The Bombay High Court was recently called upon to decide an application filed by Anupam Mittal (“Applicant”), the founder of shaadi.com, seeking to restrain Westbridge Ventures II Investment Holdings and other directors of People Interactive (India) Private Limited (“Respondents”) from enforcing an anti-suit injunction granted by the High Court of Singapore. The anti-suit injunction restrained the Applicant from proceeding with his oppression and mismanagement petition before the National Company Law Tribunal (“NCLT”) on the ground that parties had agreed to resolve their disputes via arbitration seated in Singapore and disputes pertaining to oppression and mismanagement were arbitrable under Singapore law.
By its order dated September 11, 2023, the Bombay High Court granted the anti-enforcement injunction and permitted the Applicant to proceed with his petition before the NCLT, notwithstanding the ongoing arbitration proceedings between the parties in Singapore.[1] In coming to this conclusion, the Court discussed the test to be followed while deciding applications for anti-enforcement injunctions, particularly the extent to which the Court was required to examine the allegations of oppression and mismanagement for the purpose of determining whether the Applicant made out a prima facie case for grant of the injunction.
This blog analyses the findings of the Bombay High Court and its impact on foreign seated arbitrations.
Factual Background
The parties had entered into a shareholders’ agreement (“SHA”) in 2006. The dispute resolution clause in the SHA provided that disputes between the parties shall be resolved by way of arbitration seated in Singapore. It was also agreed that enforcement of the arbitral award shall be subject to provisions of the Indian Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
Disputes arose between the parties in 2019. Pursuant to this, the Applicant filed a company petition before NCLT on March 3, 2021, alleging oppression and mismanagement under Section 241 and 242 of the Companies Act, 2013 (“Companies Act”) by the Respondents.
Against this, the Respondents approached the Singapore High Court seeking an anti-suit injunction, restraining the Applicant from pursuing proceedings before the NCLT. On March 15, 2021, the Singapore High Court granted an ex-parte anti-suit injunction in favour of the Respondents. On October 26, 2021, the Singapore High Court rejected the Applicant’s attempt to vacate the ex-parte order and confirmed its earlier order granting the anti-suit injunction.[2] On January 6, 2023, the Applicant’s appeal against the anti-suit injunction was also rejected by the Court of Appeal in Singapore.[3] Meanwhile, the Respondents also invoked the arbitration agreement, alleging that the Applicant breached various clauses of the SHA and an arbitral tribunal was constituted to consider these claims.
Against this backdrop, the Applicant approached the Bombay High Court and sought to restrain the Respondents from enforcing the anti-suit permanent injunction passed by the Singapore High Court, preventing the Applicant from proceeding with his oppression and mismanagement petition before the NCLT.
Submissions before the Bombay High Court
The Applicant argued that:
- Principles governing anti-enforcement injunction are the same that govern grant of temporary or permanent injunction, namely the Applicant is required to demonstrate that he has a strong prima facie case, he would suffer grave and irreparable loss in the absence of an injunction and that the balance of convenience is in favour of the Applicant.
- In determining whether the Applicant has a strong prima facie case, the enquiry should be limited to whether the Applicant would be left remediless in pursing his grievance regarding oppression and mismanagement as a consequence of the anti-suit injunction.
- The NCLT has exclusive jurisdiction to decide disputes pertaining to oppression and mismanagement. Such disputes are not arbitrable as per Indian law and an arbitral award deciding such disputes will be un-enforceable and set aside as being opposed to the public policy of India. Since the NCLT is the only remedy available in law for the Applicant to raise oppression and mismanagement disputes, he will be rendered remediless if the anti-enforcement injunction is not granted.
The Respondents argued that:
- The Applicant’s petition before the NCLT is a ‘dressed-up’ petition and nothing but an excuse to escape the arbitration clause under the SHA. The disputes arose out of contractual obligations under the SHA and could only be resolved by arbitration at Singapore.
- The Applicant must prima facie demonstrate that the petition filed before the NCLT is maintainable and satisfies the requirements of Section 242 of the Companies Act to claim the benefit of exclusive NCLT jurisdiction. The Court should determine whether the petition can be considered as genuinely raising disputes pertaining to oppression and mismanagement. The test should be of substance over form.
- The anti-suit injunction was passed by the Singapore courts after granting the Applicant the opportunity of being heard and the effect of such order could not be lightly nullified, particularly in the context of comity of courts, which must be respected.
- The parties agreed upon Singapore being the seat of arbitration. Therefore, the courts at Singapore were vested with exclusive jurisdiction for the purpose of regulating arbitration proceedings and the Applicant cannot be permitted to initiate parallel proceedings.
Findings of the Bombay High Court:
The Court relied on Modi Entertainment Network and another v W.S.G. Cricket PTE Limited[4] and noted that an injunction amounting to an anti-enforcement action is nothing but a species of injunction and the grant of such injunction will be dependent on the Applicant satisfying the three-pronged test of prima facie case, grave and irreparable harm and balance of convenience.
