Medima LLC V. Balasore Alloys Limited

In the present case, Medima LLC ("Medima") and Balasore Alloys Ltd. ("Balasore") had entered into an Agreement dated 31^st March 2018 ("Agreement") comprising an arbitration clause governed by the laws of the United Kingdom read with Rules of Arbitration of the International Chamber of Commerce ("ICC Rules"). The seat of arbitration was agreed to be London and the parties had also agreed to enforce the award in any court with appropriate jurisdiction over the party against whom enforcement is sought. Subsequently, the parties underwent arbitration wherein Medima emerged as the award holder. To prevent Balasore from dissipating its assets situated in India, Medima moved an application under Section 9 of the Act ("Petition") before the Calcutta High Court to ensure successful enforcement of the Arbitral Award dated 29^th March 2021 ("Award") passed in favour of Medima. The Petition was challenged by Balasore on the grounds of maintanibility.

The issue before the Court was whether Section 9 of the Act can be made applicable to a foreign award in an arbitration proceeding governed by British Laws with arbitration seat at London and whether the arbitration agreement which in its entirety is governed by the British Laws can be construed to mean 'an agreement to the contrary' under the proviso to Section 2(2) of the Act^[2] ("Proviso").

Balasore contended that by electing governing, substantive, and curial law as British Laws, the parties had specifically excluded the jurisdiction of Indian courts and therefore, the present case falls under the Proviso which lays out an exception that unless there is an agreement to the contrary, Section 9 shall also apply to international commercial arbitration. In response, Medima relied on the Statement of Objects & Reasons of the Act as well as the 246^th Law Commission Report^[3] which culminated into the introduction of the Proviso. Naturally, Balasore rebutted these contentions and submitted that the deletion of the word 'express' in relation to 'agreement to the contrary' as recommended in the said report indicates that an implied agreement suffices the eligibility criterion for applicability of the Proviso. Thus, it was the contention of Balasore that inclusion of substantive, curial and governing laws of the United Kingdom under the Agreement is an implied exclusion of the Indian laws, including Section 9 of the Act.

Placing reliance on numerous judgments of the Apex Court, including PASL Wind Solutions v. GE Power Conversion India^[4] wherein the Hon'ble Supreme Court construed the Proviso to be relevant for interim orders in a foreign-seated arbitration for assets located in India, the Calcutta High Court rejected the submissions of Balasore. It held that the elimination of the word 'express' from the Proviso as it stands today has little to negligible bearing on the legal position that there must be something more to an arbitration agreement governed by a foreign law with a foreign seat and the agreement must indicate in clear and express terms that the parties intend to exclude the operation of Section 9 of the Act. Moreover, the Calcutta High Court highlighted that as Section 9 is pivotal remedy available to an award-holder under the Act, every attempt must be made to harmonize the provisions, wherever a conflict occurs. Therefore, Section 9 must be interpreted in a manner which ensures that any award passed is not rendered redundant and the award-holder is not denuded of its rights at the stage of enforcement. Applying the aforesaid and acting in accordance with ICC Rules^[5] and UNCITRAL Model laws^[6] both of which allow parties to apply to a competent judicial authority for interim relief, the Calcutta High Court upheld the maintainability of the Petition. The matter is still pending for final adjudication of the Petition.

In our view, although the Calcutta High Court has passed a reasonable order, its bare perusal leaves the reader with a question as to what constitutes as 'an agreement to the contrary' in accordance with the Proviso in any arbitration agreement. This question has been answered in detail in the case of Aircon Beibars FZE v. Heligo Charters Pvt. Ltd^[7] which was also referred by the Calcutta High Court at the time of passing the order. While deciding a similar issue as was before the Calcutta High Court, the Single Judge of the Hon'ble High Court of Bombay ("Single Judge") held that a general agreement providing for an overseas seat and venue for arbitration does not ipso facto oust the application of the Proviso. Such exclusion must be made specifically in the arbitration agreement. The Single Judge went a step further and held that the reading of the Proviso with Section 9 of the Act was necessary to ensure the availability of a remedy or recourse to the award holder for protection of the assets located in India from being dissipated or diverted. This decision of the Single Judge was also challenged before the Division Bench^[8] of the Bombay High Court ("Division Bench"). While upholding the decision of the Single Judge, the Division Bench held that the Proviso treats Section 9 as a distinct provision from rest of the Part I of the Act. Section 9 is a transitory provision pending the process under Section 48 of the Act, which empowers the courts to step in and pass protective orders in favor of an award holder, wherever required.

Drawing inference from the aforesaid decisions, it is clear that for successfully challenging a foreign award on the grounds of maintainability before the Indian courts, an arbitration agreement must specifically exclude the provisions of the Act to remove all possibilities of its applicability to a foreign award.

Authors : Srishti Gupta (Associate), Mahima Sharma (Associate) and Preetika Bharti (Trainee Associate) at Amicus-Advocates and Solicitors. Views are personal.