I. Introduction
In international commercial arbitration, interim measures play a vital role in safeguarding the parties’ interests and ensuring the efficacy of arbitral proceedings. Framed on the lines of Article 9 of the UNCITRAL Model Law, Section 9 of the Arbitration and Conciliation Act, 1996 [“ACA”] allows parties to apply to the court for an interim measure for the preservation, custody of goods or detention of property, etc., which is the subject matter of the dispute, not only before or during arbitral proceedings but also after the arbitral award is published. The rationale behind courts granting interim relief is to facilitate the final award and to prevent it from becoming meaningless.
Based on the recommendations of the 246th Law Commission Report, the Arbitration and Conciliation (Amendment) Act, 2015 [“Amendment Act”] inserted a proviso to Section 2(2) that extended the application of Section 9 to international commercial arbitrations, “even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act” along with the expression “subject to an agreement to contrary” to uphold the principle of party autonomy. However, much of the debate revolves around the absence of the term “express” from the expression “subject to an agreement to the contrary” as there may be cases where the parties “impliedly” exclude the applicability of the provisions of Part I of the ACA to a foreign-seated arbitration. This has resulted in the emergence of the theory of “implied exclusion” by the Indian courts which has defeated the basic scheme of the Amendment Act, resulting in an approach regressive towards India’s global position as an arbitration hub.
II. Jurisprudential Analysis
The well-known case of Bhatia International v. Bulk Trading S.A [“Bhatia International”] led to the development of the theory of “implied exclusion”, which posited that the legislature intended to allow parties in international commercial arbitrations to exclude Part I of the ACA through express or implied agreement. In this case, the arbitration agreement designated the seat of arbitration as Paris and the governing rules as those of the International Chamber of Commerce[“ICC”]. Prior to the Amendment Act, Section 9 of the ACA restricted the granting of interim measures to agreements governed by Part I. However, the court recognized that this restriction would leave parties remediless as the remedy sought was a temporary injunction to restrain the sale or transfer of assets located in India. To address this, the court granted an interim injunction, thereby extending relief under the ACA even to international arbitrations.
This judgment was prospectively overruled (for agreements made after 6 September, 2012) in Bharat Aluminium Co. v. Kaiser Aluminium Technical Service [“BALCO”]. A constitution bench of the Supreme Court decided that Part I of the ACA does not apply to foreign-seated arbitration. The arbitration seat is the primary jurisdiction, and the parties must accept the curial law of that nation since the UNCITRAL Model Law only applies to the territorial jurisdiction of the arbitration seat.
The ambiguity in the proviso to the amended Section 2(2), particularly regarding whether an agreement to exclude Part I must be express or implied, has led to the Supreme Court of India and various High Courts [“HC”] issuing multiple judgments to define the scope of an “implied exclusion” agreement under the ACA.
Starting with the case of Raffles Design International India Pvt Ltd and Raffles Education Investment India Private Limited v. Educomp Professional Education Ltd & Ors. [“Raffles”] , the petitioner first requested relief from a Singapore-seated Singapore International Arbitration Center [“SIAC”] tribunal as per their agreement. However, they obtained provisional relief from an emergency arbitrator before the tribunal’s constitution. When the Respondent disregarded this emergency award, the petitioner approached the Delhi HC for interim relief.
The Delhi HC emphasized that merely selecting a foreign seat or governing law does not automatically exclude Part I of the ACA unless explicitly excluded as per the proviso to Section 2(2). It further held that, given the ACA’s lack of provisions for enforcing emergency awards from foreign-seated arbitrations, Section 9 applications remain the primary recourse for parties seeking interim relief in such situations. The decision underscores the need for judicial intervention to address this lacuna leaving it to the Apex Court to clarify the status quo. In Mr. Ashwani Minda v. U-Shin Ltd.[“Ashwani Minda case”], the applicant filed a Section 9 petition for interim relief before the Delhi HC. The court examined the arbitration clause, which specified that disputes would be arbitrated either under the India Commercial Arbitration Association rules in India (if initiated by Yushin) or under the Japan Commercial Arbitration Association [“JCAA”] rules in Japan (if initiated by JAY). Given that JAY initiated the arbitration, the court inferred an intention by the parties to exclude the applicability of provisions under Part I of the ACA. The claimant appealed to a division bench of the Delhi HC, which did not address the implied exclusion issue and left it for future proceedings.
The Single judge in the Ashwani Minda case took a regressive approach in distinguishing it from Raffles, based on the reasoning that in Raffles’ SIAC rules permitted parties to approach Indian Courts, while the JCAA rules did not. The court’s assertion that Raffles case lacked a clause excluding Section 9, implying that the Ashwani Minda case had such a clause, is flawed as a detailed examination of the agreement reveals no explicit clause excluding Section 9, thus, undermining the court’s reasoning.
The authors argue that merely a choice of institutional rules does not imply the exclusion of Section 9 provision as the very purpose of amending Section 2(2) was intended to give parties in foreign-seated arbitration, the choice of interim relief if assets or properties were in India, regardless of institutional rules.
