I. Introductory remarks
The decision of the Delhi High Court in Ashwani Minda v. U-Shin Ltd.[1] (hereinafter “Ashwani Minda”) was a stumbling block to India’s chance to develop its jurisprudence on private international law relating to international commercial arbitration. Presently, this would seem to be the controlling case law on interim measures by courts with respect to foreign-seated arbitrations, given that the Supreme Court of India refused to interfere with Ashwani Minda under its appellate jurisdiction.[2] However, it is respectively submitted that the courts (from the Delhi High Court up to the Supreme Court) misappreciated the questions of law, as well as some core principles of private international law that arose. Sure, when considering that a party approached the Indian courts after having failed to obtain a relief in emergency arbitration, it may not “look” good on the face of it but, legally speaking, the courts failed to appreciate that this case had much more than what meets the eye.
Ashwani Minda[3] had several layers. On jurisdiction, the Delhi High Court interpreted Section 2(2) of the Arbitration and Conciliation Act, 1996[4] (“the 1996 Act”) with respect to the availability of interim remedies under Section 9 of the 1996 Act[5] to an international commercial arbitration seated in Tokyo. By that, the Court rendered an opinion on the Japan Commercial Arbitration Association (JCAA) Rules (which would apply to all similarly written institutional rules). On admissibility, the Court interpreted Section 9(3) of the 1996 Act[6] as to whether it applies to an international commercial arbitration and the efficaciousness of an interim measure rendered by a foreign-seated tribunal. By that, it practically closed any interim remedies under Section 9(3) by Indian courts where a party is before a foreign-seated tribunal (just as in the case of domestic arbitration).
Furthermore, on the admissibility of this case, the Delhi High Court discusses the doctrine of election of remedies and a principle of abuse of process (albeit, inadequately and without premising it on private international law considerations). Which means that a party would be party shut out from approaching Indian courts, having already tried (and failed) before an emergency arbitrator or a foreign-seated tribunal, irrespective of the lacunae in the recognition and enforcement of interim measures rendered by an emergency arbitrator (or a foreign-seated tribunal) and irrespective of whether that party has any appellate remedy at the juridical seat.
The consequences of the decision in Ashwani Minda[7] are acute, no doubt. And in this piece, we lay out an analysis of the case, fundamentally disagreeing with (and differing from) the decisions of the Delhi High Court. For starters, in Segment II, we set out the factual matrix and then we move into Segment III on the procedural posture of the case before the Delhi High Court (both Single Judge and Division Bench). In Segment IV, we set out an analysis of the Delhi High Court’s decision, frame by frame, issue by issue, scrutinising the aspects where the High Court erred in its decision. We finally conclude in Segment IV with our closing remarks (with a mild forewarning and a pragmatic approach).
II. Factual matrix
The application under Section 9 of the 1996 Act primarily arose from the respondents’ (U-Shin Ltd. and Minebea Mitsumi Inc.) alleged breach of a joint venture agreement (JVA) dated 5-5-1986. The said alleged breaches were: first, breach of the negative covenant in Clause 4.1 of the JVA (mandating a pre-emptive offer before transfer of shares in the JV); and second, breach of negative covenant in Clause 7.1 of the JVA (restricting direct or indirect transfers without prior written consent).[8]
In accordance of the JVA, Respondent 1 (U-Shin Ltd.) held 26% share capital in the JV, with the right to increase its share capital up to 40% (inter se with the other JV-partner i.e. Appellant 1, Mr Ashwani Minda), and it had the option of nominating three Directors on the Board of the JV. On the other hand, Appellant 1 held the control/management, as well as the majority share capital in the JV (which was Appellant 2).
On 7-11-2018, the respondents entered into a planned acquisition (overseas transaction), whereby Respondent 1 (U-Shin Ltd.) became a wholly-owned subsidiary of Respondent 2 (Minebea Mitsumi Inc.). As a direct consequence of the overseas transaction, the Securities and Exchange Board of India (SEBI)(Substantial Acquisition of Shares and Takeovers) Regulations, 2011[9] (“the Takeover Code”) was triggered since Respondent 2 indirectly acquired Respondent 1’s share capital in the JV (indirect acquisition). By virtue of the indirect acquisition, Respondent 2 was obliged to publicly announce an open offer to purchase a minimum of 26% shares in the JV.
The application under Section 9 sought for interim injunction against the respondents, allegedly acting in concert. It was premised on the ground that if the additional shares purchased by Respondent 2 via open offer were add to Respondent 1’s existing share capital of 26% in the JV, the respondents would together become controlling shareholders of the JV, which would gravely prejudice the appellants – i.e. Appellant 1 would lose its status as the controlling shareholder and potentially lose control/management over the JV; Appellant 2 would lose the benefits of a fundamental arrangement under the JVA.
In other words, the appellants’ case was that Respondent 1, in concert with Respondent 2, was indirectly trying to achieve control and majority shareholding in the JV, which they could not have done but for violating the negative covenants stipulated in the JVA. On the larger policy, it was the appellants’ submission that if the open offer or the respondents’ scheme was allowed to precipitate, it would open the Pandora’s box in India — minority shareholders in other companies would then take such indirect routes to illegitimately usurp majority shareholding in companies, notwithstanding any restrictive clauses in shareholder or joint-venture agreements.
Thereafter, on 13-3-2020, the appellants filed for emergency arbitration under the Commercial Arbitration Rules of the Japanese Commercial Arbitration Association (the JCAA Rules), seeking interim injunction against the respondents by enforcing the negative covenants under JVA. In accordance with the JCAA Rules, appellants invoked the arbitration agreement only on 23-3-2020, and served the notice of arbitration to JCAA, which was served by JCAA to the respondents only on 1-4-2020. Interestingly, thus, the emergency arbitration was not pursuant to a notice of arbitration (as under Section 21 of the 1996 Act[10]) but merely based upon JCAA Rules. Thereafter, on 2-4-2020, the emergency arbitrator passed its final order (the EA order) denying emergency measures, primarily on jurisdictional grounds.
