Interim Measures in Arbitration: Legal Framework and Judicial Interpretation in India

Introduction

Arbitration has emerged as a preferred mechanism for resolving commercial disputes, offering parties greater efficiency, confidentiality, and flexibility compared to traditional litigation. A critical component of arbitration proceedings is the availability of interim measures, which serve to protect parties’ rights and preserve the status quo during the pendency of arbitral proceedings. The Arbitration and Conciliation Act, 1996 (“the Act”) provides the statutory framework for interim measures in India through Sections 9 and 17, establishing a dual mechanism that empowers both courts and arbitral tribunals to grant such relief [1].

The significance of interim measures cannot be overstated, as they ensure that the arbitration process remains effective and that the eventual award can be meaningfully enforced. These measures prevent parties from taking actions that could render the final arbitral award ineffective or cause irreparable harm during the proceedings. The Indian legal framework has evolved significantly over the years, with amendments to the Act and judicial interpretations shaping the current landscape of interim relief in arbitration.

Legislative Framework Governing Interim Measures

Section 9: Court’s Power to Grant Interim Measures

Section 9 of the Arbitration and Conciliation Act, 1996, vests courts with the authority to grant interim measures in arbitration proceedings. The provision states that a party may, before or during arbitral proceedings or at any time after making an award but before it is enforced, apply to a court for interim measures of protection. The section empowers courts to make orders for securing the amount in dispute, preservation or interim custody of property, securing the preservation of evidence, or granting interim injunctions [2].

The scope of Section 9 is deliberately broad, recognizing that parties may require urgent relief that cannot await the constitution of an arbitral tribunal or situations where the tribunal lacks the coercive power necessary to enforce its orders. Courts exercising jurisdiction under Section 9 must balance the need for interim protection with the principle of minimal judicial intervention in arbitration.

Section 17: Arbitral Tribunal’s Power to Order Interim Measures

Section 17 of the Act, introduced through the 2015 amendments, empowers arbitral tribunals to order interim measures during the course of arbitral proceedings. The provision grants tribunals the authority to order parties to take interim measures of protection as the tribunal may consider necessary in respect of the subject matter of the dispute [3]. This includes measures for securing the amount in dispute, preservation or interim custody of property, interim injunctions, and appointment of a receiver.

The 2015 amendment significantly enhanced the powers of arbitral tribunals by making their interim orders enforceable in the same manner as court orders. Section 17(2) provides that such orders shall be enforceable under the Code of Civil Procedure, 1908, in the same manner as if it were an order of the court.

Judicial Principles Governing Grant of Interim Measures

Established Legal Principles

The principles governing the grant of interim measures in arbitration mirror those applied in civil litigation under the Code of Civil Procedure, 1908. Courts and tribunals typically consider three primary factors when evaluating applications for interim relief: prima facie case, balance of convenience, and irreparable injury.

The requirement of establishing a prima facie case means that the applicant must demonstrate that they have an arguable claim that merits protection. The balance of convenience test requires weighing the potential harm to each party if the interim measure is granted or refused. The irreparable injury criterion focuses on whether the harm that might result from refusing interim relief can be adequately compensated through monetary damages.

Restoration of Status Quo

A fundamental objective of interim measures is the restoration of the status quo ante. As established in Dorab Cawasji Warden v. Coomi Sorab Warden, courts have the power to remedy situations where a party has taken actions that could not have been done legally [4]. The principle ensures that parties are restored to their original positions, preventing one party from gaining an unfair advantage during the arbitration process.

This principle is particularly important in commercial arbitrations where parties may attempt to dispose of assets, alter contractual arrangements, or take other actions that could prejudice the other party’s position. Interim measures serve as a safeguard against such strategic behavior.

Security for Claims

The courts have recognized that interim measures may include directing parties to provide security for claims, particularly where there is apprehension that a party might dissipate assets or otherwise harm the subject matter of the dispute. The principles governing such security mirror those found in Order XVIII Rule 5 of the Code of Civil Procedure, which deals with security where there is a reasonable apprehension of harm to the subject matter [5].

Significant Judicial Pronouncements

DLF Ltd. v. Leighton India Contractors Private Ltd.

