Commercial Agreements & Contracts In IndiaForeign Seated Arbitration

DELHI HIGH COURT

Ashwani Minda & M/S Jay Ushin Limited v. M/S U-Shin Limited & M/S Minebea Mitsumi Inc.

FAO(OS)(COMM) 65/2020 | Date: 07.07.2020

FACTS 

The Appellant herein is Mr. Ashwani Minda (“AM”) and Jay Ushin Limited (“JUL”) wherein the former is the Managing Director. Whereas Respondents are two companies incorporated in Japan –  U-Shin Limited (“USL”) and Minebea Mitsumi Incorporated (“MMI”).

The dispute pertains to a Joint Venture Agreement between USL and M/s Jay Industries. The latter was acquired by AM and Mr. J.P. Minda (“JPM”), father of AM.

The Appellants had invoked arbitration for breach of terms of a Joint Venture Agreement. The proceedings were to be held in Japan under the Rules of Japan Commercial Arbitration Association (“JCAA”). The Appellants had applied before the JCAA for an emergency measure of protection under the JCAA Rules.

The emergency arbitrator rejected the request, holding against the Appellants both on the question of jurisdiction and merits. During the pendency of the emergency arbitration proceedings, the Appellants submitted a request for arbitration to the JCAA and sought various interim reliefs, substantially similar to the reliefs sought in the application before the emergency arbitrator. An Arbitral Tribunal was constituted under the aegis of the JCAA.

Prior to the constitution of the arbitral tribunal, the Appellants moved the petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”) before the Learned Single Judge for seeking interim reliefs.

The Single Judge bench dismissed the petition on the grounds of maintainability, finding that the petition could not be maintained after dismissal of the Appellants’ request for emergency measures before the JCAA. It was also held that the application of Part I of the Act was impliedly excluded in instant case.

Hence, this appeal has been filed under Section 37 of the Act before the Division Bench of Hon’ble Delhi High Court.

ISSUES BEFORE THE DELHI HIGH COURT

The following issue was considered by the Delhi High Court:

Whether the Appellants ought to be permitted to proceed with their request for interim measures of protection under Section 9 of the Act, after having failed in obtaining similar relief from the emergency arbitrator under the JCAA Rules, and even after the constitution of the arbitral tribunal.

OBSERVATION 

In the present case before us the Court referred to the relevant provisions under the Act i.e. Section 2 (2), 9, 17,  of the Act in conjunction with Articles 71, 75, 77, 78 of the  JCAA Rules.

The Appellant’s averment was that the impugned judgment has overlooked the legislative intent of the proviso to Section 2(2) of the Act. The Appellant highlighted that the Law Commission’s concern was that a party to a foreign-seated arbitration seeking interim measures in respect of properties or assets in India is unlikely to have any efficacious and enforceable remedy, other than recourse to the Indian courts.

The Appellant further submitted that reliance upon Section 9(3) of the Act is erroneous, as the provision refers expressly to Section 17 of the Act, which is applicable only to arbitrations seated in India.

Furthermore, the Appellant submitted that the agreement referred to in Section 2(2) must be express, and cannot be implied from surrounding facts and circumstances.

The Appellant also submitted that the remedies before the JCAA and the Indian Courts are not inconsistent remedies, hence the doctrine of election is not applicable in the instant case.

The Appellant placed reliance on the decision in the case of Raffles Design Int’l India Pvt. Ltd. vs. Educomp Professional Education Ltd. & Ors., (2016) 234 DLT 349, and tried to establish that an independent adjudication is permitted in a petition under Section 9 of the Act, albeit the decision of an emergency arbitrator.

On the other hand, the Respondent resisted the Appellant’s averments by placing reliance on the provisions of the JCAA Rules and submitted that the arbitral tribunal is sufficiently empowered to grant interim measures, notwithstanding any contrary order of the emergency arbitrator.

The case of the Respondent was that the principles of Section 9(3) of the Act applies equally to a foreign-seated arbitration.  The efficacy of a remedy available before the arbitral tribunal under Section 9(3) of the Act should be adjudicated on the basis of the power available to the tribunal and not solely by reference to the relief sought.

CONCLUSION 

The Delhi High Court held that while Section 9(3) of the Act is expressly relatable to an arbitration seated in India, as evidenced by the reference to Section 17 of the Act, the principle of the provision is equally applicable when interim measures are sought before the Indian Courts for a foreign-seated arbitration.

The Court categorically held that only when the remedy before the tribunal lacks efficacy, a party can seek interim measures from the Court under Section 9.

The Court perused the Law Commission’s report in order to deduce the intention behind inserting  Section 9 (3) –

“This amendment seeks to reduce the role of the Court in relation to grant of interim measures once the Arbitral Tribunal has been constituted. After all, once the Tribunal is seized of the matter it is most appropriate for the Tribunal to hear all interim applications.”

The Court held that the absence of a specific reference to foreign-seated arbitrations in Section 9(3) should not to be construed as expand the scope of Section 9 to cover cases where the arbitral tribunal has been constituted and is capable of granting efficacious relief. Such an interpretation would not just extend the scope of Section 9, but would amount to the provision being available in the Indian courts in connection with foreign-seated arbitrations, but not in connection with India-seated arbitrations.

The Court concluded that “although an application under Section 9 is maintainable in connection with a foreign-seated arbitration, an application thereunder would not lie after the constitution of the arbitral tribunal, unless the applicant demonstrates that it does not have an efficacious remedy before the tribunal.”

The Division Bench of the Delhi High Court thus, upheld the order of the Single Bench and held, that the Section 9 petition is not maintainable.

AMLEGALS REMARKS 

The Court in the instant judgment has undertaken a purposive interpretation and also considered the legislative history of the 2015 Amendment to reveal that under Section 2(2), a party to a foreign-seated arbitration has the option of seeking interim measures of protection in the Indian courts, or of going to the seat court or the tribunal for interim relief.

The legislative intent is clear, that is, to provide an efficacious alternative means for seeking relief in the Indian courts, where the arbitral tribunal is either not constituted or otherwise unable to grant efficacious relief.

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