Fraud allegations do not defeat arbitrability; damages for deceit are measured by full transactional loss.

Mere allegations of fraud, misrepresentation, or diversion of funds do not by themselves make a dispute non-arbitrable or invalidate an arbitration agreement; the exception applies only where the fraud vitiates the arbitration clause itself or raises a public-law controversy beyond inter partes claims. In enforcement of a foreign award, such disputes may justify interim protection where a strong prima facie case is shown and preservation is needed to avoid irreparable prejudice. On damages for fraudulent inducement and deceit, the proper measure is restitutio in integrum: the claimant is entitled to the full loss flowing from the transaction, including price paid and directly resulting consequential loss, rather than a narrow market-value differential.

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Issues: (i) whether allegations of fraud and diversion of funds rendered the disputes non-arbitrable or invalidated the arbitration agreement, and whether the award disclosed a strong prima facie case for enforcement protection; (ii) what was the proper measure of damages arising from fraudulent misrepresentation and deceit; (iii) whether the connected appeal by the shareholder deserved interference and remand.

Issue (i): whether allegations of fraud and diversion of funds rendered the disputes non-arbitrable or invalidated the arbitration agreement, and whether the award disclosed a strong prima facie case for enforcement protection.

Analysis: The disputes were held to concern civil and contractual wrongs, including fraudulent inducement, misrepresentation, and siphoning of investment funds, rather than a fraud of such a nature as to vitiate the arbitration clause itself. The arbitration agreement was treated as independent and wide enough to cover disputes concerning existence, validity, breach, and termination. The distinction between serious fraud affecting the arbitration agreement or the public domain, and ordinary inter partes fraud, was applied. On that basis, the foreign award was found to furnish a strong prima facie case for protective relief in the pending enforcement proceedings, with balance of convenience and risk of irreparable prejudice favouring preservation of the principal award amount.

Conclusion: The disputes were arbitrable, and HSBC was held to have made out a strong prima facie case for interim protection of the awarded principal sum.

Issue (ii): what was the proper measure of damages arising from fraudulent misrepresentation and deceit.

Analysis: The measure of damages was held not to be confined to a market-value differential at the date of investment. For fraudulent inducement and deceit, the governing principle was restitutio in integrum: the claimant is to be put in the position it would have occupied had the fraud not occurred, with recovery of the price paid and consequential losses directly flowing from the wrong. The award of damages, interest, and costs on that basis was accepted as legally sustainable.

Conclusion: The correct measure was the full loss flowing from the fraudulent transaction, not the reduced market-value approach adopted by the Division Bench.

Issue (iii): whether the connected appeal by the shareholder deserved interference and remand.

Analysis: In light of the conclusions reached in the companion matters, the orders rejecting interim relief on the premise that no arbitrable dispute existed could not stand. The matter was therefore required to be reconsidered afresh by the trial court.

Conclusion: The connected appeal was allowed and the matter was remanded for fresh adjudication.

Final Conclusion: The Court upheld the arbitrability of the disputes, sustained interim protection for enforcement of the foreign award, rejected the reduced-damages approach, and sent the connected shareholder dispute back for fresh decision.

Ratio Decidendi: Mere allegations of fraud do not destroy arbitrability; only fraud that permeates the arbitration agreement itself or raises a public-law controversy of the kind recognised as an exception will exclude arbitral jurisdiction, and damages for fraudulent inducement are measured by the claimant's full loss flowing directly from the transaction.

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