This article is written by Ojasvi Sharma, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.
Table of Contents
Arbitration is an alternative to the dispute resolution by courts. The parties have been granted autonomy to a greater extent, they can decide upon matters pertaining to the dispute, to the extent that they can even decide upon their jurisdiction. As arbitration proceedings arise from the “arbitration clause” so, does the jurisdiction. But when one party is aggrieved from the arbitration proceedings, then they can refer such dispute to the court and seek to restrain the arbitration proceedings, such a reference to the court may be made in any other country or even within India, this is known as “anti-arbitration injunction proceeding” and when such an injunction is granted, it shall have an adverse effect on the ongoing arbitration proceedings and shall bring it to an abrupt halt. And is known as,“anti-arbitration injunction”. Simply put, an anti-arbitration injunction is an injunction order given by the court to restrain the arbitral proceedings.
As the law regarding the grant of anti-arbitration injunction is evolving every passing day it becomes very important to discuss it and the various factors associated with it.
In this article we shall discuss the conflicting judicial pronouncements and the judicial approach taken by the courts in India with respect to grant of anti-arbitration injunction in foreign seated arbitrations.
When are anti-arbitration Injunctions granted by the Indian courts in Foreign Seated Arbitration
Foreign seated arbitration refers to an arbitration where the parties have decided or chosen the “seat” of arbitration outside India which means that the arbitral proceedings shall be subjected to the law of the land which has been chosen by them to be the seat of arbitration by the parties and such an arbitration are called “international commercial arbitration”.
But it is not necessary that the parties and the arbitrator(s) shall meet in the geographical limitations of that country which has been chosen as the seat only. The parties shall change the “venue” of the arbitration as per their convenience. This means for instance the two parties and the sole arbitrator are all in the Asian continent but the seat of the arbitration is in New York. Then if they choose New Delhi as their venue for convenience and cost-effectiveness even then the laws of the country which they had chosen as their seat shall be applicable and the proceedings shall be done as per that.
Such foreign seated arbitration are enforced in India by the PART II CHAPTER I of the Arbitration and Conciliation Act,1996. Under the head of New York Convention Awards or under the PART II under the head of Geneva Convention Awards.
Again the law regarding grant of anti-arbitration injunction in foreign seated arbitration is evolving and there are conflicting views and judicial decisions in this regard.
Grounds under which anti-arbitration injunctions can be granted by Indian courts in foreign seated arbitration
The Supreme Court in its various judgements (as discussed in this article subsequently) has made it clear that it has jurisdiction to stay the foreign seated arbitration proceedings or in other words it can grant anti-arbitration injunctions against foreign seated arbitration but the party claiming before it has to prove that the grounds mentioned under the section 45 of the 1996 act are made out. The court shall grant anti-arbitration injunction if following grounds are proved by the party claiming, the grounds are stipulated as under :
- The agreement is “null and void” because of contrary actions of the parties or by the adverse conduct of the parties. For instance, if parties go against the agreed terms of the agreement or the agreement is affected by some invalidity right from the beginning, lack of consent due to misrepresentation, duress, fraud or undue influence.
- That the arbitration “agreement does not exist”. For instance, a party may claim that the arbitration agreement has not been entered into between the parties or the dispute is not covered under the arbitration clause.
- If the arbitration agreement is “inoperative” an agreement is said to be inoperative when the parties have revoked the agreement.
- An arbitration agreement is “Incapable of being performed”, if the arbitration agreement is vague and the terms of the agreement are ambiguous and this results in inability to establish arbitration into motion. For instance, the basic principles of drafting an arbitration clause like seat, venue, laws applicable, composition and appointment of the arbitrator are not provided for in the clause then such an arbitration agreement is said to be incapable of being performed.
- The arbitration proceedings are “oppressive and vexatious”, if the arbitration agreement is invoked to cause annoyance or to cause mental agony and harassment to the defendant and so to cause him to do or not do some action. This is purely an abuse of process of law.
