Interim Protection in Arbitration Contracts
Section 9 of the Arbitration and Conciliation Act, 1996(hereinafter referred to as the Act) is an often discussed clause and mired in dispute.
An application under Section 9 can be maintained either before the Arbitration proceedings, during the Arbitration proceedings or even thereafter till the award is enforced under the Act. This approach is often adopted by an aggrieved party to protect its Moveable/immoveable property against the opposite party, in Arbitration proceedings, by seeking interim protection from the Court under Section 9 of the Act.
Deciding an application under Section 9 of the Act, the Court has to satisfy itself as to the following ingredients:
- That there was an Arbitration Clause between the parties,
- A dispute has been raised in terms of the Arbitration clause and
- There exist sufficient grounds to grant interim relief.
The proceedings under Section 9 of the Act are akin to the proceedings under Order 39 Rule 1 and 2 of Code of Civil Procedure. Likewise Applications under Order 39 Rule 1 and 2 CPC and Reply thereto are not considered as pleadings of the parties.
The Court at this stage does not have to look into the merit or de-merits of the claim and or counter claim between the parties. All that has to be seen is whether a Prima Facie case rests in favour of the Applicant.
Thus for grant of interim relief under Section 9 of the Act, the Applicant has to satisfy the Courts as to three tests:
- Whether a Prima Facie (On the face of it) case rests in favour of the Applicant.
- Whether the Balance of Convenience is in favour of the Applicant.
- Whether irreparable loss would be caused to the Applicant if interim protection is not granted.
- Whether there is a substantial possibility that the Applicant will ultimately prevail in the dispute.
4.1 When the Arbitrator is apprised of the dispute:
In this instance Section 9 of the Act cannot be invoked as because at this stage the parties have to approach the appointed Arbitrator itself for interim relief.
4.2 Third Parties:
Generally an interim protection cannot be sought against a third party. However the Courts have passed varied decisions on this aspect.
4.3 Cancellation of Contract in full or part (Terminable Contracts)
If the contract is such that a clause is contained that the contract could be terminated on account of the fact that the opposite party does not fulfilling its obligations:
Interim relief as envisaged under Section 9 of the Act cannot be granted for specific performance of a contract. In all those cases where monetary damages can compensate the breach of contract, the Court cannot insist upon the parties that the contract should be specifically performed. Termination of the contract is one of the facets of the commercial law and if a party is aggrieved that the contract was wrongfully terminated the remedy lies in claiming damages.
Jurisdiction of Indian courts to grant interim relief in international commercial arbitration was earlier in vogue. However in a deviation from the above principle, it has now been held that Indian courts have no jurisdiction to pass interim orders in foreign arbitration awards between an Indian company and a foreign company under the provisions of the Indian Arbitration and Conciliation Act, 1996.
It must be noted that While replying to the application to the interim relief, it is also not necessary for the opposing party to state the entire case before the Court. It is sufficient for party to resist the application for interim relief and state only so much which is necessary for resistance.