AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1825
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....etitioner also claims disclosure of all the assets, moneys, bank deposits and accounts held by the respondents singly or jointly and/or severally including but not limited to the accounts with Corporation Bank by an affidavit. Petitioner seeks injunction restraining the respondents from dealing with their assets including bank accounts with Corporation Bank. Some of the relevant facts for the purpose of deciding this petition are as under :- 2 (a) Petitioner is a company incorporated under the laws of Mauritius and has its registered office at Mauritius. Petitioner is a investment holding company for the principal investments Asia Division of HSBC. Respondent no.1 is a company incorporated under the provisions of Companies Act, 1956 and has its registered office at Mumbai. Avitel India is a parent company in the Avitel Group and hold 100% share in Avitel Holdings Limited. Avitel Holdings Limited in turn hold 100% Avitel Post Studioz FZ LLC. (b) It is the case of the petitioner that the said Avitel Group represented to the HSBC and the petitioner that it was the entity responsible for 95% of the Avitel Group's post firm services and operations. The respondents represented to t....
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....tered into a Share Subscription Agreement (hereinafter referred to as the said 'SSA'). Some of the relevant clauses of the said shares subscription agreement are extracted as under :- Clause 15 15. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Republic of India without regard to applicable conflict of Laws principles. Clause 16 16. DISPUTE RESOLUTION 16.1 Arbitration 16.1.1Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach or termination shall be referred to and finally resolved by binding arbitration at the Singapore International Arbitration Centre ("SIAC") in accordance with the Singapore International Arbitration Rules in force at the date of this Agreement ("Rules"), which Rules are deemed to be incorporated by reference into this clause and as may be amended by the rest of this clause. 16.1.2The seat of arbitration shall be Singapore ... 16.1.6The parties waive any right to apply to any court of law and/or other judicial authority to determine any preliminary point of law and/or review any qu....
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.... come to Dubai in the third week of June for inspection and it was hopeful that they would sign the contract and start the production by end of June for sure, plus minus one week. It was informed that he was heading back to London for three days for signing his side of the BBC contract. (j) On 3rd June, 2011, Mr.Yogesh Garodia sent e-mail to Pratik Garg and informed that Siddhartha had visited BBC and informed that the machinery would be in place by mid of June. BBC officials were schedule to come and visit Dubai facility post 15th of June and thereon the contract would be signed. They expected to have the production up and running by 15th July. On 2nd August, 2011, respondent no.3 informed the petitioner that the BBC contract had been concluded. (k) It is case of the petitioner that on 8th February, 2012, the auditors of Avitel Dubai PWC resigned since Jains promoters of Avitel Dubai refused to allow Mr.Viren Lodha of PWC to report the status of the PwC cited serious concerns over the authenticity of Avitel Dubai's key customers and suppliers and PwC had insufficient information to verify the financial record of Avitel Dubai. In the said letter, the auditor concluded that it....
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....r that in the month of April - May, 2012 petitioner realised that the purported BBC contract was a sham and was set up by the respondents to induce the petitioner into investing into respondent no.1. Petitioner also came to know that Purple Passion represented by the Jains to be a key customer of Avitel India appeared to be a fake customer which company was dissolved on 23rd November, 2010 and was not in existence at the time the petitioner invested in Avitel India. The Jains represented, warranted and undertook that Purple Passion was the sole material customer of Avitel India with business worth approximately US $ 187 million. It is the case of the petitioner that out of the amount received by Avitel Dubai from the petitioner, atleast about US $ 51 million were not used for purchase of equipment to support the BBC Contract or in any way to support any other legitimate business operations. Remaining US $ 9 million could not be traced. Those amounts were credited to the account of Jains and/or their family concern. (q) On 11th May, 2012, the petitioner invoked two arbitrations under the SSA and the SHA, being SIAC Arbitration No. 088 and 099 and sought emergency reliefs under the ....
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....ration Bank wrote a letter to each of the respondents freezing the bank accounts of the respondents. On 3rd July, 2012, upon an application by the petitioner, leave was granted of the Singapore High Court to enforce the interim award passed in the SSA and SHA arbitrations as if it was an order of the Singapore High Court. No one appeared for the respondents before the Singapore High Court. On 12th , 16th and 17th July, 2012, the orders passed by Singapore High Court enforcing the interim awards were served on the respondents. On 16th July, 2012, respondents filed a writ petition against Corporation Bank in this court (1500 of 2012) inter alia praying for de-freezing of the accounts of the respondents with the Corporation Bank. (v) On 17th July, 2012, the counsel of the respondents sent a letter to the emergency arbitrator seeking withdrawal of the application to vacate and/or modify the interim award. The emergency arbitrator gave direction that the hearing would proceed as scheduled. On 27th July, 2012, the emergency arbitrator passed amendment to the interim award SHA and SSA award based on subsequent events and granted further reliefs to the petitioner. (w) On 30th July, 2012,....
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....he SSA jurisdiction award dated 17th December, 2012 in this proceedings. (aa) By an order dated 23rd January, 2013, passed by the Single Judge of this court, this court directed the Corporation Bank to remit a sum of Singapore Dollars 335,000/- to SIAC towards arrears of contribution of arbitration fees of the respondents. On 30th January, 2013, Division Bench of this court accepted the undertaking of respondent no.1 and directed respondent no.1 to deposit a sum of Rs. 1.40 crores equivalent to 3,35,000 Singapore Dollars with the Corporation Bank in a separate fixed deposit towards arrears of contribution of arbitration fees to be paid by respondent no.1 to SIAC and directed that the said amount shall not be remitted to SIAC till final disposal of the arbitration petition. The said order is passed without prejudice to the rights and contentions of parties keeping all contentions open. (bb) On 15th March, 2013, the Arbitral Tribunal passed a unanimous partial award in SHA arbitration dismissing the jurisdictional challenge of the respondents and declared that Singapore law determines the jurisdiction of the Tribunal and based on section 11 of the Singapore International Arbitratio....
