In this short post, we give an overview of two recent developments in Indian Arbitration.
The first one pertains to the doctrine of separability and its application in the context of Section 45 (Power of Judicial Authority to Refer Parties to Arbitration) of the Arbitration and Conciliation Act, 1996 (1996 Act). Mr. Mihir Naniwadekar of the Indian Corporate Law Blog has written a post on the seeming conflict in approaches between the Supreme Court and the Bombay High Court on applying the separability doctrine in relation to the question as to whether the arbitration clause in the agreement that was novated stood extinguished. The issue is not only that of separability but also, and perhaps more importantly, of competenz-competenz- What types of jurisdictional questions pertaining to novation would the Judicial Authority/Designate decide? See the post in Indian Corporate Law blog for further details.
The next development is the case of Embassy Property Developments Limited v. Jumbo World Holdings Limited decided by the Madras High Court on 20 June 2013. The case is interesting because it deals in detail with the availability of interim measures under Section 9 against third parties. The availability of interim measures against third parties is a topic of great interest with there emerging a bit of clarity on the law. Read the posts that appeared in the Lex Arbitri Blog and this blog (series of posts) and also read this paper on the topic.
Now, coming back to the Embassy Property case, the Division Bench of the Madras High Court held that interim measures could be ordered even against third parties to the arbitration agreement under Section 9 of the 1996 Act. On the contours of such power, the court held:
"We are of the view that the power of this court, under Section 9 of the Arbitration and Conciliation Act, 1996, is wide in scope and it would extend even to third parties in whom the properties or goods are vested, even though such parties may not be a party to the arbitration clause in an agreement. Even though section 9 of the Arbitration and Conciliation Act, 1996, could be invoked only by a party to the arbitration agreement, the interim relief could be granted by this court even against the third parties. Unless such a power is available, under section 9 of the Arbitration and Conciliation act, 1996, the parties to the arbitral agreement could be frustrated even if they succeed in the arbitral proceedings before the Arbitration Tribunal concerned."
As the emphasised words clearly suggest, the High Court held that where the goods/ properties that pertain to the arbitration, interim measures would be available against third parties who claim/ enjoy rights relating to such goods/ properties.
The court also observed that since Section 9 aims at preserving and protecting the subject matter of the arbitration, relief would be available even if the subject matter is in the hands of third parties. As long as a nexus is available between the subject matter and the parties to the arbitration agreement, the court could order interim measures even against third parties.