Applicability Of Mareva Injunction In India - Civil Law - Litigation, Mediation & Arbitration (2024)

I. Introduction

Mareva injunction or a freezing injunction finds its basis inthe English law, wherein Lord Denning, in the landmark decisions ofNippon Yusen Kaisha v.Karageorgis¹ and MarevaCompania Naviera S.A v. International BulkcariersS.A² granted this relief for the firsttime. While doing so, Lord Denning stated that:

"We are told that an injunction of this kind has neverbeen done before. It has never been the practice of the Englishcourts to seize assets of a defendant in advance of judgment, or torestrain the disposal of them. It seems to me that the time hascome when we should revise our practice. There is no reason why theHigh Court or this Court should not make an order such as is askedfor here."³

Popularly, Mareva injunction is an interlocutoryad-personam injunction which restrains therespondent/judgment debtor or the party against whom it is granted,from disposing off its assets otherwise than in the usual course ofbusiness, beyond the jurisdiction of the concerned Court, so as torender evade its resultant liability from the subject-judgment.Mareva injunction is not a matter of right and is notgranted as a means of compensation to the plaintiff/judgmentcreditor.

Usually, resort to Mareva injunction is taken while the court orarbitration proceedings are pending or when the proceedings areconcluded and a decision has been rendered but the execution of thedecision is not yet undertaken. The primary objective of Marevainjunction is to enable the plaintiff/judgment creditor to enforcethe decision against the respondent/judgment debtor, so as toprevent the enforcement of the decision from being frustrated anddefeated.

II. Standards applicable for the grant of Marevainjunction

The development of the principles and standards of Marevainjunction is primarily attributable to the judiciary which haslaid down various standards that must be satisfied for the grant ofMareva injunction. Therefore, while applying for the Marevainjunction, usually the plaintiff must establish that:

1. There exists a strongprima faciecase against the defendant, and should also provide a fulland frank disclosure of all material matters when the injunction issought without notice to the defendant;
2. It will suffer irreparable harm if theinjunction is not issued;
3. The balance of convenience favours the issuingof injunction;
4. The cause of action lies within thejurisdiction of the Court which the Mareva injunction issought.
5. It has a "good arguable case" on themerits of the cause of action. Considering that most of the Marevainjunctions are granted ex-parte and the likelihood of successcannot be quantified, the common law has not really explained theconcept of a "good arguable case" in percentage terms. Inessence, a good arguable case means that on the basis of thematerial before the court, the plaintiff seems to have realprospects of success.⁴ Therefore, it becomes incumbentfor the plaintiff to consider whether a "good arguablecase" can be established in respect of its claims.
6. The assets of the defendant lie in the jurisdiction whereMareva injunction is sought and that there is a real riskof the defendant removing its assets from thejurisdiction, or otherwise dissipating or disposing off its assets,with an intention to frustrate the execution of a successfuljudgment. However, a mere suspicion of a likelihood of dissipationis not sufficient and the plaintiff is required to present reliableevidence establishing the risk of dissipation. In one of the cases,dishonesty or adverse credibility findings against the respondentresulted in a strong basis for real risk ofdissipation.⁵
7. It is just and convenient to grantrelief;
8. A meaningful undertaking as to damages.

III. Nature and Scope of Mareva injunction

The principle of Mareva injunction is not alien to India'slegal system and the same is sometimes seen as an attachment beforejudgment under Order XXXVIII Rule 5 of Code of Civil Procedure,1908 ("CPC"). The jurisdiction of Indiancourts to pass a Mareva injunction was recognised in the caseofMohit Bhargavav.BharatBhusan Bhargava⁶, wherein the Apex Courtstated that "These two orders are certainly within thejurisdiction of the court which passed the decree since they areonly orders of restraint being issued to a person from handing overa property in his possession to the judgment-debtor along with thedocuments concerned and keeping the documents in safe custody. Theyare in the nature of a "freezing order" or a"Mareva Injunction" and an order akinto an Anton Piller order, orders that can be issued even if theproperty or the person concerned is outside the jurisdiction of thecourt."

