders of the arbitral tribunal.

In Sundaram Finance Ltd v. NEPC India Ltd. [(1999) 2 SCC 479], the Supreme Court held
that though section 17 gives the arbitral tribunal the power to pass orders, the same cannot be
enforced as orders of a court. In M.D. Army Welfare Housing Organisation v. Sumangal
Services Pvt. Ltd. [(2004) 9 SCC 619], the Court had held that under section 17 of the Act no
power is conferred on the arbitral tribunal to enforce its order nor does it provide for its
judicial enforcement.

The Delhi High Court tried to find a solution to this problem in the case of Sri Krishan v.
Anand [2009) 3 Arb LR 447 (Del)]. The Court held that any person failing to comply with
the order of the arbitral tribunal under section 17 would be deemed to be “making any other
default” or “guilty of any contempt to the arbitral tribunal during the conduct of the
proceedings” under section 27 (5) of Act. The remedy of the aggrieved party would then be
to apply to the arbitral tribunal for making a representation to the Court to mete out
appropriate punishment. Once such a representation is received by the Court from the arbitral
tribunal, the Court would be competent to deal with such party in default as if it is in
contempt of an order of the Court, i.e., either under the provisions of the Contempt of Courts
Act or under the provisions of Order 39 Rule 2A Code of Civil Procedure, 1908.

The Law Commission in its report felt that the judgment of the Delhi High Court in Sri
Krishan v. Anand is not a complete solution and recommended amendments to section 17 of
the Act which would make orders of the Arbitral Tribunal enforceable in the same manner as
the Orders of a Court. Keeping these suggestions in mind the Arbitration Ordinance remedies
the enforceability of interim measures under Section 17.

Subsequent to the amendment of 2015, section 36 of the Arbitration and Conciliation Act,
1996 stands amended.

One of the declared objectives of the Arbitration and Conciliation Act, 1996 is that every
final award is to be enforced in the same manner as the decree of the Indian court would be. It
is upon the losing party to object to the arbitral award and file an application for setting it
aside. However, if the objections to the award are not sustained or if no objections are filed
within the time limit, the award itself becomes enforceable as a decree of the court.

A domestic award can be challenged and set aside only by way of an application under
Arbitration and Conciliation Act, 1996, s 36 and only the basis of the circumstances listed
under it. An application for setting aside an award must be made within three months of
receipt of the award by the applicant subject to a further extension of 30 days on sufficient
cause being shown. An application beyond this period is time barred and further delay cannot
be condoned.

The different types of awards which are enforceable include:

Money award

Award containing injunction

Declaratory award

Proper forum to approach for enforcement

For the purposes of the Arbitration and Conciliation Act, 1996, ‘court’ means the principal
Civil Court having original jurisdiction to decide the question forming the subject matter of
the arbitration, if the same were a subject matter of a suit. The aggrieved party can, thus,
bring its application to set aside the award before the court where the successful party has its
office or where the cause of action in whole or in part arose or where the arbitration took
place.
Time limit

Any application filed under Arbitration and Conciliation Act, 1996, s 34 for setting aside the
award must be made within 3 months from receipt of the same. This period can be extended
by the court by a further period of 30 days on a sufficient cause being shown, but not
thereafter. The court normally allows a wide scope to the meaning of what constitutes
‘sufficient cause’ and if it is convinced of the genuineness of the delay in filing an application
under Arbitration and Conciliation Act, 1996, s 34, the delay is condoned.

Procedure of enforcement

The provision of enforcement of an arbitral award is given under Arbitration and Conciliation
Act, 1996, s 36 as mentioned above. The party, after the expiry of the time for setting aside
the arbitral award, as mentioned above, can file an application for execution before the court
of the competent jurisdiction for the enforcement of the arbitral award.

