Thursday 15 September 2016

When doctrine of Forum non conveniens is applicable?

Forum non conveniens
4. To clarify the position with regard to forum non conveniens, a slight
digression would be in order. Black‘s Law Dictionary, 5th Edition, defines
the phrase ―forum non conveniens‖ as follows:-
―Term refers to discretionary power of court to decline
jurisdiction when convenience of parties and of justice would
be better served if action were brought and tried in another
forum. Johnson v. Spider Staging Corp., 87 Wash.2d 577, 555
P.2d 997, 999, 1000.‖
And further as:-
―The doctrine is patterned upon the right of the court in the
exercise of its powers to refuse the imposition upon its
jurisdiction of the trial of cases even though the venue is
properly laid if it appears that for the convenience of litigants
and witnesses and in the interest of justice the action should be
instituted in another forum where the action might have been
brought. Hayes v. Chicago, R.I. & P. R. Co., D.C. Minn., 79
F. Supp. 821, 824. The doctrine presupposes at least two
forums in which the defendant is amenable to process and
furnishes criteria for choice between such forums. Wilson v.
Seas Shipping Co., D.C.N.Y., 77 F.Supp. 423,424. …….‖
―The rule is an equitable one embracing the discretionary
power of a court to decline to exercise jurisdiction which it has
over a transitory cause of action when it believes that the
action may be more appropriately and justly tried elsewhere.
Leet v. Union Pac. R. Co., 25 Cal.2d 605, 155 P.2d 42,
44……‖
(underlining added)
The principle was stated by Lord Kinnear in Sim v. Robinow: (1892) 19 K.
665 thus:
―The general rule was stated by the late Lord President in
Clements v. Macaulay 4 Macph. 593, in the following terms:
'In cases in which jurisdiction is competently founded, a court
has no discretion whether it shall exercise its jurisdiction or
not, but is bound to award the justice which a suitor comes to
ask. Judex tenetur impertiri judicium suum {a judge must
exercise jurisdiction in every case in which he is seized of it}
and the plea under consideration must not be stretched so as to
interfere with the general principle of jurisprudence.' And
Therefore the plea can never be sustained unless the court is
satisfied that there is some other tribunal, having competent
jurisdiction, in which the case may be tried more suitably for
the interests of all the parties and for the ends of justice... In all
these cases there was one indispensable element present when
the court gave effect to the plea of forum non conveniens,
namely, that the court was satisfied that there was another
court in which the action ought to be tried as being more
convenient for all the parties, and more suitable for the ends of
justice."
(underlining added)
5. In Mayar (H.K.) Ltd v. Owners & Parties, Vessel M.V. Fortune
Express: (2006) 3 SCC 100, the Supreme Court quoted with approval the
explanation of the ambit of the principle of forum non conveniens for
issuing an order of stay as given by the House of Lords in Spiliada
Maritime Corpn. V. Cansulex Ltd: (1986) All ER 843 which was to the
following effect:
―(1) The fundamental principle applicable to both the stay of
English proceedings on the ground that some other forum was
the appropriate forum and also the grant of leave to serve
proceedings out of the jurisdiction was that the court would
choose that forum in which the case could be tried more
suitably for the interests of all the parties and for the ends of
justice…
(2) In the case of an application for a stay of English
proceedings the burden of proof lay on the defendant to show
that the court should exercise its discretion to grant a stay.
Moreover, the defendant was required to show not merely that
England was not the natural or appropriate forum for the trial
but that there was another available forum which was clearly
or distinctly more appropriate than the English forum. In
considering whether there was another forum which was more
appropriate the court would look for that forum with which the
action had the most real and substantial connection e.g. in
terms of convenience or expense, availability of witnesses, the
law governing the relevant transaction, and the places where
the parties resided or carried on business. If the court
concluded that there was no other available forum which was
more appropriate than the English Court it would normally
refuse a stay. If, however, the court concluded that there was
another forum which was prima facie more appropriate the
court would normally grant a stay unless there were
circumstances militating against a stay e.g. if the plaintiff
would not obtain justice in the foreign jurisdiction….‖
6. In a more recent decision of the House of Lords [Tehrani v. Secy of
State for the Home Department: [2006] UKHL 47] it was observed:-
―The doctrine of forum non conveniens is a good example of a
reason, established by judicial authority, why a court should
not exercise a jurisdiction that (in the strict sense) it possesses.
Issues of forum non conveniens do not arise unless there are
competing courts each of which has jurisdiction (in the strict
sense) to deal with the subject matter of the dispute. It seems
to me plain that if one of the two competing courts lacks
jurisdiction (in the strict sense) a plea of forum non conveniens
could never be a bar to the exercise by the other court of its
jurisdiction.‖
(underlining added)
7. Thus, the doctrine of forum non conveniens can only be invoked
where the court deciding not to exercise jurisdiction, has jurisdiction to
decide the case. The U.S. Supreme Court also held in Gulf Oil Corp. v.
Gilbert: 330 U.S. 501 that "[I]ndeed, the doctrine of forum non conveniens
can never apply if there is absence of jurisdiction or mistake of venue".
8. In this very decision (viz. Gulf Oil Corp.) the doctrine is stated as
follows:
―The principle of forum non conveniens is simply that a court
may resist imposition upon its jurisdiction even where
jurisdiction is authorised by the letter of a general venue
statute. These statutes are drawn with a necessary generality
and usually give a plaintiff a choice of courts, so that he may
be quite sure of some place in which to pursue his remedy. But
the open door may admit those who seek not simply justice
but perhaps justice blended with some harassment. A plaintiff
sometimes is under temptation to resort to a strategy of forcing
the trial at a most inconvenient place for an adversary, even at
some inconvenience to himself.‖
9. From the above discussion, 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 HIGH COURT OF DELHI AT NEW DELHI
 Judgment delivered on: 21.07.2016
 FAO (OS) 9/2015 and CM No. 326/2015
MCDONALD’S INDIA PRIVATE LIMITED 
versus
VIKRAM BAKSHI & ORS 

CORAM:-
HON’BLE MR JUSTICE BADAR DURREZ AHMED
HON’BLE MR JUSTICE SANJEEV SACHDEVA



1. The present appeal has been preferred against the judgment dated
22.12.2014 delivered by a learned Single Judge of this Court in IA
6207/2014 which was an application under Order 39 Rules 1 and 2 of the
Code of Civil Procedure, 1908. In the said application, the respondent
Nos. 1 and 2 (plaintiffs) had prayed for an ad interim injunction against the
arbitration proceedings initiated by the appellant (defendant No.1) before
the London Court of International Arbitration at London, U.K. The said 
application had been filed in CS(OS) 962/2014 in which the respondent
Nos. 1 and 2 (plaintiffs) had sought, inter alia, a declaration that there is no
arbitration agreement between the plaintiffs (respondent Nos. 1 and 2) and
the defendant No.1 (appellant) and an injunction restraining the appellant
(defendant No.1) and the London Court of International Arbitration
(defendant No.3) from proceeding with any arbitration. A declaration was
also sought that the arbitration agreement contained in the Joint Venture
Agreement (JVA) was illegal and/ or void and /or inoperative or incapable
of performance.
2. By virtue of the impugned judgment, the learned Single Judge has
restrained the appellant from pursuing the arbitration proceedings before
the said Arbitral Tribunal till the disposal of the suit or alternatively till the
status quo order, which was granted by the Company Law Board on
16.09.2013 and continued till further orders on 04.10.2013 in Company
Petition No. 110/ND/2013, is not vacated. The learned Single Judge came
to the conclusion that the plaintiffs (respondent Nos. 1 and 2) had been able
to show prima facie that the arbitration agreement between the parties was
inoperative or incapable of performance on account of the fact that the
plaintiffs had already filed a petition for oppression and mismanagement 
before the Company Law Board in India which had directed the appellant
to maintain status quo with regard to the shareholding pattern of the
respondent No.3 during the pendency of the petition. The learned single
Judge also observed that the dispute which was pending between the parties
before the Company Law Board with regard to oppression and
mismanagement would overlap the disputes sought to be raised by the
appellant in the arbitral proceedings on the assertion that the appellant was
well within its right to terminate the Joint Venture Agreement and refer the
dispute for adjudication before the Arbitral Tribunal. The learned Single
Judge was also of the opinion that the London Court of International
Arbitration was a forum non-conveniens particularly on account of the fact
that the parties, except one of the defendants, were carrying on business in
India, the cause of action had accrued in India, the governing law between
the parties was the law of India and in case the Award was passed in favour
of the defendants, it had to be enforced in India according to Indian laws.
The learned Single Judge was of the opinion that simply by having the
Arbitral Tribunal located at London, it became forum non-conveniens and,
therefore, the carrying on of the arbitration proceedings by the defendants,
when the company petition was pending before the Company Law Board,
was oppressive and vexatious.
3. The appellant has challenged the impugned judgment by way of this
appeal. At the outset, we may point out that the observations of the learned
Single Judge with regard to the forum non-conveniens argument are not
correct in law. When we posed this question before Mr Aryama Sundaram,
the learned senior counsel who appeared on behalf of the respondents, he
submitted that he is not pressing the case on the basis of the submissions
made on forum non-conveniens and would not rely on the observations of
the learned Single Judge with regard to the forum non-conveniens
argument. We are making it clear that the forum non-conveniens argument
was, therefore, not stressed before us by the respondents nor could they
have because the observations of the learned Single Judge on this aspect of
the matter are contrary to law and, therefore, would not hold good. In order
to substantiate this, some comment on the forum non conveniens principle
would be necessary.