Therefore, jurisdictionally it is held that if section 45 conditions are proved by a party in foreign seated arbitrations then injunctions can be granted by Indian courts.
An Unpopular Remedy: Challenge to Enforcement of Foreign Arbitral Awards
When the application under section 45 is not maintainable and gets rejected by the courts mandate. Then the party has a chance to challenge such an award at the time when the other successive party applies for enforcement of such foreign award under section 48 of the act.
Although such a challenge at the time of enforcement of the award is not encouraged but still it is entertained by the court. But such a challenge can only be made when the other party moves to court to enforce their award. Section 48 of the act mentions certain grounds under which the party can challenge the enforcement of the award. The grounds mentioned under section 48 of the act have certain grounds mentioned which the aggrieved party has to prove either one or more of the mentioned grounds to stay the enforcement of the award.
These grounds are identical to those mentioned under section 34 of the act (mentioned above) which deals with the challenge to domestic arbitral award. Except one ground that is stated under section 48(1)(e) which states that a foreign arbitral award shall not be enforced in India, if it has been suspended or set-aside by the authority which has made it. For instance- In a Singapore seated arbitration parties were Indian and Singaporean. Now, the award was challenged and the tribunal in Singapore suspended it or set it aside. Then after this the Indian party cannot come and enforce the suspended award in India. If it does then the Singaporean party can exercise their right and challenge the award under section 48 and stay the enforcement of such foreign award.
Appeal against enforcement of award
An appeal can be made against an order of the enforcement of foreign award by the court under section 50 of the act and also against the order of referring the parties to arbitration passed under section 45 of the act by the court. But there shall be no appeal allowed after this but the right to move a special leave petition (SLP) before the Supreme Court is the only remedy available after this.
The jurisdiction to decide upon the applications under the section 48 and 50 of the act shall lie before the high court of the respective states of the parties as per the section 2(1)(e)(ii).
Judicial Standpoint: with respect to grant of anti-arbitration injunction in foreign seated arbitrations under The Indian law
The judicial pronouncements of the Supreme Court and high courts have laid out a conflicting viewpoint with respect to grant of anti-arbitration injunctions in foreign seated arbitrations in India. The various cases illustrating the judicial stand point are illustrated below (in chronological order):
- In, Chatterjee Petrochem Co. & Anr vs Haldia Petrochemicals Ltd [MANU/SC/1258/2013],(“Chatterjee Petrochem”) the Supreme Court on 10th December ’13, took a progressive step towards pro-arbitration and upheld the sanctity of the arbitral process. The present case was a Paris seated international chamber of commerce (ICC) arbitration. The party claimed that the arbitration agreement was not valid and prayed for an Anti-arbitration injunction.
The Supreme Court scrutinized the arbitration agreement under the provisions of section 45 of the act and found out that there was contrary to the claim of the party a valid arbitration agreement and the court did not grant anti-arbitration injunction.
It is clear that the court did have the jurisdiction to grant anti-arbitration injunction in a foreign seated arbitration but it did not grant it because the grounds under section 45 were not made out and it found that the arbitration agreement was also valid.
Therefore, the Supreme Court took a progressive step and ensured that there was minimum judicial interference in the arbitration proceedings.
- In, World Sport Group (Mauritius) Ltd vs Msm Satellite(Singapore) Pte. [MANU/SC/0054/2014] 24TH January’2014, The Supreme Court stated that the courts shall subject the arbitration agreement to the scrutiny under the grounds mentioned under the section 45 of the Act.
And only if the grounds are proved then the courts have jurisdiction to grant anti-arbitration injunctions.
Therefore, it is only when the court is satisfied that the arbitration agreement is inoperative, incapable of being performed or null & void. Only then the court can exercise its jurisdiction and stay the foreign seated arbitration proceedings. Otherwise the court is strictly bound to refer the parties to arbitration.
Thus, in the present case anti-arbitration injunction was not granted because the grounds under section 45 of the act were not proved. Thereby the Supreme Court took a step towards ensuring the arbitral process conducted and there is less judicial intervention.
