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Karnataka High Court Rules Does Not Bar Under Section 9
In a significant ruling for international commercial arbitration, the has affirmed that the selection of a foreign seat for arbitration does not automatically oust the of Indian courts to grant . Justice M.G.S. Kamal, presiding over the matter involving Singapore-based and its former consultants, held that statutory provisions under the , remain accessible unless parties explicitly agree to exclude them.
Background of the Dispute
The conflict arose from a series of Master Service Agreements (MSAs) executed between and . Aroha Labs engaged several consultants, including Prem Dharmani, to facilitate the development and commercialization of AI-driven software applications, notably Astro 247 , Amore , and Creato . Aroha Labs asserted that it had invested over ₹2.2 crore into these projects and that, under the MSAs, all intellectual property rights—including source code—were exclusively assigned to the company.
The situation deteriorated after a term sheet was signed in for the incorporation of a local Indian entity, . Aroha Labs alleged that while it expected a 38% stake in the new company, the entity, once incorporated with Mr. Dharmani holding 99.99% of shares, began claiming independent ownership of the software applications, prompting Aroha Labs to terminate the agreements and initiate arbitration at the (SIAC).
Legal Arguments
Aroha Labs argued that the , allows parties to seek from an Indian court despite a foreign seat. It further pointed to of their agreement, which explicitly permits parties to approach "any court" for .
The respondents—comprising the consultants and Creato Club—contended that because the seat of arbitration was Singapore, only the Singaporean courts possessed the to grant interim reliefs. Furthermore, they argued that Creato Club, as a to the MSAs, should not be bound by any issued by an Indian court.
Judicial Analysis and Reasoning
Justice Kamal rejected the respondents' narrow interpretation of
. The court observed that the
amendment to the Arbitration and Conciliation Act was specifically intended to preserve the power of Indian courts to protect assets situated within India.
"Mere existence of an arbitration clause providing place of arbitration outside India itself cannot be construed as 'an agreement to the contrary',"
the Court noted.
Addressing the issue of the entity, the Court emphasized that a rigid application of corporate formalities is not appropriate when evaluating whether a company is an of a signatory. Relying on the principles set forth by the Supreme Court of India in , Justice Kamal found sufficient evidence that Creato Club was effectively a under the control of Mr. Dharmani, as the applications were developed on Aroha Labs' platforms long before the entity's incorporation.
Key Observations
The High Court emphasized the necessity of a balanced approach in arbitration disputes:
*
"Courts and the Tribunals, while considering the issue, whether or not
to be a party to the arbitration agreement, cannot take rigid stand but has to take a balance stand, considering the facts and circumstances of each case."
*
"It may adopt '
' or '
' to
."
*
"The
shall consider the contentions of the parties... on its merits."
Court’s Decision
The High Court granted a partial injunction, restraining the respondents from using, modifying, or transferring the disputed software applications pending the outcome of the arbitral proceedings. However, the Court declined to issue a mandatory injunction for the immediate delivery of physical property, such as laptops and storage devices, noting that such relief typically requires a higher threshold of evidence not met at this . This ruling serves as a vital precedent, reinforcing the accessibility of Indian courts for protective measures in global commercial disputes.
