Court Has Power To Grant Anti-Enforcement Injunction Against Proceedings In Foreign Court Which Threaten Arbitral Process Initiated In India: Delhi High Court

The Delhi High Court bench of Justice C. Hari Shankar has held that when proceedings in a foreign court, or a decree issued by a foreign court, threaten the arbitral process that may be initiated in India, the court has the authority under Section 9 of the Arbitration Act to restrain the party from continuing with the foreign proceedings or enforcing the potentially prejudicial decree. The bench held that: “Though one, as noted, need actually look no further, the power to grant an anti-suit, or anti-enforcement, injunction, would also be encompassed in the power to grant interim measures of protection as may be “just and convenient”, and would in any case be included in the power to pass orders to secure the ends of justice or to prevent abuse of the process of the Court, conferred by Section 151 of the CPC.” “Where, therefore, proceedings in a foreign Court, or any order or decree passed by a foreign Court, threatens to prejudice or derail the arbitral process which may competently be instituted in India, the Section 9 Court is amply possessed of the power to injunct the party who has instituted the foreign proceedings from further proceeding with them, or from enforcing the potentially threatening order or decree passed therein. If a civil Court, dealing with a civil suit, can do so, so can a Section 9 Court seized with the task of protecting the arbitral process from being derailed or hijacked – or, as in the present case, guillotined.” Brief Facts: Honasa Consumer Limited (Petitioner) and RSM General Trading LLC (Respondent) entered into an Authorized Distributorship Agreement (ADA) under which the Respondent was to distribute the Petitioner's products in the Middle East and Africa. The ADA included an arbitration clause which mandated that disputes would be resolved through arbitration under the Arbitration and Conciliation Act, 1996 with New Delhi as the arbitration venue. Additionally, the ADA contained an exclusive jurisdiction clause conferring jurisdiction over all matters related to the contract on the courts in New Delhi and specified that the agreement was to be interpreted according to Indian law. Despite these contractual provisions, the Respondent filed a lawsuit in the Court of First Instance in Dubai alleging a breach of the ADA by the petitioner. The Dubai Court, applying Dubai law to the dispute, found the Petitioner guilty of breaching the ADA and awarded the Respondent damages amounting to AED 25,071,991 equivalent to ₹57,17,65,947. The Respondent, in its submissions, acknowledged that by obtaining this decree, it rendered the arbitration agreement and other contractual covenants unworkable. The Respondent argued that since the Dubai Court had already decided the matter, arbitration was no longer feasible. In response, the Petitioner approached the High Court under Section 9 of the Arbitration Act and sought an injunction to prevent the respondent from enforcing the Dubai Court's decree. The Petitioner argued that the Dubai lawsuit was initiated in bad faith to bypass the arbitration agreement and the exclusive jurisdiction clause in the ADA. The Petitioner also contended that the inclusion of additional defendants in the Dubai suit, who had no real connection to the dispute, was a strategic move by the Respondent to justify its approach to the Dubai Court. However, the Dubai Court itself found that none of the other defendants were liable and the damages were awarded solely against the Petitioner. The Dubai Court's judgment was challenged by the Petitioner through an appeal which is currently pending before the Dubai Court of Appeal. In the meantime, the Respondent sought to execute the Dubai Court's judgment. The Petitioner, therefore, sought interim relief from the High Court, which was granted, restraining the Respondent from enforcing the Dubai decree within India or elsewhere. The Petitioner's counsel, Rajiv Nayar, argued that the Respondent's actions in filing the Dubai suit were both oppressive and vexatious as they directly contravened the arbitration and exclusive jurisdiction clauses of the ADA. Mr. Nayar contended that the suit was a calculated effort to deprive the Petitioner of its right to arbitration by obtaining a decision from a foreign court thereby presenting the Petitioner with a fait accompli. He argued that the Dubai Court's application of Dubai law, in complete disregard of the contractually agreed Indian law and jurisdiction, further justified the need for an anti-suit injunction. Mr. Nayar also highlighted that the Respondent's inclusion of unrelated parties in the Dubai suit was an attempt to evade the arbitration agreement, a strategy that was ultimately unsuccessful, as evidenced by the Dubai Court's judgment holding only the Petitioner liable. On the other hand, the Respondent's counsel, Mr. Mudit Sharma, raised a preliminary objection to the...

Court Has Power To Grant Anti-Enforcement Injunction Against Proceedings In Foreign Court Which Threaten Arbitral Process Initiated In India: Delhi High Court

Rajesh Kumar

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