Further, the Calcutta High Court in the case of PopularJute Exchange Limited Versus Murlidhar Ratanlal ExportsLtd. & Anr.⁷ discussed the criteria for thegrant of Mareva injunctionand held that the concept of grantofMareva injunction is not different from the power of theHigh Court to grant interlocutory or final order of an injunctionand under its general power of jurisdiction to grant anexparteinjunction. The English Court has developed aprinciple that the Court has power to restrain the defendant fromremoving assets from the jurisdiction pending the trial of actionwhenever it was just and convenient to do so. This power wasoriginally exercised when the defendant was out of the jurisdictionbut has subsequently been extended so as to be available against adefendant even though he is based within the jurisdiction.

It was in that case ofAbheya Realtors Pvt.Ltd.v.SSIPL RetailLtd.⁸ that the courthad anoccasion to consider the nature and scope of Mareva injunction indetail and the following principles were laid down:

1. The underlying principle in a Mareva injunction is that theclaimant must have a good arguable case and must establish that theasset or assets within jurisdiction were unlikely to remain at thetime judgment would be delivered and the claimant would have nomeans to satisfy the decree;
2. The concept of "within jurisdiction" and"outside jurisdiction" in England that is applicable to aMareva injunction is quite distinct from what is meant by"within jurisdiction"quaa Civil Court inIndia. The expression "outside jurisdiction" inconnection with a Mareva order made in England invariably impliesbeyond the shores of that country. In India, it is possible for adecree to be transferred or transmitted under the Civil ProcedureCode from one Indian Court to another. The Court receiving thedecree for execution thereof is expected to be governed by the samelaw, both in substance and in form, and it would certainly be fromthe same school of jurisprudence as the Court that received theaction and passed judgment thereon.

IV. Mareva injunction and Order XXXVIII of the CPC

Order XXXVIII, Rule 5 of the CPC provides for attachment ofproperty before passing of a judgment.
The court has wide powers under Order XXXVIII, Rule 5 and isempowered to use this power at a time when the Court thinks thatthe defendant is about to get rid of his assets, with the intentionof obstructing or delaying the execution of the decision.

In a broader sense, both Mareva injunction and attachment beforejudgment appear to be serving the same purpose, i.e., to"enable the Plaintiff to realise the amount of the decree,if one is eventually passed, from the Defendant'sproperty."⁹ However, upon a closerexamination, it is noted that both the legal recourses aredifferent, even though they share the same object. One suchdifference is prima facie evident i.e. one remedy is an injunctionand seeks to restrain the party and the other remedy attaches thedefendant's property before judgment.

In order to gain a better understanding of the relation betweenthe two, it is essential to pay attention to the relevant judicialinterpretation of the same. More particularly, the judgmentprovided in the case of Uppal Eng. Co. (P) Ltd. vs. CimmcoBirla Ltd.¹⁰ is of importance, wherein thefollowing was observed:

"12. ..the relief sought by the plaintiff is in thenature of attachment before judgment or pre-award attachment...InUK, Lord Denning gave this procedure a fashionable name- Marevainjunction. In the parlance of arbitration law, it is usuallycalled 'pre-award attachment.' This remedy has beenavailable in India from the inception of the Code of CivilProcedure 1908. The order of attachment before judgment, is passedto ensure the availability of such property at the time ofexecution of a decree. The procedure relating to 'attachmentbefore judgment' is contained in Order 38, Rule 5 to 13 in theFirst Schedule to the Code of Civil Procedure.

However, the Court noted that the petitioner was not likely tosucceed in his claims and the Arbitral Tribunal was yet toadjudicate on those claims, therefore, it was held to be pre-maturefor the petitioner to invoke the provisions of Section 9 for reliefof far-reaching consequences, when it was difficult to say if thepetitioner or the respondent would succeed on their claims orcounter claims and if so, to what extent.

