Delhi High Court: Plaintiff, Techfab International (P) Ltd. sought a decree of declaration that any orders passed, or proceedings conducted by the Sole Arbitrator appointed by the Council for National and International Commercial Arbitration, Chennai (‘CNICA’) in Midima Holdings Ltd. (Malawi) v. Techfab International (P) Ltd. (India), PCA Case No. AA773 (‘Midima Holdings Case’), were null and void. Plaintiff also sought an anti-arbitration injunction restraining defendant, Midima Holdings Ltd., from proceeding with the said arbitration proceedings, apart from costs. Anup Jairam Bhambhani, J., observed that though the arbitration provision did say that arbitration could be conducted in any other ‘United Nations Commission on International Trade Law (‘UNCITRAL’) following countries’, that was subject to a mutual decision of the parties, and there was nothing on record to show that any such decision was taken by mutual consent of the parties. Thus, the Court restrained defendant from proceeding further with arbitral proceedings before the Sole Arbitrator appointed by the CNICA, Chennai, in Midima Holdings Case, till the next date of hearing.
Background
Plaintiff submitted that the arbitral proceedings being conducted were completely contrary to the arbitration agreement between the parties comprised in Article 9 of the Agency Agreement dated 20-11-2015 (‘Agency Agreement’) from which the disputes arose. Plaintiff further submitted that as per arbitration notice dated 02-09-2019 issued by defendant and received by plaintiff on 18-12-2019), defendant had sought to invoke arbitration in terms of Article 9.1 of the Agency Agreement, in which notice defendant had admitted that the Agreement was to be governed by the substantive laws of India; and that the place of arbitration would be in India. It was submitted that though as per Article 9.1, the place of arbitration could also be in any other UNCITRAL following country to be decided mutually, admittedly no such alternate country was ever agreed-upon between the parties.
Defendant, in keeping with the terms of the arbitration agreement, had nominated a former Judge of the Delhi High Court as the Sole Arbitrator, with an alternate nominee in Delhi; and the arbitration proceedings were proposed to be conducted in Delhi. However, defendant took no further action under the aforesaid notice invoking arbitration; until, after a long lapse of time, vide application dated 19-03-2020 made to the Secretary General of the Permanent Court of Arbitration (‘PCA’) at the Hague, Netherlands, defendant requested that organisation to designate an appointing authority under Article 6.2 of the UNCITRAL Arbitration Rules (2010).
Pursuant to application dated 19-03-2020, vide communication dated 04-12-2023, the PCA had designated the CNICA, Chennai as the appointing authority under the UNCITRAL Arbitration Rules (2010); consequent whereupon, vide communication dated 19-12-2023, the CNICA had appointed the Sole Arbitrator at the Asian International Arbitration Center (‘AIAC’), Kuala Lumpur, Malaysia to adjudicate upon the disputes between the parties. The Sole Arbitrator directed plaintiff to be represented at a re-convened case management hearing on 22-01-2024, failing which they would be proceeded ex-parte. Plaintiff was directed to pay the outstanding advance towards Arbitrator’s fees in the sum of USD 10,600 inclusive of 6% Malaysian sales and services tax. Thus, plaintiff submitted that the appointment of an Arbitrator by the PCA at the Hague through CNICA, Chennai, of a person who would hold proceedings in Kuala Lumpur, Malaysia was completely contrary to the arbitration agreement between the parties.
Plaintiff also submitted that the same claim namely, defendant’s alleged claim against plaintiff towards Agency Fee, was already filed by defendant by way of a commercial suit, i.e., Midima Holdings Case, before the Commercial Division of the High Court of Malawi. Plaintiff’s submitted that claims relating to Agency Fee did not fall within the ambit of the arbitration clause under the Agency Agreement dated 20-11-2015. The entire proceedings before the Sole Arbitrator were non-est, since they had not been initiated in accordance with, and were not founded on the arbitration clause contained in the Agency Agreement between the parties.
Analysis, Law, and Decision
The Court opined that prima facie it appeared that the appointment of the Sole Arbitrator based in Kuala Lumpur (Malaysia), by the PCA at the Hague, through CNICA, Chennai, was contrary to the procedure agreed upon in the arbitration clause comprised in Article 9 of Agency Agreement dated 20-11-2015, which contemplated that the ‘seat’ of arbitration should be in India; with the governing law being of the country where arbitration would be conducted viz. India; and further stipulating that the parties would be subject to the jurisdiction of the court at New Delhi.
The Court observed that though the arbitration provision did say that arbitration could be conducted in any other ‘UNCITRAL following countries’, that was subject to a mutual decision of the parties, and there was nothing on record to show that any such decision was taken by mutual consent of the parties. The Court noted that notice dated 02-09-2019 issued by defendant showed their acceptance and admission of the arbitration mechanism under Articles 9.1 and 9.3, pursuant to which, in 2019, defendant had itself nominated a former Judge of this court as the Sole Arbitrator, for proceedings to be conducted in Delhi.
The Court opined that it needed no re-articulation that one of the cardinal principles of arbitration was, that since arbitration was a remedy that was founded on consent of parties, the agreed procedure for appointment of the arbitrator must be scrupulously followed. This, however, did not appear to have been done in the present case.
Thus, the Court restrained defendant from proceeding further with arbitral proceedings before the Sole Arbitrator appointed by the CNICA, Chennai, in Midima Holdings Case, till the next date of hearing.
The matter would next be listed on 02-05-2024.
[Techfab International (P) Ltd. v. Midima Holdings Ltd., 2024 SCC OnLine Del 699, Order dated 19-01-2024]
Advocates who appeared in this case:
For the Plaintiff: Nidesh Gupta, Senior Advocate; Joby Varghese, Shreesh Chadha, Divjot Singh Bhatia, Aman Singh Bakshi, Advocates
