In M. Ashraf v. Kasim (2018), the Kerala High Court (HC) reversed a lower court’s finding that no relief can be sought under Section 9(1) of the Arbitration and Conciliation Act, 1996 (Arbitration Act/the Act) at a time when the final arbitral award has already been passed.
As discussed below, the Kerala HC also clarified that the mere availability of similar relief before the arbitral tribunal under Section 17 of the Act, even at the post-award stage, does not ipso facto take away the Court’s jurisdiction to grant interim reliefs under Section 9. The Appellant’s Section 9 application was then remanded back to the district court for reconsideration in light of the High Court’s observations.
Facts and Findings
The parties’ disputes arose out the dissolution of a partnership firm and culminated into an arbitral award favorable to the Appellant. While the award was akin to a money decree, the Appellant filed an application under Section 9 of the Arbitration Act in order to restrain the Respondent from alienating its assets [the Application].
At the first instance, the District Court rejected the Application pursuant to Section 9(3) of the Arbitration Act on grounds that the Appellant had an efficacious relief before the Arbitral Tribunal under section 17. Section 9(3) reads as follows:
“Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.”
Pursuant to the 2015 Amendments to the Arbitration Act, one may obtain interim relief from the arbitral tribunal at any time during the arbitral proceedings or at any time after the making of the arbitral award, but before it is enforced in accordance with Section 36 of the Act. Pertinently, an arbitral tribunal’s order under Section 17 is deemed to be an order executable in the same manner as an order passed by a court.
The District Court also observed that the availability of an equally efficacious remedy from the arbitral tribunal precludes the grant of an injunction pursuant to Section 41(h) of the Specific Relief Act, 1963 (SRA), which reads as follows:
“Injunction when refused: An injunction cannot be granted—
(h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust;”
The Appellant argued that the Tribunal had become functus officio after signing the award and communicating it to the parties. Accordingly, the tribunal was not empowered to pass any further interim relief. The Court clarified, however, that this hitherto settled position of law had been diluted by the amendment to Section 17(1), which reads as follows:
“Interim measures ordered by arbitral tribunal.
(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal […]”
In the same vein, the Court noted that its jurisdiction under Section 9 does not automatically get barred by the operation of Section 17(1). The only prerequisite to obtaining judicial interim relief is that there must exist circumstances likely to cause the remedy under Section 17 to be inefficacious. The Court emphasized that an applicant must plead the circumstances that may render the aforesaid remedy not efficacious; the applicant should be able to convince the Court why she could not approach the arbitral tribunal and obtain relief under Section 17.
It was clarified that the mere availability of a similar remedy under Section 17, which may be efficacious if granted, shouldn’t by itself be used as grounds to refuse an application under Section 9(1); even after the award is made. The Court reasoned that this is mainly because the arbitral tribunal ceases to function after the award is made, signed and communicated to the parties. The only exception, it was observed, was when a party was required to approach the tribunal under Section 33 seeking clarifications/modifications to the award.
Insofar as the bar under Section 41(h) of the SRA was concerned, the Kerala HC first noted that the provisions of Section 9 are not entirely independent from the restrictions laid down by and control of the SRA. That said, it was observed that the District Court ought not to have simply rejected (as opposed to dismissed) the request under section 9 merely on the ground of Section 41(h), since the relief sought under Section 9(1) is neither in a suit nor in a right arising under a contract. Instead, it pertains to an interim measure which is being adjudicated or is already adjudicated upon by an arbitral tribunal.
The Court further noted that Section 38 of the SRA, which deals with the grant of perpetual injunctions, was not applicable to an application under Section 9 of the Act since the latter is only an interim remedy. It was clarified that even the final order in a Section 9 Petition is in the form of an interim measure.
In the circumstances, the Court remanded the application back to the District Court for its reconsideration in accordance with its findings summarized above. Given that the Award was for payment of monies, it was left open for the District Court to decide whether an interim injunction against alienation of properties would be the appropriate relief.
The Hon’ble High Court’s decision in M. Ashraf is, overall, a welcome clarification of the scope and inter-play between Section 9 and 17 of the Arbitration Act. True, the amended Section 17 makes available almost the same the reliefs as under Section 9. However, the “efficaciousness” of this relief should be measured on a host of factors in a given set of facts – such as the timely availability of the arbitrator/tribunal and the nature of the relief sought. An imminent threat that the judgment debtor will alienate all assets; a persisting infringement of intellectual property; or a credible threat of disclosure of confidential information may each qualify as such instances.
In arriving at its decision, however, the Kerala HC also observed the following:
“12. When an application under Section 9(1) of the Act is made … after the passing of the award but before it is enforced, the Court shall bear in mind that it is a stage where the Arbitral Tribunal has ceased to function. Except in cases provided under Section 33 of the Act, the Arbitral Tribunal would have then ceased to function.” (emphasis supplied)
The very fact that post-award relief is contemplated under Section 17 indicates that the tribunal continues to function, and certainly does not become functus officio, until the Award is enforced in accordance with Section 36 of the Act. In fact, the 2018 Arbitration Amendment Bill has sought to do away with the Tribunal’s post-award powers to grant interim relief under Section 17. Therefore, it is respectfully submitted that the arbitral tribunal does not – as the law stands today – cease to function after making the award for all purposes other than those contemplated under Section 33 of the Act.
That said, the Hon’ble Court has indeed adopted a pragmatic approach in M. Ashraf towards the interpretation of Sections 9 and 17 of the Arbitration Act.