Author
Kanishk Srinivas - National Law School India University, Bengaluru
Introduction
A 3 Judge Bench of the Supreme Court (“SC”) recently referred the issue of modification of arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act (“AC Act”) to a Constitutional Bench. The referral noted though the power to modify an award was heavily restricted, courts continued to implicitly do so under various other grounds. While the treatment of awards has been at the forefront of widespread debate, discussion on the modification of interim orders provided by the arbitral tribunal (“AT”) under Section 17 hasbeen muted, if not absent. This is a particularly important discussion since interim orders form a part of all arbitral proceedings. They are tools for not only maintaining the status quo during proceedings and ensuring that the objectives of arbitration are not frustrated but also for providing just and equitable reliefs. It is this statutory and scholarly silence on the modification of interim orders under Section 17 that we seek to address in this article.
This article comprises of three parts. First, we identify what constitutes an order which will be the subject of modification. Second, we highlight the principles guiding the modification of an interim order. Finally, we indicate how the AT is and should be the appropriate authority for the modification of interim orders.
I. Identifying an Order
The AT, through Section 17, has been conferred the power to pass orders granting interim measures. Before dealing with the question of modification of such orders, it is vital to understand what an “order” entails.
A bare perusal of the AC Act reveals that there is no definition of “order”. Since the power of the AT extends to passing either an “award” or an “order”, an interpretation of what constitutes an order will have to be derived from what constitutes an award. An order will have to be interpreted as something that is not an award. For this purpose, it becomes important to develop an understanding of what constitutes an award. Section 2(1)(c) defines an “arbitral award” as something which includes an interim award. Apart from including interim awards within its ambit, the definition contained in Section 2(1)(c) does little to further our understanding of the defining characteristics of an award. In the absence of statutory guidance, reliance must be placed on judicial interpretation for defining an award.
One of the earliest interpretations of an award was provided by the Delhi HC in Rhiti Sports v Powerplay Sports (“Rhiti Sports”). The Single Judge Bench held that an award (irrespective of the stage at which it was made) was characterised by the fact that it “settled a matter that the parties were at issue”. On the contrary, an order did not have the effect of deciding on an issue between the parties. The rationale in Rhiti Sports continued to be affirmed in subsequent cases like NHAI v Lucknow Sitapur Expressway Ltd and Goyal MG Gases Pvt. Ltd. v Panama Infrastructure Developers Pvt. Ltd. The court has also noted that the terminology and language used may not conclusively determine whether a particular decision is an order or an award. The distinction between the two depends on their subject matter and the finality attached to the decision.
An overview of the judicial opinions provides a two-fold test for drawing a distinction between an order and an award. The test involves scrutinising the impugned decision from the perspective of its finality and the subject matter. An award involves a conclusive determination of an issue in the arbitration proceedings. Irrespective of the stage at which such a conclusive determination of an issue takes place, it would be classified as an award (albeit capable of further distinction as an interim, additional, settlement or final award). On the contrary, an order does not conclusively determine an issue before the AT. This position has been affirmed by the Delhi HC in ONGC Petro Additions Ltd. v. Tecnimont S.P.A. In this case, the AT had issued a decision titled as an “interim award” which rejected the petitioner’s request to produce documentary evidence after the deadline had passed. The petitioner challenged this “award” under Section 34 of the Act. One of the issues before the HC was whether the decision was an "award”. The HC held that though the decision was final and had a substantial impact on the rights of the parties, it was not related to an issue in the arbitration and would therefore be a procedural order. A decision was required to fulfil both components of finality and subject matter to be classified as an award.
II. Principles Guiding Modification
Once there is successful identification of an order i.e. the subject matter of modification, the next focus is on identifying the principles that will guide the modification of the order.Section 37(2) enables parties to appeal against interim orders of the AT under Section 17 but does not indicate the scope or standard for the same. Given that the AC Act does not provide any guidance, there is again a need to turn to judicial interpretation. However, this is a particularly rarefied field where there has only been a recognition that the appellate authority under Section 37(2) will have the power to modify interim orders issued by the AT.
This necessitates an examination of the jurisprudence on the power of courts to issue interim orders under Section 9. The comparison between Section 9 and Section 17, particularly after the 2015 Amendment to the AC Act, is ideal given the similarity in powers exercised under them. The only difference pertains to the stage at which these Sections are invoked with Section 9 primarily applying before the commencement of arbitral proceedings (and only in exceptional circumstances, during the proceedings) and Section 17 being applicable during the proceedings. The similarity is further reinforced by the text of Section 17 which confers the AT with the same powers as the court for granting interim measures and enables such measures to be enforced akin to a decree of the court.