Failing the emergency arbitration, and since the main tribunal would take several weeks to constitute, the appellants (in that backdrop) prayed for interim measure of protection under Section 9 of the 1996 Act, until the foreign award is rendered by the main tribunal. As relief, the appellants prayed for a prohibitory interim injunction, restraining the respondents (including persons claiming through or under the respondents) from pursuing any actions or steps with respect, and in relation, to the open offer to purchase shares, in excess of its existing 26% shares in the JV. Alternatively, the appellants sought for a prohibitory interim injunction, restraining the respondents (including persons claiming through or under the respondents) from alienating the shares and exercising any rights, including voting rights or receipt of dividends, in respect of shares purchased via open offer which are in excess of its existing 26% voting share capital in the JV.
III. Procedural posture and the Court’s rationale
A. Decision of the Single Judge
The learned Single Judge of the Delhi High Court (the Single Judge) dismissed the application vide an order dated 12-5-2020, on the ground of maintainability.[11] First, the Single Judge held that Section 9 was not maintainable since the mandate of the emergency arbitrator was continuing under the JCAA Rules.[12] This finding finds its basis (though not expressly stated by the Single Judge) in Section 9(3) of the 1996 Act, whereby once the Arbitral Tribunal has been constituted, the court shall not entertain an application for interim measures under Section 9. In doing so, the Single Judge assumed emergency arbitration to have recognition and enforcement under Indian law (which would not even qualify as obiter dicta).
Second, the Single Judge held that having agreed to arbitrate under JCAA Rules, parties agreed to exclude Section 9 of the 1996 Act, in accordance with Section 2(2) of the 1996 Act, which states that “subject to an agreement to the contrary, the provisions of Sections 9 […] shall also apply to international commercial arbitration”.[13]
Third, in the Single Judge’s appreciation of Delhi High Court’s decision in Raffles Design International India (P) Ltd. v. Educomp Professional Education Ltd. (hereinafter “Raffles”),[14] it was assumed that a court’s independent consideration of an application under Section 9 would arise only in circumstances where an emergency arbitrator (or a foreign tribunal) granted interim measures and rejected the same.[15]
Fourth, the Single Judge found that the appellants had consciously chosen to tread on a path and cannot turn around only because they were unsuccessful (that the appellants had elected a remedy from which it could turn around).[16] Relatedly, the Single Judge held that the pleadings of the application were really in the nature of an appeal pointing out flaws and infirmities in the order of the emergency arbitrator.[17] It accordingly held that the Court could not sit as a court of appeal to examine the order of the emergency arbitrator.
Aggrieved by the learned Single Judge’s order dated 12-5-2020, dismissing the application under Section 9 of the 1996 Act on maintainability, the appellants preferred an appeal before the Division Bench of the Delhi High Court.
B. Decision of the Delhi High Court (Division Bench)
The Division Bench of the Delhi High Court also dismissed the appellants’ case vide order dated 3-7-2020, which substantially upheld the Single Judge’s order, as well as for other reasons described below. Importantly, during the course of the appeal, circumstances changed with the main tribunal having been constituted by JCAA. This brought a whole new dimension to the case at hand, as it progressed.
First, the Division Bench considered it unnecessary to determine whether parties, having agreed to the JCAA Rules, had excluded Section 9 of the 1996 Act (even though this was the principal basis of the Single Judge’s order).[18] Instead, the Division Bench assumed a completely different basis and dismissed the case primarily on the “principles” of Section 9(3) of the 1996 Act. Besides that, the Division Bench (rather puzzlingly) granted the appellants the liberty to invoke such other remedies as may be available in law.[19]
Second, it was held that the invocation of emergency arbitration prevented the appellants from approaching Indian courts under Section 9 of the 1996 Act, since the appellants “elected” a remedial forum.[20] Relatedly, the Division Bench also held that having first approached emergency arbitration, the appellant could not now have a “second bite at the cherry,” (which is basically an offshoot of the principle of abuse of process).[21]
Aggrieved by the Division Bench’s order dated 3-7-2020, dismissing the appeal under Section 37 of the 1996 Act[22], the appellants further appealed the matter before the Supreme Court. However, a three-Judge Bench of the Supreme Court found no ground to interfere with the order passed by the Division Bench of the Delhi High Court. The special leave petition was, accordingly, dismissed vide order 31-7-2020.[23]
IV. Discussion and analysis
A. Section 2(2)
In the High Court’s view, since there was no express provision in the JCAA Rules which made Part I of the 1996 Act[24] applicable to the international commercial arbitration seated in Tokyo, it was held that interim measures under Section 9 of the 1996 Act would not be available to the appellants; hence, the petition was held to be not maintainable as the Court was without jurisdiction.[25] In other words, merely because the parties agreed to institutional arbitration under the JCAA Rules (which provides for a detailed mechanism for seeking interim and emergency measures), in the Court’s view it clearly evinced the intention of the parties to exclude Section 9 (of Part I) of the 1996 Act.
Section 2(2) provided that “subject to an agreement to the contrary, the provisions of Section 9 […] shall also apply to international commercial arbitration”. That is to say, Section 2(2) necessitates an “agreement to the contrary” to exclude Section 9 from applying to arbitrations seated outside India. However, in our opinion, there was no evidence of such agreement, express or implied, either in the arbitration clause or the JCAA Rules. Neither does the High Court cite any such evidence and, thus, it erred in appreciating the issues before it. Here, it is worth noting that while the Division Bench upheld the decision of the Single Judge, it left this issue open (even though this was the primary ground of the appeal under Section 37 of the 1996 Act).[26]
The Single Judge’s rationale in arriving at this conclusion was based on an earlier decision of the Delhi High Court in Raffles[27], which was specifically in the context of the (unrelated) 2013 Rules of the Singapore International Arbitration Center (“the SIAC Rules”).[28] The Single Judge followed an erroneous dicta in Raffles[29] that since the parties there had agreed to follow the SIAC Rules (containing Rule 26.3), Section 9 could apply to the arbitration seated outside India. Rule 26.3 states that:
- … 26.3. A request for interim relief made by a party to a judicial authority prior to the constitution of the Tribunal, or in exceptional circumstances thereafter, is not incompatible with these rules.
