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District Courts cannot refuse to enforce interim orders passed by an Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act, 1996 (‘Act’), particularly given that such orders have acquired the status of a Court Order following the 2015 amendment to the Act.
Justice GR Swaminathan of the Madras High Court recently passed an order to this effect, observing that,
“Post amendment, any order issued by the Arbitral Tribunal under Section 17(1) of the Act shall be deemed to be an order of the Court for all purposes. It shall be enforceable under the Code of Civil Procedure, in the same manner as if it were an order of the Court...the District Court to which the Arbitrator transmits an interim award should treat it as if it is one from another Court.“
A District Judge in Karur had refused to enforce an arbitral order to attach property for default on payment of loans. In a communication made in September last year, the District Judge had intimated that he would not act on the order, as the Arbitrator is not competent to to pass an order of attachment of properties which are not the subject matter of the arbitration under Section 17 of the Act.
Whereas the Arbitrator sent his reply the following month, no further action was taken thereafter by the District Judge. Therefore, the creditor moved the Madurai Bench of the Madras High Court by way of a civil revision petition.
Appearing for the petitioner, Senior Advocate MS Krishnan argued that the powers of the Arbitral Tribunal to grant interim relief is not less than those of a regular Court under Section 9 of the Act.
Reference was made to sub-clauses (1) (b) and (e) of Section 17, which empowers the Arbitral Tribunal to pass interim orders for securing the amount in dispute and for such other interim measures of protections as may be be just and convenient.
The Court noted that these provisions were inserted with the specific purpose of giving more teeth to the Arbitral Tribunal’s powers to issue interim orders. The same was inserted following recommendations made by in the Law Commission’s 246th report.
Further, sub-section (2) of the Section 17 was also inserted with a view to making the interim orders of the Arbitral Tribunal statutorily enforecable in the same manner as orders of the Court.
Justice Swaminathan also held that Section 17 of the Act should be read along with Section 94 of the Code of Civil Procedure (CPC). It was observed,
“Section 94 of C.P.C., states that in order to prevent the ends of justice from being defeated, the Court, may direct the defendant to furnish the security to produce any property belonging to him and to place the same at the disposal of the Court or order the attachment of any property. The expression used is “any property”. There is no embargo in the Section that only the subject matter of dispute should be attached.
Section 17(1) of Arbitration and Conciliation Act, 1996, should be read along with Section 94 of C.P.C. If so conjunctively read, one can come to the irresistible conclusion that the Arbitral Tribunal too can attach even a property that is not the subject matter of the arbitral proceedings.“
An interim order so passed by the Arbitrator would necessarily be forwarded to the concerned District Judge, since Arbitral Tribunals do not have the power to enforce its orders on its own.
The Court reiterated that the appropriate course of action is to forward the order to the District Court for execution, as per Section 136 of the CPC. Once this is done, the District Court is bound to execute the order. It cannot sit in appeal over the same. As emphasised in its order,
“This Court, therefore, reminds all the District Courts that an interim order issued by the Arbitral Tribunal shall be deemed to be an order of the court. This is for all purposes. It shall be enforceable under CPC in the manner as if it were an order the Court. The expression “for all purposes” is significant.“
Guidelines for execution of an Arbitral Tribunal’s interim orders
The Court has also issued clarificatory directions on how to proceed once an Arbitral Tribunal’s interim order is forwarded to be executed by the District Magistrate. The following observations of the Court are relevant in this regard:
– Whenever the Arbitral Tribunal passes an interim order under Section 17 of the Act, it has to follow the procedure laid down under Section 136 of the CPC
– Once the the District Judge receives such a communication for enforcement in terms of Section 136 of the CPC, he ordinarily forwards the order to the Nazir section for implementation
– The process fees in such cases should be paid by the concerned Advocate (representing the party in whose favour the order was passed) practicing before the District Court
– The counsel who is remitting the process fee in the Nazir section will have to hold Vakalat and he will have to authenticate the genuineness of the interim order transmitted by the Arbitral Tribunal
– There is no necessity to take out an application in the form of an Interim Application before the court
– What is to be performed is a pure ministerial act. No judicial order is warranted from the District Court for implementing the interim order passed by the Arbitral Tribunal under Section 17 of the Act. The District Court cannot sit in appeal over the order passed by the Arbitral Tribunal.
The Court made note of these aspects in view of concerns raised that in the absence of uniform procedure, some Courts would allow execution of such orders whereas others refused to do so.
Read the order: