Introduction
Section 9 of the Arbitration and Conciliation Act 1996 (“Arbitration Act”)[1] deals with the powers of courts to grant interim reliefs, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced, to parties in order to safeguard the subject matter of the arbitration. Once a court has passed an order under Section 9(1)(ii), i.e., an order of “any interim measure of protection”, then arbitral proceedings[2] must be commenced within ninety (90) days “from the date of such order” or “within such further time as the court may determine” as provided under Section 9(2). The bar on the civil court’s jurisdiction under Section 9(3) is applicable to instances where the arbitral tribunal has already been constituted. In this article, we have restricted our analysis to examining the scope and ambit of Section 9(2) of the Arbitration Act and adherence to the timeline.
The Arbitration and Conciliation (Amendment) Act 2015 inserted Subsections (2) and (3) to Section 9 of the Arbitration Act. Before the amendment and inclusion of the timeline under Section 9(2), the Supreme Court (“SC”), in its 1999 judgment reported in Sundaram Finance v. NEPC India Pvt. Ltd., had adjudicated on the timeline to commence arbitral proceedings vis-à-vis Section 9 of the Arbitration Act. The SC ruled that when a party seeks interim measures of protection under Section 9, it implicitly accepts that a final and binding arbitration agreement exists and that a dispute referable to the arbitral tribunal has arisen.[3] Thus, when a Section 9 petition is filed before the commencement of arbitral proceedings, the applicant must demonstrate manifest intention to take effective steps in commencing the impending arbitral proceedings. A notice under Section 21 of the Arbitration Act may be sufficient to establish the manifest intention to have the dispute referred to an arbitral tribunal.
However, for a scenario where a party seeks relief under Section 9 even prior to issuing a notice of arbitration, the SC held that the relevant court would have to be satisfied about the existence of a valid arbitration agreement and the applicant’s intention to take the dispute to arbitration. The court may also pass a conditional order under Section 9 directing the applicant to such terms as it deems fit with a view to ensure that the applicant takes effective steps for commencing the arbitral proceedings.
Ambiguity about date of commencement of 90-day period under Section 9(2) of the Arbitration Act
The twin requirements – (i) manifest intention to arbitrate and (ii) effective steps being taken to commence arbitral proceedings after receiving “any interim measure of protection” under Section 9 Arbitration Act – must be fulfilled; however, ambiguity exists about (i) whether “any interim measure of protection” under Section 9(1)(ii) includes both ad interim and interim orders and (ii) whether the 90-day period under Section 9(2) commences from the date of the ad interim or the final interim order. The wordings of Section 9(2) of the Arbitration Act do not distinguish between interim or ad interim orders and broadly state that “(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.”
In Information TV Private Limited v. Jitendra Dahyabhai Patel 2024 SCC OnLine Del 810, the Delhi High Court (“DHC”) adjudicated upon a petition under Section 11(6) of the Arbitration Act for the appointment of an arbitrator. The Respondent, among other things,alleged that since 2021 the Petitioner was sitting on an interim order the Court had granted in a Section 9 petition the Petitioner had sought and had chosen to invoke arbitration only in 2023. Thus, the Petitioner was barred from approaching the Court under Section 9(2) of the Arbitration Act for not demonstrating a clear and manifest intention to arbitrate. The DHC, relying on Sundaram Finance held the following: “…The Question as to when arbitral proceedings have to be commenced after filing a section 9 petition is no longer res integra and has been decided way back in 1999 by the Supreme Court in Sundaram Finance…12. In terms of the said judgment, there are only two components that need to be looked at, firstly that there has been an intention to arbitrate the disputes and secondly, effective steps have to be taken to commence the arbitral proceedings.”[4]
The DHC held that the petition was not barred for other reasons pertaining to the timelines under Section 11(6) of the Arbitration Act. However, with regard to the order passed under Section 9, it held that such order (i) continues even if a Section 21 notice is issued and (ii) remains in effect until the conclusion of the arbitral proceedings.[5]
In Ezen Aviation Limited v. Big Charter 2021 SCC OnLine Del 5369, the DHC adjudicated on two appeals Ezen sought challenging two interim orders the Single Judge under Section 9 of the Arbitration Act had passed in favour of Big Charter on the ground that Big Charter had failed to initiate arbitral proceedings within the statutory period as stipulated under Section 9(2). The Court observed that “… the respondent is yet to take steps to have its claims adjudicated through arbitration…Section 9(2) of the Act requires that where a Court passes an order for any interim measure or protection, the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such time as the Court may determine. This sub-Section was introduced by the Arbitration and Conciliation (Amendment Act), 2015. In Sundaram Finance Ltd. (Supra), the Supreme Court, while holding that an application under Section 9 of the Act may be filed before the commencement of the arbitral proceedings, observed that the party invoking such jurisdiction must satisfy the Court that it intends to take the disputes to arbitration. While passing such an order and in order to ensure that effective steps are taken for commencement of arbitral proceedings, the Court can pass a conditional order to put the applicant to such terms, as it may deem fit with a view to see that effective steps have been taken by the applicant for commencing the arbitral proceedings.” [6] Thus, the Court allowed the appeal sought by Ezen and held that the interim orders passed under Section 9 of the Arbitration Act were set aside as the statutory period for initiation of arbitral proceedings had expired[7] and Big Charter had taken no action under Section 9(2).
