Dec 01,2022 | 11 min read

Scope of Interim Relief Post Arbitral Award and Enforcement of Arbitral Award when all the parties to the Arbitration proceeding challenge the Arbitral Award

Scope of Interim Relief Post Arbitral Award:

Section 9 of the Arbitration and Conciliation Act, 1996 allows a party to an arbitration proceeding to seek interim measures from the court "even after the arbitral award has been made but before it is enforced in accordance with Section 36 of the Act" ("post award interim measures"). The act allows the grant of interim measures to protect the subject matter of arbitration "before," "during," and even "after" the award is passed but before it is enforced. The provision suggests that both the successful and unsuccessful parties are entitled to post-award interim measures.

However, different High Courts have expressed conflicting views on whether an unsuccessful party whose claims have been rejected can seek post-award interim relief. The High Courts of Delhi, Bombay and Karnataka have ruled that an unsuccessful party cannot seek post-award interim relief. However, the High Courts of Gujarat, Andhra Pradesh, Telangana have ruled that even a losing party can seek post-award interim relief. 

A Division Bench of the Bombay High Court in Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited (2013) held that after an arbitral award is made, interim relief can only be sought to protect the fruits of the proceedings until the award is enforced. It also held that the purpose of providing interim relief after the arbitral award has passed but before it is enforced is to secure its value for the benefit of the party seeking the award's enforcement. Because enforcement of the arbitral award only enured to the benefit of the party that had succeeded in the arbitral proceedings, the Court held that an unsuccessful party cannot not seek post-award interim measures.

Furthermore, the Court stated that a party who is dissatisfied with the arbitral award, i.e. the unsuccessful party, can only seek the setting aside of the arbitral award under Section 34 of the Act. Even if the unsuccessful party succeeds a petition under Section 34 of the Act, the claims rejected by the arbitral tribunal cannot be decreed in favor of the unsuccessful party by amending the arbitral award. Thus, the Court concluded that the post award interim measures cannot be granted in favor of the unsuccessful party because such interim measures would not be in aid of the final relief accruing to the unsuccessful party even after favorable disposal of the petition under section 34 of the Act.

The Delhi High Court, Karnataka High Court, and subsequent Bombay High Court benches have agreed with the reasons stated in Dirk India and held that an unsuccessful party cannot seek post-award interim measures.The Bombay High Court followed Dirk India's reasoning in Windworld India Ltd. v. Enercon Gmbh and Ors. (2017) and Home Care Retails Pvt. Ltd. v. Haresh N. Sanghavi (2015), as did the Delhi High Court in the recent case of Technimont Pvt. Ltd. v. ONGC Petro Additions (2020).

On the other hand, the Gujarat, Andhra Pradesh and Telangana High Courts have ruled that an unsuccessful party may seek post-award interim relief, citing reasons such as (i) a Court under section 34 of the Act can modify or vary the findings of the arbitral tribunal, and not merely set aside the arbitral award; (ii) an unsuccessful party cannot be left without recourse while a petition under section 34 of the Act is pending; (iii) the plain language of section 9 of the Act makes no distinction between a successful party and an unsuccessful party. However the Supreme Court recently in Project Director, NHAI v. M Hakeem, held that a court exercising jurisdiction under section 34 of the Act could not modify or alter the arbitral award, but only set it aside. Hence, to that extent the decisions of the Gujarat, Andhra Pradesh and Telangana High Courts are per incuriam.

The Supreme Court of India is yet to rule definitively on whether an unsuccessful party can seek post-award interim relief and several petitions dealing with this issue are still pending before the Supreme Court. It is most opportune now for the Supreme Court to settle this question of law.

Enforcement of Arbitral Award when all the parties to the arbitration proceeding challenge the Arbitral Award

According to Section 36 of the Arbitration and Conciliation Act, 1996, an arbitral award becomes enforceable as a decree only after the time for filing a petition under Section 34 of the Act has expired or the Section 34 petition has been dismissed. Such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.

Prior to 2015, the enforcement of an arbitral award was automatically stayed once the Court admitted the petition under Section 34 challenging the award. The Supreme Court in National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540, held that an automatic stay on the enforcement of the award was a burden on the award creditor and that such a mischief must be rectified. Setting-aside proceedings no longer have an automatic suspensive effect on the enforcement of an arbitral award since the Arbitration and Conciliation (Amendment) Act of 2015. A separate application seeking a stay of execution of the award under Section 36(2) of the Act must be filed with the Court. If the award involves money payment, the court may grant a stay subject to certain conditions, such as depositing the awarded amount in court or securing the awarded amount with a bank guarantee.

However, an amendment to Section 36 of the Act was recently introduced by an Ordinance dated 4 November 2020, which provides that when the court seized of an application for setting aside an award is satisfied that a prima facie case has been made out - that either the arbitration agreement or contract that is the basis of the award, or the making of the award, was induced or effectuated by fraud or corruption - the court shall unconditionally stay the award pending further proceedings.

So, even If all the parties to an arbitration proceedings challenge the Arbitral Award, the enforcement of the award wouldn't be automatically stayed unless a prima facie case has been made out that the award was induced or effected by fraud or corruption. Otherwise, one of the parties or even all the parties can move an application under Sec 36(2) of the Act. On the basis of such application the court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing.

References:

https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Enforcement_of_Arbitral_Awards.pdf

https://www.cyrilshroff.com/wp-content/uploads/2021/05/Challenge-to-an-arbitral-award-2021.pdf

https://indiacorplaw.in/2021/09/unsuccessful-party-post-award-interim-measures.html

http://arbitrationblog.kluwerarbitration.com/2021/04/19/is-the-remedy-under-section-9-of-indias-arbitration-and-conciliation-act-1996-available-post-award-to-the-losing-party/

https://indiacorplaw.in/2021/09/unsuccessful-party-post-award-interim-measures.html

https://globalarbitrationreview.com/insight/know-how/challenging-and-enforcing-arbitration-awards/report/india#:~:text=An%20award%20may%20be%20recognised,section%2048%20of%20the%20Act

 

 


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ABOUT THE AUTHOR


Nilanjana Adhya

PRACTICING IN VARIOUS FIELDS OF LAW OVER 12 YEARS IN KOLKATA AND OUTSIDE BEFORE VARIOUS HIGH COURTS, THE SUPREME COURT , TRIBUNALS AND SUB-ORDINATE COURTS. EXPERIENCE IN ARBITRATION AND CONNECTED PROCEEDINGS, SUITS AND CONNECTED PROCEEDINGS, WRITS, APPEALS , REVISIONS, CONSUMER DISPUTES, PROPERTY DISPUTES, LAND DISPUTES, CONSTRUCTION AND WORKS CONTRACT DISPUTES, SERVICE AND LABOUR DISPUTES, ALTERNATE DISPUTE RESOLUTIONS, DOMESTICE AND INTERNATIONAL ARBITRATION ETC

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