Authors: Rahul Basantani, Associate
Introduction
The interplay between interim relief and the enforcement of foreign arbitral awards presents a complex jurisdictional puzzle under the Arbitration and Conciliation Act, 1996 (“Act“). Section 9 of the Act permits interim measures after an award is made, yet only before it is enforced in accordance with section 36 This specific caveat embodied in Section 9(1) was written exclusively with domestic awards in mind. However, when the 2015 Amendment extended the applicability of Section 9 to encompass foreign awards, the Parliament left this temporal limitation untouched, thereby creating a legislative ambiguity that Award Debtors have actively exploited. Consider the dilemma of an Award Creditor who prudently files a Part II recognition petition concurrently with a Section 9 petition. The Award Debtor responds with a singular calculated objection, asserting that the very initiation of Part II proceedings ousts and/or closes the door qua the Court’s Section 9 jurisdiction. Should this argument prevail, the Award Creditor is left entirely unprotected/vulnerable in the face of the often-protracted recognition phase. This is precisely the jurisdictional gambit deployed by the Respondent in Osterreichischer Lloyd Seereederei (Cyprus) Ltd. v. Victore Ships Pvt. Ltd.
The Hon’ble Bombay High Court recently provided critical clarity on this issue. The Court delineated the procedural dichotomy between domestic and foreign awards, holding that a Part II petition operates, at its inception, strictly as a petition for recognition rather than execution. It is only upon the Court being satisfied as to the enforceability of the award and rendering a positive declaration to that effect under Section 49 of the Act that, such a petition, though filed as a composite proceeding, stands translated into one for execution. Until that stage, the filing of a Part II petition does not, of its own force, activate the execution machinery. Therefore, it was held that a Section 9 Court’s jurisdiction to grant interim reliefs persists until the foreign award is positively affirmed and conferred the decree status under Section 49 of the Act. The decision turns on a careful comparison of how domestic and foreign awards achieve their respective decree-status, and on the Parliament’s conscious choice to impose no Part II linked time bar when it extended Section 9 to foreign awards.
Factual Conspectus:
The Petitioner, an Austrian-Cypriot maritime entity, held a foreign arbitral award dated 23rd March 2020 for an amount of USD 269,105.08 against the Respondent, Victore Ships Private Limited. In order to secure and realize the award, the Petitioner instituted two parallel proceedings before the Bombay High Court viz., a Section 9 Petition seeking interim protective measures of securing the award amount and a Petition under Sections 48 read with 47, seeking recognition and enforcement of the foreign award.
The Respondent took exception to the said Section 9 Petition on purely jurisdictional grounds, contending inter alia that proceedings under Part II constitute a composite mechanism whereunder recognition and enforcement are rolled into one contiguous proceeding, and that “enforcement” and “execution” are interchangeable in this context. Moreover, it was urged that since a Part II petition is, by its very nature, a composite proceeding that rolls up recognition and enforcement into one, the mere act of filing such a petition partakes the character of initiating execution proceedings, thereby ousting the Section 9 Court’s jurisdiction in the same manner as it would be ousted once execution is set in motion against a domestic award. The risk of conflicting judicial directions from concurrent proceedings was also pressed as an ancillary concern.
The Statutory Puzzle: Section 9, Section 2(2), and the Decree Status Divide
The interpretive tension in this case flows from a structural mismatch within the Act itself. Section 9(1) permits the grant of interim measures at any time after the making of an award but before it is enforced in accordance with section 36. Section 36, a Part I provision which only applies to domestic awards, then provides that upon expiry of the period for challenge under Section 34, or upon rejection of such a challenge, the award becomes enforceable as if it were a decree of the court. In the context of domestic awards this transition occurs automatically upon the foregoing conditions being met and does not require any further judicial determination.
The position under Part II, however, is materially different. When the 2015 Amendment extended the applicability of Section 9 to international commercial arbitrations seated outside India through the proviso to Section 2(2), the temporal language of Section 9 was left undisturbed by the Parliament. The phrase “before it is enforced in accordance with section 36” remained in place, despite Section 36 having no application to foreign awards. The task, then, is identifying the functional equivalent of Section 36 enforcement within the Part II regime, which equivalent can be found under Section 48, provided that it passes through the rigors of Section 47 and is recognized in terms of Section 49.
This distinction is fundamental as a foreign award does not attain decree-status by default or by the efflux of time. The Award Creditor must affirmatively apply for enforcement under Section 47, produce the prescribed evidence, and satisfy the Court that no ground for refusal under Section 48 is made out. Only when the Part II Court is satisfied on all these counts does Section 49 operate to deem the award a decree of the Court. This is a process that requires a positive judicial declaration at every step. Until such determination and/or declaration is made, the award cannot be regarded as having entered the stage of enforcement in the sense contemplated by the Act and consequently, the doorway to apply for Section 9 reliefs remains open until that stage.
