Emergency Relief Under Foreign Arbitration Rules Does Not Bar Interim Relief By Indian Courts: Bombay High Court

The Bombay High Court has recently held that the availability of emergency or interim relief under the rules of a foreign arbitral institution does not, by itself, prevent Indian courts from granting interim protection in support of a foreign-seated arbitration.

It observed that merely choosing institutional rules that provide for emergency measures is not enough to exclude the court's jurisdiction.

Justice Somasekhar Sundaresan made the ruling while directing Turkish company Uzer Makina VE Kalip Sanayi A.S. to furnish additional security. The court ordered that the total amount secured before it should equal the Indian rupee equivalent of EUR 1.2 million in a dispute with Malaney Trading & Services LLP.

The court held, "In my opinion, for an implied ouster of Section from the foreign arbitration, the arbitration agreement must contain an ouster of Section 9. Ouster of jurisdiction must be express one were to take it to a standard of ouster by necessary implication, it wouldnot suffice to state that the rules of arbitration of the international arbitration institution contains a framework for interlocutory relief. Unless such rules provide for an ouster of any other means of interim relief, it would not be logical, or even commercially commonsensical to conclude that there is an ouster by necessary implication, merely by having agreed to arbitrate in an institute that also provides for emergency and interlocutory measures"

The dispute arose from a Commercial Agency and Distribution Agreement dated February 8, 2017. Under the agreement, Malaney acted as Uzer Makina's exclusive agent in India for its tyre manufacturing technology and was entitled to commission on transactions in the country.

The parties are currently before the Netherlands Arbitration Institute. It passed a partial award in Malaney's favour on February 16, 2024.

Earlier, the Bombay High Court directed MRF to give Malaney ten days' prior notice if it intended to make any payment to Uzer Makina. In a subsequent order dated December 7, 2023, the court restrained MRF from making a proposed remittance while the Section 9 proceedings were pending.

Uzer Makina argued that the arbitration was governed by the rules of the Netherlands Arbitration Institute, which provide for emergency and interim relief. It contended that by adopting those rules, the parties had agreed to seek interim relief before that forum. According to Uzer Makina, this amounted to a contract to the contrary excluding recourse to Section 9 of the Arbitration and Conciliation Act.

Rejecting the objection, the court held that Section 9 relief remains available in support of foreign-seated arbitrations unless the parties have expressly, or by necessary implication, agreed to exclude it. It ruled that the mere existence of emergency or interim relief under institutional rules does not amount to such an exclusion.

The court also noted that no emergency or interim proceedings had been initiated before the Netherlands Arbitration Institute. Instead, the parties had approached the Bombay High Court for interim protection as early as May 2022. Interlocutory arrangements had already been put in place under Section 9.

In a separate part of the judgment, the court took note of earlier findings that MRF had made payments and Uzer Makina, through its subsidiary Uzer Ithalat, had received them despite the court's interim directions.

It held, "However, in the facts of this case, not only was interlocutory relief granted by the Section 9 Court, but there is already even a judicial finding that such relief was flouted, with MFR making payments and Uzer Makina through Uzer Ithalat receiving such payments despite full knowledge and awareness of the May 2022 Order and the December 2023 Order."

The court held that this conduct posed a real threat to the fruits of the arbitration. It noted that a foreign arbitral award must first be recognised before it can be enforced in India. Interim protection therefore remained necessary pending recognition and enforcement of the foreign award in India.

Accordingly, the court directed Uzer Makina to deposit, within four weeks, the additional amount required so that the total security before the court equals the Indian rupee equivalent of EUR 1.2 million.

It also directed MRF and CEAT to deposit any payments due to Uzer Makina, Uzer Ithalat, or similarly placed affiliates with the court. The direction will continue until the total amount secured before the court reaches the Indian rupee equivalent of EUR 1.2 million.

For Petitioner: Senior Advocate Zal Andhyarujina a/w Adv. Maithili Parikh, Adv. Rugved More

For Respondents: Zerick Dastur a/w Ms. Archana Uppuluri, Ms. Esha Nangre I/b Zerick Dastur Advocates, O. Joseph D'souza, Ajay Panicker a/w Mr. Dhairya Sampat i/b Ajay Law Associates