Alternative dispute resolution: Interim Measures


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Alternative dispute resolution: Interim Measures

  1. 1. Alternative Dispute Resolution Arbitration: Interim Measures by Courts and Tribunals Supervised by: Compiled by: Dr. Sanjeev Sharma Rittika Dattana Session: 2012-13 LL.B (Hons.) 5th Semester Roll no.-145/11 [1]
  2. 2. Acknowledgement This project has been made for the purpose of covering a part of the syllabus of the Alternative Dispute Resolution as prescribed by Panjab University. I hereby, acknowledge my mentor, Dr. Sanjeev Sharma, for his expert guidance and views in each and every aspect. Without his help, making of this project would never have been possible. Compiled by: Rittika Dattana LL.B (hons.) Roll no-145/11 [2]
  3. 3. Contents S.No. Particulars Pages 1. Table of Cases 4 2. Introduction 5 3. Arbitration: Meaning 6-8 4. Interim Measures 9-11 5. Scope of Article 9 12-16 6. Scope of Article 17 17-18 7. Comparison 19-21 8. Bibliography 22 [3]
  4. 4. Table of Cases Maharashtra State Electricity Board Vs Datar Switchgear Ltd Girish Mulchand Mehta v. Mahesh S. Mehta Kanta Vashist v. Shri Ashwani Khurana National Highways Authority of India v. China Coal Construction Group Corporation Shoney Sanil v. Coastal Foundation Mikuni Corporation v. UCAL Fuel Systems Ltd Arun Kapoor v. Vikram Kapoor Firm Madan Lal Roshan Lal Mahajan v. Hukam Chand Mills Ltd., Indore Ashok Traders vs. G.D Saluja Channel Tunnel group Ltd. vs. Balfour Beatty construction Limited Anil Construction vs. Vidharbha Irrigation Dev. Corpn. Navbharat Ferro Alloys Ltd. vs. Continental Glass Ltd Nimbus Television & Sports Vs D G Doordarshan Bhatia International v. Bulk Trading Co. Marriott International Inc. vs. Ansal Hotels Limited Max India Ltd v General Binding Corp Dominant Offset (P) Ltd vs. Adamovske Strojirny [4]
  5. 5. Intoduction Gandhiji said: "I had learnt the true practice of law. I had learnt to find out the better side of human nature, and to enter men's hearts. I realized that the true function of a lawyer was to unite parties given as under. The lesson was so indelibly burnt unto me that the large part of my time, during the twenty years of my practice as a lawyer, was occupied in bringing about private compromises of hundreds of cases. I lost nothing, thereby not even money, certainly not my soul." 1 Conflict is a fact of life. It is not good or bad. However, what is important is how we manage or handle it. Negotiation techniques are often central to resolving conflict and as a basic technique these have been around for many thousands of years. Alternative Dispute Resolution (ADR) refers to a variety of streamlined resolution techniques designed to resolve issues in controversy more efficiently when the normal negotiation process fails. Alternative Dispute Resolution (ADR) is an alternative to the Formal Legal System. It is an alternative to litigation. It was being thought of in view of the fact that the Courts are over burdened with cases. The said system emanates from dissatisfaction of many people with the way in which disputes are traditionally resolved resulting in criticism of the Courts, the legal profession and sometimes lead to a sense of alienation from the whole legal system- thus, the need for Alternative Dispute Resolution. 2 The various types of ADR techniques are: Mediation Arbitration Conciliation Judicial Settlement Lok Adalat Negotiation Here, in this project some aspects of Arbitration technique will be discussed, i.e. meaning of arbitration and the interim measures of arbitration in Courts and Tribunals. 1 2 th, 30 Oct, 2013, 5.20 PM th, 30 Oct, 2013, 5.30 PM [5]
  6. 6. Arbitration: Meaning Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a resolution technique in which a third party reviews the evidence in the case and imposes a decision that is legally binding for both sides and enforceable. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts. Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Nonbinding arbitration is similar to mediation in that a decision cannot be imposed on the parties. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable. By one definition arbitration is binding and so non-binding arbitration is technically not arbitration. In simple words, Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards.3 Arbitral Award: Arbitral Award means an award given by the Arbitrator in an arbitral proceeding and Section 2(1)(c) mentions that “Arbitral Award” includes an interim award. Since the arbitrators are empowered to give an interim award, all the provisions which are applicable to arbitral 3 th, 30 Oct, 2013, 5.48 PM [6]