This is also precisely why the distinction that the Court drew is worth dwelling upon; a domestic award crystallises into a decree automatically upon the expiration of the challenge period, whereas a foreign award requires an affirmative declaration by the Part II Court. These are not merely different routes to the same destination; they are structurally different processes. Any reading that equates them for purposes of the Section 9 bar grossly misreads the scheme of the Act. A domestic award-creditor is protected by the automatic decree mechanism if a Section 34 challenge fails, however, a Foreign Award Creditor has no such automaticity and is wholly dependent on the Court’s active intervention. Stripping them of Section 9 protection during the recognition phase would leave them uniquely exposed, with no safety net in either forum.
Precedents Examined:
The Respondent’s primary reliance was on Centrient Pharmaceuticals India Pvt. Ltd. v. Hindustan Antibiotics Ltd.1 wherein a Single Judge of the Bombay High Court held that Section 9 proceedings become unavailable once execution of an arbitral award has commenced. The judgment in Centrient however was distinguished on the basis that the Court in Centrient was concerned with a domestic award, wherein the period of challenge under 34 had already elapsed and active steps qua execution of the same had in fact been initiated by the Award Creditor. Neither condition was met in the present case, as the Court was concerned with a foreign award which was still awaiting recognition in terms of Section 49. As such, the ratio in Centrient was never designed to operate in this context and importing it unto the Part II recognition phase stretches the ruling well beyond what it decided.
The observations of the Supreme Court in Fuerst Day Lawson v. Jindal Exports Ltd.2 and LMJ International Ltd. v. Sleepwell Industries Company Ltd.3 viz., that Part II proceedings roll up recognition and enforcement into one composite petition were similarly pressed into service. The Court, however, rightly declined to treat a structural description of Part II’s architecture as laid down by Fuerst and LMJ, as a temporal one. It observed that the decisions in Fuerst and LMJ merely addressed the composite character of Part II proceedings as a matter of procedural architecture and did not stipulate the same to be a temporal trigger for the ouster of interim relief under Section 9 of the Act. The Court further clarified that housing recognition and execution within the same petition does not mean that mere filing of such a petition functions to activate the execution machinery. The execution stage within Part II remains entirely contingent on Court’s determination under Section 49. To say otherwise is to mistake the form of the proceeding for its substance.
The Division Bench judgment in Heligo Charters Private Limited v. Aircon Feibars FZE4 was also of limited assistance. That judgment in Heligo addressed an entirely different conundrum i.e., whether the remedy under Section 9 would be available in aid of a foreign award unless the same had been put into execution/enforcement and not whether such relief would cease to be available upon the filing of a Part II petition. The two questions although related, do not function in a manner where answering one would answer the other.
2. 2019 SCC OnLine Bom 1614.
3. (2001) 6 SCC 356.
4. (2019) 5 SCC 302.
5. 2018 SCC OnLine Bom 1388.
Parliament’s Deliberate Silence
The most instructive aspect of the judgment is its treatment of legislative intent. When the Parliament enacted the 2015 Amendment and extended the applicability of Section 9 to foreign-seated arbitrations, it had a direct occasion to impose a corresponding time bar linking the availability of Section 9 to the initiation of proceedings under Part II. The language in Section 9(1) referencing enforcement in accordance with Section 36 was retained without modification. This legislative choice assumes particular significance when viewed against the structural divergence in the mechanisms by which domestic and foreign awards attain enforceability.
The analogy to Section 9(3) is also instructive on this point. When the Parliament sought to govern the concurrence of jurisdiction of a Section 9 Court vis-à-vis the arbitral tribunal’s jurisdiction under Section 17, it did so in express and precise terms: once a tribunal is constituted, the Section 9 Court shall not entertain an application unless the Section 17 remedy is rendered inefficacious. It is therefore evident that the Parliament knows exactly how to calibrate competing jurisdictions and its silence on any equivalent restriction governing the interplay between Section 9 and Part II proceedings indicates that no such restriction was in fact intended. Further, as the Court rightly observed, under no circumstances can a court read unstated prohibitions into the statute that run contrary to legislative wisdom of the Parliament.
Implications
From a pragmatic viewpoint, the judgment offers clear and welcome guidance. A Section 9 petition and a Part II petition may be filed and pursued in parallel. Section 9 jurisdiction remains alive throughout the recognition phase, until positive judicial affirmation under Section 49 translates the proceeding into that of an execution.
That said, the judgment also leaves one question open for a future court. While the Court indicates that execution proceedings commence upon the award being deemed a decree under Section 49, it does not conclusively determine whether the bar on Section 9 operates immediately upon such declaration or only when the Award Creditor thereafter takes active steps to actually levy execution, as was the position in Centrient. While principled reasoning points toward the former, absent the exact determination of when the Section 9 door closes, it would be prudent to treat the Section 49 declaration as the operative watershed, until a future court says otherwise.
Conclusion
The judgment in Osterreichischer settles, with appropriate clarity, a question left open since the 2015 Amendment. Filing a Part II petition does not sound the death knell for Section 9 jurisdiction. Recognition is not execution, and until a foreign award is clothed with decree-status through the Section 49 process, the Section 9 Court retains full power to protect the award-creditor. The Court’s refusal to read an unstated restriction into the statute, in the face of Parliament’s deliberate and informed silence, is both correct as a matter of construction and essential as a matter of policy. A foreign arbitral award should not become a hostage to the recognition process, and this judgment ensures that it does not.
Rahul Basantani, Associate, Solomon & Co.
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