The Court in Raffles[30] had (erroneously) assumed that Rule 26.3 meant that there was impliedly no “agreement to the contrary” which would exclude Section 9.[31] Imbibing this erroneous premise, the Single Judge erred in holding that since parties agreed to arbitrate under the JCAA Rules (which does not have a provision like Rule 26.3), there was impliedly an “agreement to the contrary” that excluded Section 9.[32]
In our opinion, the Single Judge and Raffles[33] were mistaken about the meaning and purpose of the provisions such as Rule 26.3 of the SIAC Rules. The said Rule can be sourced back to Article 26.3 of the UNCITRAL Arbitration Rules, 1976 (the UNCITRAL Rules) and Article 9 of the UNCITRAL Model Law on International Commercial Arbitration, 1985[34] (the Model Law), which are all essentially the same. As per travaux préparatoires (or legislative history) of the Model Law, Article 9 codified the dual inherent principles of arbitration:[35] one, a party does not waive its right to go to arbitration by requesting (or obtaining) interim measures of protection from a national court; and, two, that a national court is not prevented from granting such measures by the existence of an arbitration agreement.
The need for this provision arose out of what was seen as the experience with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).[36] Courts had come to divergent results on the question of whether they could grant requests for interim measures in matters governed by arbitration agreements: some had refused to do so on the ground that such measures would impede expeditious arbitration proceedings; and others had granted measures on the ground that they did not obstruct arbitration but ensured that a foreign arbitral award would be meaningful by preserving the subject-matter of the dispute or assets of a respondent.[37] In conclusion, the UNCITRAL Working Group agreed that interim measures by a national court were compatible with arbitration.[38]
This was the context behind Rule 26.3 of the SIAC Rules, Article 26.3 of the UNCITRAL Rules and Article 9 of the Model Law, all of which merely restate the inherent principles of arbitration (which principles are more obvious now, given the years of development in the field of arbitration). Therefore, the absence of a provision similar to Rule 26.3 in the JCAA Rules (restating such obviously inherent principles) could not by any stretch imply that parties, therefore, excluded Section 9. Meaning, that the absence of a specific provision like Rule 26.3 (which obviously applies by default) could not have meant anything to the contrary.
Analogically, if “something” is obvious to happen (like the default applicability of Section 9), just because it was not expressly mentioned, it does not mean that this “something” will not happen. The Court’s decision and its rationale were rather antithetic to Section 2(2) because the application of Section 9 to arbitrations seated outside India was by default.
Delving further into Section 2(2), the provision sets a high-standard and requires a negative agreement – that there must be “an agreement to the contrary”. This is indeed a different standard from: “if the parties agree that…,” or simply “an agreement” which is positive in nature.[39] Thus, in our opinion, unless there is a clear and unmistakable “agreement to the contrary”, it would be antithetic to the default/inherent rule under Section 2(2) to exclude Section 9,[40] which is meant to ensure that a foreign arbitral award remains meaningful by preserving the subject-matter of the dispute or assets. Else, Indian arbitration law will re-enter the very same precarious position which was cautioned by the 246th Report and enacted by way of amendments to the 1996 Act in 2015.
For instance, in Actis Consumer Grooming Products Ltd. v. Tigaksha Metallics (P) Ltd. (Actis Consumer),[41] the High Court of Himachal Pradesh held that choice of seat and choice of rules meant the exclusion of Part I of the 1996 Act. There, the Court failed to appreciate that a foreign seat and institutional are what define an international commercial arbitration which Section 2(2) seeks to protect. Going by the Court’s rationale in Actis Consumer, nothing would ever fall within the purview of Section 2(2) of the 1996 Act.
B. Section 9(3)
With regard to Section 9(3) of the 1996 Act, the facts on which the Single Judge and Division Bench rendered their decision were substantially different (while their reasoning was substantially the same).
For the Single Judge, the considerations pertained to the emergency arbitration and by such time the matter was appealed before the Division Bench, the main tribunal had already been constituted. The Court sourced its rationale from Section 9(3) provides that:
“Once the Arbitral Tribunal has been constituted, the court shall not entertain an application under sub-section (1), unless the court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.” But the appellants had a twofold answer to Section 9(3): (i) that its application was only limited to domestic arbitrations under Part I of the 1996 Act (which runs alongside the principles of private international law); and (ii) even if Section 9(3) reflect some principle of law (which, it did not, since there was no such evidence of it) an interim measure rendered by a foreign-seated tribunal could not considered “efficacious”.
Unfortunately, both the Single Judge and Division Bench pay insufficient scrutiny to the appellants’ submissions. The subsequent segments delve further into Section 9(3).
Emergency arbitrator
The Single Judge was of the view that as per Article 77 of the JCAA Rules, the mandate of the emergency arbitrator was continuing and it was open to the appellants to seek appropriate relief of modification, etc., if so advised.[42] In other words, it observed that the emergency arbitrator could have been approached to order, modify, suspend, or terminate emergency measures in accordance with Article 71 through 74 of the JCAA Rules.[43]
The Single Judge furthered her view by relying on Article 77(5) of the JCAA Rules, which made it clear that the emergency measures shall be deemed to be interim measures granted by the main tribunal when it is constituted or when a substitute arbitrator is confirmed or appointed by the JCAA.[44] The Single Judge also referred to Article 78(2) stating that emergency measures shall remain in effect until the Arbitral Tribunal modifies, suspends or terminates such emergency measures.[45] The aforesaid reasoning was tacitly coupled with Section 9(3) of the 1996 Act to hold that the appellant’s petition for interim measure would not be maintainable as the mandate of the emergency arbitrator was continuing.
The Single Judge, however, missed the mark on several counts. For starters, Article 77(1) of the JCAA Rules could not have applied to situations where emergency measures had been rejected or denied (particularly, for lack of the jurisdiction). Article 77(1) provides:
77.1 The emergency arbitrator may order, modify, suspend or terminate emergency measures in accordance with Article 71 through 74.
There was no question of modifying, suspending, or terminating, where emergency measures have been rejected or denied in the first place. This is furthered by Rule 77(5) of the JCAA Rules, which states that:
The emergency measures shall remain in effect until the Arbitral Tribunal modifies, suspends or terminates such emergency measures under Article 78.2.
