By – Malvika Nambiar

Abstract

To what extent does the power of Indian courts extend in relation to arbitration, especially when the arbitration is seated abroad? The Delhi High Court in the recent case of Engineering Projects (India) Ltd v. MSA Global LLC gave power to the courts to intervene in the case of a vexatious and abusive process. This paper seeks to analyse how this stance of the court conflicts with the minimal judicial intervention guaranteed under Indian arbitration law.

Introduction

Section 5 of the Arbitration and Conciliation Act of 1996 establishes a clear boundary between arbitration and the judicial process. While instilling a sense of minimal judicial intervention, this provision clearly lays down that courts may intervene only in instances provided for by the act itself. After considerable judicial back-and-forth, the Indian landscape is gradually evolving towards a pro-arbitration stance. Cases like Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO judgement), the court moved away from its interventionist approach and pronounced that Part I of the Arbitration Act, which was earlier applicable to foreign seated arbitrations would no longer be applicable and that in foreign related international commercial arbitration, no application for interim relief will be maintainable in India, either by arbitration or by filing a suit.

Following a string of similar cases, it is important to review the Delhi High Court’s recent judgment in the case of Engineering Projects (India) Ltd. v. MSA Global LLC, which provided courts with a supervisory power to prevent misuse of arbitral proceedings, especially through mechanisms like Anti-Arbitration Injunctions (AAI’s) that restrain parties from commencing or continuing arbitration. Although such orders may appear necessary in the interest of justice, it is worth questioning whether they are legitimate powers or an undue judicial intrusion into what is meant to be a private arbitral process. 

What are Anti-Arbitration Injunctions?

An anti-arbitration injunction (AAI) is an injunctive relief granted by a court or other judicial bodies preventing parties from commencing or continuing arbitral proceedings. It can be sought at any point in time prior to rendering of the final arbitral award. Through various court decisions and reliance on English law, AAI’s may be granted in limited situations, such as if the proceedings are vexatious or oppressive, the arbitration agreement proves to be non-existent, null, or void,  if there is a fraud, concealment or lack of disclosure by arbitrators. 

While these grounds may make it seem like anti-arbitration injunctions can only be invoked in limited circumstances, it still opens the gateway to a flood of arbitration cases wherein parties try to argue that the proceedings are vexatious or challenge the validity of the arbitration agreement itself. Parties anticipating an unfavourable outcome often approach the courts as a tactic to delay or prevent an award from taking effect. While statutorily Section 5 restricts intervention and other Sections like Section 8 and 45 direct courts to refer disputes to arbitration, there is no explicit bar on Anti-arbitration Injunctions, which are brought in through the ambit of the Code of Civil Procedure (CPC).

The case: EPIL v. MSA Global

In this case- Engineering Projects (India) Ltd. (EPIL), signed a sub-contract agreement with MSA Global for the construction of a border security project at the Oman-Yemen border. The contract contained an arbitration clause with seat in Singapore, ICC Rules and exclusive jurisdiction on some matters with the New Delhi Courts. Dispute arose and arbitration began.  Mr.Andre Yeap was appointed  by MSA. He had a duty under  Article 11 of ICC Rules to submit a standard disclosure regarding previous association with the parties or any conflict of interest. He failed to disclose despite having presided as an arbitrator in another matter with MSA. EPIL contended the appointment as biased and unfair, challenging it before the ICC Court which deemed the non-disclosure “regrettable” but upheld Mr. Yeap’s appointment. EPIL approached the Delhi High Court seeking an anti-arbitration injunction against the ICC arbitration.

The High Court’s Analysis

The Delhi High Court was faced with the question of whether Indian courts have the jurisdiction to injunct foreign-seated arbitration for the purpose of justice and fairness. The court, while answering in the affirmative, sought to justify the same through Section 9 and Section 151 of the Code of Civil Procedure, which provides courts with inherent powers unless expressly barred, and the Arbitration Act does not preclude these powers of the civil court, especially in cases of procedural abuse. The Court referred to the case of Dhulabhai v. State of Madhya Pradesh, wherein it was held that civil jurisdiction is preserved where arbitral proceedings were proved to be violative of fundamental norms of justice.

