Prerna Khatri, Research Associate
The Arbitration and Conciliation Act, 1996 is a comprehensive statute, consolidating and amending in nature and goes way beyond the scope of its predecessor enactment, The Act of 1940. It provides for domestic and international arbitration much in line with the law adopted by the United Nations Commission on International Trade Law (UNCITRAL). The current enactment goes a long way in setting right the flaws in the previous enactment. The beneficial features of the Act have been described by the Supreme Court as follows ((Centrotrade minerals and Metals Inc V. Hindustan Copper Ltd. (2006) 11 SCC 245)),
(i) Fair resolution of a dispute by an impartial tribunal without any unnecessary delay or expense;
(ii) Party autonomy is paramount subject only to such safeguards as are necessary in public interest; and
(iii) The Arbitral Tribunal is enjoined with a duty to act fairly and impartially.
The legislative intent of the enactment is to minimise/limit/restrict the supervisory power of the court in the arbitral process and quick nomination/appointment of the arbitrator, leaving all contentious issues to be decided in the arbitration ((Food Corporation of India V. Indian Council of Arbitration (2003) 6 SCC 564: AIR 2003 SC 3011)). One of the main aims is to settle all the disputes between the parties to avoid further litigation ((ShyamaCharanAgarwala& Sons V. Union of India (2002) 6 SCC 201: AIR 2002 SC 2659)).
POWER OF THE HIGH COURT
Subject to the provisions of the Arbitration and Conciliation Act, 1996, there are certain situations where the High Court has certain role to play. For instance, in accordance with Section 8, The High Court has the power to refer the parties to a dispute to arbitration. In P. AnandGajapathiRaju V. P.V.G.Raju ((AIR 2000 SC 1886 : 2000 (4) SCC 539)), the Supreme Court laid down the following conditions to be fulfilled, to exercise the power under Section 8 :-
(i) There is an arbitration agreement.
(ii) A party to the agreement brings an action in court against the opposite party to the dispute.
(iii) Subject matter of the action is same as the subject matter of the arbitration agreement.
(iv) The other/opposite party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.
In addition to Section 8, the High Court can also grant some interim measures under Section 9, based on an application by a party before, or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced in accordance with Section 36. It is a discretionary power of the court and hence, the court while considering such application would consider the various aspects of the matter such as ((N. Sekar V. M/s. Akash Housing, Chennai, 2011 (3) LW 357 (Mad.) ; Transmission Corporation of A.P. Ltd. V. LancoKondapalli Power (P) Ltd. (2006) 1 SCC 540 ; Bans Ropan V. IIIrd A.D.J., AIR 1993 A.P. 117; N.V. Choudhary V. Hindusthan Steel Works Construction Ltd., AIR 1984 A.P. 110));
(i) Existence of prima facie case,
(ii) Balance of convenience, and
(iii) Potential for irreparable loss or injury.
The court would weigh every possibility to ensure that it’s done in aid of the arbitration proceedings and not to frustrate them ((J&K Forest Department V. Abdul Karim Wasi, AIR 1989 SC 1498, 1508-09 )).
Where the provision can apply
An application to the court to grant interim measures can be made on specified purposes under the Act ((Section 9, The Arbitration and Conciliation Act, 1996)),
(i) For the appointment of a guardian for a minor or person of unsound mind for the arbitral proceeding;
(ii) To obtain custody, preservation and sale of any goods provided such goods are the subject matter of the arbitration agreement;
(iii) To cause recovery of the amount as a result of the arbitral award;
(iv) To detain, preserve and inspect any property or thing which is subject matter of the arbitration agreement;
(v) To obtain interim injunction;
(vi) To appoint a receiver.