Therefore, the only remedy where emergency measures were denied or rejected was to reapply for emergency measures under the JCAA Rules, since there is no provision to challenge or appeal from an order the emergency arbitrator rejecting or denying the emergency application. In other words, the mandate of the emergency arbitration terminated after the EA order.
There is also no provision under the Japanese Arbitration Act, 2003 (the JAA 2003) that gives parties appellate rights against an order granting or refusing to grant interim measures by Arbitral Tribunal (let alone an emergency arbitrator). Interim orders rendered by Arbitral Tribunals under Article 24 of the JAA 2003 (similar to Section 17 of India’s 1996 Act[46], before its amendment in 2015) cannot be enforced.[47] Like India, Japan has also adopted the Model Law, however, Japan did not adopt any of the 2006 amendments to the Model Law that were introduced to give enforceability to interim orders rendered by an Arbitral Tribunal. Thus, having no recourse under the JCAA Rules or the JAA 2003, the appellants (in our opinion) were legally entitled to approach the Delhi High Court under Section 9 of the 1996 Act.
Secondly, the Single Judge fundamentally erred in assuming that an “emergency arbitrator” is an “Arbitral Tribunal,” under the 1996 Act. There is neither any statutory provision nor any judicial law pronounced by Indian courts, that recognises, deems, or defines “emergency arbitrator” as an “Arbitral Tribunal.” The Single Judge erringly relied on Article 77(5) of the JCAA Rules in stating that emergency measures were deemed to be interim measures granted by an Arbitral Tribunal, that would remain in effect until the Arbitral Tribunal modifies, suspends or terminates such emergency measures under Article 78(2) of JCAA Rules. However, such deeming provision would not render recognition to “emergency arbitrator” as an “Arbitral Tribunal” under Indian Law nor would it mean that the EA order would have any recognition under Indian Law. In the same breath, Section 9(3) could also have no application in the present case.
And even if the EA order could be deemed to be interim measures granted by an Arbitral Tribunal under the law of the seat (Japan), there is simply no statutory basis in India or any international instrument (bilateral or multilateral) on the basis of which interim orders by foreign-seated Arbitral Tribunals may even be recognised in India. Part II of the 1996 Act[48] (which implements the 1958 New York Convention) only concerns the recognition and enforcement of “foreign arbitral award,” but not “interim orders” of foreign-seated Arbitral Tribunals.[49]
Main tribunal
After the parties appealed before the Division Bench, the facts and circumstances had evolved such that the main tribunal had been formed by the arbitral institution. Given the Tribunal was already constituted, the question remained if the petition for interim measure was not maintainable, as per the prohibition under Section 9(3).
The Division Bench was of the view that even though Section 9(3) of the 1996 Act did not apply directly, the “principle” of Section 9(3) was equally applicable when interim measures are sought before Indian courts in connection with a foreign-seated arbitration.[50] The Court’s rationale was that resolution of disputes by an Arbitral Tribunal of the parties’ choice, and reduced interference by courts, are amongst the central features of arbitration. It its view Section 9(3) of the 1996 Act reflected this understanding and manifested the legislative preference that the grant of interim measures ought to be considered by the Arbitral Tribunal, once constituted, rather than by the courts.[51]
Thus, two serious chasms are apparent in decision of the court. First, it wrongly considered that a court’s role under Section 9 of the 1996 Act was in the nature of “interference”, rather than assistance. Sections 9(3) and 17(2) were introduced by way of amendments to increase a tribunal’s powers in order to reduce the dependency on courts for interim measures (and not so as to reduce some made-up “interference” under Section 9). Second, if it was Parliament’s intent (as the Court puts it) it failed to explain and reconcile the express wordings of Section 9(3) which expressly link Section 9(3) only with Section 17 (thus, specifically concerning arbitrations under Part I).
A plain reading and the purpose behind the bar under Section 9(3) makes it evident that it strictly concerns arbitrations under Part I of the 1996 Act. This is so because tribunals seated in India may render enforceable interim orders under Section 17(2) (inserted by way of amendment in 2015), whereby the access to courts for interim measures was limited under Section 9(3), unless circumstances exist which may not render the remedy provided under Section 17 efficacious.[52] In other words, even Section 9(3) recognises a party’s right to approach courts if circumstances so exist, like situations where the enforcement of the tribunal’s order is not possible.
Section 9(3) — which is a statutory provision complementing Section 17(2) — actually does not reflect or restate any general principle of law (Indian or international). It would seem that the Division Bench conjured this out of thin air, without any evidence of such “principle” in existence. Hence, it was erroneous to extrapolate Section 9(3) to an international arbitration regime which is multi-jurisdictional in nature. Rather, if there is such a general principle of law, it clearly manifests in Article 9 of the Model Law, which states that:
“It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.”
But let us say Section 9(3) did reflect or restate some principle of law, it would still be that case that an interim measure rendered by a foreign-seated tribunal could neither be considered “efficacious,” nor could it be legitimately extrapolated onto international commercial arbitration seated outside India. Even if some existing “principle” of Section 9(3) which could be, let’s say, extrapolated to foreign seated arbitrations, Section 9(3) predicates it on the availability of an efficacious remedy (one that is “recognisable” and “enforceable”) as explained in Paragraph 41 of the 246th Report of the Law Commission of India (the 246th Report).[53] Such efficaciousness was clearly absent in the case of interim orders by a foreign tribunal, making it all the more clear that Section 9 should have been made available irrespective of whether a foreign tribunal has been constituted, or whether the foreign tribunal has passed any interim orders, or whether the foreign tribunal has been approached. Let us delve further into this.
Interim measures (or provisional measures, or interlocutory order, etc.) find no recognition or enforceability under the Part II of the 1996 Act (which ratifies the New York Convention). Under Indian Law, “awards” (whether interim or final) stand distinct in its content (and in effect) from interim measures. Interim awards, like final awards, decisively rule upon substantive rights (i.e. on merits).[54] Only such interim award (and not interim measures) may qualify as a “foreign award” under Part II of the 1996 Act.
