Delhi High Court: Anti-Arbitration Injunction Suit Are Not Maintainable Owing To The Doctrine of Kompetenz-Kompetenz

Delhi-High-CourtIn Kvaerner Cementation India Limited Vs. Bajranglal Agarwal[1], the Supreme Court held that an anti-arbitration injunction suit are not maintainable bearing in mind the very object with which Arbitration Act has been enacted and the provisions contained in Section 16, conferring the power on the arbitral tribunal to rule on its own jurisdiction including ruling on any objection with respect to existence or validity of the arbitration agreement. Similar view was taken by the Delhi High Court in catena of cases.[2]

However, the Division Bench of the Delhi High Court in Mcdonald’s India Pvt. Ltd. Vs. Vikram Bakshi[3], without noticing Kvaerner, held that anti-arbitration injunction can be granted in extreme circumstances, where the existence of the Arbitration Clause was in peril because of the “properly arguable” case of the agreement to arbitrate having been forged in order to defeat the proceedings properly brought before the Courts. It was held that the Courts have jurisdiction to determine the question as to whether the Arbitration Agreement was void or a nullity. However, having so enunciated the law, the Division Bench held that the facts of that case did not qualify for injuncting the arbitral proceedings.

In the similar vein, the Delhi High Court in Union of India Vs. Vodafone Group PLC United Kingdom[4], also 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. However, in the facts of that case also, injunction was declined.

Trust Deed Disputes

The disputes inter se Trustees or between Trustees on the one hand and beneficiaries on the other hand or between beneficiaries inter se, are not arbitrable and are subject to the exclusive jurisdiction of the Courts under the Indian Trusts Act, 1882 which is a complete Code for the purposes of the said disputes.[5]

In Dr. Bina Modi vs Mr. Lalit Modi & Ors CS(OS) 84/2020 decided on 3 March 2020, the Delhi High Court was called upon to decide the fate of an ICC arbitration seated in Singapore which was sought to be injuncted by way of anti-arbitration injunction suits before the Delhi High Court. The case involved a dispute emanating from a trust deed amongst Indian nationals executed in London which contained an ICC arbitration clause which reads as under:-

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

Disputes arose between the trustees and the Defendant filed an application for Emergency Measures before International Court of Arbitration of ICC. In response, the Plaintiffs filed an anti-arbitration injunction suit in the Delhi High Court inter alia praying the Court to injunct Emergency Arbitration commenced under the aegis of ICC in Singapore by Defendant.

In view of thereof, the question before the Delhi High Court was whether the arbitrability of the trust dispute is to be decided by the ICC arbitral tribunal inspite of the bar on granting anti-arbitration injunction suits imposed by the Supreme Court in Kvaerner.

In the anti-arbitration injunction suit, the Plaintiffs contended as under:-

  • The arbitration clause is a pathological one as no “Rules of Arbitration of the International Chamber of Commerce, Singapore” exists;
  • Even if its not pathological the seat of arbitration is in India;
  • Since all trustees are Indian Nationals, having permanent residence in India, choice of foreign seat of arbitration is null and void, unenforceable and contrary to public policy;
  • The jurisdictional fact is to be determined by the Court and not by the Arbitral Tribunal.
  • Disputes arising out of trust deed are not arbitrable under laws of India. Thus if an award is passed in such arbitration of a non-arbitrable disputes then it will be against the public policy of India.

In addition, to the above, the Court on its own questioned the Defendant on the applicability of Section 8 of the Arbitration Act which provides for stay of court proceedings in favour of arbitration.

Per contra, the Defendant contended as under:-

  • Section 8 applies on Part I i.e. domestic arbitrations whereas the present case pertains with an international commercial arbitration Singapore being the seat of arbitration;
  • Section 8 applies when on action is brought in a matter which is the subject matter of an Arbitration Agreement and it is not so here;
  • Trust deed was executed in London and that the Indian Trusts Act does not apply;
  • Arbitral Tribunal should decide the objections as to arbitrability;
  • Even if Section 8 was made applicable, it only provides for stay of court proceedings in favour of arbitration on “existence”, as distinct from “interpretation” of the Arbitration Agreement which has been admitted by the Plaintiff;

