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Foreign seated arbitration: Indian courts have power to grant anti-arbitration injunction, but must use it sparingly, says Calcutta HC

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New Delhi: The Calcutta High Court has held that while Indian Courts do have the power to grant anti-arbitration injunctions in foreign seated arbitration, they must use this power sparingly and with abundant caution.

A single judge Bench of Justice Shekhar B Saraf noted that the mere existence of multiple proceedings or proceedings before multiple forums is not sufficient reason to render an arbitration agreement inoperative. It observed that the burden of proof to show that proceedings launched before a neutral foreign forum is vexatious or oppressive is upon the party asserting the same.

The dispute occurred between an Indian company Balasore Alloys Limited and a US company Medima LLC, who in 2017, entered into an arrangement for the sale of high carbon ferro chrome manufactured by Balasore and its exclusive distribution by Medima in the territories of Canada and USA. According to the agreement, the two parties decided to refer the potential disputes to arbitration. The companies had a difference of opinion when a dispute arose between the companies regarding the seat of arbitration.

The question was whether the seat of arbitration would be in India or before the International Chamber of Commerce (ICC) in the United Kingdom. While according to the clause in the Agency Agreement from 2018, the ICC would have the jurisdiction, the terms and conditions in purchase orders required application of Indian arbitration law with Kolkata as the venue for arbitration.

International Chamber of Commerce

When the US company Medima started arbitration proceedings in the ICC, United Kingdom, the Indian Company Balasore moved the Calcutta High Court seeking restrain on the UK arbitration, and an injunction against the foreign seated arbitration.

The Calcutta High Court has found that Balasore did not conclusively discharge its burden of exhibiting that the ICC in London, the alternate forum in this case, is either a forum non-conveniens or that the proceedings initiated before it by the respondent are oppressive or vexatious in nature. The court noted that mere existence of multiple proceedings and/or chance of a matter proceeding in multiple forums is not sufficient reason to render an arbitration agreement inoperative. The court therefore found no reason to grant an anti-interim injunction to restrain the arbitration proceedings before ICC in UK.

The Court cited the judgement in the case of Modi Entertainment Network v. WSG Cricket, stated that Indian Courts should use their power of granting anti-arbitration injunction very sparingly and by following the principles laid down in that case. According to the principles laid down in the Modi Network case, injunction should be given in cases where if in its decline it would defeat the ends of justice. The defendant, against whom the injunction is sought, has to be amenable to the personal jurisdiction of the court. 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.

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The court noted that when a contract between the parties provides that the execution or performance of that contract will be in terms of another contract that specifies the terms and conditions of performance and a provision for settlement of disputes by arbitration, then, the terms of the referred contract in regard to execution/ performance alone will apply, and not the arbitration agreement in the referred contract, unless there is a special reference to the arbitration clause also.

Read the judgment here;

Balasore-Alloys-v-Medima-LLC-Calcutta-HC-order

– India Legal Bureau

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