  7. 7. award will be equally applicable to an interim award also. An award is nothing but a decision of the arbitrators in writing duly signed by them. Disputes which cannot be referred to arbitration: If a matter is governed by any other law which excludes reference to Arbitration, this Act will not apply. Since in those cases, the law has given precise jurisdiction to specified courts or tribunals only, those cases cannot be decided through the mechanism of Arbitration. The following matters in general practice, are not arbitral: 1. Insolvency matters; 2. Matrimonial causes (except matters pertaining to settlement of terms of separation or divorce) 3. Testamentary matters; e.g., validity of a Will 4. Suit under section 92 of the Code of Civil Procedure, 1908 5. Proceedings for appointment of guardian of a minor or lunatic person 6. Industrial disputes 7. Criminal proceedings [excepting matters relating to compoundable offences] 8. Relating to charities 9. Pertaining to dissolution or winding up of a company incorporated and registered under the provisions of the Companies Act, 1956 (Haryana Telecom Ltd. vs. Sterlite Ind. Ltd.) 1999 (4) L.J. (S.C.) 389. 10. Relating to claim for recovery of octroi duty 11. Pertaining to title to immovable property in a foreign country. 12. Relating to possession of leased premises governed by the provisions of the Bombay Rent, Hotel and Lodging House Rates Control Act, 1947.4 4 India/5514204080, 30 Oct, 2013, 6.37 PM [7]
  8. 8. Arbitration Process: The process can start only if there exists a valid Arbitration Agreement between the parties prior to the emergence of the dispute.  As per Section 7, such an agreement must be in writing.  The contract regarding which the dispute exists, must either contain an arbitration clause or must refer to a separate document signed by the parties containing the arbitration agreement.  The existence of an arbitration agreement can also be inferred by written correspondence such as letters, talex, or telegrams which provide a record of the agreement.  An exchange of statement of claim and defence in which existence of an arbitration agreement is alleged by one party and not denied by other is also considered as valid written arbitration agreement. Any party to the dispute can start the process of appointing arbitrator and if the other party does not cooperate, the party can approach the office of Chief Justice for appointment of an arbitrator. There are only two grounds upon which a party can challenge the appointment of an arbitrator –  reasonable doubt in the impartiality of the arbitrator; and  the lack of proper qualification of the arbitrator as required by the arbitration agreement. A sole arbitrator or a panel of arbitrators so appointed constitutes the Arbitration Tribunal. Except for some interim measures, there is very little scope for judicial intervention in the arbitration process.  The arbitration tribunal has jurisdiction over its own jurisdiction.  Thus, if a party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before the tribunal itself.  If the tribunal rejects the request, there is little the party can do except to approach a court after the tribunal makes an award.  Section 34 provides certain grounds upon which a party can appeal to the principal civil court of original jurisdiction for setting aside the award. The period for filing an appeal for setting aside an award is over, or if such an appeal is rejected, the award is binding on the parties and is considered as a decree of the court. 5 5 th, 30 Oct, 2013, 5.59 PM [8]
  9. 9. Interim Measures under the Indian Arbitration and Conciliation Act, 1996 In arbitral proceedings, the need often arises for provisional remedies or other interim measures of reliefs because, in reality, arbitral proceedings are no less adversarial than litigation in public courts. When a dispute arises, aggrieved party is always concerned with protecting his interest either in movable or immovable properties. Party is always interested in taking timely action against another party or parties so that his or her interest in the properties is protected. This prompt and timely action makes other party or parties unable to play any sort of mischief by way of tampering with properties. Thus Arbitration and Conciliation Act, 1996, under Section 9 gives parties power to approach Courts for seeking interim measures. Often it sounds against the basic philosophy of Arbitration for allowing Court’s intervention, but for many reasons such judicial interventions are inevitable. 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 reliefs’ are temporary or interim in nature and are granted in advance of the final adjudication of the dispute by the arbitral tribunal. INTERIM MEASURES: THE MODEL LAW APPROACH Why interim measures are needed An observation by Lord Mustill in Coppee Lavalin N.V. v. Ken-Ren Chemicals and Fertilizers Ltd. (In Liquidation in Kenya)6 succinctly describes the rationale behind a interim measure, through the mechanism of a municipal court, that facilitates the conduct of arbitration: On the one hand the concept of arbitration as a consensual process, reinforced by the ideal of transnationalism, leans always against the involvement of the mechanisms of state through the medium of a municipal court. On the other side there is the plain fact, palatable or not, that it is only a court possessing coercive powers which can rescue the arbitration if it is in danger of foundering, and that the only court which possesses these 6 [1995] 1 AC 38 HL [9]
