The court upheld the integrity of arbitration agreements, stating that foreign court actions violating such agreements can be restrained by injunction under Section 9 of the Arbitration and Conciliation Act.

JUDGMENT :

C. Hari Shankar, J.

A Prefatory Note

1. This is one of the worst instances of abuse of the legal process, in commercial litigation, that this Court has had the misfortune of encountering.

2. The petitioner and respondent entered into an Authorized Distributorship Agreement [“ADA” hereinafter], whereunder the respondent was to distribute the petitioner’s products in the Middle East and Africa. The contract specifically envisaged resolution of disputes by arbitration, to be governed by the Arbitration and Conciliation Act, 1996[“the 1996 Act” hereinafter], with New Delhi as the arbitral venue. The contract separately contained a clause conferring exclusive jurisdiction, in respect of all matters relating to the contract, on courts in New Delhi. The contract also specified that it was to be interpreted in accordance with Indian law which was, therefore, both the governing and the curial law.

3. The respondent, in clear and mala fide breach of all these covenants, filed a suit in the Court of First Instance, Dubai[“the Dubai Court” hereinafter], alleging breach of the ADA by the petitioner, and is now the holder of a decree by the Dubai Court which, applying Dubai law to the dispute, has found the petitioner guilty of breach of the ADA and mulcted the petitioner with damages of AED 25,071,991, equivalent to ₹ 57,17,65,947 (at the conversion rate of ₹ 22.80 to 1 AED as applicable today).

4. The respondent acknowledges, in its written submissions, without as much as blinking an eyelid, that, by this stratagem, it has rendered the arbitration agreement, as well as all other contractual covenants between the parties, unworkable. To quote the exact submission of the respondent:

“In the present case, there cannot be any arbitration as there has been a determination bya Court of Law and an arbitrator cannot be Court of Appeal.”

(Emphasis supplied)

Thus, there is a candid acknowledgement, by the respondent, that, by approaching the Dubai Court in stark violation both of the arbitration as well as the exclusive jurisdiction clauses in the ADA, the respondent has rendered the arbitration agreement unworkable.

5. The petitioner has moved this Court under Section 9[9. Interim measures, etc. by Court. –
(1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court:—
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining