Anti - Arbitration Injunction

Anti - Arbitration Injunction

An "anti-arbitration injunction" is an injunction whereby one party seeks restraining orders against the other party to proceed or commence with an arbitration proceeding in pursuance of the arbitration agreement between the parties. Though the concept of "anti-arbitration injunction" is not defined in the Arbitration and Conciliation Act, 1996 ("the Act"), it has been duly recognized and adopted by the Indian Courts. Usually, the Courts in India whilst considering section 8 of the Act refer the parties to arbitration in terms of an arbitration agreement between the parties. It may be noted that in certain circumstances, referring the parties for arbitration may be against the interests of justice and it may be necessary to grant an anti-arbitration injunction. There are judicial precedents wherein the Courts in India have elaborated the circumstances under which such relief of "anti-arbitration injunction" may be granted to the parties. In practice, however, it can be safely said that the Courts in India are, in principle, reluctant to grant an anti-arbitration injunction.

The Hon'ble High Court of Delhi, while dealing with the concept of "anti-arbitration injunction", in the matter of "McDonalds India Private Limited vs. Vikram Bakshi
[1]" observed that the principles which are applicable to an "anti-suit injunction" will not necessarily be applied to an anti-arbitration injunction as the mere existence or possibility of existence of multiple proceedings is not a sufficient cause to render the arbitration agreement inoperative or incapable of being performed. Similarly, in the matter of
"Ravi Arya and ors vs. Palmview Overseas Limited and ors[2]
" the Hon'ble Bombay High Court observed that once the matter is before the Arbitral Tribunal, the Civil Court cannot entertain any proceedings seeking injunction against the Arbitral Tribunal during the course of arbitration proceedings and that section 16 of the Act confers power on the Arbitral Tribunal to rule on its own jurisdiction which includes adjudication upon the existence or validity of the arbitration agreement.

The Hon'ble Calcutta High Court in the case of "Board of Trustees of the Port of Kolkata vs. Louis Dreyfus Armatures SAS & others[3]" has summarized, as below, the circumstances under which an anti-arbitration injunction can be granted:-

  • "If an issue is raised whether there is any 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 vexatious or unconscionable."

The Hon'ble Punjab and Haryana High Court[4], under its prerogative powers (writ jurisdiction), have granted anti-arbitration injunction thereby restraining the parties (where one of the parties was a State Entity) from initiating fresh arbitration proceedings with regard to disputes already having been seized of by an existing Arbitral Tribunal. While relying on this judgment, the Hon'ble Supreme Court of India in the matter titled as "Antrix Corp.Ltd vs. Devas Multimedia[5]" has held that where an arbitrator had already been appointed and intimation thereof had been conveyed to the other party, a separate application for appointment of an arbitrator is not maintainable. It was observed that once the arbitration clause has been invoked, there is no power left to once again refer the same dispute to a different Arbitral Tribunal since the Arbitral Tribunal which is seized of the disputes first will have the appropriate jurisdiction over the matter.

The Hon'ble Calcutta High Court in the matter of "Devi Resources Limited vs. Ambo Exports Limited[6]" held that an anti-arbitration injunction may be sought on the ground of the incapacity of the party seeking injunction or grounds of overwhelming inconvenience to such party. A party is said to be under incapacity when, it is of unsound mind or it has limited contractual capacity and cannot act beyond that capacity or where it has been incorporated by a statue and it may refer the disputes to arbitration only if it is authorized or permitted to do so by the statute incorporating it.

The Hon'ble High Court of Delhi in the matter of "Himachal Sorang Power Private Limited vs. NCC Infrastructure Holdings Limited[7]" has laid down the following parameters governing anti-arbitration injunction:

"i) The principles governing anti-suit injunction are not identical to those that govern an anti-arbitration injunction.

ii) Courts are slow in granting an anti-arbitration injunction unless it comes to the conclusion that the proceeding initiated is vexatious and/or oppressive.

iii) 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.

iv) 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.

v) 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."

The Hon'ble Supreme Court in one of its judgment[8], has held that an arbitration agreement becomes "inoperative" when it has ceased to have effect due to revocation by one of the parties or where an arbitral award has already been made or where the principles of res judicata[9] apply. It has further been observed that an arbitration agreement would not become inoperative or incapable of being performed where allegations of fraud have to be enquired into and the Court cannot refuse to refer the parties to arbitration. The Hon'ble Supreme Court in another matter[10] has further observed that a proceeding is vexatious or oppressive in nature, if a party has chosen to put his case in one way and thereafter it brings the same transaction before the Court taking a contrary stand with respect to its earlier contentions and accordingly relies on a new cause of action.

CONCLUSION & ANALYSIS

As is evident from the judicial precedents, Indian Courts do have the power to grant an anti-arbitration injunction in domestic as well as international arbitrations (in pursuance of Section 45 of the Act). It can be safely inferred that an anti-arbitration injunction may be granted by a Court under the following conditions:-

  • The arbitration initiated is vexatious and/ or oppressive in nature;
  • Fresh arbitration proceedings would be barred by res-judicata or constructive res-judicata, which could lead to proceedings that maybe vexatious and/ or oppressive in nature;

  • An existing Arbitral Tribunal has already seized of the disputes between the parties and as such any other arbitral tribunal would lack the jurisdiction to try the matter.

  • Egregious fraud has been committed by the party seeking to initiate or pursue the second arbitral reference.

  • The party seeking injunction is under some incapacity or overwhelming inconvenience.

For any clarification or further information, please contact

Varun Pareek
Partner
E: varun.pareek@clasislaw.com

Sidhant Pandita
Associate
E: sidhant.pandita@clasislaw.com

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[1] 2016 SCC OnLine Del 3949

[2] 2019 SCC OnLine Bom 251

[3] 2014 SCC OnLine Cal 17695

[4] AIR 2006 P&H 124

[5] (2014) 11 SCC 560

[6] MANU/WB/0314/2019.

[7] 2019 SCC Online Del 7575

[8] (2014)11 SCC 639

[9] 'Res-Judicata' means once an issue in a suit has been decided, the parties are barred from raising the same issue again in the Court.

[10] (1998) 3 SCC 573