A Division Bench of the Delhi High Court on July 7, 2020, in the case of Ashwani Minda and M/s Jay Ushin Limited (“Appellants”) v. M/s U-Shin Limited and M/s Minebea Mitsumi Incorporated (“Respondents”), while deciding upon an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (“the Act”), determined the scope of applicability of Section 9 of the Act in connection with foreign seated arbitrations.

Brief Facts of the case:

The Appellants in the case were Mr. Ashwani Minda (“AM”) and a company of which he is the Managing Director, viz. Jay Ushin Limited (“JUL”). Further, two companies incorporated in Japan i.e. U-Shin Limited (“USL”) and Minebea Mitsumi Incorporated (“MMI”) were impleaded as Respondents in the appeal.

The basic agreement to which the dispute related was a joint venture agreement dated May 30, 1986 (“JVA”), to which USL and a partnership firm by the name of M/s Jay Industries were parties. The dispute between the parties arose out of a transaction for mutual business integration between USL and MMI, which was announced on November 7, 2018.

The Appellants thereafter, invoked arbitration proceedings as per the JVA, to be held in Japan under the Rules of Japan Commercial Arbitration Association (“JCAA”). Subsequently, vide a communication dated March 13, 2020, the Appellants applied before the JCAA for appointment of emergency measures of protection. It is pertinent to mention that during the pendency of the emergency arbitration proceedings, the Appellants, had also submitted a request for arbitration dated March 23, 2020 to the JCAA wherein the various interim reliefs sought by the Appellants, were substantially similar to the reliefs they had sought before the emergency arbitrator.

The emergency arbitrator by an order dated April 2, 2020 rejected the request for reliefs, holding it against the Appellants both on the question of jurisdiction and merits. 

Thereafter, the arbitral tribunal under the aegis of JCAA had been constituted on May 13, 2020. However, it is imperative to mention that prior to constitution of the arbitral tribunal under JCAA, the Appellants, had filed a petition under Section 9 of the Act before a Single Bench of the Delhi High Court seeking reliefs similar to those enumerated as interim reliefs before the arbitral tribunal constituted under JCAA.

The Single Bench of the Delhi High Court vide its order dated May 12, 2020 dismissed the aforemention petition on the grounds of maintainability, finding that the petition could not be maintained after dismissal of the Appellants’ request for emergency measures before the JCAA. The Single Bench, however, accepted the argument of the Appellants that, Section 9 of the Act is also applicable to foreign seated arbitrations, consequent upon the amendment of Section 2(2) of the Act by the Arbitration and Conciliation (Amendment) Act, 2015 (“the 2015 Amendment”). Further, the Single Bench also held that the application of Part I of the Act was impliedly excluded in the facts and circumstances of the present case.

Aggrieved by the aforesaid order, the Appellants preferred the instant appeal under Section 37 of the Act.

Issue:

The primary question which arose for consideration before the court was whether the Appellants can be permitted to proceed with the petition under Section 9 of the Act, when they have been denied a similar relief under by the emergency arbitrator under JCAA and moreso, when the arbitration tribunal has already been constituted?

Decision by the court:

The court observed that although Section 9(3) of the Act, on its terms, is expressly relatable to India-seated arbitrations, the principle thereof is equally applicable when interim measures are sought in the Indian courts in respect of foreign-seated arbitration.

The court noted that the primary purpose of Part I of the Act which, inter-alia, includes Section 2, 9 and 17 is to govern India seated arbitrations. Thus, as per the court, the reference in Section 9(3) to Section 17 alone, cannot therefore, be dispositive of the question as to whether the same principle applies where the arbitration is seated outside India.

The Delhi High Court thus, observed that the absence of a specific reference to foreign-seated arbitrations under Section 9(3) of the Act ought not to be construed as a widening of the Section 9 power, to cover cases where the arbitral tribunal has been constituted, and is capable of granting efficacious relief since, such an interpretation would not just extend the scope of Section 9, but would also amount to the provision being available in the Indian courts in connection with foreign-seated arbitrations, but not in connection with India-seated arbitrations.

The court thus, held that:-

“although an application under Section 9 is maintainable in connection with a foreign-seated arbitration, an application thereunder would not lie after the constitution of the arbitral tribunal, unless the applicant demonstrates that it does not have an efficacious remedy before the tribunal.”                                                                                                                                      (emphasis supplied)

Further, with respect to the issue that whether the parties impliedly excluded the application of Part I of the Act, the court held that, it was not necessary to examine the correctness of the order of the Single Bench at this stage that whether the provision of the foreign seat and rules evinced the intention of the parties to exclude Part I of the Act. The court thus, expressly left the question to be decided in an appropriate case. The court, however, noted that the judgment of the Single Bench would not foreclose the issue, even in the context of the arbitration agreement and arbitral proceedings forming the subject matter of the instant litigation.

The Division Bench of the Delhi High Court thus, upheld the order of the Single Bench and held, that the Section 9 petition filed by the Appellants, is not maintainable.

This update has been contributed by Arka Majumdar (Partner) and Kunal Dey (Associate).