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The Delhi High Court has reiterated that no anti-arbitration injunction can be granted by a Court unless it is shown that the initiation of the arbitration proceeding is vexatious or oppressive.
The Judgement was passed by a Single Judge Bench of Justice Rajiv Shakdher in a plea by Himachal Sorang Power Private Limited (HSPL) and TAQA India Power Ventures Pvt. Ltd, seeking to restrain NCC Infrastructure Holdings Limited (NCCL) from commencing arbitration proceedings against them.
The dispute between the Plaintiffs and the Defendant arose out of a purported breach of certain material conditions under a Securities Purchase Agreement (SPA) between them to set up a Power Project on the Sorang tributary of the Sutlej river.
Notice of Arbitration was filed by HSPL and TAQA with the Singapore International Arbitration Centre (SIAC) in December 2014. After two rounds of claims and counterclaims, the Arbitral Tribunal rendered its award in favour of HSPL and TAQA in January 2018.
The Court recorded that two days before the closure of this arbitral proceedings, NCCL wrote to HSPL that they neither had nor did they intend to lodge claims under the SPA, other than those which were already pending before the Arbitral Tribunal.
After the award, while HSPL and TAQA moved an enforcement petition before the High Court, NCCL challenged the award before the Singapore High Court.
Setting the stage for the second round of litigation, NCCL sent a communication to HSPL and TAQA seeking data on ‘Annual Deemed Generation and Metered Generation’ with respect to the Power Project to buttress its claim for ‘incentive payments’ under the SPA.
After HSPL and TAQA repelled the claim for incentive payments, NCCL sought to initiate a second round of arbitration.
Against this backdrop that HSPL and TAQA received intimation from SIAC. This communication suggested that a second arbitration proceeding initiated by NCCL was deemed to have commenced from December 31, 2018.
Alarmed by this development, HSPL and TAQA moved the High Court seeking an anti-arbitration injunction.
Senior Advocate Sandeep Sethi, appearing for HSPL and TAQA, argued that NCCL’s claim was barred by principles of res judicata, waiver, and abandonment. It was stated that in spite of NCCL amending its statement of counterclaims twice, it chose not to make any claim for incentive payments. Therefore, the second round of arbitration could not have been initiated.
Nakul Dewan appearing for NCCL argued that claim for incentive payments was not barred by the principles of res judicata or constructive res judicata as it was based on a separate and distinctive cause of action.
Dewan also contended that the claims being raised in the second arbitration proceedings were based on a distinct and new cause of action, and different evidence would be led in support of these claims from what had been led in the previous arbitration proceedings.
After hearing the parties and going through the details of the agreement, the Court observed that the present case was not a case of res judicata as there was no determination on the issue pertaining to incentive payments by the First Arbitral Tribunal.
At best, the Court said, this was a case of constructive res judicata.
However, whether constructive res judicata would apply in this case, was a mixed question of fact and law, the Court added.
Since this determination would require “at least a mini-trial”, the Court held that it was not the appropriate forum to deal with the plea.
The Court said that the width and amplitude available to the Court in an anti-arbitration agreement was much narrower than what is available when an anti-suit injunction is sought.
Therefore, the Courts, ordinarily, have been very slow in granting injunctions whereby arbitration proceedings are brought to a standstill.
“The fundamental reason for this appears to be that the parties by entering into a contract would have necessarily agreed, as in this case, that all issues connected with or arising from the agreement entered into between them, would be tried by an Arbitral Tribunal duly constituted in terms of the agreement and, therefore, any sort of injunction granted by the Court would tantamount to aiding breach of the arbitration agreement.”, it explained.
Such an anti-arbitration injunction can be granted only when the initiation of arbitration is found to be vexatious and/ or oppressive, it iterated.
Therefore, holding that “an endeavour should be made to support and aid arbitration rather than allow parties to move away from the chosen adjudicatory process“, the Court observed that an aggrieved party should be encouraged to approach either the Arbitral Tribunal or the Court which has the supervisory jurisdiction in case of any objection.
Dismissing the plea, it ordered,
“The jurisdiction, to my mind, as alluded to above, with regard to constructive res judicata and other legal pleas could justly and conveniently be adjudicated upon by the 2nd Arbitral Tribunal. Therefore, in my opinion, no case is made out for injunction by this.”
The Plaintiffs (HSPL and TAQA) were represented by Senior Advocate Sandeep Sethi with Advocate Padmaja Kaul, Ketan Gaur, and Praharsh Johrey.
The Defendant (NCCL) was represented by Advocates Nakul Dewan, with Dr. Amit George, Jai Sahai Endlaw, Neelu Mohan, Nooreen Sarna, and Shivansh Soni.
Read the Judgement: