SECTION 17 OF ARBITRATION AND CONCILIATION ACT

INTRODUCTION
The Arbitration and Conciliation Act, 1996 (1996 Act) contains provision relating to interim
measures ordered by an arbitral tribunal under Section 17. Formerly, there was no such
provision in the Arbitration Act, 1940 and the said provisions of Section 17 have been
inserted in the 1996 Act. However, analogous provisions in UNCITRAL Model Law (Model
Law) are contained in Article 17 and UNCITRAL Arbitration Rules analogous provision is
contained in Article 26.

Background

According to the 1996 Act, under Section 17 the arbitral tribunal could, at the request of any
party, pass interim measures for protection as it may ponder necessary in respect of the
subject matter of the dispute. It was indeed development and a revamped version from the
1940 Act where a similar power like the above was not conferred on the arbitral tribunal.
However, even this provision had its shortcomings.

The 2015 Amendment brought about the much-needed changes to Section 17 with respect to
the grant of interim reliefs and the various kinds of the reliefs that can be granted by the
arbitral tribunal keeping the section at par with Section 9 where the Court has been
empowered to grant interim reliefs. It also introduced that any order issued by the arbitral
tribunal under this section shall be deemed to be an order of the Court for all purposes and
shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were
an order of the Court. Section 17 is reproduced under for a bare perusal:

“17. (1) A party may, during the arbitral proceedings or at any time after the making of the
arbitral award but before it is enforced in accordance with section 36, apply to the arbitral
tribunal —

 for the appointment of a guardian for a minor or person of unsound mind for the
purposes of arbitral proceedings; or

 for an interim measure of protection in respect of any of the following matters,

namely —

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-
matter of the dispute in arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter upon any land or building in
the possession of any party, or authorising any samples to be taken, or any observation to be
made, or experiment to be tried, which may be necessary or expedient for the purpose of
obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just
and convenient,

and the arbitral tribunal shall have the same power for making orders, as the court has for the
purpose of, and in relation to, any proceedings before it.”

(2) Subject to any orders passed in an appeal under section 37, any order issued by the
arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes
and shall be enforceable under the Code of Civil Procedure, 1908, in the same manner as if it
were an order of the Court.”

The 2019 Amendment amended this Section by omitting “or at any time after the making of
the arbitral award but before it is enforced in accordance with Section 36” from subsection
(1) which means that all interim measures after the declaration of an award but prior to its
enforcement will be dealt under Section 9 by the concerned Court. This amendment has
evidently succeeded in clearing the inconsistency of which authority (Tribunal or Court) is to
be approached once an arbitral award has been passed by a tribunal and before it is enforced
by one of the parties to the Arbitration.

Scope and applicability

Once an arbitral tribunal has been constituted, the court will not sustain any application for
interim relief unless it comes to the conclusion that the remedies under Section 17 are
rendered inefficacious due to any particular circumstances.

In order to consider interim measures, the arbitral tribunal has to consider whether the
claimant has laid out a prima facie case or not, that he would be able to succeed finally in
arbitration proceedings and if they were able to present a case for the grant of interim
measures.

Section 17 hereby provides for taking such interim measures of protections as the arbitral
tribunal may deem necessary. The arbitral tribunal is also further authorized to direct a party
to provide appropriate security with a measure which is ordered. It is pertinent to note that
such order can be granted only on a formal application by a party and not suo motto.

While comparing this section under the 1996 Act to Section 9, the arbitral tribunal has limited
powers of granting interim measures pertaining only to the subject matter of the dispute. An
arbitral tribunal is not a court of law and therefore its orders and functions are not judicial in
nature.

The jurisdiction of the arbitrator is confined to the arbitration agreement between the parties.
An arbitrator under this section can only pass orders which may be a subject matter of
reference. The arbitral tribunal can therefore not exercise its power ex debito justi tiae.

However, immense progress has been made through amendments over the years, more
specifically through the amendment carried out in 2015 to broaden the scope and
applicability of the arbitral tribunal for granting interim relief as mentioned above.

Progress in scope and applicability:

 The Arbitration Act of 1940 did not confer any specific power on the arbitrators to
pass any interim directions against a party unless it was done with the consent of the
parties to the arbitration.

 From a bare perusal of Section 17 of the 1996 Act, we learn that the powers of an
arbitrator were limited as they could not pass any order which goes beyond the scope
and reference of the arbitration agreement and the same must be addressed only to a
party to the arbitration. Neither any power was conferred to enforce its orders nor any
judicial enforcement of the award were provided back then.

 Under the 2015 Amendment, the parties to the arbitration agreement can exclude the
exercise of the tribunal’s power and on the other hand, while passing an order the
tribunal may require any party to provide appropriate security with a measure of
protection. The arbitral tribunal also has the power to pass any order under this
 section till the award by it in the arbitral proceeding is not put forth for execution
before the Hon’ble Court.

 According to the latest amendment to Section 17 in 2019, a party can only apply for
interim measures during the arbitral proceedings and not after making of the arbitral
award.

Thus, it is evident that the scope and applicability of arbitral tribunals to arbitration
agreements has been widened as compared to the 1996 Act.

Enforceability of interim measures granted by arbitral tribunal

Under Section 17 of the 1996 Act, the arbitral tribunal was granted the power to issue interim
measures during ongoing arbitral proceedings at the request of a party but the power was not
as wide as provided to the Hon’ble Courts under section 9. A major flaw in this section was
that the arbitral tribunal was granted the power to pass an order but was neither given the
power under legislature to enforce its own orders nor issue any orders against third parties or
even hear ex-parte applications. Adding to the same, such powers could also be excluded by
an agreement between parties. This made the parties hesitant to file an application asking for
interim measures before an arbitral tribunal.

The amendment in 2015 brought significant changes to the wordings of Section 17. The
arbitral tribunal now possesses the power to grant all interim measures similar to that which
the Hon’ble Courts have the power to grant under Section 9 of the Arbitration Act. It also
specified under sub section (2) (as read earlier) that the orders granted shall be enforceable as
if they were an order of the Court. Foregoing the statutory recognition provided herein, the
Supreme Court in Alka Chandewar v. Shamshul Ishwar Khan took the view that “any party
found in non-compliance with the orders of the arbitral tribunal shall be tried under
Contempt Of Court Act 1971”.

The brief facts of this case are as follows:

1. The Sole Arbitrator had passed an interim order dated 7th October 2010 under Section
17 of the 1996 Act that the Respondent must not dispose of any flats without the leave
of the Arbitral Tribunal.
 2. On 5th May 2014, the Tribunal referred to the contempt of its aforementioned interim
order to the High Court and requested the Hon’ble Court to pass necessary orders
under Section 27(5) of the 1996 Act.

3. However, the Hon’ble High Court opined that Section 27(5) does not in any manner
empower an Arbitral Tribunal to make representations for contempt of any of its
interim orders unless the subject relates to taking evidence.

The issue before the Hon’ble Supreme Court:

 Whether any sort of non-compliance of an interim order or any directions given by an

Arbitral Tribunal comes under the scope/ ambit of Section 27(5) of the 1996 Act or
not.

The Judgment passed by the Supreme Court:

 The Hon’ble Supreme Court while interpreting Section 27(5) held that the said section
is not confined to a person being held for contempt for failing to follow due procedure
for taking evidence.

 The Section specifically states a person guilty “of any contempt to the Arbitral
Tribunal during the conduct of Arbitral Proceedings” will be subject to contempt
proceedings.

 Relying on M/s Ambalal Sarabhai Enterprises vs. M/s Amrit Lal & Co. & Anr the SC
held that if the parties to an arbitral proceeding were given a choice to choose
between applying for interim reliefs under Section 9 or 17, then Section 17 would
remain a dead letter as all parties would go to court if any order under Section 9
would be unactionable.

 It was therefore iterated by the Supreme Court that subsection (2) of Section 17 was
added through the 2015 Amendment so that the burdensome procedure of an arbitral
tribunal to apply to the High Court for contempt of its orders was done away with.

