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This article is written by Amulya Bhatia, from Symbiosis Law School, NOIDA. This article discusses whether the civil court can grant an anti-arbitration injunction in light of the judgment, Bina Modi vs. Lalit Modi.

Introduction

The longest tussle for jurisdiction, the issue of whether an anti-arbitration injunction can be issued by civil courts in India has been discussed extensively over many years, with multiple arguments and conclusions. The grant of this injunction has been a major controversy under international arbitration, which was brought up yet again in 2020 when a family had disputes over a trust deed.  Some say that an anti-arbitration injunction is simply a way to disrupt international arbitration proceedings, while some believe for it to be an essential manner, in exceptional situations where judicial interference by the court is required. As per the legal provisions concerning arbitration, judicial intervention is allowed only when it can be shown that the arbitration agreement is null and void; but who decides whether any such agreement is valid or invalid? This decision lies with the arbitration tribunal as well. The concept circling this issue was brought up in the case, Bina Modi v. Lalit Modi (2020). This article discusses in detail the legalities around the grant of an anti-arbitration injunction, keeping in mind the provisions of the Arbitration and Conciliation Act, 1996 in light of the judgment, Bina Modi v. Lalit Modi, along with other landmark judgments pertinent to understanding this legal concept. 

Anti-arbitration injunction in India

An Anti-Arbitration Injunction (now referred to as ‘AAI’) is basically when one party approaches the court, asking them to grant an injunction to restrain the other party from either commencing or continuing an arbitral proceeding, when the same may be necessary as per the Arbitration and Conciliation Act, 1996. Such injunction is usually called for either before the arbitral process, or during the hearing, or even after the conclusion of the hearing is drawn, but before the final reward of the case is announced.

Legality of an AAI

As far as the legality of an AAI is concerned, both the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 on which the Arbitration and Conciliation Act, 1996 is built does not recognize or provide a specific provision to grant an AAI. However, these legislations and conventions do not explicitly prohibit this either.

Those against the grant of an AAI claim that the courts must ask the parties to seek relief through arbitration, allowing the arbitration tribunal to exercise its jurisdiction. As per the principle of Kompetenz-Kompetenz, the arbitral tribunal has the competency to provide a ruling on matters regarding the validity of an arbitral agreement, meaning that judicial intervention is not required. 

However, those in support of the grant of an AAI go on to refer to Section 8 of the Arbitration and Conciliation Act which states that the parties involved in an arbitration agreement may refer to arbitration unless it is evident from facts that the agreement was not valid in the first place. Also, Section 45 of the Act states the same thing when foreign arbitration agreements are concerned. Legally, there is a provision for the civil court to refuse to refer to arbitration, meaning that the civil court would technically have jurisdiction to grant an AAI, but it is only possible when the agreement in question is deemed invalid.

Judicial trends

The courts in India have had several opportunities to analyze the concept of the grant of anti-arbitration injunction. In 2001, it was held by the Hon’ble Supreme Court in the case, Kvaerner Cementation India Limited v. Bajranglal Agarwal that the civil court did not have the jurisdiction to interfere in arbitral matters, owing to the principle of Kompetenz-Kompetenz which focuses on think the competence of a court or arbitral tribunal to decide on matters, and this principle is enshrined in Section 16 of the Arbitration and Conciliation Act.

In SBP & Co. v. Patel Engineering Ltd. (2005), the argument that only the arbitral tribunal could decide the validity of an arbitration agreement was rejected by a seven-judge bench. This ruling was further affirmed by the Hon’ble Supreme Court in the case of World Sport Group (Mauritius) Ltd. v. MSM Satellite (2014) wherein it was stated the civil court would have jurisdiction to refuse arbitration if the clauses mentioned under Section 45 of the Act are satisfied.

Many rulings were made in favour of the ability of the civil court having jurisdiction to grant an anti-arbitration injunction, but with responsibility. As a result, even the ruling given in Kvaerner Cementation India Limited v. Bajranglal Agarwal in 2001 was overruled.

Case analysis

new legal draft

Whether the civil court has the jurisdiction to grant an anti-arbitration injunction has been analyzed and discussed over multiple cases. This conflict was brought up again in the year 2020 to understand the permissibility of an anti-arbitration injunction by a civil court. The same is discussed below in light of the case, Bina Modi v. Lalit Modi (2020).

Facts of the case

  • The K.K Modi Family Trust was executed by the late industrialist, Mr. K.K. Modi wherein his family Bina Modi, Lalit Modi, Charu Modi, and Samir Modi were the designated trustees. 
  • Clause 36 of the trust deed which laid down the dispute resolution process, said that in case of any disputes regarding the trust, the Rules of Arbitration of the International Chamber of Commerce (ICC) at Singapore would be approached.
  • Several disputes arose between the members of the family after the death of K.K. Modi.
  • As per the trust deed, these disputes were now to be resolved through arbitration.
  • Subsequently, Lalit Modi invoked the said arbitration clause and applied for a grant of relief before the International Court of Arbitration in Singapore. 
  • Bina Modi, Lalit Modi’s mother, and his siblings, Charu Modi and Samir Modi, taken aback by his actions then retaliated by filing a civil suit before the Delhi High Court, seeking an anti-arbitration injunction, restraining Lalit Modi to continue with the arbitral proceedings. 
  • It was contended by Bina Modi that Lalit Modi initiating proceedings in Singapore was invalid and violated the public policy of India since the law governing the arbitral proceedings was Indian law.
  • The Single Judge ruled in favor of Lalit Modi, following which Bina Modi appealed before the Division Bench of the Delhi High Court. 

