Chitransh Vijayvergia on Emergency Arbitration and Section 9 of the Arbitration & Conciliation Act: A Comment on Mr. Ashwani Minda & Anr. V. U-Shin Ltd. & Anr.

In emergency arbitrations, instead of going to the domestic courts for instant relief, the parties appoint emergency arbitrators who grant enforceable interim awards before the constitution of the arbitral tribunal. The concept of emergency arbitration has developed over time with international institutions like the UNCITRAL[i], HKIAC,[ii] and SIAC[iii] recognizing it in their respective arbitration rules and several countries like Hong Kong and Singapore that adopt the concept in their domestic legislation as well. However, the definition of ‘arbitral award’ under S.2(1)(c) of the Arbitration and Conciliation Act, 1996 [iv][“the A&C Act”] does not recognize an emergency award.

Recently, the Delhi High Court in the matter of Mr. Ashwani Minda & Anr. v. U-Shin Ltd. & Anr[v]. discussed the validity of a foreign emergency arbitral award in India. The central issue was whether a petition u/S.9[vi] of the A&C Act is maintainable when there is an existing foreign emergency arbitral award. In this post, the author analyses the reasoning of the Delhi HC and suggests certain changes in the present law.

Factual Background

The Applicant, a Partner in an Indian Partnership Firm, entered into a Joint Venture Agreement [“JV”] in 1986 and a Licensing Agreement in 2014 with Respondent No. 1, a Japanese Corporation. The Applicant held 30.30% shares in the JV, the Respondent held 26% shares and the rest was in the hands of the public. After 2014, Respondent No. 1 merged with Respondent No. 2 and delisted from the Tokyo Stock Exchange. Respondent No. 2 made an open offer to its current shareholders as per the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.[vii]

The Applicant considered this as a threat to his shareholding in the JV and thus claimed the move as a violation of the JV and the Licensing Agreement. After a failed attempt at negotiations, the Applicant enforced the arbitration clauses of the two agreements. As per the Japan Commercial Arbitration Association [“JCAA”] Rules[viii], the Applicant initiated emergency arbitration. However, the emergency arbitrator rejected the Applicant’s claim for an interim injunction against the Respondents from acquiring shares purchased in the open offer until the conclusion of the dispute. Aggrieved from the award, the Applicant approached the Delhi High Court u/S.9 of the A&C Act to seek a suitable remedy. The Respondents challenged the maintainability of the S.9 petition on the ground that the relief sought before the emergency arbitrator and that before the court was the same. Therefore, the Applicant should be barred from approaching the court as per the “Doctrine of Election”.

The decision of the Delhi High Court

While the court found the seat of arbitration to be Japan, it opined that a S 9 petition can be entertained in international commercial arbitrations if there is no exclusion of the same[ix] and that the said exclusion can be express or implied.[x] To find the intention of the parties, the court analyses the arbitration clauses of the two agreements. As per the arbitration clauses, the procedural rules of the arbitration initiated by the Indian parties would be the JCAA Rules. As per Rule 77 of the JCAA Rules, an interim relief before the constitution of an arbitral tribunal can only be given by an emergency arbitrator and the provision to approach the domestic courts is absent. Thus, the court opined that the parties intended to exclude any interference by the domestic courts, and thus S.9 would not apply.

Further, the court also ruled that as the remedy sought before both the platforms is the same, the Applicant should be restricted from approaching emergency arbitrator for alternate remedies. Therefore, the court implied the recognition of the application of the Doctrine of Election in arbitration law as argued by the Respondents, and dismissed the petition.

Analysis and Comments

To bring the Indian law in line with the universally accepted rules of arbitration, the 246th Law Commission Report[xi] recommended an amendment to S.2 (d)[xii] of the 1996 Act, which defines an ‘arbitral tribunal’, to include the concept of an emergency arbitrator.  International Chamber of Commerce (ICC) Arbitration Rules[xiii] under Article 29 recognize the use of emergency arbitration when the parties need urgent interim or conservatory measures that cannot await the constitution of an arbitration tribunal. Similarly, Article 30 of the Singapore International Arbitration Centre (SIAC)[xiv] Arbitration Rules also allows for emergency arbitration. This recommendation was reiterated by the report[xv] of the High-Level Committee under the aegis of B.R. Krishna J. However, the 2015 Amendment Act[xvi] failed to incorporate the changes and thus left the uncertainty around the enforceability of emergency awards of foreign arbitral awards as it is.

The non-application of S.9 to foreign emergency arbitral awards was previously discussed by the Indian courts in the cases of Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd.[xvii], HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd[xviii], and Plus Holdings Limited v. Xeitgeist Entertainment Group Limited & Ors[xix]. These cases categorically held that S.9 merely gives the parties the right to approach the local courts for interim measures and does not allow enforcement of foreign emergency arbitral awards. However, in the absence of any specific rules for the enforcement of foreign emergency arbitral awards in India, parties have often sought similar remedies under S.9 if the applicability is not excluded, as was held in the Raffles Design case.

