Delhi High Court Grants Anti-Arbitration Injunction In International Commercial Adjudication

Delhi High Court Grants Anti-Arbitration Injunction In International Commercial Adjudication

The interim order will remain in force till the next date of hearing on 02 May

In a landmark judgment, the Delhi High Court has granted an anti-arbitration injunction in international commercial arbitration.

In the Midima Holdings Limited (Malawi) vs Techfab International Private Limited (India) case, Justice Anup Jairam Bhambhani restrained Midima Holdings from continuing with the arbitral proceedings before the sole arbitrator appointed by the Chennai bench of the Council for National and International Commercial Arbitration in the Permanent Court of Arbitration (PCA).

The order was passed on observing that the sole arbitrator’s appointment in Kuala Lumpur, Malaysia by the PCA at The Hague, Netherlands, was contrary to the procedure agreed upon in the arbitration clause comprised in Article 9 of the Agency Agreement between Techfab International and Midima.

The bench noted that the agreement contemplated India as the seat of arbitration, with the governing law being of the country and stipulating that the parties would be subject to the jurisdiction of the Courts in New Delhi.

Justice Bhambhani stated, “Though the provision stated that arbitration could be conducted in any other UN Commission on International Trade Law following countries, it was subject to a mutual decision of the parties. There is nothing on record to show that any such mutual decision was taken. The notice of 02.09.2019 issued by the defendant shows its acceptance and admission of the arbitration mechanism under Articles 9.1 and 9.3. Under it, the defendant had nominated a former judge of this Court as the sole arbitrator, for proceedings to be conducted in Delhi.”

It added, “It needs no re-articulation that one of the cardinal principles of arbitration is that since arbitration is a remedy founded on the consent of the parties, the agreed procedure for the appointment of an arbitrator must be scrupulously followed.”

Techfab had approached the Court stating that it was party to an agency agreement with Midima. However, disputes arose, and Article 9 contains the arbitration agreement and dispute resolution mechanism. Thus, the parties agreed to the multi-tier clause according to which, after failure of the pre-arbitral steps, the parties agreed to refer their disputes to arbitration.

In September 2019, Midima issued a notice of arbitration and sought to invoke arbitration in terms of Article 9.1 of the Agency Agreement. However, it took no further action for long.

Later, on 19 March 2020, it applied to the Secretary General of the PCA to designate an appointing authority under Article 6.2 of the UNCITRAL Arbitration Rules, 2010.

Thereafter, on 23 December 2023, Techfab was informed that an arbitral tribunal was constituted and on 10 January 2023, a case management conference would be held.

On the scheduled date, Techfab did not attend the case management hearing. Subsequently, the arbitrator directed it to be represented at a re-convened case management hearing on 22 January 2024, failing which it would proceed ex-parte.

Techfab argued before the Court that the proceedings before the sole arbitrator were non-est and not founded on the arbitration clause contained in the Agency Agreement.

Prima facie, the bench agreed with Techfab’s submission and passed an injunction order in its favor.

Senior Advocate Nidesh Gupta along with Advocates Joby Varghese, Shreesh Chadha, Divjot Singh Bhatia and Aman Singh Bakshi appeared for Techfab.