The Delhi High Court’s decision in DLF Ltd. v. Leighton India Contractors Private Ltd. provides important insights into the application of interim measures under Section 9 of the Act [6]. The case involved a dispute over the invocation of bank guarantees in a construction contract. The court examined the principles applicable to furnishing security under Section 9, drawing parallels with Order XVIII Rule 5 of the Code of Civil Procedure.

The court emphasized that interim measures should not pre-empt the final determination of rights by the arbitral tribunal. The judgment underscored the importance of maintaining the balance between providing necessary interim protection and avoiding decisions that would effectively dispose of the substantive dispute. The court noted that interim relief applications must be evaluated on their own merits, considering the specific circumstances of each case.

The decision also highlighted the court’s role in ensuring that interim measures do not become a substitute for the final determination of disputes by arbitral tribunals. Courts must exercise restraint and limit their intervention to genuine cases requiring urgent protection.

Evergreen Land Mark (P) Ltd. v. John Tinson & Co. (P) Ltd.

The Supreme Court’s decision in Evergreen Land Mark (P) Ltd. v. John Tinson & Co. (P) Ltd. represents a landmark ruling on the limits of arbitral tribunals’ powers under Section 17 [7]. The case involved a lease termination dispute where the arbitral tribunal was asked to pass an interim order directing the deposit of disputed amounts before adjudicating the applicability of a force majeure clause.

The Supreme Court held that arbitral tribunals cannot pass interim orders under Section 17 where the liability to pay is seriously disputed and constitutes one of the major issues in the case. The court reasoned that directing deposit of disputed amounts before adjudicating the underlying dispute would be prejudicial and could influence the tribunal’s final decision on the merits.

This decision established an important precedent limiting the scope of interim measures that tribunals can grant. The court distinguished between measures that preserve the status quo and those that might prejudge substantive issues. The ruling emphasized that interim measures should not result in the grant of final relief or determine the main dispute.

The judgment clarified that while Section 17 grants broad powers to arbitral tribunals, these powers must be exercised judiciously and cannot extend to making determinations that would effectively decide the substantive dispute. This principle ensures that interim measures remain truly interim in nature and do not usurp the function of final adjudication.

Interplay Between Sections 9 and 17

Concurrent Jurisdiction and Choice of Forum

The existence of both Sections 9 and 17 creates a situation of concurrent jurisdiction where parties may seek interim relief from either courts or arbitral tribunals. This dual mechanism provides flexibility to parties while ensuring that urgent relief is available regardless of the stage of arbitration proceedings.

When an arbitral tribunal has not been constituted or is not yet functional, Section 9 provides the only avenue for interim relief. However, once a tribunal is constituted and functional, parties generally have the option to approach either the court under Section 9 or the tribunal under Section 17. The choice of forum may depend on various factors, including the nature of relief sought, urgency of the matter, and enforceability considerations.

Enforcement Mechanisms

The 2015 amendments significantly enhanced the enforceability of interim orders passed by arbitral tribunals under Section 17. These orders are now enforceable in the same manner as court orders under the Code of Civil Procedure. This development has reduced the practical distinction between court orders and tribunal orders in terms of enforcement.

However, courts retain certain coercive powers that arbitral tribunals lack, such as the power to attach assets or issue arrest warrants for contempt. These enforcement mechanisms may be crucial in cases involving recalcitrant parties or where immediate coercive action is necessary.

Strategic Considerations for Parties

Parties must carefully consider strategic factors when choosing between Sections 9 and 17. Court proceedings under Section 9 are generally conducted in public, while arbitral proceedings maintain confidentiality. The speed of obtaining relief may vary depending on court congestion and the availability of arbitral tribunals.

The expertise of the decision-maker is another relevant factor. Arbitral tribunals, particularly in specialized disputes, may have greater technical expertise relevant to the interim measures sought. Courts, however, have extensive experience in balancing competing interests and may be better positioned to evaluate complex procedural issues.

Scope and Limitations of Interim Measures

Types of Interim Measures Available

Both Sections 9 and 17 provide for various types of interim measures, including securing amounts in dispute, preservation of property, interim custody arrangements, and injunctive relief. The scope is deliberately broad to accommodate the diverse nature of commercial disputes that may arise in arbitration.

