India: Suit In The Nature Of Anti-Arbitration Injunction Is Not Maintainable

INTRODUCTION

The hon'ble High Court of Delhi, in a recent judgment titled as Dr. Bina Modi v Lalit Modi & Ors., CS (OS) 84/2020) (Delhi High Court), held that the suit in the nature of anti-arbitration injunction are not maintainable. In holding so, the Delhi High Court placed the reliance on case titled as Kvaerner Cementation India Limited v Bajranglal Agarwal (2012) 5 SCC 214 ,which has recently been cited with approval in National Aluminum Company Ltd. Vs. Subhash Infra Engineers Pvt. Ltd. 2019 SCC OnLine SC 1091, wherein the Supreme Court held that if the plaintiff therein wanted to raise an objection with regard to the existence or validity of the Arbitration Agreement, it was open for parties to move an application before the Arbitrator but with such plea the parties cannot maintain a suit for declaration and injunction.

FACTS

• K.K. Modi and Bina Modi were husband and wife having three children namely, Charu Modi, Lalit Modi & Samir Modi. A Trust Deed was executed by K.K. Modi as Managing Trustee and Bina, Lalit, Charu and Samir as Trustees and provided for certain obligations to be carried out by the Trustees in the event of death of K.K. Modi.
• K.K. Modi died on 02.11.2019. Consequently, as per the terms of the Trust Deed, Bina became the Managing Trustee and was further required to conduct a meeting of the Board of Trustees and certain unanimous decision were required to be taken qua the ownership and management of all the assets of the Trust Fund including the Family Controlled Business. In the event no unanimous decisions was arrived at by the Trustees, the entire Trust Fund including all Family Controlled Business was required to be sold off in the manner provided in the Trust Deed.
• A meeting of the Board of Trustees was called on 30.11.2019 viz. Bina, Lalit, Charu and Samir, however, no unanimous decision was reached regarding the sale of assets of the trust and this triggered the sale of entire assets of the trust and the family controlled business. Various communications for the settlement took place between the aforesaid parties. However, amidst the on-going settlement talks, Lalit Modi, on 18.02.2020, filed an Application for Emergency Measures before the International Court of Arbitration (ICA) of the International Chambers of Commerce (ICC).
• ICC appointed the Emergency Arbitrator and who, besides giving other directions, scheduled a preliminary call/meeting of the Emergency Arbitration proceedings on 22.02.2020 where all parties participated in the hearing before the Emergency Arbitrator. The Emergency Arbitrator issued procedural timelines and set a date for physical hearing of the Application for Emergency Measures on 07.03.2020.

Meanwhile Bina Modi Charu Modi and Samir Modi filed a suit seeking permanent injunction restraining the defendant No.1 Lalit Modi, in both the suits, from prosecuting or continuing with the Application for Emergency Measures and/or from instituting or proceeding with any arbitration proceedings against the plaintiff/plaintiffs in both the suits, under Clause 36 of the Trust Deed along with other reliefs. Clause 36 (d) of the trust deed provided that:

".....The Trustees may try to amicably resolve the difference, dispute or breach of the provisions of the deed as stated above. In case the dispute or the breach continues for a period of more than 90 days, then all such disputes shall be settled under the Rules of Arbitration of the International Chamber of Commerce, Singapore ("ICC") by one or more arbitrators appointed in accordance with the said rules.

The arbitration will be governed in accordance with the laws of India and ICC will follow Indian law as the substantive law for deciding the dispute arising between the parties under/pursuant to this deed. Each party shall bear its own cost of arbitration.

The award given by the arbitrator shall be final and binding and will not be challenged in any court by any of the parties hereto. The beneficiaries shall agree that by executing the Deed of Adherence they agree to and are bound by the provisions of this arbitration clause."

Issue Involved in suits: Whether the suit, in the nature of anti-arbitration injunction is maintainable?

