Interim protection before arbitration proceedings begin

[Anonymous]

Our firm has a dispute with a company over certain goods which are at present in the custody of the company. We are planning to initiate arbitration proceedings as per the terms of our agreement which had an arbitration clause. The issue is about the goods which are with the company which may sell them and dispose of them and if that happens the arbitration may be of no use. Can the arbitrator give interim protection to us in the form of stay against the company with regard to sale of those goods, or we have to go to some court for this purpose?

[Dr. Ashok Dhamija]

It is possible to get interim protection for the goods (in your case) from the court as well as from the arbitrator (arbitral tribunal), as described below.

Section 9 of the Arbitration and Conciliation Act, 1996, empowers the Court to grant interim protection, inter alia, of the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement. This power can be exercised by the Court (i) before or (ii) during arbitral proceedings or (iii) at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act. However, once the arbitral tribunal has been constituted, the court shall not entertain an application for such interim protection except in some specific circumstances, as laid down in Section 9(3) [see below].

Similarly, Section 17 of the Arbitration and Conciliation Act empowers the arbitral tribunal to grant interim protection, inter alia, of the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement. This power can be exercised by the arbitral tribunal (i) during the arbitral proceedings or (ii) at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 of the Act.

A careful reading of the two provisions shows that before the appointment of the arbitrator, you may have to approach the Court for interim protection in respect of the goods, while after his appointment you may have to approach the arbitrator for such interim protection.

Section 9 and Section 17 of the said Act are as under:

“9. Interim measures, etc. by Court.— (1) A party may, before or during 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 a Court:—

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient,

and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

(2) Where, before the commencement of the arbitral proceedings, a court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the court may determine.

(3) 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.”

“17. 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—

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,

and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under Section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.”

 

     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

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