TMI Blog2019 (2) TMI 2033X X X X Extracts X X X X X X X X Extracts X X X X ..... venience to such party. Another class of reasons invoked to seek an anti-arbitration injunction could be the egregious fraud committed by the party seeking to initiate or pursue the arbitral reference or of the arbitral reference being patently vexatious or unbearably oppressive. In every case, it is the duty of the court to exercise extreme caution and circumspection before issuing an anti-suit or anti-arbitration injunction and, as high authorities instruct, the injunction should be in personam and issued against a party amenable to the jurisdiction of the court issuing the injunction and not issued against a foreign court or a foreign arbitral tribunal. Just as the legal trinity of justice, equity and good conscience casts a duty on a court to see that a party before it is not unfairly prejudiced, the principles of comity, the respect for the sovereignty of a friendly nation and the need for self-restraint should guide a court to issue an injunction of such nature only in the most extreme and gross situations and not for the mere asking. A court must be alive to the fact that even an injunction in personam in such a situation interferes with the functioning of a sovereign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Adv., Sarbopriyo Mukherjee, Rahul Karmakar, Debamitra Adhikari, Rohit Banerjee, Anindita Mukherjee and Ayan Ray, Advs. For Respondents/Defendant: Ratnanko Banerji, Sr. Adv., Urmila Chakraborty and Mudrika Khaitan, Advs. JUDGMENT The principal matter in issue in this appeal is how an injunction in personam restraining a person from proceeding with a foreign arbitral reference would impact the application for implementation of the foreign award when such award has been rendered at a time that the injunction was in subsistence, but the injunction has subsequently been vacated. 2. The appellant here is a company incorporated and organised under the appropriate laws of Hong Kong and having its principal place of business in Hong Kong. The respondent is a Kolkata-based company. 3. On February 29, 2012, the parties entered into an agreement under which the appellant agreed to buy iron ore fines of indicated specifications from the respondent herein. Clause 14 of the agreement recognised the contract to be governed by English law and any dispute arising out of such agreement to be referred to arbitration in London in accordance with the English statute and the arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration in accordance with the arbitration agreement contained in the original contract between the parties of February 29, 2012. 7. On March 25, 2015, the interlocutory court here directed affidavits to be exchanged in such application filed by the appellant and restrained the parties from taking any step in the suit. In June, 2015 the appellant apparently invoked the arbitration agreement and appointed its arbitrator. The respondent denied the existence of any arbitration agreement between the parties and objected to the arbitral reference by its letter of July 7, 2015. However, by the middle of October, 2015, the appellant filed its statement of claim before the sole arbitrator. The respondent did not pay any heed to the arbitrator directing the respondent in November, 2015 to file its statement of defence and, over the next two months, the respondent sought to question the very basis of the arbitration. The substance of the respondent's challenge to the arbitration reference was that the settlement between the parties herein as embodied in the letter of April 24, 2013 issued by the appellant to the respondent was a stand-alone agreement which was not governed by any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... $ 1,270,127.15 with interest from the respondent herein. 11. In February, 2016 the appellant applied for vacating the anti-arbitration injunction of January 14, 2016 and followed it up, in April, 2016, by a petition for enforcement of the foreign award. Such petition for enforcing the said foreign award of January 21, 2016 was dismissed on August 22, 2017 on the ground that the award was passed in violation of an order of injunction that restrained the appellant herein from proceeding with the arbitral reference. This appeal arises out of such order of August 22, 2017. 12. There is one more matter of some significance; and that is a subsequent order of August 28, 2018 by which the appellant's application for vacating the injunction issued on January 14, 2016 was allowed, the respondent's application to restrain the appellant to proceed with the arbitral reference was dismissed and the appellant's application for referring the disputes in the respondent's summary suit here to arbitration was also dismissed. 