2016 Supreme(Del) 3765

IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED & ANR. – Petitioners
Versus
EDUCOMP PROFESSIONAL EDUCATION LIMITED &ORS. – Respondents
O.M.P.(I) (COMM.) 23 of 2015 & CCP(O) 59 of 2016, IA Nos.25949 of 2015 & 2179 of 2016
Decided On : 07-10-2016

Headnote:

The amendment to Section 2(2) of the Arbitration and Conciliation Act, 1996 (the Act) by Section 2(II) of the Amendment Act was intended to strengthen the view of the Supreme Court in Bharat Aluminium Company v. Kaiser Aluminium Technical Service, Inc. and Ors. (2012) 9 SCC 552 (Bharat Aluminium) in respect of lex arbitri being the law that is applicable at the seat of arbitration; at the same time also enable courts to pass interim orders. The amendment is also to overcome the view in Bhatia International v. Bulk Trading S.A. and Anr (2002) 4 SCC 105 (Bhatia International). The object of the said amendment is clearly to enable a party to take recourse to the courts to assist the arbitral process being conducted overseas.

Fact of the Case:

The petitioners and the respondents entered into a Share Purchase Agreement (SPA) whereby, on fulfilling the conditions set out in the SPA, shares of respondents in ERHEL were to be acquired by the Petitioners. Certain disputes arose between the parties in relation to the SPA. Clause 15 of the SPA provides that the SPA would be governed and construed in accordance with the laws of Singapore. Further the Arbitration would be held in Singapore under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC Rules). The petitioners invoked the arbitration clause by filing a Notice of Arbitration with the Singapore International Arbitration Centre (SIAC) with a copy thereof to the respondents. The Emergency Arbitrator passed an Interim Emergency Award (IEA) wherein the Interim relief sought by the claimants was granted and respondents were restrained from taking any action that deprived the rights of the claimants in the SPA in respect of (a) hiring and dismissal of employees of the Society; (b) functioning and management of the society. The respondents filed an application under paragraph 7 of schedule 1 of SIAC Rules praying for setting aside of the IEA. However, on 14.01.2016, a consent order was passed by the sole arbitrator, Mr Andrew Jeffries, wherein the operative first two paragraphs of the IEA were reiterated but the parties also agreed that the said paragraphs of the IEA: (1) are negative or prohibitory in nature and not positive or mandatory in nature; and (2) do not require any member of the Society to act in breach of their fiduciary duty to the Society. The petitioners filed an application being Case No 929/2015 before the High Court of the Republic of Singapore (Singapore High Court) under Section 12 of the International Arbitration Act (IAA) seeking enforcement of the IEA against respondent no 2. It is stated by the respondents that petitioners have secured an enforcement order dated 04.02.2016 against respondent no 2. The respondents filed an application under Section 34 of the Act to set aside the IEA.

Finding of the Court:

The Court held that the amendment to Section 2(2) of the Act by Section 2(II) of the Amendment Act was intended to strengthen the view of the Supreme Court in Bharat Aluminium in respect of lex arbitri being the law that is applicable at the seat of arbitration; at the same time also enable courts to pass interim orders. The amendment is also to overcome the view in Bhatia International. The object of the said amendment is clearly to enable a party to take recourse to the courts to assist the arbitral process being conducted overseas. The Court further held that the parties had expressly agreed that the arbitration shall be governed by the SIAC Rules. Rule 26.3 of the SIAC Rules, expressly provides that:- "26.3 A request for interim relief made by a party to a judicial authority prior to the constitution of the Tribunal, or in exceptional circumstances thereafter, is not incompatible with these Rules." This is pari materia to Article 9 of the Model Rules. The SIAC Rules must be read as a part of the agreement between the parties and the only conclusion that can be drawn is that the parties had expressly agreed that seeking an interim order from the Courts would not be incompatible with the arbitral proceedings. The Court also held that the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for the petitioner to file a suit.

Issues: Whether the petition filed by the petitioners is maintainable.

Ratio Decidendi: The Court held that the petition filed by the petitioners is maintainable. The Court observed that the amendment to Section 2(2) of the Act by Section 2(II) of the Amendment Act was intended to strengthen the view of the Supreme Court in Bharat Aluminium in respect of lex arbitri being the law that is applicable at the seat of arbitration; at the same time also enable courts to pass interim orders. The amendment is also to overcome the view in Bhatia International. The object of the said amendment is clearly to enable a party to take recourse to the courts to assist the arbitral process being conducted overseas. The Court further observed that the parties had expressly agreed that the arbitration shall be governed by the SIAC Rules. Rule 26.3 of the SIAC Rules, expressly provides that:- "26.3 A request for interim relief made by a party to a judicial authority prior to the constitution of the Tribunal, or in exceptional circumstances thereafter, is not incompatible with these Rules." This is pari materia to Article 9 of the Model Rules. The SIAC Rules must be read as a part of the agreement between the parties and the only conclusion that can be drawn is that the parties had expressly agreed that seeking an interim order from the Courts would not be incompatible with the arbitral proceedings.

Final Decision: The Court held that the petition filed by the petitioners is maintainable.