Scope of Judicial Interference under Arbitration and Conciliation Act, 1996

Arbitration is an alternative dispute resolution mechanism. Parties to an agreement decide beforehand that in case of any dispute arising out of the agreement that they are entering into, they will refer it to arbitration. In such a method both parties will have a say in selecting the arbitrator who will make a binding decision on the dispute. It is an alternative to approaching courts for dispute resolution which is a time and money-consuming process.

The Arbitration Act came into being in 1996 to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards.

What are the features of arbitration?

1. It is consensual.
2. Parties choose the arbitrator(s).
3. Arbitration is neutral.
4. Arbitration is confidential.
5. The decision of the arbitral tribunal is final and binding on the parties.

Sections in the Act that provides for Judicial Intervention

• Section 8- the power to refer parties to arbitration where there is an arbitration agreement. In a dispute before the Court the subject matter of which is the subject to the arbitration agreement then the party to the agreement or any person claiming through or under him may apply to the court to refer the parties to arbitration at the earliest possible chance of representation given to it.

Further, Section 8(3) provides that arbitration may be commenced or continued parallel to the application pending before the High Court and a subsequent award can also be passed.

• Section 9- interim measures by Court.
• Section 11- Appointment of arbitrator. If the parties fail to appoint an arbitrator as per the procedure determined by their agreement or this section or in case of three-panel arbitrators the two arbitrators fail to appoint a principal arbitrator then the party may request the Supreme Court, High Court or any person or institution designated by such Court for the appointment of the arbitrator.

Upon a request by the party to the court for the appointment of an arbitrator the court must restrict itself to the examination of the existence of an arbitration agreement.

The decision made by the Court, or any person/institution appointed by the court shall be final and no appeal including Letters Patent Appeal (LPA) shall lie against such a decision.

The court or any person/institution so appointed by the court shall take a disclosure in writing from the prospective arbitrator with regard to – 1) any qualification required to be the arbitrator in the agreement between the parties and 2) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

In case request has been made to multiple high courts then the one which received the request first is competent to decide on it. Such a request shall be disposed off expeditiously, i.e. within sixty (60) days. The high court may also frame rules for the determination of the fees of the arbitral tribunals.

• Section 27- court assistance in taking evidence. This section provides that the arbitral tribunal or a party with the approval of the tribunal may apply to the court for assistance in taking evidence. The court may provide that the evidence be directly be provided to the arbitral tribunal.

In case the person to whom a process has been issued by the ocurt fails to comply then they would be guilty of contempt to the arbitral tribunal pursuant to which the court can impose like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal.

• Section 29A- requires that the award that in domestic arbitration the award shall be made within a period of 12 months from the date of completion of pleadings. However, if the award is not made within a period of 12 months then the mandate of the arbitrator(S) shall terminate unless approved by the court prior or after the expiry of the period. 

Further, under this section the court has the power to substitute one or all of the arbitrators. Then they will continue from the stage already reached so it works in continuation of the earlier appointed arbitral tribunal.

• Section 31A– regime for costs. It provides that the court or arbitral tribunal has the discretion to determine whether both or one of them will pay the costs, the costs, and when such costs have to be paid.
• Section 34- application for setting aside arbitral award. The party aggrieved by the arbitral award may make an application to the Court.
• Section 2(e) defines court. It means the principal civil court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction. In case of international commercial arbitration, court means the High court in exercise of its ordinary original civil jurisdiction.
• Section 34(2) provides that an arbitral award may be set aside by the court only if-
• The party making an application can establish that it was under some incapacity.
• The arbitration agreement is not valid under the law.
• The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.
• Arbitral award deals with a dispute which is beyond the ambit of the arbitration agreement.
• That the composition of the arbitral tribunal is not in accordance with the agreed procedure between the parties.
• The Court finds that the subject matter of the dispute is not capable of settlement by arbitration under law in force.
• The Court finds that the arbitral award is in conflict with the public policy of India. Award is deemed to be against public policy only if-
  • Making of the award is induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
  • Award is in contravention with the fundamental policy of Indian law
  • Award conflicts with the most basic notions of morality or justice.
• Court is satisfied that the award is vitiated by patent illegality appearing on the face of the award. 
• But award cannot be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
• Further, application to set aside award has to be made within 3 months from the date on which the party received the arbitral award.
• Section 59 provides for appealable orders. Orders of the Court for refusing to refer the parties to Arbitration, granting or refusing to grant any measures or setting aside or refusing to set aside an arbitral award. However, no second appeal pursuant to this appeal is allowed but it doesn’t restricts the right to approach the Supreme Court in appeal.

