The Muddy Waters of Anti-Arbitration Injunctions in India

Author: Varun Tyagi*

Introduction

Signatories to arbitration agreements often resort to Civil Courts seeking to enjoin their signatories counterparties from initiating or continuing arbitral proceedings,  the so-called anti-arbitration injunctions.

In India, arbitrations are governed by the Arbitration and Conciliation Act, 1996 (“Act”), which mandates minimum interference by the Civil Courts in the conduct of arbitration proceedings under the Act. The Civil Courts in India have the power to grant injunctions under section 9 of the Code of Civil Procedure, 1908 (“CPC”). However, this power conferred to the Indian Civil Courts is subject to scrutiny under section 41(h) of the Specific Relief Act, 1963 (“SRA”), which bars the grant of injunctions when equally efficacious relief can be obtained by any other usual mode of proceeding.[1]

The dilemma of granting anti-arbitration injunctions is clear. On one hand, the Courts are bound to adhere to the principle of Kompetenz-Kompetenz and decrease judicial intervention in disputes that have an arbitration mechanism. On the other hand, the issuance of anti-arbitration injunction is rendered necessary in matters wherein the arbitration agreement is in dispute; either by claims of fraud, nullity, or where the arbitration process is oppressive, unconscionable, and vexatious. Anti-arbitration injunctions can also afford the appropriate protection to those parties with low bargaining power or where the commencement of arbitral proceedings would be oppressive or unconscionable.[2]

Kvaerner Cementation and the subsequent rollercoaster of judicial opinions

In Kvaerner Cementation India Ltd. v. Bajranglal Agarwal & Anr,[3] the Supreme Court, on a bare reading of Section 16 of the Act (which contains the principle of Kompetenz-Kompetenz) and the object of the Act, held that the Civil Courts did not have jurisdiction to determine the validity of arbitral proceedings even when the validity of the arbitration agreement is disputed. The Court in Chatterjee Petrochem Co. v. Haldia Petrochemicals Ltd.[4] reiterated its position and applied section 5 of the Act to state that “a suit filed with the aim of seeking an anti-arbitration injunction would not be maintainable in law.”

Subsequently, the Supreme Court in SBP & Co. v. Patel Engineering[5] conclusively rejected the argument that an arbitral tribunal solely has competence, to the complete exclusion of Civil Courts, to determine its own jurisdiction. In World Sport Group (Mauritius) Ltd. v. MSM Satellite,[6] the Court established and affirmed the Civil Court’s jurisdiction to intervene and bar arbitration if the grounds established under Section 45 of the Act were satisfied. However, the Indian judiciary’s stance on the issuance of anti-arbitration injunctions was yet again challenged in the cases of A. Ayyasamy v. A. Paramasivam[7] and the National Aluminium Company Limited v. Subhash Infra Engineers Private Limited,[8] where the Court revived the ratio established in Kvaerner.

A division bench of the Delhi High Court had previously, in McDonald’s India Private Limited v. Vikram Bakshi and Ors.,[9] dealt with the issue of Civil Courts’ jurisdiction to grant anti-arbitration injunctions in arbitrations governed by the Act. It was held that Civil Courts had jurisdiction to grant anti-arbitration injunctions where it was proved that the arbitration agreement was null, void, inoperative or incapable of being performed.

Delhi High Court’s decision in Bina Modi

In Bina Modi v. Lalit Modi,[10] one of the trustees of a family trust had initiated arbitral proceedings against the other trustees for resolution of disputes arising under the trust deed. The respondent trustees filed two civil suits before the Delhi High Court, seeking, inter alia, an anti-arbitration injunction against such arbitral proceedings and a declaration that the arbitration agreement in the trust deed was null, void, inoperative and unenforceable.

The Single Judge dismissed the suit without scrutinizing the merits of the case by relying on Section 16 of the Act and the principle of Kompetenz-Kompetenz. While the Kvaerner judgement was not considered binding in nature, the Judge referred to the ratio therein to scrutinize the working of Section 16 of the Act and the principle of Kompetenz-Kompetenz. Additionally, the learned judge deviated from the view taken in the McDonald’s India case and held that Civil Courts did not have the jurisdiction to bar arbitral proceedings. The Judge also deliberated upon the relief available under Section 41(h) of the SRA and declared that the bar on the injunctive relief sought under the SRA was justified as the relief would have otherwise inferred with the Act, which, by itself, provided an equally efficacious remedy under Section 16 of the Act.

On appeal, the Division Bench of Delhi High Court reversed the judgement of the learned Single Judge and granted an ad interim relief to Bina Modi in the form of anti-arbitration injunction to restrain Lalit Modi from pursuing emergency arbitration proceedings in Singapore.[11] Here, the Division Bench held that the learned Single Judge ought to have deliberated the matter on the merits by considering arbitrability of the issue (as laid down in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.).[12] The Bench maintained that the Court has the inherent jurisdiction to determine whether a dispute is arbitrable, particularly when the ends of Justice would be otherwise defeated.

The conflict of ratios between the Single Judge and the Division Bench of Delhi High Court in the Bina Modi case precisely encapsulates the dilemma surrounding the issuance of anti-arbitration injunctions in the Indian arbitration regime. This is also further illustrated by the inconsistency in judgements discussed above, on the issue of whether there exists a statutory or inherent power to intervene at the pre-arbitral stage.

Conclusion

An appeal has been filed against the Delhi High Court’s judgement in Bina Modi and is pending before the Supreme Court.[13] The Supreme Court has the opportunity to firmly establish the grounds on which an anti-arbitration injunction can be granted by Civil Courts in India. It is imperative for the Supreme Court to identify with clarity the scope and extent of powers to grant such injunctions, as well as list a narrow range of circumstances these injunctions can be granted under.

* Varun Tyagi is an ARIA Student Editor, Research Assistant to Professor George Berman, Former Judicial Law Clerk at the Supreme Court of India, and an LLM Candidate at Columbia Law School.

[1] Dr. Aniruddha Rajput, Balancing the Power of Anti-Arbitration Injunction with the Competence of Investment Tribunals: Union of India v. Vodafone Group PLC United Kingdom, 7.1 GNLU L. Rev. 109, 110 (2020).

[2] Hiroo Advani & Manav Nagpal, The curious case of Bina Modi v. Lalit Modi: Permissibility of Anti-Arbitration Injunctions in India, SCC Online Blog Exp 60 (2021).

[3] Kvaerner Cementation India Limited v. Bajranglal Agarwal And Another, (2012) 5 SCC 214 (India).

[4] Chatterjee Petrochem Company v. Haldia Petrochemicals Limited, (2014) 14 SCC 574 (India).

[5] SBP & CO. v. Patel Engineering Ltd., (2005) 8 SCC 618 (India).

[6] World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) Pte. Limited, (2014) 11 SCC 639 (India).

[7] A. Ayyasamy v. A. Paramasivam and Others, (2016) 10 SCC 386 (India).

[8] National Aluminium Company Limited v. Subhash Infra Engineers Private Limited, (2020) 15 SCC 557 (India).

[9] McDonald’s India Private Limited v. Vikram Bakshi & Ors, 2016 (4) ARbLR 250 (India).

[10] Dr. Bina Modi v. Lalit Modi and Others, 2020 SCC OnLine Del 901 (India).

[11] Dr. Bina Modi v. Lalit Kumar and Others, 2020 SCC OnLine Del 1678 (India).

[12] Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others, (2011) 5 SCC 532 (India).

[13] SLP(C) No. 001134 – 001135/2021.