Delhi High Court grants anti-arbitration injunction in international commercial arbitration

In a rare decision, the Delhi High Court recently granted an anti-arbitration injunction in an international commercial arbitration [Techfab International Private Limited v Midima Holdings Limited]..Justice Anup Jairam Bhambhani restrained Midima Holdings Limited (Midima/ defendant) from proceeding further with arbitral proceedings before the sole arbitrator appointed by the Council for National and International Commercial Arbitration, Chennai (CNICA, Chennai), in Permanent Court of Arbitration case titled Midima Holdings Limited (Malawi) vs Techfab International Private Limited (India).The interim order will continue to remain in force till the next date of hearing before the High Court on May 2, 2024..The Court passed the order after coming to a prima facie conclusion that the appointment of the sole arbitrator based out of Kuala Lumpur (Malaysia) by the Permanent Court of Arbitration (PCA) at The Hague was contrary to the procedure agreed upon in the arbitration clause comprised in Article 9 of Agency Agreement between Techfab International Private Limited (India) [Techvab/ plaintiff) and Midima.The Court noted that the agreement contemplated that the seat of arbitration shall be in India with the governing law being of the country where arbitration would be conducted viz. India and further stipulating that the parties would be subject to the jurisdiction of courts in New Delhi.“Though the arbitration provision did say that arbitration could be conducted in any other ‘UNCITRAL [United Nations Commission on International Trade Law] following countries’, that was subject to a mutual decision of the parties, and there he is nothing on record to show that any such decision was taken by mutual consent of the parties. If anything, notice dated 02.09.2019 issued by the defendant shows their acceptance and admission of the arbitration mechanism under Article 9.1 and 9.3, pursuant to which, in 2019 the defendant had itself nominated a former Judge of this court as the Sole Arbitrator, for proceedings to be conducted in Delhi,” the Court said.It added,“It needs no re-articulation that one of the cardinal principles of arbitration is, that since arbitration is a remedy that is founded on consent of parties, the agreed procedure for appointment of an arbitrator must be scrupulously followed. This, however, does not appear to have been done in the present case.”.Techfab approached the High Court stating that it is party to an agency agreement with Midima under which disputes have arisen and Article 9 of the agreement contains the arbitration agreement and dispute resolution mechanism.The Court was told that as per Article 9, the parties agreed to multi-tier clause according to which, after failure of the pre-arbitral steps, the parties agreed to refer their disputes to arbitration.Midima issued notice of arbitration in September 2019 and sought to invoke arbitration in terms of Article 9.1 of the Agency Agreement.However, it took no further action under this notice for a very period of time. Eventually, it filed an application before the Secretary General of the PCA at the Hague in Netherlands on March 19, 2020 to designate an appointing authority under Article 6.2 of the UNCITRAL Arbitration Rules (2010).Later, on December 23, 2023, Techfab was informed that an arbitral tribunal has been constituted and that a case management conference would be held virtually on January 10, 2023.Techfab did not attend the case management hearing on that date after which the arbitrator directed them to be represented at a re-convened case management hearing on January 22, 2024, failing which they would be proceeded ex-parte.Techfab argued before the High Court that the proceedings before the sole arbitrator are non-est since they have not been initiated in accordance with and are not founded on the arbitration clause contained in the agency agreement between the parties..The Court, prima facie, agreed with the submission of Techfab and proceeded to pass an injunction order in its favour..Senior Advocate Nidesh Gupta along with advocates Joby Varghese, Shreesh Chadha, Divjot Singh Bhatia and Aman Singh Bakshi appeared for Techfab..[Read Order]