Efficaciousness of remedy
Evidently, there is no international instrument, like the New York Convention, for recognition and enforcement of interim measures (unlike a “foreign arbitral award”) by foreign-seated tribunals.[55] Hence, as emphasised in the 246th Report, any interim measures passed by a foreign tribunal (much less an emergency arbitrator, which is not even recognised as an Arbitral Tribunal either in India or Japan) cannot be recognised nor enforced under Indian Law, making such remedies absolutely inefficacious. In this regard, the Law Commission stated that:[56]
Where the assets of a party are located in India, and there is a likelihood that that party will dissipate its assets in the near future, the other party will lack an efficacious remedy if the seat of the arbitration is abroad. The latter party will have two possible remedies, but neither will be efficacious. First, the latter party can obtain an interim order from a foreign court or the Arbitral Tribunal itself and file a civil suit to enforce the right created by the interim order. The interim order would not be enforceable directly by filing an execution petition as it would not qualify as a “judgment” or “decree” for the purposes of Sections 13 and 44-A of the Code of Civil Procedure (which provide a mechanism for enforcing foreign judgments). Secondly, in the event that the former party does not adhere to the terms of the foreign order, the latter party can initiate proceedings for contempt in the foreign court and enforce the judgment of the foreign court under Sections 13 and 44-A of the Code of Civil Procedure. Neither of these remedies is likely to provide a practical remedy to the party seeking to enforce the interim relief obtained by it.
That being the case, it is a distinct possibility that a foreign party would obtain an arbitral award in its favour only to realise that the entity against which it has to enforce the award has been stripped of its assets and has been converted into a shell company.
(emphasis supplied)
Accordingly, an application under Section 9 read with Section 2(2) of the 1996 Act should have been considered to be jurisdictionally maintainable by the Single Judge and the Division Bench notwithstanding the constitution of a foreign-seated tribunal, or any interim orders passed by such a tribunal.[57] The rationale applied by the Law Commission is consistent with the principle of private international law that is well recognised. On this subject, the International Law Association’s final report on lis pendens and arbitration has stated:[58]
2.8 As noted above, in many common law countries, the existence of parallel proceedings is simply an additional factor relevant to the determination of the appropriate forum (in the application of the doctrine of forum non conveniens).
2.9 In some cases, the foreign proceedings may be of no relevance at all, for example, because of their subject-matter or timing. But if genuine proceedings have been started and have had some impact on the dispute between the parties and/or are likely to have a continuing effect, then this may be a relevant (but not necessarily decisive) factor when considering whether the foreign jurisdiction provides die appropriate forum.
2.10 […] The most recent and significant example of this is the American Law Institute’s International Jurisdiction and Judgment Project, [wherein] [S]ection 11 of the draft, “declination of jurisdiction when prior action is pending”, adopts a basic lis pendens principle that presumes the first-filed matter should proceed, if that judgment would be entitled to recognition under the Act.
(emphasis supplied)
The Final Draft of the American Law Institute’s Foreign Judgments Recognition and Enforcement Act, Section 11 (April 2005) states that:[59]
11. Declination of jurisdiction when prior action is pending.—
(a) Except as provided in sub-section (b), when an action is brought in a court in the United States and it is shown that a proceeding concerning the same subject- matter and including the same or related parties as adversaries has previously been brought and is pending in the courts of a foreign State, the court in the United States shall stay, or when appropriate, dismiss the action, if:
(i) the foreign court has jurisdiction on a basis not unacceptable under Section 6; and
(ii) the foreign court is likely to render a timely judgment entitled to recognition tinder this Act.
(emphasis supplied)
Similarly, an English High Court held in Novoship (UK) Ltd. v. Mikhaylyuk that “[T]he existence of a foreign claim which, if it matured into a judgment, would not be enforceable, or entitled to recognition in England and Wales, ought therefore not to make the continuance of the English proceedings vexatious.”[60]
Contrary to the above principles of private international law that are trite and well recognised by developed jurisdictions, the Delhi High Court (Division Bench, in particular) erroneously held that a party could not come before Indian courts for any conservatory measures once the foreign tribunal was constituted, or if a party has previously approached the foreign tribunal. To top it all, the claim of the appellants (as pleaded) was that it had no alternative but to approach the Delhi High Court as the subject-matter of the dispute concerned shares of a JV incorporated in India; the open offer process under SEBI’s rules and regulations taking place in India; the law governing the dispute was Indian Law; that the JV was within the territorial jurisdiction of the Delhi High Court; and that the effects of respondents’ actions were directly felt in India.
In essence, imposing such barriers (as the Delhi High Court did) against a party to a foreign arbitration was antithetic to the Section 2(2) read with Section 9 of the 1996 Act, as stressed by the 246th Report which analysed foreign interim orders to be nothing more than “paper orders” in absence of any international instrument like the New York Convention for foreign awards. And, contrary to the Division Bench’s holding, this inefficaciousness of interim measures by a foreign tribunal cannot be miraculously elevated by an undertaking of a party,[61] or by a party’s conduct in having first approached an inappropriate/inefficacious remedial forum,[62] or by an agreement between the parties that elaborates the foreign tribunal’s power or ambit to grant interim measures.[63]
C. Equitable considerations
Both the Single Judge and Division Bench considered the appellants’ case to be not maintainable on two counts of equitable consideration. These considerations were coupled with the Court’s decision on Sections 2(1) and 9(3) of the 1996 Act.
Abuse of process
On the first count, invoking emergency arbitration could not have excluded the appellants’ right to approach Indian courts under Section 9 (after having failed to procure interim measure) or that there was a “second bite at the cherry”.[64] In the present case, the Court could have easily arrived at this conclusion on three decisive considerations: (i) that emergency arbitration was not “recognisable” under Indian Law or Japanese Law, much less the enforceability of an EA order (more in subsequent segments); (ii) the emergency arbitrator had denied the appellants’ case primarily on jurisdictional grounds and, thus, no preclusive effect or res judicata (if any) was warranted; and (iii) the emergency arbitrator did not afford any oral hearing to the appellants, which was a violation of mandatory provisions of lex arbitri and Indian Law.