Forum non conveniens
4. To clarify the position with regard to forum non conveniens, a slight
digression would be in order. Black‘s Law Dictionary, 5th Edition, defines
the phrase ―forum non conveniens‖ as follows:-
―Term refers to discretionary power of court to decline
jurisdiction when convenience of parties and of justice would
be better served if action were brought and tried in another
forum. Johnson v. Spider Staging Corp., 87 Wash.2d 577, 555
P.2d 997, 999, 1000.‖
And further as:-
―The doctrine is patterned upon the right of the court in the
exercise of its powers to refuse the imposition upon its
jurisdiction of the trial of cases even though the venue is
properly laid if it appears that for the convenience of litigants
and witnesses and in the interest of justice the action should be
instituted in another forum where the action might have been
brought. Hayes v. Chicago, R.I. & P. R. Co., D.C. Minn., 79
F. Supp. 821, 824. The doctrine presupposes at least two
forums in which the defendant is amenable to process and
furnishes criteria for choice between such forums. Wilson v.
Seas Shipping Co., D.C.N.Y., 77 F.Supp. 423,424. …….‖
―The rule is an equitable one embracing the discretionary
power of a court to decline to exercise jurisdiction which it has
over a transitory cause of action when it believes that the
action may be more appropriately and justly tried elsewhere.
Leet v. Union Pac. R. Co., 25 Cal.2d 605, 155 P.2d 42,
44……‖
(underlining added)
The principle was stated by Lord Kinnear in Sim v. Robinow: (1892) 19 K.
665 thus:
―The general rule was stated by the late Lord President in
Clements v. Macaulay 4 Macph. 593, in the following terms:
'In cases in which jurisdiction is competently founded, a court
has no discretion whether it shall exercise its jurisdiction or
not, but is bound to award the justice which a suitor comes to
ask. Judex tenetur impertiri judicium suum {a judge must
exercise jurisdiction in every case in which he is seized of it}
and the plea under consideration must not be stretched so as to
interfere with the general principle of jurisprudence.' And
Therefore the plea can never be sustained unless the court is
satisfied that there is some other tribunal, having competent
jurisdiction, in which the case may be tried more suitably for
the interests of all the parties and for the ends of justice... In all
these cases there was one indispensable element present when
the court gave effect to the plea of forum non conveniens,
namely, that the court was satisfied that there was another
court in which the action ought to be tried as being more
convenient for all the parties, and more suitable for the ends of
justice."
(underlining added)
5. In Mayar (H.K.) Ltd v. Owners & Parties, Vessel M.V. Fortune
Express: (2006) 3 SCC 100, the Supreme Court quoted with approval the
explanation of the ambit of the principle of forum non conveniens for
issuing an order of stay as given by the House of Lords in Spiliada
Maritime Corpn. V. Cansulex Ltd: (1986) All ER 843 which was to the
following effect:
―(1) The fundamental principle applicable to both the stay of
English proceedings on the ground that some other forum was
the appropriate forum and also the grant of leave to serve
proceedings out of the jurisdiction was that the court would
choose that forum in which the case could be tried more
suitably for the interests of all the parties and for the ends of
justice…
(2) In the case of an application for a stay of English
proceedings the burden of proof lay on the defendant to show
that the court should exercise its discretion to grant a stay.
Moreover, the defendant was required to show not merely that
England was not the natural or appropriate forum for the trial
but that there was another available forum which was clearly
or distinctly more appropriate than the English forum. In
considering whether there was another forum which was more
appropriate the court would look for that forum with which the
action had the most real and substantial connection e.g. in
terms of convenience or expense, availability of witnesses, the
law governing the relevant transaction, and the places where
the parties resided or carried on business. If the court
concluded that there was no other available forum which was
more appropriate than the English Court it would normally
refuse a stay. If, however, the court concluded that there was
another forum which was prima facie more appropriate the
court would normally grant a stay unless there were
circumstances militating against a stay e.g. if the plaintiff
would not obtain justice in the foreign jurisdiction….‖
6. In a more recent decision of the House of Lords [Tehrani v. Secy of
State for the Home Department: [2006] UKHL 47] it was observed:-
―The doctrine of forum non conveniens is a good example of a
reason, established by judicial authority, why a court should
not exercise a jurisdiction that (in the strict sense) it possesses.
Issues of forum non conveniens do not arise unless there are
competing courts each of which has jurisdiction (in the strict
sense) to deal with the subject matter of the dispute. It seems
to me plain that if one of the two competing courts lacks
jurisdiction (in the strict sense) a plea of forum non conveniens
could never be a bar to the exercise by the other court of its
jurisdiction.‖
(underlining added)
7. Thus, the doctrine of forum non conveniens can only be invoked
where the court deciding not to exercise jurisdiction, has jurisdiction to
decide the case. The U.S. Supreme Court also held in Gulf Oil Corp. v.
Gilbert: 330 U.S. 501 that "[I]ndeed, the doctrine of forum non conveniens
can never apply if there is absence of jurisdiction or mistake of venue".
8. In this very decision (viz. Gulf Oil Corp.) the doctrine is stated as
follows:
―The principle of forum non conveniens is simply that a court
may resist imposition upon its jurisdiction even where
jurisdiction is authorised by the letter of a general venue
statute. These statutes are drawn with a necessary generality
and usually give a plaintiff a choice of courts, so that he may
be quite sure of some place in which to pursue his remedy. But
the open door may admit those who seek not simply justice
but perhaps justice blended with some harassment. A plaintiff
sometimes is under temptation to resort to a strategy of forcing
the trial at a most inconvenient place for an adversary, even at
some inconvenience to himself.‖
9. From the above discussion, 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.
10. Clearly, the principle applies when there are competing courts, each
of which has jurisdiction to deal with the subject matter of the dispute.
This principle would have no application to the case at hand. First of all,
there is no competing court. Here we have a court and an arbitral tribunal
(which is certainly not a court). Secondly, the subject matter of dispute
before this court is different from that before the arbitral tribunal. The
subject matter before this court is the plea of an anti-arbitration injunction
and the subject matter before the arbitral tribunal is the substantive dispute
under the JVA. Thirdly, the forum of arbitration consciously chosen by the
parties as an alternative forum of dispute resolution, alternative to the
forum of a court, cannot be regarded as an inconvenient forum. Fourthly, 
the place of arbitration chosen by the parties cannot be regarded as an
‗inconvenient place‘.
11. As a rule, the plea of forum non conveniens can only be raised by a
defendant or respondent. But, in India, there is an exception to this rule that
the principle of forum non conveniens can only be invoked by a defendant.
And, that is the case of an anti-suit action which is different and distinct
from an anti-arbitration action. But, even an anti-suit injunction cannot be
granted against a defendant where parties have agreed to submit to the
exclusive jurisdiction of a court including a foreign court save in
exceptional circumstances such as (1) which permit a contracting party to
be relieved of the burden of the contract; or (2) where, after the date of the
contract, subsequent events have made it impossible, for the party seeking
injunction, to prosecute the case in the court of choice because the essence
of the jurisdiction of the court does not exist; or (3) because of a vis major
or force majeure and the like (see: Modi Entertainment Network and
Another v. W.S.G. Cricket PTE Ltd: (2003) 4 SCC 341, 360).
12. There is yet another aspect upon which some comment is required.
The principle of forum non conveniens is essentially an equitable common
law principle giving a court the discretion to not exercise a jurisdiction 
which it has on the ground that there exists another court which also has
jurisdiction but which is more convenient to the parties and for the trial of
the suit. But, in India, within India, a court at place ‗A‘ which has
jurisdiction cannot say that it shall not exercise that jurisdiction because
there is another court at place ‗B‘ which also has jurisdiction and would be
more convenient. The Code of Civil Procedure, 1908 does not permit it.
The court in which a suit is initiated, if it has jurisdiction, has to proceed
with the suit even if there is another court where also the suit could have
been instituted. The provision of stay of suit under Section 10 CPC also
does not contemplate a forum non conveniens situation. Neither does the
provision of Order 7 Rule 10 (Return of the plaint) where the court returns
a plaint for want of jurisdiction. But, if there are two courts of competent
jurisdiction, then, if the suit is instituted in one court, which is inconvenient
to the defendant, the latter could invoke the provisions of Section 24 CPC
or Section 25 CPC as the case may be. Therefore, in India, the statute
provides for situations where the common law equitable principles of forum
non conveniens and the like would be applicable.
13. Thus, the arguments addressed before us proceeded on aspects other
than the forum non-conveniens argument. Principally, the arguments were 
on the issues as to whether the court could at all interfere in the course of an
arbitral proceeding and whether the arbitral proceedings could be regarded
as vexatious or oppressive and whether the arbitration agreement was null
and void and/ or incapable of performance and 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
(hereinafter referred to as ‗the said Act‘) which had been filed before the
Company Law Board in the said Company Petition. Before we embark
upon a discussion of the rival arguments, it would be necessary to set out
the facts leading to the present appeal.
Facts:
14. On 31.03.1995, the appellant (McDonald‘s India Private Limited)
(MIPL), Mr Vikram Bakshi (VB) (respondent No.1) and McDonald‘s
Corporation, USA entered into a Joint Venture Agreement (JVA) for the
purposes of setting up and operating McDonald‘s restaurants initially
within the National Capital Region of Delhi on a non-exclusive basis.
Essentially, the agreement was between MIPL and VB and, McDonald‘s
Corporation, USA was a confirming party. The JVA stipulated that
promptly after the execution of the agreement and receipt of all necessary FAO (OS) 9/2015 Page 13 of 63
governmental approvals, MIPL and VB shall form a JV Company in which
MIPL and VB were to have 50% shares each which would be paid up in
full when issued. The relevant clauses of the JVA are set out herein under:-
―7. Managing Director. The JV Parties shall promptly cause
the nomination and election of Partner as the sole Managing
Director of JV Company.
a) Acceptance. Partner agrees to accept the office
of Managing Director, to maintain his residence in the
National Capital Region of Delhi, and to devote his
full business time and best efforts to the promotion
and development of the McDonald's Restaurants
operated by the JV Company.
xxxx xxxx xxxx xxxx
(e) Re-election of Managing Director The
Managing Director shall be elected every two (2) years.
