Evaluating NCLT's Order In the matter of Anupam Mittal v People Interactive (India) Pvt. Ltd. and others
Authors - Abhishek Vishwanath & Vandita K M
(Authors are final year law students at School of Law, Christ University, Bangalore)
Abstract
Arbitration is a very common mode of resolution of shareholder disputes, which offers businesses flexibility in choosing the applicable law and a neutral place for their dispute resolution. However, anti-arbitration injunctions may be issued in the case of multi-jurisdictional arbitrations where the subject matter is not arbitrable under local laws. In India, the legal position surrounding anti-arbitration injunctions is murky as Court decisions on this issue have been inconsistent, creating uncertainty. This lack of clarity is due to two reasons: first, there are no clear laws governing these injunctions, and second, past court rulings have not followed a consistent pattern. This ambiguity makes it difficult to predict how courts will handle these situations in the future. The NCLT’s order in Anupam Mittal v People Interactive (India) Pvt. Ltd. and others creates further uncertainty with regard to the NCLT’s competence to issue such an injunction against the backdrop of subject matter arbitrability of the above dispute. The authors analyze the violation of a critical principle of arbitration, “Kompetenz-Kompetenz,” and further delve into the NCLT’s competence to issue an anti-arbitration injunction prior to determining a case of oppression and mismanagement.
I. Introduction
In a recent turn of events, the National Company Law Tribunal (NCLT) issued a temporary injunction on an interim application filed by Anupam Mittal (Mittal) to restrain WestbridgeVentures II Investment Holdings and other directors of People Interactive (India) Private Limited (Westbridge) from invoking arbitration proceedings in Singapore under the Rules of International Chamber of Commerce (ICC). The aforesaid application sought to stay arbitration proceedings while the Company petition for oppression and mismanagement under Section 241 and Section 242 of the Companies Act 2013 was pending before the tribunal. The injunction was granted as a result of the Bombay High Court's decision that the NCLT was the sole authority to decide on matters of oppression and mismanagement, given the non-arbitrability of such disputes under Indian law. This case is particularly relevant in understanding the competence of a quasi-judicial body like the NCLT in granting an injunction staying a foreign-seated arbitration. The validity of such an Anti-Arbitration Injunction (AAI) also stands to be appraised through the prism of limited grounds considered by Indian courts while granting one.
II. Factual Circumstances
The dispute began in 2006 between Anupam Mittal, the founder of an Indian online matrimonial service, and Westbridge Ventures, a Mauritian private equity fund, over Westridge's investment in Mittal's company. Mittal filed a petition before the NCLT alleging oppression and mismanagement. Simultaneously, Westbridge approached the Singapore High Court (SGHC) seeking an Anti-Suit Injunction (ASI) restraining Mittal from continuing with the NCLT proceedings. The SGHC granted the ASI on the grounds that clause 20 of the parties' Shareholders Agreement (SHA) was governed by the laws of India and contained an arbitration clause that mandated all disputes to be resolved through arbitration seated in Singapore as per the ICC Rules.
Mittal appealed the SGHC decision to the Singapore Court of Appeals (SCA), which upheld the ASI. In the meantime, Westbridge initiated arbitration proceedings against Mittal in Singapore. The ICC tribunal issued a partial award confirming its jurisdiction to hear the disputes raised by Westbridge. Mittal then filed a suit in the Bombay High Court, seeking a declaration that the NCLT was the only competent forum to hear and decide the disputes. Thereafter, the Bombay High Court granted an interim injunction preventing Westbridgefrom enforcing the ASI in India. Following this, Mittal approached the NCLT, praying for an interim injunction to restrain the final hearing in the ICC arbitration, which was set to commence on 18 September 2023, contending that the NCLT was, in fact, competent to grant an AAI.
III. NCLT's Order
At the outset, the NCLT examined its jurisdiction to grant an AAI by relying on Section 430 of the Companies Act, 2013, and Rule 11 of the NCLT Rules, 2016. The NCLT further analyzed whether Mittal was to be granted relief in the form of an injunction staying the ICC arbitration proceedings in Singapore. A narrow approach was adopted by using the principles of grant of an ASI when, in the present facts, Mittal had prayed for an AAI. Moreover, the order used the same criteria as the Bombay High Court in the form of the three-pillar test, which is considered for granting temporary injunctions. The three-pillar test relies on the presence of a prima facie case, irreparable harm, and balance of convenience while granting temporary injunctions.