Specifically, regarding point (iii) i.e. the emergency arbitrator’s denial of oral hearings to the appellants, the said right was mandatorily available to the appellants under the JCAA Rules, JAA 2003, as well as the 1996 Act (Section 24 read with Section 18). In order to arrive at that conclusion, the following provisions need to be considered:
Article 77.3 of JCAA Rules (mandate of emergency arbitrator):
The emergency arbitrator, if he or she considers a hearing necessary in order to make a determination on the emergency measures, may hold such hearing for one day only.
This meant that Article 77.3 gives emergency arbitrator the right to hold a hearing for only one day where he considers it necessary, but it does not give the right to deny hearing since Article 77.3 is made subject to Rule 50.1 (and not the other way around!).
Article 79 of JCAA Rules (Application Mutatis Mutandis):
The other Chapters of the Rules shall apply mutatis mutandis to the emergency arbitrator and the emergency measures unless they are contrary to the nature thereof.
Accordingly, the other Chapters of the JCAA Rules include Article 50.1 on Arbitral Tribunal’s decision on hearings.
Article 50.1 of JCAA Rules (Decision on Hearings):
The Arbitral Tribunal shall decide whether to proceed with holding hearings or whether to proceed based only on documents and other materials; provided that the Arbitral Tribunal shall hold such hearings if so requested by a party at an appropriate stage of the arbitral proceedings.
Article 32(1) of the JAA:
(1) The Arbitral Tribunal may hold oral hearings for the presentation of evidence or for oral argument by the parties:
Provided, where a party makes an application for holding oral hearings, including the request in Article 34, Paragraph (3), the Arbitral Tribunal shall hold such oral hearings at an appropriate stage of the arbitral proceedings.
An appraisal of the provisions above demonstrates that the right to hearing was indispensable under the JCAA Rules. The JCAA Rules and JAA mandatorily prescribed that hearings must be held if it is requested by a party. However, this was denied by the emergency arbitrator stating: “the right only arises in emergency proceedings where I consider it necessary to determine the application”.[65]
On the principles of private international law, the Delhi High Court failed to appreciate that abuse of process has one principal exception. Such conduct of the appellant in the present case would not be an abuse of process if the foreign decision is unenforceable in India,[66] in which case the appellants were seeking a legitimate advantage (namely, obtaining an enforceable decision).[67] Separately, one may also draw the analogy of annulment proceedings at the juridical seat and yet the subsequent availability of similar grounds under Section 48 of the 1996 Act (for a court’s independent consideration, or discretionary deference to the annulling court’s decision at the seat).
Doctrine of election of remedies
On the second count of equitable consideration, invoking emergency arbitration (or arbitration, generally) for interim measures could not have meant that the appellant “elected” a remedial forum. The doctrine of election of remedies, examined by Indian court on several occasions,[68] has been stated to:[69]
(i) require a party to adopt or elect one of two or more coexisting and inconsistent remedies which the law affords on the same set of facts;
(ii) refer to situations where a party possesses two appropriate but inconsistent remedies and deliberately pursues one remedy to the other’s exclusion; and
(iii) be founded on the principle that where two remedies proceed upon opposite and irreconcilable claims of right, the one taken bars the prosecution of the other. The non-satisfaction of the doctrine of election of remedies is glaring, such that the doctrine would not apply.
First and foremostly, emergency arbitration is not even recognisable under Indian or Japanese Law; it is nothing more than a non-judicial/contractual forum which cannot be equated to a quasi-judicial or judicial forum. Because it may not be counted as a remedy to begin with, there is simply no question of a choice between two or more alternative-inconsistent remedies when remedies under emergency arbitration have no enforceability (given the absence of any statutory provision or international convention).
As emphasised in the 246th Report, an interim remedy before a foreign tribunal is not efficacious for its lack of enforceability and, hence, cannot be considered a “choice” among the remedies available to a party as per the doctrine of election.[70] Indeed, in our opinion, this understanding predicated the intent behind enacting Section 2(2) of the 1996 Act, to allow parties to secure interims measures under Section 9, such that its maintainability would be irrespective of whether a tribunal is constituted (or whether it has been approached, or whether it has passed any orders) for their lack of enforceability. Quite obviously, this inefficaciousness cannot be changed by a mere undertaking of a party, or by a party’s conduct in having first approached an inappropriate/ inefficacious remedial forum, or by an agreement between the parties (or institutional rules) that elaborates the foreign tribunal’s power or ambit of granting interim measures. Particularly, the choosing of an inappropriate and ineffectual remedy may not bar resort to an appropriate equitable remedy.[71]
Secondly, the Delhi High Court could not appreciate the nuance aspects of the doctrine of election. One understanding of the doctrine considers that the doctrine operates in regard to inconsistent substantive rights, while the other understanding of the doctrine takes the view that it is applicable to “remedies” in the narrow sense.[72] The former, for instance, in the context of a suitor who cannot claim breach of a contract and, at the same time (or subsequently), claim that the contract is void. Another such example of “affirmance and disaffirmance,” is where one cannot claim under a will and, at the same time, be in opposition of it. This is where the equitable principle applies that a suitor cannot approbate and reprobate at the same time (otherwise there is no prejudice cause to other party).[73] The latter is in the context of choice of forums providing remedies that may be repugnant to each other(s). The doctrine triggers to estop the suitor when he brings an action in forum that is repugnant to the other(s). It is the latter of those nuances that could have an implication (if any) on the present case.
In this regard, the Delhi High Court failed to appreciate that there was no repugnancy between interim remedies before a court and a foreign tribunal, given that both complementarily and supplementarily provide interim measures of protection of the very same nature (but vastly differing in their enforceability).[74] Importantly, both forums are based in two distinct national jurisdictions and, thus, mutually exclusive, non-repugnant, non-competing, and parallel – accordingly, there is no basis in Indian law or international law by which the jurisdiction of a Indian court under Section 9 could be excluded by a foreign tribunal on equitable considerations.[75] An inconsistency could only exist where:[76]
(a) the assertion of one mode or theory of redress involves the negation or repudiation of another asserted one;
(b) one remedy is founded upon the affirmance of a contract or transaction, or voidable transaction, and the other rests upon its disaffirmance or rescission;
(c) the relief is one suit is predicated on title in the plaintiff, while relief in the other depends upon title in the defendant;
(d) one statutory remedy explicitly precludes another; and
(e) a double recovery would result.
