Karnataka HC Directs Byju 's Investor to Arbitral Tribunal for Interim Relief, Cites S.9(3) Arbitration Act

Bengaluru, Karnataka – The Karnataka High Court, in a significant ruling, dismissed petitions filed by investor Qatar Holding LLC seeking interim measures against Byjus Investments Pte Ltd ( BIPL ) and its founder Byju Raveendran under Section 9 of the Arbitration and Conciliation Act, 1996. Hon'ble Mr Justice Ashok S.Kinagi held that with an Arbitral Tribunal already constituted in the Singapore-seated arbitration between the parties, the petitioner should seek relief under Section 17 of the Act before the Tribunal, unless that remedy is proven inefficacious.

The court, however, allowed existing interim orders and status-quo directions to continue for three months, granting Qatar Holding LLC time to approach the arbitral forum.

Case Background: Investment Dispute and Emergency Arbitration

The dispute originated from a USD 150 million investment by Qatar Holding LLC in Byjus Investments Pte Ltd, a Singapore-based entity, to part-finance the acquisition of shares in Aakash Educational Services Ltd ( Aakash ). The agreement, dated September 7, 2022, was supplemented by a personal guarantee from Byju Raveendran .

Alleging breaches of the agreement and events of default, Qatar Holding terminated the transaction, demanding an early termination amount of approximately USD 235.18 million. Subsequently, Qatar Holding initiated arbitration proceedings under the Singapore International Arbitration Centre (SIAC) Rules on March 7, 2024. An Emergency Arbitrator (EA) was appointed, who, on March 28, 2024, passed an interim award restraining the respondents from dealing with their assets up to the claimed value and mandating asset disclosure. This EA award was later enforced by the Singapore High Court.

Qatar Holding then approached the Karnataka High Court under Section 9 of the Arbitration Act, seeking similar interim reliefs, including an injunction against asset alienation and comprehensive asset disclosure from BIPL and Byju Raveendran , citing potential frustration of the arbitration award.

Arguments Presented

Petitioner (Qatar Holding LLC): Represented by Senior Counsel Sri. Udaya Holla and Sri. Harish B. Narasappa, argued that: * The respondents' actions and alleged transfer of assets necessitated urgent court intervention. * The High Court possesses jurisdiction under Section 9 even for foreign-seated arbitrations, and this serves as a mechanism to enforce the EA award. * The EA award covered all assets legally or beneficially owned, including Aakash shares, which they contended were beneficially owned by Byju Raveendran , pointing to his declarations under the Companies (Significant Beneficial Owners) Rules, 2018. * Byju Raveendran 's contradictory affidavits regarding the ownership of Aakash shares demonstrated malafide intent.

Respondents (Byjus Investments Pte Ltd & Byju Raveendran ): Represented by Senior Counsel Sri. Pramod Nayar, countered that: * The arbitration is seated in Singapore, and the Arbitral Tribunal has already been constituted. * Section 9(3) of the Arbitration Act bars court intervention once the Tribunal is constituted, as an efficacious remedy is available under Section 17 before the Tribunal. * They had complied with the EA award, which was enforced in Singapore. * Any modification or clarification of the EA award should be sought from the Arbitral Tribunal. * The court should not act as an appellate body over a foreign-seated EA award.

Court's Reasoning and Decision

Justice Kinagi , after perusing records and hearing arguments, focused on the applicability of Section 9(3) of the Arbitration Act.

Primacy of the Arbitral Tribunal Post-Constitution

The court underscored that Section 9(3) clearly states: "Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious."

The judgment heavily relied on the Supreme Court's decision in Arcelor Mittal Nippon Steel India Limited vs. Essar Bulk Terminal Limited (2022) 1 SCC 712 , which established that: > "the Arbitral Tribunal has the same power to grant interim relief as the Court, and the remedy under Section 17 is as efficacious as the remedy under Section 9(1). There is, therefore, no reason why the Court should continue to take up applications for interim relief, once the Arbitral Tribunal is constituted..."

The court noted that the Arbitral Tribunal in the present case was constituted and proceedings were ongoing. Therefore, the petitioner had an efficacious remedy before it.

Conduct of Respondents and Beneficial Ownership

The court took note of Byju Raveendran 's conflicting statements in affidavits concerning the ownership of Aakash shares. It observed: > "A litigant can take a different stand at different times, but cannot take a contradictory stand in the same case. A party cannot approbate and reprobate on the same facts, and take inconsistent shifting stands... A party should not blow hot and cold by taking inconsistent stands, and prolong proceedings unnecessarily." (Para 23)

The court also referenced filings under the Companies (Significant Beneficial Owners) Rules, 2018, where Byju Raveendran was declared a significant beneficial owner of Aakash shares, and the EA award's scope covering assets "legally, beneficially or otherwise" owned.

Liberty to Approach Arbitral Forum

While rejecting the petitions, the court provided a window for the petitioner. Justice Kinagi stated: > "the petitioner can approach the Arbitral Tribunal, and can make an application seeking for an interim measure. The petitioner can also seek for clarification and modification of the Emergency Arbitrator’s Award... liberty is reserved to the petitioner to make necessary application either before the Emergency Arbitrator, seeking clarification or before the Arbitral Tribunal, seeking interim relief." (Para 31, 32)

Final Order

The High Court ordered:

1. The petitions (AP.IM No. 2/2024 and AP.IM No. 3/2024) were rejected.

2. Liberty was granted to Qatar Holding LLC to approach the Emergency Arbitrator for clarification or the constituted Arbitral Tribunal for interim relief.

3. Existing interim orders, undertakings, and status-quo directions were to continue for a period of three months to enable the petitioner to seek remedies before the arbitral forum.

This judgment reinforces the principle of minimal court intervention in arbitration matters once the arbitral tribunal is seized of the dispute, directing parties towards the remedies available within the arbitral framework itself.