The Supreme Court of India (“Court”) in a landmark decision titled “BCCI vs. Kochi Cricket
Pvt. Ltd. (previously covered in a blog post) clarified the applicability of the Arbitration and
Conciliation (Amendment) Act, 2015 (“Amendment Act”) to pending arbitration and court
proceedings commenced under the Arbitration and Conciliation Act, 1996 (“1996 Act”). The
Court held the following:

Subject to party autonomy, the amendments would not apply to “arbitral proceedings” that
had commenced before the commencement of the Amendment Act.

The amendments would apply to court proceedings which have commenced, “in relation to
arbitration proceedings”, on or after the commencement of the Amendment Act.

Exception: The amendments would apply to enforcement of an award under Section 36, even
if the court proceedings relating thereto have been filed before the commencement of the
Amendment Act.

Section 36 of the 1996 Act provides for enforcement of an arbitral award in the same manner
as if it were a decree of a court in India. The Court carved an exception to Section 36 of the
1996 Act on the ground that enforcement proceedings are entirely procedural in nature, and
could be applied retrospectively since no rights are vested in the parties seeking such
enforcement. This post seeks to analyse the Court’s decision in carving out the exception for
Section 36, and also to highlight practical problems which may arise in the aftermath of the
decision.

Section 36 of the 1996 Act to apply retrospectively and no automatic stay on enforcement of
the award – exception to the general rule.

The Court held that the Amendment Act was prospective in nature and would apply in
relation to arbitration proceedings commenced after the commencement of the Amendment
Act, i.e., 23 October 2015. In the pre-amendment scenario, Section 36 provided for an
automatic stay on the enforcement of an award until the expiry of the time limit for
challenging the award, or until the disposal of such a challenge. Under the Amendment Act,
there was no longer a provision for automatic stay on enforcement of an award and such stay
could only be granted upon a request being made to the court.

The Court held that the amended Section 36 would apply to those applications for setting
aside an arbitral award under Section 34 which had been filed after the commencement of the
Amendment Act. Further, the amended Section 36 would also apply retrospectively to
Section 34 applications that had been filed prior to the commencement of the Amendment
Act.

In declaring that Section 36 applies retrospectively, the Court analysed Section 6 of the
General Clauses Act, 1897 which provides that the repeal of any enactment does not affect
any right or privilege accrued or incurred under the repealed enactment. According to the
Court, an automatic stay of awards could not be claimed as a vested right under Section 6
because enforcement is purely procedural and not substantive. Therefore, the provisions of
the amended Section 36, being purely procedural, could apply retrospectively. The operative
portion of the judgment which concludes that Section 36 is purely procedural reads as
follows:

“Since it is clear that execution of a decree pertains to the realm of procedure, and that there
is no substantive vested right in a judgment debtor to resist execution, Section 36, as
substituted, would apply even to pending Section 34 applications on the date of
commencement of the Amendment Act”

In concluding so, the Court seems to have only considered precedents on execution of a
decree, and not on enforcement of an award under Section 36. The Court did not consider if
the un-amended Section 36 was also purely procedural or if there was a change in its nature
due to the Amendment Act vis-à-vis substance and procedure. In arriving at the conclusion
that Section 36 of the 1996 Act is purely procedural, the Court only considered the post-
amendment scenario which does away with automatic stay on awards.

The essential issue which escaped the Court’s consideration is whether Section 36 could have
been considered as purely procedural even before the amendments were introduced.
Enforcement of an award, as provided for under Article 36 of the Model Law, does not only
relate to procedural aspects but also contains substantive grounds of challenging an award.
Similarly, the Article V of the New York Convention contains substantive objections to resist
the enforcement of an award. While such objections and grounds for setting aside a domestic
award are provided for under Section 34 of the 1996 Act, perhaps the Court should have
considered if Section 36 of the 1996 Act could be read in isolation from Section 34 of the
1996 Act. An argument was raised before the Court that Section 36 proceedings could not be
considered as a proceeding which was independent of a proceeding under Section 34 of the
1996 Act. However, the Court considered it unnecessary to go into the “by-lane of forensic
argument” about Section 36 standing independent of Section 34 of the Act. Once the Court
had decided that the Amendment Act was to apply prospectively, there should have been
compelling reasons to carve an exception to this general rule.
Practical considerations

