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This article has been written by Shaheen Quereshi, pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction

Section 5 of the Arbitration and Conciliation Act, 1996 (‘Act”) limits judicial intervention in the process of Arbitration in India, save as provided under the Act. Section 16, in line with internationally adopted and followed UNCITRAL Model Law, embodies the principle of Competence. Competence, according to which the Arbitral Tribunal is empowered to determine and rule on its own jurisdiction. The matters which permit the intervention of judicial authorities in Arbitration have been restricted in the Act, and are kept in check by way of regular reforms and amendments. However, a novel approach, that has not been expressly provided for in the Act, has been adopted by the Courts by way of injunctions called ‘anti-arbitration injunctions’. In this article, we shall study in detail whether Indian courts have the power to grant these injunctions in foreign seated arbitration.

What is foreign seated arbitration?

Foreign seated arbitration is an arbitration wherein the ‘seat’ of the arbitration is chosen in a country outside India. The Act is divided into three parts, wherein Part I governs arbitration which have their seats in India, except for section 2(2) of part I, the applicability of which has been extended to foreign seated arbitration, in regards to Sections 9, 27 and 37(1)(a) and 37(3). Part II provides for enforcement of awards rendered from foreign seated arbitration, covered under the New York Convention and the Geneva Convention and Part III deals with Conciliation. 

As per the recent decision of the Supreme Court of India in Mankastu Impex Pvt. Ltd. v. Airvisual Ltd, the seat of the Arbitration is the place the law of which shall be applicable to the arbitration procedure and the judicial review of the arbitral award. The venue is merely the physical location where the parties convene the arbitration proceedings. For instance, an Indian entity and an American entity, which have entered into arbitration, choose Singapore as the seat of Arbitration. For convenience, both the parties choose London as the venue of arbitration. In this instance, the arbitration proceedings shall be held in London. However, the laws of Singapore will govern the arbitration procedure regardless of wherever the proceedings are convened.

What are anti-arbitration injunctions?

An injunction is a legal remedy whereby a person is restrained, vide an order of the Court of law, from initiating or continuing any act of omission or commission. An anti-arbitration injunction, similarly, is an injunction, or to say simply, an order, restraining a party to the arbitration agreement from either commencing or continuing arbitration proceedings. These injunctions can also be issued not only against a party to arbitration, but also against the arbitral tribunal to restrain them from initiating or continuing with the proceedings. 

There are many comparisons drawn between anti-suit injunctions and anti-arbitration injunctions and the two are often used synonymously. While both of these injunctions are primarily orders restraining the beginning and continuance of suits and arbitrations respectively, it is to be noted that both of these injunctions are different with regards to their governing principles. The grant of anti-arbitration injunctions falls under the purview of the Act, which is a comprehensive code for Indian arbitration and under which the parties autonomously choose the arbitral tribunal as the adjudicating authority. This is the major point of distinction of anti-arbitration injunctions with anti-suit injunctions, as in the latter, the issue arises with regards to competent courts and not when the dispute is willingly referred to the arbitral tribunal. This position was established by the Delhi High Court in Himachal Sorang Power Private Limited vs. NCC Infrastructure Holdings Limited and McDonald’s India Pvt Ltd v Mr Vikram Bakshi.

Anti-arbitration injunctions, therefore, are typically injunctions in nature. Being injunctions granted against arbitration proceedings, there are certain statutory provisions of the Act which are related to these injunctions. 

What are the relevant statutory provisions for anti-arbitration injunctions?

Anti-arbitration injunctions are not explicitly provided for or defined in the Act. However, judicial authorities that grant these injunctions with reference to a few sections that permit intervention of the Courts into the arbitration process and expand the scope the same to construe them as an implied grant of the power to issue anti-arbitration injunctions. Given below are the following sections:

