This article has been written by Neeraj Dubey, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Table of Contents
Introduction
The concept of anti–arbitration injunctions in investment arbitrations is a controversial topic all around the globe. The injunctions granted by the court of law in India are strictly based upon the full discretion of the jurisdictional courts. The essence of the anti–arbitration injunctions in investment arbitrations has been argued at length primarily on the interference by the judicial authority where the arbitral tribunal has the power to adjudicate the matter. Further the Investment Arbitration Clause in the bilateral investment treaties signed by India to secure the rights and interest of investors plays a crucial role for foreign direct investments.
Definition of anti-arbitration
An anti-arbitration injunction is an injunction granted by the jurisdictional court to restrain parties or the arbitral tribunal from either initiating or continuing with the arbitration proceedings. The existence of such legal injunction and its enforcement is a matter of dispute not only in India but all over the world. There are a number of reasons for the dispute in this context, in the Indian jurisdiction the primary being the lack of a statutory recognition of the anti-arbitration injunction clause in the Arbitration and Conciliation Act, 1996. The anti–suit injunctions are adjudicated by the jurisdictional court to refrain and restrain other party/parties from filing of a separate suit or continue any other ongoing litigation; the anti-arbitration Injunction suit while acquiring the same abovementioned orders strip the arbitral tribunal of its power to determine its own jurisdiction which upholds the sanctity of the ‘Kompetenz – Kompetenz’ rule.
Essentials of the Arbitration & Conciliation Act, 1996
As per Section 5 of the Arbitration and Conciliation Act, 1996 of India it is clearly stated that no judicial authority shall intervene in any arbitration proceedings.
The mandatory obligation of the jurisdictional courts in cases where this a valid arbitration clause, is to refer the matter before a learned arbitration tribunal. As per Section 8 any judicial authority before which an action brought in a matter where there is a legally binding arbitration agreement and if any party before submitting their first statement, invokes the arbitration clause, the judicial authority shall refer the matter before the Arbitral Tribunal as per the arbitration agreement or otherwise.
Further, as per Section 45 of the Arbitration and Conciliation Act, 1996, it is clearly stated that when a judicial authority is seized of an action in a matter where a party has made an agreement referred to in Section 44 of the Arbitration and Conciliation Act, 1996 shall upon request of one of the parties shall refer the parties to arbitration.
Judgments on jurisdiction of anti–arbitration injunction
The anti–arbitration injunction has been a source of many disputes and contradictions since the time it has come into force, both domestically as well as internationally. The Hon’ble Supreme Court of India has also taken the same into consideration and has passed various landmark judgments accordingly. The first and foremost that comes to mind while discussing this topic is the “Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214” case wherein the Ld. Single Judge of the Hon’ble Bombay High Court held that in view of Section 5 of the Act r/w Sec 16, since the Learned Arbitral Tribunal has the power and jurisdiction to rule on its own jurisdiction, the civil courts shall not pass any injunction against an arbitral proceeding.
The Hon’ble Supreme Court further held that “In this view of the matter, we see no infirmity in the impugned order so as to be interfered with by this court. The petitioner, who is a party to the arbitral proceedings may raise the question of jurisdiction of the arbitrator as well as the objection on the ground of non – existence of any arbitration agreement in the so – called dispute in question, and on such an objection being raised, the arbitrator would do well in disposing of the same as a preliminary issue so that it may not be necessary to go into the entire gamut of arbitration proceedings.”