The Bombay High Court opined that irreparable loss would be caused as Mittal would be left remediless due to an unenforceable arbitral award premised on the non-arbitrability of oppression and mismanagement disputes in India. Moreover, the NCLT brushed aside the ICC Tribunal's partial award on jurisdiction on the grounds that it would not affect the rights of the parties before Indian courts. The NCLT order also disregarded Westbridge's contractual rights as per the SHA owing to an undecided case of oppression and mismanagement. For all these reasons, the NCLT granted an AAI, as Mittal prayed for.
IV. Comment & Analysis
1. Violation of the Principle of Kompetenz- Kompetenz
The rule of Kompetenz-Kompetenz is one of the most well-established principles in modern arbitration law. Incorporated in Sections 5 and 16 of the Arbitration and Conciliation Act 1996 (The Act), this rule allows an arbitral tribunal to rule on its jurisdiction and determine the validity or existence of the arbitration agreement. As per the dispute resolution clause in the SHA, the parties agreed to constitute an ICC tribunal seated in Singapore in case of any disputes. Article 6(9) of ICC rules upholds the principle of Kompetenz-Kompetenz, granting the tribunal all the power to decide on its jurisdiction and further continue its jurisdiction to hear the parties' claims.
Mittal, acting in violation of the dispute resolution clause in the SHA, approached the NCLT by means of a company petition under Sections 241 and 242 of the Companies Act 2013. Moreover, the partial award dated 04.04.2023 by the ICC tribunal confirmed the tribunal's jurisdiction to hear Westbridge's plea. However, the NCLT's order granting Mittal an AAI against the continuity of the ICC arbitration proceedings undermines the principle of Kompetenz-Kompetenz. The author's argument does not challenge the NCLT’s jurisdiction or authority to issue an AAI; instead, it delves into the surrounding chronology of events in the case to establish that the principle of Kompetenz-Kompetenz was violated.
The question of arbitrability forms a core of the subject-matter jurisdiction of an Arbitral Tribunal; therefore, when any authority issues an AAI, it must first make an affirmative determination that the subject matter of the dispute cannot be resolved via arbitration. Therefore, had the NCLT affirmatively found that a case for oppression and mismanagement existed, then the AAI could have been justified; however, failing such a determination, this exercise of power is anti-arbitration in character. The Company Law Board observed a similar position in the case of Sidharth Gupta and Ors. v. Getit Infoservices Private Limited and Ors, where the parties were not impeded from arbitration, borne out of a Subscription and Shareholding Agreement, as no case of oppression was found.
2. NCLT's jurisdiction over oppression and mismanagement disputes
The crux of Mittal’s contention before the NCLT was that although the parties had mutually agreed on the seat of arbitration to be in Singapore, enforcing the award was pursuant to the Act. While the laws of Singapore deemed oppression and mismanagement disputes to be amenable to arbitration, Indian law considers such disputes non-arbitrable as Sections 240 and 241 of the Companies Act 2013 while conferring exclusive jurisdiction to the NCLT to decide cases of oppression and mismanagement.
The non-arbitrability of oppression and mismanagement disputes has been upheld by the Supreme Court in N. N. Global Mercantile Private Limited v/s. Indo Unique Flame Limited& Vidya Drolia and others v/s. Durga Trading Corporation. Further, the Bombay High Court in Rakesh Malhotra v. Rajinder Kumar Malhotra clarified that oppression and mismanagement disputes are "in the nature of reliefs in rem.” Thus, no agreement between the parties can confer the arbitral tribunal to provide a remedy in case of such proceedings. However, the NCLT cannot impede arbitration upon an application under Section 8 or 45 of the Act if the petition alleging oppression and mismanagement is "merely 'dressed up' and seeks, in the guise of an oppression and mismanagement petition, to oust an arbitration clause or a petition that is itself vexatious, oppressive, mala fide (or, at any rate, not bona fide)."