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....gi, learned senior counsel appearing for the respondents and also on merits of petition :- 4. It is the case of the petitioner that respondents had represented to the petitioner that the Avitel Group was at a very advanced stage of finalizing a contract with the British Broadcasting Corporation (BBC) and had signed MOU with the said company to convert the BBC's film library from 2D to 3D which contract was expected to generate a revenue of US$ 300 million in the first phase and ultimately over US $ 1 Billion. The respondents required an investment of US$ 60 million to purchase the equipments for Avitel Post Studioz FZ LLC specifically to enable Avitel Dubai to service the BBC Contract which was required to be in place before execution of the contract. Respondent also represented that the Avitel Group had the benefit of number of material contracts with three main customers who were worth in total approximately US $ 658 million to Avitel Group. The petitioner invested US $ 60 million accordingly which investment was received from the petitioner and was routed to Avitel Dubai through Avitel Mauritius. On 21st April, 2011 petitioner and respondent no.1 entered into share subscri....
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....hallenged any of the jurisdictional awards referred to aforesaid. The Arbitral Tribunal has also granted interim measures in favour of the petitioner and against the respondents on 28th and 29th May, 2012. 10. It is submitted that the issue as to whether allegation of fraud or fraudulent representation can be referred to Arbitral Tribunal or not has been already decided by the Arbitral Tribunal in the arbitral proceedings between the same parties in the same matter by declaring so in jurisdictional award dated 17th December, 2012. The Arbitral Tribunal has also held that Law of Singapore will apply and not Indian Law. Preliminary objections raised by the respondents in this proceedings was specifically raised before the Arbitral Tribunal which objections has been specifically negatived by the Arbitral Tribunal on the issue of arbitrability as well as jurisdiction and cannot be agitated in this proceedings. Respondents not having challenged jurisdictional award rendered by the Arbitral Tribunal which is binding on the parties and are thus estopped from raising such plea in this proceedings filed by the petitioner under section 9 of the Act. 11. Dr.Tulzapurkar placed reliance on th....
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....that issue was wrongly determined. Their only remedy is to approach the higher forum if available. The determination of the issue between the parties gives rise to, as noted above, an issue estoppel. It operates in any subsequent proceedings in the same suit in which the issue had been determined. It also operates in subsequent suits between the same parties in which the same issue arises. Section 11 of the CPC contains provisions of res judicata but these are not exhaustive of the general doctrine of res judicata. Legal principles of estoppel and res judicata are equally applicable in proceedings before administrative authorities as they are based on public policy and justice. 13. Learned senior counsel placed reliance on the judgment of the Supreme Court in case of Bhanu Kumar Jain vs. Archana Kumar and another reported in (2005) 1 SCC 787 in support of his submission that there is absolute bar in relation to issues which are already decided between the parties from agitating the same in the later proceedings between the same parties. Paragraphs 29 to 32 of the said judgment reads thus :- 29.There is a distinction between 'issue estoppel' and 'res judicata' [See....
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....., pg. 243, wherein it is stated: "One special variety of estoppel is res judicata. This results from the rule, which prevents the parties to a judicial determination from litigating the same question over again even though the determination is demonstrably wrong. Except in proceedings by way of appeal, the parties bound by the judgment are estopped from questioning it. As between one another they may neither pursue the same cause of action again, nor may they again litigate any issue which was an essential element in the decision. These two aspects are sometimes distinguished as 'cause of action estoppel' and 'issue estoppel.' 20. In Hope Plantations Ltd. v. Taluk Land Board, this Court observed (SCC p.611, para 31) "31. Law on res judicata and estoppel is well understood in India and there are ample authoritative pronouncements by various courts on these subjects. As noted above, the plea of res judicata, though technical, is based on public policy in order to put an end to litigation. It is, however, different if an issue which had been decided in an earlier litigation again arises for determination between the same parties in a suit based on a fresh cause of ....
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....rt or a higher court having at an earlier stage decided a matter in one way will not allow the parties to re-agitate the matter again at a subsequent stage of the same proceedings." 16. Dr.Tulzapurkar, learned senior counsel then submits that the issue of arbitrability has to be decided by the law, governing arbitration agreement and not the law governing the main contract. Reliance is placed on the judgment of the Supreme Court in case of Sumitomo Heavy Industries Ltd. vs. ONGC Ltd. and others reported in (1998) 1 SCC 305. Paragraphs 4, 5, 8 to 11 are relevant which reads thus :- 4. On 26th July, 1995, the first respondent filed in the High Court at Bombay a petition praying that the second respondent be directed, under Section 14 of the Indian Arbitration Act, 1940, to file the award in that court. The first respondent submitted that the award was invalid, unenforceable and liable to be set aside under the provisions of the said Act. The learned Judge, as aforestated, allowed the petition. 5. The decision rendered by Potter, J. in the Commercial Court is of some importance because the jurisdiction of the English courts was discussed. The learned Judge said : "Before stating my....