 The Supreme Court further held that such arbitral tribunals’ orders would be deemed
to be orders of the Court for all purposes and would be enforced under the Civil
Procedure Code, 1908 in the same manner as if they were orders of the Court.
Principles governing exercise of powers under Section 17 of the Act

Section 9 of the Act allows a party to seek interim measures from the court before the
invocation of arbitration, during the pendency or at any time after the award is passed, but
before it is enforced in accordance with Section 36 of the Act. Similarly, Section 17 of the
Act contains similar provisions for seeking interim reliefs before an arbitral tribunal during
the pendency of arbitral proceedings. Further, Section 19 of the Act provides that the arbitral
tribunal is not bound by the CPC, which is primarily to allow an arbitral tribunal certain
flexibility in its operation. However, the principles governing the grant of injunctions,
appointments of receiver etc. are a part of the substantive law of the country. By virtue of
Section 28(1)(a) of the Act, the tribunal is bound to decide in accordance with the substantive
law of India for the time being in force. The various types of reliefs under Section 17 of the
Act and the interplay of provisions of the CPC have been in enunciated by MHC in Flywheel
Logistics Solutions Pvt. Ltd. vs. Hinduja Leyland Finance Ltd. & Ors. (supra) and are
discussed herein below:

i. Interim injunctions– The principles governing grant of interim injunctions are no

longer res integra. The SCI in Dorab Cawasji Warden vs. Coomi Sorab Warden &
Ors7 has set out the general guidelines for granting interim injunctions:

a. The plaintiff has a strong case for trial. That is, it shall be of a higher standard
than a prima facie case that is normally required for a prohibition injunction.

b. It is necessary to prevent irreparable or serious injury which normally cannot

be compensated in terms of money.

c. The balance of convenience is in favour of the one seeking such relief.

The MHC observed that these principles are law under Article 141 of the Indian constitution
and the arbitral tribunal as well as the courts would be duty bound to follow them in letter and
spirit.

ii. Appointment of Receivers- The SCI in Parmanand Patel vs. Sudha A.

Chowgule8 held that a receiver will be appointed under Order XL Rule 1 of the CPC
when the applicant establishes a prima facie case and presents a case which would not
only show the adverse and conflicted claims of property but also an emergency,
danger or loss demanding an immediate action. The element of danger is an important
 consideration. A receiver would not be appointed unless a case has been made out
which may deprive the defendant of a de facto possession. For the said purpose,
conduct of the parties would also be relevant. The SCI in Dev Prakash and Ors. vs.
Indra and Ors,9 held that the very purpose of a temporary injunction and receivership
is to protect the property from acts of waste, damage and alienation during the
pendency of the suit. The SCI in Adhunik Steels Ltd. vs. Orissa Manganese and
Minerals Pvt. Ltd.10 has settled the law that the appointment of a receiver in exercise
of powers under Section 9 of the Act can be done only if the case is brought within
the accepted principles under the CPC. Similarly, the MHC in Flywheel
Logistics (supra) noted that the above would be applicable to arbitral tribunals under
Section 17 of the Act.

iii. Power to order sale of property - Section 9(1)(ii)(a) of the Act empowers the court to
order the sale of the goods which are the subject matter of an agreement. An identical
power is available to the arbitral tribunal under Section 17(1)(ii)(a). In L & T Finance
Ltd. vs. G.G. Granites11 the MHC observed that these powers are akin to those
granted under Order XXXIX Rule 6 of the CPC, and that the principles laid down
therein must guide the exercise of power under Section 9. A fortiori, post the 2015
Amendment Act, these observations would apply equally to arbitral tribunals under
Section 17 of the Act.

iv. Orders directing furnishing of security - The power under Section 9(1)(ii)(b) and
Section 17(1)(ii)(b) of the Act is analogous to power under Order XXXVIII Rule 5 of
the CPC. The applicability of the provisions of the CPC to an application to furnish
security under Section 9(1)(ii)(b) is no longer res-integra. Recently, the High Court of
Delhi in Pearl Hospitality & Events Pvt. Ltd. vs. OYO Hotels and Homes Pvt.
Ltd12 noted that the principles governing Order XXXVIII Rule 5 would, generally, be
applicable, while considering a prayer for furnishing of security, under Section
9(1)(ii)(b) or Section 17(1)(ii)(b). The principle, enunciated by the SCI in Raman
Tech & Process Engineering Co. & Ors. vs. Solanki Traders13 that, before being
entitled to a relief by way of furnishing of security of the amount in dispute in the
arbitration, the petitioner has to satisfy the court that the respondent is attempting to
remove, or dispose of its assets, with the intention of defeating the decree that may be
passed, has, generally, been regarded as a guiding factor.
Conclusion

The 2015 Amendment has brought far reaching changes to the Arbitration Act and
Conciliation Act 1996. Section 17 of the Act now gives power to the arbitral tribunal to grant
interim measures and also enforce the said orders under Section 17(2).

