Report No. 176
2.7. Interim measures under Section 9 in international arbitration where the place of arbitration is outside India and also allowing civil court under section 8 to deal with such arbitrations by amendment of Section 2(2).
Under Section 2(2) of the 1996 Act, it is stated that Part I applies where the place of arbitration is in India. Section 9 of the Act which is in Chapter II of Part I, therefore, got excluded thereby precluding the Court from granting any interim orders in case of international arbitration where the seat of arbitration is outside India.
Section 9 would otherwise permit a party either before or during arbitral proceedings or at any time after making of the award (but before it is enforced under Section 30)- to apply to the Court for various interim orders. Section 2(2) has led to considerable litigation in courts in cases of international arbitration where the seat of arbitration is outside India.
For example, before the arbitrators are appointed, it may indeed become necessary to obtain interim orders in India. But the absence of a provision has required parties to move the Courts in the country in which the seat of arbitration is located. This may involve considerable delay if one of the parties to the contract is in India.
Similarly, at the stage of execution of an international award rendered at a seat outside India, the Indian Courts are not able to grant any relief by way of interim orders in India. A provision enabling Indian Courts to grant interim orders in international arbitrations where the seat of arbitration is outside India is therefore necessary. Delhi High Court has rendered conflicting judgments.
In FAO (O.S.3/2000) a Division Bench in Olex Focas Pvt. Ltd. Vs. Skodaexport Co. Ltd (AIR 2000 Delhi 161) held on the basis of section 2(5) and other provisions that interim orders could be granted in such cases but in Marriott International Inc (2000 (3) Arb. Law Reports 369), a Division Bench took the opposite view that no interim orders could be granted in the case of international arbitration outside India.
In the Calcutta High Court it was held in East Coast Shipping Limited Vs. M.J.Scrap Ltd. 1997(1) C.H.N.444 that interim relief could be granted but a Division Bench in Kaventers Agro Limited Vs. Seagram Co Ltd (APO 449, 498/97 dated 27-1-98) took an opposite view and SLP was dismissed. It has therefore become necessary to remedy the law in this respect.
In all arbitration statutes passed by various countries covering both international and domestic arbitrations, care has been taken to make not only Article 9 of the Model law (relating to interim measures) to be applied to international arbitrations held outside the country in question but care has also been taken to apply Sections 8, 35 and 36 of the Model law to international arbitrations outside that country. In section 2(2) of the Act even section 9 has not been excepted.
In fact section 8 of the Model law relates to suits being filed in India in which a defendant may take plea that there is an arbitration agreement which has provided that the arbitration is to take place outside India. In such a case, it will be necessary to allow the Indian Court to decide the questions arising under section 8. This is necessary inasmuch as there may be international arbitrations which contemplate the seat outside India but not covered by Part - II of the Indian Act 1996.
Part II is confined to New York Convention and Geneva Convention Awards. For example, if it is not a case of commercial arbitration or where the agreement is not in writing or where one of the parties belongs to a country which is not a signatory to the said Conventions, it will be necessary to say in Sec.2 (2) that not only section 9 but Section 8 of Part I shall apply whenever a suit is filed in a Civil Court in India and the defendant pleads an international arbitration agreement where the seat of arbitration is outside India and the case is not covered by Part-II of the 1996 Act, the Civil Court could deal with the matter under Sec.8.
In the Zimbabwe Arbitration Act 1996 para 2of the preamble and, Sub-Para 3(2) state that sections 8, 9, 35 and 36 of the Model Law will apply to international arbitrations held outside Zimbabwe. The Korean Act 1999 provides in Article 2 that Section 9 and 10 of the Act and also Articles 37 and 39 of the Act (corresponding to Articles 8,9 35 and 36 of the Model law) apply to international arbitrations held outside Korea.
Section 7 of Newzealand Act 1996 also makes Sec 8,9, 35,36 of the first schedule (corresponding to Articles 8,9,35,36 of the Model law) to international arbitrations held outside New Zealand. In Article 1 of the Canadian Act 1986 Sub-clause (2) provides that Articles 8,9,35 and 36 of the Code (corresponding to Articles 8,9,35,36 of the Model law) will apply to international arbitrations held outside Canada.
Similarly section 7 of the Arbitration (international commercial) Act 1998 Ireland permits the grant of interim measures in relation to international arbitration agreements. We shall deal with Art.35 and 36 of the Model law and Sec.2(2) of the Indian Act in the succeeding paras.
It is, therefore, obvious that Sec 2(2) of the Act which makes Part I of the Indian Act to apply only to arbitrations within India should be modified by permitting resort to Sections 8,9 (also 35, 36 ) to international Arbitrations outside India not covered by Part II.