Section 9 Arbitration Interim Relief Before the Award

A Jabalpur supplier is owed around Rs 1.2 crore under a supply contract with an arbitration clause. He issues his notice of dispute. Within a fortnight he hears that the buyer has advertised its plant machinery for sale, has begun moving stock out of the leased premises, and has applied to shift its registered office to another state. The arbitration will take a year even if it moves quickly. By the time an award arrives there may be nothing left to execute it against.

A Section 9 arbitration interim relief application is the answer to exactly that problem. Section 9 of the Arbitration and Conciliation Act 1996 lets a party ask a court for interim measures before the arbitration begins, while it is running, and after the award has been made but before it is enforced. It is the one place in the Act where the court, rather than the tribunal, can act quickly and with the full machinery of a civil court behind the order.

What the court can actually order

Section 9(1) is a list, and it is worth reading against your own facts rather than asking for something vague.

• Preservation, interim custody or sale of goods that are the subject matter of the arbitration agreement. Useful where perishable or depreciating stock is involved.
• Securing the amount in dispute. This is the workhorse. The order can direct a deposit, furnishing of a bank guarantee, or a restraint on dealing with identified assets.
• Detention, preservation or inspection of property, including permission to enter land or a building to take samples or make observations. This is how evidence about defective construction or plant is preserved before it is altered.
• An interim injunction or the appointment of a receiver. A receiver is appointed sparingly, but it is available where property is being wasted.
• Any other interim measure that appears just and convenient to the court, which is the residuary clause that most applications end up relying on in part.

Section 9 also permits the appointment of a guardian for a minor or a person of unsound mind for the purposes of the arbitration.

What the court will not do is grant the final relief in interim clothing. An application that asks the court to declare the contract terminated, or to direct payment of the claim amount, will be refused. Ask for security over assets, not for the money.

Which court hears it, and why the seat decides that

“Court” is defined in Section 2(1)(e). For a domestic arbitration it means the principal Civil Court of original jurisdiction in a district, and a High Court that has ordinary original civil jurisdiction. It expressly excludes courts inferior to the principal Civil Court and the Court of Small Causes. For an international commercial arbitration, it is the High Court.

The practical consequence in Madhya Pradesh is one that outside counsel often get wrong. The Madhya Pradesh High Court does not exercise ordinary original civil jurisdiction. So a Section 9 application in a purely domestic arbitration seated in this state is filed before the District Judge, not the High Court.

Layer the Commercial Courts Act 2015 over that. Where the dispute is a commercial dispute of Specified Value, currently Rs 3 lakh and above, applications under the Arbitration Act are heard by the Commercial Court. Most contract, supply, construction, joint venture and franchise disputes qualify. The appeal from that order then goes to the Commercial Appellate Division of the High Court.

Territorially, the seat named in the arbitration clause fixes the court. A clause naming Jabalpur as the seat sends the Section 9 application to the courts at Jabalpur, even if the goods were delivered elsewhere. That is one more reason the seat has to be written into the clause deliberately, a point covered in our note on drafting an arbitration clause that works. Section 42 then keeps every later application in the same court.

The three windows, and the 90 day trap

Section 9 arbitration interim relief can be sought at three moments, and each has its own condition.

Before the arbitration begins. This is the most valuable window, because it is when the other side has least warning. But Section 9(2) attaches a condition: where the court grants an interim measure before the commencement of arbitral proceedings, the arbitration must commence within 90 days of that order, or within such further time as the court allows. Commencement is not the filing of a claim before a tribunal. Under Section 21 the arbitration commences on the date the request for reference is received by the respondent. Applicants who obtain a good order and then spend four months negotiating an arbitrator can lose the protection.

During the arbitration. Once the tribunal is constituted, Section 9(3) says the court shall not entertain a Section 9 application unless it finds that circumstances exist which may not render the remedy under Section 17 efficacious. The bar is not absolute, but it is real. Go to the tribunal instead, unless there is a specific reason the tribunal cannot help, for example where relief is needed against a third party who is not before the tribunal, or where the tribunal cannot sit at short notice.

