The Architecture of Urgency: Re-Examining Interim Relief Under Section 9 of the A&C Act, 1996

Ayush Srivastava, Himani Khullar*

This article re-examines interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, post-2015 amendments. It analyses judicial thresholds for “inefficacious” tribunal remedies, the consequences of non-compliance with the 90-day mandate, and procedural tensions between Sections 9, 17, and 37. It critiques emerging jurisprudence, including recourse to Article 227, and evaluates proposed reforms signalling a shift towards arbitral primacy in granting interim measures.

Introduction

Interim reliefs play a critical role in protecting those parties’ rights who seek to resolve their disputes through arbitration. Section 9 of the Arbitration and Conciliation Act, 1996 (‘the Act’) empowers the courts to grant interim reliefs at three stages, i.e., before the commencement of arbitration, during its pendency, and after the award is passed, but before its enforcement under Section 36 of the Act. Section 9 of the Act gives the Court wide powers to grant interim reliefs, including orders to secure the amount in dispute, appoint a receiver, grant an injunction, direct the interim sale or custody of goods, or pass any other order deemed just and convenient. Section 17 of the Act similarly empowers the arbitral tribunal (‘the Tribunal’) to grant interim reliefs from the time it is constituted until the passing of the final award. The 2015 Amendment (‘the Amendment’) substantially revised these provisions to reduce judicial intervention and strengthen the Tribunal’s autonomy. After the Amendment, the Court’s powers under Section 9 of the Act were narrowed. The Tribunal was granted additional powers, and it was stipulated that its orders under Section 17 of the Act would be enforceable as a decree. This article highlights the practical issues that arose as a result of the Amendment, and addresses the following questions:

1. In which situations can the Court grant interim relief under Section 9 of the Act, after the Tribunal has been constituted?

2. What are the consequences, if, a party having secured an interim measure under Section 9(1) of the Act, fails to invoke arbitration within the 90-day timeframe as specified under Section 9(2) of the Act?

3. If the Tribunal is constituted after a Section 9 order has been passed, should a party seeking to challenge the Section 9 order, do so under Section 37 of the Act, or seek fresh relief before the Tribunal under Section 17 of the Act?

4. If the Court denies an ex parte interim relief under Section 9 of the Act, can a party seeking quick relief file a petition under Article 227 of the Constitution of India?

5. What does the future look like for Section 9 of the Act?

In which situations can the court grant interim relief under Section 9 of the Act, after the arbitral tribunal has been constituted?

Section 9(3) of the Act has two limbs. The first limb precludes the Court from entertaining an application under Section 9 of the Act after the Tribunal has been constituted, and the second limb provides an exception to the first limb, i.e., cases where the remedy provided by the Tribunal is inefficacious can be entertained by the Court. This raises an important question: when is the relief granted by an arbitral tribunal ‘inefficacious’? Courts have dealt with this question in detail at various instances. Broadly speaking, there can be three situations when the relief granted by the Tribunal is termed as ‘inefficacious’:

1. When the interim relief affects third-party rights;

2. When the arbitral Tribunal cannot convene immediately to deal with time-sensitive issues;

3. When the arbitration is foreign-seated, but the assets are located in India.

A primary instance of ineffectiveness arises when interim relief affects parties not bound by the arbitration agreement. In Blue Coast Infrastructure v. Blue Coast Hotels, the Delhi High Court (‘Delhi HC’), after considering relevant precedents, held that an arbitrator, being a creature of contract, could not issue directions to third parties. However, the Court, under Section 9 of the Act, could venture beyond the arbitration agreement and issue such directions. The rationale behind this is that Section 9 of the Act does not restrict the Court’s powers. Further, a Court under Section 9 exercises the powers of a civil court, thus having the power to affect third-party rights, if necessary.

When the arbitral Tribunal cannot convene immediately to deal with time-sensitive issues: Another situation where the remedy granted by the arbitral Tribunal may be deemed inefficacious is when time-sensitive matters arise and the arbitral Tribunal is not in a position to respond swiftly. Interim reliefs often pertain to issues which need to be dealt with urgently, for instance, impending financial loss or irreparable harm. The Tribunal, however, may not always be available, especially on short notice, to grant such reliefs, as arbitrators may be travelling, unwell or residing in faraway places.