McDonald's agrees to vote for the re-election of Partner
as Managing Director for so long as:
(1) he resides in the National Capital Region of
Delhi and spends substantially all of his business
time in the performance of his obligations under this
Agreement and the Operating License Agreements
executed hereunder;
(2) he and the Investing Company (as defined
below), in combination, own at least 50% of the
equity shares of JV Company;
(3) he discharges the responsibilities of
management of JV Company in a competent and
faithful manner; FAO (OS) 9/2015 Page 14 of 63
(4) he is not in breach of any term of this
Agreement or any other agreement between the JV
Parties or their affiliates or subsidiaries.‖
xxxx xxxx xxxx xxxx
―32. McDonald's Option to Purchase Shares. McDonald's,
any of its wholly-owned subsidiaries or affiliates as
designated by McDonald's, or any person or entity
designated by McDonald's, may purchase all of the shares
of JV Company owned or controlled by Partner at a
purchase price determined in accordance with Paragraph 26
above if any of the following events shall occur:
(a) Partner personally fails to maintain his principal
residence in the National Capital Region of Delhi or
fails to devote his full business time and best efforts to
JV Company;
(b) Partner terminates or suffers the termination of his
relationship as Managing Director of JV Company,
other than by reason of his death or incapacity. In the
event of Partner's death or incapacity, Paragraph 29(d)
shall govern; or
(c) upon expiration or termination of this Agreement.‖

xxxx xxxx xxxx xxxx
―35. Termination by Non-Defaulting Party. The Parties
agree that any of the following events constitutes material default
of this Agreement:
(a) failure to make the investment required by Paragraph
3;
(b) failure of the other JV Party to vote shares in JV
Company for the election of Directors and/or the
Managing Director in accordance with Paragraphs 6 FAO (OS) 9/2015 Page 15 of 63
and 7, or to otherwise vote in a Shareholders meeting
in accordance with Paragraph 4;
(c) the transfer of shares in JV Company or
encumbrance of shares in JV Company by the other
JV Party in violation of Paragraphs 4, 27, 28, 29 or
30;
(d) JV Company or the other JV Party shall enter
bankruptcy, composition, reorganisation, liquidation,
or arrangement proceedings or shall become
insolvent due to its or his inability to pay its or his
debts as they become due;
(e) JV Company shall have a negative net worth (as
calculated on a historical basis, in accordance with
generally accepted accounting principles in the
United States) as of the end of any fiscal quarter
exceeding the Indian Rupee equivalent of US
$1,000,000;
(f) All required governmental approvals to consummate
this Agreement are not received within twelve (12)
months after the date of this Agreement.
(g) All required governmental approvals to consummate
the Operating License Agreements executed
hereunder are not received within twelve (12) months
after the date of such Agreements.
In the event of such material default, the non-defaulting Party
shall give written notice of default to the defaulting Party, and
may terminate this Agreement if the event of default remains
unremedied sixty (60) days after the date of such notice; provided,
however, that no such remedy period shall be required if the
default involves Paragraph 35(c), (f) or (g).FAO (OS) 9/2015 Page 16 of 63
36. Termination by McDonald’s. The Parties further agree
that the any of following events constitutes material default of this
Agreement:
(a) Partner shall fail to serve as Managing Director in
accordance with Paragraph 7;
(b) Partner or JV Company shall use the Property in violation
of Paragraph 23;
(c) Partner shall knowingly or intentionally violate the
covenants respecting competition and conflicts of interest
contained in Paragraphs 24 and 25;
(d) Partner shall assign any interest of this Agreement in
violation of Paragraph 40(e);
(e) Partner breaches covenants contained in Paragraphs 10,
13, 45 or 46 or representations or warranties therein are
found to be untrue;
(f) Repeated delays or failures to make delivery of the reports
required by Paragraph 14;
(g) Any Operating License Agreement shall be terminated by
reason of default by JV Company.
In the event of such material default, McDonald‘s shall
give written notice of default to Partner, and may terminate this
Agreement if the event of default remains unremedied sixty (60)
days after the date of such notice; provided, however, that no such
remedy period shall be required if the default involves Paragraph
36 (d).
37. Effect of Termination. Upon termination of this
Agreement:FAO (OS) 9/2015 Page 17 of 63
(a) McDonald‘s or a designee may elect either to purchase all
shares owned and controlled by Partner in JV Company at
a purchase price determined as of the date of notice of
termination in accordance with Paragraph 26 above or,
(b) McDonald‘s may elect not to purchase all shares owned
by Partner in JV Company, and in that event, the JV
Parties agree that:
(i) the Operating License Agreements shall be
terminated or assigned as directed by McDonald‘s;
(ii) the JV Parties agree to vote promptly in a General
Meeting of Shareholders for dissolution and
liquidation of JV Company;
(iii) the JV Parties shall cause JV Company to
discontinue use of and return all Property,
information and materials to McDonald‘s;
(iv) The JV Parties agree that in liquidating JV
Company and in turn in disposing of existing
leaseholds, freeholds and other assets, McDonald‘s
or a company designated by it shall have a right of
first refusal to acquire any such leasehold, freehold
or other asset.
(v) The JV Parties shall cause JV Company to cease
the production of McDonald‘s food products and
the operation of McDonald‘s Restaurants.‖
xxxx xxxx xxxx xxxx
―40. Miscellaneousa.
Governing Law. This Agreement shall be construed
in accordance with and governed by the laws of India and FAO (OS) 9/2015 Page 18 of 63
will be subject to the jurisdiction of the courts in New
Delhi, India, except for any Indian choice of law or
conflicts of law rules which might direct the application
of the laws of any other jurisdiction.
b. Arbitration. On demand of either JV Party, any
unresolved dispute which may arise in connection with
Paragraphs 35, 36, 37, 38 or 39 of this Agreement shall
be submitted for arbitration to be administered by the
London Court of International Arbitration (the ―LCIA‖).
Such arbitration proceedings shall be conducted in
London, England and shall be conducted before a panel
of three (3) arbitrators and shall be conducted in
accordance with the then current commercial arbitration
rules of the LCIA for international arbitrations. Partner
and McDonald‘s shall each appoint one arbitrator and the
two arbitrators so appointed shall appoint a third
arbitrator to act as Chairman of the tribunal. If a JV Party
fails to nominate an arbitrator within thirty (30) days
from the date when the claimant‘s request for arbitration
has been communicated to the other JV Party, such
appointment shall be made by the LCIA. The two
arbitrators thus appointed shall attempt to agree upon the
third arbitrator to act as Chairman. If the two arbitrators
fail to nominate the Chairman within thirty (30) days
from the date of appointment of the second arbitrator to
be appointed, the Chairman shall be appointed by the
LCIA. The JV Parties shall have the right to the broadest
investigation of the facts surrounding the dispute,
provided that any dispute between the parties relating to
such investigation shall be submitted to the arbitral
tribunal for resolution. The arbitrators shall have the
right to award or include in their award any relief which
they deem proper in the circumstances, including without FAO (OS) 9/2015 Page 19 of 63
limitation, money damages (with interest on unpaid
amounts from date due), specific performance, injunctive
relief, legal fees and costs. The award and decision of the
arbitrators shall be conclusive and binding upon the JV
Parties and judgment upon the award may be entered in
any court of competent jurisdiction. Partner and
McDonald‘s waive any right to contest the validity or
enforceability of such award. The JV Parties further
agree to be bound by the provisions of any applicable
limitation on the period of time in which claims must be
brought.
xxxx xxxx xxxx xxxx‖
15. Thereafter, on 29.06.1995, the respondent No.3 (Connaught Plaza
Restaurants Private Limited) was incorporated pursuant to the JVA to
operate McDonald‘s restaurants on a non-exclusive basis in the NCR of
Delhi. In the respondent No.3 company, MIPL held Rs 14.56 crores equity
share capital. In addition, MIPL also held preference share capital to the
extent of Rs 177.30 crores and also licensed the respondent No.3 to use the
McDonald‘s brand. In effect, MIPL held 92.95% of the total issued and
paid up share capital (ordinary + preference shares). VB also invested
Rs 14.56 crores towards the equity share capital, thereby both MIPL and
VB held 50% each of the ordinary shares of the respondent No.3 company. FAO (OS) 9/2015 Page 20 of 63
16. On 11.12.1998, a supplemental agreement, supplementary to the
JVA, was entered into by virtue of which the respondent No.2 (Bakshi
Holdings Private Limited) also became bound by the JVA as if it was an
original party.
17. On 17.07.2013, the agreement for appointment of VB as the
Managing Director of the respondent No.3 expired by afflux of time. On
06.08.2013, at a meeting of the Board of Directors of the respondent No.3,
VB was not re-elected as its Managing Director.
18. On 16.08.2013, the appellant issued a notice to VB and the
respondent No. 2, electing to exercise the option to purchase the shares of
the respondent No.3 company held by VB and the respondent No.2 and for
determination of the fair market value of such shares in terms of paragraph
33 read with paragraphs 32 and 26 of the JVA. The call option was
exercised on the purported ground that VB had ceased to be the Managing
Director of the respondent No.3 as the term of his office had expired on
17.07.2013 and he was not re-elected in the Board meeting held on
06.08.2013. It was the case of the appellant that it could exercise the said
call option because of the provision of paragraph 32(b) of the JVA which
stipulated that the appellant (MIPL) could opt to purchase all the sharesFAO (OS) 9/2015 Page 21 of 63
owned or controlled by VB if VB suffered the termination of his
relationship as a Managing Director of the respondent No. 3 company.
