Reimagining the Contours of Judicial Interference under the Arbitration and Conciliation Act 1996
[Varun is a student at Gujarat National Law University.]
In Arcelor Mittal Nippon Steel India Limited v. Essar Bulk Terminal Limited (Arcelor Mittal), the Supreme Court of India (Court) clarified the relationship between Sections 9 and 17 of the Arbitration and Conciliation Act 1996 (Act). In doing so, the Court had to determine what it meant to 'entertain' an application for interim relief once the arbitral tribunal had been constituted. Further, the Court also explored its jurisdiction to grant interim relief once Section 17 was in play.
The judgement itself serves to further clarify the scheme of interim relief contemplated under the Act. It is the second notable pronouncement on the topic this year, after a Full Bench of the Supreme Court in Amazon.com Investment Holdings LLC v. Future Retail Limited and Others (Amazon Holdings) observed that emergency awards passed in Indian-seated arbitrations would be within the ambit of Section 17(1) of the Act. Interestingly, in light of the holding in Arcelor Mittal, there arises an interesting question in the interpretation of Sections 9 and 17, namely, the extent to which courts under Section 9 would have to assess the efficacy of emergency arbitration as a mode of securing interim relief. Hence, in this piece, I will be first explaining the decision in Arcelor Mittal, and I will thereafter examine the impact that it has on emergency awards in Indian-seated arbitrations. I argue that in light of the holdings in both Arcelor Mittal and Amazon Holdings, there is a legislative need to include emergency arbitrators where provided for by parties within Section 2(1)(d) of the Act and thus expand the scope of an “arbitral tribunal” for Indian-seated arbitrations.
Relevant Legal Framework
Sections 9 and 17 of the Act both govern the grant of interim relief under the Act: Section 9 entitles parties to approach courts for the grant of interim protection either before, during or after arbitral proceedings have commenced but before an award has been enforced, while Section 17 similarly entitles them to approach the arbitral tribunal at any point during arbitral proceedings.
Notably, both provisions were significantly altered by way of the Arbitration and Conciliation (Amendment) Act 2015. Thereby inter alia the powers of the tribunal under Section 17 were brought on par with those enjoyed by a court under Section 9. The amendment also saw the insertion of Section 9(3) into the Act, which provides that once a tribunal has been constituted, no court is to 'entertain' an application under Section 9(1) unless it finds that the remedy that could be granted by such tribunal under Section 17(1) would be inefficacious.
Holding in Arcelor Mittal
In Arcelor Mittal, the first question that had to be determined by the Supreme Court was the scope of the term 'entertain' as found in Section 9(3). Per the facts of the case, certain applications under Section 9 of the Act were pending before the Commercial Court in Surat when a three-member arbitral tribunal was constituted. Accordingly, unsuccessful attempts were made to transfer these proceedings to the tribunal, with the High Court ultimately noting that the lower court was within its right to adjudge the efficacy of the remedy under Section 17 before transferring proceedings.
Since the tribunal had been constituted, it was put forward that the term ‘entertain’ extended to the passing of orders on merits as well. Dealing first with the temporal scope of Section 9(3), the Court noted that the intention behind the amendment to Section 17 was to discourage the filing of applications under Section 9 once the tribunal was constituted. Notably, and in consonance with what was noted in Energo Engineering Projects Limited v. TRF Limited, the Court reiterated that the 2015 Amendment did not absolutely denude courts of jurisdiction - the bar of Section 9(3) operated only after an arbitral tribunal is constituted. Further, ‘entertain’ denoted the application of its judicial mind to issues before a court. Accordingly, courts would be precluded from taking matters up from consideration and applying their minds to applications after a tribunal has been constituted, unless the remedy under Section 17 is inefficacious. In the Court’s own words:
“The question is whether the process of consideration has commenced, and/or whether the Court has applied its mind to some extent before the constitution of the Arbitral Tribunal. If so, the application can be said to have been entertained before the constitution of the Arbitral Tribunal.” (emphasis supplied)
Hence, the present case, which merely involved the pronouncement of judgement by a court under Section 9, would not attract Section 9(3).
