This article has been written by Khyati Mehrotra, a student of pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from LawSikho.
Table of Contents
Introduction
The jurisprudence on anti-arbitration injunctions is still evolving with time and there has been a rollercoaster scenario in the stance of Indian courts going back and forth on the powers of civil court to grant anti-arbitration injunctions. A claim of anti-arbitration injunction seeks an injunction on either institution or continuation of domestic or international arbitration proceedings. When one of the parties is aggrieved by the arbitration proceedings which might commence or have already commenced, that party can file an anti-arbitration suit in the court to stay the arbitration proceedings. The courts have conflicting opinions on whether courts can grant anti arbitration injunctions or it is solely under the authority of the arbitration tribunal to determine if the arbitration proceedings shall be stayed. In the present post we will understand the principles, the courts rely to deal with anti-arbitration injunctions and also discuss the prominent judgements in this regard.
Anti-arbitration injunctions in foreign seated arbitration
When the parties decide the arbitration seat to be in a foreign country outside India, it is known as foreign seated arbitration. In this scenario, the arbitration proceedings will be governed the law of the land of such foreign country and courts of such foreign country will have jurisdiction over the proceedings. Such foreign seated arbitration is regulated by Part II of Arbitration and Conciliation Act, 1996. When an Indian party tries to seek injunction against such foreign seated arbitration by challenging the arbitration agreement and tribunal’s jurisdiction to hear it, the issue which rises before the court is whether Indian courts have the power to stay the arbitration proceedings and determine the validity and existence of Arbitration Agreement by itself or it is solely the power of arbitration tribunal to rule on its own jurisdiction.
Legal scheme behind Anti Arbitration injunctions
Civil Courts in India have the power to adjudicate all the civil cases including injunction suits under Section 9 of Civil Procedure Code, 1908 (hereinafter referred to as “CPC”). This power of court is restricted by Section 41(h) of the Specific relief Act, 1963, which states that when equally efficacious remedy can be obtained by any other mode other than injunction suit, injunction should not be granted.
Arbitration proceedings take place before an arbitration tribunal and are regulated by Arbitration and Conciliation Act, 1996 (hereinafter referred to as “The Act”). The act aims at reducing interference of the court in the arbitration proceedings and increase autonomy and independence of the arbitrators. The Act enshrines the principle of Kompetenz-Kompetenz which refers to the competence of the arbitration tribunal to determine its own jurisdiction and examine the existence and validity of the arbitration agreement. In Kvaerner Cementation India Ltd. vs. Bajranglal Agarwal & Anr. (hereinafter referred to as “Kvaerner Judgement”), Supreme Court taking a pro-arbitration approach held that as per Section 16 of the Act, it is the arbitration tribunal which had the authority to decide on its jurisdiction including any question on the existence and validity of the arbitration agreement and thus refused to grant injunction. This judgement pertains to 2001 but was only reported in 2012, which led to various conflicting judgements in these 11 years. Anyways, Kvaerner judgement does not concern foreign seated arbitration and Section 16 is in Part 1 of the Act which does not apply to foreign seated arbitration.
Later in 2005, Supreme Court’s 7- Judge Bench in SBP & Co v. Patel Engineering Limited recognized the power of the civil court to grant injunction under Section 9 of CPC but held that it does not have an absolute right over its jurisdiction.
Section 45 of the Act (hereinafter referred to as “Section 45”) which comes under part II of the Act states that notwithstanding anything contained in CPC or the act, the court shall refer the parties to arbitration if the agreement is not null and void, inoperative or incapable of being performed. This is interpreted by various judgements to mean that if the agreement does not fulfill the criteria mentioned in Section 45, the courts have the liberty to grant anti- arbitration injunction.
In World Sport Group v. MSM Satellite Singapore Ltd, the Apex Court dealt with the question of granting an anti-arbitration injunction in a foreign seated arbitration. It was held that under Section 45 of the Act, the scope of the court to examine the arbitration agreement is laid down which ensures that the court’s jurisdiction to grant anti-arbitration injunctions is not ruled out. Under Section 45, the Court can determine if the agreement is null and void, inoperative or incapable of being performed but can not go into examining the validity or legality of substantive contract.
Parties may approach the court for seeking an anti-arbitration injunction before the commencement of proceedings, during the continuation of arbitration proceedings or even after the conclusion of hearing before the tribunal but not after the final award is rendered.
Judicial Trends and grounds with respect to anti arbitration injunction in foreign seated
The Delhi High Court in McDonald’s India Pvt Ltd v. Mr Vikram Bakshi in a shareholder dispute discussed principles dealing with anti-arbitration injunctions in foreign seated arbitration and held that civil courts have the power to grant anti arbitration injunctions however such power should be used sparingly and cautiously within the scope of Section 45. The court discussed that an agreement is null and void if it is hit by invalidity from the very making of the agreement such as lack of consent, competency of the parties etc. It will be considered inoperative if arbitration agreement has ceased to have effect. Also, the agreement becomes incapable of being performed when the arbitration cannot be effectively set into motion. This can happen if the agreement is vaguely worded or parties’ intention to arbitrate is contradicted by other terms of agreement etc. In all these above cases, the court can grant anti-arbitration injunction.