The argument raised by the Petitioner (EPIL) was that the non-disclosure by Mr. Yeap was materially violative of public policy, equity and natural justice, in which case Indian Courts have jurisdiction to grant injunctions against such proceedings. In order to assess whether the arbitration proceedings were “vexatious and oppressive”, the court adopted a two-limb test and concluded that MSA’s insistence on continuing arbitral proceedings despite pending challenges and seeking procedural remedies in multiple forums was oppressive, and Mr. Yeap’s non-disclosure to avoid challenge to his appointment was seen as breaching the core of arbitration-party consent. Accordingly, the arbitral proceedings were deemed oppressive and vexatious, thereby giving the courts the authority to intervene. To assess whether an injunction could be granted, the court applied the standard test of injunctions under Order XXXIX Rules 1-2 of CPC and concluded that a prima facie case existed based on the deliberate non-disclosure and subsequent procedural abuse, the balance of convenience was in favour of EPI since continuation of arbitration would risk public funds and the legitimacy of the proceedings. Further, there would be irreparable injury if EPI was compelled to arbitrate before a tribunal against whom it contended, and this would go against party autonomy. Thus, the court finally held that in exceptional circumstances, Indian civil courts can grant injunctions on foreign-seated arbitrations which prove to be procedurally abusive. 

Justice or Forced Intervention?

The Arbitration Act expressly limits judicial intervention to what it permits. The case of Bharat Aluminium (BALCO) clearly laid down that the law of the seat should be respected, and any contrary reading would pose a threat to arbitral autonomy, which lies in the law and courts of the seat. The Engineering Projects (India) Ltd. case arises in a matter whose seat lies in Singapore, and simultaneous anti-suit injunctions have been filed in Singaporean Courts by MSA Global. Here, granting an anti-arbitration injunction, especially when there is no challenge to the validity of the arbitration agreement or the tribunal’s jurisdiction, along with the fact that parallel proceedings are ongoing in the seat jurisdiction, leads to a deviation, granting Indian courts a supervisory role without any justification.

The judgment, while addressing a seemingly straightforward issue, highlights a significant gap in arbitral procedure, between arbitrators’ disclosure obligations and the availability of effective remedies. The Indian Courts were forced to answer in the absence of effective institutional responses from other forums like the ICC. While the judgment might be landmark in bringing a limited interventionist approach, the larger question remains: To what extent can courts intervene? What is the standard of unfairness or procedural violations required for courts to intervene?

Conclusion

Anti-arbitration injunctions strike at the root principles of arbitration like Kompetenz Kompetenz, stripping arbitral tribunals of the power to determine their own jurisdiction and promoting abuse of the arbitral process by parties who use it as deliberate obstruction tactics. While these reasons must dissuade the overall use of anti-arbitration injunctions, the Delhi High Court has been able to show sufficient evidence to interfere with the process.

The Court has intervened to protect against a vexatious and unfair process using not the Arbitration Act but the Civil Procedure Code, assuming a supervisory role and giving itself limited jurisdiction to intervene in extraordinary circumstances. While this represents a relatively balanced outcome, it may soon be invoked to justify far more expansive instances of judicial intervention.  Therefore, there is a need to establish a definitive test for granting Anti-Arbitration Injunctions and confining them to situations of manifest injustice. In order to prevent many more such cases from coming forth, there is a need for arbitral institutions like ICC to enforce stricter disclosure norms, reducing the need for court intervention.

This case, while highlighting the need for a pro-arbitration stance, also emphasises that it will not be blind to injustice in the process and will take action to keep even arbitrators and the arbitral process accountable to principles of justice and fairness.

About the Author

Malvika Nambiar is a final-year law student at O.P. Jindal Global University, pursuing BA LLB (Hons.). She is interested in International Human Rights Law, Business, Dispute Resolution and their intersection.

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