  • Section 8 – Section 8 of the Act, pertaining to domestic arbitration, provides for the parties to the arbitration agreement to move the Court to seek reference to arbitration. In this instance, the Court is only required to inquire as to the prima facie existence of the arbitration agreement. However, the Courts seldom, under this section, grant an injunction restraining the party from commencing domestic arbitration proceedings in circumstances under which such an initiation would not be justifiable or valid. Some of the general grounds are when the arbitration agreement does not exist, or the arbitration is in breach of an exclusive jurisdiction of court clauses, arbitration against a person who is not a party to the arbitration agreement, etc
  • Section 9 – Section 9 allows the parties to arbitration agreement to approach the relevant judicial authority to seek interim reliefs, in domestic as well as foreign seated arbitration, when the arbitral tribunal has not been constituted, when the arbitral tribunal becomes functus officio or when, during the subsistence of the arbitral tribunal, the remedy is of such nature that the tribunal cannot provide it and the Court has to interfere and grant such a relief. Injunctions are normally granted by way of interim reliefs, and through the present section, the Courts have also expanded the purview to grant anti-arbitration injunctions.
  • Section 45 –  Section 45 pertains to foreign seated arbitrations and is akin to section 8 of Part I of the Act. Under this section, the Court is required to refer the parties to arbitration unless it is of the view that the agreement is null and void, inoperative or incapable of being performed. Anti-arbitration injunctions in foreign seated arbitration are granted under the ambit of this section.

In World Sport Group (Mauritius) Limited vs. MSM Satellite (Singapore) Pvt. Ltd, the Supreme Court of India also held that under Section 9 of the Civil Procedure Code, 1908, the civil courts of the country have inherent jurisdiction to issue anti-arbitration injunctions.

Anti-arbitration injunctions, therefore, can be granted under the implied ambit of the above mentioned sections. However, in foreign seated arbitration, when the laws of India become secondary (as the designated seat of arbitration is another country), how do Indian courts come into the picture?

What is the role of Indian Courts in foreign seated arbitration?

Although the Act aims at reducing the instances in which the court can intervene in the arbitration process, it still gives the Courts the precedence over the arbitral tribunal by giving it the power to pronounce appeals over the decisions of the Tribunal, as well as the power to grant certain exclusive remedies vide certain sections of the Act. In foreign seated arbitration, although the courts of the seat of arbitration have the exclusive jurisdiction to deal with the arbitration proceedings, there are instances where the Courts of India have the power to intervene in the same. For instance, in a foreign seated arbitration, when a party to the arbitration agreement has a property in India which is to be realised as per the arbitral award or when the parties to a foreign seated arbitration make a reference to arbitration in an Indian Court. The role of Indian Courts in foreign seated arbitration can be explained under the following sections:

  • Section 9

By the 2015 Amendment, the Supreme Court put the controversy regarding the applicability of this section to foreign seated arbitration at rest and established that even in international commercial arbitration having foreign seats, the Indian Courts can be approached to seek appropriate interim relief under section 9 of the Act. 

  • Section 45

Vide section 45, the parties to a foreign seated arbitration can approach an indian court for reference to arbitration. The Court is empowered to assess the agreement on various parameters provided for under this section before making a reference to arbitration.

The grant of anti-arbitration injunctions is a power that is used sparingly and it is imperative to know the stages during which these injunctions can be sought from the Courts of law.

When can anti-arbitration injunctions be sought in foreign seated arbitration? 

An anti-arbitration injunction can be sought at the following stages:

  • Before the arbitration proceedings commence:

When the party has an anticipation that an arbitration proceedings may be initiated and such proceedings fall under one of the many circumstances which makes it unjustified or unsustainable, the aggrieved party can approach the Court under section 45 for seeking an anti-arbitration injunction against initiation of such arbitration injunctions. Incidentally, under the said section, the Court can even take suo moto cognisance and grant an anti-arbitration injunction at its discretion. Pursuant to the 2015  amendment, an anti-arbitration injunction restraining the party from commencing the arbitration proceedings can also be done vide section 9 as an interim relief.

  • During the arbitration proceedings:

Anti-arbitration injunction can be sought under section 9, as an interim relief, during the subsistence of the arbitration proceedings, to restrain the continuation of the arbitration proceedings and to request the Court to halt the same.

  • After the conclusion of the hearings

Such injunctions may be issued even after conclusion of the substantive hearings in the arbitration proceedings. However, the injunction must be sought before the final award is rendered.