On the other hand, the Bombay High Court in the case of Aditya Birla Finance v. Airen Metals, COMM. ARB.PET. (L) No. 6754 of 2021 sought to distinguish between ad interim and interim orders qua the applicability of the 90-day timeline under Section 9(2) Arbitration Act. The Court observed the following: “This submission is made on the strength of section 9(2) of the Arbitration Act. I find this argument also to be without any merit. What has been granted by this Court on 1st April, 2021 are not interim reliefs but ad-interim reliefs. This petition was thereafter kept for further reliefs and has not been disposed of. In such circumstances, I do not think that Section 9(2) of the Arbitration Act would be of any assistance to the Respondent No.1 – Company…”[8] On the contrary, in the case of Borivali Anamika Niwas Coop Hsg Soc Ltd. v. Aditya Developers and Ors. 2019 SCC OnLine Bom 10718, the Bombay High Court held that “Section 9(2) Arbitration Act requires that after an interim order is made, arbitral proceedings must commence within 90 days from the date of such order or within further time as the Court may permit. No application for any enlargement of time was ever made. It was for this reason that on 4th November 2019 I vacated the ad-interim relief previously granted in favour of the society.”[9].
Additionally, along the lines of the Bombay High Court order in Borivali Anamika, in the case of Manosh Elias Constructions Pvt. Ltd. v. Manual John 2018 SCC OnLine Ker 6383, the Kerala High Court adjudicated on the applicability of Section 9(2) timelines to ad interim orders and held “that the limitations stipulated under sub-section (2) of Section 9 will squarely apply even with respect to an ad-interim order passed in an original petition filed under Section 9(1)”.[10]
Consequence of non-initiation of arbitration within the statutory 90-day period
The wordings of Section 9(2) of the Arbitration Act reflect no express statutory consequences and/or penalties on the failure to initiate arbitration within the 90-day period. This is also on account of the words, “within such further time as the court may determine”. Thus, while an automatic vacation of an interim order of protection under Section 9(1) cannot be presumed, the courts have set aside such orders on a case-to-case basis. In fact, failure to initiate arbitration within the 90-day period/taking of effective steps could demonstrate the applicant’s lack of intent to arbitrate. This, too, after securing an interim measure of protection in its favour and indicating inequitable conduct.
In Shanti Dey v. Suvodeep Saha, 2016 SCC OnLine Cal 6251,[11] the Calcutta High Court held that the use of the words“or within such further time as the Court may determine”makes it clear that the time stipulation of ninety (90) days is directory and, accordingly, the Court might extend the time for commencement of arbitral proceedings. Further, it also held that there is no penalty for default in the commencement of arbitral proceedings within ninety (90) days. However, Section 9(2) cannot be interpretated in a manner that expands any situation not legislatively contemplated.[12]
Conclusion
Before the amendment to Section 9(2) of the Arbitration Act in 2015 and the insertion of the 90-day timeline, a party armed with an interim order of protection under Section 9(1) of the Arbitration Act had to (i) demonstrate a manifest intention to arbitrate and (ii) take effective steps to commence arbitral proceedings (such as a notice under Section 21 of the Arbitration Act). However, some judgments made after the amendment suggest that parties are required to adhere to the 90-day timeline from the date of grant of any interim order (both ad interim and interim orders) and that courts may vacate such interim orders granted if parties do not adhere to the timeline. Different high courts seem to have taken different stances, depending on the facts and circumstances of each case and on the nature (directory/mandatory) of the timeline under Section (2). It would be interesting to see if the issue travels to the SC and how it deals with the same. Nonetheless, in our view, keeping in mind the aim and intent of arbitration, the 90-day period should be made mandatory, and a party that has received any interim order/protection must take effective steps to initiate arbitration within the stipulated time frame.
For further information, please contact:
Vikash Kumar Jha, Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] 9. Interim measures, etc., by Court. —
(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.
[2] In accordance with Section 21 of the Arbitration Act, arbitral proceedings commence upon the issuance of a notice of arbitration.
[3] Sundaram Finance v. NEPC India Pvt. Ltd. (1999) 2 SCC 479, Para 19
[4] Information TV Private Limited v. Jitendra Dahyabhai Patel 2024 SCC OnLine Del 810, para 11 and 12
[5] Unless otherwise stated by the courts in its order.
[6] Ezen Aviation Limited v. Big Charter 2021 SCC OnLine Del 5369, para 8, 9, 10
[7] See also, SIPL Lifestyle Private Limited v. Vama Apparels (India) Private Limited and Another. (2020) 267 DLT 467. The DHC @para 27 held that while previously no limitation was fixed for commencement of arbitration after seeking interim reliefs under S.9. In the amended S.9, the arbitral proceedings must begin within 90 days after interim order is passed.
[8] Aditya Birla Finance v. Airen Metals, COMM. ARB.PET. (L) No. 6754 of 2021, para 22
[9] Borivali Anamika Niwas Coop Hsg Soc Ltd. v. Aditya Developers and Ors. 2019 SCC OnLine Bom 10718, para 5
[10] Manosh Elias Constructions Pvt. Ltd. v. Manual John 2018 SCC OnLine Ker 6383, para 7
[11] Shanti Dey v. Suvodeep Saha, 2016 SCC OnLine Cal 6251
[12] Chaudhary Avadhesh Kumar v. Volleyball Federation of India 2017 SCC OnLine Mad 19117, para 41