  10. 10. powers is the municipal court of an individual state. Whatever extreme positions may have been taken in the past there is, I believe, a broad consensus acknowledging that the local court can have a proper and beneficial part to play in the grant of supportive measures. Delays in resolution are the inevitable consequences of contemporary arbitration and its procedural safeguards. This delay can greatly disadvantage one party, sometimes irreparably.7 Dissipation of assets, destruction of evidence and loss of market value of property are common examples of such damage. Responding to the foregoing challenges, national legislatures, including ours have developed means for granting immediate interim measures designed to safeguard parties from serious injury caused by delays in the arbitral process. Gary B Born defines interim measures as awards or orders issued for the purpose of protecting one or both parties to a dispute from damage during the course of arbitration. These measures are intended to preserve a factual or legal situation so as to safeguard rights the recognition of which is otherwise sought from the court having jurisdiction as to the substance of the case. 7 Gary B Born, International Commercial Arbitration, (Vol II Kluwer Law International 2009) 1943, Electronic copy available at: [10]
  11. 11. Types of Interim Measures: 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:8 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. These reliefs can be provided by : granting an interim injunction, appointing a receiver, making of an attachment order or any other interim order for securing the amount in dispute or for the preservation, custody or sale of the property in dispute. During the pendency of a proceeding in a court, a party may make an application for grant of an interim measure(s) and the court may grant such measure(s) as permitted under the procedural rules governing the powers of the court or those that it may derive through its inherent powers. The principle governing the grant of interim measures is the use of judicial discretion by a Court while taking into consideration questions pertaining to balance of convenience, the applicant’s ability to make out a prima facie case and most importantly the irreparable harm that would be caused in the event the measure is not granted. Under Indian Law, courts have both the express power of granting interim measures under Order 39 Rule1 and Rule 2 of the Civil Procedure Code as well as their inherent power under section 151 to grant an interim measure other than that specified under Order 39, Rule 1 and 2.9 8 , Lira Goswami, Interim Relief under the Arbitration Act, 1996.(Goswami) Speech at New Delhi: 2000, available at th, 30 Oct, 2013, 7.01 PM 9 Under Indian Law there was a conflict of judicial opinion on the question whether Court’s could issue a temporary injunction through the use its inherent power u/s 151 of the Code of Civil Procedure when the case did not fall with the purview of Order 39 Rules 1 and 2. The matter was settled in Manohar Lal v. Seth Hira Lal, (1) SCR [11]
  12. 12. SCOPE OF INTERIM MEASURES UNDER SECTION 9 OF THE ARBITRATION AND CONCILIATION ACT, 1996 Section 9 of the Arbitration & Conciliation Act 1996 provides for interim measures that may be passed by the Court relating to the subject-matter of arbitration or arbitration proceedings. It reads as follows: Interim measures etc. by Court. 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, apply to a courti. ii. for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or for an interim measure of protection in respect of any of die following matters, namely:a. the preservation, interim custody or sale of any goods which are the subjectmatter of the arbitration agreement; b. securing the amount in dispute in the arbitration; c. the detention, preservation or inspection of any property or thing which is die subject- matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any part or authorizing 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; 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. For purposes of and in relation to arbitration proceedings, the court has wide powers to pass interim orders for detention, preservation, interim custody and sale of any property, for granting an interim injunction and appointing a receiver or for appointing a guardian of a minor 450, wherein the Supreme Court of India held that a Court had power u/s 151 to issue injunctions for matters not falling in Order 39, Rules 1 and 2 [12]
