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Doctrine of Election in Arbitration Law

Arbitration has become the preferred mode of dispute resolution for resolution of disputes amongst the business community due to speedy resolution, confidentiality of proceedings and availability of subject matter experts. Institutional Arbitration has gained popularity in the world of arbitration, with institutions like ICC, LCIA, SIAC and JAMS gaining a stellar reputation across the globe for their expertise in administrating arbitrations.

The concept of an Emergency Arbitrator is usually provided for in these institutions and has also gained popularity as a concept. Parties who seek immediate relief move Emergency applications before a temporarily appointed arbitrator for adjudication of urgent interim relief.

This article will endeavour to understand whether a party which has sought interim relief before the emergency arbitrator, and has been unsuccessful is entitled to move the National Courts for interim relief under Section 9 of The Arbitration and Conciliation Act, 1996 for the same relief or whether such application will be barred under the Doctrine of Election. This article will endeavour to explain this question through a recent judicial pronouncement of the Hon'ble High Court of Delhi in the case of Ashwani Minda vs U-shin.

What Is An Emergency Arbitrator/Tribunal?

The concept of Emergency arbitrator was first envisaged in the SIAC arbitration rules in 2010. The basic purpose of an emergency arbitrator or tribunal is to adjudicate on urgent interim relief which the parties seek, and which cannot wait for the formal appointment of a sole arbitrator or arbitral tribunal. Emergency applications have now increasingly become a commonplace feature in all arbitral institutions and usually the reliefs which are sought through emergency arbitration are in the nature of preservation orders, freezing orders, Mareva injunctions and general injunctive relief. Indian Arbitral institutions like the Indian Council of Arbitration and Delhi International Arbitration centre also have provisions for emergency arbitrations in their rules.

What Is The Meaning Of Doctrine Of Election?:

The Doctrine of Election is a branch of the rule of Estoppel, it is essentially an branch of equity jurisprudence. It means that when several remedies are available to a litigant arising out of the same transaction the aggrieved party can choose either of them, but not both. The lectures of Maitland have succinctly described this position by saying as follows:-election is the obligation imposed by a party by the courts of equity to choose between 2 inconsistent or alternate rights when there is clear intention of persons for whom he derives one, that he should not enjoy both.

Ashwani Minda Vs U-Shin(Omp (I) (Comm.) 90/2020):

  1. On 14th January 2020 Justice Jyoti Singh of the Hon'ble Delhi High Court delivered a landmark judgement as to the applicability of the Doctrine of Election to arbitration proceedings .It explains in a very nuanced manner the applicability of this doctrine to arbitration proceedings and also makes interesting observations about the Courts power to grant interim relief when the arbitral tribunal has adjudicated on the same interim relief. It also discusses in what circumstances can parties be said to be excluded by conduct from Part-1 of The Arbitration and Conciliation Act, 1996?
     
  2. Factual Background Of The Case:

    The applicant/petitioner in the said instant case entered into a joint venture agreement with the respondent, U-shin Ltd. The Respondent is a Japanese corporation with the business of designing, developing and sale of control mechanisms for automative machines.

    Respondent No.2 is also a Japanese company. Respondent No.1 is a wholly owned subsidiary of Respondent No.2 . As per clause 5.1 and 5.2 of the JVA applicant no.1 was to have majority shareholding in the JV, and thus applicant would have complete control over the JV through day to day management activities as well as majority voting rights at directors and shareholders meetings. As per Article 7 of the said JVA-Benefits and obligations under the agreement shall not be directly or indirectly transferred by any of the parties hereto without prior consent in writing, providing herein that nothing shall restrict right to transfer or assign benefits and obligations hereunder to any parent company or merged or subsidiary company.

    On 10.04.2019 Respondent No.1 informed applicants that business integration has been duly executed and Respondent 1 has become the group company of Respondent No.2, which meant that it was a wholly owned subsidiary of Respondent No 2. Respondent No.1was de-listed from the Tokyo Stock exchange, which meant that Respondent No.2 was completely under Respondent No1.

