Grant of Anti-Arbitration Injunctions in India - Recent Developments

Anti-arbitration injunctions have always masqueraded as a quandary for lawyers and judges alike. In a world moving towards a pro-arbitration system of dispute resolution, interference by courts is seen as a hindrance. For this very reason, the courts in India have been perplexed with the issue and have delivered conflicting, divergent and incongruous judgements resulting in inconsistency. Theoretically, anti-arbitration injunctions can be granted by the courts to injunct a party from initiating arbitration proceedings, or if initiated, grant a stay on the proceedings. In practice, these injunctions are rarely granted but granted nonetheless, subject to severe limitations. The Calcutta High Court recently examined the law relating to anti-arbitration injunctions in Balasore Alloys vs. Medima LLC 2020 SCC OnLine Cal 1699, in foreign seated arbitrations.

Prior to the discussion on anti-arbitration injunctions, it is essential to acquaint the reader with the facts of the case. The Parties had entered into an Agreement in 2017 wherein the Respondent would exclusively distribute and sell the goods of the Plaintiff in United States of America (U.S.A.) and Canada. Subsequently, in the year 2018, the parties signed an Agency Agreement intended to govern all future transactions and purchase orders between the parties. The Agency Agreement was signed in addition to the 2017 Agreement but did not replace it. The 2017 Agreement provided a dispute resolution clause which was starkly different to the one in 2018 Agency Agreement such that under the former, the arbitrations were subjected to English law and held in England while under the latter, arbitrations were subject to Indian law and to be held in India. As disputes arose between the Parties, the Respondent issued a 'Notice of Dispute' under the 2017 Agreement. The Plaintiff opposed the same stating that the dispute had arisen under the 2018 Agreement and shall take place in India. As a result, both the parties initiated arbitrations in two separate forums i.e. the Respondents initiated it in ICC, London while the Plaintiff initiated it in India. Since the dispute was submitted to ICC, it agreed to constitute an arbitral tribunal and commence arbitration. Aggrieved from this decision, the Plaintiff approached the High Court of Calcutta seeking an injunction against the arbitration proceedings in London.

The Hon’ble High Court had the occasion to examine several judicial precedents brought to the attention of the court during the proceedings. In particular, the arguments circled around the contrasting decisions set out in Kvaerner Cementation India Limited v. Bajranglal Agarwal and Anr. (2012) 5 SCC 214 (Kvaerner) and SBP & Co. v. Patel Engineering (2005) 8 SCC 618 (SBP), both of which dealt with the powers of the civil court to grant anti-arbitration injunctions.

The Hon’ble High Court relied on SBP wherein the Apex Court rejected the view that an arbitral tribunal, relying on the Kompetenz Kompetenz principle, is solely empowered to decide on its own jurisdiction, to the exclusion of civil courts. Considering that SBP was pronounced by the constitutional bench of the Hon’ble Supreme Court and delivered a verdict contrary to Kvaerner, it has implicitly overruled the decision in Kvaerner, thereby settling the issue by holding that civil courts are empowered to grant anti-arbitration injunctions. The High Court therefore held that the civil courts, in line with the decision of the Supreme Court, are empowered to grant anti-arbitration injunctions. However, the High Court cautioned against the excessive use of such injunctions, emphasising that such injunctions are to be used sparingly and with abundant caution, and only under the circumstances enumerated in Modi Entertainment Network v. W.S.G. Cricket (2003) 4 SCC 341 (Modi Entertainment) by the Supreme Court. These circumstances are as follows:

"1) In exercising discretion to grant an ant-suit injunction the court must be satisfied of the following aspects:

a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court;

b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and

c) the principle of comity - respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained - must be borne in mind.

2) In a case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings which are oppressive or vexatious or in a forum non-conveniens.

3) Where the jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non-exclusive jurisdiction of the court of the choice of parties are not determinative but are relevant factors and when a question arises as to the nature of the jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case.

4) A court of natural jurisdiction will not normally grant anti-suit injunction against a defendant before it where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court, a forum of their choice in regard to the commencement or continuance of proceedings in the court of choice, save in exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like.

5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum.

6) A party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as it would amount to aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive nor can the court be said to be forum non-conveniens.

7) The burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same."

Upon analysing the prevailing law relating to anti-arbitration injunctions and in light of the circumstances enumerated in Modi Entertainment, the High Court held that the Plaintiff failed to convince the court that ICC, London is a forum non-conveniens or the proceedings initiated at ICC are oppressive or vexatious in nature, as per sub-point 7 of the aforementioned paragraph of Modi Entertainment. The High Court further observed that the mere possibility of multiplicity of proceedings, as enumerated in sub-point 6 of aforementioned paragraph of Modi Entertainment, is not a ground in itself to obtain an anti-arbitration injunction unless such a ground is coupled with either a plea of forum non-conveniens or vexatious or oppressive proceedings. The High Court clarified that for an arbitration agreement to become inoperative, it should have ceased to have effect and the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. As a result, the High Court refused to grant an anti-arbitration injunction as the Plaintiff had failed to discharge its burden.

In conclusion, the High Court has clarified the law pertaining to power of the civil courts to grant anti-arbitration injunctions. Such injunctions can certainly be granted by the civil courts however, the threshold for discharging the burden of proof to obtain such an injunction has been set quite high. As a result, a party seeking an anti-arbitration injunction must prove the circumstances set out in Modi Entertainment to the satisfaction of the court. However, another interesting development relating to anti-arbitration injunction has been the verdict delivered in Bina Modi vs Lalit Modi (2020) SCC OnLine Del 901 wherein the Delhi High Court has held that civil courts are not empowered to grant anti-arbitration injunctions. Considering that Bina Modi and Balasore decision have been delivered just a few months apart and in different states, the prevalent law in State of West Bengal allows anti-arbitration injunctions whereas such injunctions are not allowed in NCT of Delhi. This uncertainty created by the verdicts of these High Courts shall be addressed by the Hon’ble Supreme Court, bring legal certainty and uniformity in decisions.

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