Further, an additional ground was considered by the Delhi HC in Himachal Sarang Power Pvt Ltd v. NCC Infrastructure in dealing with the issue of injunction in foreign seated arbitration whereby it was held that injunctions will be granted if the arbitration proceedings are proved to be vexatious or oppressive. This case has now widened the scope of enquiry under Section 45 and have paved the way for court to grant anti-arbitration injunction on the ground of vexatious and oppressive proceedings.
The Calcutta High Court in The Board of Trustees of the Port of Kolkata vs. Louis Dreyfus Armatures SAS & Others, summarized the above-mentioned grounds and reiterated that civil courts can grant the anti-arbitration injunctions.
In a recent case of Balasore Alloys Limited v. Medima LLC, Calcutta High Court discussed the scope and limitation within which the court’s power to grant anti-arbitration injunction can be exercised. In this case, the agency agreement between the parties as well as the purchase orders exchanged between them contained contrasting governing law and seat of arbitration proceedings. When the dispute arose, both parties-initiated proceedings before different forums on in foreign tribunal and other in Indian Court under Section 11 of the Act. The question before the court was whether it has power to grant anti-arbitration injunctions against a foreign seated arbitration? The court discussed the precedents such as Kvaerner judgement and Patel Engineering case and held that courts do have power to grant anti-arbitration injunctions.
It emphasized that the circumstances under which anti-suit injunction is passed enumerated in Modi Entertainment Network v. W.S.G. Cricket (hereinafter referred to as “Modi Entertainment case”) and held that the courts should use the powers sparingly and with abundant caution and only under the circumstances laid down in Modi Entertainment case. Though the court recognized the court’s power to grant injunctions however, it refused to grant such order in this case as plaintiff failed to conclusively prove to the court that the arbitration proceedings are vexatious or oppressive or the principle of forum-non-conveniens is applicable.
- The point which should be noted that in Modi Entertainment case, the Supreme court laid down circumstances for the grant of anti-suit injunctions where the suit is filed in a foreign court and not anti-arbitration injunctions.
- The Calcutta High Court by considering principles of Modi Entertainment case in Balasore Judgement concerning arbitration proceedings has widened the powers of court to deal with anti-arbitration injunctions beyond what is prescribed under Section 45.
- The principles in the case of anti-arbitration injunction and anti-suit injunction can not be at par as the former curtails the power of an arbitration tribunal which wither down the party autonomy and interfere with an independent and autonomous proceedings, while the later deals with the interference in the sovereign courts of foreign countries.
- The parameters in both scenarios can not be the same and thus, for anti-arbitration injunction, specific parameters should be followed as laid down in Section 45.
The most talked about judgement of Delhi High Court in this context has been the case of Bina Modi & Ors vs. Lalit Modi & Ors., which has further contributed towards the jurisprudence of anti-arbitration injunctions. The single judge bench of Delhi HC, in this dispute arising out of trust deed between the parties, ousted the jurisdiction of court to grant anti-arbitration injunction and held that an equally efficacious remedy is present to the plaintiff in the form of arbitration proceedings and thus, refused to grant injunction. This order was reversed by the Appellate Bench of Delhi High Court, which concluded that the dispute arising out of trust deed is not arbitrable as per Indian laws and thus anti-arbitration injunction shall be granted.
The court further held that, it is the duty of the court to examine the validity of the agreement in the facts and circumstances of the case before parties spend enormous amount of money in a foreign arbitration proceeding. The court observed the question of autonomy of arbitration will not arise as the dispute is not capable of being submitted to arbitration. Therefore, the tribunal lacks inherent jurisdiction to hear the dispute. Thus, in addition to the grounds laid down in Section 45, this case added non-arbitrability of dispute as a criterion to grant anti-arbitration injunction.
Conclusion
The concept of anti-arbitration injunction is evolving with time but yet the principles guiding such injunctions are not exhaustively and concretely defined which led to conflicting judgements. Though an array of cases has settled the position that civil courts have inherent power to grant anti arbitration injunction in foreign seated Arbitration, this power should be used sparingly. The courts should take care of the fact that such anti arbitration injunction suits shall not be stretched for long duration as it will defeat the whole purpose of arbitration mechanism. Further, there is still a need of Supreme Court to set a precedent which exhaustively lays down the grounds wherein a civil court can interfere in the arbitration proceedings and put this issue at rest.
References
- https://blog.ipleaders.in/indian-courts-empowered-grant-anti-arbitration-injunctions-foreign-seated-arbitration/
- https://www.mondaq.com/india/arbitration-dispute-resolution/1053432/to-grant-or-not-to-grant-anti-arbitration-injunctions-in-india
- https://blog.ipleaders.in/the-evolving-jurisprudence-grant-of-anti-arbitration-injunctions-by-indian-courts-in-foreign-seated-arbitrations/
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