Bombay High Court Reaffirms Binding Nature Of Emergency Arbitrator's Decision, Grants Interim Relief U/S 9 Of Arbitration Act

Brief Facts:

By a Shareholders Agreement (SHA) dated 12.05.2017, the Respondents had agreed to purchase Petitioner's shares in Respondent No. 4. The SHA contained an arbitration clause that provided for arbitration under the Singapore International Arbitration Chamber (SIAC) rules.

Disputes arose when the petitioner terminated the SHA and the respondents did not comply with its obligations. An Arbitral Tribunal was constituted under the SIAC Rules. On 01.06.2023, the Tribunal issued an Award, which upheld the termination of SHA as well as the respondent's obligation under the SHA. It directed an independent valuer to conduct a new valuation. On 01.10.2023, the petitioners were awarded Rs. 9 crore in costs.

The petitioners filed petitions under section 49 of the Act to enforce these awards. PwC was appointed as the independent valuer. PwC on 2.01.2024 issued a valuation report determining the enhanced call price at Rs. 181 crores. The respondents refused to make payment of the enhanced call price and disputed the independence of the valuer.

On 19.01.2024, the Delhi High Court ordered a status quo on the respondent's assets. On 20.02.2024, the petitioners applied for emergency interim relief under Schedule I of SIAC Rules. On 13.03.2024, the court allowed the enforcement of the Awards. The Emergency Arbitrator gave a direction to the respondents to provide a bank guarantee of Rs. 145 crores by 28.03.2024. The Respondents stated in their representations that they were unable to provide a bank guarantee because of the Delhi High Court's order which injuncted them from dealing with their assets. The High Court modified the injunction on 01.05.2024.

On 31.05.2024, the Respondents filed an application to modify the Emergency Arbitrator's decision to substitute the bank guarantee with another form of security. The Arbitral Tribunal rejected the modification request on 24.07.2024 and directed the Respondents to provide security in the form of bank guarantee in the amount of Rs. 145 crores within 14 days. The Respondents did not comply with the Tribunal's Order.

The Petitioners filed the petition under section 9 of the Arbitration and Conciliation Act 1996, seeking the following reliefs:

1. Direction to Respondents to deposit Rs. 145 crore as security, pending the arbitral proceedings and enforcement of the award.
2. Alternative direction to Respondents to provide a bank guarantee for the same amount.
3. Appointment of a Court Receiver.
4. Attachment of the assets of the Respondents upto the value of Rs. 145 crore.
5. Restraint on Respondents from dealing with or encumbering their assets.
6. Direction to Respondents to disclose all their assets.
7. Grant of ex-parte ad interim reliefs in terms of prayers (E) and (F).

Contentions of the Parties:

Petitioners' Contentions:

• The Emergency Arbitrator's Decision, an "Emergency Interim Award”, was an interim “order” rather than a final award as contemplated by Part II of the Act. Paragraph 8 of Schedule 1 of the SIAC Rules makes distinct use of the terms “awards” and “orders.” In Amazon.com NV Investment Holdings LLC v. Future Retail Limited, the Supreme Court noted that an Emergency Arbitrator's “award” is an “order”.
• The Emergency Arbitrator's Decision would not be one which was enforceable under Part II of the Act. Hence, the Petitioner would always have recourse to section 9 of the Act by virtue of the proviso to section 2(2).
• Although section 9 cannot be used to enforce an emergency arbitrator's orders, the Court can independently assess the facts and grant interim relief. Reliance was placed upon Raffles Design International India Private Limited & Anr. v. Educomp Professional Education Ltd & Ors.
• The parties having agreed to a procedure which contemplated the appointment of an Emergency Arbitrator, must be bound by its decisions. In Amazon.com NV Investment Holdings LLC, it was held that:

“A party cannot be heard to say, after it participates in an emergency award proceeding, having agreed to institutional rules made in that regard, that thereafter it will not be bound by an Emergency Arbitrator's ruling.”