3. NCLT's competence to grant AAI
The NCLT derives its power to grant AAIs from Rule 11 of the National Company Law Tribunal Rules, 2016, which is to be exercised in consonance with the provisions of the Specific Relief Act 1963. Section 41 of the Specific Relief Act of 1963 describes situations and circumstances where an injunction cannot be granted. Section 41(b), in particular, stipulates that an injunction cannot be granted "to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought." The Hon'ble Supreme Court, in Cotton Corpn. of India Ltd. v. United Industrial Bank Ltd., opined that Section 41(b) was based on the equitable principle that anyone who complains of an infringement of legally bestowed interest has the right to access courts in search of justice and the same cannot be impeded. Thus, only a superior court can pass an injunction against an aggrieved party, restraining such party from instituting or prosecuting any proceeding in a subordinate court.
Additionally, the Supreme Court in Indus Mobile Distribution Private Limited Vs. Datawind Innovations Private Limited held that only courts that have jurisdiction over the seat of arbitration have the power to supervise or regulate arbitration proceedings. The power to grant an AAI restraining the proceedings before an arbitral tribunal is thus reserved only with courts in Singapore.
In the present case, the NCLT's AAI barred a foreign seated arbitration, which was mutually agreed upon between the parties to be held as per ICC Rules, with the seat being in Singapore. The NCLT acted in direct violation of Section 41(b) by granting an injunction against an arbitral tribunal, which is neither subordinate nor of equal standing to it. Although the NCLT has the inherent power to grant an AAI under Rule 11 of the National Company Law Tribunal Rules, 2016, the same cannot be exercised as a blanket power beyond the scope of Section 41(b) as done in the present case.
Interestingly, the NCLT order mentions the Himachal Sorang Power Private Limited (HSPL) Vs. NCC Infrastructure Holdings Limited (NCCL) case while considering Mittal’s arguments. In this precedent, the Delhi High Court has delineated the following broad parameters for granting an AAI;
(1) The principles operable in the case of AAI differ from those which apply to ASI.
(2) Courts are not amenable to grant an AAI unless they decide that the litigation before them is not "vexatious and/or oppressive."
(3) However, courts that have "supervisory or even personal jurisdiction" can bar new proceedings due to res judicata or constructive res judicata.
(4) The Court must also assess the necessity of conducting a trial, and if it weighs in favour of the same, the grant of an AAI would be discouraged.
(5) The Court should aim to encourage parties to pursue the "chosen adjudicatory process" by nudging them to appear before the Arbitral Tribunal or the Court that has supervisory jurisdiction in the matter.
A thorough analysis of the above-mentioned criteria would reveal that the NCLT disregarded the Delhi High Court's mandate by applying the three-pillar test rather than complying with the differential principles for AAIs as laid down in this precedent. The application of the three-pillar test free rides on the Bombay High Court's reasoning for granting an Anti-enforcement injunction, which decidedly differs from an AAI. Furthermore, the NCLT did not consider whether the proceedings before it were "vexatious and/or oppressive" and, despite the undecided nature of such proceedings, granted an AAI. Moreover, party autonomy is not respected when encouraging the parties to revert to the mutually agreed form of dispute resolution, i.e., the foreign-seated arbitration proceedings in Singapore.
V. Conclusion
The NCLT's order in Anupam Mittal has carved out an exceptional circumstance for granting an AAI by vitiating the parties' agreement to arbitrate. Granting the AAI on the grounds of irreparable loss to Mittal against the backdrop of a pending dispute before the ICC tribunal and an undecided case of oppression and mismanagement raises alarms about the NCLT's competence in this regard, especially considering the international character of the dispute, the procedural missteps of the NCLT and the consequent disregard of the arbitrators' jurisdiction.
The dispute between the parties is a long-standing one, where each has attempted to obtain ASIs and AAIs before courts in their respective jurisdictions. Filing multiple petitions in Singapore and India has rendered the dispute resolution clause of the SHA redundant, defeating the principle of party autonomy. The decision of the NCLT violates well-settled principles of Kompetenz-Kompetenz and the comity of courts with far-reaching repercussions on the jurisprudence of granting AAIs in Indian law. The NCLT should have adopted a more reserved approach towards granting an AAI, given the cautious outlook on judicial interference in arbitration proceedings, especially considering the pending nature of the assertion of oppression and mismanagement.
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