The Court’s decision that Section 36 of the Act applies retrospectively because it is purely
procedural may lead to further litigation on retrospective application of other similarly placed
provisions which concern only procedural issues. The Court did not undertake a detailed
analysis as to why the proceedings under Section 36 were not proceedings “in relation to
arbitration”. This leaves room for further attempts at seeking retrospective applicability of
other similarly situated provisions on the basis that they are purely procedural. For instance,
what would be the fate of an interim order rendered by a tribunal under Section 17 of the
Act? Section 17 of the 1996 Act is modelled on Article 17 of the UNCITRAL Model Law
and confers powers upon an arbitral tribunal to issue interim measures. Before the
amendments, Section 17 of the Act did not provide for any court assisted measure for
enforcing an interim award. The Amendment Act has led to the insertion of Section 17(2) to
provide that an interim order shall be enforceable as if it were an order of the court. On the
basis of the Court’s decision, it may be possible to argue that enforcement of an award being
procedural and “in relation to arbitration”, Section 17(2) should also apply retrospectively for
enforcement of an interim award made before the enactment of the Amendment Act.

To consider another instance, an arbitration commences under the 1996 Act and a challenge
is made to the appointment of one of the arbitrators on the ground of independence or
impartiality. The tribunal decides under the 1996 Act as it stood before amendments, rejects
the challenge and delivers the final award. After the amendments are introduced, a party
approaches the Court under Section 34(2)(a)(v) of the Amendment Act for setting aside the
award on the ground that the composition of the tribunal was improper. The Amendment Act
led to the insertion of the Fifth Schedule which lists down the grounds which give rise to
justifiable doubts as to the independence or impartiality of arbitrators. The tribunal while
deciding under the 1996 Act would not have considered the grounds listed in the Fifth
Schedule since it was inserted subsequently. However, the court while considering the
Section 34 application under the Amendment Act would scrutinize the award on the basis of
the Fifth Schedule. This would lead to different grounds being considered by the tribunal and
the court in deciding the same issue.

The Court’s decision goes a long way in granting relief to award-debtors who have been
waiting to enforce their awards, but has also caused an uncertainty in the law of arbitration.
The decision also runs contrary to the recommendations made by the Srikrishna Committee
that the Amendment Act should not apply retrospectively lest it would result in inconsistency
and uncertainty, and would cause prejudice to the parties.

The Arbitration and Conciliation (Amendment) Bill, 2018 (“2018 Bill”) tries to resolve these
uncertainties and clarifies that the Amendment Act would not apply to arbitral proceedings
and court proceedings (arising out of such arbitral proceedings) that have commenced before
the Amendment Act. The 2018 Bill further provides that the Amendment Act would only
apply to arbitral and court proceedings which commence after the Amendment Act. It may be
important to note that the provisions of the 2018 Bill were brought to the Court’s attention
during the hearing for BCCI v. Kochi but the Court was not inclined to consider it. The
Court had observed that the amendments in the 2018 Bill would put all the important
amendments of the Amendment Act on a “back-burner”. Yet, the 2018 Bill has been passed
by the Lower House of the Parliament without making any substantive modifications. Once
enacted, it will be interesting to see how courts interpret the 2018 Bill on the applicability of
the Amendment Act.

