Section 5 Bar on Civil Suits Seeking Anti-Arbitration Injunctions in India-Seated Arbitrations; “Then in Effect” Adopts Amended Institutional Rules

Court: High Court of Karnataka at Bengaluru
Date: 26-09-2025
Case: L AND T INFRA INVESTMENT PARTNERS ADVISORY PRIVATE LIMITED v. BHORUKA POWER CORPORATION LIMITED (COMAP No. 261 of 2025 c/w COMAP No.279 of 2025)

1. Introduction

These connected commercial appeals arose from two identically worded interim orders of the Commercial Court restraining L&T Infra Investment Partners Advisory Private Limited (acting as investment manager for the Fund) from continuing an arbitration it had initiated with the London Court of International Arbitration (LCIA). The underlying disputes stemmed from a CCD subscription and Securities Holders Agreement dated 21.06.2013 (“CCD Agreement”), pursuant to which L&T entities subscribed to CCDs of Bhoruka Power Corporation Limited (BPCL) and obtained security interests (including share pledges).

After alleged defaults relating to “exit”/buy-back obligations and subsequent notices including a Section 21 Arbitration and Conciliation Act, 1996 (“A&C Act”) invocation, the appellant filed a request for arbitration with the LCIA on 10.01.2025. In response, BPCL and the promoter shareholders filed two commercial suits seeking declarations that the arbitration clause (Article 16) was null and void / frustrated (owing to the cessation of LCIA India) and sought an injunction restraining the LCIA-administered arbitration.

The core issues before the High Court were:

  • Whether such civil suits (and interim anti-arbitration injunctions) are maintainable in the face of Section 5 of the A&C Act when the arbitration is India-seated and governed by Part I.
  • Whether the arbitration being administered by the LCIA (London) under LCIA Arbitration Rules, 2020 was contrary to Article 16, which referred to “London Court of International Arbitration India Rules then in effect”.
  • Whether the arbitration was “vexatious and oppressive”, justifying injunctive relief.

2. Summary of the Judgment

The Division Bench (per Chief Justice Vibhu Bakhru) set aside the Commercial Court’s injunction orders. The High Court held, in substance, that:

  • Part I bar (Section 5): Where arbitration is governed by Part I of the A&C Act (India-seated), civil courts cannot entertain suits to restrain arbitration; jurisdiction is barred by Section 5 except as expressly provided in Part I.
  • Kompetenz-kompetenz route (Section 16): Any plea that the tribunal lacks jurisdiction—including disputes about the applicable institutional rules/administration—must be raised before the arbitral tribunal under Section 16, with statutory remedies thereafter (Sections 37/34).
  • No “vexatious/oppressive” case made out: Higher LCIA cost structures and speculative conflicts of law arguments were insufficient; the arbitration remained India-seated and governed by the A&C Act.
  • “Then in effect” is dynamic: “Then in effect” in Article 16.1 refers to the rules in force at the time disputes are referred to arbitration, not the rules existing on the contract date. Since the referenced LCIA India Rules stood amended to direct administration by the LCIA and application of LCIA Arbitration Rules, 2020, the appellant’s LCIA-administered arbitration aligned with the clause.

3. Analysis

3.1 Precedents Cited (and how they shaped the decision)

A. Maintainability and the Section 5 interdiction

  • Kvaerner Cementation India Limited v. Bajranglal Agarwal and Another, (2012) 5 SCC 214: The High Court treated this as the clearest statement that, given Section 16, civil courts “cannot have jurisdiction” to decide objections to the existence/validity of arbitration agreements and cannot restrain arbitration by injunction. This directly underpinned the conclusion that the suits were barred.
  • National Aluminium Company Limited v. Subhash Infra Engineers Private Limited and Another: (2020) 15 SCC 557: Reinforced Kvaerner Cementation by holding that where a party disputes existence/validity of an arbitration agreement, its remedy is Section 16 before the arbitrator—not a civil suit for declaration/injunction. The High Court relied on this to reject the plaintiffs’ attempt to halt arbitration via suits.
  • S.B.P. and Co. v. Patel Engineering Limited and Others: (2005) 8 SCC 618: The Commercial Court and parties invoked it; the High Court clarified it does not authorize anti-arbitration suits. Instead, it highlights the A&C Act’s design to restrict court interference and explains that courts’ involvement is limited to pathways expressly provided in Part I (e.g., Sections 8/9/11).
  • Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 In Re.: (2024) 6 SCC 1: Used to fortify the construction of Section 5 as a strong non obstante restriction. The High Court drew from it that intervention is confined to what Part I permits; courts cannot import broader powers from other laws (including CPC) to interdict arbitration.
  • Balasore Alloys Ltd., v. Medima LLC: 2020 SCC OnLine Cal 1699: The plaintiffs relied on it for the proposition that Kvaerner Cementation was “implicitly overruled” by S.B.P. and Co.. The High Court expressly disagreed, pointing out (i) S.B.P. and Co. does not support anti-arbitration suits, and (ii) National Aluminium Company Limited followed Kvaerner Cementation even after S.B.P. and Co..