Further, the observations in the case of RiteApproach v. Rosoborne Export¹¹withregard to Mareva injunction and attachment before judgment areworth noting as it was held that pleading for Mareva injunctionnecessarily requires the party to meet the rigours of Order 38 Rule5 of the Code. Relevant part of the judgment is as follows:

"6. Mareva or freezing injunction is passed when thereis evidence or material to show that the debtor is acting in amanner or is likely to act in a manner to frustrate subsequentorder/decree of the court or tribunal. The Court Therefore freezesthe assets of the debtor to prevent the assets from beingdissipated, to prevent irreparable harm to the creditor. Itprevents a foreign defendant from removing his assets from thejurisdiction of the court. It is like and akin to "attachmentbefore judgment" and conditions mentioned in the saidprovision should be satisfied before freezing junction order ispassed.."

The interplay between Mareva injunction and attachment beforejudgment is inevitable in light of their common object and the sameis a developing area of law and remains open for judicialinterpretation. However, the plaintiff while taking recourse ofMareva injunction before Indian courts must ensure that therequirements w.r.t. the standards applicable are being dulymet.

V. Judicial precedents governing the application of Marevainjunction in India

1. InIridium v.Motorola¹², the plaintiff (Iridium) filedfor an order in the nature of Attachment Before Judgment, and thefindings of the Bombay High Court are summarised hereinbelow:
   1. Existence of debt/liability: A clear liabilityor a debt owing to the plaintiff is absolutely necessary before theCourt grants a Mareva injunction which really seems to be an orderfor freezing the assets in exercise of the powers conferred on theIndian courts under Order XXXVIII, Rule 5.
   2. Disclosure of material matters by thePlaintiff: Such an injunction would be attracted where thecompany is one which is registered in a country where nothing canbe found about the membership or its control or its assets andjudgment cannot be enforced against it and more over where there isno reciprocal enforcement of a judgment. Even there the fact thatthe plaintiff must give an undertaking is treated as a matter ofcourse. Applying the aforesaid principle to the present case, theCourt held that there was evidence of a lack of a full disclosureof all matters within the plaintiff's knowledge as theplaintiff had failed to make a disclosure of the fact of a windingup petition having been admitted against it.
   3. Risk of dissipation of assets: The Court heldthat the plaintiff has given no material for inferring that thereis a risk of assets being removed in order to defeat the decreethat may be passed. On the other hand, it was observed that thedefendants' business was growing.
   4. Plaintiff's undertaking in damages: Apartfrom the fact that it is not necessary to consider the question ofattachment before judgment from the point of view of a Marevainjunction, a practice which appears to have been adopted by theEnglish Court initially, it was held that an injunction ought notto be granted in this case even if looked at from the point of viewof the law relevant to this injunction as developed by the courtsin India, as the plaintiff seeks an order which could stop thedefendants from doing business completely in India. However, it waspermissible for the Court to grant an injunction despite thisconsequence but for that to happen, something more than the merepossibility of a decree in the plaintiff's favour wasnecessary. The Court noted that the plaintiff's undertaking indamages is essential, particularly since they are seeking an orderwhich has the potential of stopping the defendants from doingbusiness. In such a situation, the undertaking in damages should begood. Having regard to the pendency of the winding up proceedings,the Court stated that it was difficult to see that the value of theplaintiff's undertaking in damages, in case their claim turnsout to be unjustified."
2. In an application praying for Mareva Injunction, the Court inthe case of Dilip Chowdhury v Pratishruti Projects Limited& Ors.¹³ held that application prayedforMareva injunction even after the Division Bench orderedthe securing of money payable by the respondent no. 9 in an awardsuffered by him to be deposited with the Registrar of this Court.The Court may issue Mareva injunction in order to prevent theassets from being removed from the jurisdiction in an attempt toavoid and frustrate the claim. The Division Bench in clear andunequivocal terms had directed the money receivable from the9^threspondent to be deposited with the Courtwithin a week therefrom and it was not in dispute that in absenceof the failure in getting the award set aside, the monetary claimof the petitioner is sufficiently protected and secured.
3. The Court in the case of Indian Oil Corporation Ltd.vs. Iranian Offshore Engineering and ConstructionCompany¹⁴ held that the Arbitral Tribunal inthe case had rightly discharged the respondent from the undertakingand allowed it to sail the vessel out of Indian waters as Tribunalwas the best judge to see if there was a prima facie case or notsince the Tribunal had all facts and circ*mstances before it. TheTribunal had also considered the financial soundness of therespondent and the fact that the vessel in question was not thesubject matter of the contract at any point of time. The Courtfurther stated that "The order of the nature of detentionof the vessel of the respondent would be an order akin to Order 38Rule 5 CPC. A defendant is not debarred from dealing with hisproperty merely because a suit was filed or about to be filed. Thecourt should be satisfied that there was a reasonable chance of adecree being passed in the suit against the defendant and the Courtshould be satisfied that plaintiff had a prima facie case and afterbeing satisfied of it, in order to exercise power under Order 38Rule 5 CPC, a Court should be further satisfied that the defendantwas attempting to remove or dispose of his assets with theintention of defeating the decree."
4. In the case of Formosa Plastic Corporation Ltd. vs.Ashok Chauhan and Ors.¹⁵, the court whilediscussing its inherent power under Section 151 of CPC, held that"there seems to be no legal impediment if in such a case ajudgment-debtor is restrained from alienating, disposing of or inany manner encumbering or dissipating his property which may besold in execution of the decree when the bar against execution ofthe decree is lifted. Assuming that Order 21, Rules 30, 46 and 54and Order 39, Rules 1 & 2 and Order 38, Rule 5 are notavailable in the present case, such an order could be made underthe inherent power of the Court u/Sec. 151 of the Code whichprovides that "Nothing in this Code shall be deemed to limitor otherwise affect the inherent power of the Court to make suchorders as may be necessary for the ends of justice or to preventabuse of the process of the Court."

