POST-AWARD INTERIM RELIEF FOR UNSUCCESSFUL PARTIES: A CRITICAL READING OF HOME CARE RETAIL

[Aishani Agarwal and Amith Mathew Paul are fourth-year student at Gujarat National Law University]

 In the recent case of Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi (“Home Care Retail”) the Supreme Court has handed down a ruling which finally resolved, albeit conclusively, a much debated but practical issue of Indian arbitration law. The issue pertained to whether the unsuccessful party in arbitral proceedings would be able to seek relief under Section 9 of the Arbitration and Conciliation Act, 1996 (“the Act”). In the case in hand, the Supreme Court affirmed, among other things, that the provisions of Section 9 of the Act do not make any distinction between the winning and the losing parties.

The ruling also has ramifications for the unsuccessful party wishing to appeal the arbitral award. An unsuccessful party may face the danger of dissipation of assets relating to the matter before they are able to get their appeal heard, thus rendering any successful appeal to be of no value. By confirming that Section 9 is still available at this point in time, the judgment ensures that the possibility of effectively challenging an arbitral award is not lost due to the passage of time caused by procedural attrition. However, the judgment has some inherent contradictions and flawed reasoning, which is are examined by this article.

Factual Background

Whether the aggrieved party can avail of the relief of interim measure even at the post-award stage had given rise to an irreconcilable conflict of views among High Courts over the years. The Bombay High Court in Dirk India Pvt. Ltd. v. Maharashtra State Electricity Generation Co. Ltd. (“Dirk India”) provided the prevailing view. They opined that the interim measure after award is to safeguard the “fruits of arbitral proceedings” and therefore any party who has not obtained the award cannot invoke Section 9. The Delhi, Madras, and Karnataka High Courts adopted a similar stance. The Telangana, Gujarat, and Punjab & Haryana High Courts dissented. According to them, Section 9 does not specify any limitation or restriction on a party availing of the relief after the award and since the section makes a mention of "a party" without any qualification, any party with an apprehension of injury or dissipation could avail of it.

An Analysis of SC’s Ruling

The Court held that section 9 authorises courts to protect the “subject matter of the arbitration” and the “amount in dispute”, expressions that are broader than protecting the “fruits of an arbitral award”. Further, the court dismissed the submission that the phrase “a party” in Section 9 should only include the successful party and not the losing party, holding that Section 2(h) defines “party” simply as “a party to an arbitration agreement” and does not distinguish between a successful and unsuccessful party in this context and that courts cannot read such a limitation into clear statutory language. That approach is consistent with Firm Ashok Traders v. Gurumukh Das Saluja, where the Supreme Court explained that the qualification for invoking Section 9 is being a party to an arbitration agreement. However, the Court's commitment to textual fidelity is less consistent than it appears. Having refused to read a limitation into Section 9 on the ground that no such limitation appears in the statute, the Court proceeds to introduce a higher threshold for unsuccessful parties: a standard that is equally absent from the text of Section 9.

The rationale underlying the higher threshold is understandable. It ensures that the award holders expectations are met, rejections of frivolous applications are in place and the finality of the award is preserved. Nevertheless, these arguments do not provide doctrinal clarity. Consequently, while the objective of filtering frivolous claims is legitimate, the absence of defined parameters risks producing inconsistent judicial outcomes and uncertainty for commercial parties.

As observed by the court, in the cases MCD Vs. Gurnam Kaur and State of U.P. Vs. Synthetics & Chemicals Ltd, it is opined that courts can interpret the law, and not alter the law. The court cannot add words to a statute or read words which are not there in it. Even if there is a defect or an omission in the statute, the court cannot correct the defect or supply the omission. Having different thresholds for successful and unsuccessful party does seem to amount to altering the law. Such a distinction finds no place in statutory law, rather, it creates no difference between any party. Creating a new threshold also appears to be reading words which are not there.

There is consistent reassurance in the judgement that unsuccessful parties to litigation will get interim protection and only be granted if they meet exceptional circumstances, however the judgement does not provide a basis for the identification of what are these “rare and compelling” circumstances. This is the Court's own formulation (see para 60); it appears nowhere in the text of Section 9 or elsewhere in the Act. The court mandates that the tripartite conditions (prima facie case, balance of convenience, and likelihood of irreparable harm or injury) that apply to any party seeking interim relief should be applied, and also says that the same three factors be satisfied to some unspecified, elevated degree, yet provides no metric for measuring when that degree is reached. Even if it is argued that all three conditions can be answered objectively, the “rare and compelling” standard demands a further evaluative judgment that is left entirely to judicial intuition, rendering it subjective.