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.... four cases. (1) will usually be decisive as to (2), in the absence of an express contrary choice; (2) and (3) will very rarely differ. However, as to (4), it is not uncommon to encounter the incidence of a different curial law in cases where the parties have made an express choice for arbitration (frequently in London) in a jurisdiction divorced from the jurisdiction with which the contract in (1) has most real connection. In this case, as to (1), the parties have made an express choice of Indian law as the proper law of the contract. As to (2), it seems to me likely (although it is not necessary finally to decide) that the proper law of the arbitration agreement is similarly Indian law, since the arbitration agreement is part of the substance of the underlying contract and the terms of Clause 17.1 are clear in that respect. As to (3), it matters not for the purposes of this application whether the governing law is English or Indian law, because Mr. Dunning has conceded before me that there is no material difference between the two so far as applicable to the doctrine of frustration upon which he relies (see also par. 7 of the affidavit of Mr. Majumdar to that effect.) As to (4)....
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....e Courts exercising jurisdiction at X". The learned Judge observed that there was no reason in theory which precluded "parties to agree that an arbitration shall be held at a place or in country X but subject to the procedural laws of Y" (Emphasis supplied.) 10. In the Law and Practice of Commercial Arbitration in England, Second Edition by Mustill and Boyd, there is a chapter on "The applicable law and the jurisdiction of the court". Under the subtitle, "Laws Governing The Arbitration", it is said, "An agreed reference to arbitration involves two groups of obligations. The first concerns the mutual obligations of the parties to submit future disputes, or an existing dispute to arbitration, and to abide by the award of a tribunal constituted in accordance with the agreement. It is now firmly established that the arbitration agreement which creates these obligations is a separate contract, distinct from the substantive agreement in which it is usually embedded, capable of surviving the termination of the substantive agreement and susceptible of premature termination by express or implied consent, or by repudiation or frustration, in much the same manner as in more ordinary forms o....
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....obligation to arbitrate future disputes. 2. The curial law governs; the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract. 3. The proper law of the reference governs: the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute. xxxxx xxxxx xxxxx In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the 'seat' of the arbitration, i.e. the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement to arbitrate. (Emphasis supplied.) 11. The conclusion that we reach is that the curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and conduct thereof. The courts administering the curial ....
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....contention of the Respondents that by reason of what is stated in paragraph 197 in the BALCO judgment, the law declared therein is prospective is untenable. What is made prospective is the law laid down therein by which the earlier decisions of the Supreme Court in Bhatia International (2002) 4 SC 105 and Venture Global Engineering (2008) 4 SCC 190, are over ruled. The BALCO judgment also declares the law (other than the law set out in the said two over ruled judgments) viz. in the absence of any express choice as to the law governing the arbitration agreement, the law of the seat will be the governing law of the arbitration agreement. It is submitted that this declaration of law is not made prospective and cannot be prospective. What is made prospective is the decision that Part I of the Arbitration Act, including Section 9 thereof, does not apply to arbitrations held outside India. The declaration of the Supreme Court of law on all other aspects is not prospective. The aforesaid position is clear from the interpretation of the BALCO judgment by the Division Bench of this Hon'ble Court in the case of Konkola Copper Mines (PLC) Vs. Stewarts & Lloyds of India reported in 2013 (5....
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....sed either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as the law of the country in which the arbitration is agreed to be held. On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract. 26. Whereas, as stated above, the proper law of arbitration (i.e., the substantive law governing arbitration) determines the validity, effect and interpretation of the arbitration agreement, the arbitration proceedings are conducted, in the absence of any agreement to the contrary, in accordance with the law of the country in which the arbitration is held. On the other hand, if the parties have specifically chosen the law governing....
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.... in no case would be Indian Arbitration Act except section 9. It is submitted that judgment of Supreme Court in case of National Thermal Power Corporation (supra) would squarely apply to the facts of this case. My attetnion is invited to the submissions made by parties before the Arbitral Tribunal on the issue of arbitrability and jurisdiction and the findings rendered thereof by the Arbitral Tribunal. 20. Dr.Tulzapurkar placed reliance on the judgment of the Division Bench of this Court in case of Konkola Copper Mines (PLC) vs. Stewarts and Lloyds of India Limited reported in (2013) 5 BCR 29 support of his submission that though seat of arbitration was at Singapore, however in view of the parties having agreed to apply section 9 of the Arbitration and Conciliation Act, 1996, this petition filed in this court under section 9 is maintainable. It is submitted that this court has interpreted the judgment of the Supreme Court in case of Bharat Aluminium Company (supra) and has held that the entire judgment of the Supreme Court would not apply with prospective effect. In so far as applicability of the governing law of arbitration agreement based on seat of the arbitration is concerned,....
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....) does not refer to the proceedings which can be decided in better way by civil court. It is submitted that in a given case, court may come to a conclusion while appointing arbitrator or referring parties to arbitration that though dispute is capable of arbitration, in the facts of a particular case, it would be more appropriate or proper if the subject matter of the arbitration agreement is decided by the civil court and not by an arbitrator. It is submitted that section 48(2) (a) does not contemplate a situation whether it would be less competent or less effective to decide the matter though subject matter of arbitration by a civil court or by an arbitrator. 24. Dr.Tulzapurkar submits that it was the case of the petitioner before the Arbitral Tribunal and in this proceedings that consent of the petitioner was obtained by mis-representation by the respondents which amounted to fraud and on that ground the petitioner applied for refund of the money invested. Claim of the petitioner was by way of damages. It is submitted that it is not the objection of the respondents that such claim of damages arises out of arbitration agreement is incapable of adjudication by arbitrator. It is su....
