The case of Raffles Design International India Private Limited &Anr. vs. Educomp Professional Education Limited &Ors, before the Delhi High Court, was decided on October 7, 2016.
Raffles Education Corporation Limited (“RECL”) and Educomp Solutions Limited (“ECL”) entered into a Master Joint Venture Agreement (“MJVA”) in 2008, which led to the establishment of Educomp Raffles Higher Education Limited (“ERHEL”) for providing courses in management and designing. RECL and ECL are parent companies of the petitioner company and the respondent company respectively. RECL and ECL had 50:50 stake in ERHEL and RECL had subsequently increased its stake in ERHEL to 58.18%.
A Share Purchase Agreement (“the SPA”) was entered into in 2015 between the petitioners and the respondents. Shares of respondents in ERHEL were to be acquired by the petitioners on fulfillment of certain conditions incorporated in the SPA.
Disputes erupted between the parties. It was provided in the SPA that disputes were to be governed and construed as per the laws of Singapore. Arbitration was to be conducted at Singapore under the Arbitration Rules of the Singapore International Arbitration Centre (“the SIAC Rules”).
The petitioners invoked the arbitration clause and made a request for appointment of an Emergency Arbitrator. Meanwhile, the SPA was terminated by the respondents, contending that there was breach of the SPA by the petitioners. Singapore International Arbitration Centre (“SIAC”) appointed Mr. Michael Lee as the Emergency Arbitrator. Interim Emergency Award came to be passed by the Emergency Arbitrator, granting certain Interim relief to the petitioners. The petitioners initiated the process to enforce the Emergency Award against respondent no. 2 in Singapore and certain enforcement order was obtained. The respondents filed an application praying for setting aside of the Emergency Award. However, on January 14, 2016 a consent order was passed by the sole arbitrator. As per the consent order the operative first two paragraphs of the Emergency Award was reiterated
Petitioners alleged that the respondents, even after passage of the Emergency Award, continued to act in contravention of the rights of the petitioners under the SPA. The petitioners were thus compelled to file this petition before the Court under Section 9 of the Arbitration and Conciliation Act, 1996 (“the Act”). The maintainability of this petition was challenged by the respondent.
The questions that arose for consideration before the Court regarding maintainability were:
(i) Whether the provisions of the Arbitration and Conciliation (Amendment) Act, 2015 (“the Amendment Act”) were applicable to the proceedings?
(ii) If the answer to the aforesaid question was in the affirmative then whether Section 9 of the Act is applicable by virtue of the proviso introduced in Section 2(2) of the Act by Section 2 (II) of the Amendment Act?
Section 26 of the Amendment Act reads as under:
“26. Act not to apply to pending arbitral proceedings. –
Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”
The Court was of the view that the Amendment Act would not apply to arbitral proceedings commenced under PartI of the Act before October 23, 2015. However, regarding the second limb of Section 26, it was observed that it would cover all proceedings which are connected with the arbitral proceedings whether commenced under Part-I or otherwise including proceedings under Sections 8, 9, 14, 34 and 37 of the Act.
The Court further observed, “The Parliament had specified the date on which the Amendment Act came into force and unless enacted otherwise, it would be applicable to all proceedings instituted after the specified date. There is no reason to hold that the Amendment Act would not apply to the applications filed in Courts. For the reasons stated herein before the Amendment Act would also apply to pending proceedings before courts.”
With regards enforceability of the Emergency Award, it was noted, “In the circumstances, the Emergency Award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for the petitioner to file a suit. However, in my view, a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order from an arbitral tribunal. Needless to state that the question whether the interim orders should be granted under section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.”
This judgment makes an important point that in respect of foreign seated arbitrations, there is no implied bar in respect of all arbitration related court proceedings including under section 9 instituted after the Amendment Act came into force, even if the related arbitration was commenced before the Amendment Act.
This judgment also points out a lacuna in as much as in a foreign seated arbitration, an emergency award is unenforceable in India. Therefore, in such cases, an application under section 9 is the only remedy available to the parties seeking interim measures of protection in India.
We have, in our recent editions, captured a series of judgments which are set to give a big boost to the alternate dispute resolution landscape in India. The arbitration friendly approach of the Indian judiciary will go a long way in bolstering the confidence in arbitration as an effective and speedy dispute resolution mechanism.