2019 (3) TMI 1981 - HC - Indian Laws

Court dismisses anti-arbitration injunction, allowing defendant to proceed with second arbitration.

HIMACHAL SORANG POWER PRIVATE LIMITED & ANR. Versus NCC INFRASTRUCTURE HOLDINGS LIMITED

The court dismissed the application for an anti-arbitration injunction, allowing the defendant (NCCL) to proceed with the second arbitration proceedings. ... Principles of res-judicata - Seeking to commence arbitration proceedings for claiming 'incentive payments' under Clause 14 of the Securities Purchase Agreement - seeking to resist the arbitration action initiated by the defendant on the plea that it is, inter alia, barred by res judicata - whether or not NCCL could continue with the 2nd or a new arbitration? - HELD THAT:- The doctrine has its roots in public policy. It, therefore, bars raising of an issue in a subsequent proceeding, which is directly and substantially in issue in an earlier proceeding between the same parties or between the parties claiming or litigating under the same title. Pertinently, the decision on which reliance is placed to invoke the doctrine of res judicata should be a decision of a Court of competent jurisdiction. It would, however, matter little if it is a Court of limited jurisdiction, that is, it is not competent to try the subsequent action or the action in which the issue has been raised subsequently. As to whether constructive res judicata would apply in this case, one would have to examine whether the issue at hand concerning incentive payments is a mixed question of fact and law and, therefore, would require, if not, a full-blown trial at least a mini-trial. If it does, then, perhaps, this Court is not the appropriate forum to deal with this plea - what HSPL and TAQA, in effect, seek in terms of relief, both in the interlocutory application and the suit, is an anti-arbitration injunction. 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. In the instant case, I have not been able to come to a conclusion that the arbitration agreement has been rendered null and void, inoperative or incapable of being performed. These expressions were used by Mr. Sethi in the context of very same facts which were put forth to expound the bar of res judicata, waiver, and abandonment. Since, I have held that a trial would be required the same reasoning would hold vis-à-vis this submission as well. The question raised is whether at this juncture it is just and convenient to injunct the 2nd Arbitration proceeding by labeling it as an abuse of process, which clearly is a mixed question of law and fact and would require trial - Since I have come to the conclusion that under the relevant SIAC Rules, the 2nd Arbitral Tribunal could adjudicate upon this aspect, it cannot be said at this stage, especially, in the context of arbitration proceedings that triggering of 2nd arbitration proceedings is an abuse of process. The jurisdiction, 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, no case is made out for injunction by this Court. Application dismissed. Issues Involved:1. Whether the defendant (NCCL) could continue with the second arbitration proceedings.2. Whether the claim for incentive payments by NCCL is barred by principles of res judicata, waiver, and abandonment.3. Whether the arbitration agreement has become inoperative or incapable of being performed.4. Whether the second arbitration proceedings are vexatious, time-consuming, and involve unnecessary expenses.5. Whether the claim for incentive payments is barred by limitation.Issue-Wise Detailed Analysis:1. Continuation of Second Arbitration Proceedings:The central issue is whether NCCL could continue with the second arbitration proceedings. HSPL and TAQA argue that NCCL should have raised its claim for incentive payments in the first arbitration proceedings. Since NCCL did not do so, they contend that the continuation of the second arbitration is barred by law. The court examined whether the arbitration agreement subsisting between the parties had become inoperative or incapable of being performed.2. Principles of Res Judicata, Waiver, and Abandonment:HSPL and TAQA argue that NCCL's claim for incentive payments is barred by principles of res judicata, waiver, and abandonment. They refer to NCCL's conduct before and during the first arbitration proceedings, including pre-arbitration notices and replies, amendments to counterclaims, and specific paragraphs in NCCL's Statement of Defence. The court noted that there was no determination by the first Arbitral Tribunal on the issue of incentive payments, suggesting that this might be a case of constructive res judicata. The court also considered whether the issue at hand concerning incentive payments is a mixed question of fact and law, requiring a trial.3. Inoperability or Incapability of Arbitration Agreement:HSPL and TAQA argue that the arbitration agreement has become inoperative or incapable of being performed. They contend that if the doctrine of res judicata applies, then the arbitration agreement is inoperative. The court examined whether the arbitration agreement had been rendered null and void, inoperative, or incapable of being performed. It concluded that a trial would be required to determine this issue, and thus, the arbitration agreement could not be deemed inoperative at this stage.4. Vexatious and Oppressive Proceedings:HSPL and TAQA argue that NCCL's attempt to initiate second arbitration proceedings is vexatious, time-consuming, and involves unnecessary expenses. The court noted that courts are generally slow in granting anti-arbitration injunctions unless the proceedings are found to be vexatious and/or oppressive. The court considered whether the second arbitration proceedings would require a trial to determine if they are vexatious or oppressive, and concluded that this issue should be addressed by the second Arbitral Tribunal.5. Limitation of Claim for Incentive Payments:HSPL and TAQA argue that NCCL's claim for incentive payments is barred by limitation, as the Wet Commissioning Date (WCD) was required to be achieved by 31.3.2013, and TAQA stepped in to take over the project on 5.3.2014. NCCL issued its notice to claim incentive payments only on 28.12.2018. The court considered whether the cause of action for laying a claim for incentive payments could have arisen only after the first Arbitral Tribunal determined the WCD. The court concluded that this issue should be determined by the second Arbitral Tribunal.Conclusion:The court found no merit in the application for an anti-arbitration injunction and dismissed it. The second Arbitral Tribunal would be free to consider all pleas raised by the parties, including those raised before the court. The court emphasized that arbitration agreements are not extinguished merely because arbitration on one set of disputes has concluded and that the second Arbitral Tribunal could adjudicate on the issues raised. The court also outlined the broad parameters governing anti-arbitration injunctions, emphasizing that courts are slow in granting such injunctions unless the proceedings are vexatious and/or oppressive.