2017 (8) TMI 968 - HC - Indian Laws

Permit the defendants to prosecute the foreign arbitration - Held that - This Court is of the prima facie opinion that as the claimants in the two arbitral proceedings form part of the same corporate group being run, governed and managed by the same set of shareholders, they cannot file two independent arbitral proceedings as that amounts to abuse of process of law. This Court is further of the prima facie view that there is a risk of parallel proceedings and inconsistent decisions by two separate arbitral tribunals in the present case. In the prima facie opinion of this Court, it would be inequitable, unfair and unjust to permit the defendants to prosecute the foreign arbitration. Consequently, defendant No.1 and 2, their servants, agents, attorneys, assigns are restrained from taking any action in furtherance of the notice of dispute dated 15th June, 2015 and the notice of arbitration dated 24th January, 2017 and from initiating arbitration proceedings under India-UK Bilateral Investment Protection Agreement or continuing with it as regards the dispute mentioned by the defendants in the Notice of Arbitration dated 24th January, 2017.

Summary

Issues Involved:
1. Exemption from filing certified copies/originals of documents.
2. Extension of time for filing court fees.
3. Issuance of summons and procedural directions for the suit.
4. Jurisdiction and abuse of process in arbitration proceedings under Bilateral Investment Promotion and Protection Agreements (BIPA).

Issue-wise Detailed Analysis:

1. Exemption from Filing Certified Copies/Originals of Documents:

The plaintiff requested an exemption from filing certified copies and originals of documents at this stage. The court granted this exemption, noting that the order was made without prejudice to the rights and contentions of the parties. Consequently, the application was disposed of.

2. Extension of Time for Filing Court Fees:

The plaintiff filed an application seeking an extension of time to file the court fees. The court permitted the plaintiff to file the deficient court fees within two weeks, and the application was accordingly disposed of.

3. Issuance of Summons and Procedural Directions for the Suit:

The court ordered the plaint to be registered as a suit and issued summons to the defendants by all modes, returnable on 26th October 2017. The summons required the defendants to file a written statement within four weeks of receipt, with liberty for the plaintiff to file a replication within two weeks of receiving the written statement. Both parties were directed to file all original documents supporting their claims along with their pleadings. If relying on documents not in their possession, details and sources were to be mentioned in the list of reliance. Admission/denial of documents was to be filed on affidavit within two weeks of completing pleadings.

4. Jurisdiction and Abuse of Process in Arbitration Proceedings under BIPA:

The court addressed the issue of arbitration proceedings initiated by the defendants under the India-UK BIPA, which were based on the same tax demand already under arbitration between VIHBV (a subsidiary of the defendants) and the plaintiff under the India-Netherlands BIPA. The plaintiff argued that the two claims were based on the same cause of action and sought identical reliefs, constituting an abuse of law by initiating multiple proceedings.

The court referred to the award in Orascom TMT Investments S.a r.l. v. People’s Democratic Republic of Algeria, emphasizing that an investor controlling several entities in a vertical chain may commit an abuse by seeking to impugn the same host state measures and claim for the same harm at various levels of the chain. The court noted that the purpose of investment treaties is to promote economic development and protect investments, and initiating multiple proceedings for the same harm would conflict with this purpose.

The plaintiff contended that tax demands raised by a host state are beyond the scope of arbitration under a bilateral investment treaty, as taxation is a sovereign function to be adjudicated by constitutional courts. The court acknowledged the need for caution in restraining foreign arbitration and referred to the Indian Supreme Court's decision in Modi Entertainment Networks v. WSG Cricket Pte. Ltd., which allows anti-suit injunctions against foreign courts if the forum is oppressive or vexatious.

The court observed that the reliefs sought under both the India-UK BIPA and the India-Netherlands BIPA were virtually identical, indicating a duplication of parties and issues. The court recognized the doctrine of a single economic entity, concluding that the defendants and their subsidiary VIHBV appeared to be one single economic entity. Consequently, the court held that filing two independent arbitral proceedings amounted to an abuse of process of law, posing a risk of parallel proceedings and inconsistent decisions.

In conclusion, the court restrained the defendants and their agents from taking any action in furtherance of the notice of dispute dated 15th June 2015 and the notice of arbitration dated 24th January 2017, and from initiating or continuing arbitration proceedings under the India-UK BIPA regarding the dispute mentioned in the notice of arbitration dated 24th January 2017.

The court directed compliance with the provisions of Order 39 Rule 3 CPC within a week.