VI. Conclusion

Mareva injunction has come a long way since its inception in1975 and has undoubtedly become a powerful tool to ensure that thejudgment passed by the court/tribunal is not rendered worthless.Gradually, the Mareva injunction has evolved from being asimpliciter prohibition to a broader relief which has wider scopeof application and covers even those assets which are notnecessarily a part of the subject-matter in dispute.

In case of Mareva injunction, the court has power to freezedefendant's assets, in case there exists a probability of theassets being dissipated with an intention to make a judgmentagainst him worthless and un-enforceable. In the Indian context,this remedy appears to be similar to the order to "attachproperty before judgment" under the CPC. A decision tocontinue or set aside a Mareva injunction requires a particularconsideration of whether there was a real risk of dissipation. Inthis respect, it has been held that the mere identification of afinding of dishonesty is insufficient; there still had to be aconsideration of whether the dishonesty justifies an inference thatthere is a real risk of dissipation.¹⁶

Footnotes

1 [1975] 3 All ER 282; [1975] 1 WLR 1093

2 [1975] 2 Lloyd's Rep. 509.

3 [1975] 3 All ER 282, at 283.

4 Allen v White Eagle Modern Building Solutions Ltd[2015] EWHC 2359 (QB).

5 SPL Private Finance (PF1) IC Ltd v Arch FinancialProducts LLP [2015] EWHC 1124 (Comm).

6 (2007) 4 SCC 795.

7 1998 SCC OnLine Cal 15.

8 2010 (2) CHN (Cal) 203.

9 Ganu Singh v. Janji Lal (1899)ILR 26 Cal 531, 533;Amulya Ratan v. ProsadChandra AIR (1936) Cal 143.

10 MANU/DE/0909/2005.

11 Rite Approach Group Ltd. v. Rosobornexport AIR 2007 Del 145.

12 Iridium India Telecom v. MotorolaInc. 2003 (6) Bom CR 511.

13 2016 SCC OnLine Cal 2564.

14 MANU/DE/2390/2009.

15 MANU/DE/0259/1999.

16 SPL Private Finance (PF1) IC Ltd v Arch FinancialProducts LLP [2015] EWHC 1124 (Comm).

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