1. Litigants in disputes involving monetary claims (in the nature of compensation/damages) are often faced with the question of the most appropriate mode for seeking interim reliefs. In disputes involving arbitration and where interim reliefs are sought, litigants can either approach the Court under Section 9 or the Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act 1996. This article briefly discusses provisions of law available to claim interim reliefs to “secure the monetary claim”.
Securing the amount under dispute-
2. The “amount in dispute” and “sums on account of damages in advance” have different connotations. The amount in dispute is an ascertained sum, whereas the latter is unascertained. The Courts have consistently held that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and ascertained. [1]
The Power of the Court to grant interim reliefs for “securing the amount under dispute” under Section 9 (ii)(b) vis-a-vis the Power of Tribunal under Section 17:
3. Section 9(ii) (b) – empowers the Court to grant interim measures (i) before the commencement of arbitral proceedings or (ii) during the pendency of arbitral proceedings before the arbitral tribunal or (iii) at any time after the making of arbitral award and closure of the arbitral proceedings. One of the interim measures is to secure the amount under dispute. However, Section 9 also places an embargo upon the exercise of such power towards granting interim measures. Once the Arbitral Tribunal is constituted, normally the Court shall not entertain an application under Section 9 (1). The Court can entertain such an application if the Court finds that there exists circumstances which may not render the remedy provided under Section 17 efficacious.
4. The power conferred to the Arbitral Tribunal under Section 17 and the power conferred on the Court under Section 9 may overlap to some extent. But so far as the period pre- and post- the arbitral proceedings is concerned, the party requiring an interim relief will necessarily have to approach the Court. [2] Moreover, the power of the Court is much wider than the power of the Arbitral Tribunal in grating the interim reliefs. The Hon’ble Supreme Court in MD, Army Welfare Housing Organization Vs. Sumangal Services (P) Ltd[3] has held that “the Tribunal cannot issue any directions/reliefs which would go beyond the arbitral reference. It was also held that the power of Arbitrator under Section 17 of the Act is a limited one.”
5. In Shin Satellite Public Co. Ltd. v. Jain Studios Ltd. it was held that the expression "amount in dispute" in Section 9(ii)(b) had a different connotation. It was further held that the “amount in dispute” should not be understood/used to enable the claimant petitioner "to recover the sums on account of damages in advance". The Hon’ble Supreme Court in the above case further observed that “probably the Court under Section 9 alone has power to make an order directing the parties to furnish Bank Guarantee as security in respect of amount in dispute. It is also observed that the Arbitral Tribunal has no such power.” The expression “any interim measure of protection” cannot obviously be stretched to include to provide security in respect of unascertained amount.
Application of provisions of CPC to Arbitration vis – a -vis Order 38 Rule 5 CPC:
6. In Raman Tech. & Process Engg. Co. v. Solanki Traders[4] the Hon’ble Supreme Court has held that power to order attachment before judgment under Order 38 Rule 5 CPC is “drastic”. In order to pass an Order of attachment before judgment, the claim petitioner has to satisfy the Court that he has a prima facie case in his favour. The proof of prima facie case is a condition precedent before the Court would proceed to the next stage. After making out a prima facie case to the satisfaction of the Court, the next stage would be to examine as to whether the interest of the claim petitioner is protected. The order of attachment before judgment is an extra-ordinary power. It should be exercised with due care and caution. The Hon’ble Supreme Court further observed that such an extra-ordinary power should not be exercised mechanically, casually or merely for the asking. The power of the Court under Order 38 Rule 5 CPC should not be misused so as to convert an unsecured debt into secured debt.
7. The parties to the Arbitration are free to adopt their own procedure by way of an Agreement. If the Arbitration Agreement is silent or has not provided procedure to be followed, then the Arbitral Tribunal may conduct the proceedings in the manner it considers appropriate. The Section 19 (1) of the Act has prescribed that Arbitral Tribunal shall not be bound by the Code of Civil Procedure 1908 or by the Evidence Act 1982. However, Section 19(1) of the Act does not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying CPC or Evidence Act.[1]
Appeal:
Any person aggrieved by the order passed by the Arbitral Tribunal under Section 17, may approach the Court by way of an appeal under Section 37 (2)(b). Similarly, the person aggrieved by interim order passed under Section 9 can file an appeal under Section 37 (1) (b) to the Court authorised by law to hear appeals from the original decrees passing the order.
Conclusion: The power of the Arbitral Tribunal under Section 17 is not as wide as that of the Court under Section 9 of the Act. The principles underlying Section 9 of the Act would not ipso facto be applicable to Section 17.
[1] Maharastra State Electricity Board Vs. Datar Swichgear Ltd 2003 (2) RARJ 163Talens Van Gogh WatercolorsSecuring the Amount under Dispute in Arbitration Proceedings
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