Baker Hughes Singapore Pte vs Shiv-Vani Oil And Gas Exploration ... on 11 November,
2014 Bench: R.D. Dhanuka IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 1127
OF 2014

This petition is filed under section 37 of the Arbitration and Conciliation Act, 1996,
(hereinafter referred to as the said Act) for impugning the order dated 19 th May, 2014 passed
by the learned arbitrator rejecting the application under section 17 2 arbp-1127.2014.doc filed
by the petitioner for interim measures of protection

On 24th April, 2013 the petitioner once again issued notice invoking arbitration agreement
and suggested the name of Mr. Anant Shende advocate as the sole arbitrator. The petitioner
thereafter filed a petition under section 9 of the Arbitration and Conciliation Act, 1996
against the respondent seeking relief in the nature of attachment before judgment in respect of
the claim of the petitioner. By an order dated 21st March, 2014 it was ordered that the said
petition shall be converted into an application under section 17 of the Act and all the
affidavits shall be treated as pleadings of the respondent. This court had directed the learned
arbitrator to dispose of the said application within two months from the date of the said order.
The respondent was directed to file an affidavit disclosing their encumbered and
unencumbered assets. It was made clear that while passing the said order the relative merits
of the respective cases was not considered by this court. The respondent was free to object to
any part of the prayers for interim reliefs being granted. The petitioner 8 arbp-1127.2014.doc
did not press his prayer for receiver in the application under section 17. The parties agreed
that the learned arbitrator may consider the application under section 17 on the basis that he
had jurisdiction to consider such an application.

By an order dated 19th May, 2014 the learned arbitrator rejected the application filed by the
petitioner before this court under section 9 which was treated as an application under section
17 on the ground that at this stage it was not necessary to go into the details of the merits of
the claim and counter claim since evidence was yet to be led. It is held that both the parties
are disputing the correctness of the documents produced and the accuracy of the amounts
mentioned therein. Though the claim is not in the nature of unliquidated damages, the amount
of alleged liability of the respondent is yet to be ascertained. The learned arbitrator also
noticed that as against the claim of USD 2495809.75, there was a counter claim of USD 9
arbp-1127.2014.doc 16398542.61. The learned arbitrator after referring to the judgment of
the Supreme Court in case of Firm Ashok Traders Vs. Gurmukhdas Saluja and Ors. (2004) 3
SCC 155 and judgment of Supreme Court in case of Gail India Limited Vs. Lal Kishan
Agarwal Industries Ltd. (2008) 8 SCC 161 and judgment of Delhi High Court in case of
Intertole ICS Cecons O & M Company Vs. National Highways Authority of India (2013) ILR
2 Delhi 1018 held that a bare perusal of language used in section 9 elaborating different
interim measures under clause (i) and (ii) shows the width and amplitude of the court's
powers as compared to the limited power of the arbitral tribunal under section 17 ordering a
party to take any interim measure or protection in respect of the subject matter of the dispute.
It is held that it was not possible to hold that the claimant had made out a case at this stage for
passing an interim order as prayed in terms of prayer clause (a) or (b) and rejected the said
application. The learned arbitrator however, made it clear that he had not expressed any
views on the merits of the claim, since the evidence was yet to be laid and what was stated in
that order was merely for the purpose of deciding of the said application under section 17 of
the Act.

It is submitted by the learned counsel that the parties had not argued the petition filed by the
petitioner under section 9 before this court on merits. The said petition was converted into an
application under section 17 by this court by order 11 arbp-1127.2014.doc dated 21st March,
2014 recording an agreement that the learned arbitrator may consider the application under
section 17 on the basis that he had jurisdiction to consider such an application. The
respondent was however, granted liberty to object any part of the prayers for interim relief
being granted and keeping all contentions of parties on merits expressly open.

Learned counsel submits that considering such financial condition of the respondent the
learned arbitrator ought to have exercised powers under section 17 and ought to have directed
the respondent to provide a security and/or to deposit the amount claimed by the petitioner. It
is submitted by the learned counsel that under 12 arbp-1127.2014.doc section 17(2) of the
Act, it is contemplated that the arbitral tribunal may require a party to provide appropriate
security in connection with a measure ordered under sub section (1) of sub section (17). Such
order for providing appropriate security can be ordered by the tribunal under section 17(1) of
the Act itself. It is submitted that securing a money claim is one of the form of interim
protection. If security can be ordered under section 17(2) in connection with a measure
ordered under section 17(1), such relief for providing security can be granted as part of
section 17(1) by way of providing security. It is submitted that money claim itself is the
subject matter of dispute and thus security in connection with money claim can be ordered
under section 17(1) itself. Learned counsel submits that the learned arbitrator however, has
failed to exercise his powers though the petitioner had made out a prima facie case for
securing their claim which was subject matter of the dispute.

