[Abhinav is a student at West Bengal National University of Juridical Sciences, Kolkata]
A single-judge bench of Calcutta High Court on 12 August 2020, in Balasore Alloys Limited v. Medima LLC (Balasore), held that the decision of the Delhi High Court in Bina Modi v. Mr Lalit Modi & Others (Bina Modi) is per incuriam. Both matters deal with the Indian civil court’s jurisdiction to render a widely debated anti-arbitration injunction. The recent Calcutta High Court decision streamlines the Indian jurisprudence on anti-arbitration injunctions to a certain extent.
Development before Balasore
Two broad schools of thought have existed in India on the court’s power to grant anti-arbitration injunctions. One is led by a three-judge Supreme Court (SC) decision in 2001, reported in 2012, in Kvaerner Cementation India Limited v. Bajranglal Agarwal (Kvaerner), which held that arbitral tribunals have the power to determine their own jurisdiction due to Section 5 (limitation to judicial intervention) read with Section 16 (kompetenz-kompetenz principle) of the Arbitration and Conciliation Act 1996 (the Act) and, therefore, tribunals shall exercise ‘exclusive’ jurisdiction. The other school of thought is led by a seven-judge SC decision in SBP & Co. v. Patel Engineering Limited, which opined that the kompetenz-kompetenz principle only ensures the tribunal’s ability to rule over its own jurisdiction and courts can grant anti-arbitration injunctions. SBP, however, never expressly overruled Kvaerner.
Subsequently, different High Courts and SC decisions have relied on one school of thought, without juxtaposing it with the other. However, in May 2020, the Delhi High Court in Bina Modi categorically held that Mcdonald’s India Private Limited v. Vikram Bakshi and Others (McDonald’s) was bad in law as it did not consider the position laid down in Kvaerner. In McDonald’s, the court had upheld the power of the civil courts to grant anti-arbitration injunctions in cases where the arbitration agreement was null, void, inoperative or incapable to be performed. The court in Bina Modi comfortably chose to ignore SBP delivered by a larger bench.
Calcutta High Court’s decision in Balasore
As a dispute arose, there were divergent views on the seat of arbitration. While the plaintiff (Balasore Alloys Limited) contended that the seat was Kolkata, India, as per the purchase order, the respondent (Medima LLC) argued it to be International Chambers of Commerce (ICC), London, as per a 2018 agreement. The respondent then initiated arbitration proceedings in England pursuant to which the plaintiff filed an anti-arbitration suit in Calcutta High Court.
A single-judge bench comprising Shekhar Saraf J held that civil courts have jurisdiction to grant anti-arbitration injunctions and relied on the division bench decision of Calcutta High Court in Devi Resources Limited v. Ambo Exports Limited (Devi Resources). In Devi Resources, it was held that the authority of the court, especially of a High Court exercising its original civil jurisdiction, cannot be doubted for granting anti-arbitration injunctions.
Further, it rejected the arguments that relied on Kvaerner as it was ‘implicitly overruled’ by SBP wherein the majority had conclusively dismissed the argument that a tribunal ‘solely’ has the competence to determine jurisdiction. The court took this view given that: firstly, Kvaerner was decided before SBP and secondly, Kvaerner was decided by a three-judge bench while SBP was decided by a seven-judge bench. The court rejected the reliance on Bina Modi, stating that the court in Bina Modi was simply not made aware of SBP. It concluded that the decision in Bina Modi did not have any precedential value and was per incuriam.
The court observed that the power to grant anti-arbitration injunctions must be used ‘sparingly and with abundant caution’. The judge relied on Modi Entertainment Network & Another v. W.S.G. Cricket Private Limited (Modi Entertainment) to lay down seven grounds and guidelines on which anti-arbitration injunctions could be granted. Some important grounds and guidelines were:
declining anti-arbitration injunction would perpetuate injustice;
principle of comity – respect for other courts – must be observed;
proceedings are oppressive or vexatious or in a forum non-conveniens.
On merits, however, the anti-arbitration injunction was denied. The court observed that the plaintiff had failed to prove that ICC was a forum non-conveniens or that the proceedings were vexatious or oppressive.
