Popularity of arbitration as a dispute resolution mechanism can be traced to parties’ aversion to long drawn Court driven adjudication. Unfortunately, we routinely come across instances where recalcitrant parties mischievously attempt to deviate from their bargained choice of adjudicatory forum. A popular tactic employed in the past to scuttle arbitral proceedings were anti-arbitration injunction suits.

In this post, we argue that the construct of the [Indian] Arbitration and Conciliation Act, 1996 (“Act”) coupled with the Indian Courts’ strong pro-arbitration stance should relegate anti-arbitration injunction suits, especially for India seated arbitrations, to history. As regards foreign seated arbitrations, we explore the extremely limited lens through which Indian Courts ought to consider such suits and defences, if any, available to parties.

Anti-arbitration injunction suit

These suits are filed to restrain a person from initiating/continuing arbitral proceedings and typically hit at the arbitral tribunal’s jurisdiction to consider the dispute. The objections raised in such suits include (a) absence of a valid arbitration agreement (b) agreement being inoperative/incapable of being performed¹; (c) arbitrability of the subject matter of the dispute; (d) foreign arbitration proceeding being oppressive/vexatious/unconscionable²; and (e) issue in dispute being hit by principles of res judicata³; and (e) non-enforceability of the arbitral award.

When faced with such suits, a Court is tasked with the crucial responsibility of determining whether to interfere or refer parties to the agreed adjudicatory forum.

Is there a statutory bar against such suits in India seated arbitrations?

Section 5 of the Act begins with a non-obstante clause (an addition by the Indian Parliament to Article 5 of the Model Law) and contains an express warning that “matters governed by this Part, no judicial authority shall intervene except where so provided in this Part“. Thus, unless provided (and to the extent provided for in Part 1), Section 5 bars any form of Court interference in arbitrations.

Section 5 is the beacon embodying the Act’s primary objective of minimizing Court supervision in arbitrations. Given its strict construct, it may be argued that it does not leave any room for grant of an anti-arbitration injunction. Part I admittedly does not contemplate any such leeway. On the contrary, under Section 16, it empowers the arbitral tribunals alone to tackle concerns which may go to the root of their jurisdiction.

Indian Courts have time and again respected this fence drawn by the Act, clarifying that civil Courts do not have the power to consider questions relating to an arbitrator’s jurisdiction⁴ and warning Courts against bypassing the Act⁵. To this end, the Indian Courts have adopted the mantra of ‘when in doubt, do refer‘⁶.

Recently, the Supreme Court⁷ once again emphasised on this aspect while throwing light on the positive and negative facets of Section 5. The Court observed that the positive facet vests judicial authorities with jurisdiction over arbitral proceedings in matters expressly allowed in/ dealt with under Part I of the Act. The flip side to this approach (which is the negative facet) is that judicial authorities are prohibited from intervening in arbitral proceedings in situations where the tribunal has been bestowed with exclusive jurisdiction. The Court made these observations while acknowledging that the basis of arbitral autonomy is to give effect to the parties’ true intention distancing themselves from the ‘risk of domestic judicial parochialism‘.

While Section 5 contains the statutory bar against Court intervention, Order 7 Rule 11 of the Code of Civil Procedure, 1908, gives teeth to this statutory bar. It calls for the rejection of a plaint inter alia in cases where the “suit appears from the statement in the plaint to be barred by any law“. Thus, one may argue that a suit seeking such an injunction barred by Section 5 would be hit by Order 7 Rule 11.⁸

Can Indian Courts entertain anti-arbitration injunction suits in foreign seated arbitrations?

Part II of the Act provides the statutory framework for foreign seated arbitrations, wherein Section 45 serves as an effective shield against suits seeking anti-arbitration injunctions.

Section 45 calls upon Courts to mandatorily refer parties to arbitration if the parties have executed a written arbitration agreement (to which the New York Convention applies) relating to the dispute raised before it. The only exception envisaged is a prima facie finding that the arbitration agreement is null and void, inoperative/incapable of being performed.

While at present there is no complete statutory bar on judicial intervention akin to Section 5 vis-à-vis foreign seated arbitrations, it also cannot be said that parties have been given a freeway for approaching Courts to seek such relief. The Act instead limits access on the basis of 3 extremely specific grounds, namely, that the arbitration agreement is ‘null and void, ‘inoperative‘ or ‘incapable of being performed‘. Unless, one of these requirements are met, the Courts have no leeway to entertain a suit which relates to a written valid arbitration agreement in case of foreign seated arbitrations. Moreover, Courts in the past have also relied on the principle embodied in Section 5 barring judicial intervention to such cases⁹.

