'The Arbitration and Conciliation Act, 1996' (the Act/the 1996 Act), is the cardinal law on arbitration and aimed to expeditiously dissolve disputes following the principles of party autonomy and minimum judicial interference1. Once the arbitral tribunal commences, a party can seek interim relief from the arbitral tribunal under Section 17 of the Act to ensure the prospective arbitral claims of a party are protected in the form of security, guarantees or any other measures. However, in certain cases, the paucity of time makes remedy under Section 17 of the Act inefficacious. Therefore, in urgent matters, the Act allows a party to seek similar interim relief under Section 9 of the Act from the court prior to commencement or during the arbitration proceeding, or at any time after the passing of the award but before it is enforced under Section 36 of the Act.
The 2015 Amendment Act mandates that once the arbitral tribunal has been constituted, the Court shall not entertain an application under Section 9 of the Act. However, the role of Judiciary in granting interim relief under Section 9 of the Act becomes significant prior to commencement of the arbitral proceedings or even after the constitution of arbitral tribunal if the circumstances exists which render the remedy provided under Section 17 inefficacious2.
One of the remedy under Section 9 is securing the amount in dispute in the arbitration by attaching the property3. However, the Act does not laid down criteria for granting relief of attachment of property under Section 9. Therefore, Court relies on CPC while hearing the application under Section 9. Order 38 Rule 5 of the CPC provides the procedure to be followed for attachment of defendant/respondent' property prior to completion of trial. The
View of High Courts
Various High Courts have given different findings on the question of extent to which the provisions of the CPC would apply to proceedings under Section 9 of the Act. Approach of several high courts could be divided into two parts as follows;
- Inclusive Approach5: This approach advocates that proceedings under Section 9 of the Act to be in line with the procedures under Order 38 Rule 5 of the CPC. Therefore, the principles of Order 38 Rule 5 must be followed6 while granting interim relief under Section 9 of the Act despite CPC is not binding on the arbitral proceeding7.
- Exclusive Approach8: This approach advocates that the technicalities of Order 38 Rule 5 of the CPC will be merely a guideline9 and need not be mandatorily adhered while granting relief under Section 9 of the Act.
View of
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Way forward
Both the judgments of Apex Court are conflicting. Though, Sanghi was later in time, but cannot be considered as precedent because both the judgment are of a division bench. Therefore, the contrary opinion of the Apex Court causing diverse opinion from different High Courts on the issue that whether the Court while hearing the application under Section 9 of the Act for "attachment before judgment" should follow all the prerequisites under Order 38 Rule 5 of the CPC or not.
On 06.10.2023, the
The 1996 Act does not contain any provision, which entirely excludes the applicability of the CPC to Section 9 of the Act. Certain provisions of the Act clearly provides where the CPC will be applicable16 or where it would be excluded17. Therefore, even if the rigors of general laws of the CPC is not applicable on the 1996 Act18, the Court should adhere to the basic principles of CPC while hearing the application under Section 9 of the Act. An interim order granting "attachment before judgment" is a more stringent interim order than other interim relief against defendant. Therefore, threshold of granting such relief should be higher. The Court should follow a middle path of both the extremes i.e. Order 38 Rule 5 of the CPC need not to be followed at all and all rigors of Order 38 Rule 5 of the CPC must be satisfied. Therefore, as held in Essar, the Plaintiff praying for interim relief must have to establish prima facie case, balance of convenience in his favour and demonstrate, and not simply aver, that the conduct of defendant will defeat the purpose of arbitral proceeding. Plaintiff need not establish the actual threat by defendant to the property or the intent of defendant to defeat the purpose of arbitral proceeding. Therefore, the threshold for the relief of attachment of property would be lower than the rigors of Order 38 Rule 5 of the CPC. This approach would be pro-arbitration while balancing the interest of both the parties and will not lead to unnecessary attachment of property of the defendant.
Footnotes
1.
2. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 9(3); and
3. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 9(1)(ii)(b)
4. Raman Tech v. Solanki Traders, (2008) 2 SCC 302
5.
6. ITI v. Siemens Public Communication, AIR 2002 SC 2308
7. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 19(2)
8.
9.
10. Arvind Constructions v.
11.
12.
13.
14. Prathyusha AMR JV vs.
15. Skypower Solar India Private vs.
16. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 36
17. The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), Section 45
18.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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