Legal Brief: Interim measures in Arbitration Act meant to support not undermine arbitration.
Case: Ashok Kumar Goel and Anr. Vs Ebix Cash Limited & Ors.
Court: Bombay High Court
Date of Judgment: 08.10.2024
By: Adv. Saksham Mathur
- Facts:
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This case involves a dispute arising out of a Shareholders Agreement dated12.05.2017. The Respondents were obligated to purchase the Petitioners’ shareholding in Respondent No. 4 company ( Ebix Payment Service Private Limited) under clauses 15.6 and 15.7 of the Agreement. The Agreement contained an arbitration clause, stipulating arbitration in accordance with the Singapore International Arbitration Chamber (“SIAC”) Rules for any disputes.
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Disputes arose, leading to the formation of an Arbitral Tribunal. On 01.06.2023, the Arbitral Tribunal issued an award (“First Award”), upholding the SHA’s termination and the Respondents’ (Nos. 1 to 3) obligation to purchase the Petitioners’ shares.
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The Tribunal rejected a valuation report submitted by Deloitte due to a lack of independence and directed a new independent valuation. On 01.09.2023, the Tribunal awarded the Petitioners approximately Rs. 9 crores in costs (Cost Award).
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The Petitioners filed petitions under Section 49 of the Arbitration Act in the Delhi High Court to enforce both the First Award and the Cost Award.
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On 30.11.2023, the Petitioners appointed Price Waterhouse & Co LLP (“PwC”) as an eligible valuer under the agreement to determine the enhanced call price, which PwC determined to be Rs. 181 crores.
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The Respondents refused to pay the enhanced call price, disputing PwC’s independence. On 19.012024, the Delhi High Court issued a status quo order regarding the Respondents’ assets in the enforcement petitions.
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The Petitioners invoked arbitration under SIAC Rules and sought emergency interim relief under Schedule-I of the SIAC Rules. On 13.03.2024, the Delhi High Court allowed both enforcement petitions,
rendering the First Award and the Cost Award final and valid under
Indian law.
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An Emergency Arbitrator ordered the Respondents to furnish an irrevocable bank guarantee of INR 145 crores to the Petitioners within 14 days.
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The Respondents represented that they were unable to furnish the bank guarantee due to the Delhi High Court’s order restraining them from dealing with their assets.
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The Respondents applied to the Delhi High Court to modify the order dated January 19, 2024, which was allowed on 1.05.2024. The Respondents then applied to modify the Emergency Arbitrator’s decision before the regular Arbitral Tribunal, seeking to substitute the bank guarantee with other forms of security.
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On 24.07.2024, the Arbitral Tribunal rejected the Respondents’ request and directed them to provide security in the form of a bank guarantee of Rs. 145 crores within 14 days.
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The Petitioners filed the present petition under Section 9 of the Arbitration and Conciliation Act 1996, seeking interim relief in the form of a deposit, bank guarantee, appointment of a Court Receiver, attachment of assets, an injunction restraining the Respondents from dealing with their assets, and disclosure of all their assets. Issue
1.
Whether the Petitioners are entitled to interim relief under Section 9 of the Arbitration and Conciliation Act 1996, in light of the Emergency Arbitrator’s decision and the subsequent Tribunal’s Order, in a foreign-seated arbitration governed by the SIAC Rules?Legal Analysis
The Petitioners argue that they are entitled to interim relief under Section 9 of the Arbitration Act despite the arbitration being seated in Singapore. They contend that:
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The Emergency Arbitrator’s decision and the Tribunal’s Order are not final awards but interim orders. Party autonomy requires upholding the Emergency Arbitrator’s decision.
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Section 9 is intended to structurally support arbitration.
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The Respondents’ conduct justifies the grant of interim relief, including their failure to comply with previous awards and their attempts to delay compliance.
The Respondents counter that the petition under Section 9 is not maintainable because:
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The Emergency Arbitrator’s decision constitutes an award enforceable under Section 49 of the Arbitration Act.
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The parties excluded the application of Part I of the Arbitration Act by agreeing to arbitration under the SIAC Rules.
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The Petitioners failed to demonstrate exceptional circumstances justifying recourse to the judicial authority under Rule 30.3 of the SIAC Rules.
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The Respondents dispute the valuation conducted by PwC, asserting it lacks independence.
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The Respondents claim the Petitioners suppressed information regarding the conclusion of the US bankruptcy proceedings involving Ebix Inc.
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The Court, after considering the arguments and relevant case law, found that the Petitioners had established a case for interim relief. The Court reasoned that:
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The Emergency Arbitrator’s decision was an interim order and not a final award, as it did not finally determine any part of the dispute.
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There was no express agreement to exclude the applicability of Part I of the Arbitration Act.
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The Respondents’ reliance on case law regarding Section 34 of the Arbitration Act was misplaced.
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Party autonomy supports upholding the Emergency Arbitrator’s decision, which was well-reasoned and rendered after a fair hearing. The Respondents’ conduct, including their attempts to delay and obstruct compliance with previous awards, justified the grant of interim relief.
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The Court was not bound by the provisions of the Code of Civil Procedure when granting interim relief under Section 9.Conclusion
The Court held that the Petitioners were entitled to interim relief in the form of a bank guarantee, an injunction, and disclosure of assets. The Court rejected the Respondents’ preliminary objections regarding the maintainability of the petition under Section 9. The Court emphasized the importance of supporting arbitration and upholding party autonomy. The Court also found the Respondents’ conduct to be obstructionist and a factor justifying the grant of interim relief