Learned counsel placed reliance on the judgment of Kerala High Court in case of K.G.
Rathishkumar Vs. NPR Finance Limited 2012 SCC Online Kerala 29908 and in particular
paragraph 3 thereof and would submit that under section 17 of the Arbitration and
Conciliation Act, 1996 any interim measure or protection can be ordered by the learned
arbitrator which may include an order for providing appropriate security in connection with
the measure ordered under section 17(1) of the Arbitration and Conciliation Act, 1996.
Paragraph 3 of the said judgment reads thus : "3. We are satisfied that the impugned order is a
non-speaking one and hence it is unsustainable. Further, learned counsel for respondent
submitted that even if the said order is set aside, the order of attachment may be allowed to
continue for a particular or until respondent gets an order from the arbitrator. Admittedly,
arbitration proceedings are initiated. Therefore, going by Section 17 of the Arbitration and
Conciliation Act, 1996 any interim measure of 13 arbp-1127.2014.doc protection afforded to
a party by a Arbitral Tribunal. The Tribunal may also require the party to provide appropriate
security in connection with the measure ordered under Section 17(1) of the Arbitration and
Conciliation Act, 1996. Therefore, having initiated arbitral proceedings it is possible to obtain
an order from the Arbitral Tribunal itself."

24. Learned counsel placed reliance on the judgment of Andhra Pradesh High Court in case
of SPA Agencies (I) Pvt. Ltd. Vs. Harish Rawtani, 2009 SCC Online (2010) 2 ALR 221 and
more particularly paragraph 8 in support of the submission that arbitrator may order for an
injunction to furnish security, to appoint commissioner to take evidence. Paragraph 8 of the
said judgment reads thus : "8. Section 17(1) of A & C Act is couched in broad language and
confers power on arbitral tribunal to pass interlocutory orders as may be considered
necessary. In our considered opinion, having regard to the phraseology in Section 17(1), an
arbitrator can pass all orders as may be necessary. These orders may include an order - for
injunction, to furnish security, to appoint commissioner to take evidence (in addition to
Section 27), to appoint experts etc. But any such interim order shall be directed only to
parties to arbitral proceedings and not to third party, and any interim order by the arbitrator
cannot go beyond the reference of arbitration agreement. Be it also noted that a petition under
Section 9 is not a suit before a Civil Court, but a remedy provided to a party to an arbitration
agreement to seek interim order in relation to subject-matter of the arbitration pending
adjudication."

25. Learned counsel placed reliance on the judgment of the Supreme Court in case of Gail
India Limited Vs. Bal Kishan Agarwal Glass Industries Pvt Ltd. (2008) 8 SCC 161 in support
of its submission that under section 17 of the Arbitration and Conciliation Act, interim orders
can be passed by the learned arbitrator.