• In Plus Holdings Lts Xeitgiest vs. Entertainment Group Ltd., the Bombay High Court had granted ad interim relief based entirely upon the view taken by the Emergency Arbitrator.
• The Respondents did not raise a single grievance re the findings of the Emergency Arbitrator and also did not dispute that the Emergency Arbitrator's Decision was after the Parties were given a full and fair opportunity of hearing. There was no reason for the Court to not rely upon/adopt the reasoning, basis which the Emergency Arbitrator's Decision was passed, instead of considering the matter de novo.
• The Petitioner has made out an overwhelming case for the grant of interim relief, given the conduct of the Respondents:
• The Respondents' liability to purchase the Petitioners' shares is final, confirmed by the Award, and admitted in their filings and financial statements.
• The Respondents consistently defaulted in payment of nominal damages, costs and arbitral fees.
• The Respondents did not comply with the Emergency Arbitrator's Decision.
• They represented that they were unable to furnish a bank guarantee due to an injunction.
• They sought a modification of the Emergency Arbitrator's Decision to furnish alternative securities in place of Bank Guarantee.
• The Respondents relied on the pending bankruptcy proceedings against its holding company, Ebix Inc. as a reason for non-compliance.
• A plain reading of Section 2(2) of the Act makes it clear that section 9 would apply to international commercial arbitrations. If section 9 were excluded simply because the place of arbitration was Singapore, it would be contrary to the proviso to section 2(2) of the Act. In Ultra Deep Subsea Pvt. Ltd., it was held that there must be a specific Agreement between the parties to oust the jurisdiction of the Court under section 9. It was held that “merely because the parties agreed that the arbitration would be conducted in London and would be governed by the English Law, would not amount to an “agreement to the contrary” as contemplated in the proviso to Section 2(2) of the Indian Arbitration Act.”
• Clause 20.2 of the SHA does not imply that the Parties had agreed to exclude Part I of the Act.
• The Emergency Arbitrator's Decision did not constitute a final award, but rather interim relief.

Respondent's Contentions:

• The Petitioners are seeking to enforce the Emergency Arbitrator's Decision without filing a petition under section 49. The Emergency Arbitrator's Decision is an “award” under clause 1.3 of the SIAC rules. Hence, it must be enforced under section 49. The Section 9 Petition was not maintainable.
• In Hyundai Heavy Industries Company Limited vs. Del Seatek India Private Limited, the court held that an Interim Foreign Arbitration Award and an Interim Cost Award which were passed in an arbitration held in London under the rules of the London Court of International Arbitration were foreign awards within the meaning of Section 44 of the Act.
• The arbitration agreement under clause 20.1 of the SHA, applies SIAC Rules and designated Singapore as the seat of arbitration. Therefore, the parties had excluded the applicability of Part I of the Act.
• Rule 30.3 of the SIAC Rules provided for a request for interim relief to be made prior to the constitution of the tribunal or in “exceptional circumstances”, which the Petitioners did not make out as they had approached the court under clause 19.1 of the SHA, which provided that the jurisdiction of the court was “subject to Article 20 of SHA”. The jurisdiction of the court under Part I of the Act was ousted once the parties had elected to invoke article 20 of SHA.
• The proper recourse for petitioner was to file a petition for the enforcement of the Emergency Arbitrator's award under Part II of the Act.
• The SIAC Rules contain no provision to challenge an Emergency Arbitrator's award.
• The valuation of the shares had not been finally determined. No order could have been passed on the basis of the valuation by PwC.
• If the court were to grant relief on the basis of the valuation of PwC, it would mean that the Court had accepted the valuation report which was under challenge.
• The bankruptcy proceedings against Ebix Inc. ended in August 2024. The petitioners deliberately suppressed this fact.
• The Petitioners' claim to seek a deposit of the amount and/or in the alternative, a bank guarantee was nothing more than an attachment before judgment under Order 38 Rule 5 of CPC.