To approach the court with a prayer to grant an anti-arbitration injunction, there must not be a mere apprehension of the agreement being unjustified and unsustainable as per the circumstances provided in section 45. The contention must be actual and concrete and must be substantiated by the aggrieved party in detail. The Court exercises this power only under rare circumstances, and it is only when the aggrieved party substantiates certain grounds, does the Court grant these injunctions in restraint of arbitration proceedings.

What are the grounds under which Indian courts can grant foreign seated arbitration?

It is clear from what is stated above that the Indian Courts have been granted the authority to issue anti-arbitration injunctions. However, in order to obtain an anti-arbitration injunction in foreign seated arbitration, the aggrieved party has to substantiate certain grounds enunciated under section 45 of the Act, stated as under:

  • The arbitration agreement is null and void;

If the arbitration agreement does not live upto the essentials of being a valid and binding agreement enforceable by law, it becomes null and void and an anti-arbitration injunction can hereby be granted against such an agreement. In McDonald’s India Pvt Ltd v Mr Vikram Bakshi, the Delhi High Court defined a null and void arbitration agreement as one that is affected by some invalidity, for instance,  lack of free consent, right since the beginning.

  • The arbitration agreement is inoperative;

As per McDonald’s India Pvt Ltd v Mr Vikram Bakshi, the term ‘inoperative’ would mean arbitration agreements which have stopped to be of any effect. This would include cases where the arbitration is revoked by the parties, when the arbitral award has been rendered or when the subject matter of the dispute cannot be adjudicated by reason of res judicata or constructive res judicata, etc.

  • The arbitration agreement is incapable of being performed;

If the arbitration agreement is incapable of being performed, the judicial authority would grant an anti-arbitration injunction in respect of the same. For instance, an arbitration agreement which is vague and ambiguous in its terms and conditions would be uncertain in nature and, therefore, is incapable of performance.

  • The arbitration proceedings are vexatious and oppressive:

If the arbitration proceedings are vexatious or oppressive or prejudicial to the legal process, the indian courts have complete power to grant injunctions against such proceedings. This was established in the case of Union of India v Vodafone Group Plc(10) and Union of India v Khaitan Holdings by the Delhi High Court. It was also stated in Himachal Sorang Power Private Limited vs. NCC Infrastructure Holdings Limited that the Courts are slow in granting anti-arbitration injunctions unless it is determined that the arbitration proceedings are vexatious or oppressive in nature.

Other circumstances, with reference to the judicial precedents in the matter, when the Courts shall grant anti-arbitration injunction are when the party praying for injunction is under some incapacity or inconvenience, when the Arbitral Tribunal has already been constituted to adjudicate the dispute for which a second arbitration is being invoked, etc. Therefore, while the statute grants only a few circumstances under which the Court may intervene in the arbitration process, the range of issues that can fall within the umbrella of these circumstances is wide. 

What is the jurisprudence in India with respect to anti-arbitration injunctions in foreign seated arbitration?

The jurisprudence in this regard is an evolving one, since there is no express statutory provision to back the grant of anti-arbitration injunctions. Anti-arbitration injunctions have been the subject matter of umpteen cases, wherein some courts favor the grant of the same while the others take a pro-arbitration approach. This has led to contradictory and conflicting views taken by different Courts. Let us examine a few of these landmark cases to draw a conclusion:

