The Delhi High Court (Division Bench) (“the Delhi HC”) in the case of Mcdonald's India Private Limited (“McDonald”vs. Vikram Bakshi (“Vikram”and Ors. (collectively “the respondents), decided on July 21, 2016, has observed that Courts should minimize interference with arbitration process, which is the policy discernible from the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

McDonald, Vikram and the McDonald's Corporation, U.S.A. entered into a joint venture agreement (“JVA”) for setting up and operating McDonald's restaurants initially within the National Capital Region of Delhi on a non- exclusive basis. Essentially, the agreement was between McDonald and Vikram and, McDonald's Corporation, U.S.A. was a confirming party. The Delhi HC referred to relevant clauses of the JVA and the major developments that took place after the execution of JVA. The crux of the dispute was that McDonald wanted to exercise call option under the JVA as Vikram ceased to be the Managing Director of a company incorporated pursuant to provisions of JVA (“said company”). The Company petition before the Company Law Board (“CLB”) came to be filed by Vikram and another alleging oppression and mismanagement against McDonald and seeking reinstatement of Vikram as the Managing Director of said company. An order was passed by CLB directing McDonald to maintain status quo over the shareholding, board pattern and right of call option. Thereafter, McDonald terminated the JVA and instituted arbitration proceedings in the London Court of International Arbitration. By an order of the Single Judge of the Delhi High Court, McDonald was restrained from pursuing the arbitration proceedings until, inter alia, the status quo order passed by CLB was vacated.

The contention of the respondents was that arbitration proceedings at London would be vexatious and oppressive. Several case laws on this and related points were discussed by the Delhi HC. The Delhi HC observed that unless and until a party seeking an anti-arbitration injunction can demonstrably show that the arbitration agreement is null and void, inoperative or incapable of being performed, no such relief can be granted in the suit or as an interim measure therein. The Delhi HC was of the view that the finding of the learned single Judge that the arbitration agreement in the present case is incapable of performance or inoperative because of the pendency of the proceedings in the CLB was not sound. According to the Delhi HC, even if it was assumed that Part I of Arbitration Act was to apply, then also, because of the provisions of Section 8 of the Arbitration Act, the judicial authority was obliged to refer the parties to arbitration, as, the Delhi HC noted that, there is now a mandate to refer the parties to arbitration unless the court finds that prima facie no valid arbitration agreement exists.

The Delhi HC finally concluded that the circumstances of invalidity of the arbitration agreement or it being inoperative or incapable of being performed did not exist in this case and observed, “Courts must be extremely circumspect and, indeed, reluctant to thwart arbitration proceedings. Thus, while courts in India may have the power to injunct arbitration proceedings, they must exercise that power rarely and only on principles analogous to those found in sections 8 and 45, as the case may be, of the 1996 Act.”

VA View

This ruling emphasis the objectives for which the Arbitration and Conciliation Act, 1996 was enacted. The Delhi HC has observed that courts should not frequently interfere with arbitration proceedings, except to the extent permissible under the applicable provisions of the Arbitration Act thereby ensuring speedy resolution of disputes which is an important facet of the arbitration process.