Analysing the Court’s Decision
The Court placed reliance on the Supreme Court’s ruling in Vidya Drolia and Others v. Durga Trading Corporation, and it was stressed that judicial interference was to be limited to situations that were explicitly permitted by statute. Further, the Court also listed out circumstances that would render the remedy under Section 17 being rendered inefficacious, such as the inconvenient location of arbitrators and their temporary unavailability due to illness. Given the emphasis on the inherent urgency of interim relief, we may infer that the main parameter in judging efficacy is time. This is only natural – as discussed earlier, the powers that vest in tribunals and courts for the purposes of interim relief are identical. Hence, this is another step towards better understanding the applicability of Section 9(3).
However, more interestingly, Arcelor Mittal perpetuates a quandary vis-à-vis emergency relief under the Act. In Amazon Holdings, the Supreme Court made amply clear that emergency awards rendered in domestic-seated arbitrations would be recognized as interim orders of the arbitral tribunal under Section 17(1) of the Act. As has been argued here, the decision seemingly invited courts approached pre-constitution to explore the efficacy of emergency arbitrator decisions under Section 9(3) before entertaining applications, when parties had provided for the same. Resultantly, it could be argued that the Amazon Holdings Court equated the status of an emergency arbitrator to a fully constituted arbitral tribunal.
Arcelor Mittal reiterates that courts’ duty under Section 9(3) will kick in only after the constitution of the tribunal. At this juncture, the exact language used in Arcelor Mittal must be noted. Referring to the decision of the Delhi High Court in Avantha Holdings Limited v. Vistra ITCL India Limited, the Supreme Court made the following observations:
“We fully approve the view taken by the Single Bench of the Delhi High Court in Avantha Holdings Limited (supra) except for the observation that the 'Court while exercising jurisdiction under Section 9, even at a pre-arbitration stage, cannot usurp the jurisdiction which would, otherwise be vested in the arbitrator, or the Arbitral Tribunal, yet to be constituted'. The bar of Section 9(3) operates after an Arbitral Tribunal is constituted. There can therefore be no question of usurpation of jurisdiction of the Arbitral Tribunal under Section 17 before the Arbitral Tribunal is constituted.” (emphasis supplied)
Evidently, the Court viewed the entire question of Section 9(3) and the examination of tribunal-ordered relief through a temporal lens – the constitution of the arbitral tribunal was emphasized as the trigger for courts’ duties thereunder. Since emergency arbitration exclusively operates in the pre-arbitral tribunal timeframe, Arcelor Mittal seems to suggests that it would be exempt from the rigor of Section 9(3). However, as discussed, emergency awards are recognized under Section 17(1). In Amazon Holdings, the Law Commission of India’s recommendation to expand the definition of an 'arbitral tribunal' to include emergency arbitrators was accorded importance despite no legislative action having been taken. This emphasizes that the understanding of the arbitral timeline under the Act, going forward, was to be broadened. Hence, in this light, despite the language used in Arcelor Mittal, the understanding of the constitution of the arbitral tribunal should indeed be understood to include emergency arbitrators where provided for. Accordingly, emergency arbitration, where provided for in the institutional rules chosen by the parties, should be assessed before judicial interference under Section 9(3).
The holding in Arcelor Mittal is undoubtedly significant – it upholds the spirit of minimal judicial interference and clarifies the scope of Section 9(3) of the Act. At the same time, the emphasis on the constitution of the arbitral tribunal as a trigger for the latter’s operation may be misinterpreted to exclude emergency arbitration from any discussion thereon. The amendment of Section 2(1)(d) of the Act to include emergency arbitrators, as suggested by the 246th Law Commission Report, would undoubtedly help resolve this anomaly and would serve to further the intention expressed by the Supreme Court in Amazon Holdings. It is now clear that emergency arbitration is envisioned to be within the ambit of the Act – it is time to legislatively recognize the same.