Interim Relief Measures against Third Parties in the Indian Arbitration Regime

Abstract

Arbitration incorporates procedural protections that shield the parties' interests in the event of
a violation. These protections are the interim or interlocutory measures. They provide the
aggrieved the opportunity to seek the assistance of the courts in order to protect their rights
and prevent intentional acts from meddling with the arbitral processes. §17 and § 9 of the
Arbitration and Conciliation Act, 1996 (hereinafter "the Act") give the arbitral tribunal and
the court the authority to award interim relief. Interim remedy may be issued against non-
parties to the arbitration. These could be the parties' bankers or subcontractors. Involvement
of such third parties is sometimes essential in convoluted disputes for ensuring a
fruitful arbitration. Nonetheless, the question of if an arbitral tribunal can award interim relief
against third parties has elicited unconvincing responses.

The intention of this paper is to analyse the judgments of several High Courts about the
contours of § 9 in awarding interim relief against third parties. Furthermore, the paper
presents a juxtaposition by addressing the tribunal's powers in giving interim relief against
third parties in consonance with the framework of the Act. Using the qualitative, secondary
method of doctrinal research, traditional legal databases , case laws and books have been
referred to draw conclusions and to identify the spaces which the law should fill in the near
future.

Keywords : Third-party arbitration, Dispute Resolution, Interim Relief Measures,

Arbitration

Third Party Relief Measures – Position of Law

Delays in settlement are an unavoidable result of modern arbitration and its procedural
protections. This delay can severely harm one side, sometimes irreparably. Asset loss,
evidence erasure, and property market value loss are prominent examples of such harm. In
response to the aforementioned issues, many governments, including that of India, have
devised mechanisms for awarding rapid interim remedies aimed to protect parties from
substantial harm caused by delays in the arbitral procedure. 
Interim measures, according to Gary B Born, are awards or orders granted to safeguard the
party or parties to a dispute from harm during the pendency of arbitral proceedings.1 These
actions are designed to safeguard a factual or legal situation in order to protect rights that
would otherwise be sought from the court exercising the requisite jurisdiction over the
substantive issues of the dispute. Interim measures are sometimes known as "pre-award"
relief, or "protective measures." Despite the increased use of temporary remedies, there is
negligible agreement on the manner in which arbitral tribunals can enforce such order against
non-parties.

The Act was legislated with the stated goal of limiting courts’ participation in the process of
arbitration. However, court-ordered temporary remedies are an inherent aspect of the Act's
structure. §s 9 and 17 of the Act, respectively, authorise the tribunal and the courts to award
interim relief. § 9 is essentially based on UNCITRAL Model Law Article 9, which also
provides for interim protective measures. The 2015 Amendment to the Act put an end to the
debate about whether the court's powers are limited under § 9. As a result, the court has
extensive powers to award temporary relief, which § 9 does not limit in any manner.

With respect to the arbitral process, the courts have broad powers to grant interim orders for
the detainment, custody, preservation of evidence, selling of property, or to designate a
guardian of a minor or an individual of unsound mind and to issue an interim injunction and
assign a receiver.2 As a result, the court's powers under § 9 are wider than the tribunal's
under § 17.

It is relatively clear who has the authority to make interim orders in favour of and against the
parties to the Arbitration proceedings. The question of whether orders can be issued against
third persons who are not parties to the Arbitration proceedings and/or signatories to the
arbitration agreement arises. When it is firmly recognised that no Arbitration may take place
amongst unrelated non-signatories to the agreement in respect of the disputes, the legal
position becomes more convoluted.

The Conundrum – Conflicting Judicial Precedents

The debate over whether courts have the authority under § 9 to award interim relief against
third parties has a long background. Different High Courts have adopted opposing opinions
on this subject; nonetheless, the absence of a Supreme Court ruling on the topic has
1
GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION, 3RD ED., WOLTERS KLUWER (2021).
2
OP MALHOTRA & INDU MALHOTRA, LAW AND PRACTICE OF ARBITRATION AND CONCILIATION ( 2006).