Interestingly, in a 2018 judgment, the Bombay HC followed a liberal interpretation of the proviso of Section 2(2). It held Section 9 provisions were not excluded due to the absence of a specific clause in the international arbitration agreement. Since the claimant’s assets were located within the court’s jurisdiction, the petition to prevent asset dissipation was allowed. The court did not examine the arbitration agreement for any implied exclusion of Section 9.
On similar lines, the Himachal Pradesh HC in the Actis Consumer Grooming Products Ltd v. Tigaksha Metallics Private Limited case emphasized its jurisdiction as the subject matter of the dispute was within its territory and allowed to provide interim relief for arbitration proceedings conducted in Geneva as per the London Court of International arbitration rules.
The authors support the view followed in these cases as the courts upheld the Amendment Act’s objective by proactively protecting assets within their jurisdiction and preventing the parties from being in a remediless situation. Thus, making sure that natural justice is ensured by providing remedies in cases of assets being in India rather than a rigid ‘cut-and-dried’ approach in cases like Ashwani Minda. The authors advocate shifting from an “implied exclusion” to an “implied inclusion” regime, i.e. the presumption of the applicability of Section 9 unless explicitly stated otherwise. Hence, the Supreme Court must provide a consistent stance on interim reliefs in foreign-seated arbitration and courts should desist from applying the implied exclusion theory, like the Bhatia regime, that contradicts the Amendment Act’s purpose of making Section 9 available in foreign-seated arbitrations.
III. Instances of Extended Horizons of Section 9
Post the Amendment Act, Indian courts in a few instances have taken a more liberal approach in interpreting Section 9 of the ACA in relation to foreign-seated arbitration.
For instance, Goodwill Non-Woven(P) Ltd. v. Xcoal Energy & Resources LLC dismissed the respondent’s stance that the proviso to Section 2(2) is only an “asset-based jurisdiction” and stated that a bank guarantee or security deposit obtained through a Section 9 order can be utilized by the applicant party even if the opposing party has no assets within India. It further held that interim measures in foreign-seated arbitration under Section 9 of ACA, “do not presuppose existence of asset(s) in India.”
Referring the Raffles case and recommendations of the report, the court deemed the application admissible under Section 9 of ACA and maintained that choosing a foreign seat for arbitration does not automatically exclude the applicability of Part I of ACA, and parties may still seek interim measures from Indian courts irrespective of the presence of assets in India. Therefore, this interpretation broadens the scope of the provision to cover situations in which the counterparty’s assets are situated outside of India.
In 2022, the Calcutta HC in Uphealth Holdings Inc v. Glocal Healthcare Systems Pvt. Ltd. allowed a petition to enforce interim orders passed by an emergency arbitrator under Section 9 of the ACA. The case involved a dispute between an Indian company, Glocal Healthcare Systems, and Uphealth Holdings Inc., a US-company, which had entered into an agreement governed by the ICC rules containing an arbitration clause. The petitioner sought an application for the grant of interim measures from an emergency arbitrator regarding access to the financial statements of the respondents. The application was granted, and the petitioner approached the Calcutta HC to seek measures as granted by the emergency arbitrator. The court determined that since ACA lacks a provision for the enforcement of orders passed by an emergency arbitrator, the same can be taken into consideration at the stage of Section 9 application.
In Balasore Alloys Ltd. v. Medima LLC , Balasore Alloys Ltd. (an Indian company) and Medima LLC (a US company) entered into an arbitration agreement with the seat of arbitration in London and the governing laws according to the UK read with the ICC rules. Medima filed an application under Section 9 to successfully seek enforcement of the award to stop Balasore from dissipating its assets located in India. Given that the governing law and the arbitration seat were outside of India, the Calcutta HC was asked to decide on whether the application under Section 9 could be maintained and whether such a clause in an arbitration agreement could be interpreted as an “agreement to the contrary”. The court adopted a liberal approach and held that the parties in the agreement should clearly intend to exclude the application of Section 9 to interpret it as an agreement to the contrary. Therefore, choosing a foreign seat and foreign law does not automatically exclude the application of Section 9.
IV. Conclusion
To construe Section 9 as an aid to the enforcement of foreign awards, there must be a harmonious interpretation of this Section with the proviso to Section 2(2). The very intention of inserting the proviso was to aid foreign parties in situations where the subject matter of their dispute was in India and thus the courts should desist from applying the implied exclusion theory. The Indian courts can further adopt the principles followed in foreign pro-arbitration jurisdictions such as England and Singapore where the courts provide interim relief after considering whether assets are located within their jurisdiction and if there is a significant risk of asset dissipation. In cases where the assets are not situated within the jurisdiction, the focus shifts to establishing a substantial connection between “the parties, the contract, or the arbitration agreement with the jurisdiction in question.”
It is suggested that the legislative body should add the term “express” in the expression “subject to an agreement to the contrary” of the proviso. This will ensure that the holder of a foreign award is not left without a remedy due to conflicting interpretations by different HCs. There also exists a gap in the ACA concerning the enforcement of orders issued by emergency arbitrators and interim measures granted by foreign-seated tribunals. The authors think that if the legislature addresses these issues through appropriate amendments, it would enhance stability and coherence in supporting the principles of international commercial arbitration.
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