Given the above guardrail, a party in a foreign seated arbitration (arising from an arbitration agreement to which the New York Convention applies) facing an anti-arbitration suit in India can move an application under Section 45 seeking reference to the mutually agreed arbitral process.

Subject to the party satisfying the Court that there is a written arbitration agreement to which New York Convention applies and prima facie the agreement is not null and void, inoperable/ incapable of being performed, the Court would be statutorily bound to refer the parties to arbitration.¹⁰

In this regard, Courts in line with India’s restrictive statutory framework, have categorically recognised that they do not have an inherent power to issue anti-arbitration injunctions, especially in case of international commercial arbitrations¹¹. They have further clarified that unless and until a party seeking such an injunction can demonstrably show that the arbitration agreement is null and void, inoperative/ incapable of being performed, no such relief can be granted in a suit, even as an interim measure¹². In this regard, the existence of multiple proceedings would not be sufficient to render an arbitration agreement inoperative/ incapable of being performed¹³. Thus, anti-arbitration injunction suits are to be considered through this limited lens.

An important judgment of the Delhi High Court which consolidates the guiding parameters for considering such5r suits is Himachal Sorang Power Private Limited vs. NCC Infrastructure Holdings Limited.^[14] The Court in this case recognised that Courts are slow in granting an anti-arbitration injunction unless it comes to the conclusion that the proceeding initiated is vexatious and/or oppressive. The Court further cautioned that an “endeavour should be made to support and aid arbitration rather than allow parties to move away from the chosen adjudicatory process“.¹⁵ Similar sentiment was echoed in in Uttam Chand Rakesh Kumar v. Derco Foods¹⁶.

Thus, the focus of Indian Courts has largely been to uphold the principles of party autonomy and kompetenz – kompetenz, which are the foundational pillars of arbitration.

Conclusion:

Over the years, popularity of anti-arbitration injunctions suits has significantly reduced given the strict stand taken by both the legislature and judiciary. The statutory framework’s restrictive language has been complemented by the Indian Court’s approach of nudging parties to resolve disputes through the chosen adjudicatory mechanism.

In fact, one can now safely argue that given Section 5’s strict language, such suits are no more a possibility for India seated arbitration. Even for foreign seated arbitrations, the statutory mechanism and judicial precedents have streamlined and limited the extent to which such suits may be entertained.

Footnotes:

1 World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., (2014) 11 SCC 639; Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC 433.

2 Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS, 2014 SCC OnLine Cal 17695; Union of India v. Dabhol Power Co., 2004 SCC OnLine Del 1298, para 15.

3 World Sport Group V. MSM Satellite Ltd., (2014)11 SCC 639.

4 Kvaerner Cementation India Ltd. vs. Bajranglal Agarwal, (2012) 5 SCC 214, para 3, 5.

5 Bhushan Steel Ltd. v. Singapore International Arbitration Centre, 2010 SCC OnLine Del 2236, at paras 20, 25.

6 Vidya Drolia and Ors. vs. Durga Trading Corporation, (2021) 2 SCC 1, paras 129-133, 244.4.

7 In Re – Interplay between arbitration agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 SCC OnLine SC 1666, paras 73, 88-90, 136-137, 166.

8 Oval Investment Pvt. Ltd. v. Indiabulls Financial Services Ltd., 2009 (112) DRJ 195, paras 36, 39, which has been affirmed by the Division Bench of the Delhi High Court in Oval Investment Pvt. Ltd. v. Indiabulls Financial Services Ltd., RFA(OS) No. 68 of 2009.

9 Chatterjee Petrochem Company and Anr. vs. Haldia Petrochemicals Limited and Ors., (2014) 14 SCC 574; Bhushan Steel Ltd. v. Singapore International Arbitration Centre, 2010 SCC OnLine Del 2236.

10 Sasan Power Ltd. v. North American Coal Corpn. (India) (P) Ltd., (2016) 10 SCC 813, paras 46, 49, 81; World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., (2014) 11 SCC 639, at paras 33, 36; Uttam Chand Rakesh Kumar v. Derco Foods, 2020:DHC:3212, paras 11.1-11.2; Jes & Ben Groupo Pvt. Ltd. v. Hell Energy Magyarorzag KFT, 2019 SCC OnLine Del 10225, paras 8,12-13,17

11 Union of India v. Vodafone Group PLC United Kingdom, 2018 SCC OnLine Del 8842, para 117.

12 McDonald’s India Private Limited v. Vikram Bakshi, 2016 SCC OnLine Del 3949, para 55.

13 McDonald’s India Private Limited v. Vikram Bakshi, 2016 SCC OnLine Del 3949, para 55-56.

14 2019 SCC Online Del 7575, para 127.

15 Ibid.

16 2020:DHC:3212, Para 13.7