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....dispute regarding the reconstitution of the partnership firm and the subsequent deed framed to that effect. The dispute was relating to the continuation of the appellant as a partner of the firm, and especially when the respondents prayed for a declaration to the effect that the appellant had ceased to be a partner of the firm after his retirement, there is no doubt in our mind that the dispute squarely fell within the purview of the arbitration clause of the partnership deed dated 7th of April, 2003. Therefore, the Arbitrator was competent to decide the matter relating to the existence of the original deed and its validity to that effect. Thus the contention that the subject matter of the suit before the 1st Addl. District Munsif Court at Coimbatore was beyond the purview of the arbitration clause, cannot be accepted. 17. Having found that the subject matter of the suit was within the jurisdiction of the Arbitrator, we now proceed to decide whether the Arbitrator was competent to deal with the dispute raised by the parties. 18. The learned Counsel for the appellant contended that the High Court was wrong in its interpretation of the clause "difference of opinion" and held that i....
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....case of Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak and Anr. MANU/SC/0363/1961 : AIR 1962 SC 406 in which this Court under para 17 held as under: " 17. There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the court not to order an arbitration agreement to be filed and not to make the reference....". In our view and relying on the aforesaid observations of this Court in the aforesaid decision and going by the ratio of the above mentioned case, the facts of the present case does not warrant the matter to be tried and decided by the Arbitrator, rather for the furtherance of justice, it should be tried in a court of law which would be more competent and have the means to decide such a complicated matter involving various questions and issues raised in the present dispute. 24. This view has been further enunciated and affirmed by this Court in the decision of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. MANU/SC/0401/1999: AIR 1999 SC 2354 wherein this Court under para 4 observed: "4. Sub-section (1) o....
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....lare that the revision petitioner is not a partner with effect from 18.11.2005, and for consequential injunction restraining the petitioner from disturbing the smooth functioning of the first respondent firm, the issue relates to the causes which compelled the respondents to expel the revision petitioner from the partnership firm and the necessity to reconstitute the firm by entering into a fresh partnership deed. Therefore such issues involve detailed evidence which could be done only by a civil court...." 26. Dr.Tulzapurkar submits that judgment of the Supreme Court in case of N.Radhakrishnan (supra) has been interpreted by the judgment of Calcutta High Court in case of Ram Kishan Mimani and another vs. Goverdhan Das Mimani and others in Arbitration Petition No. 126 of 2010 by judgment dated 7th April, 2010 and it is held that it is at the discretion of the court under section 8 to refer the parties to arbitration or not even if the subject matter of the suit is covered by arbitration agreement, if the court comes to the conclusion that the same shall be appropriately dealt with by the civil court. Relevant paragraphs of the said judgment reads thus :- The petitioners refer to ....
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....y or stultify the progress of a suit where the issues or likely issues were covered by an arbitration agreement. Even going by this test, a serious allegation of fraud or malpractice has to be made and it is only the exceptional cases which are required to be retained in Court and not sent to arbitration on the reasoning contained in the N. Radhakrishnan's case that "it cannot be properly dealt with by the Arbitrator." Though there is a charge of malpractice and though there is a charge of the respondents having siphoned off funds, it does not appear that such charges are such that the arbitrator or the arbitral tribunal would not be able to address the same. The extent of oral or documentary evidence that would be necessary to deal with likely issues in the reference is not such that warrant the exercise of the extraordinary discretion which has now been recognised, to negate the mandate of the 1996 Act in the present case. In any event, Section 27 of the 1996 Act permits an arbitrator or arbitral tribunal to seek the assistance of the Court in the event the arbitrator or arbitral tribunal is faced with any problem relating to evidence being received. It is also to be noticed t....
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.... Prabhakar Oak and another reported in AIR 1962 SC 406 and in particular paragraphs 12, 13, 16 and 17 which read thus :- 12. Re. (4). We now turn to the question of fraud. The contention on behalf of the appellant in this connection is that serious allegations of fraud have been made against him and therefore this is not a case which should be referred to arbitration Sub-section (4) of section 20 lays down that where no sufficient cause is shown, the court shall order the agreement to be filed and make an order of reference to the arbitrator. It is therefore open to a court under this sub-section, where sufficient cause is shown not to order the agreement to be filed and not to make a reference to the arbitrator. The words of this sub-section leave a wide discretion in the court to consider whether an order for filing the agreement should be made and a reference made accordingly. It is neither necessary nor desirable to lay down in general terms when would be sufficient cause which would entitle a court to refuse to order the agreement to be filed and thus refuse to make an order of reference. The court will have to decide on the facts of each case whether sufficient cause has bee....
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....as in those circumstances that the court made the observations to which we have referred above. Even so, the learned master of the Rolls also observed in the course of the judgment at p. 476 as follows :- "Why should it be necessarily beyond the purview of this contract to refer to an arbitration questions of account, even when those questions do involve is conduct amounting even to dishonesty on the party of some partner ? I do not see it. I do not say that in many case which I will come to in the second branch of the case before the Court. The Court may not, in the exercise of its discretion, refuse to interfere; but it does not appear to me to follow of necessity that this clause was not intended to apply to all questions, even including questions either imputing moral dishonesty or moral misconduct to one or other of the parties. " We are clearly of opinion that merely because some allegations have been made that accounts are not correct or that certain items are exaggerated and so on that is not enough to induce the court to refuse to make a reference to arbitration. It is only in cases of allegations of fraud of a serious nature that the court will refuse as decided in Russ....
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....tration. While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of 'arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon Sub- Section 2(b)(i) of that section. 33. But where the issue of 'arbitrability' arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the court seized of the suit, and cannot be left to the decision of the Arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject matter of the suit ....