This power is discretionary in nature and not all interim measures have been provided herein. The court must objectively examine the merits of each case and determine the extent of interim relief to be guaranteed. This power vested upon the courts cannot be taken away by the parties by consent as it is specifically provided by the Act. The provisions of Section 9 are largely entwined with various other provisions of the Act. For instance, under Section 31(6), the arbitrator at any point of the arbitral proceedings can make an interim arbitral award at any time with respect to any matter to which the arbitrator has the authority to make the final award. In addition, interim measures can be granted under Section 17. However, the provisions herein provide that the arbitral tribunal is empowered to issue any interim measures at the request of the party during the arbitration proceedings, but the tribunal cannot order any interim measures before the commencement of the arbitration proceedings or after the arbitral award has been made.
Purpose of interim relief
The purpose of interim relief has been explained in depth by the Allahabad High Court in Deepak Mitra V. District Judge, Allahabad ((AIR 2000 All 9 at p. 20)). The court said:
“Interim measures can be issued under Section 9 only for the purpose of arbitration proceedings and with a view to protect the interest of the parties which otherwise cannot be protected or safeguarded by the arbitral tribunal. The power intended under Section 9 is not intended to frustrate the arbitration proceedings. This power cannot be exercised by the court if it would prejudice the powers vested in the arbitrator and render him incapable of resolving the dispute.”
Effect of interim measures:
An interim measure does not put to rest the rights of the parties. The rights of the parties are required to be adjudicated finally when a reference is made. The court has the authority and jurisdiction to pass interim orders for protection and preservation of the rights of the parties during the arbitration proceedings. However, this does not imply that if a party has availed of a benefit under this jurisdiction, the other party cannot put his claim in the main proceedings before the arbitrator. The interim measure/arrangement made by the court has to be given the necessary interim status. When an arbitration clause exists in a contract and an order, relating to the contract has been passed and the parties do not abdicate the arbitration clause and, on the contrary, take recourse to the same, then all the disputes, inclusive of benefits arising or having already arisen, have to be decided by the arbitrator ((Arvind Iron and Steel Corporation V. Steel Authority of India Ltd. AIR 2000 MP 247)).
OTHER POWERS OF THE HIGH COURT
Besides the powers explained above, the parties to the dispute or the arbitral tribunal, may apply to the court to seek assistance with respect to taking evidence as under Section 27. An application must be made to the court which shall specify:
(i) The names and addresses of the parties and the arbitrators;
(ii) The general nature of the claim and the relief sought;
(iii) The evidence to be obtained, in particular:
- The name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required;
- The description of any document to be produced or property to be inspected.
In comparison to the Act of 1940 where only the tribunal or the umpire could apply for assistance, the Act of 1996 empowers even a party to the dispute to apply for such assistance after seeking permission of the Tribunal.
Persons who fail to attend as required, or make any other default, or refuse to give evidence; are guilty of contempt of the Arbitral Tribunal and shall be dealt with by the Court on representation of the Arbitral Tribunal in the same way as the person who was guilty of like offences in suits before courts.
Similar to a court’s proceedings, matters where the assistance has been sought, should be dealt in the same manner as if it is before a Court. The rules of natural justice will strictly follow with no exceptions. Failure to follow these basic principles of Rule of Law, would render the award invalid and liable to be set aside ((K.P. Poulose V. State of Kerala, AIR 1975 SC 1259)).
The Delhi High Court in Lalit Mohan V. Building Committee ((AIR 1995 Del. 180)), has held that once the arbitrator has permitted the witness to be examined, it is not proper on the part of the arbitrator to decline to issue summons to the sole witness. The award would be liable to be set aside on grounds that the summons weren’t issued.
This provision to seek the court’s assistance in taking evidence of witness is necessary because the arbitral tribunal has not been conferred power to summon witnesses or to issue process as such.
The Arbitration and Conciliation Act, 1996 though minimises the aspect of judicial intervention, also leaves scope wherein the parties to the dispute or the Tribunal may seek for some kind of assistance from the Court in critical situations. This not to enhances the decision making capacity of the Arbitral Tribunal by vesting them with the sole authority to make decisions but also respects the Judicial setup without compromising on the interests of the parties.