2016 (7) TMI 1648 - HC - Indian Laws

Appellate Court Emphasizes Arbitration Autonomy and Minimal Judicial Interference

MCDONALD’S INDIA PRIVATE LIMITED Versus VIKRAM BAKSHI & ORS

The appellate court set aside the injunction granted by the Single Judge, emphasizing minimal judicial interference in arbitration. It clarified that ... Seeking interim injunction against the arbitration proceedings initiated by the appellant - invocation of doctrine of forum non conveniens - whether the court could at all interfere in the course of an arbitral proceeding? - whether the arbitral proceedings could be regarded as vexatious or oppressive? - whether the arbitration agreement was null and void and/ or incapable of performance? - whether there was waiver of the arbitration clause on the part of the appellant because of its withdrawal of a petition under Section 45 of the Arbitration and Conciliation Act, 1996 which had been filed before the Company Law Board in the said Company Petition? HELD THAT:- It is clear that the doctrine of forum non conveniens can only be invoked where the court deciding not to exercise jurisdiction, has jurisdiction in the strict sense, but comes to the conclusion that some other court, which also has jurisdiction, would be the more convenient forum. It must also be kept in mind that the doctrine of forum non conveniens is essentially a common law doctrine originating from admiralty cases having trans-national implications. It is clear that the doctrine of forum non conveniens is only available when a Court has the jurisdiction but the respondent is able to establish the existence of another competent court. The finding of the learned single Judge that the arbitration agreement in the present case is incapable of performance or inoperative because of the pendency of the proceedings in the Company Law Board is clearly out of line. As pointed out above, while discussing the World Sport Group (supra) decision, it was specifically noted that the mere existence of the multiple proceedings (proceedings before the Company Law Board and those before the arbitral tribunal) is not sufficient to render the arbitration agreement inoperative or incapable of being performed - In any event, the subject matter of the proceedings before the Company Law Board fell within the ambit of the alleged oppression and mismanagement whereas the subject matter of the dispute before the arbitral tribunal related to the termination of the JVA and the rights flowing therefrom. The learned single Judge was of the view that there was a waiver or abandonment of the arbitration clause by the parties. This finding is clearly erroneous. The learned single Judge was of the view that merely because the appellant withdrew its application under Section 45 which it had challenged before the Company Law Board, the appellant had abandoned the arbitration agreement - The learned single Judge lost sight of the fact that, while through the application under Section 45, the appellant had sought a reference to arbitration of the claims of the respondents before the Company Law Board, it had subsequently directly invoked the arbitration agreement which had also been set in motion and, therefore, by no stretch of imagination could it have been concluded that the appellant had abandoned and / or waived the arbitration agreement. There was some debate and discussion that the ‘place of arbitration’ was not London in terms of the arbitration agreement and, therefore, Part I would not apply. On the one hand, it was contended on the part of the respondents that London was only a venue and not the ‘place of arbitration’, which, according to them, was New Delhi. Thus, their arguments and counter-arguments as to whether Part I applied or Part II applied were based on the difference of opinion with regard to the ‘place of arbitration’. There appears to be confusion even in the minds of the parties as, on the one hand, the appellant had filed an application under Section 45 of the 1996 Act (which falls in Part II) before the Company Law Board and, on the other hand, the very same appellant filed an application under Section 9 (which falls in Part I) of the 1996 Act. Of course, the appellant took the plea that because the agreement was prior to 06.09.2012, the decision in Bhatia International would apply and, therefore, Part I would be applicable even in respect of arbitration agreements referred to in Section 44 of the 1996 Act. Be that as it may, we are not entering into this controversy. Courts need to remind themselves that the trend is to minimize interference with arbitration process as that is the forum of choice. That is also the policy discernible from the 1996 Act. Courts must be extremely circumspect and, indeed, reluctant to thwart arbitration proceedings. Thus, while courts in India may have the power to injunct arbitration proceedings, they must exercise that power rarely and only on principles analogous to those found in sections 8 and 45, as the case may be, of the 1996 Act - Application disposed off. Issues Involved:1. Anti-arbitration injunction2. Forum non conveniens3. Jurisdiction of the civil court4. Waiver of the arbitration clauseIssue-wise Detailed Analysis:1. Anti-arbitration injunction:The core issue was whether the court could interfere with ongoing arbitration proceedings. The respondents sought an injunction to halt arbitration initiated by the appellant before the London Court of International Arbitration (LCIA). The learned Single Judge granted this injunction, reasoning that the arbitration agreement was inoperative or incapable of performance due to overlapping disputes before the Company Law Board (CLB) and the LCIA. However, the appellate court found this reasoning flawed, emphasizing that mere multiple proceedings do not render an arbitration agreement inoperative. The appellate court underscored the principles of minimal judicial interference in arbitration, as mandated by the Arbitration and Conciliation Act, 1996 (1996 Act), particularly referencing Sections 8 and 45, which obligate courts to refer parties to arbitration unless the agreement is null, void, inoperative, or incapable of being performed.2. Forum non conveniens:The learned Single Judge had opined that the LCIA was a forum non conveniens due to the parties' primary business operations in India and the governing law being Indian law. However, this argument was not pressed by the respondents before the appellate court. The appellate court clarified that the principle of forum non conveniens, which allows a court to decline jurisdiction if another forum is more appropriate, does not apply when the parties have chosen arbitration as their dispute resolution mechanism. The appellate court emphasized that the arbitration forum chosen by the parties cannot be deemed inconvenient merely due to its location.3. Jurisdiction of the civil court:The appellant argued that the civil court lacked jurisdiction to entertain the suit for an anti-arbitration injunction due to the arbitration agreement. The respondents contended that the civil court could intervene if the arbitration agreement was null, void, inoperative, or incapable of being performed. The appellate court referred to the Supreme Court's decisions in Chatterjee Petrochem and World Sport Group, concluding that while courts have jurisdiction to determine the validity of an arbitration agreement, they must refer parties to arbitration unless the agreement is demonstrably invalid. The appellate court found no basis to declare the arbitration agreement inoperative or incapable of performance due to the CLB proceedings.4. Waiver of the arbitration clause:The learned Single Judge found that the appellant had waived the arbitration clause by withdrawing its Section 45 application before the CLB. The appellate court disagreed, noting that the withdrawal was due to the initiation of arbitration proceedings, not an abandonment of the arbitration agreement. The appellate court highlighted that the appellant's actions, including filing a Section 9 application under the 1996 Act, demonstrated its intent to pursue arbitration, not to waive it.Conclusion:The appellate court set aside the impugned judgment, emphasizing the need for minimal judicial interference in arbitration proceedings and upholding the principles of arbitration autonomy and competence-competence. The court reiterated that an anti-arbitration injunction could only be granted in exceptional circumstances where the arbitration agreement is clearly invalid, inoperative, or incapable of being performed, none of which were present in this case.