B. Foreign-seated anti-arbitration cases distinguished (Part II / comity context)

  • World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd.: (2014) 11 SCC 639: Distinguished because it involved a foreign-seated arbitration and Part II (Section 45) analysis. The High Court explained that Section 45 expressly requires the court to assess whether the arbitration agreement is “null and void, inoperative or incapable of being performed”—a structure not available to justify civil suits to stop Part I arbitrations due to Section 5.
  • Engineering Projects (India) Limited v. MSA Global LLC (Oman) : 2025 SCC Online Del 5072 and O.N.G.C v. Western Co. of North America : 1987 (1) SCC 496: Discussed to show that anti-arbitration injunction jurisprudence (where recognized) typically arises in foreign-seated contexts and is treated as exceptional; it cannot be transposed to India-seated Part I arbitrations because of Section 5.
  • Mcdonald'S India Private Limited v. Vikram Bakshi & Ors. S : 2016 SCC Online Del 3949 and Union of India v. Dabhol Power Company : 2004 SCC Online Del 1298: Held inapplicable as they did not involve the Section 5 bar applicable to Part I domestic/India-seated arbitrations.

C. The statutory remedial architecture supporting “raise it before the tribunal”

  • IFFCO vs Bhadra Products: (2018) 2 SCC 534: Cited for the proposition that where a Section 16 jurisdictional objection is upheld, appeal lies under Section 37.
  • HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Ltd.: (2018) 12 SCC 471: Used to outline that challenges to arbitrators’ impartiality/independence follow Section 13 (with Section 34 after award), whereas ineligibility/de jure incapacity may be pursued under Section 14—again emphasizing the A&C Act’s self-contained pathways.

D. Interpretation of “then in effect” (dynamic incorporation of rules)

  • Thyssen Stahlunion Gmbh v. Steel Authority Of India Ltd. .: (1999) 9 SCC 334: Relied on to interpret “for the time being in force” (analogous to “then in effect”) as including future amendments and re-enactments; the High Court treated this as supporting dynamic incorporation of procedural arbitration rules.
  • Municipal Corpn. of Delhi v. Prem Chand Gupta, (2000) 10 SCC 115 and Forum for People's Collective Efforts (FPCE) and Anr. v. The State of West Bengal and Anr.: (2021) 8 SCC 599: Further support for reading such phrases as ambulatory—meaning rules applicable “from time to time”, not frozen at execution.
  • Cars & Cars Pte Ltd v. Volkswagen AG and Another: [2009] SGHC 233 and Peter Cremer v. Granaria BV: [1981] Lloyd's Rep 583: Treated as persuasive comparative authority that institutional rules referenced “for the time being in force” sensibly refer to the rules in force when arbitration commences; expecting arbitrators/institutions to administer under superseded procedural regimes would be impractical.

E. Institutional substitution cases (foreign decree) distinguished

  • Baker Hughes Saudi Arabia Company Limited v. Dynamic Industries Inc and others : Civil Action No.2: 23-cv-1396: The plaintiffs used it to argue that one arbitral institution cannot be substituted without consent. The High Court distinguished it: here, parties had agreed to arbitration under rules “then in effect”, and the rules themselves (as amended) provided for the current administration mechanism; the arbitration remained India-seated and governed by Indian law.

F. Limitation at Section 11 stage (contextual, not determinative)

  • SBI General Insurance Company v. Krish Spinning : 2024 SCC OnLine SC 1754 and M/s. Arif Azim Co. Ltd. v. M/s. Aptech Ltd. : 2024 INC 155: Not central to the final outcome, but used to caution that Section 11 courts should not conduct deep limitation merits review—blunting the plaintiffs’ apparent strategy of forcing a Section 11 detour to litigate limitation pre-arbitration.

3.2 Legal Reasoning

(i) Section 5 operates as a hard gatekeeper for Part I arbitrations

The High Court’s central move is structural: it treats Section 5 as the legislative command that, in “matters governed by this Part” (Part I), courts cannot intervene except where Part I itself provides. The Court holds that a civil suit seeking to restrain arbitration is not among the permissible modes of intervention under Part I; hence it is barred, notwithstanding the general civil jurisdiction under Section 9 CPC.

The Court strengthens this through the A&C Act’s internal remedial design:

  • Jurisdictional objections (including the scope/procedure questions the plaintiffs raise) must be taken to the tribunal under Section 16.
  • Challenges to arbitrator bias run through Sections 13/14 (not civil suits).
  • Judicial review is channelled to Section 37 (in limited cases) and Section 34 (post-award), rather than pre-emptive injunctions.

