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I. INTRODUCTION
Interim reliefs are granted to either party before the final adjudication of the
dispute. Section 9 of the Arbitration and Conciliation Act, 1996 stipulates the diverse
forms of interim reliefs which can be sought before the enforcement of an arbitral
award.3 One such form of relief is the injunction for which courts exercise judicial
discretion for granting the same by evaluating the facts and circumstances of each
case.4 Injunctions in the past were granted by the courts of equity,5 for maintaining
the status quo of parties until adjudication of final rights and duties, a flexible
approach was adopted.6 The period after merging of the courts of equity with law7
gave rise to various contradictory judgments on injunction. These inconsistencies
prevailed because even though the grounds of granting injunctions are stipulated in
statutes, their interpretation varies across different judges. This issue of lack of
uniformity which arose in the 20th century has now acquired a new dimension; due to
the enactment of the Arbitration and Conciliation Act, 1996. Arbitration is an alternate
dispute resolution mechanism that aims at limiting court interference and advocates
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party autonomy.8 Courts face a dilemma because they are asked to not intervene in
arbitration; on the other hand, they are duty-bound to protect the petitioner who shall
face irreparable harm, if the court abstains from granting an injunction.
In the present regime, Section 9 can be invoked when there exists an arbitration
agreement9 , an intention of the applicant to take recourse to
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arbitration proceedings10 , and most importantly when the relief asked for emanates
from the arbitration agreement.11 Once, the above conditions are satisfied, Courts
would assess the petition in light of the grounds of granting temporary injunctions as
mentioned under order 39 of the Code of Civil Procedure.12 The three pillars13 of
granting an injunction under Code of Civil Procedure are the presence of a prima facie
case, irreparable harm/injustice to the applicant in case injunction is not granted, and
lastly whether the balance of convenience is in the plaintiff's favor.14 Even though
these principles are applicable when the court determines a section 9 application15 , the
nature of cases for which they would apply remains contentious. Indian precedents
have been influenced by divergent views i.e. whether to admit an application for an
injunction based on “prima facie triable issue” or whether to examine the case on its
“merits”. The author argues that for maintaining a balance between courts and arbitral
tribunals concerning section 9, specifically injunction applications there is a dire need
for the objective exercise of discretion by courts.
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equities has transformed into special equities and is considered to be a ground for
granting an injunction in disputes related to bank guarantees. In cases of commercial
contracts, a letter of guarantee is issued by banks to the creditor stating that the bank
would be liable to pay a stipulated amount (conditional bank guarantee) in case of
breach of contract by the debtor. This is an independent contract between the bank
and the creditor and the bank is always required to pay the amount, the debtor being
a third party has no say in the same.18 An exception to the same is “fraud” by the
creditor and presence of “special equities” in favour of the debtor who would then
have the right to seek “interim injunction” by the courts to prohibit encashment of
money either against the creditor or the bank. Courts generally issue an injunction
against the bank for not making the payment of guarantee amount in cases which
prima facie are unjust and would result in “abuse of rights” such as the unprecedented
COVID-19 19
The term special equities was first coined in the case Texmaco Ltd. v. State Bank of
India20 wherein the Calcutta High Court stated that special equities are an exception to
the payment of the letter of credit and shall entitle the plaintiff to an injunction
restraining performance of bank guarantee. Due to the absence of special equities, the
plaintiff was not granted an injunction even though the court did not elaborate upon
the scope of special equities. Special equities were elucidated in BSES Limited v.
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Fenner India Ltd.21 as a circumstance where not granting an injunction would cause
irretrievable injustice to the party. Thus, special equity as a ground for an interim
injunction has a close nexus to irreparable harm and injury.
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Subsequently, the word “prima facie” was attached to special equities and it was
observed by the court that injunction should be granted only in serious cases so as to
preserve the integrity of trading operations.22
Irretrievable injury in case of bank guarantee was pointed out in Dwarikesh Sugar
Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd.23 wherein the Court stated
that the nature of circumstances has to be such that it makes it impossible for the
guarantor to reimburse himself and the Court must be satisfied that there would be no
possible restitution of the party. Standard Chartered Bank v. Heavy Engineering
Corporation Limited,24 conceptualized and compartmentalized irretrievable injustice
and special equities as distinct circumstances, the existence of either of which would
justify an order of injunction. It can be deduced that while some courts treat special
equities corollary to irretrievable harm, others believe both of these to be distinct
grounds. Further, by analysing the above judgments the author states that the
principle of irretrievable injustice or special equities would come into play where either
party to a contract having been provided with an internal adjudicative mechanism
such as arbitration, attempts to frustrate results of such an internal adjudication by
recourse to encashment of bank guarantee. The court as the guardian of citizens would
then step in and provide relief to the party at risk.
