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Power of an Arbitral Tribunal to Order Interim Measures



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Significance of Interim Measures in Arbitration Proceedings


Interim measures hold significant importance in both domestic and international arbitration settings. The temporal gap between the emergence of a dispute and the issuance of an arbitral award can lead to the disappearance of crucial evidence or subject matter, causing irreparable harm to a party. 



Moreover, there are instances where a counterparty might attempt to hinder the enforcement of a future award by disposing of its assets. In such scenarios, interim measures serve as a vital recourse, enabling parties to safeguard their rights and assets and ensuring the effective enforcement of arbitral awards against debtors.



Both state courts and arbitral tribunals possess the authority to grant interim measures, and parties seeking such relief must carefully deliberate which forum to approach.


Sections 9 and 17 of the Arbitration and Conciliation Act 1996 empower courts and arbitral tribunals, respectively, to order interim measures. 



Section 9 delineates the provisions for interim measures by the court, including the appointment of guardians for minors or individuals of unsound mind, preservation of goods, securing disputed amounts, property inspection, interim injunctions, and other protective measures deemed just and convenient by the court. 

 
 

Similarly, Section 17 grants arbitral tribunals the power to issue interim measures, mirroring the authority of courts in making such orders.



The scope of the Arbitration Act encompasses both domestic and international commercial arbitrations seated in India, with certain provisions now extending to international arbitrations conducted outside India. 



However, the application of Part I provisions to international arbitrations seated abroad has been a contentious issue.


The landmark case of Bhatia International v. Bulk Trading S.A. established that Part I provisions would apply to international arbitrations held outside India unless expressly or impliedly excluded by agreement between the parties. 



Subsequent Supreme Court decisions upheld the rationale of Bhatia International until the 2012 ruling in Bharat Aluminium Company (BALCO) v. Kaiser Aluminium Technical Services Inc, which overturned the previous precedent. BALCO held that Part I provisions would not apply to international arbitrations outside India, affecting the availability of interim relief under Section 9 in such cases.


However, this ruling applied prospectively, affecting arbitration agreements executed after 6th September 2012.


Authority of Arbitral Tribunals to Order Interim Measures: Section 17


Section 17 of the Arbitration Act delineates the authority vested in arbitral tribunals regarding the issuance of interim relief in arbitrations seated in India.


This section elucidates the scope and constraints of the tribunal's power, addressing the nature of the orders it can issue, the differentiation between interim orders and awards, and aspects related to enforcement. 



Additionally, it delves into the tribunal's jurisdiction over third parties and avenues for challenging interim measures.



Scope and Constraints


The discretion to grant interim measures rests with the tribunal. Generally, an applicant must demonstrate:


(i) a prima facie case in its favour,


(ii) a balance of convenience favouring the interim relief, and


(iii) the risk of irreparable harm if relief is not granted.



Prior to the 2015 Amendment, Section 17 lacked specificity regarding the types of interim measures available to tribunals. It allowed tribunals to order any interim protective measures deemed necessary for the subject matter of the dispute, along with requiring parties to furnish appropriate security.



However, parties could limit the tribunal's power in this regard through provisions in the arbitration agreement.



The 2015 Amendment aligned the tribunal's powers under Section 17 with those of a court under Section 9, enabling tribunals to grant measures akin to those granted by courts. It also clarified that orders issued by tribunals hold the same weight as court orders and are enforceable under the Civil Procedure Code.



Subsequently, Section 9 was amended to restrict courts from entertaining interim measure applications once a tribunal is constituted, unless circumstances render relief under Section 17 inadequate.



The 2015 Amendment abolished party autonomy recognized under the previous Section 17, ensuring that the remedy under this section remains available irrespective of agreements between parties.


In cases where parties opt for institutional arbitration, the tribunal's powers under institutional rules supplement Section 17 provisions. Conflicts between institutional rules and Section 17 are yet to be tested in court.



An additional amendment in 2015 allowed tribunals to grant interim measures not only during but also after arbitral proceedings and before award enforcement. However, this conflicted with Section 32 of the Arbitration Act, which terminates tribunal mandates upon final awards.



The 2019 Amendment rectified this discrepancy by removing the clause allowing interim measures after award issuance but before enforcement.



Section 17 does not apply to arbitrations seated outside India. In such cases, the tribunal's power to grant interim measures is governed by the arbitration laws of the seat, supplemented by agreed institutional rules.

 
 

Distinguishing Interim Orders from Interim or Partial Awards


Section 17 of the Arbitration Act empowers an arbitral tribunal to issue 'orders' exclusively. It's crucial to differentiate between interim orders pursuant to Section 17 and interim awards as per 


Section 31(6) of the Arbitration Act:

  • The definition of an arbitral award in Part I of the Arbitration Act encompasses interim awards under Section 2(1)(c). Section 31(6) allows tribunals to issue interim arbitral awards during proceedings, addressing matters within the scope of final arbitral awards. As such, interim awards under Section 31(6) are subject to challenge akin to final awards.


  • Conversely, interim orders under Section 17 are distinct and have a separate appeal mechanism. They can only be appealed as orders under Section 37(2)(b). Unlike interim awards, interim orders are subject to modification by the court in addition to being set aside or upheld.



Differentiating Between Interim Orders and Interim Awards


In practice, distinguishing between an interim order and an interim award issued by an arbitral tribunal can present challenges. Merely relying on the terminology used by the tribunal is not conclusive, as judicial decisions have highlighted that the nature and effect of the decision should be the primary considerations in determining its classification.



In the case of Asian Electronics Ltd., Thane v. M.P. State Electricity Board, the court addressed an appeal against a Section 17 order, contested on the grounds that it resembled an interim award under Section 31(6).



The court emphasised that the designation of the order under Section 17 doesn't automatically categorise it as an interim award. Instead, it evaluated the substance of the decision and concluded that it wasn't merely a protective measure but rather an expression of the tribunal's opinion on the dispute, akin to an interim award under Section 31(6).



Similarly, in McDermott International Inc. v. Burn Standard Co. Ltd., the court clarified that an interim award, as defined in Section 2(1)(c) and Section 31(6), should be a final determination on matters covered therein, albeit made at an interim stage.



The court upheld the validity of a partial award, emphasising that if a partial award conclusively resolves all matters within its scope, it qualifies as an award under Section 2(1)(c), despite the Act not explicitly using the term "partial award."



Moreover, in National Thermal Power Corporation Ltd. v. Siemens Aktiengesellschaft (SAG), the court distinguished between interim and partial awards, noting that while an interim award typically addresses preliminary issues like jurisdiction or liability, a partial award has immediate monetary implications. However, both are considered final and binding on the parties akin to court decrees.



Consequently, orders pertaining to interim measures under Section 17 are not deemed final or binding awards under the Arbitration Act. Instead, they are treated as appealable orders under Section 37(2)(b), highlighting the procedural distinction between interim orders and interim awards within arbitration proceedings.

 
 

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