ANTI-ARBITRATION INJUNCTIONS: AN IMPEDIMENT TO ARBITRATION IN INDIA

Bhavya Sangri | August 2, 2021

INTRODUCTION

An Anti-Arbitration Injunction (AAI) is an injunction granted by courts to restrain parties or an arbitral tribunal from either commencing or continuing with the arbitration proceedings. An anti-arbitration injunction can be sought at three stages i.e., before the commencement of arbitration, during the arbitration hearing, or after the hearing but before the rendering of the final award.

The grant of an anti-arbitration injunction can be seen to be contrary to the cardinal principle of arbitration, i.e. the rule of Kompetenz-Kompetenz. This rule is embodied in Section 16 of the Arbitration and Conciliation Act, 1996and it allows the arbitral tribunal alone to rule on its jurisdiction and decide any issue regarding the existence and validity of the arbitration agreement. This is read along with Section 5 of the Act, which does not allow any judicial authority to intervene in matters governed by the Act except where so provided in the statute.

However, the courts, on a few occasions, have assumed jurisdiction under Section 9and Section 45 of the Act to grant anti-arbitration injunctions. Section 9 empowers the court to grant interim remedies to parties before or during the arbitral proceedings. Similarly, Section 45 of the Act provides certain powers to the court to interfere with proceeding in foreign arbitrations if the arbitration agreement between the parties is null and void or inoperative or incapable of being performed.

POWER OF COURTS IN RESPECT OF ANTI-ARBITRATION INJUNCTIONS

The earliest decision concerning the anti-arbitration injunction is that of Kvaerner Cementation India Limited v. Bajranglal Agarwal.[1] The Supreme Court relied on Sections 16 and 5 and refused to grant an anti-arbitration injunction. In this case, the court stated that a civil court does not have jurisdiction to determine any objection with respect to the existence or validity of an arbitration agreement.

This case came to be a significant precedent set by the Supreme Court in matters of anti-arbitration injunctions. Kvaerner Cementation has been upheld by the Supreme Court in A. Ayyasamy v. A. Paramasivam and Ors.[2]wherein it was held that the civil court shall not have any jurisdiction to adjudicate if the arbitration proceedings had already begun before filing such suit before the court. Thus, again anti-arbitration injunction was not granted.

However, there is another set of case laws that have affirmed the jurisdiction of civil courts to grant anti-arbitration injunctions under limited or exceptional circumstances. The primary case in this regard was SBP & Co. v. Patel Engineering[3]where the Supreme Court rejected the argument that the arbitral tribunal solely has the competence to determine its jurisdiction. The court held that the civil courts cannot be excluded from determining the jurisdiction of the arbitral tribunal.

Subsequently, the Apex Court in Chatterjee Petrochem Company and Anr. v. Haldia Petrochemicals Limited[4] reaffirmed the jurisdiction of civil courts to grant anti-arbitration injunctions. Soon after this case, the Supreme Court in World Sport Group (Mauritius) Ltd. v. MSM Satellite[5] held that a civil court has inherent jurisdiction under Section 9of the Code of Civil Procedure, 1908, to try all suits of civil nature unless expressly or impliedly barred by the law. The court in this case also stated that in the absence of any such bar on the maintainability of anti-arbitration suit, suits seeking injunctions in restraint of arbitration are indeed maintainable.

However, a bare reading in all these cases would reveal that the anti-arbitration injunction was granted only when the arbitration agreement was void, inoperative, or incapable of being performed; the proceedings were oppressive or vexatious, or there was an abuse of legal process.

Regardless, the Supreme Courts and High Courts have time and again upheld the policy of minimal interference in arbitration matters. In the matter of Ravi Arya & Ors v. Palmview Overseas Limited,[6] the Bombay High Court observed that once the matter is before the arbitral tribunal, the Civil Court cannot entertain any proceedings seeking an injunction against the arbitral tribunal during arbitration proceedings.

Similarly, the Delhi High Court in Himachal Sorang Power Private Limited v. NCC Infrastructure Holdings Limited[7] rejected the application seeking an anti-arbitration injunction and laid down the following parameters governing anti-arbitration injunction:

  1. “The principles governing anti-suit injunction are not identical to those that govern an anti-arbitration injunction.
  2. Courts are slow in granting an anti-arbitration injunction unless it concludes that the proceeding initiated is vexatious and/or oppressive.
  3. The fact that in the assessment of the Court a trial would be required would be a factor that would weigh against the grant of anti-arbitration injunction.
  4. The aggrieved should be encouraged to approach either the Arbitral Tribunal or the Court which has the supervisory jurisdiction in the matter. An endeavor should be made to support and aid arbitration rather than allow parties to move away from the chosen adjudicatory process.”

More recently, the case of Bina Modi & Ors v. Lalit Modi & Ors[8] has regenerated an uproar in granting anti-arbitration injunctions.

The case emerged with the Modi family forming a trust for the maintenance of family assets and property. A conflict emerged between the trustees within a trust deed dated 9th April 2014. One of the trustees, Lalit Modi, filed an application seeking emergency measures against the other trustees before the Singapore International Chamber of Commerce. The other trustees filed anti-arbitration injunction suits before the Court, demanding a declaration that the arbitration proceedings are inapplicable and contradictory to India’s public policy.

In March 2020, the High Court declined to grant the anti-arbitration injunction based on the reasoning that courts cannot rule on the validity or existence of an arbitration agreement unless there is a “substantive action” brought before the Court under Section 8 of the Arbitration and Conciliation Act 1996. Another reason provided was that since an equally efficacious remedy was available by the application of the Kompetenz-Kompetenz principle, it did not warrant any interference by the Court.

The Calcutta High Court went a step further in the case of Balasore Alloys Limited v. Medima LLC[9]which dealt with the question that whether the arbitration seat was in India, or the United Kingdom’s International Chamber of Commerce (ICC). The High Court held that the Courts in India have the power to grant anti-arbitration injunctions against foreign seated arbitrations; however, this power should be used sparingly and with caution.

CONCLUSION

Given the contentious existence of the anti-arbitration injunctions, the approach taken by the courts in the recent cases has been progressive and is in the direction of a pro-arbitration regime.

The stand taken by the courts in the grant of anti-arbitration injunctions in domestic arbitrations has preserved the sanctity of the arbitral process and has ensured that the trust of people in the arbitration process is not adversely affected. With the coming of the Bina Modi case and the Balasore Alloys Limited case, it is evident that the court is open to broadening the scope of not granting anti-arbitration injunctions and promoted minimal

[1] (2012) 5 SCC 214.

[2] (2016) 10 SCC 386.

[3] (2005) 8 SCC 618.

[4](2014) 14 SCC 574.

[5](2014) 11 SCC 639.

[6]2019 SCC OnLine Bom 251.

[7]2019 SCC Online Del 7575.

[8]2020 SCC OnLine Del 901.

[9] (2020) 9 SCC 136.

Leave a Reply

Your email address will not be published. Required fields are marked *