Anti-arbitration injunctions: Protecting against vexatious and oppressive proceedings

What happens when a party turns to Indian courts asking them to stop international arbitration altogether? The answer lies in the remedy of anti-arbitration injunctions (hereinafter ‘AAIs’) that restrain parties from initiating or continuing arbitral proceedings. While justified as shields against injustice, they are at odds with the principle of kompetenz-kompetenz and India’s legislative policy of minimal judicial interference under the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act’)..Nonetheless, Indian courts have not shied away from invoking this exceptional remedy in carefully laid down circumstances. In Board of Trustees of Port of Kolkata v. Louis Dreyfus Armatures SAS, the Calcutta High Court identified three clear grounds for granting such injunctions:(i) Where an issue is raised as to whether there is any valid arbitration agreement between the parties and the court finds that no agreement exists.(ii) Where the arbitration agreement is null and void, inoperative, or incapable of being performed.(iii) Where continuation of foreign arbitration proceedings might be oppressive or vexatious or unconscionable..The Delhi High Court in Dr. Bina Modi v. Lalit Kumar Modi while discussing the aforesaid grounds observed,“It would be noticed straightaway that the points (i) and (ii) extracted above are essentially taken from Section 45 of the 1996 Act. The only addition being point No. (iii) where it was submitted that an anti-arbitration injunction could be granted if the continuation of ‘foreign’ arbitration proceedings were to be oppressive, vexatious or unconscionable.”.Together, these grounds can broadly guide courts to decide when it is appropriate to intervene judicially through AAIs, which are briefly discussed in the succeeding paragraphs..Civil courts in India, as indicated in Chatterjee Petrochem v. Haldia Petrochemicals and reiterated in World Sport Group (Mauritius) Ltd. vs. MSM Satellite (Singapore) Pte. Ltd., have the power to grant AAIs in foreign-seated arbitrations on grounds specified under Section 45 of the Act, viz. the arbitration agreement is found to be null, void, inoperative, or incapable of being performed which, for example, include situations rendering an agreement inoperative including expiry of the time limit for initiating arbitration or rendering awards, or when parties waive their right to arbitrate..However, the courts in cases like Balasore Alloys vs. Medima LLC, McDonalds India Pvt Ltd. vs. Vikram Bakshi (hereinafter ‘McDonalds India case’), and Himachal Sorang Power Pvt. Ltd. v. NCC Infrastructure Holdings Ltd. (hereinafter ‘Himachal Sorang Power case’), have observed that such power to direct AAIs must be used sparingly and with abundant caution..While the aforesaid grounds for AAI emanating from Section 45 of the Act have a legislative basis, the next ground appears to be more dynamic and emanates from principles of equity and fairness..Vexatious conduct is characterized by the initiation or continuation of proceedings without sufficient legal basis, motivated by intent to harass or burden the opposing party. Oppressive conduct, on the other hand, refers to the imposition of undue harshness, unfair domination, or other unfair burdens on the party seeking restraint.This ground, originating in English law in J Jarvis and Sons v. Blue Circle Dartford Estates Ltd[i], has also been recognized by the Delhi High Court in Engineering Projects (India) Ltd. v. MSA Global LLC (hereinafter ‘Engineering Projects case’), where it was articulated that an arbitration proceeding would be considered vexatious or oppressive, if the continuation of such proceedings amounted to an abuse of legal process..Judicial precedents: What qualifies as oppressive and vexatious?In Himachal Sorang Power case, it was clarified that the Court which has the supervisory or personal jurisdiction, can disallow commencement of fresh proceedings on the ground of res judicata or constructive res judicata. If convinced, the Court may hold such new proceedings to be vexatious and/or oppressive, thus barring them. This bar can apply to an issue of law, fact, or even a mixed question of law and fact..In McDonalds India case, the Delhi High Court identified instances such as disputes over parties’ consent to arbitration or allegations that the arbitration agreement was forged or tainted by fraud as constituting oppressive or unconscionable conduct warranting judicial intervention..The Delhi High Court in the Engineering Projects case, held the proceedings to be vexatious and oppressive, where the right of the Indian party to informed consent was violated due to material non-disclosure by the arbitrator. AAI can thus be granted on the basis of vexatious and oppressive conduct by a party, emphasizing that enforcing arbitration agreements or awards is contrary to public policy where the legitimacy of the arbitral tribunal itself is seriously questioned unless such concerns are first resolved [Malaysian Development Berhad v. International Petroleum Investment Co [2019] EWCA Civ 2080]. Apart from the aforesaid, the Court also noted a clear pattern of vexatious litigation by the opposing party justifying the grant of an AAI..Separately, the Delhi High Court has also granted AAIs, in the Bina Modi case and Techfab International Private Limited vs. Midima Holdings Limited, where the dispute referred to arbitration was non-arbitrable in Indian law, and where the appointment of the arbitrator was not in accordance with the arbitration agreement, even though, the Court did not expressly use the terms “oppressive” and “vexatious.".What does not qualify as vexatious and oppressive?In Modi Entertainment Network v. WSG Cricket Pte. Ltd., it was observed that when the parties to a contract containing a jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive. In the Bina Modi case, an argument was raised that the arbitration proceedings in Singapore being costly were oppressive and vexatious, but this was rejected at the first instance by the Single Judge, relying on the aforesaid principle laid in Modi Entertainment Network case..Thus, as the Delhi High Court held in the Engineering Projects case, assessing the Act’s scheme, it can be concluded that the principle of minimum interference and not negligible interference, is required. This narrow line between the two, safeguards parties by ensuring that consensually agreed arbitration mechanisms do not become oppressive or unregulated, upholding foundational principles of judicial propriety and procedure. It is in these exceptional cases that Civil Courts act as vigilant sentinels, sentinel on the qui vive, ensuring that parties alleging vexation and oppression are not left remediless..The law on anti-arbitration injunctions has become clearer recently. Courts cautiously intervene only in exceptional cases to maintain fairness while respecting party autonomy. This approach upholds arbitration’s integrity, offering parties a more balanced and dependable way to resolve disputes efficiently and justly..About the authors: Aditya Ganju is a Partner and Vatsal Agrawal is a Trainee Associate at AG Chambers..Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench..If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.