- In, Mcdonald’s India Private Ltd. Vs. Vikram Bakshi And Ors.[ MANU/DE/1684/2016] The division bench of the hon’ble Delhi High Court on 21st July’16 took a pro-arbitration stand and set-aside the order of the single judge bench of the court which granted an anti-arbitration injunction. The division bench came to the view that the Indian courts did have the jurisdiction to grant anti-arbitration injunctions in foreign seated arbitrations but such an injunction shall only be granted in rarest of rare cases and the court should exercise caution while granting it.
The court also stated that the grounds mentioned under section 45 of the act shall also be made out and proved by the party claiming before it. That is the inoperative, Incapable of being performed and null & void. If these grounds are proved then the court has the jurisdiction to stay the foreign seated arbitration.
In the present case the division bench was not satisfied with grounds under section 45 and that they were not made out. Also, the parties claim that the Forum non-conveniens was not applicable here as the parties themselves chose the place of the arbitration and cannot claim it to be inconvenient later on.
Therefore the anti-arbitration injunction was not granted and the court took a more progressive step towards pro-arbitration and less of judicial intervention.
Thus, it is clear from the above cases that the judicial standpoint was clear that the Indian courts had the jurisdiction to grant anti-arbitration injunction against foreign seated arbitrations but such an injunction shall only be granted after exercising utmost caution and after the arbitration agreement is scrutinized under the grounds mentioned in the section 45 of the act.
It is pertinent to mention that the Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, [(2012)MANU/SC/1965/2001], (“Kvaerner cementation”) judgement even though it was reported in 2012 was Not taken into account by the Supreme Court and by the Delhi High Court. Also, the counsels appearing in the above mentioned cases did not rely on the “Kvaerner cementation” judgement.
In “Kvaerner cementation” judgement the Supreme Court clearly stated that the courts do not have the jurisdiction to interfere and grant anti-arbitration injunctions and the arbitrator has the competence to rule upon its own competence, the court relied on the competence-competence principle (kompetenz-kompetenz). The court further stated that the arbitrator shall check whether there is a valid and existing arbitration agreement or not along with other issues and the courts shall be bound to simply refer the dispute to arbitration where on the simple read of the agreement it is clear that there is an arbitration agreement between the parties.
The Contrary View of the Delhi High Court
The Delhi High Court in its recent judgement given by a single judge bench in Dr. Bina Modi vs Mr. Lalit Modi & Ors.[MANU/DE/0685/2020] (“Bina Modi”) On 3 March, 2020, took a very contrasting approach as far as the cases decided in the previous two decades to the judgement are concerned.
In the present case the parties were in a dispute with regard to a family trust deed (“trust deed”) entered into by the parties on 9th April’2014 at London. The members of the trust were Mrs. Bina modi(Managing trustee) after her husband K.K Modi’s demise on 2nd November’19, Mr. Lalit Modi(son), Mr. Samir Modi (son) and Ms. Charu Modi(Daughter).
After a meeting of the trust was conducted and no amicable solution could be reached between the parties. The defendant initiated emergency arbitration proceedings at the international chamber of commerce (ICC) at Singapore.
The parties attended the first preliminary meeting on 22nd February 2020. After which the present suit was filed before the court.
Decision of the court
The judgement was given by the hon’ble Justice Rajiv Sahai Endlaw of the Delhi High Court. The court relied heavily on the (“Kvaerner cementation”) judgement given by Supreme Court and upheld the supremacy of the competence-competence(kompetenz-kompetez) principle which states that the arbitrator shall have the competence to decide upon the competence of the arbitral tribunal and the issues pertaining to the validity of the agreement along with others. The reasons behind the decision were as follows:
- The Plaintiff’s claimed that the procedure followed in the Singapore arbitration was contrary to the Indian arbitration law. The court stated that according to the section 19 of the act the parties can choose the procedure of the arbitration as per their wish. And as they had consciously chosen Singapore as the seat of the arbitration in the trust deed, the claim is not maintainable.