The plaintiff contended that there was neither any express bar nor any implied bar to this court in exercising jurisdiction to grant injunction against arbitration or against a party, restraining such party from proceeding with the arbitration placing reliance on Mcdonald's India Pvt. Ltd. Vs. Vikram Bakshi (2016) 232 DLT 394, wherein this High Court held that anti-arbitration injunction can be granted in extreme circumstances, where the existence of the Arbitration Clause is in peril because of the "properly arguable" case of the agreement to arbitrate which was forged in order to defeat the proceedings properly brought before the courts and the courts have jurisdiction to determine the question as to whether the Arbitration Agreement was void or a nullity. The plaintiff further relied on Union of India Vs. Vodafone Group PLC United Kingdom 2018 SCC OnLine Del 8842, wherein it was held that there is no unqualified or indefeasible right to arbitrate and that the National Courts in India do have and retain the jurisdiction to restrain International Treaty Arbitrations which are oppressive, vexatious, inequitable or constitute an abuse of legal process. Further, the plaintiff contended that Kvaerner Cementation India Limited Vs. Bajranglal Agarwal (2012) 5 SCC 214 does not qualify as precedent, as it contains no discussion and no facts and the same does not notice Section 2(3) of the Arbitration Act.

On merits, it was argued that since the procedural law as well as the substantive law to be applied for adjudication of disputes, is of India and Emergency arbitration is not recognized under the Act, hence, it was not maintainable. The defendant countered the above said argument while placing its reliance on CS(OS) No.1769/2003 titled Bharti Tele-Ventures Ltd. Vs. DSS Enterprises Pvt. Ltd., wherein the court held that a suit for declaration of invalidity of Arbitration Agreement or of arbitration commenced, and for permanent injunction to restrain arbitration, to be not maintainable and Bhushan Steel Ltd. Vs. Singapore International Arbitration Centre 2010 SCC OnLine Del 2236 relying on Kvaerner Cementation India Limited Vs. Bajranglal Agarwal Supra holding, that once it is held there is a valid Arbitration Agreement between the parties, a suit for declaration that the Arbitral Tribunal has no jurisdiction or for permanent injunction to restrain arbitration would not be maintainable.

The defendant further contended that the present suit is not maintainable as in the matter of Kvaerner Cementation India Limited v Bajranglal Agarwal Supra as recently cited with approval in National Aluminum Company Ltd. Vs. Subhash Infra Engineers Pvt. Ltd. 2019 SCC OnLine SC 1091. The Supreme Court held that if the plaintiff therein wanted to raise an objection with regard to existence or validity of the Arbitration Agreement, it was open to the plaintiff to move an application before the Arbitrator but with such plea he cannot maintain a suit for declaration and injunction.

DecisionThe High Court held that suits such as the present one, to declare the invalidity of an arbitration clause/agreement and to injunct arbitration proceedings, whether falling in Part I or Part II, are not maintainable for following reasons:

i. Kvaerner Cementation India Limited (supra) is binding on this Court and the jurisdiction to decide the validity and existence of Arbitration Agreement will rest with the Arbitration Tribunal i.e. owing to the availability of the same remedy under Section 16 of the Arbitration Act under the principles of autonomy of arbitration and competence-competence (kompetenzkompetenz),

ii. The reliance on behalf of Plaintiffs, on McDonald's India Private Limited and Vodafone Group PLC United Kingdom supra is of no help. Both do not notice Kvaerner Cementation India Limited supra which was passed before the said judgments, as it is settled law that dicta of a larger bench of the High Court does not bind when the law even if earlier in point of time pronounced by the Supreme Court is otherwise and especially when the larger bench of the High Court has not noticed the law as declared by the Supreme Court.

iii. The High Court further observed that the division Bench of this Court in McDonald's India Pvt. Ltd. supra relied on LMJ International Ltd. Vs. Sleepwell Industries Co. Ltd 2012 SCC OnLine Cal 10733 (DB), dicta of the Division Bench of the Calcutta High Court which was concerned with the power and jurisdiction of a Civil Court to restrain a party from making a reference to an International Commercial Arbitration referring the judgment of the Supreme Court in Modi Entertainment Network Vs. W.S.G. Cricket Pte Ltd. (2003)4 SCC 341 pertaining to anti suit injunction, holding that the principles laid down therein would apply to antiarbitration injunction suits as well. In doing so the Division Bench of this Court did not consider the alternative remedy under Section 16 of the Arbitration Act and under the ICC Rules also, available in relation to anti- arbitration injunction suits as distinct from antisuit injunctions and thus, the same cannot be relied upon.

iv. Once the statute (Act) has provided for the mode of obtaining the same relief before the Arbitral Tribunal, the court under Section 41(h) of Specific Relief Act would not grant the same relief i.e. of anti-arbitration injunction.

v. The Arbitration Act is a complete code in itself. The courts cannot interfere with the code pertaining to arbitration laid down in the statute, by exercising jurisdiction to do, for which equally efficacious relief can certainly be obtained before the Arbitral Tribunal.

Originally published on April 2020

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