Judicial intervention to provide interim relief-

In instance where the arbitral tribunal is not empowered to provide interim reliefs under Section 17 of the Act then the party may approach the Court, even during the pendency of the arbitration process.

Interim measures that the party may seek from the Court under Section 9 includes-

1. Appointment of guardian for a minor/unsound mind person for purpose of arbitral proceedings.
2. Preservation, interim custody, or sale of any goods which are subject matter to the arbitral proceedings.
3. Securing the amount in dispute in the arbitration.
4. Detention, preservation or inspection of any property or thing which is the subject matter to the dispute.
5. Interim injunction or the appointment of a receiver.
6. Other measures which the court may deem just and convenient.
7. Note- if the party seeks interim relief before the initiation of court proceedings, then the arbitration proceedings must commence within a period of 90 days from date on which such order was give.

Can Indian Courts provide interim relief in disputes governed by international law?

1. Section 9(1)(ii) of the 1996 Act empowered the court to provide interim relief in domestic arbitration agreement.
2. The 2015 amendment Act further empowered the Courts in India to entertain applications for interim and urgent reliefs in cases of International commercial arbitrations,  i.e. atleast one party to the agreement is a foreign national or foreign based entity, even in case where place of arbitration is outside India.
3. Delhi HC in the case of Raffles Design International Pvt. Ltd. v. Educomp Professional Education Ltd. (2016) held that Court was empowered to give interim relief even if the contract was governed by the law of Singapore and the arbitration was seated in Singapore.

Can Indian Courts provide interim relief in disputes when arbitral tribunal is already constituted?

1. Section 17 of the Act provides power to the arbitral tribunal to give interim measures so that the need to approach the Court doesn’t arise. This is because arbitration is supposed to be an expeditious remedy for the parties involved.
2. However, sometimes it is possible that the nature of the interim relief being sought is beyond the scope of Section 17 and hence approaching the Court becomes the only suitable option left with the parties involved.
3. In the case of Bishnu Kumar Yadav v. M/s ML Soni and in the case of SREI Equipment Finance Ltd. v. Ray Infra Services Private Ltd., the Calcutta HC observed that the court is empowered to provide interim relief pursuant to an application even if the arbitral tribunal is established if it is found that arbitral tribunal cannot provide a suitable remedy within its scope of power.
4. However in the case of Manbhupinder Singh Atwal v. Neeraj Kumarpal Shah, the Gujarat HC had noted that the ability of the party to approach court for interim measures under section 9 is restricted after the arbitral tribunal is constituted.
5. Further, a recent judgment of Delhi HC in 2019, Hero Wind Energy Pvt. Ltd v. Inox Renewables Ltd., it was reinforced that during the pendency of arbitration proceedings as a general rule the parties should approach the arbitral tribunal for interim measures under Section 17 of the Act.
6. In the case of Planet M. Retail v. Select Infrastructure Pvt. Ltd., Delhi High Court held that in the absence of any prime facie case no interim relief shall be granted to the party. Further, if the interim relief has the tendency to provide relief in the nature of final relief at the interim stage itself then such order can’t be passed.

Can the Court appoint arbitrator under Section 11(6) when the party claims that the agreement containing arbitration clause is invalid?

In the case of Konkan Railway Corpn. Ltd., 2002 (2) SCC 388, it was noted that deciding upon the validity of arbitration clause or the question of jurisdiction is the question for arbitrator under Section 16 and not the court. Hence, the Court decided to adopt an arbitrator under its power in Section 11 of the Act.

Conclusion

In essence, in case of establishment of an arbitral tribunal, the parties should seek the tribunal only for providing an interim relief under Section 17 of the A&C conciliation and the court should intervene only in the case when the arbitral tribunal has not yet been established or in case it is established then intervene only in the case where tribunal cannot provide an efficacious remedy.