Business Dispute With an Arbitration Clause in Gurugram? How to Get Urgent Court Protection Under Section 9

Many business agreements, vendor contracts, partnership deeds and builder agreements in Gurugram contain an arbitration clause. When a dispute arises, people often assume that this clause means they cannot go to court at all, and that nothing can be done until an arbitrator is appointed, which can take weeks or months. Meanwhile, the other side may be selling off stock, withdrawing money from accounts, transferring property or encashing a bank guarantee.

The law anticipates exactly this problem. Section 9 of the Arbitration and Conciliation Act, 1996 allows a party to an arbitration agreement to approach a court for urgent interim protection, even before arbitration has begun. This article explains how that works.

What Section 9 allows

Under Section 9, a party may apply to the court for interim measures before arbitral proceedings start, during the proceedings, or after the award is made but before it is enforced. The court can grant a wide range of protective orders, including:

• preserving or securing the goods or property that are the subject of the dispute;
• securing the amount in dispute, for example by directing the other side to deposit money or furnish security;
• restraining the other side from selling, transferring or creating third-party rights in property;
• appointing a receiver to take charge of property or a business asset;
• preserving documents, data or other evidence; and
• any other interim measure of protection that appears just and convenient to the court.

In effect, Section 9 does for arbitration what a temporary injunction does in a civil suit. If you are dealing with property specifically, you may also find our article on getting an urgent stay where property is being built on or sold useful.

When is Section 9 typically used?

• A supplier or distributor has stopped performing and is diverting stock or assets.
• A business partner is withdrawing funds or transferring company assets.
• One side threatens to invoke or encash a bank guarantee in a disputed contract.
• A builder or developer is selling units or creating third-party rights in a disputed project.
• Important records, data or machinery may be destroyed or removed before the arbitrator can see them.

Which court do you approach?

For a domestic arbitration, the application is generally filed before the principal civil court of original jurisdiction in the district where the subject matter of the dispute is located or where the cause of action arose, unless the agreement validly fixes a seat elsewhere. Where the dispute is a commercial dispute within the meaning of the Commercial Courts Act, 2015, the application is heard by the designated Commercial Court. For international commercial arbitrations, the application lies before the High Court.

The seat or venue clause in your agreement matters a great deal here. If the contract names a particular city as the seat of arbitration, courts at that place will usually have jurisdiction, and filing elsewhere can lead to the application being returned.

What the court looks at

Courts apply the same broad principles that govern temporary injunctions:

1. Prima facie case: is there a valid arbitration agreement and a serious claim to be decided?
2. Balance of convenience: would refusing protection cause you more harm than granting it would cause the other side?
3. Irreparable injury: would the harm be difficult to undo or compensate later, for instance because assets will be gone by the time the award is made?

Where the claim is for money, the court usually wants to see some material suggesting that the other side may remove or dissipate its assets to defeat a future award. A general apprehension, without facts, is often not enough.

In genuinely urgent situations, the court can pass an ex parte order, that is, without first hearing the other side, and then list the matter for a full hearing.

Time limits you must keep in mind

Start arbitration within 90 days

If the court grants an interim measure before arbitration has begun, Section 9(2) requires that arbitral proceedings be commenced within 90 days of the order, or within such further time as the court may allow. Arbitration ordinarily commences when the other side receives a request to refer the dispute to arbitration (Section 21). Courts have treated this requirement seriously, and a party that sits on its protection without starting arbitration risks having the order vacated.

Once the tribunal is in place, go to the tribunal

After the arbitral tribunal has been constituted, Section 9(3) provides that the court will not ordinarily entertain a Section 9 application unless the remedy before the tribunal under Section 17 would not be efficacious. The tribunal itself has power to grant interim measures, and its orders under Section 17 are enforceable as if they were orders of a court.

Section 9 does not decide the dispute

It is important to understand what a Section 9 order is not. It does not decide who is right. It only preserves the position so that the final award, whichever way it goes, can be effectively enforced. The merits are decided by the arbitrator.

Documents to keep ready

• The agreement containing the arbitration clause, and any later amendments;
• correspondence showing the dispute, including notices sent and received;
• invoices, ledgers, bank statements and payment records;
• evidence of the threatened act, such as messages, advertisements of sale, board resolutions or bank guarantee invocation letters; and
• details of the assets or property you want protected.