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....ded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 36. The well recognized examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. 37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected....
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....tration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. .... Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order.... (Emphasis supplied) Mustill and Boyd in their 2001 Companion Volume to the 2nd Edition of commercial Arbitration, observe thus (page 73): " Many commentaries treat it as axiomatic that 'real' rights, that is rights which are valid as against the whole world, cannot be the subject of private arbitration, although some acknowledge that subordinate rights in personam derived from the real rights may be ruled upon by arbitrato....
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....d (Purple Passion) worth approximately USD $ 758 to the Avitel group etc. Learned senior counsel also invited my attention to the correspondence on record regarding those contracts and parties pre-investments and post-investments. 30. Dr Tulzapurkar submits that the amounts invested by the petitioner were transferred to the bank accounts by Avitel Dubai on 10th May 2011. Out of Us $ 60 million, at least $ 51 million had circulated back to respondent No.3 who is the son of respondent No.2 and brother of respondent No.4 as he was the sole signatory to the companies to whom those amounts were credited and were not used to purchase the equipment for the BBC contract as was represented to the petitioner. 31. Learned senior counsel pointed out following instances in support of allegations of siphoning off funds by the respondents. (i) On May 15, 2011 Avitel Dubai's Account was debited in the amount of USD 6 million (approx. INR 33 crores) which was credited to an account held in the name of Highend. It has been discovered that in fact Respondent No. 3 is the sole signatory of Highend's Dubai accounts; (ii) On May 23, 2011 the Avitel Dubai Account was debited in the amount of USD ....
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....raud cannot be referred to arbitration. Learned senior counsel placed reliance on the Judgment of Supreme Court in case of N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72. The relevant portion of the said Judgment reads thus : "17. Having found that the subject-matter of the suit was within the jurisdiction of the arbitrator, we now proceed to decide whether the arbitrator was competent to deal with the dispute raised by the parties. 21. In our opinion, the contention of the respondents relating to the jurisdiction of the arbitrator to decide a dispute pertaining to a matter of this proportion should be upheld, in view of the facts and circumstances of the case. The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the arbitrator. 34. It is submitted that there is jurisdictional bar in the matter relating to fraud being decided by an arbitrator and the same can be settled only by a Court. It is submitted ....
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....ds that substantial issues of fraud, misrepresentation etc. are raised on the facts of a given case, the Court has no discretion whatsoever. It will, in such a situation refuse arbitration whether it is a case under Section 11 of the Act, or a case under Section 8 of the Act and similarly in a case under Section 9 which is based on an arbitration whether in India or abroad. Indian law, it is submitted, does not allow arbitration in respect of matters relating to fraud etc. The instant petition is replete with allegations of fraud and deception. 38. It is submitted by the learned senior counsel that the governing law of the contract is Indian Law. The Singapore arbitration tribunal had no authority to apply any other law and clothe itself with jurisdiction to arbitrate upon matters where extensive fraud is pleaded. Doing it in the guise of 'law of the agreement' is wholly impermissible. Law of the agreement, unless specified to the contrary, will follow the governing law of the contract. A Section 9 arising from proceedings which are inherently lacking in jurisdiction before the Singapore tribunal is without any legs to stand upon. It is like an interim injunction under Order 39 in....
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....he SSA (and same clause in SHA), the law of Arbitration is Indian Law. Relying on Judgment of NTPC (supra), it is submitted that even the said matter, the parties had agreed to oust the Indian Arbitration Act, 1940 and in spite of such exclusion, the Court held in that case that the applicable law of arbitration would be Indian law because the substantive law was Indian Law. Mr Rohatgi, learned senior counsel distinguished the Judgment in case of Bharat Aluminium company (2012) 9 SCC 552 and would submit that the said Judgment was dealing only with the curial law i.e. law relating to procedure and does not hold that law. The law of arbitration agreement is determined by the country of arbitration. Learned senior counsel then submits that assuming that any award is passed by the Arbitral Tribunal, the same would inevitably have to be brought to India and subjected to the Indian legal process before the same can be executed. The only way a foreign award can be executed is if the conditions of enforceability laid down by Section 48 of the Arbitration and Conciliation Act, 1996 are met. The relevant part of the Section reads as under: "Section 48. Conditions for enforcement of foreign....
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....ment by arbitration, but whether it ought to be referred to arbitration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not." 48. Learned senior counsel submits that the Judgment of Supreme Court in case of Phuchand Export v. OOO Patriot (2011) 10 SCC 300 is overruled in the Judgment of Shree Lal Mahal v. Progetto Grano only to the extent that a patent illegality does not amount to something contrary to the fundamental policy of Indian Law. It is submitted that the fundamental policy of Indian law is that matters relating to fraud ought not to be referred to arbitration. In this view of the matter, the award would also be hit by Section 48 (2)(b) of the Act. It is settled law that when a statute mandates that a particular thing has to be done in one way, it must be done in that way or not at all. Once the statute requires the filing of objections under Section 48 of the Arbitration Act, the Petitioner cannot be allowed to circumvent that by filing a Section 9 Petition. 49. Mr Rohatgi, learned senior counsel t....