13. In the order impugned of August 22, 2017 the reasons in support thereof are found in the following solitary paragraph: During the pendency of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he day that its petition for implementation of the foreign award came up for hearing before the Single Bench, the other applications and petition, which ultimately culminated in the order of August 28, 2018, did not appear simultaneously in the list for all the matters to be taken up together. The appellant contends that in view of the order of August 28, 2018 and the finding rendered therein that the respondent herein could not have sought any restraint on the foreign arbitral reference since its claim in the summary suit here was not founded on the same matrix contract, the appellant's petition for implementation of the foreign award may have succeeded if all the matters were taken up and disposed of together. As to the only reason indicated in the order impugned dated August 22, 2017 in declining to enforce the foreign arbitral award on the ground of the award being obtained by the appellant in the teeth of the order of injunction that was subsisting on the date of the award, the appellant suggests that the vacating of the injunction issued on January 14, 2016 by the order of August 28, 2018 would relate back to the filing of the relevant application. The legal implication o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult of the appellant not furnishing evidence in support of its balance claims, in deference to the order of injunction that the appellant perceived to be operating on the appellant, it has been seriously prejudiced by such heads of claim being disallowed and the appellant's cause of action in such regard being extinguished without the appellant having any further right of recourse in such regard. 18. Several judgments have been carried by the appellant in support of its case, most of them for the proposition that an injunction of the nature that was issued on January 14, 2016 should, ordinarily, not be granted; or, at any rate, such an injunction may be issued in the most gross of situations. The appellant maintains that, ordinarily, a court in a particular country would neither have the authority to restrain proceedings or an arbitral reference in another country or even interfere with the right of a party before it to prosecute its action in a foreign land. The appellant accepts that in the rare case such an injunction may issue, but that would be once in a blue moon and not for the mere asking. The appellant reasons that if the grounds for issuance of such an injunction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the party who is amenable to the jurisdiction of the court so that the injunction is effective. Finally, the judgment emphasises that since such an injunction indirectly affects a foreign court, the jurisdiction is one which must be exercised with caution . The judgment is replete with myriad peculiar situations in which an injunction of such extraordinary nature was issued in cases before the English courts. 21. The illuminating discussion in Aerospatiale deals with the famous dictum in Spiliada Maritime Corp v. Cansulex Limited [(1986) 3 All ER 843] and the reasons why merely because England was found to be the natural forum for the action, an injunction would invariably be issued to restrain foreign proceedings in respect of such matter. Indeed, the dilemma that such a situation presents is captured in the following passage: ... In practice, however, the principle so stated would have the effect that, where the parties are in dispute on the point whether the action should proceed in an English or a foreign court, the English court would be prepared, not merely to decline to adjudicate by granting a stay of proceedings on the ground that the English court was forum no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty applied by way of Section 9 of the Act of 1996, seeking an injunction against the members of the ICC arbitral tribunal so that they could not receive any further submission or pass any further direction or ruling or award in the relevant arbitral reference. An ad interim order was passed, restraining the members of the arbitral tribunal as sought and the order continued till the petition for enforcement of the partial foreign award was decided. The ICC arbitral tribunal took note of the interim order passed by the Bombay High Court, observed that it was not binding on the tribunal and decided to proceed with the arbitral reference. The Italian party made its submission and filed written notes before the tribunal, but the Indian party informed the tribunal that it did not intend to make any submission in view of the subsisting order of injunction. The Indian party's nominee on the ICC arbitral tribunal also indicated that he was unable to continue on the arbitral tribunal in view of the interim order passed by the Bombay High Court. The ICC decided to replace such member on the arbitral tribunal and the arbitral tribunal passed a final award thereafter. Thus, at the time tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining the further arbitral proceedings was passed on a petition under Section 9 of the Act of 1996 which did not empower any court to issue such an injunction under such provision; and, that the injunction was issued against a foreign arbitral tribunal which was not amenable to the jurisdiction of any Indian court and, as such, the order was a nullity. In support of the first limb of reasoning that Section 9 of the Act of 1996 