- The Plaintiff’s claimed that the proceedings were oppressive and vexatious as they were to be held in Singapore thus very expensive. But the court again stated that they had consciously chosen Singapore as the seat in the trust deed and now cannot claim it to be non-convenient for them.
- The court also stated that when the disputes which can be adjudicated by the arbitral tribunal shall not be adjudicated by the court as if it was a civil-suit and the court shall be liable to refer such a dispute to the arbitral tribunal.
- The plaintiff’s stated that the court was wrong in relying on the “Kvaerner cementation” judgement of the Supreme Court as it was reported eleven years later i.e. in 2012 and it had no binding precedent. The court stated that even though “Kvaerner cementation” was not reported until 2012 and was a short order, it does not mean that it is not a binding decision and reiterated that the High Courts are bound by the decisions of the Supreme Court. Hence, the court relied on it heavily.
Thus, the Delhi High Court overwhelmingly relied on the Supreme Court judgement in “Kvaerner Cementation” and stated that irrespective that the arbitration being domestic or foreign seated the civil courts did not have jurisdiction to intervene in the arbitral proceedings and the arbitral tribunal had all the competence to adjudicate upon the validity, existence and jurisdiction of the proceedings by the virtues of section 16 of the act and also upheld the supremacy of the competence-competence principle (kompetenz-kompetenz). The anti-arbitration injunction was not granted.
It is important to mention that Delhi high court while pronouncing the present decision also stated that even though, there are various judgements of the Supreme Court and the High Court’s which state that the civil court has the jurisdiction to adjudicate the anti-arbitration injunction suit and scrutinize the arbitration agreement and the proceedings under the grounds mention in section 45 are not a good application of law as they had not considered “Kvaerner cementation”.
However, an appeal was made and the decision is pending before the division-bench of the Delhi High Court.
Dissenting Opinion of the Calcutta High Court
In the recent case of Balasore Alloys Limited vs. Medima LLC (12.08.2020 – CALHC): [MANU/WB/0616/2020].The Calcutta high court on 12th August’20 decided upon a dispute between the parties in dispute and strongly dissented with the (“Kvaerner cementation”) judgement of the Delhi High court passed preceding to this present judgement.
The plaintiff Balasore is an Indian public limited company whereas the defendant Medima LLC is a limited liability company (LLC) incorporated as per the laws of New York in the United States of America. The plaintiff supplies “Ferro alloy” to the defendant. Some dispute arose between the parties with regard to 37 independent purchase orders/contracts.
The present suit is filed by the plaintiff to restrain the defendant from continuing arbitration at the international chamber of commerce (“ICC”) London, United Kingdom.
For this matter the counsel appearing for the defendant relied on various judgements out of which three are important to be mentioned- 1. (“Kvaerner Cementation”) 2. (“Chatterjee Petrochem”) and 3. (“Bina Modi”). These are discussed below in the light of the present judgement.
- The Calcutta High Court stated that the “Kvaerner cementation” judgement was implicitly Overruled by the Supreme Court itself in their subsequent judgement of S.B.P. and Co. vs. Patel Engineering Ltd. and Ors. [MANU/SC/1787/2005] (“SBP Case”).
The Calcutta high court stated that it heavily relied on the “SBP Case” in which the Supreme Court stated that the civil courts did have the jurisdiction to rule upon the jurisdiction of the arbitral tribunal and were not totally excluded by the virtue of competence of the arbitral tribunal. But, such power shall be exercised with utmost caution and in rarest of rare cases. It is stated that the “Kvaerner cementation” was implicitly overruled, by “SBP Case” on two grounds:
- That the “SBP Case” came subsequent to the “Kvaerner Cementation” i.e. in 2005 and in 2001, respectively.
- That the Supreme Court implicitly overruled the “Kvaerner Cementation” by a seven-judge constitution bench in SBP Case. As compared to a three-judge bench in the “Kvaerner cementation”.
Thus the Calcutta High Court rejected the reliance of the defendant’s counsel on the “Kvaerner Cementation”.