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....nd, it could not have done so in any independent Petition. Any petition seeking to challenge a foreign award would not be maintainable. 52. Learned senior counsel then submits that the interim emergency award is also inadmissible. It is submitted that the Petitioner is simply seeking to enforce the emergency award passed by the arbitral tribunal on 28th May 2012 and 29th May 2012. The Petitioner, rather than seeking enforcement of the award under Section 48 of the Act, is seeking to enforce it circuitously under Section 9 of the Act. By invoking Section 9, the Petitioner is seeking to bypass the mandatory conditions of enforceability required by Section 48 of the Act. It is submitted that this is impermissible in law. Reliance is placed on the Judgment of Delhi High Court in case of HFCL v. UOI OMP 464 of 2009 dt. 18/08/2009 in which it is held that no petition under Section 9 can be filed to execute an award. It is submitted that till the Petitioner seeks enforcement of the award under Section 48 of the Act, the Respondent will not have any occasion to assail its correctness or validity. In this view of the matter, the Petitioner cannot be allowed to rely on an award that has by ....
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....ed that in the present case, it is very important to note that the Petitioner has not placed any material before the court and has advanced no argument whatsoever to show how or why the findings in the EOW report are inaccurate or incorrect. There is, in fact a deemed admission by the Petitioner of the findings in the EOW Report which was placed on the record of this Court by an affidavit filed as far back as in August 2013. In so far as e-mail from one of the respondents in August 2011 stating that BBC contract had been signed, it is submitted that this email is entirely irrelevant since it was sent after the execution of the contract. It is not possible for the Petitioners to contend that they relied on any email or representation of the Respondent after the execution of the agreements. It is elementary that any alleged misrepresentation which induced the Petitioner to enter into a contract must have been made before the contract is entered into and not after. 55. In so far as allegation regarding contracts with Purple Passions Productions Ltd. is concerned, it is submitted that in the Petitioners due-diligence report dated 14th January 2011, where the Petitioner itself sets out....
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....ny. For this purpose, it had conducted a due diligence from May 2009 till March 2010 (for more than 10 months) with the assistance of leading and renowned professional firms including Ernst & Young (E & Y), Aryan Business Consultants and Clifford Chance. HAV3 was admittedly an affiliate of the Petitioner at the time it made the investment. As on date, Even though the Petitioner's Parent has allegedly divested its share from HAV3, it continues to retain about 20% shares in HAV3 and HAV3 & the Petitioners continue to be affiliates. This due diligence was conducted for 5 months from December 2010 and April 2011. A total sum of Rs. 3 crores or so was paid by the Respondent towards this due diligence. It is submitted that USD 300,000 was paid towards structuring fees, USD 304,665 towards re-imbursement of fees paid to international lawyers and a sum of Rs. 25,35,000 paid to the Indian lawyers. It is submitted that there is no mention of BBC contract in the SSA or SHA entered into between the parties or in the disclosure letter which was pursuant to and forms part of the SSA. The SHA was signed by the petitioner after the disclosure letter was given on 6th May 2011. Learned senior counse....
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....d that if the report of the EOW can be considered, then the jurisdictional award of the arbitral tribunal also can be looked into. Dr.Tulzapurkar, learned senior counsel distinguished the judgment of the Supreme Court in case reported in (2008) 11 SCC 753 on the ground that two judges of the Supreme Court did not noticed the judgment of the three judges reported in AIR 1960 SC 941. It is submitted that the petitioner is relying upon the jurisdictional award and not applying for enforcement of the said award in this proceedings filed under section 9 of the Arbitration Act. If the petitioner would have applied for enforcement of the jurisdictional award, the objection under section 48(2) (a) could have been considered by this court. Learned senior counsel submits that there is difference between incapacity of the arbitrator to decide as against inappropriateness for an arbitrator to decide. Only such dispute which are barred cannot be referred to arbitration. Whether disputes which are not barred and should be referred to arbitration or not depend on the fact of each case. Section 48 of the Arbitration Act does not talk of any "cannot go category". The allegations of fraud are not in....
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....s suitable than a civil court in deciding a matter involving allegations of fraud is not a ground to be found in Section 48(2)(a) of the Arbitration Act. What the section states is that the subject matter of the dispute should be incapable of being decided by the Arbitral Tribunal. It is only those cases which cannot be decided by the arbitrators that can be said to be covered by section 48(2)(a). Reliance is placed on the judgment of the Supreme Court in case of Booz Allen & Hamilton Vs. SBI Home Finance Ltd. (supra) in which it is held that the matter in rem are not arbitrable whereas disputes relating to rights in personam are considered to be amenable to arbitration. It is submitted that bar contemplated under section 48(2) (a) does not apply and therefore petitioner is entitled to rely on the final partial award on jurisdiction. Dr.Tulzapurkar, learned senior counsel reiterated that the law governing the arbitration agreement is the law of Singapore and not the law of India. 65. In so far as reliance on the opinion of EOW dated 22nd July, 2013 by the respondents is concerned, it is submitted that the opinion of the EOW is not binding on the Magistrate, nor can it be relied up....
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....n the jurisdiction of the arbitrator. It is held that in majority of cases it is found that the curial law, i.e. the law governing the conduct, of the reference, is the same as the law governing the obligation to arbitrate. It is, however, open to the parties to submit, expressly or by implication, the conduct of the reference to a different law from the one governing the underlying arbitration agreement. In such a case, the court looks first at the arbitration agreement to see whether the dispute is one which should be arbitrated, and which has validly been made the subject of the reference; it then looks to the curial law to see, how that reference should be conducted; and then returns to the first law in order to give effect to the resulting award. It is held that in the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the "seat" of the arbitration, i.e. the place at which the arbitration is to be conducted, on the ground that is the country most closely connected with the proceedings. The curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and c....
