2019 (2) TMI 2033 - HC - Indian Laws

Effect of subsequent vacation of injunction - how an injunction in personam restraining a person from proceeding with a foreign arbitral reference would impact the application for implementation of the foreign award when such award has been rendered at a time that the injunction was in subsistence, but the injunction has subsequently been vacated? HELD THAT - While it is impossible to imagine every possible ground that can be urged by a party to arrest the initiation or the continuation of a foreign arbitral reference even by inviting an injunction in personam, there can be certain broad categories in which such grounds may be placed. There could be classes of cases challenging the jurisdiction of the foreign arbitral tribunal on the ground of the very existence of the arbitration agreement or the efficacy of the arbitration agreement or the survival of the arbitration agreement or the jurisdiction of the arbitral tribunal. Likewise, an anti-arbitration injunction may be sought on the ground of the incapacity of the party seeking the injunction or grounds of overwhelming inconvenience to such party. Another class of reasons invoked to seek an anti-arbitration injunction could be the egregious fraud committed by the party seeking to initiate or pursue the arbitral reference or of the arbitral reference being patently vexatious or unbearably oppressive. In every case, it is the duty of the court to exercise extreme caution and circumspection before issuing an anti-suit or anti-arbitration injunction and, as high authorities instruct, the injunction should be in personam and issued against a party amenable to the jurisdiction of the court issuing the injunction and not issued against a foreign court or a foreign arbitral tribunal. Just as the legal trinity of justice, equity and good conscience casts a duty on a court to see that a party before it is not unfairly prejudiced, the principles of comity, the respect for the sovereignty of a friendly nation and the need for self-restraint should guide a court to issue an injunction of such nature only in the most extreme and gross situations and not for the mere asking. A court must be alive to the fact that even an injunction in personam in such a situation interferes with the functioning of a sovereign or a private forum which may not be subject to the writ of that court. When an anti-suit or anti-arbitration injunction is issued by way of an ad interim or interim order without the relevant application being decided finally, its efficacy would never be established till the order has reached finality. And, if foreign proceedings (whether before a court or in course of an arbitration) are continued during the subsistence of an anti-suit or anti-arbitration injunction, the legality of the outcome of such foreign proceedings will depend on the final outcome of the application on which the injunction was issued, whether at the same level or in appeal or revision or the like. There is good reason for such an exception to be made - when a foreign decree or a foreign arbitral award is sought to be enforced and the only or primary ground to resist the same is that the decree or award was obtained by a party in derogation of an order of an injunction in personam against such party being in place by a court of the country where the enforcement is sought, the court in seisin of the petition for enforcement will take upon the adjudication of such ground if the injunction has attained finality. Since the respondent's injunction restraining the appellant from proceeding the foreign arbitral reference has been vacated and the appellant's application for vacating such injunction has been allowed, such order, which has now attained finality since no appeal against the same has been preferred, will date back to the time of the institution of the respondent's application for injunction and the legal implication would be that the order of January 14, 2016 was never passed - Since none of the other grounds as sought to be canvassed by the respondent in course of the present appeal appear to have been taken before the court of the first instance and since such grounds, even if taken, had to be disregarded since the respondent did not challenge the arbitral award in the appropriate jurisdiction, the order impugned dated August 22, 2017 is set aside and the decks are cleared for the enforcement of the arbitral award dated January 21, 2016 by the appellant in accordance with law. Appeal allowed.

Summary

Issues Involved:
1. Impact of an injunction in personam on the enforcement of a foreign arbitral award.
2. Validity and scope of the arbitration agreement.
3. Proper notice and constitution of the arbitral tribunal.
4. Grounds for resisting the enforcement of a foreign arbitral award under Section 48 of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Impact of an Injunction in Personam on the Enforcement of a Foreign Arbitral Award:
The principal matter in issue is how an injunction in personam restraining a person from proceeding with a foreign arbitral reference impacts the application for implementation of the foreign award when such award has been rendered during the subsistence of the injunction but subsequently vacated. The court held that once the injunction is vacated, it should be seen to have been obliterated as if it never existed. The court emphasized that the vacating of the injunction would relate back to the filing of the relevant application, thus nullifying the injunction's effect.

2. Validity and Scope of the Arbitration Agreement:
The respondent contended that the arbitration agreement had worked itself out and did not cover the disputes pertaining to the settlement of April 24, 2013. The court found that the existence of the arbitration agreement was not in dispute, and the respondent's assertion that the arbitration agreement had worked itself out was unilateral. The court noted that the grounds for resisting the enforcement of a foreign award under Section 48 of the Act of 1996 are not the same as those that could have been raised in the arbitral reference or in a challenge to the award in the appropriate jurisdiction.

3. Proper Notice and Constitution of the Arbitral Tribunal:
The respondent argued that the arbitration agreement stipulated a reference to three arbitrators, and the appointment of a sole arbitrator was not in accordance with the agreement. The court observed that there was substantial correspondence between the parties and the arbitrator, and none of the letters alluded to the illegal or erroneous constitution of the arbitral tribunal. The court concluded that the respondent's objections regarding the composition of the arbitral tribunal were not raised at the appropriate stage and were not substantiated.

4. Grounds for Resisting the Enforcement of a Foreign Arbitral Award under Section 48 of the Arbitration and Conciliation Act, 1996:
The court considered the grounds under Section 48(1) of the Act of 1996, which include the invalidity of the arbitration agreement, lack of proper notice, matters beyond the scope of submission to arbitration, and improper composition of the arbitral tribunal. The court found that the respondent's affidavit in opposition to the enforcement petition did not provide sufficient proof to meet the burden of resisting enforcement. The court emphasized that Section 48 of the Act of 1996 is not a substitute for objections that could have been raised before the arbitral tribunal or in a challenge to the award in the appropriate jurisdiction. The court concluded that the enforcement of the foreign arbitral award should be allowed, as none of the grounds for resisting enforcement were substantiated.

Conclusion:
The court set aside the order impugned dated August 22, 2017, and cleared the decks for the enforcement of the arbitral award dated January 21, 2016, by the appellant in accordance with law. The appeal succeeded, and the matter was restored to the board of the executing court for further proceedings in accordance with law.