Source: Delhi High Court

Why in News?

A bench of Justice C. Hari Prasad held that the court does possess the power to grant an anti-enforcement injunction where the foreign proceedings are violative of the exclusive jurisdiction clause in the contract.

• The Delhi High Court held this in the case of Hosana Consumer Limited v. RSM General Trading LLC.

What is the Background of Hosana Consumer Limited v. RSM General Trading LLC Case?

• The Petitioner and Respondent in this case entered into an Authorized Distributorship Agreement whereby the respondent were to distribute the products of petitioner in the Middle East and Africa.
• The contract specifically provided that any dispute arising would be resolved by arbitration governed by the Arbitration and Conciliation Act, 1996 (A&C Act) with an arbitral venue as New Delhi.
• The contract also specified that the Indian Law was both the governing and curial law (i.e. the contract should be interpreted in accordance with Indian Law).
• The Respondent, however, filed a suit in Dubai, Court of First Instance alleging breach by the petitioner.
• Therefore, Respondent holds a decree from the Court of First Instance, Dubai.
• The Petitioner has moved to the Delhi High Court under Section 9 of the A&C Act seeking injunction against the Respondent from enforcing decree of Dubai Court so that the petitioner can proceed to invoke the remedy of arbitration to resolve the disputes.
• Thus, the issue before the Court was whether Anti-enforcement injunction can be issued under Section 9 of A&C Act.

What were the Court’s Observations?

• The Court held that the scope of Section 9 of A&C Act is wide and compendious.
• The Court further observed that the powers under Section 9 are absolute and there are no restrictions either under the 1996 Act or elsewhere.
• The Court held that where proceedings in foreign Court threaten to prejudice or derail the arbitral process which may be competently instituted in India Section 9 is possessed of the power to injunct the party who has instituted the foreign proceedings.
• The Court further observed that the principle of comity of Courts will have no application in those cases where a foreign Court has manifestly acted in excess of jurisdiction.
• The Court held that as per Section 9, the Court does possess the power to grant an anti-enforcement injunction where the foreign proceedings are violative of the exclusive jurisdiction clause in the contract between the parties.

What is Section 9 of the A&C Act?

• Section 9 of the A&C Act provides for power to grant interim measures etc. by the Court.
• Interim measure can be granted by the Court on the application of the party in following circumstances:
  • Before Arbitral Proceedings
  • During Arbitral Proceedings
  • At any time after the making of the arbitral award but before it is enforced in accordance with Section 36
• Following interim measures can be passed:
  • Appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
  • For an interim measure of protection in respect of any of the following matters, namely:
    • The preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
    • Securing the amount in dispute in the arbitration;
    • The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence
    • Interim injunction or the appointment of a receiver;
    • Such other interim measure of protection as may appear to the Court to be just and convenient,
  • The Court under this Section shall have same power for making orders as it has for the purpose of or in relation to any proceedings before it.
• Further, Section 9 (2) of A&C Act provides that where order for interim measure is passed before the commencement of arbitral proceedings the arbitral proceeding shall be commenced within 90 days from the date of such order or within such period as the Court may determine.
• Section 9 (3) provides that once the arbitral Tribunal is constituted the relief under sub-section (1) shall not be granted unless the Court finds that the remedy under Section 17 is not efficacious.

What is the Scope of Power under Section 9 of A&C Act?

• Essar House Pvt. Ltd v. Arcellor Mittal Nippon Steel India Ltd. (2022):
  • While granting relief under Section 9 the Court cannot ignore the basic principles of Civil Procedure Code, 1908 (CPC).
  • The power is however not curtailed by the rigors of every procedural provision in CPC.
  • Thus, the Court is not strictly bound by the provisions of CPC.
• Hindustan Cleanenergy Ltd v. MAIF Investments India Pte Ltd. (2022):
  • For the purpose of relief under Section 9 demonstration of irreparable harm should be done.
  • The relief under Section 9 may overlap with the final relief sought in arbitral proceedings.
  • The grant of interim relief would be subject to restrictions under Section 9 of Specific Relief Act, 1963 (SRA).

What is an Injunction?

• An injunction is a remedy which can be granted in a civil suit.
• There are two types of injunction:
  • Permanent Injunction:
    • This is granted under Section 38 of SRA.
    • A permanent injunction is a court order that restrains a party from engaging in certain conduct or compels them to perform specific acts.
    • It is considered a final and permanent remedy, distinct from preliminary injunctions, which are issued on a temporary basis during the pendency of a legal proceeding.
  • Temporary Injunction:
    • This is granted under Order 39 of CPC.
    • The primary purpose of a temporary injunction is to prevent irreparable harm or injustice during the course of litigation.
    • It serves as a balancing act between preserving the rights of the parties and ensuring that justice is done.

What are Principles Governing Anti Suit and Anti Enforcement Injunction?

• Modi Entertainment Network v. WSG Cricket Pte Ltd. (2003)
  • The principles governing grant of injunction are also applicable to the grant of anti suit injunction.
  • In exercising the grant of anti-suit injunction the Court must be satisfied of following aspects:
    • the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court;
    • if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and
    • 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.
• Interdigital Technology Corporation v. Xiaomi Corporation (2021)
  • The principles laid down in this case on the aspect of anti-enforcement or anti-suit injunction were as follows:
    • Comity considerations may potentially apply even in cases where anti-suit relief is sought for a breach of the arbitration or exclusive jurisdiction clause.
    • There must be respect given to the vast amount of time and expenses incurred by the foreign Court.
    • Also, there must be shown exceptional circumstances that warrant the exercise of Court’s jurisdiction.