In such situations, a party can approach the Court for immediate relief. In Energo Engineering Projects Ltd. v. TRF Ltd., a Division Bench of the Delhi HC considered a situation where the arbitral Tribunal had been constituted, but its functioning was stayed due to an SLP before the Supreme Court (‘SC’). The Court held that, under these circumstances, an efficacious relief could only be granted by a court under Section 9 of the Act, and therefore, the exception given under Section 9(3) would apply.

In addition to the above, another situation in which the court’s intervention may be required is when the arbitration is seated outside India, but the parties’ assets are located within India. Orders under Section 17 of the Act issued by foreign-seated tribunals are not automatically enforceable in India and the only option available is to file a civil suit to obtain a decree under the Civil Procedure Code, 1908 using the foreign tribunal’s order as evidence. However, this can be time-consuming and can frustrate the arbitral proceedings. Therefore, in cases where a party’s assets are located in India, the most efficacious remedy for securing assets in India is to file a Section 9 petition before Indian courts.

What are the consequences, if, a party having secured an interim measure under Section 9(1) of the Act, fails to invoke arbitration within the 90-day timeframe as specified under Section 9(2) of the Act?

The objective of interim reliefs is to secure the subject matter of arbitration proceedings. However, some parties, after receiving an interim order in their favour, choose to sit over the order and delay the proceedings. To discourage parties from doing so, the 2015 Amendment introduced Section 9(2) to the Act, which provides for a 90-day time period to commence arbitration after obtaining the interim relief. The use of the word “shall” in Section 9(2) of the Act suggests that this time frame is mandatory. However, the provision also grants the court discretion to extend this time limit. This duality has resulted in conflicting interpretations by various High Courts.  There has been a varied interpretation of Section 9(2) of the Arbitration Act, particularly regarding whether this provision must be followed mandatorily or not.

The Karnataka HC has consistently given effect to the intention of Parliament in its decisions and held that upon breach of the 90-day time limit, the interim order would automatically stand vacated. It has, in fact, gone a step further by creating its own rules, which make it mandatory to adhere to the 90-day time limit and provide for vacation of the interim order if arbitration is not initiated within the specified timeframe. Similarly, the Calcutta High Court, and the Hyderabad High Court, have also issued orders for automatic vacation when arbitration was not commenced within 90 days. A ruling of the Kerala High Court has also postulated that the time period given under Section 9(2) of the Act strictly applies to interim reliefs given under Section 9(1) of the Act.

In stark contrast, other courts, like the Bombay High Court, have adopted a more flexible stance. These courts have liberally construed Section 9(2) of the Arbitration Act, focusing on the second limb of the provision which grants courts the power to extend the 90-day time limit. This extension has been granted on various grounds, for instance, in the interests of justice or when a genuine reason for delay has been put forth by the party seeking relief.

Hence, there is no uniform interpretation of the consequences of breaching the timeline prescribed under Section 9(2) of the Act. These differing interpretations reflect an ongoing tension between following strict procedures and ensuring fair outcomes, which requires the SC’s intervention in coming times.

If the Arbitral Tribunal is constituted after a Section 9 order has been passed, should a party seeking to challenge the Section 9 order, do so under Section 37 of the Arbitration Act, or seek fresh relief before the Arbitral Tribunal under Section 17 of the Act?

Sometimes, Courts pass interim orders under Section 9 of the Act even before the arbitral tribunal is constituted. Consequently, once the Tribunal is in place, a question that arises is - Should the party dejected with the court’s order approach the Tribunal for the same relief under Section 17, or challenge the Section 9 order by filing an appeal under Section 37 of the Act?

This question becomes important because Section 17 allows arbitral Tribunal to grant interim relief, and after the 2015 Amendment, their orders carry the same weight as court orders. At the same time, Section 37 of the Act specifically allows appeals against Section 9 orders passed by the Courts. If both options are pursued, it could lead to two different and potentially conflicting orders, both of which are enforceable in the same way. The SC and various High Courts have clarified that once a court has passed a Section 9 order, the matter should not be reopened before the arbitral tribunal. Therefore, logically, the correct remedy is to appeal under Section 37 of the Act.

Re-agitation of issues before the Arbitral Tribunal under Section 17 of the Act

This problem of duplicative proceedings was addressed by the Supreme Court in Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal. The SC noted that once a court had reserved orders under Section 9 of the Act, the Tribunal could not re-examine the issue in its entirety, as doing so would rewind the clock on the interim relief. The Apex Court considered the intention behind granting interim reliefs, which are typically awarded to preserve the subject matter of the dispute, and noted that delays in this process can frustrate the arbitral proceedings.