  13. 13. or a person of unsound mind.10 Article 9 of the UNCITRAL Model Law is a corresponding provision. The Court before the grant of interim measures must broadly satisfy itself that: a. the person seeking interim measures has made out a prima facie case b. the balance of convenience is in his favour and c. the person in absence of interim measures would suffer irreparable loss or injury.11 Under Section 9,the existence of the arbitration clause and the necessity of providing interim measures of protection alone have to be considered by the court for issuing necessary directions. The court has no power under the section to decide the merits of the case or rights of the parties.12 Jurisdiction of Courts The powers of the court under this provision are available only when the place of arbitration is in India. Sub section (2) of section 2 provides in a clear and unambiguous language that Part I shall apply where the place of Arbitration is in India. However, the Delhi High Court, in Dominant Offset (P) Ltd vs. Adamovske Strojirny13 where the arbitration took place at London, held that Part I also applies to International Commercial Arbitration conducted outside India. However, the Division Bench of Delhi High Court in Marriott International Inc. vs. Ansal Hotels Limited14, where arbitration proceedings were held at Kuala Lumpur in Malaysia, held that Part I of the Act shall apply to all arbitrations where the place of arbitration is in India. Moreover, in Max India Ltd v General Binding Corp.15, the Division Bench of the Delhi High Court upheld the decision of the Single Bench of the High Court regarding the jurisdiction of Indian courts to grant interim relief in international commercial arbitrations. 10 Justice R.S. Bachawat, Justice Bachawat’s Arbitration & Conciliation Act, 1996 (4th ed Wadhwa 2005) 405, PT Tirtamas Comexindo v Delta International Ltd ( 2001) 4 RAJ 12 (Cal) 12 Nepo Ltd v Manoj Kumar AIR 1999 MP 57 13 1997 (2) ALR 335, Similar view was again taken by Delhi High Court in the case of Olex Focas Private Limited vs. Skoda export co. Ltd., (AIR 2000 Delhi 161) 14 AIR 2000 Delhi 377 15 FAO (OS) 193/2009 Delhi High Court. Max India Ltd had filed a petition under s.9 seeking to restrain GeneralBinding Corp (GBC) from implementing the terms of an agreement that it had entered into directly or through its holding company with Cosmo Films regarding the sale of its commercial prints finishing business. The agreement specifically provided that the Singapore courts had jurisdiction to resolve any disputes between the parties subject to Arbitration under the Singapore International Arbitration Center Rules. Max 11 [13]
  14. 14. The division bench uphold the judgment of single judge and came to the conclusion that as per the decision in Bhatia International v. Bulk Trading Co.16 it was settled law that Part 1 of the Arbitration and Conciliation Act would apply to all arbitrations, including international commercial arbitrations held outside India, unless the parties by express or implied agreement excluded all or any of its provisions . As far as the position of the Indian Law is concerned, this decision seeks to clarify the scope of the powers of an Indian court to grant interim relief in international commercial arbitration. The rule that seems to emerge is that when the parties have specifically intended that: (a) the law governing the contract; (b) the rules governing the arbitration; and (c) the court’s jurisdiction and the place of arbitration are outside India, then it would signify that the Indian court’s jurisdiction and applicability of Part 1 of the Act (which contains the power of the Indian courts to provide interim measures) are excluded. Section 9 is an exception to Section 5 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.17 Circumstances preventing court from granting interim relief The opening words of the section ‘a party may before or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced in accordance with s 36’ indicate that an interim measure may be granted only from the date of the arbitration India had invoked the arbitration clause and duly served notice on GBC. Pending the arbitration Max India argued that it had the right to file S.9 application in India itself. 16 (2002) 4 S.C.C. 105 17 Yenepoya Minerals And Granites Limited, Mangalore And Anr. Vs Maharashtra Apex Corporation Limited, Bangalore[2004(2) Arb. LR 47 (Karnataka) (DB)(Karnataka High Court) decided on 05-01- 2004] [14]