This is the perfect example as to wherein even the Hon’ble Supreme Court of India refuses to intervene with any ongoing arbitration proceedings. However, in the same judgment the Hon’ble Supreme Court of India went out of its way to frame a preliminary issue and suggested the learned arbitrator to dispose of the dispute on the same. Section 16 of the Arbitration and Conciliation Act has been reiterated as under for your reference:
“16. Competence of arbitral tribunal to rule on its jurisdiction. —
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, —
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”
Now we take up the latest case titled “Dr. Bina Modi Vs Mr. Lalit Modi & Ors.” Hon’ble Justice Sh. Rajiv Sahai Endlaw of the Hon’ble High Court of Delhi was pleased to take into consideration the aspect of the anti-arbitration injunction suit and passed a detailed order dated 03/03/2020 wherein the Ld. Judge cited and referred to a number of judgments including but not limited to the Kvaerner Cementation India Limited supra, State of Himachal Pradesh Vs. Ashwani Kumar (2015) 15 SCC 534, Sakshi Vs. Union of India (2004) 5 SCC 518, Union of India Vs. Paras Laminates (P) Ltd. (1990) 4 SCC 453 and Bangalore Water Supply, Sewerage Board Vs. A. Rajappa (1978) 2 SCC 21, McDonald’s India Private Limited and Vodafone Group PLC United Kingdom supra; where all the judgments submitting difference contentions for passing the award has been explained in details, the Ld. Justice Sh. Rajiv Sahai Endlaw was pleased to pass the order stating that:
“32. Being of the view that this Court does not have the jurisdiction to adjudicate a plea which can be adjudicated by the Arbitral Tribunal relating to its own jurisdiction, I have not gone into the same and the said pleas remain open to the parties to take before the Arbitral Tribunal.
Once the conclusion hereinabove reached is that an anti-arbitration injunction suit does not lie, the suits are not maintainable and are dismissed. However, in view of Mcdonald’s India Pvt. Ltd. and Vodafone Group PLC United Kingdom supra singing a different tune and Kvaerner Cementation India Limited supra remaining unpublished for nearly twelve years, no costs.”
Although while pointing out the fact that even though the court are hesitant to eliminate their power of adjudication, the Hon’ble Justice Sh. Rajiv Sahai Endlaw also stated in the abovementioned judgment that “The Court is reluctant to denude itself of jurisdiction, especially when, in the facts before it, not opting to exercise jurisdiction. This is for the fear of such denudation of jurisdiction in future coming in the way of granting relief in a deserving case. Though I admit, the same to have governed my judicial decision making also, but find that the reluctance to return a finding of the Court having no jurisdiction, though for good reasons as aforesaid, results in the Courts being flooded with cases with each litigant taking a chance, that in the facts of his case, the Court which has not declined to be having jurisdiction, may grant the relief of injuncting arbitration.”
Therefore, being a controversial topic all over the world, the concept of Anti – Arbitration Injunction does not stand ground in India. However, the same is always open for arguments, the abovementioned clauses of the Arbitration and Conciliation Act, 1996 clearly state that the since Arbitral Tribunal has the power and the authority to adjudicate the matters relating to its own jurisdiction, the Hon’ble courts of India are inclined towards referring the matters/disputes to the Arbitral Tribunal for proper adjudication as per the Statutes and Act.
Investment arbitration
The concept unvestment arbitration is where a dispute has arisen between the investor and the host state, wherein the investor has the right to sue the host state. The host state in order to invite foreign investors has to enter into a treaty which includes the consent for the Investment Arbitration. The Investment Arbitration is required and essential to safeguard the rights and interest of the foreign investor. It is important to point out that such Investment Arbitration is International Commercial Arbitration so as to protect the foreign investor from the host state from achieving any biased judgments/awards in its favor.
Conclusion
The foreign direct investment in India is the practice of signing the Bilateral Investment Treaties. These bilateral investment treaties include the Investment Arbitration Clause wherein the investor has the right to sue the host in order to protect its rights and interests. However, the stand of the Indian Judicial system in case of Anti – Arbitration Injunction as discussed above is mostly in favor of pro arbitration. Therefore, it will be fair to say that in case of anti-arbitration Injunctions in Investment Arbitration, the cases will have the same effect in India.
Sources
- The Arbitration and Conciliation Act, 1996.
- Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214
- Dr. Bina Modi Vs Mr. Lalit Modi & Ors.
- Anti-arbitration injunctions: use and controversy – Lexology https://www.lexology.com
- Anti-arbitration Injunctions: Delhi High Court Says Nay … http://arbitrationblog.kluwerarbitration.com
- To Grant Or Not To Grant: Anti-Arbitration Injunctions In India …https://www.mondaq.com
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