A similar view was expressed by a Division Bench of the Gujarat High Court, where the Court held that once an issue is decided under Section 9, it cannot be considered again under Section 17 of the Act by the arbitral tribunal. The Court considered the intention of Parliament behind Section 17(2) of the Act and observed that the intention could not have been to permit two conflicting orders, both being enforceable as court orders arising from the same cause of action. Therefore, once an issue is decided under Section 9, it cannot be reagitated before the Tribunal under Section 17.

These rulings affirm that once a court has ruled under Section 9, the only remedy is an appeal under Section 37 of the Act. Further, Section 37 states that any appeal from a Section 9 order shall only lie before the “court authorised by law”, thereby excluding the arbitral tribunal. In fact, appeals under Section 17 of the Act also lie before the court. Therefore, any grievance with a Section 9 order can be considered by the Court and the Tribunal cannot bypass this mechanism by addressing grievances related to a Section 9 order given by the Court.

If a court denies an ex parte interim measure under Section 9 of the Act, can a party seeking quick relief consider invoking Article 227 of the Constitution of India?

In a recent judgement in Jindal Steel & Power Ltd. v. Bansal Infra Projects Pvt. Ltd., the SC upheld Orissa High Court’s status quo order restraining invocation of a bank guarantee while a Section 9 petition was pending. It held that interim protection was justified to prevent the petition from becoming infructuous and found no prejudice to either party. Though criticised for diluting the principle of minimal judicial interference and bypassing the Section 37 appeal route, the judgment effectively allows recourse to Article 227 for interim relief during pendency of the Section 9 proceedings before the court.

What does the future look like for Section 9 of the Act?

The proposed amendments to the Act under the Draft Arbitration Amendment Bill, 2024, introduce several notable changes. First, the power of courts to entertain applications for interim relief during the pendency of arbitral proceedings, under Section 9(1), has been omitted. Second, under the amended Section 9(2) of the Act, arbitration is required to commence within 90 days from the filing of the application for interim relief before the court, as opposed to 90 days from the passing of an order under Section 9(1) of the Act. Third, since the court’s power to entertain interim applications after the constitution of the arbitral Tribunal or during arbitral proceedings has been withdrawn, Section 9(3) has been omitted as redundant. Lastly, a new provision, Section 17(1)(ii)(da), has been proposed, empowering the arbitral Tribunal to confirm, modify, or vacate any interim order passed by the court under Section 9 of the Act, subject to such conditions as it may deem appropriate and after hearing both parties. These amendments eliminate the jurisdictional overlap between courts and arbitral tribunals pertaining to interim relief. Consequently, they indicate a shift towards the primacy of the arbitral tribunal as the sole authority to grant interim reliefs during arbitral proceedings.

Conclusion

Interim relief is often the first crucial step in protecting a party’s interests before or during arbitration. For practitioners and parties, some clear principles emerge:

1. Section 9 of the Act may be invoked even after the arbitral Tribunal is constituted, but in limited circumstances, such as affecting third-party rights, situations where urgent relief is needed and the tribunal cannot act quickly, or where the arbitration is seated abroad but assets are located in India.

2. The 90-day period under Section 9(2) of the Act for initiating arbitration after receiving interim relief should be strictly adhered to. While some courts have shown flexibility, parties should not rely on extensions unless they have a suitable cause for delay.

3. Once a court has granted relief under Section 9 of the Act, that decision cannot be revisited by the arbitral tribunal under Section 17 of the Act. The appropriate remedy would be to file an appeal before the relevant court under Section 37 of the Act.

4. If relief under Section 9 of the Act is kept pending by the Court, the aggrieved party may consider invoking Article 227 of the Constitution of India.

   
   

By understanding how courts have interpreted and applied these provisions, parties can refine their strategy while seeking interim reliefs. A well-timed and properly structured application, backed by a clear understanding of the legal framework, can go a long way in safeguarding commercial interests and ensuring a smooth arbitration process.

*Ayush Srivastava is a Senior Associate at Dentons Link Legal. Himani Khullar, student at Rajiv Gandhi National University of Law, Punjab assisted him in writing this article.