Analysis
The Balasore judgment streamlines the jurisprudence on anti-arbitration injunctions in India by finally expressly stating that the Kvaerner is not good law. By implication, the judgments that had heavily relied on Kvaerner for upholding that anti-arbitration injunctions cannot be granted by the civil courts such as National Aluminium Company Limited v. Subhash Infra Engineers Private Limited were also deemed bad in law. These previous cases had simply failed to analyse the contradictory judgements and Balasore categorically upheld SBP as the leading authority on this point.
The judgement by the Calcutta High Court is more procedural than substantive in nature since it does not delve into any substantive provisions of the statutes but only looks at the precedential aspect of the law, which is the bench strength of the judgements. For instance, SBP and Kvaerner both interpreted Section 16 of the Act to determine whether the tribunal has exclusive jurisdiction due to the kompetenz-kompetenz principle.
The court could have analysed the case of World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) Pte. Ltd., wherein the court delved into Section 9 of the Code of Civil Procedure 1908. The court reasoned that parties have the right to file a suit before the civil court unless there is an express or implied bar, and due to absence of any such bar on the maintainability of anti-arbitration suits, such suits are indeed maintainable.
It is also to be noted that the court did not address the larger problem of anti-arbitration injunctions being contrary to the state obligations under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Award (NYC). Domestic civil courts act as an organ of the state, and for all its actions, the State is internationally responsible. Thus, when a domestic court issues an anti-arbitration injunction blocking an international agreement, the court fails to refer the party to arbitration under Article II(3) of NYC. Further, in substance, it fails to anticipatorily recognise arbitral awards as binding and enforce them under Article III of NYC and pre-emptively refuses the recognition and enforcement of the award on the grounds that may not, or do not, fall within the ambit of Article V of NYC.[1]
The judgement in Balasore upholds SBP as the leading authority concerning jurisdiction to grant anti-arbitration injunction and dismisses the ruling in Kvaerner. The fallout from the decision is still to be gauged and it is to be seen whether SC and other High Courts align with the verdict or generate more contradictions. Certainly, the ruling can help align Bina Modi since it is presently on appeal before a division bench of the Delhi High Court which, on the last date of hearing, directed both parties to stay the ICC proceedings in Singapore.
However, the judgement is flawed to the extent it relies on Modi Entertainment to lay down the grounds for granting anti-arbitration injunction. The grounds mentioned in Modi Entertainment are in relation to granting an anti-suit injunction rather than an anti-arbitration injunction. Fundamentally, anti-arbitration injunction and anti-suit injunction are different in many aspects. As the name suggests, anti-arbitration injunctions prohibit parties from approaching the tribunal, while anti-suit injunctions prohibit them from approaching the civil courts. While anti-arbitration injunctions can be granted against parties as well as the arbitrators, anti-suit injunctions are only directed against the parties. The need for an anti-suit injunction can arise when a party has initiated a proceeding in a foreign court to gain a strategic or substantive advantage, whereas, the need for an anti-arbitration injunction can arise when the there exists no arbitration agreement, proceedings violate condition precedents under the arbitration agreement, or the proceedings are vexatious or oppressive. Further, anti-arbitration injunctions pose a danger to party autonomy, breach of kompetenz-kompetenz, and the doctrine of separability, while anti-suit injunctions are a threat to the rights of the parties to access courts and the principle of state sovereignty.
Moreover, the Delhi High Court in McDonald’s had also expressly stated that the principles laid down in Modi Entertainment concerned anti-suit injunctions and cannot be applied to cases of anti-arbitration injunctions. The court opined that this was due to the principles of autonomy of arbitral proceedings and the kompetenz-kompetenz principle. In Bina Modi too, the court reiterated this specific observation made in McDonald’s and stated that the seven principles laid down in Modi Entertainment pertain only to anti-suit injunctions.
Saraf J, however, did not provide the rationale behind relying on Modi Entertainment in a matter concerning anti-arbitration injunctions. The decision has been appealed to a division bench at the Calcutta High Court, thereby giving the court an opportunity to rectify this error in the judgment.
[1] Gary B. Born, International Commercial Arbitration, 1052 – 1053 (Vol.1, 2009).
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