  15. 15. agreement up to the date of enforcement of the award under s 36.18 No interim relief may be granted de hors these limits. Even during these limits, relief must be related to the arbitral proceedings.19 The Bombay High Court in Nimbus Television & Sports Vs D G Doordarshan20 opined that if the interim relief prayed for u/s 9 would amount to granting final relief frustrating the arbitration proceedings such a relief cannot be granted by the court. In Navbharat Ferro Alloys Ltd. vs. Continental Glass Ltd.21, the Delhi High Court held that when the claim is for money, the sale of materials cannot be ordered as an interim relief. However, it is submitted that an order of interim measure of protection can be passed by a competent court for sale of property where such property forming the subject matter of the dispute is perishable in nature. The Bombay High Court, in Anil Construction vs. Vidharbha Irrigation Dev. Corpn.22 , held that the benefit of section 9 cannot be availed of by a party, which has no intention to appoint the Arbitral Tribunal. The provision cannot be availed by a party for restraining the other party from approaching the Arbitral Tribunal. The Delhi High Court, in Arun Kapur v. Vikram Kapoor and others23, after considering the decision of an English court in Channel Tunnel group Ltd. vs. Balfour Beatty construction Limited24 observed as follows: “It is cardinal rule that if the party invokes preliminary alternative remedy before the Arbitral Tribunal, it is debarred from invoking the jurisdiction of the court under Section 9 of the Act. Ordinarily if the arbitrator is seized of the matter the interim relief should not be entertained and the parties should be advised to approach the arbitrator for interim relief unless and until the nature of relief intended to be sought falls outside the jurisdiction of the arbitrator or beyond terms of the agreement or reference of disputes. Otherwise, the very object of adjudication of disputes by arbitration would stand frustrated. A party should always be discouraged to knock the door of the Court particularly when the arbitrator is seized of all the relevant or even ancillary disputes.” 18 OP Malhotra, Indu Malhotra, ‘The Law and Practice of Arbitration & Conciliation, (2nd ed, LexisNexis,2006) 382 Archcon v Sewda Construction 2005(2) Arb LR 156 (Gau) 20 All Mah. L R 1998(2) page 6 21 1998, 1 ALR 492 22 2000 (1) M L J 38 23 2002 (1) ARB. L R 256 24 1993 (1) ALL E R 664 19 [15]
  16. 16. A two-member bench of the Supreme Court, in the case of Firm Ashok Traders vs. G.D held that: An application under Section 9 is neither a suit nor an application for enforcing a right arising from a contract – Prima facie the bar enacted by Section 69 of the Partnership Act, 1932 is not attracted to an application under Section 9 of the Act. Only a party to an arbitration agreement is qualified to make an application under Section 9. A person not a party to an arbitration agreement cannot make an application under Section 9. When application under Section 9 is filed before the commencement of arbitral proceedings, the applicant must be able to satisfy the Court that arbitral proceedings are positively going to commence within a reasonable time. There should be proximity between the application and the arbitral proceedings. 25 Saluja a. b. c. 25 9th January, 2004(AWLJ 175) [16]
  17. 17. SCOPE OF INTERIM MEASURES UNDER SECTION 17 OF THE ARBITRATION AND CONCILIATION ACT, 1996 Arbitration is a forum for adjudication that is a departure away from courts and in fact, court interference has been considered a bane to its development.26 However, under arbitration procedural statutes and rules, courts not only have the power to grant interim measures but this power, in most cases, is wider than that of a Tribunal. Though, it has been realized that a total curtailment of the court’s power to grant interim measures during the pendency of arbitration cannot be envisaged and it is necessary to allow the court to grant interim measures, courts have, keeping in mind the new changes in legislative thinking, reduced their interference in arbitration proceedings. However it is not possible to completely do away with the role of the court as the nature of interim injunctions make it necessary to go to a court of law and it is possible that the very purpose of seeking an interim measure may be defeated. Under the new Act of 1996, S.17 states that the arbitral tribunal has inherent power to order a party to take interim measures of protection, unless the power is excluded by agreement between the parties. Thus, under the new Act, arbitrator has been given the power to order the parties to take recourse to the interim measure. The opening words of Section 17(1) indicate that the parties