2. The defendant’s counsel also relied on the “Bina Modi” judgement of the Delhi High Court which clearly excludes the jurisdiction of the civil courts to grant-anti arbitration injunction.
The Calcutta high court stated that the Hon’ble single judge heading the bench in the “Bina Modi” relied heavily on the “Kvaerner cementation” as a precedent but was not made aware by the counsels about the “SBP Case” and that it had implicitly overruled the “Kvaerner cementation” as far as civil courts jurisdiction is concerned to rule upon the existence and validity of the arbitration agreement and competence of the arbitral tribunal. Because it is clear from the SBP Case that the civil courts had the jurisdiction to grant anti-arbitration injunction but with extreme caution, Contrary to what is held in the “Bina modi” judgement.
3. Also reliance was placed on the Supreme Court judgement in “Chatterjee Petrochem” by the defendant’s counsel.
The Calcutta High Court held that the Supreme Court went on to scrutinize the agreement under the grounds mentioned in section 45 of the act. And it found that there was a “valid and existing” arbitration agreement and it is only then that the apex court refused to grant anti-arbitration injunction in the case and not otherwise.
Therefore, in the view of the Hon’ble single judge bench of the Calcutta High Court, the courts had to grant relief to a party approaching it. Hence, the civil court did have the jurisdiction to rule upon the validity and existence of the arbitration agreement and decide the competence of the arbitral tribunal. But it should be done with extreme caution and sparingly.
Thus, the court held that because the plaintiff had failed to prove that the agreement was “inoperative” or any other ground under section 45. The anti-arbitration injunction cannot be granted and referred the parties to arbitration.
However, an appeal was made before the Division bench of the Hon’ble Calcutta High Court. The division bench on consideration also upheld the decision by the single judge bench of the same court and rejected to issue an interim order of anti-arbitration injunction against the arbitration proceedings at “ICC”.
Supreme Court’s view on the case
In, Balasore alloys limited vs. Medima LLC,[ MANU/SC/0691/2020] decided on 16th September’20, An application was made under section 11(6) of the arbitration and conciliation(amendment) act,2019 by plaintiff/applicant to appoint an arbitrator, before the Supreme Court it arose vide a special leave petition (SLP) out of the above-mentioned decision of the Calcutta high court. It was claimed by the applicant that the arbitration proceedings were to be held in India under some other dispute resolution clause and for that the court shall appoint an arbitrator.
Keeping in mind the limited power to be exercised under the said section, it is important to mention that the Supreme Court still considered the judgement of Calcutta high court in the “Balasore alloys” and the apex court stated that it “Found no reason to interfere” in the arbitration proceedings which had begun under the three arbitrators at “ICC” London.
Grant Anti-arbitration injunctions in domestic arbitration
The courts in India have primarily taken a progressive approach in various judicial decisions and do not encourage the grant of anti-arbitration injunctions in domestic arbitrations and there are judicial conflicts same as it is in the grant of anti-arbitration injunctions in foreign seated arbitration by the Indian courts. The amendments brought to the arbitration and conciliation act are also focused on the lines to reduce the judicial interference as much as possible in the arbitration process. However, the fundamental principles regarding anti-arbitration injunctions are still evolving.
Arbitration is an evolving jurisprudence and more particularly as far as principles regarding anti-arbitration injunctions are concerned. There have been conflicting judicial pronouncements with regard to grant of anti-arbitration injunctions by courts in India. It will be interesting to see how the principles unfold in the coming future. Indeed the future seems bright for arbitration in international as well as domestic sphere.
In my opinion, anti-arbitration injunctions shall be granted. It is because a person has the right to safeguard himself and if he approaches a court for such a relief he shall not be denied just because there is a blanket rule of not interfering in the arbitral process. Every case should be judged on its own merits and if need be an anti-arbitration injunction, shall be granted. But with extreme caution and in cases where if not granted shall be an injustice to the party aggrieved.
Hence, the fundamental principles governing anti-arbitration injunctions are still evolving every passing day, it is interesting to be a witness to it growing and also how the principles unfold in the coming time.
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