Interim Arbitral Reliefs in Determinable Contracts

Introduction:

Being preferred as one of the mechanisms for the resolution of commercial disputes, arbitration has been the flexible way-out for the parties to conduct the arbitral proceedings along with numerous safeguards.

Interim measures, in various forms, attempts to be preventive during the pendency of proceedings. To ensure that justice is done, certain interim relief is required to be given to the parties. Though, varying on the facts and circumstances of the dispute, it is of paramount importance to understand the nature of the interim reliefs which can be granted by courts and arbitral tribunals especially in the context of the ‘determinable’ contracts, in the light of this article.

In the course of this article, we will understand each term along with the citations of the cases held.

What is Interim Arbitral Reliefs?

When the parties engaged in deferring the ongoing procedures or prejudice the rights of opposite parties by inter alia dissipating assets or interfering with the functioning of bodies (in case of a company where both parties are stakeholders). In that case, the relief which will be final, granted by the tribunal may be reduced to no effect or meaning unless the court or tribunal is safeguarding the rights of parties during the pendency of arbitral proceedings.

Such that, the party’s right to have the interim reliefs, in the intervening period between the point at which the dispute started till the award is executed to the party. In the backdrop of this, there might be a question springs to our mind; whether who can apply for interim measures? The answer to such a question lies in Section 9 (ii) of the Arbitration & Conciliation Act, 1996 (“Act”).

Section 9 predicates an application for rendering an interim measure of protection after the making of an arbitral award and before it is enforced for securing the property for the benefit of the party which seeks enforcement of the award.

Dealing with the domain of jurisprudence, Possession is 9/10 of the law. Similarly, in the case of Interim Relief’s in the case of Arbitration, both before the National Courts and the Arbitral Tribunal; the above-mentioned quotation holds all the truer as in the 21st Century arena of minimum interference in the Arbitral Process, with the role of the National Courts becoming somewhat lifeless. It is the seeking of interim relief which the National Courts have found themselves circumscribed to in today’s era.

The seeking of Interim Relief in the case of determinable contracts containing an arbitral clause is commonplace, even though the chances of success are limited due to the hurdles in its way placed by the Specific Relief Act 1963 and other allied Legislations.

What are determinable contracts?

This term ‘determinable contracts’ is defined under Clause c to sub-section 1 of Section 14 of the Specific Relief Act, 1963.

In common terms, the word ‘determinable’ means ‘to put an end to’. Here also, the term means the same, as a whole. It comes under Section 14 under the heading of the contracts which cannot be specifically enforced.

Under Clause c to sub-section 1 of Section 14 of the Specific Relief Act, 1963, specific performance is not ordered of a contract which is in its nature determinable.

In the case of Indian Oil Corporation vs Amritsar Gas Service (2013), wherein the Apex Court held that a distributorship agreement which had a clause which entitled either party to terminate the contract with 30 days prior notice and without assigning any reason was ‘determinable’ in nature and could not be specifically enforced.

While analyzing the approach of the National Courts in Section 9 petitions preferred under the Arbitration and Conciliation Act, 1996 in case of determinable contracts through Judgements of the Delhi High Court and Apex Court, we could enumerate them as follows:

• M/S Inter ADS Exhibition Pvt Ltd v/s Busworld International (2012) – In this, the Petitioner and the Respondent had entered into a Joint Venture Agreement to jointly organize an event known as Busworld in Bangalore. The Respondent after the successful completion of the event terminated the JVA with the Petitioner herein. The Petitioner filed an application for Interim Relief in the Delhi High Court under Section 9 of The Arbitration and Conciliation Act, 1996 praying that the Respondents be restrained from terminating the Joint Venture Agreement with the Petitioners herein. The Court concluded that as per Article 7.3 of the Joint Venture Agreement either party can terminate the agreement, hence the contract is of determinable nature.
  The Delhi High Court referred to the case of RPS Educational Society vs Stroh Brewery[3] where the Apex Court had remarked that in cases of determinable contracts, specific performance of the determinable contract is statutorily barred under Section 14(1) d of the Specific Relief Act 1963 and also under Section 41(h) which says that injunction will be refused when there is an equally efficacious relief available to the parties. On the basis of this decision, the Court declined to give relief to the Petitioner and dismissed the application for Interim relief preferred by them.
• ONGC Ltd v/s Streamline Shipping Co. (P) Ltd. (2002)- A contract of hiring vessels for three years with the right reserved in the hirer to terminate it after one year, the court said that the hirer could not be prevented from exercising this right.
• Zee Telefilms vs Sundilal Telecommunication (2003)- The Bombay High Court had restrained the Respondents from disclosing confidential information even though the Contract between the parties was determinable in nature, as the Court was of the opinion that monetary compensation would not be sufficient to remedy the breach, and hence Injunction was granted to the Petitioner.

Conclusion

The above-mentioned Case Laws aid us in understanding the complexities revolving around these, which the Courts takedown to regard the grants of Interim Relief in Determinable Contracts. The Courts usually do not meddlesome on account of the statutory bars provided under the Specific Relief Act, 1963; however, if there are exculpating circumstances like monetary compensation not being sufficient for the breach (as also provided in Section 38 of the Specific Relief Act, 1963)  and to prevent a breach of confidential information obtained through a contractual relationship as enumerated through the above Case Laws the Courts will grant Injunction in case of Determinable Contracts also.