After the award, before enforcement. Section 9 remains available after the award is made and until it is enforced under Section 36. This window matters because a challenge under Section 34 no longer stays enforcement automatically, and a losing party sometimes begins moving assets the day the award is published.

Section 9 or Section 17

Since the 2015 amendment the tribunal’s powers under Section 17 mirror those of the court under Section 9, and a Section 17 order is enforceable as if it were an order of the court under the Code of Civil Procedure. The choice is now mostly about timing and reach.

	Section 9	Section 17
Who decides	Court, usually the District Judge or Commercial Court	The arbitral tribunal
When available	Before, during and after the arbitration until enforcement	Only while the tribunal is functioning, until the award is made
Against third parties	Yes, a court can bind persons who are not parties to the arbitration	No, the tribunal binds only the parties before it
Once the tribunal exists	Restricted by Section 9(3)	The default route
Appeal	Section 37(1)(b)	Section 37(2)(b)

Where the arbitration is administered by an institution whose rules provide for an emergency arbitrator, an emergency order in an India seated arbitration has been held to operate as an order under Section 17 and is enforceable accordingly. That route can be faster than a court, and it is worth checking the institution’s rules before assuming a court application is the only option.

What you actually have to prove

Courts are not strictly bound by the Code of Civil Procedure when deciding a Section 9 application, but they are guided by its principles, and applications that ignore them fail.

For an injunction, the familiar three: a prima facie case, the balance of convenience, and irreparable injury that damages cannot repair.

For securing the amount in dispute, the standard is higher and applicants underestimate it. The principle underlying Order 38 Rule 5 applies, which means you must place material showing that the other party is about to dispose of or remove property with the object of defeating an eventual award. A large claim, a weak balance sheet or a general fear of non payment is not enough. What works is specific and documentary:

• the sale advertisement, the broker listing or the auction notice;
• a search of the register of charges showing fresh encumbrances;
• ROC filings showing a change of registered office or a reduction in assets;
• correspondence in which the counterparty says it cannot pay;
• an inspection report or photographs showing stock being removed.

The papers to file alongside are the contract containing the arbitration clause, the Section 21 notice if one has been issued, the correspondence, the computation of the claim, and an affidavit that discloses everything material. Where relief is sought without notice, disclosure has to be complete, including the facts that help the other side. An ex parte order obtained on a partial account is usually vacated at the return date, and the applicant loses credibility for the rest of the case.

Bank guarantees are a separate battle

A large share of Section 9 applications are attempts to restrain the invocation of a bank guarantee. The law here is settled and narrow. An unconditional bank guarantee is an independent contract between the bank and the beneficiary, and courts refuse to interfere except on established fraud of an egregious kind that vitiates the whole transaction, or where invocation would cause irretrievable injustice. Disputes about performance of the underlying contract, however strong, are not a ground. That is what the arbitration is for.

Where applications go wrong

Applications for Section 9 arbitration interim relief fail for a short and repetitive list of reasons.

• Waiting. There is no limitation period written into Section 9, and whether Article 137 of the Limitation Act 1963 applies is arguable, but delay destroys the case for urgency long before any technical point does.
• Filing in the High Court in a domestic arbitration seated in Madhya Pradesh, then losing weeks to a jurisdictional objection.
• Asking for money rather than security.
• Obtaining an order before commencement and letting the 90 day period in Section 9(2) run out.
• Going to court after the tribunal is in place without explaining why Section 17 would not work.
• Pleading dissipation in general terms, with no document behind it.

We act in Section 9 and Section 17 applications and in the arbitrations that follow, and we advise on the same questions from the enforcement side in commercial and contractual disputes. The pattern worth remembering is simple. Interim relief is won on evidence gathered before the application is drafted, and the time to gather it is the week the counterparty starts behaving oddly. This work sits within our litigation and arbitration practice in Jabalpur.

This article is general information on Indian arbitration law and not legal advice on any specific dispute. Whether Section 9 or Section 17 is the right route, and what a court will secure, depends on your contract, the seat and the evidence available. To discuss your own facts, write to us through the contact page.