(ii) “Anti-arbitration injunction” doctrine (where it exists) cannot override Section 5 in India-seated arbitrations

The Commercial Court applied anti-suit/anti-arbitration principles (comity, amenability to jurisdiction, ends of justice) drawn from decisions like Modi Entertainment Network and anr. v. W.S.G Cricket Pte Ltd. : (2003) 4 SCC 341. The High Court’s answer is jurisdictional: regardless of equitable tests, Section 5 disallows such intervention for Part I arbitrations. Those tests may have space in foreign-seated contexts (Part II / non-Part I situations), but not here.

(iii) “Vexatious and oppressive” requires more than cost comparisons and conjectural conflicts

On facts, the plaintiffs’ “vexatious/oppressive” narrative was tied mainly to (a) increased institutional costs and (b) a suggestion of UK law controlling the arbitration due to LCIA Rules 2020 (including Rule 16.5). The High Court rejected both:

  • Seat controls lex arbitri: The arbitration clause chose an Indian seat (Mumbai/Bengaluru at the investor’s discretion). Therefore, Indian arbitration law (Part I) governs the arbitration regardless of institutional administration.
  • Rule 16.5 is interpretive, not dispositive: Even if LCIA Rules are “interpreted in accordance with the laws of England”, the law applicable to the arbitration agreement/arbitration remains tied to the seat (Rule 16.4) and, in any event, no concrete disadvantage from English interpretive principles was demonstrated.
  • Costs were not unconscionable in context: Given the claim values (over ₹1,462 crores as reflected in Section 9 reliefs), the tribunal’s hourly rates were not shown to be “oppressive” in the legal sense (unconscionably harsh/burdensome). The Court also compared fees under Fourth Schedule/DIAC to show that “higher than LCIA India (2010)” does not equal “oppressive”.

(iv) “Then in effect” = rules in force when arbitration is to be commenced

The Court interprets Article 16.1 contextually: “then” links to the time when consultation fails and the dispute “shall be finally settled” under rules “then in effect”—i.e., in effect at the time of reference. It treats this as synonymous with “for the time being in force”.

This reasoning matters because LCIA India ceased and the LCIA India Rules were amended to route administration to the LCIA and to apply LCIA Arbitration Rules 2020. The Court’s conclusion is that the arbitration was being conducted under the referenced rules as they stood at the relevant time; therefore, there was no prima facie contractual breach warranting injunctive restraint (even apart from Section 5).

3.3 Impact

  • Reinforcement of “no civil-court derailment” of India-seated arbitration: The decision is a clear appellate-level statement that parties cannot use commercial suits to obtain anti-arbitration injunctions against Part I arbitrations; Section 5 and Section 16 must be respected.
  • Institutional rule evolution is accommodated, not treated as frustration: By holding that “then in effect” captures amended rules, the Court reduces uncertainty when institutional rules are updated, rebranded, or administratively re-routed—so long as the arbitration remains within the parties’ chosen seat/lex arbitri framework.
  • Higher cost ≠ “oppressive” absent unconscionability: The ruling sets a high threshold for characterizing an institutional arbitration as vexatious/oppressive merely due to cost differentials.
  • Drafting lesson (implied): Parties wanting “static” rules (fixed to a particular version or a specific administering entity) must draft that expressly; otherwise, “then in effect” language will likely be read dynamically.

4. Complex Concepts Simplified

  • Section 5 (A&C Act) in simple terms: If an arbitration is governed by Part I, courts can step in only where Part I expressly allows (e.g., Section 9 interim measures, Section 11 appointment). A separate civil suit to stop arbitration is not one of those allowed steps.
  • Kompetenz-kompetenz (Section 16): The tribunal decides first whether it has jurisdiction (including whether the arbitration clause covers the dispute, and procedural objections). Courts review later through the Act’s specified remedies.
  • Seat vs. institution: The seat (here Mumbai/Bengaluru) determines the “curial law” (lex arbitri)—Indian arbitration law applies. An institution (like LCIA) administers procedure/logistics; it does not change the seat’s legal control.
  • “Then in effect” in arbitration clauses: This typically means the rules that exist when arbitration begins, not the rules that existed on the date the contract was signed.
  • “Vexatious” / “oppressive”: “Vexatious” is harassment without reasonable basis; “oppressive” is unjustly harsh to the point of unconscionability. Mere expense or preference for another forum usually does not meet this standard.

5. Conclusion

The Karnataka High Court’s decision is significant for firmly reasserting the A&C Act’s “hands-off” architecture for India-seated arbitrations: parties cannot bypass Section 16 and Section 5 by filing civil suits to restrain ongoing arbitral proceedings. Equally, the Court’s construction of “then in effect” affirms a dynamic incorporation of institutional procedural rules, insulating India-seated arbitrations from disruption caused by subsequent amendments or administrative restructuring of arbitral institutions. The combined effect is to curb tactical anti-arbitration litigation, preserve arbitral autonomy, and promote procedural certainty in long-term investment arrangements that rely on institutional arbitration clauses.