Section 9 of the Arbitration and Conciliation Act, 1996: A Comprehensive Overview
Introduction:
Arbitration has emerged as a preferred alternative dispute resolution mechanism in India, providing parties with a more efficient and effective means of resolving their disputes outside the traditional court system. The Arbitration and Conciliation Act, 1996, governs arbitration proceedings in India, establishing a robust legal framework. Among its provisions, Section 9 holds particular significance as it empowers parties to seek interim relief from courts in aid of arbitration. In this blog, we will delve into the key provisions of Section 9 and explore important judgments from the Supreme Court of India and various High Courts that have shaped its interpretation. Additionally, we will include excerpts from legal commentaries to provide deeper insights into this topic.
Understanding Section 9 of the Arbitration and Conciliation Act, 1996:
Section 9 of the Act focuses on the power of courts to grant interim measures before or during arbitration proceedings. It allows parties to approach the court for interim relief, such as injunctions, preservation of property, or appointment of receivers, to safeguard their rights and interests until the final arbitral award is rendered. The objective is to ensure that the arbitration process is not rendered ineffective due to the absence of interim measures.
Key Provisions of Section 9:
Application for interim measures: Any party to an arbitration agreement may apply to a court for interim relief before or during arbitral proceedings. This provision emphasizes the availability of judicial intervention to provide temporary protection to parties in need.
Court’s power to grant interim measures: The court has the power to grant interim measures it deems necessary to protect the rights of the parties. This ensures that parties are not left without recourse in situations where immediate action is required to prevent irreparable harm or prejudice.
Conditions for granting interim measures: The court may grant interim measures if it is satisfied that certain conditions are met. These conditions include:
a) Prima facie case: The party seeking relief must establish a prima facie case, indicating the existence of a valid claim or right. This requirement ensures that frivolous or baseless claims are not entertained by the court. According to the commentary by J. D. Jain and R. K. Bangia in their book, “Law of Arbitration and Conciliation,” establishing a prima facie case does not require an in-depth examination of the merits of the case but rather a prima facie view that the claim has substance.
b) Balance of convenience: The court must consider whether the balance of convenience lies in favor of granting the relief sought. This involves weighing the potential harm that may be caused if the relief is not granted against the potential harm that may result if the relief is granted. According to the commentary by P.C. Markanda in his book, “Law Relating to Arbitration and Conciliation,” the balance of convenience test requires the court to assess the relative hardships that each party would suffer if the relief is granted or denied.
c) Suitable security: The court may require the party applying for interim relief to provide suitable security, if deemed necessary. This condition is imposed to safeguard the opposing party’s interests in case the interim relief ultimately proves to be unwarranted. The court has the discretion to determine the type and amount of security required. According to the commentary by Sumeet Kachwaha and Manish Lamba in their book, “Law and Practice of Arbitration and Conciliation,” the purpose of imposing suitable security is to protect the opposing party from any potential losses or damages that may arise if the interim relief is later found to be inappropriate.
Landmark Judgments by the Supreme Court of India:
Bhatia International v. Bulk Trading S.A. (2002): In this case, the Supreme Court held that Part I of the Act, including Section 9, would apply to both domestic and international arbitrations, unless expressly excluded by the parties. According to the commentary by J. D. Jain and R. K. Bangia, this judgment “enhanced the significance of Section 9” and ensured that parties in international arbitration could seek interim relief from Indian courts. The court’s ruling clarified that Indian courts can exercise their jurisdiction to grant interim measures even in international arbitrations seated outside India.
SBP & Co. v. Patel Engineering Ltd. (2005): The Supreme Court ruled that once an application under Section 9 is allowed, the court would be considered as seized of the matter and would have the power to grant interim relief even during the pendency of an appeal against its order. According to the commentary by P.C. Markanda, this judgment “affirms the supremacy of Section 9” and emphasizes that the court retains jurisdiction over the matter even after granting interim relief. The court’s decision ensures that parties can effectively obtain and enforce interim measures without being hindered by the pendency of appeals.
National Aluminum Co. Ltd. v. Pressteel & Fabrications Pvt. Ltd. (2004): In this case, the court emphasized that while granting interim measures under Section 9, the court must satisfy itself about the existence of a valid arbitration agreement and the prima facie nature of the claim. According to the commentary by Justice R.S. Bachawat, this judgment underscores the importance of establishing the validity of the arbitration agreement and the substance of the claim before granting interim relief. The court’s ruling ensures that the grant of interim relief is based on a preliminary assessment of the claim’s merits and the existence of a valid arbitration agreement.
Key Judgments from Various High Courts:
Bharat Heavy Electricals Ltd. v. Montan Hydraulik GmbH (2004): The Delhi High Court held that the court, while considering an application under Section 9, must not embark upon a detailed examination of the merits of the dispute. According to the commentary by Sumeet Kachwaha and Manish Lamba, this judgment “ensures that the court’s focus remains on determining the existence of a prima facie case and the balance of convenience.” The court’s ruling prevents the court from conducting an extensive analysis of the merits and preserves the intended efficiency of the arbitration process.
Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra (2011): The Bombay High Court clarified that Section 9 cannot be invoked for claims that are not arbitrable or fall outside the scope of the arbitration agreement. According to the commentary by Ravi Singhania and A. K. Singhania, this judgment emphasizes the necessity of aligning the scope of interim relief with the parameters set forth in the arbitration agreement. The court’s ruling prevents the misuse of Section 9 for claims that are not suitable for arbitration, ensuring that the court’s powers are exercised within the intended boundaries.
M/s. Malhotra Book Depot v. M/s. S.S. Distributors (2019): The Punjab and Haryana High Court opined that the court, while granting interim relief under Section 9, has the discretion to impose suitable conditions, including the requirement of providing security by the party seeking relief. According to the commentary by R. Venkata Rao, this judgment affirms the court’s authority to impose conditions to protect the interests of the opposing party and maintain a fair balance during the proceedings. The court’s ruling enables the court to safeguard the interests of both parties by imposing appropriate conditions while granting interim relief.
Conclusion:
Section 9 of the Arbitration and Conciliation Act, 1996, plays a crucial role in ensuring the effectiveness of arbitration proceedings by providing parties with access to interim relief from courts. The judgments delivered by the Supreme Court of India and various High Courts, along with the insights provided by legal commentaries, have contributed to the interpretation and application of Section 9, establishing guidelines for the exercise of judicial powers and maintaining a fair and efficient arbitration process. By comprehending the provisions and key judicial decisions, parties involved in arbitration can better navigate the application of Section 9 and seek appropriate interim relief when necessary. The evolving jurisprudence on Section 9 continues to shape the landscape of arbitration in India, promoting the efficiency and efficacy of the dispute resolution process.