Conflict of laws – Foreign proceedings – Restraint of foreign proceedings

Malhotra v Malhotra and another: Queen's Bench Division, Commercial Court: 30 October 2012

The first defendant founded a group of family-owned companies. Five Indian companies he owned either manufactured products for the group, or owned land or intellectual property rights used by the group in its business (the Indian companies). The claimant and the defendants entered into two linked agreements concerning the group (the revised transaction). In March 2011, the revised transaction took effect and brought about a restructuring, with the claimant in control of the group.

In February 2012, five sets of proceedings were commenced in India against, inter alios, the claimant in the form of petitions seeking relief for mismanagement of the affairs of the Indian companies (the Indian proceedings). In March 2012, the claimant obtained an anti-suit injunction granted without notice against the defendants (the injunction) on the basis that the Indian proceedings were within the scope of an arbitration agreement in the revised transaction. The broad effect of the injunction was to stop the defendants continuing the Indian proceedings. In June 2012, the defendants undertook to amend specified paragraphs of the petitions in the Indian proceedings to only seek to set aside, terminate or modify dealings affected after the completion of ancillary restructuring agreements (the undertaking). The claimant sought the continuation of the injunction. It fell to be determined whether there was a high degree of probability that the bringing and continuing of the Indian proceedings was contrary to the arbitration agreement. The application would be dismissed.

The authorities provided that an applicant for an anti-suit injunction had to establish a high degree of probability that its case against the respondent was right and that it was indeed entitled as of right to restrain the respondent from taking proceedings abroad (see [70] of the judgment). In the instant case, the threshold requirement was not met as regarded the base question whether the Indian proceedings had been shown to a high degree of probability to involve the determination of something which, if the Indian proceedings had all been brought against the parties, fell within the arbitration clause. Further, the undertaking would ensure that ancillary restructuring agreements were not put at risk in the Indian proceedings (see [158], [160], [176] of the judgment). The claimant’s application would be refused given the undertaking (see [184] of the judgment). Transfield Shipping Inc v Chiping Xinfa Huayu Alumina Co Ltd [2009] EWHC 3642 (Comm) applied; Stonehouse v Jones [2012] All ER (D) 91 (Jul) applied.

Neil Calver QC (instructed by Akin Gump Strauss Hauer & Feld LLP) for the claimant; Elizabeth Weaver (instructed by Fladgate LLP) for the defendants.