may by agreement exclude the exercise of such a power by the Arbitral Tribunal. The power given to the arbitrator under this is very narrow. This is because he has been given the power to order the parties to take interim measures in matters only related to the subject matter of the dispute and not otherwise. In other words, the power is restricted only to the extent of agreement between the parties and not beyond that. As per S.16 of the new Act the arbitrator has the power to rule on its own jurisdiction. This section corresponds to Article 16 of the UNCITRAL Model Law and Article 21 of the UNCITRAL Arbitration Rules. Article 16 of the Model Law says that the Arbitral tribunal may rule on its own jurisdiction whereas Article 21 of the Rules states that the Arbitral tribunal shall have the power to rule. Such power given to the arbitral tribunal is also referred to as ‘Kompetenz’. Thus, it has enacted the principle of ‘Kompetenz-Kompetenz’ which states that if there is a clause in the agreement entered into between the parties that there dispute shall be settled through the process of arbitration, then the arbitral tribunal had the jurisdiction to rule over that case. It 26 Arthur Marriott, Q.C., Indian and International Arbitration, (Marriott), Address delivered on 6th May. 2002 at NewDelhi, [17]
  18. 18. can then decided the validity of the agreement also and in such a case the power of the courts are restricted. The power of the arbitrator to grant interim measures under S.17 of the new Act is a limited one to the extent of the agreement between the parties to the dispute. The ‘interim measures’ which are given by the tribunal are temporary & provisional, and are operative till the dispute is resolved by an award, to protect the interest of a party. The courts cannot sit in appeal over the views of the arbitral tribunal by re-examining and re-assessing the materials. The Court cannot review the award and correct any mistake in his adjudication unless objection to ‘legality of award’ is apparent in the face of it. Hence, it can be stated over here that the power has been given to the Court to set aside the award given by the arbitral tribunal on the grounds of ‘legal misconduct in proceedings’ only. The word ‘legal misconduct in proceedings’ as defined by Atkin, J. means “such a mishandling of the arbitration as is likely to cause some substantial miscarriage of justice and one instance of this is where the arbitrator refuses to hear evidence upon a material issue”. The Hon’ble Supreme Court of India has also observed in the case, Firm Madan Lal Roshan Lal Mahajan v. Hukam Chand Mills Ltd., Indore27, that the award, both on fact and law is final and the court cannot review the award and correct any mistakes in its adjudication unless there is a legal misconduct on the face of record. Under Section 17 of the Act, it is also stated that the power of the arbitrator to grant interim award will come into picture only when there is a specific clause in the agreement entered into between the parties that the dispute shall be settled by the arbitrator. In the absence of such a clause in the agreement, the arbitrator cannot pass interim order even with the consent of the parties as it will be acting ultra vires. 27 AIR 1967 SC 1030; Also relied in Puri Construction Pvt. Ltd.v. Union of India: AIR 1989 SC 777; Food Corporation of India v. Joginderpal Mohinderpal: AIR 1989 SC 1263. [18]
  19. 19. [19]
  20. 20. Comparison between Section 9 and Section 17 Several cases have appeared before various High Courts, involving parties that were not signatories to the arbitration agreements, and against whom interim measures were sought. In Arun Kapoor v. Vikram Kapoor 28 where Justice J.D. Kapoor observed, Section 9 is distinct from Section 17 inasmuch as that the petition under Section 17 is moved before the Arbitrator for an order against a party to the proceedings whereas Section 9 vest remedy in a party to the arbitration proceedings to seek interim measure of protection against a person who need not be either party to the arbitration agreement or to the arbitration proceedings. This dictum seems fairly straightforward, and is in keeping with the text of the provision. However, its precedential value is limited, since it was an observation made in passing, and one that finally led to the dismissal of the section 9 application. Thus, even if Justice J.D. Kapoor sought to give section 9 a wide ambit, the subsequent dismissal of the section 9 application shows that the widening did not play a material role in the judge arriving at his decision. Contrarily, later, in Mikuni Corporation v. UCAL Fuel Systems Ltd29 it was held by the Delhi High Court that since no arbitration proceedings could take place vis-à-vis the party against whom orders were