does not conceive of an injunction against the further continuation of a foreign arbitral reference to be included within its fold, the Bombay High Court relied on a judgment of the Supreme Court reported at (2002) 4 SCC 105 (Bhatia International v. Bulk Trading S.A), which then held the field. Such Supreme Court judgment took the view that there cannot be applications under section 9 for stay of arbitral proceedings or to challenge the existence or validity of arbitration agreements or the jurisdiction of the arbitral tribunal. The judgment in Bhatia International has since been overruled by a Constitution Bench in a judgment reported at (2012) 9 SCC 552 (Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.) on the ground that Bhatia Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant herein. The Supreme Court held that once a decree had been passed, Order XXXIX Rule 2-A of the Code could not be invoked since such provision was only for the enforcement of an interlocutory order passed under Order XXXIX Rules 1 and 2 of the Code. Further, the court held that the relevant decree could have been put into execution in accordance with law and the very assumption of jurisdiction under Order XXXIX Rule 2-A of the Code was illegal. 29. It cannot be said, as will be discussed more fully hereafter, that such principle has any manner of application in the present case. 30. Three further judgments have been referred to on behalf of the appellant in course of its rejoinder. In the first of such judgments, reported at (2014) 14 SCC 574 (Chatterjee Petrochem Company v. Haldia Petrochemicals Limited), an issue arose pertaining to the maintainability of the suit instituted by the respondent before the Supreme Court against a request for arbitration by the appellant. Paragraph 21 of the report sets out the legal questions addressed by the Supreme Court. At paragraph 33 of the report, the Supreme Court held on facts that the arbitration agreement invoked by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its the party in breach with other consequences as contempt of court or the like. The fundamental ground urged by the respondent is that shorn of the technicalities and the rules of procedure, there is no doubt that a court in this country has the authority to pass an anti-suit or anti-arbitration injunction; and once it is seen that a court did have the authority to pass such an order and it did pass such an order, anything done in violation thereof has to be seen to be void. The respondent contends that it is an entirely different matter that contempt proceedings may also be brought against the person acting in breach of the order where the court may or may not find the alleged contemnor to have deliberately or willfully violated the order. But that would not detract from the efficacy of the order or the inevitable consequence of the breach. At any rate, the respondent maintains, an arbitral award procured despite the subsistence of an order of injunction on the award-holder from proceeding with the reference cannot be rewarded with the implementation of such award and such an arbitral award has to fail the test under Section 48 of the Act of 1996. 34. The respondent reasons t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29, 2012 (Though the agreement was prepared on February 27, 2012, the respondent signed the same on February 29, 2012.), stipulated that the reference would be to three arbitrators: one each by the parties and the third in accordance with the rules of the London Maritime Arbitrators' Association. The respondent states that the reference could be made to a sole arbitrator only upon one of the parties appointing its arbitrator and sending notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that the first party would appoint its arbitrator as sole arbitrator unless the other party appointed its own arbitrator and gave notice that it had done so within the 14 days specified. In other words, according to the respondent, it is only if the notice of appointment of the arbitrator was issued by the appellant to the respondent and the respondent was called upon to appoint its arbitrator within the next 14 days but the respondent did not do so, that the arbitrator nominated by the appellant would become the sole arbitrator. 37. The respondent refers to the letter of appointm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign award must also be seen. 39. The respondent also seeks to address on the merits of the disputes between the parties and the merits of the claim carried to the arbitral reference by the appellant herein. According to the respondent, the settlement of April 24, 2013 took into account the claim of the appellant on account of alleged demurrage and dead freight. The respondent says that the value of the goods sold and supplied by the respondent, or at the behest of the respondent, to the appellant was well in excess of US $ 1 million but the finally agreed pay-out by the appellant was pegged at US $ 1 million after negotiations. Such reduced figure was arrived at, according to the respondent, since the payment by the appellant on account of demurrage and dead freight and the claim