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....e, controversy or claim shall be resolved by binding arbitration at Singapore International Arbitration Centre and shall be in accordance with Singapore International Arbitration Rules, what is the effect of the parties having agreed that except section 9, Part I of the Indian Arbitration and Conciliation Act shall not apply to the terms of the agreement. 70. In case of Bharat Aluminium Co. Ltd. (supra) Supreme Court has held that Indian Arbitration Act is a seat centric. Division Bench of this Court in case of Konkola Copper Mines (PLC) (supra) after adverting to the judgment of the Supreme Court in case of Bharat Aluminium Co. Ltd. (supra) has held that the entire judgment of the Supreme Court in case of Bharat Aluminium Co. Ltd. (supra) would not apply with prospective effect. It is held by the Supreme Court that a seat of arbitration would determinate the governing law of arbitration agreement. Placing reliance on the judgment in Sumitomo Heavy Industries Ltd. (supra), National Thermal Power Corporation (supra), Bharat Aluminium Co. Ltd. (supra) and judgment of Division Bench in case of Konkola Copper Mines (PLC) (supra), the submission of Dr.Tulzapurkar is that in this case i....
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.... that the court has to decide in the facts of this case that though the arbitration agreement exist between the parties considering the nature of dispute which is even if based on allegations of fraud, forgery and malpractice, whether it would be more convenient and proper to refer such dispute/allegation to arbitration or it would be more convenient that such dispute is decided by a civil court. Learned senior counsel submitted that in case of N.Radhakrishnan (supra) the Supreme Court has not laid down any law to this effect that no sooner any allegations of fraud or forgery are made in any proceedings between the parties which are governed by the arbitration agreement, matter cannot be referred to arbitration at all but has to be decided by civil court only. In support of this submission, Dr.Tulzapurkar, learned senior counsel placed reliance on the judgment of the Madras High Court in case of H.G.Oomor Sait vs. O.Aslam Sait (2001) 3 CTS 269 which is upheld by the Supreme Court in case of N.Radhakrishnan (supra). Reliance is also placed on the judgment of Calcutta High Court in case of Ram Kishan Mimani and another vs. Goverdhan Das Mimani and others in Arbitration Petition No. 1....
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....arned senior counsel is that this court has interpreted the judgment of the Supreme Court in case of N.Radhakrishnan (supra) and has held that once there are serious allegations of fraud, forgery and fabrication, the same cannot be decided by the arbitrator at all though arbitration agreement exist between the parties. Learned senior counsel submits that in so far as judgment of the Supreme Court in case of Bharat Aluminium (supra) is concerned, it is held by the Supreme Court that the said judgment would apply with prospective effect and in view of the fact that the agreement entered into between the parties is prior to the date of pronouncement of the said judgment by the Supreme Court in case of Bharat Aluminium (supra), merely because the seat of the arbitration was at Singapore, it cannot be construed that parties would be governed by law of Singapore and not Indian law. 73. It is not in dispute that petitioner had invoked arbitration agreement which was forming part of the agreement entered into between the parties. On perusal of clause 15 of the agreement, it is clear that it was not intended by the parties that the Indian law would apply to the main agreement as well as to....
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....n this case and thus whether dispute raised by the petitioner was arbitrable or not would have been decided as per law of Singapore and not as per Indian Law. In my view, since there is no dispute that allegations of fraud, forgery and fabrication etc. can be decided under the laws of Singapore by the learned tribunal, there is no merit in the submission of Mr.Rohatgi, learned senior counsel that such issue has to be decided only as per Indian law. 75. The next submission of Mr.Rohatgi, on this issue was that if any award is passed by the arbitral tribunal, the same would have to be brought in India for enforcement and would be subjected to the Indian legal process and as per Indian law, since allegations of fraud, fabrication and forgery cannot be decided by arbitrator, such award would not be enforceable in India under Indian law. 76. It is not in dispute that the arbitral tribunal which has held hearing at Singapore and has applied laws of Singapore has rendered a jurisdictional award in this matter. The arbitral tribunal has considered the objections raised by the respondents herein that the arbitral tribunal did not have jurisdiction to decide the allegations to forgery, fra....
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....ion even under laws of India. Be that as it may, since no application is made by the petitioner for enforcement of the jurisdictional award, submission of the learned counsel for the respondents that conditions of section 48 (2) (a) and (b) for enforcement of foreign award would apply to this application under section 9 for interim measures has no merits. In my view reliance placed by Mr.Rohatgi on paragraph (39) of the judgment of the Supreme Court in case of Booz Allen and Hamilton Inc. (supra) is misplaced. 78. Next question that arises for consideration is whether such jurisdictional award rendered by the arbitral tribunal by applying laws of Singapore can be referred to and relied upon by the petitioner in this proceedings and is binding on the parties or not. 79. Dr.Tulzapurkar, learned senior appearing for petitioner has pressed in service the law of estoppel on this issue against the respondents and placed reliance on several judgments of Supreme Court and judgment of this Court on the issue that principles of estoppel and res judicata are based on public policy and justice. Supreme Court in case of Hope Plantations Ltd.(supra), Bhanu Kumar Jain (supra), Ishwar Dutt (supr....