26. Learned counsel placed reliance on the judgment of Division Bench of this court in case
of Nimbus Communications Ltd. Vs. Board of Control for Cricket in 14 arbp-1127.2014.doc
India and another, 2012 (5) Bom.C.R. 114 and in particular paragraph 24 and would submit
that the principles laid down by the Division Bench of this court that when the court decides a
petition under section 9 must have regard to the underline purpose of the conferment of the
power upon the court which is to promote the efficacy of arbitration as a form of dispute
resolution shall be applied to the powers of arbitrator under section 17. Learned counsel
submits that powers of arbitrator under section 17 and powers of court under section 9 for
granting interim measures by way of attachment before judgment are identical. A party
cannot be compelled to approach the court under section 9 for seeking an order by way of
attachment before judgment. Paragraph 24 of the judgment of Division Bench of this court in
case of Nimbus Communications (supra) reads thus: . A close reading of the judgment of the
Supreme Court in Adhunik Steels would indicate that while the Court held that the basic
principles governing the grant of interim injunction would stand attracted to a petition under
Section 9, the Court was of the view that the power under Section 9 is not totally independent
of those principles. In other words, the power which is exercised by the Court under Section 9
is guided by the underlying principles which govern the exercise of an analogous power in
the Code of Civil Procedure 1908. The exercise of the power under Section 9 cannot be
totally independent of those principles. At the same time, the Court when it decides a petition
under Section 9 must have due regard to the underlying purpose of the conferment of the
power upon the Court which is to promote the efficacy of arbitration as a form of dispute
resolution. Just as on the one hand the exercise of the power under Section 9 cannot be
carried out in an uncharted territory ignoring the basic principles of procedural law contained
in the Code of Civil Procedure 1908, the rigors of every procedural provision in the Code of
Civil Procedure 1908 cannot be put into place to defeat the grant of relief which would
subserve the paramount interests of justice. A balance has to be drawn between the two
considerations in the facts of each case. The principles laid down in the Code of Civil
Procedure 1908 for the grant of interlocutory remedies must furnish a guide to the Court
when it determines an application under Section 9 of the Arbitration and Conciliation Act,
1996. The underlying basis of Order 38 Rule 5 therefore has to be borne in mind while
deciding 15 arbp-1127.2014.doc an application under Section 9(ii)(b)."

27. Learned counsel placed reliance on the judgment of this court in case of Ircon
International Limited Vs. Hathway Cable and Detacom Pvt. Ltd., and another, 2010 VOL.
112 (2) BLR 491 and in particular paragraph 31 and would submit that jurisdiction of the
court should be exercised so as to achieve the ends of justice and not unnecessarily restrict its
discretion. Particularly the later approach would lead to frustrate the very object of the Act.
Paragraph 31 of the said judgment of the Division Bench reads thus : "31. Rival submissions
have been made before us with regard to operation and effect of proviso to Sub-clause (iv) of
Clause (a) of Section 34. According to the appellants the proviso applies to the entire section
while according to the respondent, its operation is limited to subclause (iv) alone. There
seems to be some merit in the contention of the respondent inasmuch as the language of the
proviso is directly referable to the section itself and, thus, must take its colour from the
principal section viz. 34(2)(iv). A reading of the proviso shows that where severability is
possible, the court in the class of the cases falling under sub clause (iv) is expected to set
aside the award partially. In other words, a greater obligation is placed upon the court to
adopt such an approach when the case in hand is covered under the provisions of sub clause
(iv). This contention will not have any adverse effect on the interpretation and scope of
Section 34 as a whole. It is a settled rule of interpretation that the statutory provision should
be read as a whole to find out the real legislative intent and that provision should be read by
keeping in mind the scheme of the Act as well as the object which is sought to be achieved by
the Legislation while enacting such a law. There is nothing in the proviso or in the language
of Section 34 which has an impact or effect to restrict the power of the court as contemplated
under Section 34 read with the opening words of subsections (2) and (4) of Section 34 the
Act. Est boni judicis ampliare jurisdictionem is a settled canon of law courts should expand
and amplify jurisdiction to achieve the ends of justice and not unnecessarily restrict its
discretion particularly when the later approach would lead to frustrate the very object of the
Act."
In so far as judgment of Delhi high Court in case of Intertole ICS (Cecons) O & M Company
Pvt. Ltd. (supra) relied upon by the learned arbitrator, in the impugned order is concerned, it
is submitted that the said judgment does not lay down a law that power of a court under
section 9 to pass an interim order to secure the subject matter of the dispute, cannot be
exercised by an arbitrator under section 17 of the Act. Reliance is placed on paragraphs 13,
14, 18 to 22, 24 to 26 which read thus : "13. The interim measure of protection under Section
17 of the Act has to be understood with reference to the "subject-matter of the dispute". A
plain reading of the provision shows that an arbitral Tribunal can in exercise of its powers
thereunder direct a party "to take any interim measure of protection" "in respect of the
subject- matter of the dispute". The words "take" and "protection" give an indication as to the
legislative intent behind the words "subject- matter of the dispute." The protection envisaged
is in relation to some tangile property and not an indeterminate monetary claim.

