Difference In Powers Of Courts And Arbitrunal Tribunal In Reference To Interim Measures Under Arbitration And Conciliation Act 1996 & 2015

INTRODUCTION

WHAT IS ARBITRATION?

Arbitration is a flexible and consensual process for resolving business disputes in a binding and enforceable manner, wherein parties refer their dispute to a neutral third party (“the arbitrator”) for settlement without resorting to court action. It is a form of Alternate Dispute Resolution (ADR), agree to be bound by the arbitration decision (the "award").

Arbitration and Conciliation Act, 1996

  • Based on the UNICITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Arbitration Rules, 1976.
  • It provides for domestic arbitration; international commercial arbitration; enforcement of foreign award and conciliation

BENEFITS OF THE ARBITRATION

  • Swift settlement of dispute without interference of judicial courts.
  • Enable the parties to decide the rules and procedures of arbitral proceedings.
  • Empowers the parties to appoint arbitrator(s) of their choice.
  •  Provide liberty to the parties to decide the language and seat of arbitration.
  • Cost effective settlement of commercial disputes.
  • Effective enforcement of arbitral award as if a decree of the court
  • Informal proceedings provide better comfort to the parties

NEED FOR ARBITRATION

  • Alternative dispute resolution (ADR) mechanisms  such as arbitration could go a long way in reducing the burden of pending cases on the courts, and also present a win-win situation for the two parties.
  • Besides, they can also provide lucrative career opportunity to the professionals in arbitration.
  • If the ADR mechanism if not accepted, Indian judiciary is likely to be crumbled under its own weight.

LEGAL PROCEEDINGS

A legal proceeding is any activity that seeks to invoke the power of a tribunal in order to enforce a law, or obtain legal remedies pursuant to a law.

PROCESS INVOLVED

Legal process (or sometimes "process"), are the proceedings in any civil lawsuit or criminal prosecution and, particularly, describes the formal notice or writ used by a court to exercise jurisdiction over a person or property.

INTERIM MEASURES BY COURT (SECTION 9) 1996.

Interim measures, 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(enforcement), apply to a court.

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

(II) For an interim measure of protection in respect of any of the following matters, namely:-

  • the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
  • securing the amount in dispute in the arbitration;
  • The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, 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;
  • Interim injunction or the appointment of a receiver;
  • 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

INTERM MEASURES BY THE ARBITRAL TRIBUNAL [Section 17] 1996.

Interim measures ordered by arbitral tribunal. -

(I)  Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.

(II)  The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).

ARBITRATION & CONCILIATION ACT AMENDMENT (2015)

 The President of India promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2015 ("the Ordinance") on October 23, 2015 amending the Arbitration and Conciliation Act, 1996 ("the Act"). The said Ordinance has come into force on the date of notification i.e. October 23, 2015.

AMENDMENT TO (SECTION 9) 2015

Where the Court passes an order for any interim measure under sub-section (1) of Section 9 before the commencement of arbitral proceedings, the arbitral proceedings shall be commenced within a period of ninety days (90) from the date of such order. It further provides that once the arbitral tribunal is constituted, the Court shall not entertain an application for interim measure unless it finds circumstances that may render the remedy provided under section 17 inefficacious. Hence more power to tribunals.

AMENDMENT TO (SECTION 17) 2015

The arbitral tribunal shall have power to grant all kinds of interim measures which the Court is empowered to grant under section 9 of the Act. Such interim measures can be granted by the arbitral tribunal during the arbitral proceedings or at any time after making the arbitral award, but before it is enforced under section 36 of the Act. Any order issued by the arbitral tribunal for grant of interim measures shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court.

EFFECT OF AMENDMENTS

  • If the Court passes an order for interim measures before the commencement of arbitral proceedings, it will now have to specify a timeline within which the arbitration should be commenced, which by default has been provided as 90 days.  Once the tribunal has been constituted, parties  will have to approach the tribunal under section 17 for interim measures and will not be permitted to approach the court under section 9. Courts can only entertain such an application if it is convinced that an order of the tribunal will not be efficacious.
  • An order of the arbitral tribunal granting interim measures can now be enforced by courts as if it was an order of the court.

CONCLUSION

  • The new provision has not yet been tested fully. In the meanwhile, we must recognize that difficult questions regarding interim protection in aid of arbitration by foreign tribunals/courts are yet to be resolved holistically. Even within the scope of the changes made, the inclusion of an appropriateness test would have been advisable. Further, while it remains the case that there is no homogeneity globally on how such orders should be enforced.
  • In any event, the spectre of Section 9 has risen to haunt again, and although positive changes have been introduced, they do not appear enough to obviate the need for further review at some stage in the future

 

Rishub 
on 26 October 2017
Published in Civil Law
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