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intensified the issue's disputed nature even more. In Girish Mehta v. M.S. Mehta, a Division
Bench of the Bombay High Court adopted a flexible stance and ruled that an interim measure
against a third party would not be an obstacle to its competence while stating that the purpose
of such powers is to safeguard the arbitration agreement’s subject matter. In Nirma v. Lentjes
Energy, the Court referred the UNCITRAL Model Law and said, without venturing too
deeply into the subject, that the Court can order interim remedies against third parties in a
certain case.

In Arun Kapoor v. Vikram Kapoor, the Delhi High Court stated that the applications
emanating from §s 9 and 17 of the Act are extremely different in character. While the former
is an application to the arbitrator merely concerning a party to the proceedings, the latter
under § 9 is seeking an order which may affect a third party as well as a party to the
proceedings.

In Value Advisory Services v. ZTE Corporation, the Delhi High Court noted that
establishing a blanket rule that a § 9 application shall not be available against a third party as
the same will only impede the provision's efficacy. The court ruled that even though the
proceedings between the tribunal and before the court are among the same parties, they differ
significantly in terms of procedure. Accordingly, the authority to issue interim relief orders
against non-parties in within the scope of the court’s power. The Act makes no mention of
restricting the court's power when giving interim relief, instead stating in § 9 "the court shall
have the same power for issuing orders…”. Analogously, it was determined that if the courts
possess the ability to issue a relief measure against a third party in a certain, they also have
the power to do so under Section 9 of the Act.

In Shoney Sanil v. Coastal Foundations, the Kerala High Court found that the Act's design
unmistakably suggested that the courts are stopped short of meddling in, or infringing upon
the rights of third parties, notwithstanding the fact that the operation of § 9. As a corollary,
the authority of the courts to issue interim measures under 9 is restricted to only those who
are parties to the arbitration agreement or to any entity claiming under such agreement. 

Interestingly, in Mikuni Corporation v. UCAL Fuel Systems, the Delhi High Court took a
very opposite approach, stating that § 9 could not be evoked to seek interim remedy against
any party against whom the proceedings could not have been otherwise initiated. In
Brahmaputra Realtors v. G.G. Transport, the Hon'ble High Court of Gauhati  that interim

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measures can only be taken against the 'party' to the Arbitration Agreement, or against the
third party claiming under the party(ies), but not against any other external third party who
has an independent right.

The High Court of Delhi determined in Dorling Kindersley v. Sanguine Technical that an
interim order under § 9 of the Act can only be given against a third party in extremely
unusual instances. The Court did not elaborate on what constitutes a 'exceptional instance.'
However, in Gatx India v. Arshiya Rail Infrastructure ("Gatx Judgment"), the Court
ruled that interim orders against third parties could only be granted in extraordinary cases
where "refusal thereof could perhaps nullify the claimant’s rights in the process of arbitration;
destroy the purpose of arbitration; make the arbitration process futile; result
in grave injustice; and/or leave the claimant without a remedy, based on the facts of each
case.

Blue Coast Infrastructure Development v. Blue Coast Hotels (“Blue Coast ruling”)
brought the matter before the Delhi High Court once more.  It was determined that, while the
tribunal's powers under § 17 are limited, the court's powers under § 9 are comprehensive and
include the ability to provide interim relief against third parties. The Court ruled that the
tribunal is constrained by the four walls of the agreement to arbitrate under § 17. As a result,
it cannot provide any directive to the parties that is not expressly stated in the contract,
although the same is not true for § 9 of the Act. The confines of the contract are not
applicable for the purposes of § 9, hence the courts have broad authority to impose orders
against third parties. However, in outlining the scope of § 9, the Court made a few perplexing
observations regarding the tribunal's powers under § 17, prompting the author to investigate
the tribunal's jurisdiction to give interim relief against third parties. The same has been
critically analysed in the following segment.