14.. The scope of the powers of an arbitral Tribunal under Section 17 of the Act has been
explained by the Supreme Court in MD, Army Welfare Housing Organisation v. Sumangal
Services (P) Ltd. (2004) 9 SCC 619 as under (SCC, p. 649):

58. A bare perusal of the aforementioned provisions would clearly show that even under
Section 17 of the 1996 Act the power of the arbitrator is a limited one. He cannot issue any
direction which would go beyond the reference or the arbitration agreement. Furthermore, an
award of the arbitrator under the 1996 Act is not required to be made a rule of court; the same
is enforceable on its own force. Even under Section 17 of the 1996 Act, 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. Even under Section 17 of
the 1996 Act, no power is conferred upon the Arbitral Tribunal to enforce its order nor does it
provide for judicial enforcement thereof.

17. This Court is of the view that to the extent that there is a clear enunciation in Section 9 of
the types of interim relief that can be granted it does appear that powers of the Court there
under are by their very nature wider than the powers of a Tribunal under Section 17 of the
Act. Therefore, it is not possible to accept the contention of NHAI, which found favour with
the Tribunal in the instant case, 17 arbp-1127.2014.doc that the powers of the Tribunal under
Section 17 are as wide as that of the Court under Section 9 of the Act and that the principle
underlying Section 9 of the Act would ipso facto be applicable to Section 17 of the Act.
'Subject-matter of dispute'

THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 06.01.2017 FAO
(OS) No.221/2016 ARDEE INFRASTRUCTURE PVT. LTD ... Appellant versus MS.
ANURADHA BHATIA ... Respondent

Nothing contained in this Act shall apply to the arbitral proceedings commenced, in
accordance with the provisions of section 21 of the principal Act, before the commencement
of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral
proceedings commenced on or after the date of commencement of this Act.‖ At this juncture,
it would be necessary to also set down the differences in Section 36 of the said Act, pre and
post-amendment:- Pre-amendment Post-amendment 36. Enforcement. – Where the time for
making an application to set aside the arbitral award under section 34 has expired, or such
application having been made, it has been refused, the award shall be enforced under the
Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the
Court. 36. (1) Where the time for making an application to set aside the arbitral award under
section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be
enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same
manner as if it were a decree of the court. (2) Where an application to set aside the arbitral
award has been filed in the Court under section 34, the filing of such an application shall not
by itself render that award unenforceable, unless the Court grants an order of stay of the
operation of the said arbitral award in accordance with the provisions of subsection (3), on a
separate application made for that purpose. Upon filing of an application under sub-section
(2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as
it may deem fit, grant stay of the operation of such award for reasons to be recorded in
writing: Provided that the Court shall, while considering the application for grant of stay in
the case of an arbitral award for payment of money, have due regard to the provisions for
grant of stay of a money decree under the provisions for grant of stay of a money decree
under the provisions of the Code of Civil Procedure, 1908.‖