19. VB and the respondent No.2 filed a Company Petition, being CP
110/ND/2013 before the Company Law Board alleging oppression and
mismanagement against the appellant (MIPL) and sought reinstatement of
VB as the Managing Director of the respondent No. 3. On 16.09.2013, the
Company Law Board passed an order directing, inter alia, MIPL to
maintain status quo over the share holding, board pattern and right of call
option until the next date of hearing which was to be on 25.09.2013. This
status quo order was continued by the Company Law Board until further
orders by another order dated 04.10.2013 and is still in operation.
20. In the meanwhile, on 22.09.2013, MIPL filed an application (CA
No. 94/2013) in the said Company Petition under Section 45 of the said Act
seeking a reference of the respondent Nos. 1 and 2‘s claims to arbitration in
view of the arbitration agreement contained in the JVA.
21. On 28.11.2013, MIPL terminated the JVA by a notice of termination
in which it, inter alia, alleged that covenants contained in the JVA had been
broken by VB and that the good faith and mutual confidence between FAO (OS) 9/2015 Page 22 of 63
MIPL and VB had been irrevocably lost. It was also alleged that VB
through his express words and conduct had also repudiated the JVA. MIPL
also elected, in view of paragraph 37(a) of the JVA, to purchase all the
shares held by VB, directly or indirectly through the respondent No. 2, in
the respondent No. 3 company upon the termination of the JVA.
22. On the very next day, that is, on 29.11.2013, MIPL invoked the
arbitration agreement by its request for arbitration and instituted arbitration
proceedings in the London Court of International Arbitration. Shortly
thereafter, on 02.12.2013, MIPL filed a petition under Section 9 of the said
Act before this Court seeking interim reliefs in aid of the arbitration
proceedings. By an order dated 02.12.2013 passed in the said Section 9
application (OMP 1196/2013), the same was disposed of, but after
recording the following:-
―7. Both Mr. Kaul, learned counsel for Respondent No.1 and
Mr. Mukherjee; learned counsel for Respondent No.2 state on
instructions and, without prejudice to the contentions of the
Respondents in the CLB regarding the arbitrability of the
disputes, that status quo will be maintained as regards the
shareholding of Respondents 1 and 2 in CPRL, as well as in the
shareholding pattern of Respondent No.2, till such time, interim
directions/orders are issued in the arbitral proceedings, if any.FAO (OS) 9/2015 Page 23 of 63
8. The above statement of the Respondents is taken on
record and will bind them. However, it is clarified that this
order is without prejudice to the contentions of the Respondents
regarding the arbitrability of the disputes.‖
(underlining added)
23. On 02.12.2013 itself, MIPL filed an application (CA No. 153/2013)
before the Company Law Board bringing to its notice the subsequent events
as also the termination of the JVA and the factum of initiation of arbitration
proceedings and prayed for vacation of the status quo order. On
13.12.2013, VB and the respondent No. 2 filed an application (CA
No. 164/2014) before the Company Law Board, inter alia, challenging the
termination of the JVA and seeking stay of the arbitral proceedings on the
ground that the application under Section 45 was still pending. On
30.12.2013, the Company Law Board declined stay of arbitration by virtue
of a reasoned order.
24. On 30.12.2013 itself, VB and the respondent No.2 appointed their
nominee arbitrator in the arbitration proceedings, of course, without
prejudice to their jurisdictional objections. On 30.01.2014, MIPL withdrew
its application under Section 45 of the said Act (CA No. 94/2013) on the
ground that due to the termination of the JVA, the Company Petition itself FAO (OS) 9/2015 Page 24 of 63
became infructuous and seeking a reference of VB‘s and the respondent
No.2‘s claims in the Company Petition to arbitration would be an exercise
in futility. It may be pointed out at this juncture itself that although an
appeal against the order declining stay of arbitration dated 30.12.2013 had
been filed by VB and the respondent No. 2 before this Court, the same was
not pursued. According to VB and the respondent No. 2, the appeal was
not pursued because MIPL had withdrawn its application under Section 45
of the said Act.
25. On 29.03.2014, approximately four months after the arbitration
proceedings had commenced, VB and the respondent No. 2 filed the said
suit [CS(OS) 962/2014] before this Court. Along with the said suit, the
said IA 6207/2014 under Order 39 Rules 1 and 2 seeking ad interim stay of
the arbitration proceedings was also filed.
26. On 03.04.2014, VB and the respondent No. 2 deposited an amount of
GBP 30,000 with the London Court of International Arbitration by way of
an initial advance towards the expenses of the arbitration proceedings. On
30.04.2014, after hearing detailed submissions on IA 6207/2014, the
learned Single Judge reserved orders. On 18.07.2014, MIPL filed its
written statement in the suit without prejudice to its application seeking FAO (OS) 9/2015 Page 25 of 63
rejection of the plaint which it had filed on 14.04.2014 under Order 7 Rule
11 CPC. On 09.06.2014, MIPL filed its statement of case before the
London Court of International Arbitration setting out its separate and
distinct claims relating to the termination of the JVA. This was followed,
on 04.08.2014 by the statement of defence filed by VB and the respondent
No.2 in the said arbitration proceedings subject to its jurisdictional
objections.
27. On 29.10.2014, MIPL filed its statement of reply and response to the
jurisdictional objections taken by VB and the respondent No. 2 in the
arbitration proceedings and on 05.12.2014, VB and the respondent No. 2
filed their statement of rejoinder and reply to the response with regard to
the jurisdictional objections before the London Court of International
arbitration.
28. Thereafter, on 22.12.2014, the learned Single Judge delivered the
impugned judgment restraining MIPL from pursuing the arbitration
proceedings until the disposal of the suit or until the status quo order passed
by the Company Law Board was vacated. Being aggrieved by the
impugned judgment, the present appeal has been filed.FAO (OS) 9/2015 Page 26 of 63
Summary of facts:
From the above narration of facts, the following points emerge:-
1) The company petition pending before the Company Law Board is on
account of MIPL not re-electing VB as the Managing Director of the
respondent No.3 and, consequent thereupon, in MIPL exercising its
call option. This conduct on the part of MIPL has been challenged in
the Company Law Board by VB and respondent No.2 under sections
397 and 398 of the Companies Act, 1956 as amounting to oppression
and mismanagement. An order has been passed in those proceedings
whereby MIPL has been directed to maintain status quo with regard to
share holding, board pattern and the right of call option. That order
has been continued and is still operating;
2) When this company petition was filed, MIPL filed an application
under Section 45 of the said Act seeking a reference of the claims
raised by VB and respondent No.2 in the company petition to
arbitration. That application has subsequently been withdrawn on
30.01.2014;FAO (OS) 9/2015 Page 27 of 63
3) After the filing of the company petition, the JVA was terminated by
MIPL through a notice dated 28.11.2013 and MIPL also elected to
purchase all the shares of VB and respondent No.2 in respondent
No.3;
4) Immediately after the termination of the JVA, MIPL invoked the
arbitration clause in respect of their purported rights leading to and
flowing from the termination of the JVA. Shortly, thereafter, on
02.12.2013, MIPL filed a petition under Section 9 of the said Act,
which was disposed of by a learned single Judge of this court on
02.12.2013 after recording the statement made on behalf of VB and
Respondent No.2 that they shall maintain status quo with regard to
their share-holding in respondent No.3 till such time interim directions
/ orders are issued in the arbitral proceedings. This was, however,
without prejudice to the issue of arbitrability which had been raised by
VB and Respondent No.2 before the Arbitral Tribunal. The order
clearly records that the statement of the said respondents was taken on
record and that they would be bound by it. From this, it appears that
VB and respondent No.2 conceded that the question of arbitrability as
also the competence of the arbitral tribunal was to be decided by the FAO (OS) 9/2015 Page 28 of 63
arbitral tribunal itself and that the interim order passed by the learned
single Judge would continue to operate till other or further directions /
orders were issued in the arbitral proceedings.
5) VB and Respondent No.2 sought to challenge the termination of the
JVA in the pending company petition before the Company Law Board
and sought stay of the arbitral proceedings. This was declined by the
Company Law Board by a reasoned order. Apparently, an appeal was
filed against the order declining stay, but the same was not pursued by
VB and Respondent No.2 on the purported ground that since the
Section 45 application had been withdrawn by MIPL, there was no
occasion to take the appeal any further;
6) Thereafter, VB and Respondent No.2 participated in various steps
before the arbitral tribunal. Of course, without prejudice to their
objection to the competence of the arbitral tribunal and the issue of the
arbitrability which was to be decided by the arbitral tribunal itself;
7) After all this, VB and Respondent No.2 filed the suit [CS(OS)
962/2014] seeking an injunction of the arbitration proceedings. In the
application under Order 39 Rules 1 and 2 filed in the said suit, the
learned single Judge has restrained MIPL by the impugned judgment FAO (OS) 9/2015 Page 29 of 63
dated 22.12.2014 from pursuing the arbitration proceedings until the
disposal of the suit or until the status quo order passed by the
Company Law Board was vacated.
The Law:
29. In Naviera Amazonica Peruana S.A. v. Compania Internacional De
Seguros Del Peru: (1988) 1 Lloyd’s Rep 116 (CA), the Court of Appeal in
England observed as under:-
―All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant systems
of law: (1) the law governing the substantive contract; (2) the
law governing the agreement to arbitrate and the performance
of that agreement; (3) the law governing the conduct of the
arbitration. In the majority of cases all three will be the same.
But (1) will often be different from (2) and (3). And
occasionally, but rarely, (2) may also differ from (3).‖
30. Several decisions were cited with regard to the issue of grant of an
anti-arbitration injunction or an injunction order granted in a suit restraining
arbitration proceedings. The decision in V.O. Tractoroexport, Moscow v.