With that being said, the Ashwani Minda decision has marked a deviation from these decisions. This change can be understood as follows:

Firstly, the Delhi HC distinguished the Raffles Design judgment based on the applicable procedural law. The Raffles Design judgment was delivered in respect of the SIAC Rules which recognized the power of the domestic courts to grant interim relief. However, the JCAA Rules, applicable in the present case, under Article 77 provide for interim relief only through an emergency arbitrator. Thus, an S.9 petition would not be maintainable.

Secondly, the Delhi HC took a pro-arbitration stance and limited the scope of judicial interference against the intention of the parties. In paragraph 55 of the judgment, the court emphasized that the emergency arbitral award was detailed and well-reasoned and thus the Applicant should not be allowed to bring a case before the domestic courts. Further, the court also opined that as there was no substantial change in the circumstance of the parties since the passing of the arbitral award, there is no reason to entertain a S.9 petition. Thus, though the court primarily relied on the implied exclusion test, it also upheld the principles of judicial non-interference with that of the arbitral awards and the intention of the parties.

Thirdly, the Delhi HC has adopted a two-pronged test to determine the intention of the parties. First, the court has relied on the Raffles Design test of express or implied exclusion in the arbitration clause to determine the intention of the parties. Second, the court has delved into the wording of the institutional arbitration rules i.e. JCAA to determine the intention of the parties. This latter test can be considered to be inspired by the Roger Shashoua v. Mukesh Sharma[xx] case where the Supreme Court of India held that selection of institutional rules be a substantial factor in the determination of the judicial seat of arbitration. Thus, the case has widened the scope of the intention of the parties.

Concluding Remarks

In the absence of emergency arbitration in India, S.9 serves as a mode of getting interim relief before the constitution of arbitral tribunals and it should not be used to disregard arbitral awards. While S.9 can be used to uphold the emergency award and to grant similar interim reliefs, the courts should be cautious when the relief is sought against the arbitral awards. This would ensure that the indirect enforcement mechanism of emergency arbitral awards u/S.9 does not become an appellate mechanism for the parties.

The Delhi HC in the Ashwani Minda case has taken a pro-arbitration stance by effectively restricting a party from bringing an appeal from an unfavorable emergency arbitral award. Further, it has also given primacy to the intention of the parties and has thus restricted judicial interference with arbitral autonomy. However, as the matter has been decided differently by different High Courts, certainty on the issue can only be achieved once the matter is decided by the Supreme Court of India.

In conclusion, the author argues that it is high time for India to make legislative amendments to the A&C Act to include ‘emergency arbitral awards’ in S.2(1)(c) and provide for the appointment of an ‘emergency arbitrator’ under S.2(1)(d). Further, Indian institutional arbitration rules like DIAC[xxi] and MCIA[xxii] have already recognized the arbitral awards delivered by emergency arbitrators as enforceable. These amendments would recognize emergency arbitration in India and the parties would not have to fall upon S.9 for interim measures. This, in turn, would restrict any kind of judicial interference and would consequently promote arbitral au

[i] https://www.uncitral.org/pdf/english/texts/arbitration/arb-rules/arb-rules.pdf

[ii] https://www.hkiac.org/sites/default/files/ck_filebrowser/PDF/arbitration/2018_hkiac_rules.pdf

[iii] https://siac.org.sg/our-rules/rules/siac-rules-2016

[iv] http://egazette.nic.in/WriteReadData/2019/210414.pdf

[v] Mr. Ashwani Minda & Anr v. U-Shin Ltd & Anr.

[vi] http://legislative.gov.in/sites/default/files/A1996-26.pdf

[vii] https://www.sebi.gov.in/sebi_data/commondocs/acquistionofshares.pdf

[viii] https://www.jcaa.or.jp/en/common/pdf/arbitration/Commercial_Arbitoration_Rules2019_en.pdf

[ix] Bhatia International v. Bulk Trading SA, (2002) 4 SCC 105 (India); Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (India).

[x] Raffles Design Int’l India Pvt. Ltd. v. Educomp Professional Education Ltd. & Ors. (2016) SCC OnLine Del. 5521.

[xi] http://lawcommissionofindia.nic.in/reports/report246.pdf

[xii] http://legislative.gov.in/sites/default/files/A1996-26.pdf

[xiii] https://iccwbo.org/content/uploads/sites/3/2017/01/ICC-2017-Arbitration-and-2014-Mediation-Rules-english-version.pdf.pdf

[xiv] https://siac.org.sg/our-rules/rules/siac-rules-2016

[xv] http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf

[xvi] http://www.adrassociation.org/pdf/acact2015.pdf

[xvii] https://indiankanoon.org/doc/166921970/

[xviii] https://indiankanoon.org/doc/190050677/

[xix] https://indiankanoon.org/doc/86667417/

[xx] https://indiankanoon.org/doc/70870056/

[xxi] http://www.dacdelhi.org/topics.aspx?mid=74

[xxii] https://mcia.org.in/wp-content/uploads/2016/05/MCIA-Rules_2017.pdf

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