of the appellant on account of the inferior quality of goods were taken into account in arriving at the final figure of US $ 1 million. It is further asserted by the respondent that the settlement of April 24, 2013 was acted upon and honoured in part by the appellant and payments totaling about US $ 300,000/- were made by the appellant to the respondent in terms thereof. The appellant submits that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if a court subsequently discovered that it had no jurisdiction to entertain a suit in the first place, an interim order of injunction passed in such suit could not be disregarded or violated and had to be obeyed till it was set at naught. The case deals with the authority under Section 9A of the Code conferred on courts in Maharashtra. In the State of Maharashtra Section 9A has been inserted after Section 9 in the Code of 1908. Section 9A(1) mandates that any objection as to jurisdiction of the court has to be decided as a preliminary issue. However, Section 9A(2) authorises even such court, whose jurisdiction has been objected to, to pass an interim relief pending a decision on the preliminary issue as to the maintainability of the suit. The respondent has referred in passing to the famous judgment reported at AIR 1969 SC 823 (Official Trustee, West Bengal v. Sachindra Nath Chatterjee) which recognises that a void order may be challenged in collateral proceedings to suggest that both the judgments in Tayabbhai and in Sachindra Nath Chatterjee instruct that only if the court lacks jurisdiction over the subject-matter before it, would such objection as to jurisdiction go to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fused. The order impugned in this case does not refer to any additional ground having been canvassed by the respondent herein. The respondent seeks to make out that such additional grounds as to its challenge under clauses (a) to (d) of Section 48(1) of the Act of 1996 were indicated in its affidavit-in-opposition to the petition filed by the appellant herein to enforce the foreign arbitral award. A reading of the relevant affidavit does not reveal that any ground other than the ground that the arbitral award was passed in violation of the order of injunction was taken therein. It is true that while dealing with the averments in the appellant's petition specifically denying the grounds under Section 48(1)(a), (b), (c) and (d) of the Act, the respondent has controverted the averments; but only bald denials have been issued without indicating how the arbitration agreement was not valid or how no proper notice of the appointment of the arbitrator was given to the respondent or which matters were beyond the scope of submission to arbitration but had been included by the appellant in the arbitral reference or how the composition of the arbitral tribunal may not have been in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to enter upon the merits of the disputes between the parties as covered by the arbitral reference. Apart from the fact that this court in exercise of its limited authority under Section 48 of the Act of 1996 could not have looked into such grounds, there is no sense of injustice that the court perceives in the matter. In other words, far from the appellant's conduct shocking the conscience of the court, it does not appear that the award, to the extent that it was limited to the appellant's claim on account of demurrage and dead freight and the like, can be said to have prejudiced the respondent in any manner. The respondent's suit still remains in this court. The respondent's claim is founded on bills of exchange and it is for the respondent to chart its own course and invoke such jurisdiction as may be open to the respondent for it to obtain the remedy that it seeks. 48. Section 48 of the Act of 1996 is not a safety-net that catches every unworthy foreign arbitral award or every act of perceived illegality or injustice or wrongful prejudice. Section 48 of the Act of 1996 has to be seen in its context. Most countries which are signatories to the New York Conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the award would be opposed to public policy where public policy has to be construed rather strictly and confined to the fundamental policy of Indian law or the interest of India or justice or morality. 50. It bears repetition that the grounds available under Section 48 of the Act of 1996 to resist the enforcement of a foreign arbitral award are not the grounds that ought to be raised in course of the arbitral reference or grounds that could have been raised if the arbitral award had been challenged in the appropriate country. The grounds in Section 48 of the Act of 1996 are the really fundamental grounds that no fair or responsible judicial system would dare to overlook. As much as a court would protect a party from injustice, the court has also to remember the international commitment of India to enforce a New York Convention Award. 