Thirdly, a cardinal principle of the doctrine is that the election of one remedy over the others results in an irrevocable/permanent effect that absolutely bars the suitor from pursuing the other remedy.[77] This, however, fails to apply for two basic reasons: (i) the right to seek interim relief of protection, which is temporary and may be validly sought again; and (ii) the forum of emergency arbitration, which only lasts for an interim period. There is no rationale or legal basis for the proposition that this common law rule of equity should apply to remedies available for interim reliefs of protection – that would run counter to the motif behind interim reliefs under Section 9 of the 1996 Act that are laterally made available to parties to arbitrations, both inside and outside India.
Finally, the doctrine of election of remedies has no application where a party is seeking only one remedy but in more than one forums; the issue then is properly and accurately analysed as one of jurisdiction and forum selection.[78] However, no such issue of forum selection arose in the present case and the only jurisdictional considerations before the Delhi High Court were related to Sections 2(2) and 9(3) of the 1996 Act.
IV. Concluding remarks
For some time, the Indian courts have (directly and indirectly) preached the so-called “duplicative approach” derived from the decision of the Bombay High Court in Avitel Post Studioz v. HSBC PI Holdings.[79] There, the enforcement of an interim measure by a foreign-seated tribunal was indirectly achieved by duplicating it into a court-ordered provisional measure under the relevant statutory provision.[80] But the point is that even if the appellants procured a favourable order from the foreign tribunal and attempted to enforce it via Section 9: (i) Indian courts would need to independently examine the application (since courts do not exercise an enforcement jurisdiction under Section 9);[81] and (ii) the respondents would be entitled to reagitate all objections (procedural and substantive). Hence, despite the duplicative approach, it dissipates the entire process spent to secure the interim protection from a foreign tribunal. And though respondents (in Ashwani Minda) offered an undertaking to follow the tribunal’s measures, they reserved their remedies against it.
In our opinion, the most reasonable and pragmatic standard for the courts is this; that where a foreign tribunal has made a determination (let’s say) refusing interim measures, Indian courts would theoretically be required to render an independent determination. This would not mean that the courts are absolutely stripped from its discretion to give some deference to the tribunal’s determination on the merits or substance of the case for interim protection, but maintainability would generally be an on-issue given the import of Section 2(2) of the 1996 Act. On policy considerations, such standard is non-regressive and reflective of India’s pro-arbitration stand. It is also not the case that in applying such standard the court would be usurping the arbitral process; rather it would be supporting the arbitral process at the place where the subject-matter is situated (of course, when equities demand that the party be protected in the interim).
*FCIArb, FMIArb, FAIADR, FPD, SFBIAMC. Advocate and Arbitrator; LLB (1996), Campus Law Center, University of Delhi; Diploma, CIArb UK; Director–India, Chartered Institute of Arbitrators UK; Chairman–India, Society of Construction Law UK; Fellow, Chartered Institute of Arbitrators UK; Fellow, Prime Disputes UK; Fellow, Malaysian Institute of Arbitrators; Fellow, Asian Institute of Alternate Dispute Resolution.
**Arbitration and Mediation Counsel; LLB Hons. (2015), V. M Salgaocar College of Law, Goa University; LLM International Commercial Arbitration (2018), Straus Institute for Dispute Resolution, Pepperdine University Caruso School of Law; Certificate (2018), Indian Society of International Law; Certificate (2020), The Hague Academy of International Law; Secretary, Society of Construction Law – India; Member, International Task Force on Mixed Mode Dispute Resolution.
[1] 2020 SCC OnLine Del 721 (hereinafter “the Division Bench order”).
[4] Arbitration and Conciliation Act, 1996.
[5] <http://www.scconline.com/DocumentLink/8p216XFz>.
[6] <http://www.scconline.com/DocumentLink/8p216XFz>.
[8]See generally, Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC 545 para 42 (on negative covenants).
[9] Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
[10] Section 21, Arbitration and Conciliation Act, 1996.
[11]Ashwani Minda v. U-Shin Ltd., 2020 SCC OnLine Del 1648 (hereinafter “the Single Judge order”).
[12]Single Judge order, supra Note 11, para 57.
[13]Single Judge order, supra Note 11, paras 54-55.
[14] 2016 SCC OnLine Del 5521.
[15] Single Judge order, supra Note 11, para 58.
[16]Single Judge order, supra Note 11, para 56.
[17] Single Judge order, supra Note 11, para 56.
[18]Division Bench order, supra Note 1, paras 47 and 49(c).
[19] Division Bench order, supra Note 1, para 49.
[20] Division Bench order, supra Note 1, paras 42-43.
[21] Division Bench order, supra Note 1, paras 42-43.
[22] <http://www.scconline.com/DocumentLink/0Vi7sQsH>.
[23]Ashwani Minda v. U-Shin Ltd., 2020 SCC OnLine SC 1123.
[24]<http://www.scconline.com/DocumentLink/QWdt5a4f>.
[25]Single Judge order, supra Note 11, paras 55 and 62.
[26]Division Bench order, supra Note 1, paras 47 and 49(c).
[27] 2016 SCC OnLine Del 5521.
[28]Single Judge order, supra Note 11, paras 59-61.
[29] 2016 SCC OnLine Del 5521.
[31]Raffles, supra Note 14, paras 101-105.
[32]Single Judge order, supra Note 11, para 61.
[33] 2016 SCC OnLine Del 5521.
[34] <http://www.scconline.com/DocumentLink/q0V16q1A>.
[35]See Howard M. Holtzmann and Joseph Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary 332 (1989).
[36]Ibid.
[37]Ibid.
[38]Ibid.