    On 16.12.2019 Respondent informed applicants that Respondent No.2 was obliged to give an open offer under the provisions of the Takeover Code. The Applicant considered this as a breach of the JVA and sought interim injunctive relief to prevent Respondents from purchasing shares via open offer from the Emergency Arbitrator appointed under Japanese Commercial Arbitration Association rules. The Emergency Arbitrator heard the submissions of the parties in detail and declined to grant interim relief in favour of the applicants/petitioners. The applicants filed a petition under Section 9 of The Arbitration and Conciliation Act, 1996 seeking inter alia the same relief that was sought from the Emergency Arbitrator.
     
  3. Issues Before The Court-

    1. Scope of right of party to approach the Court for seeking interim relief when the arbitral tribunal/arbitrator has already declined to give the same interim relief:-The Hon'ble Court said that the parties have consciously chosen to tread on a particular part, and they cannot now turn back because they have been unsuccessful. The Court said that the Doctrine of Election will bar the applicant from seeking interim relief as the same issue has been raised before the Emergency Arbitrator. All the issues have been conclusively dealt by the arbitrator vide detailed order and applicants cannot be permitted to take a second bite at the cherry.
       
    2. Whether Part 1 of the Arbitration and Conciliation Act, 1996 has been consciously excluded by the agreement of the parties? The Court considered the arbitration clause entered into between the parties which provided for disputes to be resolved by arbitration as per rules of the Japanese Commercial Arbitration Association with seat in Tokyo.

      It is settled Law that when seat of Arbitration is situated in a particular country, only that particular countries courts can grant interim relief, as designation of seat is akin to an exclusive jurisdiction clause. The Court contended that it was conclusively held in the BALCO case that when seat of arbitration is held to be outside India, then part-1 of the Arbitration and Conciliation Act,1996 will stand excluded, and subsequently petition under Section 9 cannot be made in India.

      This position was somewhat altered by 2015 amendment to the arbitration act by virtue of Section 2(2) was amended and the applicability of certain provisions of the Arbitration Act like Section 9 was extended even to foreign seated arbitration, unless the parties have consciously decided to exclude Part 1 of The Arbitration and Conciliation Act,1996 by express or implied conduct.

      The Hon'ble Court after analysing the facts in the present case held that parties have consciously decided to conduct arbitration as per the Japanese Commercial Arbitration Association rules, with arbitration seated in Tokyo. The Hon'ble Court also said on perusal of Art 77(5) of the Japanese Commercial Arbitration Association rules it is clear that Emergency measures are deemed to be interim measures granted by the Tribunal Thus it clear that parties have decided to exclude the provisions of The Arbitration and Conciliation Act, 1996 by clear inference.

Conclusion
Arbitration has become the preferred mode of dispute resolution amongst the business community. International Commercial Arbitration administered by institutions like SIAC, JAMS, LCIA have gained prominence for their effectiveness in governing these arbitrations, and giving timely and effective resolutions. Parties to the arbitration clause or agreement often seek appointment of Emergency Arbitrator or tribunal for seeking urgent interim relief.

The question which arises is whether the parties can seek interim relief before the Court under Section 9 of The Arbitration and Conciliation Act, 1996 when such relief has already been adjudicated by the Emergency Arbitrator or will it be barred under the Doctrine of Election?

This question has to some extent been answered in the above mentioned case of Ashwin Minda where the Court declined to entertain the application for relief as the Court said the emergency arbitrator has comprehensively dealt with the relief sought, and the Court concluded that the subsequent petition under Section 9 would be barred as being stymied by the Doctrine of Election, and the Petitioner cannot be allowed to take a second bite at the cherry.

There is another aspect herein which merits consideration, that is if the arbitral institution has rules which do not deem the emergency arbitrator or the tribunal to be the permanent tribunal, and purely deems it to be an ad-interim mechanism, then a subsequent application under Section 9 of The Arbitration and Conciliation Act, 1996 can be maintainable.

It can also be put forth that if the emergency arbitrator or tribunal has adjudicated on interim reliefs which are wholly different from the one sought before the National Court or if such reliefs cannot be adjudicated effectively by the emergency arbitrator or tribunal, then despite the parties already having agitated their rights before the emergency arbitrator, a subsequent application under Section 9 of The Arbitration and Conciliation Act, 1996 would be maintainable before the National Courts and the Doctrine of Election would not be applicable.  

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