The Hon’ble High Court of Calcutta (“Court”) in the case of Devi Resources Limited v AMBO Exports Limited (APO No. 430 of 2017),held that the anti-suit injunction passed by the Court staying a foreign arbitral reference and the enforcement of the award passed by the foreign arbitration, if finally vacated by the Court, is without jurisdiction and should be treated as non-existing from the beginning.
Facts:
Devi Resources Ltd., (the “Appellant”), a Hong Kong based company, entered into an agreement with AMBO Exports Limited (the “Respondent”), a Kolkata based company. Clause 14 of the agreement recognised the contract to be governed by English law and any dispute arising out of the agreement would be arbitrated in London, in accordance with the English statute and the arbitration was to be conducted by the London Maritime Arbitrators’ Association (LMAA). Upon a dispute arising between the parties, the parties entered into a settlement. However, on the breach of the settlement, the Respondent filed a summary suit with the Court. The Appellant then applied under Section 45 of the Arbitration and Conciliation Act, 1996 (“Act”) for the disputes to be referred to arbitration. The Respondent objected to the arbitration on the basis that the settlement constituted a ‘stand-alone’ agreement and was not covered by the arbitration clause. While the Appellant started the arbitration process, the Respondent applied to the Court for an injunction against the LMAA arbitral reference from continuing the foreign arbitration proceedings and also prayed for an injunction against the Appellant from proceeding with the arbitration. On January 14, 2016, vide an interim order the Court granted the anti-injunction (“injunction”). The LMAA had passed an order in favour of the Appellant on January 21, 2016, and the Appellant filed an application for the enforcement of the award. On August 22, 2017, the enforcement application was rejected on the ground that the award was passed in violation of the injunction. However, on August 28, 2018, the injunction was vacated by the Court.
Issue:
How does an anti-arbitration injunction in personam restraining a foreign arbitration to take place effect 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? Will the final order operate retroactively, as if the injunction had not been issued in the first place?
Arguments:
The Appellant, inter alia, contended that since the only reason for the non-enforcement of the arbitral award was the injunction, upon its vacation, the original order granting injunction should be seen to have been obliterated in the sense that it never existed. To justify that it did not act against the injunction, the Appellant showed that it had not furnished any evidence before the arbitral tribunal after the injunction was passed. However, it also contended that being a foreign company, it was not naturally amenable to the jurisdiction of the Court and had not submitted to its jurisdiction either. The Respondent argued that by paying the arbitrators fees, the Appellant had violated the injunction, and thus the arbitral award cannot be enforced due to ‘public policy’.
Judgement and Analysis:
Regarding passing an anti-arbitration injunction, the Court said:
“53. … 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.
54. 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.”
The Court further held that since “contrary to public policy of India” in the context of Section 48 of the Act had to be construed very strictly, the arbitral award did not meet the standard, and therefore the award was valid.
In relation to the injunction being vacated, the Court observed the following:
“56. The ordinary rule is that an injunction that interferes with the proceedings before another forum, albeit such injunction being couched in terms that make it operate in personam, is without jurisdiction. If such an injunction is issued by way of an interim measure, subject to further consideration, it will no doubt remain effective during its currency; but if it is vacated at the final stage or set aside in appeal or revision by an immediate superior forum or even higher, it will date back to the institution of the petition and once vacated or set aside it will stand obliterated in the sense that it was never passed.
….
62. …. In such a scenario when such a suit is instituted in a particular court in India and the defendant seeks to institute or pursue proceedings in a foreign court in derogation of the jurisdiction clause, the relevant Indian court where the suit has been filed surely has the authority to restrain the defendant in personam from instituting or proceeding with the foreign action in violation of the jurisdiction clause.
63. Thus, it cannot be said that this court, while in seisin of the respondent’s suit, did not have the authority to issue an anti-suit or an anti-arbitration injunction against the appellant herein. It is only that once such interim injunction has been vacated or set aside, it would imply that the injunction had never been passed. The consequence of an injunction is so devastating in such circumstances that such an exception has to be carved out.
The Court allowed the appeal and held that the order vacating the injunction will date back to the time of the institution of the Respondent’ application for injunction and the legal implication would be that the order of January 14, 2016 was never passed.
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