Column: Legal

LEGAL
Going By The Book

Indian courts have no jurisdiction to grant interim relief where arbitral proceedings are held outside India.

By Diljeet Titus, Titus & Co. Advocates

Our arbitration agreement provides for resolution of disputes as per the ICC Rules of Conciliation and Arbitration and London is the venue of arbitration. Being an Indian company, can we seek interim measures of protection from a court in India against our foreign partner?

Section 9 of the Arbitration and Conciliation Act, 1996 (Act) allows interim relief by Indian courts, if the arbitral venue is in India. The Act, however, does not provide for interim relief through the Indian court process where the place of arbitration is outside India. In a recent judgement, the High Court of Delhi held that if the venue of arbitration is outside India, a petition under Section 9 of the Act, to seek interim relief, will not be maintainable since Section 9 which is under Part-I of the Act applies only to arbitral proceedings where the place of arbitration is in India. Indian courts, therefore, have no jurisdiction to grant interim relief where arbitral proceedings are held outside India. Even though a party may not be able to apply to Indian courts for interim relief, in such circumstances, it is not remediless, in as much as it can apply to the arbitral tribunal to make an interim award, which may be enforced as if it was an arbitral award. In the circumstances, though an Indian court may not grant interim relief, you can apply to the arbitral tribunal constituted under the ICC Rules to obtain relief.

A transaction that we are currently contemplating requires, as part of the documentation, an irrevocable power of attorney to us to deal with movable properties. Can a power of attorney actually be made irrevocable under Indian law?

If the attorney holder himself has an interest in the movable property, the executor cannot unilaterally revoke the authority to the attorney holder's prejudice. For example, if interest in the subject matter is assigned to the attorney holder as security simultaneous with the vesting of power and the attorney holder exercises such power to discharge an obligation owed by the executor to the attorney holder, then the power becomes irrevocable. However, if the interest created for the attorney holder is only in the result; or the proceeds arising after exercise of the power; or is only incidental to the exercise of the granted power (for example, if the attorney holder is to retain a percentage of the proceeds as his commission or remuneration) then the power of attorney is revocable. A power of attorney in any case cannot be revoked after the attorney holder has exercised the powers assigned to him. Thus, under Indian law, authority under a power of attorney can be irrevocable if the authority assigned to the attorney holder also creates an interest on an independent basis.

We have provided a bank guarantee to a private party for our due performance of the contract. Should the other party seek to encash the bank guarantee for reasons not directly related to contract performance, can we obtain an injunction against the same?

The Supreme Court of India has held in a number of cases that only in special cases of fraud or misrepresentation or where encashment of bank guarantee is likely to result in irreparable damage or irretrievable injustice to the debtor, should courts grant injunction against encashment of the bank guarantee. Courts have held that the bank must pay according to the tenor of its guarantee on demand without proof or condition. A bank guarantee is construed as separate and distinct from the contract between the parties under which contractual obligations are to be performed and encashment of the bank guarantee is generally not qualified by the underlying transaction and the validity of the primary contract between the parties. If a bank guarantee is unconditional, courts usually refrain from issuing an injunction against encashment while in cases of conditional guarantees, courts may issue an injunction against encashment. Thus, if your bank guarantee is conditional or fraud of a serious nature is established in the transaction, you may have a case to obtain an injunction against the other party from encashing the bank guarantee.

The view expressed here should not be construed as legal opinion and is for reference only. Business Today and/or the author will not be responsible for any decision taken by readers on the basis of these views. Please send in your queries to legal.bt@intoday.com or Going By The Book, c/o Business Today, F-26, Connaught Place, New Delhi-1

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