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Post Arbitral Discriminatory Relief: A False Dichotomy

Updated: Sep 25, 2021

Shubham Gandhi*

 

Abstract

This article analyses the often-discriminatory parameters employed by courts when deciding who is granted interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. The judicial system has long since stuck to giving interim relief post-arbitral awards to the winning party alone, with no legislative intent favouring this practice. The author, in this article, while parsing Section 9 of the Act, aims to accentuate the unwanted divergence of opinions rendered by various High Courts on the subject. This article will then argue why the interpretation adopted by various High Courts is a problematic one and suggest a new line of reasoning, which should take precedence.


Keywords

Arbitration & Conciliation Act, Discrimination, Interim Relief, Section 9, Post arbitral award relief.


Introduction

Section 9 of the Arbitration and Conciliation Act, 1996 ("Act") provides interim relief to parties involved in a dispute "before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced."


Section 9 has been crafted in line with Article 9 of UNCITRAL Model Law. The only difference between the two is that the Model law does not grant interim relief after the pronouncement of the arbitral award. The intent behind this differentiation is that Section 9 is enacted to safeguard the subject matter and ensure that the award passed does not stand futile or infructuous before the stage of execution. To achieve that, the Act grants the courts the power to pass interim relief post arbitral award, and thus, provide the winning party with the fruits of the arbitration award.


It is interesting to note that an appeal is already pending before the Apex court in Home Cares Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi[1]concerning the scope and extent of Section 9. A critical question that the appeal asks is whether the award debtor (the losing party) should be able to make an application for interim relief post pronouncement of the arbitral award or not.


Statutory Interpretation of Section 9

Section 9 of the Arbitration Act does not draw any disparity whatsoever regarding the dichotomy as adopted by courts. Section 9 entitles "Any party" to the dispute to obtain interim relief. Similarly, Section 2(1)(h) of the Act defines the word 'party' as "party to an arbitration agreement," which means that "any party" to the "arbitration agreement" can apply for interim relief. The Legislature, by using "any party" in place of "award creditor," clearly showcased their intention of not discriminating between the winning and losing party with respect to Section 9 application.

The Bombay High Court judgement in the Dirk India case was delivered in 2013. The Legislature thereafter never incorporated the said interpretation by any subsequent amendment, which reflects the lack of legislative intent towards discriminating between two parties. This creates a typical situation where the Legislature's intention is clear, and so judgements must be held to the first rule of interpretation; the judiciary is there only to interpret the said law and not to legislate.


The Legislature recently amended the Arbitration and Conciliation Act of 2021. The Amendment Act, by Section 2, added a proviso to Section 36, which states that in case the award is prima facie influenced by fraud or corruption, then proceedings must be halted unconditionally.


The amended Section reads:

"...Provided further that where the Court is satisfied that a prima facie case is made out that,— (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award."


As explained by the Statement of Purpose of the Amendment Bill, this move was to give equal opportunity to all the stakeholders to present their side of the case and seek adequate protection. This implies that the Legislature intends to maintain equality between the parties.


The Bombay High Court gave birth to the dichotomy through its landmark judgement: Dirk India Pvt. Ltd. v. Maharashtra State Power Generation Company Ltd. (2013). The court asserted that interim relief, as provided under Section 9, will only be made available to the award creditor (winning party) as soon as the award has been passed and that the same will not be available to the award debtor.

The court explicitly stated that the purpose of granting interim relief is to secure the "fruits of the reward" and safeguard the arbitral award's enforcement. The court further remarked that the party who loses the award does not hold any right to the subject matter, so a relief under Section 9 after the award has been passed will not be made available to such party.


Additionally, the court held that Section 36 of the Act, which deals with the enforcement of arbitral awards, is applicable only when the losing party does not make an application for setting aside the award under Section 34 or if a competent court rejects said application. The court held that Section 34 is the only recourse available to award debtors; Section 9 is entirely inapplicable. In a recent case of Home Care Retails Pvt. Ltd. v. Haresh N. Sanghavi (pending before Apex court) and Windworld India Ltd. v. Enercon Gmbh and Ors.,(2017), the Bombay HC has affirmed the reasoning given in the Dirk India case.


Contrariwise, in Organising Committee Commonwealth v. M/s Nussli (Switzerland) Ltd, the Delhi High Court held that the award debtor has the right, granted by the Arbitration and Conciliation Act, to challenge the award under Section 34 within 90 days after its passing. The court held that, by dint of Section 34, the award debtor retains his right over the subject matter. The denial of interim relief under Section 9 will cause injustice to the award debtor in the sense that if proceedings are set aside and the award debtor becomes the award creditor, they will not be able to avail the subject matter. Remarkably, the same High Court's recent judgement in Tecnimont Pvt. Ltd. v. ONGC Petro Additions (2020) overruled the Organising Committee judgement and followed the precedent set by Bombay High Court, stating that the object of Section 9 is to "step in aid of enforcement." Similarly, in Sierra Construction v. Padma Mahadev (2021), the Karnataka HC held that the losing party is not entitled to get interim relief under Section 9. Furthermore, the courts shall not restrict themselves from awarding relief to the award debtor if such relief does not harm or negate the rights of the award creditor with regard to the subject matter.


In the case of Wind World (supra), the award debtor prayed to maintain the privacy or confidentiality of the documents pendente lite by the application made under Section 34 of the Act. The author believes that the relief so asked does not infringe upon any of the award creditor's rights, instead of protecting the losing party until the application under Section 34 is disposed of. Such relief is only preventive, ensuring the rights of unsuccessful parties who have pending applications. Despite that, the court denied interim protection to the unsuccessful party.


The court shall consider the right of the unsuccessful party to get relief under Section 9 if a stay on enforcement has been ordered on the application made under Section 34. Section 36 states that with regards to execution, the court is bound to follow the Civil Procedure Code, 1908. The Code vide Order 39 provides that if the plaintiff made out The contention that allowing applications under Section 9 will cause hindrance and delay to the proceedings cannot go unheeded, but making it the sole reason to not grant the relief to award debtor, does not justify the stance as supposedly improper use of law cannot be given precedence.


Conclusion

The provision of Section 9 is remedial: after the passing of the award and before its enforcement, there are significant chances of either party trying to mishandle the subject matter of the dispute. The primary rule of interpretation is that the court cannot interpret what the Legislature never intended. Section 9 is drafted to clearly exhibit the Legislature's intention to provide the remedy to both parties to the disputes equally. The further amendments which have taken place also hinted towards the predominance of the statutory rule rather than judicial interpretation. The law as pronounced by the court in the Dirk India does not hold legitimacy and is a judgement based on unreasoned interpretation of the statute. To redress this possible defect, the author suggests that, before allowing a post-award application from the award debtor, the court shall make it mandatory on the part of the award debtor to submit an amount which will be forfeited if the court in later proceedings discovers that the application was filed in bad faith to delay the execution proceedings.


The long-standing conundrum regarding Sections 9, 34, and 36 must be rectified as soon as possible either by the Legislature inserting an explanation in Section 9 or by the Apex court pronouncing a strong precedent as an authority in the pending decision over the issue, finally resolving this fallacy once and for all.


[1] SLP (C) No. 29972 of 2015


 

[*] Shubham Gandhi is a fourth-year student at National Law University, Jabalpur. His research area focuses on domestic arbitration and competition law. The author may be reached out through shubhamlaw7@gmail.com.


Preferred Citation – Shubham Gandhi, “Post Arbitral Discriminatory Relief: A False Dichotomy", Syin & Sern Law Review, Published on 25th September 2021.


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