[39]See Big Charter (P) Ltd. v. Ezen Aviation Pty. Ltd., 2020 SCC OnLine Del 1713, paras 65 and 68 (The agreement, which would exclude the application of the proviso to S. 2(2) would, therefore, have to be contrary to the dispensation provided in the proviso i.e. it would have to be contrary to the applicability, to the proceedings, of S. 9 of the 1996 Act.).
[40]See e.g. Archer Power System (P) Ltd. v. Kohli Ventures Ltd., 2017 SCC OnLine Mad 36458, paras 23-25 (there was a clear “agreement to the contrary” provided in the arbitration, as per S. 2(2) of the 1996 Act, which excluded the application of the entire 1996 Act, except for enforcement purposes); Heligo Charters (P) Ltd. v. Aircon Feibars FZE, 2018 SCC OnLine Bom 1388, para 16 (that a “specific” agreement to the contrary was required); Big Charter (P) Ltd. v. Ezen Aviation Pty. Ltd., 2020 SCC OnLine Del 1713, para 68 (The question is not whether the agreement to the contrary is express or implied – indeed, it may be either – but whether there is an agreement to the contrary.).
[41]2020 SCC OnLine HP 2234, para 30. Cf. Big Charter (P) Ltd. v. Ezen Aviation Pty. Ltd., 2020 SCC OnLine Del 1713, para 58 (the fixation of seat of arbitration would not, ipso facto, divest an Indian court of jurisdiction under Section 9 and that such divestiture would occur only if there is any “agreement to the contrary”).
[42]Single Judge order, supra Note 11, para 57.
[43]Single Judge order, supra Note 11, para 55.
[44]Single Judge order, supra Note 11, para 54.
[45]Ibid.
[46] <http://www.scconline.com/DocumentLink/27KJ0N1c>.
[47]Yutaro Kawabata, Azusa Saito and Motonori Ezaki, Arbitration Procedures and Practice in Japan: Overview, Practical Law (1-1-2020), <https://uk.practicallaw.thomsonreuters.com/6-602-0046?transitionType=Default&contextData=(sc.Default)&firstPage=true>; Yuko Kanamaru and Yoshinori Tatsuno, International Arbitration Laws and Regulations 2020 – Japan, ICLG (24-8-2020).
[48] <http://www.scconline.com/DocumentLink/QWdt5a4f>.
[49]See Gracious Timothy Dunna, Recognition and Enforcement of Foreign Interim Measures under the Indian Arbitration and Conciliation Act, 1996, Asian Disp. Rev. 115 (July 2020) (hereinafter “Dunna”).
[50]Division Bench order, supra Note 1, paras 33 and 35.
[51]Ibid.
[52] See Law Commission of India, Report No. 246, Amendments to the Arbitration and Conciliation Act, 1996 (August 2014) pp. 44-45 and 50-51 (hereinafter “the 246th Report”).
[53]Ibid.
[54]See generally, McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, 211, para 68.
[55]See Dunna, supra Note 49.
[56]See 246th Report, supra Note 52, at para 41.
[57]See 246th Report, supra Note 52, at para 41.
[58]Filip De Ly and Audley Sheppard, ILA Final Report on Lis Pendens and Arbitration, 25(1) Arb. Int’l 3, 9 (2009).
[59]Foreign Judgments Recognition and Enforcement Act (with Comment and Reporters’ Notes) The Proposed Final Draft 31(11).
[60] 2012 EWHC 1352.
[61]See Division Bench order, supra Note 1, paras 24 and 37.
[62]See Division Bench , supra Note 1, para 37.
[63]See Division Bench order, supra Note 1, para 36.
[64]See generally, Karafarin Bank v. Mansoury-Dara, (2009) 2 Llyod’s Rep 289. (It is an abuse of process to require a defendant to defend the same cause of action both in English proceedings and abroad.)
[65]Emergency Arbitrator’s order (on file with the authors).
[66]See e.g. Novoship (UK) Ltd. v. Mikhaylyuk, 2012 EWHC 1352.
[67]See e.g., Novoship (UK) Ltd. v. Mikhaylyuk, 2012 EWHC 1352, at para .
[68]See Transcore v. Union of India, (2008) 1 SCC 125 paras 64-69; Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409, para 6.
[69]Am. Jur. 2d Election of Remedies §1.
[70] See Gulab Koer v. Badshah Bahadur, 1909 SCC OnLine Cal 143, 1216 affirmedd by five-Judge Bench in Daryao v. State of U.P., (1962) 1 SCR 574.
[71]See Ibid. See also, Am. Jur. 2d Election of Remedies § 24.
[72]See Am. Jur. 2d Election of Remedies § 2.
[73]See e.g. Nagubai Ammal v. B. Shama Rao, 1956 SCR 451.
[74]See Will of Shepherd, In re, 761 S E 2d 221 (NC Ct App 2014) (The principle does not apply to coexisting and consistent remedies.). See also, Am. Jur. 2d Election of Remedies § 21 (The doctrine of election of remedies does not apply if the available remedies are consistent and concurrent or cumulative. If the remedies are alternative and concurrent, there is no bar until satisfaction has been obtained.).
[75]See Am. Jur. 2d Election of Remedies § 5 (The doctrine is ordinarily applied in a strict and limited way, without being unduly extended. It should not be applied in an oppressive manner or in a formulaic way but rather with due consideration for equities of the case.).
[76]See Am. Jur. 2d Election of Remedies § 20.
[77]See Am. Jur. 2d Election of Remedies § 6 (the election is final and bars any action, suit, or proceeding inconsistent with the elected remedy).
[78]See Am. Jur. 2d Election of Remedies § 9.
[79]2014 SCC OnLine Bom 929 (hereinafter “Avitel”).
[80]See generally, Raffles, supra Note 14; Plus Holdings Ltd. v. Xeitgeist Entertainment Group Ltd., 2019 SCC OnLine Bom 13069
[81]See Raffles, supra Note 14, at paras 101-105. See also, Avitel, supra Note 79 (“Merely because, in the present case such emergency or interim awards have been made by the Arbitral Tribunal at Singapore, that would make no difference, particularly when it comes to determination of the jurisdiction of the Indian courts to grant interim measures by resort to S. 9 of the Act.”).
