Recently, the Delhi High Court issued an anti-arbitration injunction (AAIs) with respect to arbitration proceedings before the Permanent Court of Arbitration, The Hague, in the case of Techfab International Private Limited v. Midima Holdings Limited citing the lack of party consent as a bar to the jurisdiction of the arbitral institution.

AAIs have long been a subject of controversy with scholars and practitioners labelling it as infringement upon the tribunal's right to decide its own jurisdiction. However, Common Law jurisdictions, including India have not demurred from issuing AAIs, citing larger notions of justice and equity. This article attempts to contribute to the debate by justifying the validity of AAIs and the Delhi High Court's latest judgement.

Factual Summary

The parties in the concerned matter were Techfab International Private Limited (Plaintiff) and Midima Holdings Limited (Defendant). The entire proceedings stemmed from a 2015 agency agreement wherein the dispute resolution clause establishes arbitration to be the default mode of dispute resolution. The relevant portion of the dispute resolution clause is reproduced below:

9.1. …

The parties agree that (i) the language to be used in the Arbitral proceedings shall be the English language and (ii) the number of arbitratiors and their appointing authority to be decided mutually (iii) the seat of arbitration shall be at India or any other UNCITRAL following countries to be decided mutually and the governing law will be of the country where arbitration will be conducted. The decision of the arbitration award shall be final and binding on each party.”

The dispute resolution clause also confered exclusive jurisdiction upon the “the court at New Delhi or the courts of capital of any UNCITRAL following country where arbitration is held, shall have exclusive jurisdiction.”

The Plaintiff filed a suit seeking an anti-arbitration injunction (among other remedies), before the Delhi High Court after the Defendant applied to the Secretary General of the Permanent Court of Arbitration at The Hague for appointment of an arbitral tribunal under Article 6.2 of the UNCITRAL Arbitration Rules, 2010.

The Defendant also initiated a commercial suit before the Commercial Division of the High Court of Malawi. Therefore, the Plaintiff's primary contention was that the Defendant's appointment of the PCA as the appointing authority and the consequent appointment of the tribunal is in stark contradiction of the contractual mechanism as outlined in the dispute resolution clause, given that there was no mutual consent as far as selection of the appointing authority is concerned.

In light of the aforementioned facts, the Court issued a ruling that took note of the fact that the Defendant, having issued an arbitration notice to the Plaintiff, and having appointed an ex-Delhi High Court Judge as the sole arbitrator in that notice, could be construed as an acceptance of the arbitration mechanism under the dispute resolution clause of the agency agreement. This is particularly of value given that the default seat of the arbitration as per the dispute resolution clause, is the Republic of India and the conduct of the parties does not evince any intention or decision to select any other jurisdiction as the seat of the arbitration.

Thereafter, the Delhi High Court admitted the application seeking an anti-arbitration injunction while noting that “one of the cardinal principles of arbitration is, that since arbitration is a remedy that is founded on consent of parties, the agreed procedure for appointment of an arbitrator must be scrupulously followed. This however, does not appear to have been done in the present case.”

Comparative Analysis of Indian Jurisprudence on AAIs and the International Position

To begin with, an AAI is essentially an injunction awarded against parties from pursuing arbitral proceedings by the national courts of a relevant jurisdiction. The apparent controversy arises out of the fact that an AAI is in contravention of the internationally recognised principle of kompetenz – kompetenz, that allows a tribunal to determine its own jurisdiction vis-à-vis a given arbitration agreement and the scope of that agreement with respect to the subject matter in dispute.

However, there is an argument to be made the AAIs are valid given that party consent is the paramount consideration in arbitration. Therefore, where a party is prejudiced by arbitration proceedings that were instituted in a manner contrary to an arbitration agreement, an AAI remains to be the only remedy available to the prejudiced party.

The position in India has evolved over time with Kvaerner Cementation India Limited v. Bajranglal Agarwal^[1] being one of the first cases where an AAI was sought and denied by the Hon'ble Supreme Court of India. However, thereafter, the Supreme Court of India, in a slew of rulings has affirmed the validity and legality of AAIs, despite the lack of an express provision in the Arbitration and Conciliation Act, 1996 (the Act). Through its evolving jurisprudence, the Hon'ble Court has noted the recognition of the kompetenz-kompetenz principle in section 16 of the Act. Thereafter, in the SBP & Co. judgement^[2], the Supreme Court seemingly rejected the premise of Kvaerner that an arbitral tribunal has exclusive jurisdiction in ruling upon the validity of an arbitration agreement. The Supreme Court went further to establish section 45 of the Act as the foundation upon which civil courts reserve the jurisdiction to refuse arbitration in the MSM Satellite^[3] ruling.

The international position, however, is extremely conflicted with respect to AAIs being issued by national courts. Gary Born, renowned jurist in the clique of international arbitration, among other leading practitioners, has rejected the notion of AAIs on the grounds that it impedes the tribunal's rightful application of the kompetenz-kompetenz principle. As far as national courts are concerned, there seems to be distinct gap in jurisprudence with respect to Civil law jurisdictions and Common law jurisdictions. While the Federal Supreme Court of Switzerland and the Cour de Cassation of France have reasoned against AAIs as being instruments of undue judicial interference in arbitral mechanisms, English, American and Indian courts rejected the notion that arbitral tribunals hold exclusive jurisdiction over the validity of an arbitration agreement and the jurisdictional scope flowing from such an instrument.

It is the opinion of the author that there lies a very strong argument in favour of AAIs whereby prejudiced parties are left with no option but to pursue litigation before national courts. While AAIs are undoubtedly used mischievously, it would be contrary to every principle of natural justice to deprive a prejudiced party the right to effective judicial recourse.

India aligned with the kompetenz-kompetenz principle by bringing it within the ambit of the 1996 Act. However, the Act did preserve the authority of courts to rule upon the validity of an arbitration agreement under section 45. Therefore, the intent of the arbitration act was certainly not to oust the influence of courts altogether in as far as the validity of arbitral proceedings is concerned. Moreover, the Courts have, since SBP & Co. developed jurisprudence that national courts are well within their jurisdictional purview to issue anti-arbitration injunctions, where there has been a prima facie violation of party consent.

While it is true that in 2021, the Hon'ble Delhi High Court rejected an application seeking an anti-arbitration injunction in the case of Bina Modi v. Lalit Modi^[4], it is worth noting the glaring distinguishing factor between the present case and the Bina Modi case. In the latter, an anti-arbitration injunction was sought on the grounds that the substantive law applicable to the dispute was Indian. It was argued by the Petitioner that it would be against the public policy of India for the arbitration to proceed with Singapore as its seat. However, it is settled law that the substantive law has little to do with the law of the seat. The substantive law is to be applied by the tribunal in determining the merits of the case whereas the law of the seat relates to the arbitral procedure. Therefore, it is the author's opinion that the Hon'ble Delhi High, in the present matter, has not acted in contradiction to the Bina Modi judgement.

Therefore, it is the reasoned view of the author that the Delhi High Court's recent ruling that allowed an anti-arbitration injunction, stands the test to legal reasoning and jurisprudence while also affirming the paramount consideration of party consent and the jurisdiction of the Court to review the validity of arbitral proceedings, based on an instrument, at a prima facie degree. This ruling represents a developing uniformity in the application of the law so far as international arbitration is concerned, where a lack of uniformity is one of the greatest challenges to the legitimacy of the institution as a whole.

Abhishek Mookherjee is a L.L.M. Candidate of International Arbitration and Dispute Resolution at National University of Singapore. Views are personal.