Tarapore & Company and Another: 1969 (3) SCC 562 was relied upon by
the learned counsel for the respondents. In that case, one of the questions
related to the jurisdiction of the courts in India to grant an injunction
restraining a party which, in that case, was a Moscow firm, to proceed with FAO (OS) 9/2015 Page 30 of 63
the conduct of an arbitration before a tribunal there. The High Court had
granted an interim injunction restraining the Russian firm from proceeding
with the arbitration at Moscow. The Supreme Court noted the rule as stated
in Halsbury‘s Laws of England, Volume 21 at page 407, with regard to
foreign proceedings. It noted that the court would restrain a person within
its jurisdiction from instituting or prosecuting suits in a foreign court
whenever the circumstances of the case make such an interposition
necessary or proper. Specifically, it was noted that the jurisdiction would
be exercised whenever there is vexation or oppression. The Supreme Court
observed and held as under:-
―27. If the venue of the arbitration proceedings had been in
India and if the provisions of the Arbitration Act of 1940, had
been applicable, the suit and the arbitration proceedings could
not have been allowed to go on simultaneously and either the
suit would have been stayed under Section 34 or if it was not
stayed, and the arbitrators were notified about the pendency of
the suit, they would have had to stay the arbitration proceedings
because under Section 35 such proceedings would become
invalid if there was identity between the subject-matter of the
reference and the suit. In the present case, when the suit is not
being stayed under Section 34 of the Act it would be contrary to
the principle underlying Section 35 not to grant an injunction
restraining the Russian Firm from proceeding with the
arbitration at Moscow. The principle essentially is that the
arbitrators should not proceed with the arbitration side by side
in rivalry or in competition as if it were a Civil Court.‖
(underlining added)FAO (OS) 9/2015 Page 31 of 63
31. It would be clear from the above extract that the observations of the
Supreme Court were in the context of the Arbitration Act, 1940 and,
particularly, with reference to Section 35 and the principles embodied in
Sections 34 and 35 of that Act. Sections 34 and 35 of the Arbitration Act,
1940 read as under:-
―34. Power to stay legal proceedings where there is an
arbitration agreement.– Where any party to an arbitration
agreement or any person claiming under him commences any
legal proceedings against any other party to the agreement or
any person claiming under him in respect of any matter agreed
to be referred, any party to such legal proceedings may, at any
time before filing a written statement or taking any other steps
in the proceedings, apply to the judicial authority before which
the proceedings are pending to stay the proceedings ; and if
satisfied that there is no sufficient reason why the matter should
not be referred in accordance with the arbitration agreement and
that the applicant was, at the time when the proceedings were
commenced, and still remains, ready and willing to do all things
necessary to the proper conduct of the arbitration, such
authority may make an order staying the proceedings.
35. Effect of legal proceedings on arbitration.– (1) No
reference nor award shall be rendered invalid by reason only of
the commencement of legal proceedings upon the subjectmatter
of the reference, but when legal proceedings upon the
whole of the subject-matter of the reference have been
commenced between all the parties to the reference and notice
thereof has been given to the arbitrators or umpire, all further
proceedings in a pending reference shall, unless a stay of
proceedings is granted under Sec. 34, be invalid.
(2) In this section the expression "parties to the reference"
includes any persons claiming under any of the parties and
litigating under the same title.‖FAO (OS) 9/2015 Page 32 of 63
32. Based on these two provisions, the Supreme Court was of the view
that a suit and an arbitration proceeding cannot go on simultaneously and
that either the suit would have to be stayed under Section 34 or, if it was
not so stayed by the court before which the suit is filed, the arbitrator, if
notified about the pendency of the suit, would have to stay the arbitration
proceedings because, otherwise under Section 35 of the 1940 Act, such
proceedings before the arbitrators would become invalid if there was
identity between the subject matter of the reference and the suit. The
Supreme Court clearly spelt out the applicable principle in terms of the
provisions of the 1940 Act to be that the arbitrator should not proceed with
the arbitration side by side in rivalry or in competition as if it were a civil
court. This pronouncement of the Supreme Court was based, as already
mentioned above, on the provisions of the 1940 Act and, in particular, the
interplay between the provisions of Sections 34 and 35 thereof. But, in the
present case, we are concerned with the Arbitration and Conciliation Act,
1996 and not the Arbitration Act, 1940, which stands repealed. Under the
1996 Act, whether Part I thereof or Part II is applicable, the focus seems to
have shifted towards directing the parties to arbitration rather than deciding
the same subject matter as a civil suit. This is clearly discernible from FAO (OS) 9/2015 Page 33 of 63
Section 8 of the 1996 Act as also Section 45 thereof. In both eventualities,
in an action which is brought before a court and which also happens to be
the subject of an arbitration agreement, on the request made by one of the
parties, the court is duty bound to refer the parties to arbitration. Unless, of
course, in a case where Section 45 of the 1996 Act applies, the arbitration
agreement is null and void, inoperative or incapable of being performed. It
is clear that the principles applicable under the 1940 Act and those under
the 1996 Act with regard to such references are entirely different.
33. Therefore, we are of the view that this decision would not be of any
help to the respondents in support of the impugned judgment whereby an
anti-arbitration injunction has been granted.
34. The decision in Oil and Natural Gas Commission v. Western
Company of North America: 1987 (1) SCC 496, which was also sought to
be pressed into service by the respondents, was, like the Tractoroexport
case (supra), a pre-1996 Act decision and, which followed Tractoroexport
(supra). Therefore, the decision in ONGC (supra) would also be of no
assistance to the respondents.FAO (OS) 9/2015 Page 34 of 63
35. The decision in Union of India v. Dabhol Power Company: [Suit
No.1268/2003, decided on 05.05.2004] is, in any event, not binding on us
because it is a decision of a learned single Judge of this court. In this case,
reliance was placed on Tractoroexport (supra) and ONGC (supra), which,
we have pointed out, would really not be of help in the backdrop of the
1996 Act. Furthermore, in the said decision, the learned single Judge
observed that Section 5 as well as Section 45 of the 1996 Act do not stand
in the way of this court while invoking inherent powers and that the
inherent jurisdiction can be exercised whenever there is vexation of
oppression. We do not agree with this proposition and that would be clear
from the discussion below.
36. A reference was also made to LMJ International Limited v.
Sleepwell Industries Co. Limited & Another: 2014 (1) Arb. LR 227
(Calcutta) (DB). The question in that case was with regard to the power
and jurisdiction of a civil court to restrain a party from making a reference
to an international commercial arbitration and to have the said dispute
resolved by such international arbitration. While discussing the said
question, a Division Bench of the Calcutta High Court referred to the
Supreme Court decision in Modi Entertainment Network and Another v. FAO (OS) 9/2015 Page 35 of 63
W.S.G. Cricket Pte. Ltd: 2003 (1) Arb. LR 533 (SC), which was
essentially a decision pertaining to anti-suit injunctions. The Supreme
Court, in Modi Entertainment Network (supra), laid down the following
principles governing an anti-suit injunction:-
―1. In exercising discretion to grant an anti-suit injunction
the court must be satisfied of the following aspects:-
(a) the defendant, against whom injunction is sought,
is amenable to the personal jurisdiction of the
court;
(b) if the injunction is declined the ends of justice will
be defeated and injustice will be perpetuated; and
(c) the principle of comity - respect for the court in
which the commencement or continuance of action
/ proceeding is sought to be restrained - must be
borne in mind;
2. In a case where more forums than one are available, the
Court in exercise of its discretion to grant anti-suit
injunction will examine as to which is the appropriate
forum (Forum conveniens) having regard to the
convenience of the parties and may grant anti-suit
injunction in regard to proceedings which are oppressive
or vexations or in a forum non-conveniens;
3. Where a jurisdiction of a Court is invoked on the basis of
jurisdiction clause in a contract, the recitals therein in
regard to exclusive or nonexclusive jurisdiction of the
court of choice of the parties are not determinative but are
relevant factors and when a question arises as to the
nature of jurisdiction agreed to between the parties the
court has to decide the same on a true interpretation of 
the contract on the facts and in the circumstances of each
case;
4. A court of natural jurisdiction will not normally grant
anti-suit injunction against a defendant before it where
parties have agreed to submit to the exclusive jurisdiction
of a court including a foreign court, a forum of their
choice in regard to the commencement or continuance of
proceedings in the court of choice, save in an exceptional
case for good and sufficient reasons, with a view to
prevent injustice in circumstances such as which permit a
contracting party to be relieved of the burden of the
contract; or since the date for the contract the
circumstances or subsequent events have made it
impossible for the party seeking injunction to prosecute
the case in the court of choice because the essence of the
jurisdiction of the court does not exist or because of a vis
major or force majeure and the like;
5. Where parties have agreed, under a non-exclusive
jurisdiction clause, to approach a neutral foreign forum
and be governed by the law applicable to it for the
resolution of their disputes arising under the contract,
ordinarily no anti-suit injunction will be granted in regard
to proceedings in such a forum conveniens and favoured
forum as it shall be presumed that the parties have
thought over their convenience and all other relevant
factors before submitting to non-exclusive jurisdiction of
the court of their choice which cannot be treated just an
alternative forum;
6. A party to the contract containing jurisdiction clause
cannot normally be prevented from approaching the court
of choice of the parties as it would amount to aiding
breach of the contract; yet when one of the parties to the
jurisdiction clause approaches the court of choice in
which exclusive or non-exclusive jurisdiction is created,
the proceedings in that court cannot per se be treated as FAO (OS) 9/2015 Page 37 of 63
vexatious or oppressive nor can the court be said to be
forum non-conveniens;
7. The burden of establishing that the forum of the choice is
a forum non-conveniens or the proceedings therein are
oppressive or vexatious would be on the party so
contending to aver and prove the same.‖
37. It is important to note that the present case pertains to an antiarbitration
injunction and the principles governing the present case cannot
be the same as one governing a case of an anti-suit injunction. This is so
because of the principles of autonomy of arbitration and the competencecompetence
(Kompetenz-kompetenz) principle. For the present, it is
necessary to note point numbers 6 and 7 in the extract from the Supreme
Court decision in Modi Entertainment Network (supra). It has been
observed that when one of the parties to a contract containing a jurisdiction
clause approaches the court of choice in which exclusive or non-exclusive
jurisdiction is created, the proceedings in that court cannot per se be treated
as vexatious or oppressive. Furthermore, the burden of establishing that the
proceedings in the forum of choice are oppressive or vexatious would be on
the party so contending to aver and prove the same.