On the aspect of the prima facie case, the Court referred to Section 430 of the Companies Act and the decisions in Invesco Developing Markets Fund v Zee Entertainment Enterprises Limited[5] and Rakesh Malhotra v Rajinder Malhotra[6] to hold that NCLT has exclusive jurisdiction in matters related to oppression and mismanagement and that no civil court can grant an injunction in respect of any action to be taken by the NCLT in pursuance of the powers conferred under the Companies Act.
The Court further relied on the Supreme Court decisions in N.N. Global Mercantile Private Limited v Indo Unique Flame Limited[7] and Vijay Karia v Prysmian Cavi E Sistemi SRL[8] to note that disputes related to oppression and mismanagement cannot be settled through arbitration under Indian law and that it was impossible to enforce an arbitral award deciding such disputes under Section 48 of the Arbitration Act as it would be opposed to the public policy of India. This was especially so considering that the arbitration clause in the SHA provided that enforcement of the award would be subject to the provision of the Arbitration Act. It was thus obvious that the only remedy available to the Applicant was to approach the NCLT and the anti-suit injunction granted by the Singapore High Court prevented him for exercising his right to such a remedy, thus rendering him remediless.
In this regard, the Court also referred to the Delhi High Court’s decision in Interdigital Technology Corporation v Xiaomi Corporation[9] (see here) to rule that while the principle of comity of courts is well recognised, it cannot override a litigant’s right to access of justice, particularly when an anti-suit injunction passed by a foreign court prevents the litigant from pursuing the only available remedy.
Dealing with the Respondents’ argument that the examination of a prima facie case must include an exercise on the part of the Court to determine whether the Applicant made out a genuine case of oppression and mismanagement, the Court held that such an exercise would be limited to examining whether the Applicant’s petition at all pertains to disputes concerning oppression and mismanagement. In other words, while looking at the petition filed before the NCLT, the Court cannot go into the depth of the claims and counter-claims or determine whether the Applicant’s petition is a ‘dressed-up’ petition as the same would require a detailed exercise to be carried out, which would entrench upon the NCLT’s jurisdiction. Perusing the Applicant’s petition from this angle, the Court concluded that the Applicant had made certain claims regarding the relationship between the parties in the context of the SHA and thereafter claimed oppression and mismanagement. The Court also clarified that while it did not accept whatever was stated in the petition as gospel truth, it could also not conclude that the petition did not at all pertain to oppression and mismanagement.
Thus, the Court concluded that the Applicant had a strong prima facie case in his favour since he was able to show that he will be rendered remediless and suffer grave and irreparable harm if the Respondents enforced the anti-suit injunction granted by the Singapore High Court. The balance of convenience was also in the Applicant’s favour since the grant of the anti-enforcement injunction would not prevent the Respondents from asserting their claims before the NCLT.
In view of its findings, the Court granted the anti-enforcement injunction in favour of the Applicant and restrained the Respondents from directly or indirectly enforcing the anti-suit injunction granted by the Singapore High Court.
Conclusion: Futility to override Party Autonomy?
The Bombay High Court’s decision re-affirms the principles to be considered by a court while deciding applications for grant of anti-enforcement injunctions. It also clarifies the extent to which a court can examine the genuineness of allegations regarding oppression and mismanagement while considering whether the applicant has made out a prima facie case for grant of an anti-enforcement injunction.
This decision also has some bearing on party autonomy in foreign seated arbitrations. This is because the Bombay High Court has given primacy to the futility of conducting arbitration (owing to the final award being unenforceable in India) over a conscious choice made by sophisticated parties, acting on the advice of their counsel, to have their disputes resolved by arbitration in Singapore (which allows arbitration in case of oppression and mismanagement disputes as opposed to India).
It is not difficult to imagine that by placing reliance on the Bombay High Court’s decision, recalcitrant parties may raise frivolous claims alleging that the dispute is non-arbitrable in order to avoid or delay the arbitration proceedings. As a result, parties will have to exercise caution while choosing the seat of arbitration, particularly where the contract may give rise to disputes which, although arbitrable as per the law of the seat, may not be arbitrable in India.
For further information, please contact:
Monark Gahlot, Partner, Cyril Amarchand Mangaldas
monark.gahlot@cyrilshroff.com
[1] Interim Application No.1010 OF 2021 in Suit No.95 OF 2021, In the High Court of Judicature at Bombay.
[2] [2021] SGHC 244.
[3] [2023] SGCA 1
[4] (2003) 4 SCC 341.
[5] 2022 SCC OnLine Bom 630.
[6] 2014 SCC OnLine Bom 1146.
[7] (2021) 4 SCC 379.
[8] (2020) 11 SCC 1.
[9] Judgement and order dated 03.05.2021 passed in Interim Application No.8772 of 2020 in CS (Comm) 295 of 2020.