51. Though no appeal has been preferred by the respondent against the order ultimately rejecting the respondent's application for the anti-arbitration injunction and it also does not appear that any special leave petition has been carried to the Supreme Court from such order, the respondent has made some murmurs to the effect that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitral reference being patently vexatious or unbearably oppressive. In every case, it is the duty of the court to exercise extreme caution and circumspection before issuing an anti-suit or anti-arbitration injunction and, as high authorities instruct, the injunction should be in personam and issued against a party amenable to the jurisdiction of the court issuing the injunction and not issued against a foreign court or a foreign arbitral tribunal. 54. Just as the legal trinity of justice, equity and good conscience casts a duty on a court to see that a party before it is not unfairly prejudiced, the principles of comity, the respect for the sovereignty of a friendly nation and the need for self-restraint should guide a court to issue an injunction of such nature only in the most extreme and gross situations and not for the mere asking. A court must be alive to the fact that even an injunction in personam in such a situation interferes with the functioning of a sovereign or a private forum which may not be subject to the writ of that court. At the same time, despite placing such an onerous burden on a court assessing the propriety of such an injunction, the authority of such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general rule is that notwithstanding an order of injunction being subsequently vacated or set aside - whether at the same level or higher - acts done in derogation of the injunction during its subsistence would be regarded as void acts. 57. In other words, when an anti-suit or anti-arbitration injunction is issued by way of an ad interim or interim order without the relevant application being decided finally, its efficacy would never be established till the order has reached finality. And, if foreign proceedings (whether before a court or in course of an arbitration) are continued during the subsistence of an anti-suit or anti-arbitration injunction, the legality of the outcome of such foreign proceedings will depend on the final outcome of the application on which the injunction was issued, whether at the same level or in appeal or revision or the like. There is good reason for such an exception to be made. It is possible that a tentative view is taken at the initial stage to pass an anti-suit or anti-arbitration injunction in personam, but the party suffering the injunction has no choice in not proceeding with the foreign action lest its cause of action gets extinguished on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use is espoused before it. Though Bhatia International is no longer good law after the Constitution Bench judgment in Kaiser Aluminium, in Noy Vallesina a passage from Bhatia International on the scope of Section 9 of the Act of 1996 was relied upon to hold that an anti-arbitration injunction could not be passed on a petition under such provision. In Kaiser Aluminium, the Constitution Bench held that Bhatia International was not good law because it permitted Section 9 of the 1996 Act to be invoked in respect of a foreign commercial arbitration which did not have a seat in India as Section 9 was contained in Part-I of the Act of 1996 and nothing in Part-I applies to a foreign arbitral reference with its seat not in India. Indeed, the Constitution Bench's undoing of Bhatia International has itself been undone by the 2016 Amendment to the Act of 1996 with retrospective effect from October 23, 2015. A proviso to Section 2(2) of the Act of 1996 has expressly extended Section 9 thereof to an international commercial arbitration even if the seat of such international commercial arbitration is outside India, though the parties to the arbitration agreement may contract to the contrary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in seisin of the prayer for such injunction, it would not make the prayer for injunction infructuous if the applicant meets the high test otherwise required. The court may mould the relief and issue an injunction in personam. There is a line in some of the judgments, including in Noy Vallesina, that an anti-suit and anti-arbitration injunction may issue in personam only against a party amenable to the jurisdiction of the court issuing the injunction. Such amenability need not be seen or tested at the time of issuance of the injunction, but may also be seen from a different perspective. If such an injunction is sought against a foreign party by a party amenable to the jurisdiction of the court, the amenability of the foreign party to the jurisdiction of such court may also be seen in the context of the foreign party coming on a later date to enforce the foreign decree or foreign award in this country. 65. It must also be recorded that there was substantial correspondence exchanged between the London arbitrator and the respondent or advocates representing the respondent. Several objections were taken in course of the letters addressed on behalf of the respondent to the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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