The courts have routinely held that though the provisions of the CPC do not apply to arbitration proceedings, their principles can guide the grant of interim reliefs under Section 9.The rationale for this seems to be that while the AC Act confers the courts with the power to provide relief, it does not specify how such power is to be exercised. Since such broad powers cannot be exercised arbitrarily, the courts have tended to utilise established CPC principles while dealing with applications for interim relief under Section 9. The application of CPC principles has also been extended to the modification of interim orders under Section 9 as seen in Airports Authority of India v. TDI International India Ltd. In this case, the Delhi HC opined that that principles of change in circumstances and undue hardship envisaged by Order XXXIX Rule 4 of the CPC were applicable when applications for modification of interim reliefs granted under Section 9 were considered.
Judicial opinions in cases like Augmont Gold (P) Ltd. v. One97 Communication Ltd. have consistently held that principles guiding the exercise of powers under Section 9 must also inform the exercise of similar powers under Section 17. When the court’s power to modifyinterim orders under Section 9 based on CPC principles has been recognised, it is an inescapable conclusion that the exercise of powers by the AT under Section 17 can also be guided by the same principles. Aspects like change in circumstances and undue hardship that compel courts to modify their Section 9 order may have a similar effect on orders of the AT under Section 17. The recognition that there is an equivalence in powers of the courts and the AT in granting interim measures further bolsters the AT to exercise powers of modification.
III. AT as the Appropriate Authority for Modification
It is now established that conditions like changes in circumstances and undue hardships could lead to a modification of interim orders passed by the courts or the AT. However, there is a lack of clarity on which forum constitutes the appropriate authority for such a modification. While the power of courts to modify interim orders through their power under Section 37(2)(b) has been recognised, the power of the AT to modify its interim orders under Section 17 is unclear. We argue that, for the reasons provided below, the AT is and should be the appropriate forum for the modification of its interim orders as opposed to the courts under Section 37.
First, the AC Act and its subsequent amendments have expressed the legislative intention to reduce frequent and pervasive interference by the courts in arbitral proceedings. With the constitution of the AT, it is deemed to be the appropriate authority for adjudication of all issues before it. The rationale behind restricting the jurisdiction of the courts to grant interim reliefs under Section 9 after the commencement of arbitral proceedings has been the sameinclination to reduce judicial intervention. If the interim measure granted by the AT can be efficaciously enforced, parties cannot approach the courts for the same under Section 9. When the overarching inclination seems to be the restriction of judicial interference except when absolutely required, it becomes necessary that the AT be the appropriate forum for the modification of interim orders. When the AT (which has the same powers as a court with regard to interim orders) provides an interim relief, it is a logical corollary that it will havethe power to modify the same to account for a change in circumstances or undue hardship. It is unreasonable and inimical to the objectives of arbitration to expect parties to approach the court for a modification to the interim order when the AT is competent and well-empowered to deal with the same. Given the wide powers of the AT and the intention to restrict judicial interference, the AT must be the appropriate authority for the modification of interim orders.
Second, the international position on the modification of interim orders also locates the AT as the appropriate authority for such modifications. The AC Act is based on and heavily borrowed from the UNCITRAL Model Law on International Commercial Arbitration(“UNCITRAL Model Law”). Since the issue of modification of interim orders passed by the AT was not at the forefront of discussion when the UNCITRAL Model Law was first introduced, most national legislations based on it did not have provisions for the same.However, in 2006, the Working Group on the UNCITRAL Model Law introduced an amendment which added Article 17D which reads as:
The arbitral tribunal may modify, suspend or terminate an interim measure or a preliminary order it has granted, upon application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.
With the introduction of Article 17D, the UNCITRAL Model Law now explicitly confers powers on the AT to modify its interim orders either upon the application of parties or on its own motion. While the Working Group had suggested adding the phrase “in light of additional information or change of circumstances”, it was dropped to ensure that the power of the AT to provide an interim relief was not unduly restricted.
With the change to the UNCITRAL Model Law, there have been amendments to national legislations on arbitration. For instance, the Malaysia Arbitration Act was amended in 2018 to introduce Section 19D which confers the same powers as envisaged by Article 17D. New national legislations on arbitration have also incorporated the powers of Article 17D as seen in Section 28(5) of the Abu Dhabi Arbitration Regulations. Hence, there has been an evolution of the international position towards recognising the power of the AT to modify its interim orders. The power of the AT to provide interim reliefs has been expanded to include the power to modify them according to the circumstances of the parties. This provides a compelling case for the legislature to amend the AC Act to bring it in line with international best practices. In the meantime, courts must recognise the AT as the appropriate authority for the modification of interim orders under Section 17.
Conclusion
The evolution of the jurisprudence on the AC Act as well as the international position providea strong case for arbitral tribunals to be considered the appropriate authority for modification of their own interim orders rather than courts under Section 37(2)(b).
While the AC Act currently lacks an express provision along these lines, courts must interpret the existing provisions harmoniously to recognize arbitral tribunals as the appropriate forum for modifying interim orders they have passed. This would be in line with both the scheme of the Act to make arbitral tribunals as self-contained as possible as well as international best practices. The legislature should also consider amending the Act to explicitly provide for this power of modification to arbitral tribunals.
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