sought, application under Section 9 did not lie against such party. The Hon’ble Kerala High Court gave a similar decision in Shoney Sanil v. Coastal Foundation30, on a plain reading of Section 9 of the Act and going by the scheme of the said Act, there is no room to hold that by an interim measure under Section 9, the rights of third party, holding possession on the basis of a court sale could be interfered with, injuncted or subjected to proceedings under Section 9 of the Act. Section 9 of the Act contemplates issuance of interim measures by the court only at the instance of a party to an arbitration agreement with regard to the subject-matter of the arbitration agreement. This can be only as against the party to an arbitration agreement, or, at best, against any person claiming under him. The writ petitioner is a third party auction purchaser in whose favour is a sale certificate, followed by delivery of possession. He cannot therefore be subjected to proceedings under Section 9 of the Act, initiated on the basis of an alleged arbitral agreement between the respondents. 28 Ibid.23 2008 (1) Arb. LR 503 (Delhi) 30 AIR 2006 Ker 206 29 [20]
  21. 21. It was held similarly in National Highways Authority of India v. China Coal Construction Group Corporation31 that an interim order could be passed in respect of parties to arbitration and in connection with subject matter thereof and no interim order could be passed in respect of a party who had no privity of contract with the petitioner. Thus the petition seeking interim measures against a non party to the arbitration was held to be not maintainable. In Smt. Kanta Vashist v. Shri Ashwani Khurana32 also it was held that no injunction could be issued even against companies which though of the family, members whereof were parties to the arbitration, were independent legal entities and not parties to the arbitration agreement. Finally, the most recent judicial consideration of this issue was by the Bombay High Court in Girish Mulchand Mehta v. Mahesh S. Mehta33. In 2009, when it noted the prior observations of the Kerala and Delhi High Courts to the effect that a section 9 application is maintainable only against a party to the arbitration, or someone claiming under him. The Bombay High Court seemed to be uncomfortable with this interpretation. However, in the spirit of judicial deference, the Court responded by placing the burden of proof on the respondent to establish that he was not a party of claiming under him. In the words of the Court, “Thus understood, Section 9 can be invoked even against a third party who is not party to an arbitration agreement or arbitration proceedings, if he were to be person claiming under the party to the arbitration agreement and likely to be affected by the interim measures. The Appellants herein will have to substantiate that they were claiming independent right in respect of any portion of the subject matter of the Arbitration Agreement on their own and not claiming under the Respondent No. 2 Society who is party to the Arbitration Agreement. In absence thereof, the Court would certainly have jurisdiction to pass appropriate order by way of interim measures even against the Appellants herein, irrespective of the fact that they are not party to the Arbitration Agreement or the Arbitration Proceedings.” In Maharashtra State Electricity Board Vs Datar Switchgear Ltd34, it was discussed the scope of power of the court u/s 9 vis a vis the powers granted to the arbitrator u/s 17. The court held that if the power that has been conferred upon the court u/s9 is compared with the power conferred on the arbitral tribunal u/s17, it is immediately noticeable that the court can exercise its power either before or during arbitral proceedings or even thereafter upon making 31 AIR 2006 Delhi 134 MANU/DE/0380/2008 33 MANU/MH/1458/2009 34 2003(2) RAJ 163 (Bom) 32 [21]
  22. 22. of the award but before it is enforced. The Act does not contemplate interference of courts at the interim stage in matters of jurisdiction of the Tribunal or n challenges to the existence or validity of the arbitration agreement. Comparison: Basis Section 9 (Courts) Section 17 (Tribunals) Scope Wider Narrower Power More power; not limited to only subject-matter; supreme Limited to subject matter of the dispute Order Against anyone, i.e. any third party Against any of the engaged parties Exercise Even before the tribunal is constituted. Only after tribunal is constituted [22]
  23. 23. Bibliography Books: OP Malhotra, Indu Malhotra, ‘The Law and Practice of Arbitration & Conciliation, (2nd ed, LexisNexis,2006) Justice R.S. Bachawat, Justice Bachawat’s Arbitration & Conciliation Act, 1996 (4th ed Wadhwa 2005 Gary B Born, International Commercial Arbitration, (Vol II Kluwer Law International 2009) Weblinks:,,, [23]