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Issues: (i) Whether the law governing the arbitration agreement was Indian law or Singapore law and whether the appellants could question the Singapore jurisdiction in proceedings under section 9; (ii) Whether allegations of fraud and misrepresentation in a civil investment dispute rendered the subject matter non-arbitrable or incapable of enforcement in India; (iii) Whether the learned Single Judge was justified in granting an interim mandatory injunction directing deposit of the entire claimed amount as security.
Issue (i): Whether the law governing the arbitration agreement was Indian law or Singapore law and whether the appellants could question the Singapore jurisdiction in proceedings under section 9.
Analysis: The agreement provided for Indian substantive law, but the arbitration clause fixed Singapore as the seat, required SIAC arbitration, and excluded Part I of the Arbitration and Conciliation Act, 1996 save section 9. The seat-based choice and the contractual language showed an express or implied intention that the arbitration agreement be governed by Singapore law. In that view, the challenge to Singapore jurisdiction did not survive.
Conclusion: The arbitration agreement was governed by Singapore law, and the appellants could not succeed on the jurisdictional challenge.
Issue (ii): Whether allegations of fraud and misrepresentation in a civil investment dispute rendered the subject matter non-arbitrable or incapable of enforcement in India.
Analysis: Allegations of fraud and misrepresentation do not, by themselves, exclude arbitration where the dispute retains an essentially civil character and concerns validity of consent to the contract. The authorities relied upon did not lay down a universal bar against arbitration of such disputes. The later view treating N. Radhakrishnan as per incuriam was accepted, and the dispute was held to be suitable for arbitral determination. The contention based on section 48(2)(a) also failed because non-enforceability was not established on the facts.
Conclusion: The dispute was arbitrable, and the alleged fraud did not bar arbitral adjudication or interim relief under section 9.
Issue (iii): Whether the learned Single Judge was justified in granting an interim mandatory injunction directing deposit of the entire claimed amount as security.
Analysis: Interim mandatory injunctions require a stronger case than a mere prima facie case and cannot operate as a pre-trial decree. The Court accepted the prima facie case for some security, but held that the direction to secure the entire USD 60 million was excessive. Applying the governing principles for interim mandatory relief, the Court reduced the security to an amount it considered proportionate to the case made out, while leaving the merits for arbitration.
Conclusion: The order for deposit of the entire claimed amount was modified, and only a reduced security deposit was upheld.
Final Conclusion: The appeal succeeded only to the limited extent of modifying the quantum of interim security, while the rest of the protective directions were maintained.
Ratio Decidendi: Where the arbitration clause selects a foreign seat and excludes Part I except section 9, the arbitration agreement follows the law of the seat; allegations of fraud or misrepresentation in an otherwise civil dispute do not automatically render the matter non-arbitrable; and an interim mandatory injunction must satisfy a standard higher than a prima facie case and must not amount to a pre-trial decree.
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