Emergency Arbitration or Court for Interim Relief? Answer through the Indian Prism

Ramit Singh and Sakshi Lulla *

Abstract

This article throws light on the issue of whether a party shall lose its right to seek interim relief under section 9 of the Arbitration and Conciliation Act, 1996 if it has already sought the same interim relief before the emergency arbitration. This article attempts to critically analyse the recent judgment of Ashwin Minda along with the Raffle judgment, both decided by the Delhi High Court, to examine the issue of emergency arbitration and interim relief under section 9 of the Arbitration Act. Finally, the article highlights that Indian laws are still silent on the enforceability of the emergency arbitrator’s award, leaving the parties with no option, but to resort to interim relief by the court

Background of the Case

In the case of Mr. Ashwani Minda & Anr vs U-Shin Ltd & Anr, (‘Ashwin’), the parties entered into a Joint Venture Agreement (JVA) and a License and Technical Assistance Agreement (LTAA) on 30 May 1986 and 17 February 2014 respectively.

On 7 November 2018, Respondents announced the commencement of a tender offer of shares for a mutual business integration between themselves. This act breached clauses that prohibited the Respondents from directly or indirectly transferring obligations and benefits under the JVA and LTAA, to any third party. On 16 December 2019, the Respondents informed the Applicants that due to the obligations arising out of an Overseas Transaction they were obliged to give an open offer under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The Applicants were of the view that an open offer would lead to a situation where the Respondents would collectively hold majority voting share capital, thereby, changing the equation of the majority shareholding and Control-cum-Management as per the JVA.

The Applicants on March 13, 2020 invoked Emergency Arbitration under the Japan Commercial Arbitration Association Rules (‘JCAA Rules’). On 19 March 2020, Emergency Arbitral Tribunal was constituted.

On 2 April 2020, the Emergency Arbitrator passed a detailed order rejecting the relief sought by the Applicants as an emergency measure. The Applicants thereafter approached the Delhi HC under section 9(1) of The Arbitration and Conciliation Act, 1996 (‘the Act’) in order to substantively seek the same relief as previously sought before the Emergency Arbitrator.

Arguments by the Parties and The Court’s Decision

The argument by the Respondents was that the parties by opting for JCAA Rules had ruled out the applicability section 9 of the Act, and thus the applicant cannot approach the court to seek an interim relief. Further, it was contended that the petition for interim relief is barred by Section 9(3) of the Act, and an Arbitral Tribunal had been constituted already at the instance of the Applicants, whose mandate continues till date. Thus, unless the court discovers that circumstances exist that may render tribunal-ordered interim relief inefficacious, the petition is not maintainable. Even if the Emergency Arbitrator appointed under the JCAA Rules did not constitute an “arbitral tribunal” under section 9 of the Act, the application for court interim relief would be barred by the Doctrine of Election.

The Applicants, on the other hand, argued that the Doctrine of Election would not be applicable in the current case as the relief sought is an interim relief of protection while the Doctrine is applicable in cases where there is an availability of alternative rights, concerning the merits or substantive rights. They further argued that the power of the court to grant an interim relief under Section 9 of the Act is not limited solely to the parties to the arbitration agreement. A relief of interim measure can be sought even against a third party, and the present cause of action arose on account of takeover by Respondents, which triggered the open offer.

The court opined that by choosing JCAA rules, the parties impliedly excluded Part I of the Act. In particular, according Article 77 JCAA Rules, the power to grant interim relief prior to the constitution of the arbitral tribunal lies exclusively with the Emergency Arbitrator. Since the Emergency Arbitrator had already rendered an order, the parties weren’t allowed to approach the court for an interim relief because as this would provide parties with an option of cherry picking forum in order to get a relief in its favour. Pursuant to the Doctrine of Election, the applicant itself chose Emergency Arbitration and therefore, cannot seek an interim relief under section 9 of the Act.  

In Raffles Design Int’l India Pvt. Ltd. v. Educomp Professional Education Ltd. & Ors., (‘Raffles’) the Delhi HC held that courts need to decide the question of granting interim measures under section 9 of the Act, independent of the emergency arbitrator’s order. However, the Ashwin case differs from the above mentioned judgement as the parties in Raffles did not agree to exclude section 9 of the act. Further, the rules governing the Arbitration were Singapore International Arbitration Centre (SIAC Rules) which did not prohibit approaching the court.

Furthermore, if the court grants an interim order over and above the order granted by the Emergency Arbitrator, then it would seem as if the court acted as a court of appeal, which it isn’t while hearing a matter under section 9 of the Act.

Additionally, according to Article 77(1) read with Article 74 of the JCAA Rules, the Emergency Arbitrator has the power to modify, suspend and terminate emergency measures. So, if the Applicants have any grievance, they can approach the Emergency Arbitrator but, having lost before the Arbitrator, it is not open to them to pursue the same relief from the court under section 9 of the Act. Thus, the court held that the petition is not maintainable and dismissed it.

Analysis and Concluding Remarks

With the Ashwin judgment, the Delhi HC explores a broader question of whether a party, by choosing institutional arbitration rules, could exclude the mechanism provided under section 9 of the Act. After this judgment, India’s position on granting interim relief by courts when parties have the option of an emergency arbitrator, is now comparable to the position in England. The English court in Gerald Metals S.A. v Timis & Orsheld that interim relief under section 44 of the English Arbitration Act shall be granted only when the parties are unable to seek emergency relief from the London Court of International Arbitration (LCIA) Court under Articles 9A and 9B of LCIA Rules. However, the Delhi HC in Raffles held that courts could must apply its mind and grant interim relief in cases where it is warranted, even if a party has obtained a similar order from the emergency arbitrator.

On the one hand, Delhi HC in Ashwin decided that parties shall not be granted interim relief by the courts under section 9 of the Act, if the parties have already sought the same relief before the emergency arbitrator. On the other hand, Delhi HC in Raffles decided that parties can approach courts seeking interim relief under section 9 of the Act, even after an interim relief has been granted by the emergency arbitration. Due to the difference in the decision of these judgments ,the position as to whether a court can grant interim relief to a party who has first tried its luck before an emergency arbitrator is unclear and needs consideration of a larger bench of the High Court or the Indian Supreme Court. 

In recent times, the concept of emergency arbitrations has been introduced in several arbitration institutions such as the International Chamber of Commerce, SIAC, LCIA and Hong Kong International Arbitration Centre. It was brought to increase the options for parties seeking interim/emergency relief. However, the Ashwin judgement by considering the doctrine of election holds a view that a party shall not have recourse under section 9 of the Act after it has already sought the same remedy before an emergency arbitrator. Accordingly, a careful choice has to be made by a party with regards to ‘electing’ the forum it intends to seek interim relief from. It is because the option of resorting to court shall not be available to a party if it has already exercised its option of emergency arbitration. Additionally, parties must prudently draft arbitration clauses that do not explicitly or implicitly exclude the applicability of section 9 of the Act, so that the parties can avail the recourse mechanism as provided under Part I of the Act.  

The laws in India are silent with regards to the enforceability of the interim order rendered by an emergency arbitrator. In light of the existing vacuum in law, it will be an uphill task for the parties to enforce interim orders by emergency arbitrators. Thus, due to the prevailing ambiguity in the enforcement of emergency arbitrator’s order, parties would prefer to exercise their option to seek interim relief from the court. 


* Ramit and Sakshi are third year students at Institute of Law, Nirma University.


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.