Critical Analysis

Notably, party autonomy is the cornerstone of arbitration.3 It allows the parties to design the
“rules of the game” in a manner that is convenient to them, and stems from the contractual
nature of the agreement to arbitrate and its operation as a private law between the parties. In
such a situation, vesting powers in the tribunal and in the court to issue protective relief
against third parties who are neither a part of the arbitration agreement, nor involved in the

3
ALAN & MARTIN HUNTER, REDFERN AND HUNTER ON INTERNATIONAL ARBITRATION, 6TH ED. (2015).

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dispute can go against this principle. In this background, it is unsurprising to note that the law
surrounding the powers of the courts and tribunals against third parties is not settled
conclusively.

The Blue Coast ruling relied almost entirely on an earlier single judgment of the Delhi High
Court Gatx Judgment in making a comment on the ambit of § 17 in relation to non-parties to
the arbitration. The Gatx decision also stated that § 17 cannot be invoked against non-party
arbitrators. It is crucial to note, however, that the Gatx Judgment dealt with § 17 when the
same had not been changed in 2015. § 17 used to read, "...the arbitral tribunal may, at the
request of a party, instruct a party to adopt any interim measure....". Because the wording
"order a party" confined the ambit of § 17 to just "parties to arbitration," the tribunal was
precluded from providing interim relief to non-parties. This clause requires the parties to
contact the competent court under § 9 in order to get temporary relief from non-parties. The
aforesaid §, however, was superseded by the 2015 Amendment. § 10 of the 2015 Amendment
gave the tribunal "...the same ability to make orders that the court has...".

A civil court has broad and extended order-making powers under § 151 of the Code of Civil
Procedure. The 2015 Amendment proposes to provide the arbitral tribunal the same broad
powers for the purpose of providing interim reliefs. A review of the Blue Coast decision
reveals that the court incorrectly relied on an obsolete decision and could not provide a
revised evaluation on § 17, especially post 2015 Amendment to the Act.

The primary reason for parties to arbitration to seek a judicial intervention after the
establishment of the arbitral panel is the tribunal's incapacity to grant interim relief against
third-parties.

In 2015, § 17 was amended with the view to equalise the authority and jurisdiction of the
tribunals with those of the courts under § 9. This is owing to the fact that post the constitution
of the arbitral tribunal, seeking relief from the courts should be the exception rather than the
rule. The extent of judicial involvement in arbitration was attempted to be restricted by
expanding the powers of the arbitral panel in this respect. The complacent acceptance of the
finding in the Blue Coast case shall result in the present inclination of parties rushing to
courts to seek interim relief measures become even more widespread, because granting
interim reliefs frequently affects the rights of non-parties.

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 The Way Forward and Conclusion

Multiple High Courts have adopted differing positions on their competence to issue interim
relief against non-parties parties, creating ambiguity in the scope of powers that courts and
tribunals are vested with. Nonetheless, there is enough clarity on the subject that if the courts
may give interim relief against third parties, so can the tribunal. Both §s 9 and 17 of the Act
require a similar interpretation of the aforementioned language. The Act's goal and purpose
are to encourage fast trials and eliminate court intervention.

The 'proximity’ that a third party has with the substantive issues or with any of the party to
the agreement to arbitrate seems to be the key factor in all situations where High Courts
ordered interim remedies against such a party. The Courts have attempted to demonstrate that
because the third party was so intricately intertwined with the arbitration’s subject
matter, rejecting interim relief would have impeded the arbitral process.

If the kind of temporary relief granted by the courts is different from that provided by the
tribunals, the Act's basic objective would be defeated. Furthermore, the 2015 Amendment
made major adjustments to § 17 to minimise judicial meddling after the tribunal's formation.
The flawed ratio in Blue Coast has complicated the already unsettled law on this topic. The
ruling aims to distinguish between the powers of the tribunal and those of the courts by
restricting the ambit of § 17, causing the parties to recourse to the courts. § 17 necessitates a
fresh viewpoint that takes into account the 2015 Amendment as well. The Supreme Court
must take the risk of resolving the thorny question of interim relief with respect to third
parties under both §s 9 and 17 of the Act.