2010 (9) TMI 1228 - HC - Companies Law

Court sets aside order, restrains Mauritius company from arbitration pending deposit. Judicial intervention due to fraud and public policy.

The appeal was allowed, setting aside the Single Judge's order. The court restrained the Mauritius company from proceeding with arbitration, pending ... - Issues Involved:1. Validity of arbitration clause in the Facilitation Deed.2. Allegations of fraud and misrepresentation.3. Jurisdiction of the High Court vs. arbitration tribunal.4. Public policy considerations.5. Impact on third parties, specifically BCCI.Detailed Analysis:1. Validity of Arbitration Clause in the Facilitation Deed:The plaintiff, MSM Satellite (Singapore) Pte Ltd. (Sony), sought an injunction to prevent the defendant, World Sport Group (Mauritius) Limited (Mauritius company), from referring disputes to arbitration under the Facilitation Deed dated 25th March 2009. The defendant argued that the arbitration clause in the Facilitation Deed mandated arbitration under the International Chamber of Commerce (ICC) rules in Singapore. The learned Single Judge dismissed the plaintiff's motion, holding that the arbitration clause survives even if the agreement is rescinded, and all contentions can be raised before the arbitral tribunal.2. Allegations of Fraud and Misrepresentation:Sony alleged that the Mauritius company fraudulently induced them into the Facilitation Deed by misrepresenting that they had media rights which had actually reverted to BCCI. Sony claimed that the Mauritius company and IPL Commissioner Lalit Modi made false representations to secure a facilitation fee of Rs. 425 crores. BCCI's letter dated 30th May 2010 supported Sony's claim, stating that the Mauritius company had no role in securing the media rights and that any facilitation fee should be paid to BCCI.3. Jurisdiction of the High Court vs. Arbitration Tribunal:Sony contended that the dispute involved serious allegations of fraud and required detailed examination of witnesses, making it unsuitable for arbitration. They argued that the High Court had inherent jurisdiction to decide the matter, especially since BCCI, a crucial party, was not part of the arbitration proceedings. The defendant countered that under Sections 5 and 16 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal could rule on its own jurisdiction, including the validity of the arbitration agreement.4. Public Policy Considerations:Sony invoked Section 23 of the Indian Contract Act, 1872, arguing that the Facilitation Deed was against public policy. The court noted that BCCI, which discharges public functions, had accused the Mauritius company and Lalit Modi of fraud, and an arbitral award favoring the Mauritius company would be contrary to public policy. The court emphasized that the arbitration clause foreclosed an open trial, which was not in the public interest given BCCI's role in Indian cricket.5. Impact on Third Parties, Specifically BCCI:The court highlighted that the Facilitation Deed was interconnected with other agreements involving BCCI, and BCCI had initiated actions against Lalit Modi and the Mauritius company. The court held that the arbitration proceedings could not adjudicate the fraud allegations involving BCCI, making it necessary for the High Court to decide the matter to ensure justice and public accountability.Conclusion:The appeal was allowed, and the order of the learned Single Judge was set aside. The court restrained the Mauritius company from continuing with the arbitral proceedings, subject to Sony depositing Rs. 300 crores with the court. The court emphasized that the allegations of fraud and public policy considerations warranted judicial intervention, and the interconnected disputes involving BCCI required a comprehensive resolution in the Indian judicial system.