Delhi High Court supports parties' agreement to arbitrate in Singapore

Appellate courts in India have sometimes been subject to criticism from international arbitration practitioners due to their interventionist approach (often under the guise of supervision) towards arbitration proceedings.

Therefore, it is worth noting the recent decision in Max India Limited v. General Binding Corporation (Max) in which the Delhi High Court rejected the appellant's invitation to intervene and ruled that it should not grant interim relief to the applicant prior to the commencement of arbitral proceedings, as there was an alternate forum available to the parties in the Singapore courts. The decision was upheld on appeal by a division bench of the Delhi High Court.

The ruling contrasts with some other Indian court decisions, particularly in the context of the applicability of Part I of the Indian Arbitration and Conciliation Act, 1996 (Act) to international arbitrations seated outside India.

The facts

The case concerned an agreement between a US company and an Indian company regarding the manufacture of synthetic films. The agreement, which was said to have been executed in Delhi, provided for disputes to be resolved by arbitration in Singapore under the rules of the Singapore International Arbitration Centre (SIAC) and for the Singapore courts to otherwise have jurisdiction.

A dispute having arisen, the Indian party applied ex parte under the Act for an interim restraining injunction against the US party pending the constitution of an arbitral tribunal in Singapore. The US party then successfully challenged the injunction on the basis that the Delhi High Court had no jurisdiction in the matter. This decision was then appealed.

Applicability of Part I of the Act to International Arbitrations: Legacy of Bhatia International

In order to appreciate the position of the Delhi High Court in Max, it is important to refer back to the decision of the Indian Supreme Court in Bhatia International v Bulk Trading SA (2002 4 SCC 105) regarding the scope of application of Section 9 of the Act. This case formed the cornerstone of the appellant's arguments in Max and was carefully considered by the appeal bench.
Section 9 (situated in Part I of the Act) enables Indian courts to grant interim measures to parties either before or during arbitral proceedings, or at any time after the making of an arbitration award but before it is enforced.

Section 2(2) of the Act provides that Part I (including Section 9) applies where the place of arbitration is in India, but is silent as regards arbitrations outside India. Part II then concerns the enforcement of foreign arbitral awards.

In Bhatia International, the Indian Supreme Court ruled that the Provisions of Part I of the Act (including Section 9) were also applicable to international commercial arbitrations, irrespective of the seat of the arbitration, unless parties specifically contracted out of Part I, either expressly or impliedly. The Supreme Court was concerned that in the absence of an extension of Part I to international arbitrations seated outside India, parties in need of remedies in India would be left without any recourse.

Ruling in Max: Change in Stance?

The agreement in Max provided for Singapore law as the governing law, and stated that the Singapore courts "have jurisdiction to settle any disputes that may arise out of or in connection with this Agreement". The agreement further provided for arbitration under SIAC Rules in Singapore. In considering Bhatia International (and Venture Global Engineering v. Satyam Computer Services), the Delhi High Court found a "manifest intention of the Agreement … to exclude the jurisdiction of the Indian Courts". The fact that the parties had chosen Singapore law, Singapore arbitration and the Singapore courts meant, as the First Instance judge had found, that they "knew very well" at the time of entering the agreement that the jurisdiction of Part I of the Act had been excluded.

In its detailed decision, the Appellate Bench considered the applicability of Bhatia International and other decisions of the Supreme Court on Section 9. It reasoned that although the Supreme Court in Bhatia International was concerned that parties would be without remedy if Section 9 was not to apply to international arbitration, there was no necessity for the Indian courts to grant interim relief to the appellant in this case as it was not left without remedy – it could apply to the Singapore courts.

Conclusion

The detailed judgment of the two judge Appellate Bench in Max provides an explicit statement of the role of the national court in supporting the process of arbitration. Indeed it even includes a re-statement of the "general principles on which arbitration is founded", namely:

"i. The object of arbitration is to ensure a fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.

ii. The parties should be free to agree how their disputes are resolved subject only to such safeguards as are necessary in the public interest.

iii. Intervention of the courts should be restricted."

The resistance shown by the Delhi High Court in this case in rejecting successive invitations by the Indian party to assert jurisdiction over the parties' agreement is to be welcomed.

It is particularly noteworthy that, although bound by and in no way diverting from the decision of the apex court in Bhatia International, the Delhi High Court has resisted widening the application of that decision by upholding the clear intention of the parties to resolve their disputes in a forum outside India.