38. The only principle on which the respondents‘ case is based is that the
arbitration proceedings at London would be vexatious or oppressive. But, FAO (OS) 9/2015 Page 38 of 63
as pointed out in Modi Entertainment Network (supra), merely because an
arbitration is proceeded with at the place of choice (London), would not,
per se amount to a vexatious or oppressive proceeding. The onus would be
on the respondents to establish that the arbitration proceedings are
oppressive or vexatious. We may also note that the learned counsel for the
respondents had categorically stated that it is not the place of arbitration or
the expenses which would be incurred for the conduct of arbitration
proceedings at London, which is the objection on their part. The objection
is to the forum of arbitration itself being vexatious. In other words, the
grievance of the respondents is not with regard to the place of arbitration,
but to the arbitration proceedings itself !
39. Coming back to the decision of the Calcutta High Court in LMJ
International Limited (supra), we find that on the facts of the case, the
court decided that there was no demonstrable injustice or harassment
caused by the reason of initiation of arbitral proceedings and, therefore, the
plaintiff therein was not entitled to an order of injunction. A reference in
that case was also made to a decision of the Court of Appeal in England in
the case of Albon (T/A NA Carriage Co.) v. Naza Motor Training SDN FAO (OS) 9/2015 Page 39 of 63
BHD: 2008 (1) Lloyds Law Reports 1, to which we shall specifically refer
later in this judgment.
40. Another decision on which reliance was placed by the learned
counsel for the respondents was that of a Division Bench of the Madras
High Court in PPN Power Generating Company Limited v. PPN
(Mauritius) Co. and Others: 2006 (129) Comp Cas 849 (Mad). One of
the questions which arose for consideration before the Division Bench of
the Madras High Court was whether the Company Law Board had inherent
powers to grant an anti-suit injunction and, if so, whether such power had
not been properly exercised in the case at hand. That case was entirely on
the principles of an anti-suit injunction and did not have the trappings of an
anti-arbitration injunction. The said case was decided on the basis of
Regulation 44 and Section 402(g) of the Companies Act, 1956 with regard
to the inherent powers of the Company Law Board. References were made
to the Supreme Court decision in Modi Entertainment Network (supra)
and Tractoroexport (supra), which we have already discussed above. In
the facts of the case, the Madras High Court did not find it fit to issue an
injunction as the proceedings complained were neither vexatious nor FAO (OS) 9/2015 Page 40 of 63
oppressive. In any event, this decision is not of any help to the respondents
as it does not deal with the case of an anti-arbitration injunction.
41. In another decision referred to by the respondents, which was of a
learned single Judge of the High Court in Calcutta in the case of the Board
of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS &
Others: G.A. No.1997/2014 in CS No.220/2014, the circumstances under
which an anti-arbitration injunction could be granted were summarised as
under:-
―(i) If an issue is raised whether there is any valid arbitration
agreement between the parties and the Court is of the
view that no agreement exists between the parties.
(ii) If the arbitration agreement is null and void, inoperative
or incapable of being performed.
(iii) Continuation of foreign arbitration proceeding might be
oppressive or vexatious or unconscionable.‖
42. It would be noticed straightaway that the points (i) and (ii) extracted
above are essentially taken from Section 45 of the 1996 Act. The only
addition being point No. (iii) where it was submitted that an anti-arbitration
injunction could be granted if the continuation of ‗foreign‘ arbitration
proceedings were to be oppressive, vexatious or unconscionable.FAO (OS) 9/2015 Page 41 of 63
43. In Essel Sports Pvt. Ltd. v. Board of Control for Cricket in India &
Others: ILR (2011) V Delhi 585, the plaintiff (BCCI) had prayed for a
perpetual injunction against ESPL from initiating any action against BCCI
in any other judicial forum in respect of the allegations, subject matter and
reliefs contained and covered in an earlier suit which was pending before
the Delhi High Court. The Division Bench observed, after examining the
claims and contentions of the parties, that the causes of action in the two
proceedings in India and in England were substantially and materially the
same. Reliance was thereafter placed on Modi Entertainment Network
(supra) to observe that a subsequent suit, if held to be vexatious and
oppressive could be injuncted by the Indian courts provided other necessary
ingredients were also satisfied. It was observed that if a party endeavoured
to invoke the jurisdiction of a foreign court to a cause of action already
being prosecuted in the national forum, it would amount to vexatious
litigation. It also sounded a note of caution that the courts have to be
circumspect in exercising their power to issue an anti-suit injunction. But,
it must do so where the ends of justice would otherwise be defeated. In
conclusion, the Division Bench in ESSEL Sports Pvt Ltd (supra) held that
BCCI had been able to establish the vexatious and oppressive nature of the
U.K. action which ESPL was pursuing and, therefore, passed an interim FAO (OS) 9/2015 Page 42 of 63
injunction against ESPL from proceeding with the U.K. action to the extent
the U.K. action contained allegations against BCCI or that the adjudication
of that action overlapped the pending suit in India. It goes without saying
that the said decision of the Division Bench in ESSL Sports Pvt Ltd (supra)
was also a case of an anti-suit injunction and was not concerned with an
anti-arbitration injunction. It applied the principles for an anti-suit
injunction laid down in Modi Entertainment Network (supra).
44. We had noted, while discussing LMJ International Limited (supra),
that the decision of the Court of Appeal in England in the case of Albon v.
Naza Motor Training SDN BHD (supra) would be specifically referred to.
That was a case where arbitration proceedings had been injuncted. There
was an arbitration clause in a written document called the Joint Venture
Agreement. A dispute had been raised with regard to the JVA being a
forgery. The court below had granted an injunction mainly because there
would be limited scope for the arbitrators to proceed with the arbitration till
the authenticity of the JVA had been decided and it would be oppressive for
Mr Albon who had limited funds to be required to fight a battle on two
fronts and it would not be long before the question of authenticity would be
decided by the court. It was also noted in paragraph 2 of the said decision FAO (OS) 9/2015 Page 43 of 63
that it had been agreed that the question of authenticity was to be
determined finally by the English Courts. The Court of Appeal noted, inter
alia, that there was a good arguable case that not only Mr Albon‘s signature
on the JVA had been forged but that the forgery was brought into existence
after Mr Albon issued his proceedings and in order to stop the English
proceedings in their tracks. It was further noted that the English Court was
to be the final Judge on the question of authenticity of the JVA and that as
such the question of authenticity could not be determined by the
Arbitrators. It is in these circumstances that it was observed that the
immediate and co-extensive continuance of arbitration proceedings was
unconscionable (in the sense of being oppressive) for very much the same
reason which the court below gave. It was considered to be a needless
expense and that it would be difficult to avoid over-proliferation of
pleadings and disclosure, if the parties did not know whether it would be
ultimately determined that the JVA was genuine or not. Paras 16 and 17 of
the said decision of the Court of Appeal are relevant. They are extracted
below:-
―16. That leaves for consideration the argument relating to the
autonomy of the arbitration tribunal. It is said that the caution
exercised by the court relating to anti-suit injunctions should be
increased or even re-doubled in the case of an anti-arbitration
injunction. It is further said that the judge is effectively case FAO (OS) 9/2015 Page 44 of 63
managing the arbitration and that it should be for the arbitrators,
not the English Court, to decide whether the arbitration should
proceed pending resolution of the genuineness of the JVA.
17. In the ordinary case there would be much to be said for
this argument. But this is not an ordinary case because of the
features set out in paragraph 13 above. It is properly arguable
that the agreement to arbitrate has been forged in order to defeat
proceedings properly brought in England and, in addition to
this, it is at present agreed that the English Court will determine
that question. The autonomy of the arbitrators has thus already
been undermined because they are, in any event, precluded for
the present from determining that question. In these
circumstances it is not right to say that the judge is attempting
to case-manage the arbitration. It would be more accurate to
say that he is case-managing the application before him which
will determine in England the question whether the JHVA is
authentic or not.‖
(underlining added)
45. It is thus clear that the anti-arbitration injunction was granted in the
extreme circumstances as referred to above. The existence of the
arbitration clause was in peril because of the ―properly arguable‖ case that
the agreement to arbitrate had been forged in order to defeat the
proceedings properly brought in England. The main ground for the grant of
an anti-arbitration injunction was that the arbitration agreement itself was
suspect and was introduced only to defeat the proceedings which had
already been properly brought in England. The case at hand is entirely
different.FAO (OS) 9/2015 Page 45 of 63
46. The decision in Excalibur Venture LLC v. Texas Keystone Inc &
Others: 2011 EWHC 1624 (Comm) was also referred to by the learned
counsel for the respondents as another instance of an anti-arbitration
injunction. One of the issues, which arose for consideration in Excalibur
(supra) was whether the court had jurisdiction to grant an injunction
restraining Excalibur (supra) from proceeding with the arbitration
proceedings against the Gulf defendants. It was observed in paragraph 54
of the said decision that English Courts clearly had jurisdiction under
Section 37 of the Senior Courts Act, 1981 (more or less equivalent to
Section 151 of the Code of Civil Procedure 1908) to grant injunctions
restraining arbitrations where the seat of arbitration is in a foreign
jurisdiction, although that power is only to be exercised in exceptional
cases and with caution. In paragraph 55, it was noted that an English court
would be particularly slow to restrain arbitration proceedings where there is
an agreement for the arbitration to have its seat in a foreign jurisdiction and
the parties have ―unquestionably agreed‖ to the foreign arbitration clause.