III. COVID-19 : PRIMA FACIE GROUND FOR INJUNCTION?
In a recent judgement, Halliburton Offshore Services Limited v. Vedanta Limited25 ,
the Delhi High Court granted an injunction to the plaintiff to refrain the respondent
from invoking the clause related to
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bank guarantee. The court stated that non-performance of the contract was due to the
global pandemic and pointed out the two grounds on which injunction is granted in
case of bank guarantees i.e. fraud or presence of prima facie “special equities”. In
the context of this particular case, the pandemic was deemed as being prima facie a
force majeure event as sufficient enough ground for granting an injunction. The
plaintiff was able to establish that he had made a genuine attempt to fulfil the
obligations, there is no adequate remedy available under law and lastly that he is
under threat of suffering irreparable harm.
A judgement rendered a month apart from the above case in the case of Standard
Retail Pvt. Ltd. v. G.S. Global Corp.26 deviated from the ratio decidendi of the above
case. In this case, petitioners had invoked Section 9 of the Arbitration Act and sought
an injunction against the invocation of the Bank guarantee. They claimed “force
majeure” and stated that in view of the COVID-19 pandemic and the lockdown, their
contracts with Respondent No. 1 were terminated as unenforceable on account of
frustration, impossibility and impracticability. The court denied the plaintiff interim
relief in the form of an injunction by ruling that Petitioners cannot abstain from
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This principle was adopted by the Indian Courts, In Israil v. Samser Rahman34
wherein the Calcutta High Court stated:
“What the Court has, at this stage, to determine is whether there is a bona fide
contention between the parties, or… whether there is a fair and substantial question
to be decided as to what the rights of the parties are.”35
Later, courts opined that the presence of a serious question of law was not enough,
and the probability of success in the suit was necessary for establishing a prima facie
case.36 In Preston v. Luck37 the Court of Appeal in England held that the Court must be
satisfied that there is a probability that plaintiffs are entitled to relief. A tilt from the
presence of a “substantial question” to “probability of relief” was also adopted by the
Indian Courts at that period, in Ismail v. Tayaballi Essaj38 the Court vacated an
injunction order on grounds that there was no probability of plaintiff attaining relief.
Similarly in Vithal v. Dawoo39 the court stated the need for “prejudging a case” before
granting an injunction. This principle implies that an injunction shall be denied when
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in the courts view, the petition lacks any factual or legal issue which warrants court
interference. The principle of probability of relief can be exemplified by the ratio laid
down in the case of Gujarat Bottling Co. v. Coca Cola40 wherein the Supreme Court
stated that:
“Relief is granted by way of an interlocutory injunction for mitigating risk of
injustice to the plaintiff. Discretion is to be exercised by the Court by assessing the
presence of a prima facie case, balance of convenience and the risk of irreparable
injury to the plaintiff if
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Subsequently, to subvert the prevailing uncertainty, House of Lords for the first
time laid some guidelines in the case of American Cyanamid.41 These guidelines were
centred around the idea that courts should not adjudge the case on its merits for
granting an interim injunction. An injunction should be granted only in those cases
wherein providing damages would be an unsatisfactory remedy.42 These guidelines
were further reiterated by the Madhya Pradesh High Court43 and the Apex court.44 In
Laxmikant Patel v. Chetanbhai,45 ’ Supreme Court held that:
“a refusal to grant an injunction despite the availability of facts, which are prima
facie established by overwhelming evidence and material available on record
justifying the grant thereof, occasion a failure of justice”.
The contemporary approach for granting an interim injunction under Section 9, is
however different from the above stated flexible approach. In Transmission
Corporation of AP v. Lanco Kondapalli46 as well as M Gurudas v. Rasaranjan47 the
courts held that to grant an injunction
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it is important to assess the strength of the parties i.e. whether the plaintiff is likely to
win the suit or not.48
The Court in the Halliburton decision has not highlighted the exact principles of
determining prima facie case; nonetheless, the author believes that it has applied the
principle of assessing relative strength and analysed the merits of the case. This
principle enumerates the need to decipher probability of a successful injunction claim
at the end of the trial. In the recent case of CRSC Research and Design Institute Group
Co. Ltd. v. Dedicated Freight Corridor Corporation of India49 , the Delhi High Court has
again reinstated this principle by noting down the rounds for granting interim relief in
case of a Section 9 Application as follows:
• The existence of a prima facie case, the balance of convenience and irreparable
loss, justifying such grant of interim relief to the applicant;
• The existence of emergent necessity, so that, if interim protection is not granted
by the Court, chance to approach Arbitral Tribunal under Section 17 would be
futile.
