Section 9 Arbitration Act will apply to foreign arbitration unless arbitration agreement expressly excludes its application: Calcutta High Court

The Calcutta High Court on Tuesday ruled that choosing foreign law to govern arbitration would not, by itself, exclude the application of Section 9 of the Arbitration Act, which allows parties to approach Indian courts for interim protection or reliefs (Medima LLC v. Balasore Alloys Limited.)..Justice Moushumi Bhattacharya passed the order after perusing Sections 9 and 2(2) of the Arbitration and Conciliation Act, 1996. .The proviso to Section 2(2) lays down, inter alia, that Section 9 under Part I of the Act, which ordinarily applies if the place of arbitration is in India, would also apply to international commercial arbitration, even if the place of arbitration is outside India, unless there is "an agreement to the contrary.".On Tuesday, the Court concluded that the "agreement to the contrary" mentioned in Section 2 (2) must be express and not implied. In other words, unless an arbitration agreement clearly and expressly excludes the application of Section 9, the provision would apply to foreign seated arbitration as well, the Court said. .The phrase "agreement to the contrary" in Section 2(2) of the Arbitration Act means that the "the contracting parties must evince and articulate an intention not to subject the arbitration agreement to the application of section 9 of the Act", the Court explained.."Simply put, there must be something more to an arbitration agreement governed by a foreign law and with a foreign seat; the agreement must indicate in clear and express terms that the parties intend to exclude the operation of section 9 from the purview of the said arbitration agreement (underlined for emphasis). Hence, an arbitration agreement which merely chooses the law governing the underlying agreement, the arbitration and the conduct thereof without anything more cannot be seen as excluding the application of Section 9 by implication and closing the gates to Section 9 or the scope of the proviso to 2(2) of the Act", the order stated..In this regard, the Court rejected the argument that the omission of the word "express" in the proviso to Section 2(2) would mean that Section 9 can be impliedly excluded from international arbitration. ."The argument that the deletion of the word ‘express’ in relation to ‘agreement to the contrary’, as recommended by the Law Commission to the proviso to 2(2) would indicate that an implied agreement is included in the proviso has to be seen through the same prism as the other sections of the Act which contemplate an agreement by the parties. In other words, dropping the word ‘express’ in the final cut means little; the structure of the proviso as it exists today is that there must be a clear, unequivocal and unambiguous articulation by the parties to exclude the application of section 9 from the arbitration which is to take place outside India," the Court observed. .The ruling was passed on a petition moved by Medima LLC which had secured an arbitration award in its favour in a dispute with Balasore Alloys Limited..The award was passed by the International Chamber of Commerce (ICC) in proceedings governed by British law with the seat of arbitration in London, United Kingdom. Having secured the award running to about Rs 22.08 crores, Medima moved an application under Section 9 seeking protective orders to secure the dues payable by Balasore Alloys. .Ballasore Alloys contested the maintainability of the plea on the ground that the applicability of Section 9 was excluded since the parties were governed by English law and since the arbitration took place before the ICC. .In this regard, Balasore Alloys also relied on Clause 23 of the agreement (dealing with the law governing the parties i.e. English law) to contend that it would reflect the exclusion of Section 9 or Indian law for that matter..Any recourse taken by either of the parties in respect of the award must necessarily be before the courts in England or before the ICC, Ballasore Alloys contended..An additional contention raised was that Section 9 does not entail grant of interim reliefs after the award is made or post-award in a foreign arbitration. Balasore Alloys argued that relief under Section 9 can be given before, during or after the arbitration only in relation to domestic awards..The Court, however, disagreed with Balasore Alloys, as detailed above. .As far as the additional contention regarding whether Section 9 would apply post-award in foreign arbitration, the Court observed that Section 2(2) involves the use of the words "an arbitral award made or to be made". This, coupled with the proviso to the Section makes it clear that Section 9 would apply in the post-award scenario as well, the Court said. .The Court added:"There is every chance that an award-holder of an arbitration which took place outside India would be rendered remediless if prompt and effective interim measures are not granted to the award-holder in the interregnum in relation to the assets of the award-debtor which are located in India. In other words, if suitable interim measures are not granted to a foreign award-holder and the award is made to pass the tests for enforcement under Part II, the award-holder may be denuded of its rights. The Act, together with the amendments, intends to facilitate quick resolution of disputes through alternative means. Hence, asking an award-holder to wait until the award is recognised and enforced is antithetical to the very objective of the Act. The Law Commission in its 246th Report noticed the aforesaid as also the lack of an efficacious remedy in furtherance of the award.".The Judge proceeded to hold that Medima's application for interim protection under Section 9 of the Act in respect of the award of the London-seated arbitration is maintainable. .The matter has been posted next on August 11..Senior advocate SN Mookherji and advocates Shaunak Mitra, Nandini Khaitan, Shreya Singh, Vishal Sinha appeared for Medima. Advocates Rishad Medora, Meghajit Mukherjee and Shivangi Thard appeared for Balasore Alloys..[Read Order]