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....o public policy. 82. Reliance is placed by Mr.Rohatgi, learned senior counsel in support of this issue on the judgment of supreme Court in case of N.Radhakrishnan (supra), judgment of this court in case of Goldstar Metal Solutions (supra), in case of MSM Satelite (supra), , judgment of this court in case of Ivory Properties (supra) and judgment of Supreme Court in case of Hindustan Petroleum v. Pink city midway Petroleums (2003) 6 SCC 503. Dr.Tulzapukar, learned senior counsel on the other hand distinguished the judgment of the Supreme Court in case of N.Radhakrishnan (supra) and other judgments relied upon by Mr.Rohatgi, learned senior counsel on the ground that no law is laid down by the Supreme Court in case of N.Radhakrishnan (supra) that if any allegations of fraud, forgery and fabrication etc. are made by a party, such allegations cannot be decided by the arbitrator at all. It is submitted that in the facts of that case the Supreme Court has held that it is at the discretion of the court under Section 8 to refer the parties to arbitration or not even if the subject matter of the suit is covered by arbitration agreement, if the court comes to the conclusion that the same shal....
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....spondents relating to the jurisdiction of the arbitrator to decide a dispute pertaining to a matter of that proportion should be upheld in view of the facts and circumstances of the case. Such allegations cannot be properly gone into by the arbitrator. Supreme Court has held that in the facts of that case it did not warrant the matter to be tried and decided by the arbitrator, rather for the furtherance of justice, it should be tried in the court of law which could be more competent and have a means to decide such a complicated matter involving various questions and issues raised in the said dispute. Supreme court agreed with the views taken by the Madras High Court in case of H.G.Oomor Sait vs. O.Aslam Sait (2001) 3 CTS 269. In paragraphs 26 of the said judgment in case of N.Radhakrishnan (supra), it is held that in view of the serious allegations made against the respondents alleging them to commit mal-practises in the account books and manipulates the finances of the partnership firm, such allegations could not be properly raised with before the arbitrator. It is held that such issues involved detailed evidence which could be done only by a civil court. A perusal of the judgment....
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....sent case. Under section 27 of the Arbitration Act, an arbitrator or the arbitral tribunal can seek the assistance of the court in the event the arbitrator or the arbiral tribunal is faced with any problem relating to evidence being received. 85. In my view, Dr. Tulzapurkar, learned senior counsel appearing for the petitioner is right in his submissions that judgment in case of N. Radhakrishnan (supra) is not an authority on the proposition that as soon as allegations of fraud is made by any party, no such matter can be referred to arbitration at all. I am in agreement with the view taken by the Calcutta High Court which has dealt with and interpreted the judgment of the Supreme Court in the case of N. Radhakrishnan (supra). 86. In so far as judgment of this court in case of Goldstar Metal Solutions (supra), MSM Satelite (supra), Ivory Properties Hotels (supra) relied upon by Mr. Rohatgi, learned senior counsel appearing for respondent in support of his submission that such allegations of fraud and forgery could not be referred to arbitration at all though arbitration agreement exists are concerned, a perusal of these judgments would indicate that there was no issue raised by any....
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....fer the parties to arbitration under section 8 of the Act, even if parties might have agreed upon arbitration. In my view, court has to decide whether such allegations made by the parties can be referred to arbitration or it would be more appropriate and covenant to decide such allegations by court itself though arbitration agreement exists. Supreme Court in the said judgment did not carve out any such category of allegations under the category of non arbitrable disputes. In my view Dr. Tulzapurkar is right in placing reliance upon the judgment of the Supreme Court in the case of Booz Allen (supra). I am respectfully bound by the said judgment. 89. In so far as judgment of this court in case of Jindal Drugs (supra) relied upon by Mr. Rohatgi, learned senior counsel that unless petitioner files an application for enforcement of foreign award in this court, respondents cannot challenge the validity of such award is concerned, in my view, since present application filed under section 9 of the Arbitration Act by the petitioner is not for enforcement of the interim award or jurisdictional award rendered by the arbitral tribunal but the petitioner seeks interim measures against the resp....
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....etitioner is only a shareholder in respondent No.1 company and not a creditor and its investment in the respondent 1 company ceased to have the character of money and remedy of the petitioner if any was under the provisions of the Companies Act 1956 is concerned, on perusal of the statement of claim filed before the arbitral tribunal and the pleadings filed in this proceedings it is clear that the claims made by the petitioner is not for recovery of equity shares but is for damages on the premise that the respondent No.1 had misrepresented the petitioner on BBC contract and had committed various other acts of misrepresentation regarding material contract vendors, suppliers etc. In my view, reliefs claimed in the arbitration proceedings could not be subject matter of the proceedings under Section 397 of the Companies Act. I am not inclined to accept the submission of Mr Rohatgi learned senior counsel that the claim of the petitioner is made as a shareholder of respondent No.1 company and not as a creditor in any respect. 94. Next submission of Mr Rohatgi learned senior counsel is that M/s HAV 3 continues to hold about 10% shares in the respondent 1 company and none of the other sha....
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....ns of the petitioner that there was false misrepresentations on the part of the respondent on various such issues has substance. 97. A perusal of the record also prima facie indicates that out of USD 60 million invested by the petitioner in respondent No.1 at least USD 51 million had been circulated back to respondent No.3 as he was sole signatory of the companies to whom those amounts were credited and was not used to purchase the equipments for the BBC contract though represented by the respondent. Details of routing such amounts have been highlighted in the earlier part of this Judgment. 98. In my view, whether HAV 3, and other shareholders concerned who had also invested some amount in respondent No.1 have demanded any refund or made any grievance against respondent No.1 or not would not affect the claims made by the petitioner which is based on the false representation and for other reasons. 99. In my view Dr Tulzapurkar learned senior counsel is right in his submission that the question as to whether the arbitral tribunal being less suitable or it would be more convenient or appropriate for a civil court to decide allegations of fraud etc., is not a ground available under ....