GRANTING INTERIM RELIEF AGAINST THE THIRD PARTY BY ARBITRAL TRIBUNAL: AN ONEROUS PUZZLE TO BE SOLVED
Section 17 and Section 9, of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) provides for the power of the arbitral tribunal and the court to grant interim reliefs respectively to the parties. Interim relief directed against non-parties to the arbitration, such as the parties’ banks or subcontractors, is often required in complicated disputes to ensure successful arbitration. However, there are no adequate answers to the question of whether an arbitral tribunal may offer temporary relief to non-parties to the arbitration proceedings.
In the recent judgement of 2020, Blue Coast Infrastructure Development Pvt Ltd v Blue Coast Hotels Ltd (“Blue Coast judgment”), the Delhi High Court made two relevant observations. Firstly, the authority of an arbitral tribunal under Section 17 of the act was limited to only providing temporary relief against the arbitration parties. Second, that the court’s ability to grant temporary relief under Section 9 was expanded, allowing it to issue orders against all parties and non-parties to the arbitration.
Hence, the purpose of the present article is to analyse the judgment on party autonomy. Alongside, the authors will also try to interpret the erroneous interpretation made by the court of delimiting the interim power of the arbitral tribunal under Section 17 with the Objective & Aim of forming an arbitral tribunal in the first place.
The reasoning of the court in the present case is based upon the previous judgment of the same court by a single judge bench in Gatx India Pvt. Ltd. v. Arshiya Rail Infrastructure Limited (“Gatx Judgment”). While making an observation on the scope of Section 17 in relation to non-parties to the arbitration, the single judge bench in the Gatx Judgement held that Section 17 cannot be used against non-parties to the arbitration. Here, it is important to understand that the Gatx Judgment dealt with Section 17 before its amendment in 2015.
Before the 2015 amendment, Section 17 of the act used the term “order a party”, hence limiting the scope to only “parties to the arbitration,” and an arbitral tribunal does not offer temporary relief to non-parties to the arbitration. This clause allowed the parties to seek temporary relief against non-parties from the appropriate court under Section 9.
Subsequently, after the amendment of the 2015, Arbitration and Conciliation (Amendment) Act, 2015, the aforementioned Section 17 was substituted. Section 10 of the Amendment Act granted the arbitral tribunal “…the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it”. Appositely, a civil court has broad and expansive powers to issue orders under Section 151 of the Code of Civil Procedure. The 2015 Amendment aims to give the arbitral tribunal the same broad powers when it comes to granting temporary reliefs.
What’s noteworthy is that the above amendment seems to be derived from Section 9, which contains a similar term that grants the court the same powers as a civil court in granting temporary reliefs. The fact that the Blue Coast Ruling and the Gatx Ruling used the inclusion of this exact phrase in Section 9 as the ground for holding that the courts should grant temporary relief against non-parties to the arbitration under Section 9 of the Arbitration Act adds to the interest of this observation.
Though a civil court’s powers to grant interim relief are wide that includes granting interim injunctive relief against third parties to a complaint, granting courts the same powers under Section 9 allowed them to grant interim reliefs against non-parties to arbitration proceedings, according to the rationale in both cases.
The apparent paradox is as follows: If the use of the above term gives courts the power to grant temporary relief against non-parties to the arbitration under Section 9, then does an arbitral tribunal not have the same power under Section 17? Since both the arbitral tribunal as well as the court have been granted the powers of a civil court in granting temporary reliefs under Section 17 and Section 9, it seems unreasonable to infer that one of them has the greater power of passing orders against third parties to the arbitration.
The fact that an arbitral tribunal is a type of private adjudication does not excuse restricting its powers in granting temporary reliefs if the legislature has expressly granted the same powers. A close examination of the Blue Coast decision reveals that the court erred in relying on an out-of-date decision and neglected to provide a fresh perspective on Section 17 in light of the 2015 Amendment.
The arbitral tribunal’s failure to offer temporary redress against third parties is one of the main reasons why parties to an arbitration arrangement request court intervention after the arbitral tribunal is established. The 2015 Amendment to amend Section 17 appears to be aimed at bringing the arbitral tribunal’s powers up to par with those of the courts under Section 9. This is because, once the arbitral tribunal has been established, seeking redress from the courts should be an exception rather than the rule. The extent of judicial intervention in arbitration was hoped to be limited by increasing the powers of the arbitral tribunal in this case.
If the decision in the Blue Coast case is upheld, the existing practice of parties running to the courts for temporary reliefs will continue, as third parties’ interests are often impacted when interim reliefs are granted. As a result, Section 17 includes a fresh outlook that also considers the 2015 Amendment. Therefore, for speedy justice and also looking at the party autonomy principle, it is necessary to widen the ambit of Section 17.
Author: umang sethi,
this is submitted as co- authorship. Details: Umang Sethi & Samar pratap singh rathore, penultimate year, Institute of law, nirma university, ahmedabad.