That is because given the priority to be accorded to the parties choice of
arbitration and the limited nature of the court‘s power to intervene under
the provisions of the Arbitration Act 1996 (the English Act) the court FAO (OS) 9/2015 Page 46 of 63
should not simply apply the same approach as for the grant of a normal
anti-suit injunction. It was also observed that questions relating to
arbitrability or jurisdiction, or to staying the arbitration, may in appropriate
circumstances better be left to the foreign courts having supervisory
jurisdiction over the arbitration.
47. Paragraphs 56 and 57 of the said decision are relevant and they are
set out hereinbelow:-
―56. Nonetheless, in exceptional cases, for example where the
continuation of the foreign arbitration proceedings may be
oppressive or unconscionable so far as the applicant is
concerned, the court may exercise its power under s37 to grant
such an injunction. Those circumstances include the situation
where the very issue is whether or not the parties consented to a
foreign arbitration, or where, for example, there is an allegation
that the arbitration agreement is a forgery. See also: Dicey,
Morris & Collins: The Conflict of Laws, 14th Edition, 4th
Cumulative Supplement at 16–0-88.
57. Moreover, it is clear from the decision of the Supreme
Court in Dallah Real Estate and Tourism v Ministry of
Religious Affairs of the Government of Pakistan [2010] UKSC
46 that, despite the doctrine of “Kompetenz-kompetenz” or
―competence-competence‖ (i.e. the ability of an arbitral tribunal
to determine its own jurisdiction even where challenged), the
English court retains the jurisdiction to determine the issue as to
whether there was ever an agreement to arbitrate; see ibid per
Lord Mance at paragraphs 26 — 30; Lord Collins at paragraphs
84, 93-98, 105–106. The question is whether it is appropriate to
do so in the particular circumstances of the case.‖
(underlining added )FAO (OS) 9/2015 Page 47 of 63
48. It is pertinent to note that this case, that is, Excalibur (supra) stresses
upon the difference of approach between a normal anti-suit injunction and
an injunction restraining arbitration proceedings. We are also in agreement
with this view. There must be a distinction between an anti-suit injunction
and an anti-arbitration injunction. The principles which apply to an antisuit
injunction will not necessarily apply to an anti-arbitration injunction. It
is further important to note that the exceptional cases where arbitrations
could be injuncted upon holding that the arbitration proceedings would be
oppressive or unconscionable were regarded as those circumstances which
would include the situation where the very issue was whether or not the
parties had consented to the arbitration or where there was an allegation
that the arbitration agreement was a forgery just as in the case of Albon
(supra). It is clear that none of these exceptional circumstances arise in the
present case.
49. It is also important to note that although the competence-competence
principle was applicable and the arbitral tribunal had the requisite
competence to determine its own jurisdiction, the courts in England
retained the jurisdiction to determine the issue as to whether there was ever
an agreement to arbitrate. In our view, the same principle would apply FAO (OS) 9/2015 Page 48 of 63
insofar as the courts in India are concerned. The courts in India would
certainly have the jurisdiction to determine the question as to whether an
arbitration agreement was void or a nullity. But, that is not the case here.
Jurisdiction of the Civil Court
50. It was argued before the learned single Judge that the civil court does
not have any jurisdiction to entertain a suit, the subject matter of which is
also covered by an arbitration agreement. References were made to
Sections 9 and 20 of the Code of Civil Procedure, 1908 as also to Sections
5 and 45 of the 1996 Act. On the one hand, it was argued on behalf of the
appellant (defendant) that because of the provisions of Sections 5 and 45 of
the 1996 Act, a civil court did not have jurisdiction to intervene in a matter
which was the subject of arbitration and, therefore, the suit was not
maintainable. On the other hand, it was argued on behalf of the respondent
(plaintiff) that there was no absolute bar to a suit being filed before a civil
court to seek an injunction against an arbitration proceeding. In this
context, there was a debate with regard to the impact of the decisions of the
Supreme Court in the case of Chatterjee Petrochem Coompany v. Haldia
Petrochemicals Limited: 2014 (14) SCC 574 and World Sport Group
(Mauritious) Limited v. MSM Satellite (Singapore) Pte. Ltd: 2014 (11)FAO (OS) 9/2015 Page 49 of 63
SCC 639. The appellant had relied on Chatterjee Petrochem (supra) to
submit that Section 5 of the 1996 Act, which bars judicial intervention by
judicial authorities in respect of arbitration agreements would also be
applicable to international agreements. In Chatterjee Petrochem (supra),
reliance was, in turn, placed on Venture Global Engineering v. Satyam
Computer Services Limited and Another: 2008 (4) SCC 190 (this decision
has, of course, been overruled in Bharat Aluminium Company and Others
v. Kaiser Aluminium Technical Service, Inc. & Others: 2012 (9) SCC 552
but only with respect to arbitration agreements entered into on or after
06.09.2012). In Venture Global (supra), which would apply to the present
case inasmuch as the agreement was prior to 06.09.2012, it was held that
the scheme of the Act is such that the general provisions of Part I, including
Section 5, will apply to all chapters or parts of the Act. Reliance was
placed on World Sport Group (supra) to contend that a suit of the present
nature would be maintainable in certain circumstances, such as where the
arbitration agreement was null and void, inoperative or incapable of being
performed. The learned single Judge, in our view, fell into an unnecessary
tangle in coming to the conclusion that the decisions in Chatterjee
Petrochem (supra) and World Sport Group (supra) were diametrically
opposed to each other. We do not think that that is the correct view. In any FAO (OS) 9/2015 Page 50 of 63
event, the decision in World Sport Group (supra), which was also relied
upon by the appellant, does not, in any manner, hamper the case of the
appellant or advance the case of the respondents. The decision in World
Sport Group (supra) was clearly dealing with an agreement for arbitration
to which the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards of 1958 applied. Consequently, sections 44 and
45 of the 1996 Act were referred to and relied upon. The said provisions
read as under:-
―44. Definition.–In this Chapter, unless the context otherwise
requires, "foreign award" means an arbitral award on
differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under the
law in force in India, made on or after the 11th day of October,
1960—
(a) in pursuance of an agreement in writing for arbitration to
which the Convention set forth in the First Schedule
applies, and
(b) in one of such territories as the Central Government,
being satisfied that reciprocal provisions have been made
may, by notification in the Official Gazette, declare to be
territories to which the said Convention applies.
45. Power of judicial authority to refer parties to
arbitration.–Notwithstanding anything contained in Part I or in
the Code of Civil Procedure, 1908 (5 of 1908), a judicial
authority, when seized of an action in a matter in respect of
which the parties have made an agreement referred to in section
44, shall, at the request of one of the parties or any person
claiming through or under him, refer the parties to arbitration, 
unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.‖
51. The Supreme Court in World Sport Group (supra) observed that
Section 45 made it clear that notwithstanding anything contained in Part I
or in the Code of Civil Procedure, a judicial authority, when seized of an
action in a matter in respect of which the parties have made an agreement
referred to in Section 44, shall, at the request of one of the parties or any
person claiming through or under him, refer the parties to arbitration, unless
it finds that the said agreement is null and void, inoperative or incapable of
being performed. It is evident from the said decision that even if, under
Section 9 CPC read with Section 20 CPC, this court had jurisdiction to
entertain a suit, once a request is made by one of the parties or any person
claiming through or under him to refer the parties to arbitration, this court
would be obliged to refer the parties to arbitration unless it found that the
agreement was null and void, inoperative or incapable of being performed.
Importantly, the Supreme Court also noted that even if no formal
application to refer the parties to arbitration is made and an objection is
filed to the effect that the arbitration has already been invoked and
arbitration proceedings have commenced, that would itself amount to a
request made by a party to refer the parties to arbitration which had already
commenced. It was clarified that no formal application was necessary for
invoking the provisions of Section 45 of the 1996 Act. The Supreme Court
decision in World Sport Group (supra) also noted that the provisions of
Article II of the New York Convention and, in particular, paragraph 3
thereof, was mirrored in Section 45 of the 1996 Act. The Supreme Court
referred to various authorities in order to ascertain the meaning of the
expressions ‗null and void‘, ‗inoperative‘ and ‗incapable of being
performed‘. The relevant paragraphs of the said decision are set out
hereinbelow:-
―33. Mr. Gopal Subramanium's contention, however, is also
that the arbitration agreement was inoperative or incapable of
being performed as allegations of fraud could be enquired into
by the court and not by the arbitrator. The authorities on the
meaning of the words "inoperative or incapable of being
performed" do not support this contention of Mr. Subramanium.
The words "inoperative or incapable of being performed" in
Section 45 of the Act have been taken from Article II (3) of the
New York Convention as set out in para 22 of this judgment.
