2014 (1) TMI 1842 - SC - Indian Laws

Supreme Court Restores Single Judge's Order on Foreign Arbitration Jurisdiction

World Sport Group (Mauritius) Ltd. Versus MSM Satellite (Singapore) Pte. Ltd.

World Sport Group (Mauritius) Ltd. Versus MSM Satellite (Singapore) Pte. Ltd. - 2014 AIR 968, 2014 (1) SCR 796, 2014 (11) SCC 639, 2014 (2) JT 444, 2014 ... Issues Involved1. Jurisdiction of the Bombay High Court to restrain foreign arbitration.2. Applicability of Section 45 of the Arbitration and Conciliation Act, 1996.3. Validity of the arbitration agreement in light of allegations of fraud and misrepresentation.4. Public policy considerations and the legality of Clause 9 of the Facilitation Deed.5. The impact of pending suits on the decision to refer parties to arbitration.Detailed AnalysisJurisdiction of the Bombay High Court to Restrain Foreign ArbitrationThe appellant contended that the Bombay High Court had no jurisdiction to pass an order of injunction restraining a foreign-seated international arbitration at Singapore, citing Clause 9 of the Facilitation Deed. However, the court found that under Section 9 of the CPC, Indian courts have jurisdiction to try all suits of a civil nature except those expressly or impliedly barred. The court held that the Bombay High Court had territorial jurisdiction as the cause of action arose within its jurisdiction. The principle of comity of courts did not apply as no foreign court decision or law was cited that would require deference.Applicability of Section 45 of the Arbitration and Conciliation Act, 1996Section 45 mandates that a judicial authority must refer parties to arbitration unless the arbitration agreement is found to be null and void, inoperative, or incapable of being performed. The court noted that the appellant had made a request to refer the parties to arbitration at Singapore through its affidavit. The court emphasized that the Bombay High Court was obliged to refer the parties to arbitration unless it found the agreement to be null and void, inoperative, or incapable of being performed.Validity of the Arbitration Agreement in Light of Allegations of Fraud and MisrepresentationThe respondent argued that the Facilitation Deed, including the arbitration agreement, was void due to fraud and misrepresentation. The court referred to the principle of separability, which means that the arbitration agreement is independent of the main contract. The court found that the grounds for rescinding the Facilitation Deed did not affect the arbitration agreement in Clause 9, which remained valid and enforceable. The court held that it was for the arbitrator to decide on the validity of the Facilitation Deed.Public Policy Considerations and the Legality of Clause 9 of the Facilitation DeedThe Division Bench of the High Court had held that Clause 9 was void for being opposed to public policy and for being an agreement in restraint of legal proceedings. However, the Supreme Court found this reasoning erroneous. Clause 9 was consistent with the policy of the Arbitration and Conciliation Act, 1996, and was saved by Exception 1 to Section 28 of the Indian Contract Act, 1872. The court also noted that the right to a jury trial is not available under Indian laws, making the Division Bench's finding on this point incorrect.The Impact of Pending Suits on the Decision to Refer Parties to ArbitrationThe Division Bench had also reasoned that the existence of an earlier suit (Suit No.1869 of 2010) pending in court and its interconnection with the second suit (Suit No.1828 of 2010) justified not referring the parties to arbitration. The Supreme Court found this reasoning alien to the provisions of Section 45, which does not empower the court to decline a reference to arbitration on the ground of another pending suit.ConclusionThe Supreme Court allowed the appeal, set aside the judgment of the Division Bench of the Bombay High Court, and restored the order of the learned Single Judge. The court reiterated that it is for the arbitrator to decide the disputes in accordance with the arbitration agreement, and the parties were referred to arbitration as per Clause 9 of the Facilitation Deed. The parties were ordered to bear their own costs.