In the landmark case of Anupam Mittal v Westbridge Ventures II Investment Holdings[1], the Singapore court of Appeal (SGCA) dealt with the issue of arbitrability of subject matter at the initial stage of arbitration. The court ruled on the question that to decide if the subject matter is arbitrable or not, what one must consider, law of arbitration agreement or law of seat. Arbitration agreement is rules decided by both parties for arbitration and seat of law is where the arbitration proceeding is going to be held. The case gave clear idea about what subject matter is arbitrable and how to decide it.
FACTS
- The appellant in this case is an Indian resident who is a founder of the company and also owns very well-known matrimonial service known as “Shaadi.com.” The respondent is a private equity fund incorporated under the laws of Mauritius. It invested in company in 2006. They both entered into two agreements. One of them was Shareholders’ Agreement (“the SHA”) that determined the parties’ right and responsibilities as shareholders.
- This Agreement (shareholders agreement) and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India.
- All such disputes that have not been satisfactorily resolved under Clause 20.1 above shall be referred to arbitration…and the place of the arbitration shall be Singapore.
- Appellant share in the company was 30.26% and respondent had majority share i.e. 44.38%. The Shareholders’ Agreement specified that if an Initial Public Offering is not completed within five years from the closing date, the Respondent would have the right to redeem its shares and, if needed, compel all shareholders to sell their shares to a third party. Following the clause, the respondent, Westbridge, wanted to exit the company, but conflict arose between parties.
- As part of withdrawal procedure, the parties had difference of opinion on various points including – the sale of company to the competitor and respondent refusing the appointment of appellant as the Managing Director of the Company. Due to this dispute, Appellant filed a case before the National Company Law Tribunal in India pursuing relief for corporate oppression.
- The Respondent sought a permanent anti-suit injunction to stop the NCLT proceedings, insisting on arbitration per the Shareholders’ Agreement (SHA). The Appellant argued that minority shareholder oppression disputes are non-arbitrable under Indian law, which governs the arbitration agreement. The High Court granted the injunction, stating that such disputes are arbitrable under Singapore law. The Appellant appealed to the Singapore Court of Appeal, contending that the arbitration agreement should be governed by Indian law, not the law of the seat.
ISSUES
- Are questions of arbitrability to be determined according to the law of the seat or the proper law of the arbitration agreement?
- What is the proper law of the arbitration agreement in this case?
- What is the proper characterisation of the disputes here?
- Even if the disputes are arbitrable, should the Court order a stay of the anti-suit injunction on case management grounds?
JUDGEMENT
Law that governs arbitrability of subject matter
The judge agreed with respondent on the issue that arbitrability should be on the basis of law of the seat. The court focused on the point that non-arbitrability of subject matter should be defined on the basis if the conflict makes it against public policy to resolve it by arbitration. Section 11 of the Arbitration act[2] states that arbitration agreement should be followed to the extent it does not violate public policy. The court believes that section 11[3] includes not just Singapore’s public policy but also foreign public policy if it is relevant to the arbitration agreement. The case of Tomolugen[4] did not foreclose this interpretation because it dealt with a domestic issue without foreign law elements.
If an arbitration agreement is governed by a foreign law that deems a dispute non-arbitrable, Singapore courts should not allow arbitration to proceed, as it would be against public policy, even if Singapore law considers the dispute arbitrable. The same applies if Singapore law finds the dispute non-arbitrable.
In this case, since Indian law does not permit arbitration for oppression disputes and the agreement is governed by Indian law, arbitration cannot proceed in Singapore, despite Singapore law allowing it. This approach respects both local and foreign public policies and ensures that arbitration agreements are crafted carefully to avoid such issues.
Proper law of the arbitration agreement in this case
In summary, the proper law of an arbitration agreement is determined using a three-stage test from the case BCY v BCZ[5].
- Stage 1: Express Choice of Law
Check if the parties expressly chose the proper law for the arbitration agreement. In this case, Clause 20 of the Shareholders’ Agreement (SHA) was examined. The clause states that the SHA is governed by Indian law, but this is not explicitly extended to the arbitration agreement within the SHA.
- Stage 2: Implied Choice of Law
Typically, the governing law of the main contract implies the same for the arbitration agreement. However, in this case, although the SHA is governed by Indian law, the fact that the arbitration is to be held in Singapore under Singapore law and ICC rules implies that Indian law was not intended to govern the arbitration agreement. Applying Indian law would frustrate the parties’ intention to arbitrate disputes, especially since oppression claims are not arbitrable in India.
- Stage 3: Closest Connection
If no express or implied choice is found, identify the law with the closest connection to the arbitration agreement. The arbitration is to take place in Singapore, making Singapore law the most closely connected to the arbitration agreement.
In conclusion, despite the SHA being governed by Indian law, the arbitration agreement is governed by Singapore law, as it has the most real and substantial connection. This approach aligns with Singapore’s strong public policy in favour of arbitration.
Nature of the dispute of NCLT petition
With Singapore law governing the arbitration agreement, the key question was whether Mittal’s initiation of the NCLT Proceedings breached that agreement. This involved determining if the claims in the NCLT Proceedings fell within the scope of the arbitration agreement, which covered disputes relating to the company’s management and the provisions and interpretation of the SHA. The Court of Appeal (CA) found that almost all of Mittal’s complaints in the NCLT Proceedings were related to either the company’s management or the SHA. Even though these complaints might support a finding of oppression, they still fell within the categories of disputes that the SHA required to be arbitrated. Consequently, the CA agreed with the High Court (HC) that starting the NCLT Proceedings was a breach of the arbitration agreement, and there was no basis to lift the anti-suit injunction granted by the HC.
The court order a stay of the anti-suit injunction on case management grounds
Under section 49(2) of the Supreme Court of Judicature Act 1969, the Court of Appeal (CA) could stay court proceedings in Singapore to avoid conflicting decisions with the concurrent proceedings in the Bombay High Court and NCLT. The CA noted that such a stay was discretionary and aimed at ensuring an efficient and fair resolution, considering factors like which proceeding started first and their potential impact on each other. The court had to balance a claimant’s right to choose whom and where to sue, preventing circumvention of an arbitration clause, and managing its processes to avoid abuse. The CA decided against a limited stay, holding Mittal to his arbitration obligations, because the Bombay suit was unlikely to be resolved within a year and assuming arbitration was fruitless due to enforcement issues in India was speculative. Arbitration would benefit both parties by compelling evidence collection and testing their legal arguments. Thus, the CA affirmed the High Court’s anti-suit injunction.
CONCLUSION
Singapore court of Appeal dismissed the appeal and maintained the anti- suit injunction order. The court emphasized that, despite the Shareholders’ Agreement being under Indian law, Singapore law should govern the arbitration agreement due to its closer connection to the arbitration process. The CA ruled that the disputes raised by Mittal in the NCLT Proceedings fell within the scope of the arbitration agreement, and therefore, Mittal’s initiation of these proceedings breached the agreement. Additionally, the CA decided against a limited stay of the Singapore proceedings, noting that the ongoing Bombay suit was unlikely to conclude soon and that speculation about the impracticality of arbitration was premature. The decision underscored the importance of adhering to arbitration agreements and balancing the need for effective dispute resolution with respecting the parties’ chosen arbitration framework.
REFERENCES
[1] [2023] SGCA 1
[2] Section 11 of International Arbitration act, 1994
[3] Section 11 of International Arbitration act, 1994
[4] [2015] SGCA 57
[5] [2016] SGHC 249
Authors: Mohit Porwal (VP – Legal & Finance), Vidhi Agrawal (Associate)
