Power of arbitral tribunal to modify its interim orders

Posted On - 5 September, 2022 • By - Renjith Nair

The parties to arbitration have limited remedies under the appeal provision against the orders of the arbitral tribunal. While the Arbitration and Conciliation Act, 1996 (Act) contemplates appeal from interim orders of the arbitral tribunal to courts, such orders cannot be reviewed or recalled by the arbitral tribunal itself. This brings one to the question of whether an arbitral tribunal possesses the jurisdiction to modify an interim order passed by it previously. In the recent case of Airports Authority of India v. TDI International Limited (Airports Authority Case), the Delhi High Court had the opportunity to consider and throw light on this issue. In this article, we discuss the judgment of the Delhi High Court.

Facts of the case

TDI International Limited (TDI) was declared as the successful bidder by the Airports Authority of India (AAI) with respect to a tender for advertisement rights at certain sites at Kolkata airport. Accordingly, AAI and TDI entered into a license agreement. Certain disputes arose between the parties and TDI invoked arbitration in 2013. During the arbitral proceedings, TDI sought interim reliefs from the arbitral tribunal that it should be allowed to participate in future tenders that may be floated by AAI. In 2015, the arbitral tribunal passed an order (2015 Order) allowing the interim relief, subject to TDI depositing certain bank guarantees to AAI.

Accordingly, TDI deposited the required bank guarantees with AAI and thereby became eligible to participate in future tenders. However, between 2015 to 2022, TDI never took benefit of the 2015 Order and did not participate in any tender process. In 2022, while the arbitration proceedings were still underway, TDI filed another application before the arbitral tribunal seeking modification of the 2015 Order to permit TDI to withdraw its bank guarantees that it had deposited in compliance with the 2015 Order. The arbitral tribunal, noting that TDI had neither participated in any of the tenders nor intended to do so in the future, held that such change in circumstances warrant modification of its 2015 Order and allowed TDI to withdraw its bank guarantees. This order of the arbitral tribunal (Modification Order) was challenged by AAI before the Delhi High Court.

Ruling of the Delhi High Court

The Delhi High Court noted that the purpose of the bank guarantees was to ensure that while TDI can participate in subsequent tenders, the rights of AAI are also protected during the pendency of arbitration proceedings. But, as TDI did not participate nor intends to participate in such tenders, maintaining the bank guarantees would no longer serve the purpose of the 2015 Order. The Court agreed that directing TDI to maintain the bank guarantees would cause undue financial hardships.

The Delhi High Court referred to the Code of Civil Procedure, 1908 (CPC) which is the procedural law related to the administration of civil proceedings in India. Although arbitral tribunals are not strictly bound by the provisions of CPC, yet the settled principles of CPC such as rules for appreciation of evidence, passing of an order based upon material/ evidence placed by the parties, etc., are considered in arbitration. The Delhi High Court noted that under the CPC, a court is empowered to vary or set aside an order on an application made by a party, where such variation or setting aside of the order has been necessitated by a change in circumstances or because the court is satisfied that the order has caused undue hardship to a party. The High Court further elaborated that change in circumstances and undue financial hardships are grounds for ‘modification’ of an interim order, and such modification would not amount to ‘review’. For such reasons, the High Court upheld the Modification Order, agreeing that TDI had shown sufficient cause to warrant a modification of the 2015 Order.

Our thoughts

The procedure adopted by an arbitral tribunal while conducting an arbitration is usually the procedure agreed between the parties. In the absence of such an agreed procedure, the provisions of the Act are applicable. Being a complete code, the Act stipulates that the tribunal shall not be bound by the rules of CPC. It has been held by the Bombay High Court in Maharashtra State Electricity Board v. Data Switchgear Ltd. that the provisions of the Act do not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying the Civil Procedure Code or Evidence Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of observing the provisions of the Code and the law relating to evidence with all its rigour. Therefore, in the present case, the application of CPC by the arbitral tribunal is in consonance with the precedents of the courts in India. Moreover, the application of CPC to resolve procedural formalities that are not provided under the Act ensures that the parties have a suitable remedy.

In our view, Delhi High Court’s order upholding the Modification Order is a welcome one especially given the change in circumstances of the present case. The Delhi High Court has also categorically held that though the arbitral tribunal does not have the power of substantive review of its previous order, it does have the power to vacate or modify the conditions of its previous order if the change in circumstances so warrant or causes undue hardships to the party seeking such modification.

Authors: Renjith Nair, Altamash Qureshi and Richa Phulwani 

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