  1. In Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2001), in an SLP against an order of a Single Judge of the Bombay High Court, the Supreme Court took the pro-arbitration approach and stated that only the arbitral tribunal possesses the competence to rule on and determine its own jurisdiction. Accordingly a suit for anti-arbitration injunction is not maintainable, given the availability of an alternate remedy available with the Arbitral Tribunal and any civil court does not have the authority to grant anti-arbitration injunctions.
  2. The Supreme Court of India in Chatterjee Petrochem Co. & Anr vs Haldia Petrochemicals Ltd. (2013) was faced with an issue about the validity of the arbitration agreement and claimed the agreement is void/inoperative/unenforceable by the reason of the same. However, the Supreme Court found the arbitration agreement standing valid and enforceable in law and held that the suit for injunction against arbitration stands dismissed.
  3. In World Sport Group (Mauritius) Ltd vs Msm Satellite(Singapore) Pte. (2014), the Supreme Court of India held that civil courts have the power to issue injunctions in restraint of arbitration proceedings. However, the same must be done within the confines of section 45 of the Act and only if the agreement falls within the grounds mentioned in the said section.
  4. The Delhi High Court held, in Mcdonald’s India Private Ltd. Vs. Vikram Bakshi And Ors. (2016), that the Courts in India possess the power to grant anti-arbitration injunctions. However, such power must be exercised only ‘in the rarest of rare cases’ and ‘on principles analogous to those found in Section 8 and 45’ of the Act, as the objective of the Act is to minimize court interference.
  5. The Delhi High Court, in the case of Union of India v. Vodafone Group PLC United Kingdom and Ors (2018) reiterated that the power to grant anti-arbitration injunctions are with courts of natural jurisdiction, being India in the present case. However, such a power must be exercised with great caution, only when the arbitration proceedings are oppressive, vexatious, inequitable or abusive of the process of law.
  6. In Devi Resources Limited vs Ambo Exports Limited (2019), the Calcutta High Court held that Indian Courts have the power to issue anti-arbitration injunctions in foreign seated arbitration, with special reference to section 9 of the Act.
  7. In National Aluminum Company Ltd v. Subhash Infra Engineering Pvt. Ltd (2019), the Supreme Court, relying on the judgement of Kvaerner Cementation, refused to grant an anti-arbitration injunction stating that the appropriate remedy is to approach the Arbitral Tribunal under section 16 of the Act.
  8. Recently in the case of Dr. Bina Modi vs Mr. Lalit Modi & Ors. (March 2020), the judgement in Kvaerner Cementation case was relied on again and the principle of Competence was reaffirmed by the Delhi High Court. It refused to grant an anti-arbitration injunction stating there was a remedy present under section 16 of the Act, and the civil courts, therefore, cannot entertain cases which the arbitral tribunal has the authority to adjudicate. 

This decision was appealed later to a Division Bench of the Delhi High Court which restrained the continuation of emergency arbitration proceedings until conclusion of the appeal. This restraining order was challenged before the Supreme Court, which dismissed the same.

Pursuant to this, the Calcutta High Court in Balasore Alloys Limited vs. Medima LLC (August 2020) dissented the view that was taken by the Delhi High Court in the abovementioned Bina Modi case. The Court stated that in the above mentioned case, the Delhi High Court relied on the Kvaerner Cementation case without considering that the same had been implicitly overruled by the case of S.B.P. & Co vs Patel Engineering Ltd. & Anr. It was, therefore, held that the civil courts had the power to grant anti-arbitration injunctions, subject to such power being used sparingly and with caution.

Thus, there is no uniform view established in the matter and contradictory stances have been taken by the Courts over the course of years. However, what remains undisputed and certain is that, in addition to courts that reaffirmed the power of arbitral tribunal and the provisions of the legislation, even the Courts that have supported the grant of these injunctions have repeatedly suggested upholding the objectives of the Act which provide for minimal court interference and court intervention only in cases of utmost necessity or disparity. 

Conclusion

On a careful perusal of the above-mentioned details, it is apparent, therefore, that the Indian Courts have the power to grant anti-arbitration injunctions. Although the Arbitration Act is a complete and self-sufficient framework in itself, the legislation and the jurisprudence have kept the window open for the judicial authorities to intervene in the arbitral process in times of grave necessity or other exigencies. However, a majority of the judicial decisions have consistently emphasized that even while issuing such injunctions, the Courts must not only adhere to the confines and principles of the relevant provisions of the Act in strict conformity, but also use this power sparingly and only in rare cases. Additionally, the Courts have also held that the objective of the Act to minimize Court intervention should be kept in mind, and the Courts should generally be reluctant to step in the arbitration process. Therefore, even when the Indian Courts are empowered to issue anti-arbitration injunctions, they maintain a pro-arbitration approach, respecting and upholding the specific objectives with which the Act was brought in force with a view to promoting the growth of arbitration in India.

References


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