Foreign-seated arbitration survives fraud allegations against the main contract when the arbitration clause remains independently enforceable.

A foreign-seated ICC arbitration in Singapore could not be restrained merely because the underlying Facilitation Deed was alleged to be void for fraud and misrepresentation. Section 45 of the Arbitration and Conciliation Act required reference to arbitration unless the arbitration agreement itself was shown to be null and void, inoperative or incapable of being performed. The arbitration clause was treated as a separate and collateral agreement, so allegations directed at the main contract did not invalidate it. Sections 23 and 28 of the Contract Act did not render the clause void, and a connected suit did not justify refusal of reference. The injunction was set aside and arbitration was directed to proceed.

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Issues: Whether the Bombay High Court could injunct ICC arbitration seated in Singapore on the ground that the Facilitation Deed was alleged to be void for fraud and misrepresentation, and whether the arbitration agreement in Clause 9 was null and void, inoperative or incapable of being performed.

Analysis: Section 45 of the Arbitration and Conciliation Act, 1996 obliges the judicial authority to refer the parties to arbitration in a matter covered by a New York Convention agreement unless it finds that the agreement referred to in Section 44 is null and void, inoperative or incapable of being performed. The arbitration clause was treated as a distinct and collateral agreement, independent of the substantive contract, so a challenge to the main deed on fraud or misrepresentation did not by itself destroy the arbitration agreement. The alleged fraud went to the merits of the underlying transaction and did not render the arbitration clause inoperative or incapable of performance. The Court also held that Sections 23 and 28 of the Indian Contract Act, 1872 did not make the arbitration clause void, and that the pendency of a connected suit did not justify refusing reference to arbitration.

Conclusion: The injunction against the foreign arbitration could not be sustained. The dispute had to be referred to arbitration, and the arbitration agreement remained enforceable.

Final Conclusion: The appeal succeeded, the injunction order was set aside, and the order of the learned Single Judge directing the arbitration to proceed was restored.

Ratio Decidendi: In a foreign-seated arbitration governed by Section 45 of the Arbitration and Conciliation Act, 1996, a court must refer the parties to arbitration unless the arbitration agreement itself is shown to be null and void, inoperative or incapable of being performed; allegations attacking only the main contract do not, without more, invalidate the arbitration clause.

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