Court’s Decision
The Karnataka High Court dismissed a petition seeking an anti-arbitration injunction to restrain arbitral proceedings initiated before the Delhi High Court Arbitration Centre. The Division Bench comprising Chief Justice Vibhu Bakhru and Justice C.M. Joshi held that the petition was not maintainable as it directly contravened the non-obstante clause in Section 5 of the Arbitration and Conciliation Act, 1996, which bars judicial interference except where expressly permitted by the statute.
The Court observed:
“When parties have consciously chosen arbitration as their mode of dispute resolution, judicial interference in the arbitral process is both impermissible and destructive of legislative intent.”
It further held that anti-arbitration injunctions are inconsistent with the statutory framework of the 1996 Act, as parties aggrieved by the existence or validity of an arbitration agreement have adequate remedies under Sections 8, 11, 13, and 16 of the Act itself.
Accordingly, the petition was dismissed as devoid of merit, and the parties were directed to raise all their jurisdictional and substantive objections before the arbitral tribunal.
Facts
The dispute arose out of a Shareholders’ Agreement (SHA) executed between two corporate entities engaged in the renewable energy sector. The agreement contained a comprehensive arbitration clause, providing that disputes would be resolved through arbitration seated in New Delhi, with proceedings governed by the Arbitration and Conciliation Act, 1996.
After differences emerged concerning share transfers and management control, one of the parties invoked arbitration before the Delhi International Arbitration Centre (DIAC). The opposing party, instead of participating in the proceedings, approached the Karnataka High Court, seeking an injunction to restrain continuation of the arbitration on the ground that the claims were barred by limitation and that the invocation itself was mala fide.
The petitioner argued that the invocation of arbitration was contrary to the terms of the SHA and that continuing the proceedings would cause grave injustice. It thus prayed for a permanent injunction to restrain the respondent from proceeding before the DIAC.
Issues
- Whether a High Court has jurisdiction to restrain arbitration proceedings through an anti-arbitration injunction in light of Section 5 of the Arbitration and Conciliation Act, 1996.
- Whether allegations of mala fide invocation or limitation can justify judicial interference prior to the tribunal’s constitution.
- Whether objections regarding jurisdiction and arbitrability should be decided by the Court or by the arbitral tribunal under Section 16 (Kompetenz-Kompetenz principle).
Petitioner’s Arguments
The petitioner contended that the invocation of arbitration was void ab initio, as the claims raised were time-barred and beyond the scope of the arbitration clause. It was argued that permitting the proceedings to continue would amount to abuse of process and cause irreparable loss.
It was further submitted that Section 9 of the Arbitration Act empowers courts to grant interim relief, and therefore, the present injunction was a legitimate extension of judicial power to prevent a futile or vexatious arbitration. The petitioner relied upon Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2012) to argue that courts can, in exceptional cases, examine whether an arbitration agreement exists or whether invocation is fraudulent.
The petitioner urged that where manifest illegality or bad faith is apparent on the face of the record, courts retain inherent jurisdiction under Article 226 of the Constitution to issue appropriate writs, including anti-arbitration injunctions, to prevent injustice.
Respondent’s Arguments
The respondent opposed the petition, asserting that the relief sought was fundamentally barred under Section 5 of the Arbitration Act, which limits judicial intervention to circumstances expressly provided for in the statute. The respondent submitted that all jurisdictional and arbitrability issues must be decided by the arbitral tribunal under Section 16, and that courts cannot pre-emptively intervene in the arbitral process.
It was contended that the petitioner’s grievances regarding limitation, maintainability, or mala fides were defences on merits, which could not form the basis of an injunction. The respondent relied on SBP & Co. v. Patel Engineering Ltd. (2005), Kvaerner Cementation Ltd. v. Bajranglal Agarwal (2012), and A. Ayyasamy v. A. Paramasivam (2016) to highlight the principle of minimal judicial interference and the competence of arbitral tribunals to decide jurisdictional questions.
Analysis of the Law
The Court analysed the legislative scheme of the Arbitration and Conciliation Act, 1996, noting that it was designed to minimise judicial intervention and promote autonomy of the arbitral process. Section 5 of the Act begins with a non-obstante clause, stating that “no judicial authority shall intervene except where so provided in this Part.”
The Bench clarified that while Section 9 allows courts to grant interim measures, such powers cannot be stretched to restrain arbitration itself. The statutory remedy for contesting jurisdiction or arbitrability lies under Section 16 (Kompetenz-Kompetenz) and, subsequently, under Section 34, if an award is made.
The Court emphasised that entertaining anti-arbitration injunctions would frustrate the object of the Act, which is to ensure expeditious resolution of disputes without procedural obstruction.
Precedent Analysis
- Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2012) 5 SCC 214 – The Supreme Court held that once an arbitration clause exists, the issue of jurisdiction must be raised before the arbitral tribunal, not the court.
- SBP & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618 – Clarified the limited role of courts at the pre-arbitral stage and reaffirmed minimal interference.
- A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386 – Held that even allegations of fraud do not automatically render a dispute non-arbitrable unless they go to the root of the agreement.
- World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte Ltd. (2014) 11 SCC 639 – Confirmed that anti-arbitration injunctions are to be granted only in rarest cases involving clear absence of an arbitration agreement.
- Vidya Drolia v. Durga Trading Corporation (2020) 20 SCC 406 – Reaffirmed the Kompetenz-Kompetenz principle and held that the arbitral tribunal is the first authority to decide jurisdictional objections.
The High Court relied on these decisions to hold that the statutory framework provides an inbuilt mechanism for resolving preliminary objections and that court interference at this stage would be contrary to legislative intent.
Court’s Reasoning
Chief Justice Bakhru noted that the petitioner’s grievance pertained to limitation and validity of invocation, both of which are arbitral issues, not jurisdictional ones. The Court reasoned that the arbitral tribunal has the exclusive competence to decide these questions under Section 16.
The Bench held that judicial restraint is essential to preserve the efficacy of the arbitral process. If courts begin entertaining challenges to arbitration before constitution of the tribunal, every respondent could obstruct proceedings by seeking injunctions, defeating the very object of arbitration.
It further observed:
“Courts cannot be used as forums to derail arbitral proceedings. The legislative intent is clear — all objections to the existence or validity of an arbitration agreement must be addressed before the arbitral tribunal itself.”
Consequently, the petition was dismissed as not maintainable, with liberty to the petitioner to raise its objections before the arbitral tribunal.
Conclusion
The Karnataka High Court dismissed the anti-arbitration injunction petition, reaffirming that Section 5 of the Arbitration Act bars judicial interference in arbitral proceedings except where explicitly authorised. The decision underscores the judiciary’s consistent commitment to the autonomy of arbitral tribunals and the principle of minimal court intervention.
The Court also cautioned that entertaining such petitions would open the floodgates for pre-emptive litigation, undermining the efficiency and finality that arbitration seeks to achieve.
Implications
- Reaffirms that anti-arbitration injunctions are impermissible in domestic arbitration under the 1996 Act.
- Clarifies that courts cannot restrain arbitral proceedings; objections must be raised under Section 16 before the tribunal.
- Strengthens India’s arbitration-friendly jurisprudence, promoting procedural efficiency and party autonomy.
- Signals judicial intolerance toward pre-emptive obstruction of arbitration through writ or injunction petitions.