There are also certain drawbacks which cannot be ignored. As mentioned above, even though
the arbitral tribunal has been given the power to enforce their orders, the Act is vague on the
procedure which pertains to instances where a party to the arbitration refuses or does not
comply with the order voluntarily. The same issue when referred to the Supreme Court, it
was asserted that the non- complying party would be tried under Contempt of Court Act
1971. This in turn takes us back to the same door which allows judicial intervention. It is
pertinent to mention that the whole purpose of the Arbitration Act is to curb excessive
judicial interference and to relieve the judiciary of its excessive workload. Nonetheless, the
law commission has been taking steps in order to develop our Act and get closer to achieving
its objectives for the Arbitration Act.

M/s. Shakti International Private Limited VS M/s. Excel Metal Processors Private
Limited

The Bombay High Court has held that an arbitral tribunal does not have the power to appoint
the court receiver of the high court as a receiver under Section 17 of the Arbitration and
Conciliation (Amended) Act.

Justice SJ Kathawalla pronounced the order on March 16 following a court receiver’s report
seeking directions as to “whether the Registry should accept the matters wherein the Arbitral
Tribunal appoints the Court Receiver, High Court, Bombay, as a Receiver for execution of
orders passed by it etc.”

This query on part of the court receiver arose after an arbitral tribunal appointed the court
receiver as receiver of certain goods in a dispute between M/s Shakti International Pvt. Ltd.
(claimant) and M/s Excel Processors Pvt Ltd (respondent), on an application of the claimant
under Section 17 of the Arbitration and Conciliation Act.

The tribunal had passed the order on December 27, 2016.

Sharan Jagtiani, who appeared for the court receiver in the matter, argued that an arbitral
tribunal has no power to appoint the court receiver as a receiver when passing an interim
order under Section 17 of the amended Act. He submitted that court receiver, as an employee
of the High Court of Judicature at Bombay, is subject to the supervision of the chief justice of
Bombay HC (or a Judge designated by the CJ).

Therefore, no arbitral tribunal can exercise any power of appointment, which amounts to
supervision and control over the court receiver, Jagtiani said.

Senior advocate JP Sen appeared for the original claimant on whose application the tribunal
passed the order.

Sen argued that a proper interpretation of Section 17 of the amended Act was that there is “no
fetter or restriction on the power of the arbitrator to appoint any person whom the arbitrator
deems fit to act as a receiver under Section 17(1)(d) of the amended Act”.

After considering previous view held by the high court in some cases, the court
observed: “From a reading and consideration of the above Judgments, I am of the view that
it has been clearly held that the Court Receiver, High Court, Bombay, is an employee or a
Department of the Bombay High Court and that it is this Court that has the powers to direct
its duties and responsibilities.

I am of the view that an arbitral tribunal cannot appoint the Court Receiver, High Court,
Bombay, to act as a Receiver, under Section 17 of the Amended Act.”

Interpreting Section 17 of the amended Arbitration and Conciliation Act, 1996, the court held
that the said provision, “does not mean that the arbitral tribunal is itself a Court, or in this
case, the High Court, Bombay”.

It also noted that the office of the court receiver, High Court, Bombay, has a total working
strength of 83 members (Class I to IV), working in different sections.

Of them, only the court receiver, the officer on special duty and the 1st and 2nd assistant to
the court receiver, are the officers who usually attend to matters in court.

The total number of pending matters as on December 31, 2016, is 6 683. There are 2 206
movable properties and 1 014 immovable properties that are presently custodia legis.

Thus, the court observed: “The Office of the Court Receiver, High Court, Bombay, already
has its hands full in fulfilling its present commitments. If it were appointed to act as a
Receiver in arbitrations, there would be no room for supervising such appointments by this
Court and such Officers would be answerable only to the arbitral tribunals.

Notwithstanding width of power for making interim orders, the arbitral tribunal has its
limitation as it is not a Court and that there are some matters or functions, which can only be
done by the Court.”