Issues involved

The issues that the Court has come across and answered through this case are as follows:

  • Whether there is a valid agreement between the two parties involved?
  • Whether a civil court has the jurisdiction to grant an anti-arbitration injunction?

Contention of the parties

Plaintiffs’ arguments

The learned counsel appearing on behalf of the petitioner, i.e. Bina Modi, Samir Modi, and Charu Modi humbly submitted before the Court that Clause 36 of the Trust Deed which states that in the case of any dispute regarding the deed, Rules of Arbitration of the International Chamber of Commerce (ICC) at Singapore would be approached, cannot be enforced as it is not in line with the public policy of India. Mukul Rohatgi, who was the senior counsel put forth certain facts which would serve as pertinent to the judgment of the case:

  • The assets of the deed in question are located in Delhi.
  • Both the plaintiff and defendant are residents of Delhi.
  • According to the counsel, the defendant has approached the international court in Singapore for arbitration only to avoid proceedings in Delhi.

As per these facts, it is evident the law of the land must be applied to the case in hand. Moreover, the counsel also relied on the judgments Vimal Kishor Shah v. Jayesh Dinesh Shah (2016), Vidya Drolia & Ors. v. Durga Trading Corporation (2020), Mcdonald’s India Pvt. Ltd. v. Vikram Bakshi (2016), Union of India v. Vodafone Group PLC United Kingdom (2018). In these cases, it was held by the courts that there is no bar to grant an injunction to restrain the defendant from proceeding towards arbitral proceedings, thereby making their case and establishing that it is well under the jurisdiction of the civil court to grant an anti-arbitration injunction. 

Defendant’s arguments

The learned counsel on behalf of Lalit Modi on the other hand claimed that the principles on which the plaintiff is standing because of the judgments cited fall flat for the simple reasons that these cannot be applied to the present case. Section 8 of the Arbitration Act can only be applied to cases dealing with domestic arbitration and not international. The current case is concerning an international arbitration, meaning that the principles presented by the plaintiff cannot be applied. Moreover, judicial intervention is only welcome when it is proved that the agreement is invalid, and the power to deem an agreement invalid also lies with the arbitration tribunal.

The counsel further cited the judgments to Bharti Tele-Ventures Ltd. v. DSS Enterprises Pvt. Ltd. (2018), Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2001), and Ashok Kalra v. Akash Paper Board Pvt. Ltd. (2013) to strengthen their case. It was humbly submitted before the Court that the suit declaring the invalidity of the arbitration proceeding followed by the injunction to restrain arbitration is not maintainable before the eyes of the law. 

Judgment

The learned Single Judge of the Delhi High Court, in this case, was very quick to dismiss the suit, meaning that they had a negative opinion on the maintainability of an anti-arbitration injunction. The Court relied its judgment on the doctrine of Kompetenz-Kompetenz, embodied in Section 16 of the Act.  Aggrieved by the decision of the single judge of the Delhi High Court, Bina Modi then appealed before the Division Bench of the Delhi High Court which granted an interim injunction in the present case for now. The Division Bench displayed their disagreement with the judgment delivered by the Single Bench.

It was observed by the Court that civil courts have the jurisdiction to dwell upon the arbitrability or non-arbitrability of disputes. Emphasis was placed on the judgment delivered in McDonald’s India Private Limited v Vikram Bakshi where it was held that when the party seeking the injunction can show that the agreement is null and void, the Court will have the jurisdiction to grant such an injunction. As per the Division Bench, the Single Judge made an error in their reasoning by not granting an anti-arbitration injunction as a relief to Bina Modi. In conclusion, the Court also relied on the decision delivered in Vimal Kishor Shah and Vidya Drolia to claim that the dispute in question was non-arbitrable. Therefore the appeal was allowed, and the decision of the single judge was squashed, allowing an anti-arbitration injunction against Lalit Modi in the given case.

Conclusion

The law of arbitration is based on the idea of referring to an arbitral tribunal instead of an ordinary court in case of any conflict. The objective behind the Act is to resolve disputes in a faster manner than remain pending before the court for months. However, there are certain situations where judicial interference in arbitration proceedings becomes necessary to smoothen the legal process. However, such interference is subject to the limitations specified within the Arbitration and Conciliation Act, 1996.

As far as an anti-arbitration injunction is concerned, there is still a lot of ambiguity around this concept. Questions regarding whether the grant of an injunction is defeating the purpose of the Act have also come up in this discussion. But one thing that seems to be clear is that the Indian Courts, through the multiple judgments delivered, have concluded that the civil courts are well within their jurisdiction while granting such injunction. The case of Bina Modi v. Lalit Modi has set clear boundaries regarding the interference of the court in arbitral matters. There needs to be a fine balance between the autonomy of an arbitral tribunal and the power of Indian Courts to interfere in arbitral proceedings, and this judgment is likely to have a positive impact on the concept of arbitration in India.

References


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