Empowered Arbitral Tribunals - Better Times For Arbitration

In any dispute, securing an interim relief at the outset of such dispute is one of the most crucial aspects to enable a party to finally enjoy the fruits under the Award/Decree after adjudication of such dispute. Considering this aspect Sections 9 & 17 of the Arbitration & Conciliation Act, 1996(“Act”) envisages two wings for grant of such interim reliefs.

Recognising these characteristics, the Arbitration and Conciliation (Amendment) Act, 2015 (“amendments”)has introduced several changes in the Act.One of the most important changes is the time frame to dispose the arbitration reference within 12 months from the date of entering reference and also grant of interim reliefs by an Arbitral Tribunal akin to a Civil Court. Also, before the amendment, on obtaining an interim relief from an Arbitral Tribunal a successful party who obtained such interim relief had no recourse to execute/enforce such an interim relief under the Act. This was because there was no provision under the Act to execute/enforce such interim orders passed even if the other party disregards such interim reliefs. Arbitral Tribunals were therefore, virtually a toothless forum.The Supreme Court also from time to time held that orders passed by the Arbitral Tribunal under Section 17 are not enforceable. Consequently, parties seeking interim reliefs ended up filing proceedings before the Courts under Section 9 of the Act.  This obviously led to multiplicity of proceedings and the whole intent and purpose of the Act was being defeated.

In this regard it is worth noting that under the Act; only a final award can be enforced under Section 36. Before the amendment, the only provision under the Act, which closely empowered the Arbitral Tribunal, was Section 27 which envisages that any person failing to comply with the order of the Arbitral Tribunal or“making any other default” or guilty of any contempt to the Arbitral Tribunal during the conduct of the proceedings shall be subject to the like punishments by order of court on the representation of the Arbitral Tribunal as if they were suits tried before the court. However, in reality Arbitrators/ Arbitral Tribunals are reluctant to make such representation to a court even if requested by the parties. In absence of such representation the court cannot invoke Contempt against the defaulting party.

However, by the amendments, the Arbitral Tribunals who were once toothless are now empowered, as parties to Arbitration can execute Arbitral Tribunal’s orders.For instance, in a claim for recovery of money, if an Arbitral Tribunal directed the other party to furnish a security and if such party failed in doing so, the party who has obtained such relief could not execute/enforce it and approached the court to obtain similar reliefs under Section 9 of the Act.  However, with the introduction of the amended Section 17 of the Act, Arbitral Tribunals are now empowered with powers identical to courts. By virtue of the amendment any order of an Arbitral Tribunal issued under Section 17 shall be deemed to be an order of the court for all purposes and are enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the court, which indeed is a very bold and progressive step to reform the Alternate Dispute Resolution mechanism.

To sum up, the Act now having been amended, entitles parties to seek all the reliefs from an Arbitral Tribunal as is available to them if the party had approached the courts. However, such reliefs can be obtained from Arbitral Tribunal,only during the arbitral proceeding and not prior to the same. This indeed has opened a new dimension to the Alternate Dispute Resolution mechanism. After this amendment, it is expected that parties and Arbitral Tribunals will play a proactive role and take advantage of the amendments to the Act and there will therefore be minimum intervention of courts in the matters in relation to and in connection with Arbitration Act, which is one of the objectives of the said Act.