Anti-arbitration injunctions are the most contentious interventions by national courts in international arbitration. Courts in India seek to balance party autonomy against the misuse of arbitration. The jurisprudence has evolved significantly.
The Arbitration and Conciliation Act, 1996 (act) does not provide for anti-arbitration injunctions. Indeed, it limits judicial intervention in arbitration and empowers arbitral tribunals to rule on their own jurisdiction and that of foreign-seated arbitration. It demands arbitration unless the agreement is void, inoperative or incapable of performance.
Anushka Sharda
Partner
Khaitan & Co.
Approaches to anti-arbitration injunctions have swung between restrictive and permissive. The Supreme Court at first adopted a restrictive approach, upholding the principle of kompetenz-kompetenz in its brief judgment in Kvaerner Cementation India Limited v Bajranglal Agarwal. The court relied wholly on section 16 of the act as it then stood in 2001.
In Bina Modi v Lalit Modi and Ors, a single judge of Delhi High Court followed Kvaerner Cementation, refusing to interfere with an emergency application to the Singapore International Commercial Court. However, an appellate bench of Delhi High Court overruled the single judge’s decision, holding that before making reference to arbitration, the court was required to determine whether the dispute was arbitrable, such as for trust disputes, in the said case.
In a recent significant decision, Engineering Projects (India) Limited v MSA Global Limited Liability Company, the Delhi High Court held that civil courts retain jurisdiction to grant anti-arbitration injunctions in foreign-seated arbitrations if the proceedings are vexatious and oppressive. The agreement provided for ICC arbitration applying Omani substantive law. Exclusive jurisdiction vested in the New Delhi courts and Singapore was the seat. The court granted the injunction because a party-nominated arbitrator failed to disclose a possible conflict of interest, being involved in arbitral proceedings in which the opposite party’s managing director was concerned.
Saloni Gupta
Senior associate
Khaitan & Co.
The court held that the arbitrator’s deliberate non-disclosure when he was appointed removed the opportunity to challenge his impartiality. The proceedings were, on the face of it, vexatious and oppressive. The court also ruled that the arbitration process entailed substantial outlay of public funds and administrative resources, since the plaintiff was a public sector undertaking. Incurring such expenditure when the fundamental objection to the impartiality of the arbitrator remained unresolved was not prudent.
The defendant’s conduct in pressing for the continuation of arbitral proceedings and continually applying to the High Court of Singapore, despite being aware of the challenges launched by the plaintiff in both Delhi High Court and the Singapore court, demonstrated bad faith and oppression.
Business professionals must conduct thorough due diligence in arbitrator selection before nomination. The other side’s arbitrator must also be vetted. Parties should demand full conflict checks and disclosures before the arbitration starts.
Parties should state the reason why an exclusive jurisdiction court is designated and define the limits of its jurisdiction. Contracts with public sector entities involve public funds and resources. They may be particularly scrutinised. Parties have to strengthen safeguards and be aware of due process requirements.
Generally, courts may now grant anti-arbitration injunctions against foreign-seated arbitrations because of the invalidity of the arbitration agreement, procedural impropriety and lack of fairness, vexatious or oppressive proceedings and non-arbitrability. Although acknowledging their power to grant anti-arbitration injunctions, courts consistently emphasise the need for restraint. The threshold for grant of the same remains high.
Although being appealed, Engineering Projects is a reminder that arbitration is subject to judicial oversight, particularly when fundamental principles of fairness and procedural integrity are disregarded. Respecting these principles may lead to success in arbitration.
Anushka Sharda is a partner and Saloni Gupta is a senior associate at Khaitan & Co.
Khaitan & Co.
Mumbai
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