Soni Satti
The Madras High Court recently stated that the threshold requirements for granting an anti-arbitration injunction are more exacting than the tests for granting an anti-suit injunction.
Justice Senthilkumar Ramamoorthy agreed with the Delhi High Court’s decision in McDonald’s India Pvt. Ltd. v. Vikram Bakshi in this respect.
The Court while hearing the case of Sarl v. Sunraja Oil Industries Private Limited and ors ruled,
“The Delhi High Court underscored the fact that the threshold tests for an anti-arbitration injunction are more exacting than that applicable for an anti-suit injunction and concluded that the principal considerations would be those underpinning Section 45 of the Indian Arbitration Act, i.e., whether there is an arbitration agreement; and whether such agreement is null and void, inoperative or incapable of being performed. I respectfully concur with the principles set out therein. Therefore, these tests should be applied to the case at hand,”
The arbitration proceedings, in this case, resulted from a disagreement over the purchase of crude sunflower seed oil from ADM International Sarl in Switzerland by two firms, Sunraja Oil Industries Private Limited and Gem Edible Oils Private Limited.
Sunraja and Gem had objected to the arbitration proceedings because they believed the Federation of Oil Seeds & Fats Association (FOSFA), was a non-neutral platform.
The arrangements between ADM and the two firms were often criticised as unfair because they did not give the customers the option of termination.
The two buyer-companies had secured an interim injunction on ADM’s arbitration proceedings in 2019, which was periodically extended. ADM then petitioned the Madras High Court to get the injunction lifted.
In light of the issues described above regarding the grant of anti-arbitration injunctions, the High Court ruled in ADM’s favour. The Court ignored Sunraja and Gem’s arguments about the arbitral institution’s neutrality.
The Court held, “While ‘justifiable doubts of bias’s may be a valid test when an arbitral tribunal is challenged either before such tribunal or before a jurisdictional court; as stated earlier, a higher threshold should be satisfied for an anti-arbitration injunction because the plaintiff should justify the departure from the contractual dispute resolution mechanism,”
Notably, the arbitral institution’s neutrality has been questioned since it is completely owned by major oilseed sellers such as ADM. The Court, on the other hand, stated that this is not always a sign of bias.
Finally, the Court threw out the anti-arbitration injunction sought by the two buyer-companies earlier and found that the Court lacked jurisdiction over the matter.