Preservation of property is particularly important in cases where there is a risk of asset dissipation or destruction. Interim custody arrangements may be necessary where physical assets or documents are in dispute. Injunctive relief can prevent parties from taking actions that might prejudice the arbitration or cause irreparable harm.

Limitations on Grant of Interim Measures

The Evergreen Land Mark decision established important limitations on the grant of interim measures, particularly by arbitral tribunals. Tribunals cannot use their interim powers to prejudge substantive issues or grant what amounts to final relief. This limitation ensures that interim measures remain truly ancillary to the main proceedings.

Courts and tribunals must also consider the principle of proportionality when granting interim measures. The relief granted should be proportionate to the harm sought to be prevented and should not impose an unreasonable burden on the party against whom it is directed.

Temporal Limitations

Interim measures are by definition temporary in nature and should remain in effect only for as long as necessary to protect the interests they are designed to safeguard. Courts and tribunals should regularly review the continued need for such measures and modify or discharge them as circumstances change.

The duration of interim measures may be tied to specific events, such as the constitution of an arbitral tribunal or the progress of arbitration proceedings. Clear temporal limitations help prevent interim measures from becoming indefinite restraints on parties’ rights.

Contemporary Challenges and Developments

Cross-Border Enforcement

With the increasing international nature of commercial arbitration, the enforcement of interim measures across borders has become a significant challenge. While the 2015 amendments to the Indian Act aligned Indian law with international standards, practical enforcement issues remain, particularly in cases involving foreign assets or parties.

The Model Law provisions on interim measures provide a framework for international recognition and enforcement, but their effectiveness depends on the cooperation of national courts and the existence of appropriate bilateral or multilateral arrangements.

Emergency Arbitration

The concept of emergency arbitration, while not explicitly recognized in the current Indian legislation, is gaining prominence in institutional arbitration rules. Emergency arbitrators can provide interim relief before the constitution of the main arbitral tribunal, addressing the temporal gap that sometimes exists in urgent cases.

Indian courts have begun recognizing and enforcing emergency arbitrator orders, signaling a pragmatic approach to these developments in international arbitration practice. However, legislative clarity on this issue would provide greater certainty to parties and practitioners.

Technology and Interim Measures

The increasing digitization of business processes and the rise of cryptocurrency and digital assets present new challenges for interim measures. Traditional concepts of asset preservation and injunctive relief may need to be adapted to address digital assets and online business operations.

Courts and tribunals are beginning to grapple with issues such as blocking cryptocurrency transactions, preserving digital evidence, and preventing the dissipation of digital assets. These developments require both legal and technical expertise to ensure effective relief.

Procedural Considerations

Application Procedures

Applications for interim measures under both Sections 9 and 17 must comply with specific procedural requirements. Under Section 9, applications are made to courts following established civil procedure rules. The application must clearly state the grounds for relief and the specific measures sought.

Applications under Section 17 are made to arbitral tribunals following the procedural rules adopted for the arbitration. These procedures may be less formal than court procedures but must ensure due process and provide adequate opportunity for all parties to be heard.

Notice and Hearing Requirements

The principle of natural justice requires that parties be given adequate notice and opportunity to be heard before interim measures are granted. However, in cases of extreme urgency, courts and tribunals may grant ex parte relief, subject to the condition that the other party be given an early opportunity to challenge the order.

The balance between urgency and due process is particularly delicate in interim measure applications. Decision-makers must ensure that the need for immediate relief does not compromise fundamental procedural safeguards.

Costs and Security

Courts and tribunals may require applicants for interim measures to provide security for costs or potential damages that might result from the grant of interim relief. This requirement protects parties against whom interim measures are granted from suffering uncompensated harm if the measures are later found to have been wrongly granted.

The amount and form of security should be reasonable and proportionate to the potential harm. Courts and tribunals must balance the need to protect parties against wrongful interim measures with the requirement not to make interim relief illusory through excessive security requirements.

Future Directions and Recommendations

Legislative Reforms

The continuing evolution of arbitration practice suggests that further legislative reforms may be necessary to address emerging challenges. Areas requiring attention include explicit recognition of emergency arbitration, enhanced enforcement mechanisms for cross-border interim measures, and provisions addressing digital assets and technology-related disputes.