Redfern and Hunter on International Arbitration (5th Ed.)
published by the Oxford University Press has explained the
meaning of these words "inoperative or incapable of being
performed" used in the New York Convention at page 148,
thus:
―At first sight it is difficult to see a distinction
between the terms 'inoperative' and 'incapable of
being performed'. However, an arbitration clause is
inoperative where it has ceased to have effect as a
result, for example, of a failure by the parties to
comply with a time-limit, or where the parties have
by their conduct impliedly revoked the arbitration
agreement. By contrast, the expression 'incapable of
being performed' appears to refer to more practical
aspects of the prospective arbitration proceedings. It
applies, for example, if for some reason it is
impossible to establish the arbitral tribunal.‖
34. Albert Jan Van Den Berg in an article titled "The New
York Convention, 1958—An Overview" published in the
website of ICCA [www.arbitrationicca.org/media/0/12125884227980/new_york_convention_of-
1958_overview.pdf], referring to Article II(3) of the New York
Convention, states:
―The words "null and void" may be
interpreted as referring to those cases where the
arbitration agreement is affected by some invalidity
right from the beginning, such as lack of consent
due to misrepresentation, duress, fraud or undue
influence.
The word "inoperative" can be said to cover
those cases where the arbitration agreement has
ceased to have effect, such as revocation by the
parties.
The words "incapable of being performed"
would seem to apply to those cases where the
arbitration cannot be effectively set into motion.
This may happen where the arbitration clause is too
vaguely worded, or other terms of the contract
contradict the parties' intention to arbitrate, as in the
case of the so-called co-equal forum selection
clauses. Even in these cases, the courts interpret the
contract provisions in favour of arbitration.‖
(emphasis in original)
35. The book 'Recognition and Conferment of Foreign
Arbitral Awards: A Global Commentary on the New York 
Convention' by Kronke, Nacimiento, et al.(ed.) (2010) at page
82 says:-
―Most authorities hold that the same schools of
thought and approaches regarding the term null and void
also apply to the terms inoperative and incapable of
being performed. Consequently, the majority of
authorities do not interpret these terms uniformly,
resulting in an unfortunate lack of uniformity. With that
caveat, we shall give an overview of typical examples
where arbitration agreements were held to be (or not to
be) inoperative or incapable of being performed.
The terms inoperative refers to cases where the
arbitration agreement has ceased to have effect by the
time the court is asked to refer the parties to arbitration.
For example, the arbitration agreement ceases to have
effect if there has already been an arbitral award or a
court decision with res judicata effect concerning the
same subject matter and parties. However, the mere
existence of multiple proceedings is not sufficient to
render the arbitration agreement inoperative.
Additionally, the arbitration agreement can cease to have
effect if the time limit for initiating the arbitration or
rendering the award has expired, provided that it was the
parties' intent no longer to be bound by the arbitration
agreement due to the expiration of this time-limit.
Finally, several authorities have held that the
arbitration agreement ceases to have effect if the parties
waive arbitration. There are many possible ways of
waiving a right to arbitrate. Most commonly, a party will
waive the right to arbitrate if, in a court proceeding, it
fails to properly invoke the arbitration agreement or if it
actively pursues claims covered by the arbitration
agreement.‖ (emphasis in original)
36. Thus, the arbitration agreement does not become
"inoperative or incapable of being performed" where allegations FAO (OS) 9/2015 Page 55 of 63
of fraud have to be inquired into and the court cannot refuse to
refer the parties to arbitration as provided in Section 45 of the
Act on the ground that allegations of fraud have been made by
the party which can only be inquired into by the court and not
by the arbitrator. N. Radhakrishnan v. Maestro Engineers: 2010
(1) SCC 72 and Abdul Kadir Shamsuddin Bubere v. Madhav
Prabhakar Oak: AIR 1962 SC 406 were decisions rendered in
the context of domestic arbitration and not in the context of
arbitrations under the New York Convention to which Section
45 of the Act applies. In the case of such arbitrations covered
by the New York Convention, the Court can decline to make a
reference of a dispute covered by the arbitration agreement only
if it comes to the conclusion that the arbitration agreement is
null and void, inoperative or incapable of being performed, and
not on the ground that allegations of fraud or misrepresentation
have to be inquired into while deciding the disputes between the
parties.‖
52. One of the meanings of the expression ‗null and void‘ which was
considered by the Supreme Court, was where the arbitration agreement is
affected by some invalidity right from the beginning, such as lack of
consent due to misrepresentation, duress, fraud or undue influence. This is
clearly not the case in the present proceedings. Insofar as the word
‗inoperative‘ is concerned, it is said to cover those cases where the
arbitration agreement has ceased to have effect, such as the case of
revocation by the parties. Another instance of the agreement having
become inoperative is where it ceases to have effect because an arbitral
award has already been made or there is a court decision with res judicata 
effect concerning the same subject matter and parties. Importantly, it has
been expressed that the mere existence of multiple proceedings is not
sufficient to render the arbitration agreement inoperative. Thus, the mere
existence of the proceedings before the Company Law Board would not
amount to rendering the arbitration agreement as being inoperative.
Furthermore, the Supreme Court observed that an arbitration agreement
would not become inoperative or incapable of being performed where
allegations of fraud have to be enquired into and the court cannot refuse to
refer the parties to arbitration as provided in Section 45 of the 1996 Act on
the ground that the allegations of fraud have been made by the parties
which can only be enquired into by the court and not by the arbitrator.
Clearly, the Supreme Court held that in the case of arbitrations covered by
the New York Convention, the court could decline to make a reference of a
dispute covered by the arbitration agreement only if it came to the
conclusion that the arbitration agreement was null and void, inoperative or
incapable of being performed and not on the ground that the allegations of
fraud or misrepresentation had to be enquired into while deciding the
dispute between the parties. It is, therefore, clear from the observations of
the Supreme Court in World Sport Group (supra) that the rule is for a
reference to arbitration under Section 45 unless the court comes to the clear
conclusion that the arbitration agreement is null and void, inoperative or
incapable of being performed. This principle would also apply in the case
of a party seeking an anti-arbitration injunction in respect of an agreement
under the New York Convention. In other words, unless and until a party
seeking an anti-arbitration injunction can demonstrably show that the
arbitration agreement is null and void, inoperative or incapable of being
performed, no such relief can be granted in the suit or as an interim measure
therein.
53. 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.
Waiver of the arbitration clause
54. 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. We do not see how such a conclusion can be
arrived at, particularly, in view of the explanation given by the appellant
that the said application had been withdrawn because, in the meanwhile,
after the filing of the said application, the JVA had been terminated and
arbitration proceedings had been initiated and, therefore, in the opinion of
the appellant, the said application, which was one seeking a reference to
arbitration, had become infructuous. 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.
55. The learned single Judge has also committed an error in observing
that the application filed under Section 9 of the 1996 Act by the appellant
was also not pressed. This is clearly not correct. We have already referred
to the order passed on the Section 9 application (OMP 1196/2013) by a
learned single Judge of this court on 02.12.2013 where, clearly, the learned
counsel for VB and Respondent No.2 had stated, on instructions, though
without prejudice to their contentions in the Company Law Board regarding
the arbitrability of the disputes, that status quo would be maintained as
regards the share-holding of the said respondents in Respondent No.3 as
well as in the share-holding pattern of respondent No.2, till such time,
interim directions / orders are issued in the arbitral proceedings, if any. The
order passed by the learned single Judge specifically indicated that the said
statement of the respondents was taken on record and would bind them.
Thus, as an interim measure, the appellant had succeeded in getting a
limited protection in the said Section 9 application. Therefore, the finding
of the learned single Judge that the application was not pressed is contrary
to the record. The observations of the learned single Judge contained in 
paragraph 68 to the effect that because of the withdrawal of the application
under Section 45 and because of not taking the Section 9 application to its
logical conclusion, the appellant had indicated its intention that it was
submitting to the jurisdiction of the Company Law Board and of the Indian
courts and had abandoned the arbitration clause, is clearly erroneous.
Conclusion
56. We may point out that the question as to whether Part I or Part II of
the 1996 Act would apply has not been determined by us. 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 counterarguments
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.
57. Our focus is on the question whether an anti-arbitration injunction
could at all have been granted in the facts and circumstances of the present
case. We have already explained as to how, if the arbitration agreement
was taken to be one which was covered under Section 44 of the 1996 Act,
the arbitration proceedings could not be injuncted because the same was
neither null or void, inoperative or incapable or being performed. Even if
we assume that Part I of the 1996 Act was to apply, then also, because of
the provisions of Section 8, the judicial authority would be obliged to refer
the parties to arbitration. We may point out that Section 8 and, in
particular, sub-section (1) thereof has been recently amended with
retrospective effect from 23.10.2015 to read as under:-
―8. Power to refer parties to arbitration where there is an
arbitration agreement.– (1) A judicial authority, before which
an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party to the arbitration
agreement or any person claiming through or under him, so
applies not later than the date of submitting his first statement 
on the substance of the dispute, then, notwithstanding any
judgment, decree or order of the Supreme Court or any Court,
refer the parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
xxxx xxxx xxxx xxxx xxxx‖
58. Thus, there is now a mandate to refer the parties to arbitration unless
the court finds that prima faice no valid arbitration agreement exists. This
is clearly not the case here. Therefore, in any eventuality, in the facts and
circumstances of the case and applying the principles, as indicated above,
the learned single Judge could not have restrained the appellant from
pursuing the arbitration proceedings before the arbitral tribunal.
59. There is a very interesting observation in paragraph 7.01 of Redfern
and Hunter on International Arbitration: Sixth Edition: Oxford University
Press. The observation is as follows:-
―The relationship between national courts and arbitral tribunals
swings between forced cohabitation and true partnership.
Arbitration is dependent on the underlying support of the courts,
which alone have the power to rescue the system when one
party seeks to sabotage it. …‖
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. We
have already indicated that the circumstances of invalidity of the arbitration
agreement or it being inoperative or incapable of being performed do not
exist in this case.
60. Consequently, the impugned judgment is set aside.
BADAR DURREZ AHMED, J
July 21, 2016 SANJEEV SACHDEVA, J

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