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The second reason which prompts the author towards the notion of analysing merits
of the case before the trial is the fact that the courts have ample opportunity to
examine all the documentary evidence which are corollary to an interim injunction
application. Under the 2002 amendment to the Code of Civil Procedure, parties are
conferred with the obligation of filing all possible documents which are even remotely
significant for their case.50 The judge probably inferred the presence of a prima facie
case by examining the contractual obligation of the plaintiff, his efforts to fulfil the
contract and lastly his inability as a result of the pandemic. Moreover, it is bound by
the law laid down by Supreme
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Court51 which clearly states that the presence of a prima facie case is dependent on
examination of pleadings in the documents submitted.52 Thus, the author feels that
the court drifted from the approach which deems the presence of a prima facie case
based on a “triable issue” because of the 2002 amendment and secondly because not
following the precedents would have decided per incuriam.53
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that the applicant can resort to the machinery provided under rule 2A of Order 39 of
the Code of Civil Procedure.59
and irretrievable injustice is a statutory ground for granting injunctions, thus the latter
applies to all types of subject matters. The author suggests that special equities
should be granted statutory recognition and deemed as a fourth ground for granting
an injunction. This addition would develop jurisprudence on special equities which
would help in distinguishing it from irretrievable harm and limit contradictory
judgments on similar facts. Special equities is used in conjunction with prima facie
case and has a close nexus with irreparable harm and thereby can run parallel to the
existing principles. Incorporating special equities would help uphold
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the integrity of arbitration agreements and party autonomy since the parties would not
be surrounded by an air of subjectivity.
17
Id.
18 Delhi Lotteries v. Rajesh Aggarwal, AIR 1998 Del 332 (India).
19
Binnur Ataseven & Oguz Comert, Interim Injunction with Regard to Letters of Guarantee, (2020) 22 GSI 58.
20
Texmaco Ltd. v. State Bank of India, 1978 SCC OnLine Cal 140 (India).
21 BSES Limited v. Fenner India Ltd., (2006) 2 SCC 728 (India).
22 Svenska Handelsbanken v. Indian Charge Chrome, (1994) 2 SCC 155 (India).
23
Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450 (India).
24Standard Chartered Bank v. Heavy Engineering Corporation Limited, (2020) 13 SCC 574 : 2019 SCC OnLine SC
1638 (India).
25 Halliburton Offshore Services Limited v. Vedanta Limited, 2020 SCC OnLine Del 542 (India).
26
Standard Retail Pvt. Ltd. v. G.S. Global Corp, Commercial Arbitration Petition (L) No. 404 of (2020).
27 Valliama Champaka Pillai v. Sivathanu Pillai, (1979) 4 SCC 429 (India).
28 Black Law Dictionary (10th edn, West 2014) 2-3, 1909.
29
J.G. Woodroffe, THE LAW RELATING TO INJUNCTIONS IN BRITISH INDIA, 100-102 (1st edn, Thacker, Spink, and Co
1900).
30
Adrian Zuckerman, Zuckerman Civil Procedure : Principles & Practice (3rd edn, Sweet & Maxwell 2013).
31 Allahabad Bank v. Rana Sheo Ambar Singh, AIR 1976 All 447 (India).
32
Walker v. Jones, (1865) 16 ER 151
33
Id. 156.
34 Israil v. Samser Rahman, AIR 1914 Cal 362 (India).
35
Id. 364.
36 Ismail v. Tayaballi Essaji, AIR 1929 Sind 182 (India).
37 Preston v. Luck, [L.R.] 27 Ch.D. 497.
38
Ismail v. Tayaballi Essaj, AIR 1929 Sind 182 (India).
39 Vithal v. Dawoo, AIR 1931 Nag 106 (India).
40 Gujarat Bottling Co. Ltd. v. The Coca Cola Co., (1995) 5 SCC 545 (India).
41
American Cyanamid Co v. Ethicon, [1975] A.C. 396.
42 Id.
43 Shankarlal Debiprasad v. State of MP, 1978 MP LJ 419 (India).
44Power Control Appliances v. Sumeet Machines, (1994) 2 SCC 448 (India); Colgate Palmolive Ltd. v. Hindustan
Unilever Ltd., (1999) 7 SCC 1 (India).
45 Laxmikant Patel v. Chetanbhai, (2002) 3 SCC 65, 75 (India).
46 Transmission Corporation of AP v. Lanco Kondapalli, (2006) 1 SCC 540 (India).
47 M Gurudas v. Rasaranjan, (2006) 8 SCC 367 (India).
48
S.M. Dyechem v. Cadbury Ltd., (2000) 5 SCC 573 (India).
49
CRSC Research and Design Institute Group Co. Ltd. v. Dedicated Freight Corridor Corporation of India, O.M.P.
(I)(COMM.) 184/2020 (India).
50 Civil Procedure Code, Order VIII, Rule 1A.
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60 Hindustan Construction Co. Ltd. v. Satluj Jal Vidyut Nigam Ltd., 2005 SCC OnLine Del 1249 (India).
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