Introduction
In our earlier article at https://rdlawchambers.com/research-articles/ , we have discussed about Anti-suit injunctions, when does a court exercise such jurisdiction, circumstances when such injunction will be relevant, effect and implications of grant of anti-suit injunctions, grounds for the same etc. In this article, we seek to deal with the topic of anti-arbitration injunctions relating to an arbitration proceeding initiated in a foreign country and also relating to an arbitration proceeding initiated in India concerning a commercial dispute.
Anti Arbitration Injunction against an Arbitration Proceeding seated in India
Before we proceed to deal with the aspect further, it is imperative to clarify that anti-arbitration injunctions are a possibility only regarding foreign seated arbitration proceedings against an Indian corporation. No anti-arbitration injunction is possible as regards Indian seated arbitration proceeding with curial law being Indian Arbitration and Conciliation Act 1996, for Section 5 of the said act provides that notwithstanding anything contained in any other law, in the matters governed by Part 1 of the Arbitration and Conciliation Act 1996, no judicial authority shall intervene except to the extent provided in Part 1. Thus, there is an express prohibition against granting an injunction to restrain a party from pursuing Indian seated arbitration proceedings.
Anti-Arbitration Injunction regarding a foreign seated Arbitration
As far as the foreign seated of arbitration is concerned, apparently there is no embargo against intervention by the judicial authorities regarding grant of Anti- arbitration injunction or any other matters as is to be seen in case of Indian seated arbitration.
On the subject matter of grant of anti-arbitration injunctions in a foreign seated arbitration, different High courts in India have expressed different views and applied different principles in a matter for restraining a party from pursuing foreign arbitration proceedings. We will therefore first seek to point out the views taken by different courts in matter of anti-arbitration injunction and thereafter seek to state our views on the subject.
Different Judgments on the subject of Anti-Arbitration Injunctions
In the case of LMJ International Limited versus Sleep well Industries Company Limited, while the division bench of Calcutta High Court held there was no case made out for granting an anti-arbitration injunction on account of no injustice or harassment or initiation of oppressive or vexatious proceedings of arbitration having been established, it essentially sought to apply the principles regarding grant of anti-suit injunction as laid down by the Hon’ble Supreme Court of India in the case of Modi Entertainment Network versus WSG Cricket Pte Limited to an anti-arbitration injunction proceedings.
In the case of Port of Kolkata Versus Louis Dreyfus Armatures SAS, Calcutta High Court elaborated on circumstances under which, anti- arbitration injunction can be granted as under: –
If an issue is raised whether there is a valid arbitration agreement between the parties and the court is of the view that no agreement exists between the parties;
If the arbitration agreement is null and void, inoperative or incapable of being performed;
Continuation of foreign arbitration proceeding might be oppressive or vicious or unconscionable.
In the case of, Mc Donald’s India (P) Limited versus Vikram Bakshi Delhi High Court dealt with the aspect of anti-arbitration injunction. In that case it was argued by the plaintiff that the arbitration agreement was inoperative and incapable of being performed as various disputes between the parties were being dealt with before Company Law Board, where a status quo order was already passed. The single Judge of Delhi High Court granted anti- arbitration injunction applying the principles pertaining to grant of injunction i.e. the prime facia case, Balance of convenience, Irreparable injury in light of the pending proceedings under company law and grant of the order of status quo.
The matter was taken in the appeal by Mc Donald’s and referring to the decision in the case of World Sports Group, the Division Bench of Delhi High Court held that mere existence of multiple proceedings (proceedings before the Company Law Board and those before the Arbitral Tribunal) is not sufficient to render the arbitration agreement inoperative or incapable of being performed and in any event the matter before the Company Law Board fell within ambit of alleged oppression and mismanagement whereas the subject matter of the dispute for the arbitral tribunal related to termination of the JV agreement and rights flowing therefrom. The division bench also held that it was erroneous to hold that there was a waiver or abandonment of the arbitration clause by the parties. The bench also emphasised on the aspect that forum of Arbitration was consciously chosen by the parties for resolution of the disputes and such place consciously chosen by the parties could not be considered as inconvenient place and therefore the aspect of forum non convenience could not have been established.
In the case of Himachal Sorang Power (P) Limited versus the NCC Infrastructure Holdings Ltd., Delhi High Court while dealing with the matter pertaining to grant of anti-arbitration injunction against a foreign seated arbitration sought to encapsulate the broad parameters governing the entire arbitration injunctions as:-
The principles governing anti-suit injunction are not identical to those that govern an anti-arbitration injunction.
Courts are slow in granting an anti-arbitration injunction unless it comes to the conclusion that the proceeding initiated is vexatious and/ or oppressive.
The Court which has supervisory jurisdiction or even personal jurisdiction over parties has the power to disallow commencement of fresh proceedings on the ground of res judicata or constructive res judicata. If persuaded to do so the Court could hold such proceeding to be vexatious and/ or oppressive. This bar could obtain in respect of an issue of law or fact or even a mixed question of law and fact.
The fact that in the assessment of the Court a trial would be required would be a factor which would weigh against grant of anti- arbitration injunction.
The aggrieved should be encouraged to approach either the Arbitral Tribunal or the Court which has the supervisory jurisdiction in the matter. An endeavour should be made to support and aid arbitration rather than allow parties to move away from the chosen adjudicatory process.
The arbitral tribunal could adopt a procedure to deal with it.
In the case of World Sports Group (Mauritius Limited) versus Amazon Satellite (Singapore) Pta Ltd., in the appeal before the Supreme Court, decision of the division of the Bombay High Court was under challenge. The division bench had granted an injunction against the arbitration proceedings in Singapore mainly on the ground that there were allegations of fraud which were required to be gone into and court will be a more suitable forum to address matters pertaining to the allegations of fraud especially when there was a matter related to public funds. The Supreme Court reversed the decision and held that the arbitration agreement does not become “inoperative or incapable of being performed” where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration on the grounds that allegations of fraud have been made by the party which only could be inquired into by the court and not by the arbitrator.
It further held that in case of the arbitrations covered by New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void and inoperative or incapable of being performed and not on allegation that aspect of fraud have to be inquired into while deciding the disputes between the parties.
OUR VIEWS
From above, it would be seen that the different courts have applied different principles regarding the grant of entire arbitration injunctions with some courts applying the principles of anti- suit injunction to an application for anti- arbitration injunction. The courts have also considered in some cases as to whether the arbitration proceedings could be considered to be vexatious or oppressive, whether the arbitration proceedings will be hit by the principles of Res Judicata or Constructive Res Judicata Etc.
Most important decision pertaining to anti-arbitration injunction regarding a foreign seated arbitration is the decision of Supreme Court in the case of World Sport Group (Mauritius) Limited, where the Supreme Court has held that the reference to arbitration could be denied only if the court finds that the arbitration agreement is null and void, inoperative, or incapable of being performed and in author’s view, while parties could try moving anti- arbitration injunction applications on different grounds, they are more likely to succeed if they can establish the agreement to be null and void, inoperative, or incapable of being performed or if they are able to establish that the disputes sought to be referred to or dispute referred to the arbitration is hit by principles of Res Judicata.
Author: Ravish Bhatt, Managing Partner, R&D Law Chambers LLP.
Email : ravish@rdlawchambers.com
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