There is no dispute with the proposition that if the pre-amendment provisions of Section 36
of the said Act were to apply, the very filing and pendency of a petition under Section 34
would, in effect, operate as a stay of the enforcement of the award. This has been materially
changed by virtue of the amendment brought about in Section 36 of the said Act. The post-
amendment scenario is that where an application to set aside an arbitral award is filed under
Section 34 before a court, the filing of such an application would not by itself render the
award non-enforceable unless the court granted an order of stay of operation of the arbitral
award in accordance with the provisions of Section 36(3) on a separate application made for
that purpose. Sub-section (3) of Section 36 stipulates that upon the filing of an application for
stay of operation of the arbitral award, it would be open to the court, subject to such
conditions, as it may deem fit, to grant stay of operation of the award for the reasons to be
recorded in writing. The proviso thereto requires the court, while considering the application
for grant of stay in the case of an arbitral award for payment of money, to have due regard to
the provisions for grant of stay of a money decree under the provisions of the Code of Civil
Procedure, 1908. According to the learned counsel for the petitioners, this change in law with
regard to the enforcement of an award under Section 36 of the said Act tends to take away
vested rights. Therefore, the provisions of Section 6 of the General Clauses Act, 1897 would
be applicable. Section 6 of the General Clauses Act, 1897 reads as under:- ―6. Effect of
repeal. – Where this Act, or any [Central Act] or Regulation made after the commencement
of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a
different intention appears, the repeal shall not–(a) revive anything not in force or existing at
the time at which the repeal takes effect; or (b) affect the previous operation of any enactment
so repealed or anything duly done or suffered there under; or (c) affect any right, privilege,
obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d)
affect any penalty, forfeiture or punishment incurred in respect of any offence committed
against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy
in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment
as aforesaid, and any such investigation, legal proceeding or remedy may be instituted,
continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if
the repealing Act or Regulation had not been passed.‖ It was submitted in the context of
Section 6 of the General Clauses Act that a repeal of an enactment would not affect any right
acquired or accrued under the repealed enactment, unless a different intention appears in the
repealing Act.

It was contended that Section 26 of the Amending Act does not express any intention of
retrospective application prior to 23.10.2015. It was further submitted that under the old
provision, there was no requirement for a party objecting to the award and seeking the setting
aside of the award to separately ask for stay of the award. The mere filing of the petition
under Section 34 of the said Act entailed an automatic stay of the enforcement of the award.
That vested right of automatic stay is no longer available under the new Section 36. This,
according to the learned counsel for the petitioners, would operate only prospectively, that is,
to arbitral proceedings commenced after 23.10.2015 and not to arbitrations commenced prior
to 23.10.2015.

It was further contended on the strength of the Supreme Court decision in the case of
Hitendra Vishnu Thakur and Others etc. etc. v. State of Maharashtra and Others: 1994 (4)
SCC 602 that a statute which affects substantive rights is presumed to be prospective in
operation, unless made retrospective, either expressly or by necessary intendment.
Furthermore, the law relating to forum and limitation is procedural in nature, whereas the law
relating to action and right of appeal, even though remedial, is substantive in nature. This,
according to the learned counsel for the petitioners, would cover petitions under Section 34 of
the said Act.

Comment

The principle of arbitrability came into play in this case. A debtor had clearly admitted
liability, but refused to pay. In reality, it had no defence to the claim. The issues that it wishes
to submit to arbitration are an afterthought that should not warrant the additional expense of
arbitration proceedings. The judgement of the Court of Appeal reflects sound common sense
that it is an utter waste of time to take non-disputes to arbitration, thereby creating an
opportunity for recalcitrant debtors to further waste the creditor’s time and money. In such
cases, the debtor’s admission of liability negatives the need to arbitrate, and confers the court
with jurisdiction to swiftly enforce the parties contractual obligations. By logical inference,
where the debt is only partly admitted, the creditor may submit the disputed part to
arbitration, and file an action in court to summarily enforce the admitted debt.
Footnotes

https://blog.ipleaders.in/interim-reliefs-arbitration-conciliation-amendment-ordinance-2015

www.Supremecourt.com

https://www.lexisnexis.com/ap/pg/indiaalternatedisputeresolution/document/429958/5N34-
3S41-DY39-V1W5-00000-00/Enforcement_of_arbitral_award_overview

https://indiankanoon.org

http://www.spaajibade.com

http://lobis.nic.in/ddir/dhc/BDA/judgement/