Judicial trends and the three-fold test for granting anti-arbitral injunctions in India and

across the world.

Introduction

An Anti-Arbitration Injunction (“AAI”) is an injunction given by courts to restrict the parties or

an arbitral tribunal from either initiating or continuing with arbitration proceedings. AAI
injunctions are a controversial subject in jurisdictions across the world. An AAI is generally
sought before an arbitration commences or in the course of the arbitration hearing or after the
conclusion of substantive hearing but before the rendering of final award.

From a global jurisprudence perspective, arbitral injunctions are rarely granted and have been
strongly criticized in the field. Both the UNCITRAL Model Law 1985 and the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 which lays
the basis of the Arbitration and Conciliation Act, 1996, do not provide for an express provision
authorising the grant of AAIs by courts.

Further, arbitral injunctions are also against the principle of competence-competence (or
kompetenz-kompetenz) which is recognised by most arbitration statutes across the world. As per
the competence-competence principle, an arbitral tribunal is given the power to render awards in
its own jurisdiction, decide the matters along with the the ability to decide upon issues relating to
the arbitration agreements validity, existence, and scope. In foreign seated arbitrations, the case
for judicial deference is made stronger based on the principle of comity of courts. Along with
that principle, the Arbitration and Conciliation Act, 1996 contains the non-obstante clause in
Section 51 providing that ‘notwithstanding anything contained in any other law for time being in
force’, no judicial authority should intervene except when so provided under the Act.

Aspect of jurisprudence of AAI injunctions have been brought into focus after a division bench
of the Delhi High Court, in the Amazon-Future dispute, granted an interim stay order on the
Delhi seated arbitral proceedings.

The three-fold test for granting anti-arbitral injunctions

1 Kvaerner Cementation India Limited v. Bajranglal Agarwal, (2012) 5 SCC 214.

Article II(3) of the New York Convention provides that the court shall refer a matter falling
within the scope of an arbitration agreement to arbitration unless the arbitration agreement is null
and void, inoperative or incapable of being performed.
Similarly, Section 452 of the Arbitration Act empowers the courts to refer matters to arbitration
unless it is found that the arbitration agreement is null and void, inoperative or incapable of
being performed. Several courts have adopted these three broad conditions to decide upon
matters where anti-arbitral injunctions were sought.

Judicial Trends in India

Indian Courts have on several occasions dealt with AAI. The Hon’ble Supreme Court in the
matter of Kvaerner Cementation India Limited v. Bajranglal Agarwal3 held that a civil court did
not have jurisdiction to determine any objection with respect to the existence or validity of an
arbitration agreement owing to the principle of Kompetenz-Kompetenz enshrined under Section
16 of the Act. Regrettably, Kvaerner failed to cite any precedent or provide any elaborate
reasoning for this decision, and was reported only in the year 2012, after 11 years.

During the same period, a constitution bench of the Hon’ble Supreme Court in SBP & Co. v.
Patel Engineering Ltd.4, by a majority judgment, rejected the argument that there is exclusive
jurisdiction of the arbitral tribunal to decide the existence or validity of the arbitration agreement.
This was further strengthened by the ruling of the Hon’ble Supreme Court in World Sport Group
(Mauritius) Ltd. v. MSM Satellite5 wherein the Hon’ble Supreme Court affirmed the jurisdiction
of civil courts to refuse arbitration if the grounds mentioned under Section 45 of the Act are
satisfied.

Subsequently, division benches of the Delhi High Court and the Calcutta High Court held that
civil courts are empowered to grant AAIs; however, such power should be exercised sparingly
and with abundant caution6. In fact, the Hon’ble Calcutta High Court in Balasore Alloys Limited

2 SBP & Co. v. Patel Engineering Ltd., 2005 (8) SCC 618.
3 World Sport Group (Mauritius) Ltd. v. MSM Satellite, AIR 2014 SC 968.
4 McDonald’s India Private Limited v. Vikram Bakshi and Ors, 2016 (4) ARbLR 250; Devi Resources Ltd. v. Ambo
Exports Ltd, 2019 (6) ARbLR 32
5 A. Ayyasamy v. A. Paramsivam, (2016) 10 SCC 386.
6 National Aluminium Company Limited v. Subhash Infra Engineers Private Limited, 2019 (5) ARbLR 254.
v. Medima LLC7 clarified that Kvaerner appears to have been impliedly overruled by the later
larger bench in SBP & Co.

Kvaerner Cementation India Limited v. Bajranglal Agarwal was brought to life after 15 years
when the Hon’ble Supreme Court cited it with its approval in A. Ayyasamy v. A. Paramsivam8
and subsequently in National Aluminium Company Limited v. Subhash Infra Engineers Private
Limited. Recently, this controversy has again come into prominence due to the Hon’ble Delhi
High Court judgment in Bina Modi v. Lalit Modi and Ors which held that suits to declare the
invalidity of an arbitration clause/agreement and to injunct arbitration proceedings, whether
falling in Part I or Part II, are not maintainable.

Judicial Trends in across the world

In the quarter century since the English Court of Appeal delivered its famous decision in the
Angelic Grace9. Anti-suit injunctions have been one very important and robust way in which
common law courts have supported the arbitration process. Indeed, even where there may be an
issue as to the existence or currency of an arbitration agreement, or a question as to the parties
thereto, there need only be a “high degree of probability” that there is an arbitration agreement
for an anti-suit injunction to issue and restrain foreign proceedings brought in the face of it 10.
This robustness has only been reinforced by the United Kingdom Supreme Court’s recent
decision Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb11.
In US, the Anti-suit injunctions have interacted with arbitration in four different ways. First, a
party may ask a court to issue an anti-suit injunction to preclude a litigation that seeks to go
forward in contravention of a valid arbitration agreement. Second, a party may ask a court to
issue an anti-arbitration injunction to preclude an arbitration from going forward. Third, a party
may request an arbitral tribunal to issue an anti-suit injunction. Fourth, a party may ask a court to
issue an anti-suit injunction to disallow parallel proceedings regarding enforcement of a foreign
arbitral award. Each of these scenarios is considered in turn. Courts in past have refused to issue

7 The Arbitration and Conciliation Act, 1996 § 5, No. 26, Acts of Parliament, 1996 (India).

8 The Arbitration and Conciliation Act, 1996 § 45, No. 26, Acts of Parliament, 1996 (India).
9 Ecobank Transnational Inc v Tanoh [2016] 1 WLR 2231 at 2250.
10 [1995] 1 Lloyd’s Rep 87.
11 Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb, [2020] UKSC 38.
an anti-suit injunction if there is some dispute regarding the validity of the alleged arbitration
agreement, as seen in Dependable Highway Express, Inc. v. Navigators Insurance, Co., which
involved a dispute about the validity of an arbitration agreement naming London as the arbitral
seat.
Conclusion
As witnessed in the judicial trends, there is no uniform threshold for granting anti-arbitral
injunctions. While the three-fold test o/ffers some direction and guidance to granting anti-arbitral
injunctions in India, we are far from having a crystallised position. The Indian courts have
created an arbitration-friendly jurisprudence over the years to make India a global arbitration
hotspot.
Uniformity and high threshold are required, in line with other mature jurisdictions around the
world, for granting anti-arbitral injunctions. A path must be laid that pays regard to the right of
arbitrators to determine their jurisdiction and the right of courts to prevent abuse of the arbitral
process.