While the Bombay High Court in ONGC v. Larsen & Toubro Ltd (“Larsen &Toubro”) and ONGC v. Swiber Offshore Construction Pte. Ltd. (“Swiber Offshore”) relied on Home Care Retail, the two decisions reached opposite outcomes on similar facts. In Larsen & Toubro, the Court found the case “rare and compelling” because the bank guarantee formed the subject matter of the dispute and its expiry would irreversibly extinguish ONGC's security pending the Section 34 challenge. Conversely, in Swiber Offshore, the Court refused relief, holding that the parties consent terms limiting the guarantee's duration and ONGC's delay outweighed concerns arising from Swiber's liquidation. This make the interpretation highly unpredictable.

The judgment further explains the connection among Sections 9, 34 and 36. It found that each section serves a different purpose; Section 34 relates to objections to the arbitral award, Section 36 its execution and Section 9 the maintenance of the subject-matter during legal proceedings.  In reaching this conclusion, the Court relied on the Constitution Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (“Gayatri Balasamy”), observing that the recognised power to modify arbitral awards under section 34 undermines the premise in Dirk India that challenge proceedings can only result in an award being upheld or set aside. Gayatri Balasamy recognised the ability to only modify for very narrowly defined circumstances: pursuant to the severability of valid/invalid portions; as a correction of clerical or computational error; and through the post-award modification provisions. Situations where the arbitral award is modified to change the party from a losing party to a winning party will be rare, and using this power to justify a general rule regarding access to section 9 relief is inadequately justified in the judgement.

This article does not dispute the right of an unsuccessful party to seek post-award interim relief under Section 9. Rather, it points to the inconsistencies of the reasoning adopted by the Court. Instead of imposing another higher threshold, the Court could have provided safeguards such as an assessment of proportionality weighing the prejudice to both parties; confining the relief to the measures strictly necessary to maintain the subject matter of the dispute or, where appropriate, requiring the applicant to provide security or an undertaking as to damages. These safeguards would have reduced uncertainty and maintained the proper balance between an efficient Section 34 proceeding and finality of the award.

Additionally, tThe Supreme Court rightly rejects the interpretation of Dirk India, however, it does not answer whether the commercial objective of finality is diluted. The law of arbitration is not merely procedural but is intended to streamline dispute resolution by passing binding and final orders.. The recent case of Madhya Pradesh Road Development Corporation Ltd. v. M/s Jabalpur Corridor Pvt. Ltd, also reaffirms the judicial commitment to respect the finality of the award and it discourages repeated challenges to the same award. It is important for the court to deal with this issue adequately.

Implications of the Judgment

Home Care Retail redistributes procedural leverage post-award, altering not just the remedies available to the parties but also the strategic and commercial considerations that inform arbitration practice.

Prior to Home Care Retail, the unsuccessful party's post-award remedies were largely confined to proceedings under Sections 34 and 36. The procedural sequence was relatively linear. Now, an unsuccessful party may seek interim protection immediately after the award in order to preserve the subject matter of the dispute or prevent the dissipation of assets while challenge proceedings are pursued. Consequently, post-award litigation is no longer confined to challenge and enforcement proceedings but may increasingly follow the sequence of: Award → Section 9 → Section 34 → Section 36 → Section 37. Since orders granting or refusing interim measures under Section 9 can be appealed under Section 37(1)(b), the judgment is also likely to generate an additional appellate layer within the post-award process. Section 9 petitions can also be used as tactical measures to freeze assets, increase the costs incurred in connection or delay the appeal with any post-award litigation.

The availability of interim protection may diminish the incentive to negotiate an early settlement, as parties have greater scope to prolong the dispute and preserve their bargaining position pending the outcome of challenge proceedings, especially if the “rare and compelling” standard is applied liberally. Even where Section 9 applications ultimately fail, the prospect of additional litigation may increase costs, delay enforcement and strengthen the negotiating leverage of the unsuccessful party. Conversely, it may encourage settlement by ensuring that negotiations occur on a relatively equal footing.

The broader impact of Home Care Retail lies will be on its potential effect on India's position as an arbitral seat. For some parties, it will make India a more appealing arbitration seat because there is greater security from the time that an asset is removed until the time that an arbitration award is issued, especially in high-value disputes. However, for others, this decision could also result in more opportunities for post-award litigation and, thus, less procedural certainty.

Conclusion

Home Care Retail has rightly resolved the question of whether unsuccessful parties can avail of Section 9. However, by implementing a higher threshold for establishing a case under Section 9, the ruling does not provide clarity about key issues, and how this standard will be interpreted and implemented in future cases will determine its viability.