Observations:

The court held that the Petitioner was entitled to the grant of interim relief for the following reasons:

1. The Emergency Arbitrator's decision had not finally determined any part of the lis.
2. The SIAC Rules make specific and distinct use of the words “award” and “order”. The Emergency Arbitrator's decision is an order and not an award. The court placed reliance on Amazon.com NV Investment Holdings LLC.

Section 9 was applicable because there was no exclusion in the SHA for Part I of the Act. The proviso to section 2(2) expressly states that section 9 applies to international commercial arbitrations unless an agreement to the contrary is in place. As a result, absent an express written agreement between the Parties to exclude Part I of the Act, accepting Respondents' contention would be contrary to the proviso to section 2(2).

3. The SHA did not contain any agreement to exclude Part I. The court relied upon Ultra Deep Subsea Pvt Ltd., where it was expressly held in the context of exclusion of section 9 to foreign seated arbitrations, that, “there must be a specific Agreement between the parties which would indicate a clear intention to oust the jurisdiction of Court to grant relief under section 9 of the Indian Arbitration Act”.
4. The court observed that:

“the object and intention of Section 9 of the Arbitration Act is to support Arbitration and not defeat and/or permit parties to detract from the very process of arbitration. Therefore, party autonomy being the bedrock of arbitration, this would necessarily apply from the agreement to the rendering of the final arbitral award.”

The court held that the Parties having agreed to arbitration under the SIAC Rules, and procedure contemplated thereunder would therefore be bound by the Emergency Arbitrator's Decision. It noted that no dispute and/or grievance had been raised by the Respondent in the Reply filed qua either the Emergency Arbitrator's Decision and/or the fairness of procedure of the Emergency Arbitrator.

5. The Emergency Arbitrator's Decision is well reasoned, detailed and rendered after an extensive hearing given to Parties. In Amazon.com NV Investment Holdings LLC, the Supreme Court held that once a party agrees to institutional rules and participates in an emergency arbitration proceeding, it cannot later claim that the decision of the Emergency Arbitrator is not binding or invalid.

The court held that: “the party is bound by the Emergency Arbitrator's award and must comply with it immediately, as they have explicitly agreed to its binding nature and the obligation to carry out the interim Order without delay.”

6. The Petitioners are entitled to the grant of interim reliefs given the obstructionist conduct of the Respondents which is only to defeat and/or delay the enforcement of the orders passed in the arbitration. The court observed that:

• The Awards had attained finality and the Respondents' obligation to purchase the Petitioners' shares was binding. The Respondents did not oppose the enforcement petitions.
• The opposition to the valuation by PwC on the ground of independence is untenable.
• The Respondents had made representations to the effect that they intended to comply with the decision of the Emergency Arbitrator.
• The Respondents stated that they were unable to provide a bank guarantee due to asset attachment orders.
• The Respondents sought to replace the bank guarantee with a less prejudicial means, which was rejected because the offered shares were less marketable and likely to lose value.
• The Respondents also filed the application for modification of Status Quo Order to vacate the interim order dated 19.01.2024.

The court referred to the judgment in J.P. Parekh and Another v. Naseem Qureshi and Others and Essar House Private Limited vs. Arcellor Mittal Nippon Steel India Ltd., which held that obstructionist conduct of the party would be material fact to consider while granting interim relief. The court found it be to a fit case for the grant of interim reliefs because of the obstructionist conduct of the Respondents.

The court listed the matter for compliance on 22.10.2024.

Case Title: Ashok Kumar Goel & Anr. vs. EbixCash Limited & Ors.

Case Number: COMMERCIAL ARBITRATION PETITION (L) NO. 25579 OF 2024

Counsel for the Petitioners: Mr Sharan Jagtiani, Senior Advocate, with Nitesh Jain, Juhi Mathur, Sonia Dasgupta Ananyaa Jagirdar Surbhi Agarwal & Atul Jain, i/b Trilegal.

Counsel for the Respondents Nos 1, 2 & 4: Mr Mayur Khandeparkar, with Chetan Yadav, Allen Mathew & Pratibha Tiwari, i/b VJ Juris Advocates.

Date of Judgment: 08.10.2024