Greater harmonization with international standards, particularly the UNCITRAL Model Law, would enhance India’s attractiveness as an arbitration destination and improve the enforceability of Indian arbitral awards and interim measures internationally.

Institutional Development

The development of robust arbitral institutions with experienced case management teams can significantly improve the efficiency and effectiveness of interim measure procedures. Investment in training programs for arbitrators and court personnel would enhance the quality of decision-making in interim measure applications.

The establishment of specialized commercial courts with dedicated arbitration expertise could improve the handling of Section 9 applications and reduce delays in obtaining urgent relief.

Technological Integration

The integration of technology in arbitration proceedings, including interim measure applications, could improve efficiency and accessibility. Online filing systems, video conferencing for urgent hearings, and digital case management tools could reduce the time required to obtain interim relief.

However, technological solutions must be implemented with appropriate safeguards to maintain security, confidentiality, and due process requirements that are fundamental to arbitration proceedings.

Conclusion

Interim measures constitute a vital component of the arbitration framework in India, providing essential protection for parties’ rights during the pendency of arbitral proceedings. The dual mechanism established through Sections 9 and 17 of the Arbitration and Conciliation Act, 1996, offers flexibility while ensuring that urgent relief remains accessible to parties.

The judicial interpretation of these provisions, particularly through landmark decisions such as Evergreen Land Mark v. John Tinson, has established important boundaries on the scope of interim measures, ensuring that they remain truly interim in nature and do not prejudge substantive disputes. These developments have contributed to a more mature and balanced approach to interim relief in arbitration.

The continued evolution of commercial arbitration, particularly in the context of international disputes and technological advancement, will require ongoing adaptation of legal frameworks and judicial approaches. The success of India’s arbitration regime will depend on maintaining the delicate balance between providing effective interim protection and preserving the fundamental characteristics of arbitration as an efficient and party-autonomous dispute resolution mechanism.

The effectiveness of interim measures ultimately depends not only on legal provisions and judicial interpretation but also on the practical implementation by courts, tribunals, and parties. Continued dialogue between stakeholders, including legislators, judiciary, arbitrators, and practitioners, will be essential to address emerging challenges and ensure that interim measures continue to serve their fundamental purpose of protecting parties’ rights in arbitration proceedings.

References

[1] Arbitration and Conciliation Act, 1996, Sections 9 and 17. Available at: https://www.indiacode.nic.in/handle/123456789/1978 

[2] Interim measures under the Arbitration and Conciliation Act – iPleaders. Available at: https://blog.ipleaders.in/interim-measures-arbitration-conciliation-act/ 

[3] Section 9 of Arbitration & Conciliation Act: Interim Measures in Arbitration. Available at: https://thelegalschool.in/blog/section-9-arbitration-conciliation-act 

[4] Dorab Cawasji Warden v. Coomi Sorab Warden, (1990) 2 SCC 117

[5] Interim Reliefs in Arbitration: Emerging Judicial Trends in India. SCC Times. Available at: https://www.scconline.com/blog/post/2024/03/27/interim-reliefs-arbitration-emerging-judicial-trends-india/ 

[6] Leighton India Contractors Private Ltd vs DLF Ltd. & Anr on 22 July, 2021. Available at: https://indiankanoon.org/doc/87336818/ 

[7] Arbitral Tribunal Can’t Direct Interim Deposit Of Amount In Dispute When Liability To Pay Is Seriously Disputed : Supreme Court. LiveLaw. Available at: https://www.livelaw.in/top-stories/supreme-court-arbitral-tribunal-cannot-pass-orders-deposit-amount-dispute-section-17-liability-pay-amount-seriously-disputed-not-yet-adjudicated-arbitration-and-conciliation-act-1996-197061 

[8] Evergreen V John Tinson: Analysing Supreme Court’s Erroneous Ruling On Section 17 Of Arbitration Act. Available at: https://rmlnlulawreview.com/2022/09/09/arbitrationintenancy/ 

[9] What is the differences between Section 9 and 17 of the Arbitration and Conciliation Act. IDRC. Available at: https://theidrc.com/content/adr-faqs/what-is-the-differences-between-section-9-and-17-of-the-arbitration-and-conciliation-act