After considering the rival contentions, the Delhi High Court held that the anti-arbitration injunction suits filed by the Plaintiff 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. The court reasoned this finding as under:-

  • Kvaerner is a binding precedent in respect of anti-arbitration injunction suit for the simple reason that a pronouncement of the Supreme Court, even if it cannot be strictly called the ratio decidendi of the judgment would certainly be binding on the High Court.[6]
  • Even an observation or an obiter of the Supreme Court is binding on the High Court in the absence of a direct pronouncement on that question, of the Supreme Court.[7] Even the obiter dicta of the Supreme Court is binding on other Courts in the country.[8]
  • Kvaerner holds the fray for the last nearly twenty years and binds the Delhi High Court since it is just, reasonable and the need of the hour, that a view which has held fort for the last twenty years and on which parties have acted be not disturbed.[9]
  • McDonald India per incuriam qua Kvaerner is not binding on the Delhi High Court since a 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.[10]
  • The grant of reliefs of declaration and injunction by the Indian Courts is governed by the provisions of the Specific Relief Act, 1963. Section 41(h) of the said Act bars grant of injunction when equally efficacious relief can certainly be obtained any other usual mode of proceeding. It is not the Plaintiffs that the Arbitral Tribunal constituted by ICA of ICC is not empowered to decide any of the objections which have been taken by them for injuncting arbitration. Once the statute has provided for the mode of obtaining the same relief before the Arbitral Tribunal, the Court under Section 41(h) would not grant the same relief i.e. of anti-arbitration injunction.
  • The Arbitration Act is a complete code in itself.[11]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.

In view thereof, the Court held that anti-arbitration injunction suit are not maintainable and are dismissed.

[1] (2012) 5 SCC 214

[2] Bharti Tele-Ventures Ltd. Vs. DSS Enterprises Pvt. Ltd., Roshan Lal Gupta Vs. Parasram Holdings Pvt. Ltd. (2009) 157 DLT 712, Spentex Industries Ltd. Vs. Dunavant SA, 2009 SCC OnLine Del 1666, Shree Krishna Vanaspati Industries (P) Ltd. Vs. Virgoz Oils & Fats Pte Ltd. 2009 SCC OnLine Del 1665, M. Sons Enterprises Pvt. Ltd. Vs. Suresh Jagasia 2011 SCC OnLine Del 82 and Ashok Kalra Vs. Akash Paper Board Pvt. Ltd. 2013 SCC OnLine Del 3299 all holding a suit for declaration of invalidity of Arbitration Agreement or of arbitration commenced, and for permanent injunction to restrain arbitration, to be not maintainable citing Kvaerner with approval.

[3] (2016) 232 DLT 394

[4] 2018 SCC OnLine Del 8842

[5]Vimal Kishor Shah Vs. Jayesh Dinesh Shah (2016) 8 SCC 788 as also in Vidya Drolia & Ors. Vs. Durga Trading Corporation 2019 SCC OnLine SC 358,

[6] Peerless General Finance and Investment Company Ltd. Vs. Commissioner of Income Tax 2019 SCC OnLine SC 851

[7] Oriental Insurance Co. Ltd. Vs. Meena Variyal (2007) 5 SCC 428

[8] Sanjay Dutt Vs. State (1994) 5 SCC 402

[9] an interpretation of statute which has stood for long and on which parties have acted, and based their dealings, should not be readily interfered with as held in State of Himachal Pradesh Vs. Ashwani Kumar (2015) 15 SCC 534, Sakshi Vs. Union of India (2004) 5 SCC 518, Union of India Vs. Paras Laminates (P) Ltd. (1990) 4 SCC 453 and Bangalore Water Supply and Sewerage Board Vs. A. Rajappa (1978) 2 SCC 213

[10] Pal Singh Vs. National Thermal Power Corporation Limited 2002 SCC OnLine Del 178

[11] Morgan Securities and Credit (P) Ltd. Vs. Modi Rubber Ltd. (2006) 12 SCC 642, Fuerst Day Lawson Limited Vs. Jindal Exports Limited (2011) 8 SCC 333 and Pam Developments Private Limited Vs. State of West Bengal (2019) 8 SCC 112)

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

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