TaxTMI 
TaxTMI 
2014 (1) TMI 1825
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....egard to the claims of the petitioner. Petitioner 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 ....
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.....1 and promoters including respondent nos. 2 to 4 entered 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 au....
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.... stating that respondent no.3 was in London with BBC person and they were scheduled to 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 veri....
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....30 p.m. Mr.Linwood was in meetings with members of BBC Staff. (p) It is the case of the petitioner 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 und....
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....modify the interim awards. On 22nd June, 2012 and 27th June, 2012, Shivaji Park and Mandvi Branch of the Corporation 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 ....
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....e said jurisdictional award so far. On 15th January, 2013, petitioner filed an additional affidavit bringing on record the 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....
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....ons of Dr.Tulzapurkar, learned senior counsel appearing on behalf of the petitioner on the preliminary objections raised by Mr.Rohatgi, 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 a....
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....mber, 2013, final hearing in the SSA arbitration before the Arbitral Tribunal took place at Singapore. Award is awaited. Respondents have not challenged 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 ....
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....ce an issue has been finally determined, parties cannot subsequently in the same suit advance arguments or adduce further evidence directed to showing 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 pa....
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....ion has attained finality, the principle of res judicata shall fully apply. 19. Reference in this regard may be made to Wade and Forsyth on Administrative Law, 9th Ed., 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 ....
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....s the matter again............................ The principle of res judicata applies also as between two stages in the same litigation to this extent that a court, whether the trial court 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. ....
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....dural powers and duties of the arbitrators, questions of evidence and the determination of the proper law of the contract. In respect of many arbitrations, the applicable law will be the same in all 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 ....
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....bitration. The lex fori is then the law of X, and accordingly X is the agreed forum of the arbitration. A further consequence is then that the Courts which are competent to control or assist the arbitration are the 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, capabl....
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....otice of arbitration; the Constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any 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 arbitra....
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....ew of the seat of the arbitration being Singapore, there is a clear contrary intention to apply the law for the main contract to the arbitration agreement, and the law governing the arbitration agreement is therefore the law of Singapore. The 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 asp....
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....reedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised 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 ag....
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....rivate International Law, eleventh ed. (1987). 19. Learned senior counsel placed reliance on clause 16.4 of the share subscription agreement and submits that part I is thus explicitly excluded except section 9 and thus the law governing the arbitration 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 cas....
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....al Tribunal has decided any issues which are incapable of decision of arbitrator, such foreign award would not be enforceable under section 48(2) (a) read with section 46 of the Arbitration Act. It is submitted by the learned senior counsel that section 48 (2) (a) 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 app....
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.... within the ambit of the arbitration clause of the original partnership deed dated 7th of April, 2003, cannot be sustained. We are in agreement with the contention of the appellant to this effect. 16. It is clear from a perusal of the documents that there was a clear 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 Arbitra....
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....ated the accounts and defrauded the appellant by cheating the appellant of his dues, thereby warning the respondents with serious criminal action against them for the alleged commission of criminal offences. In this connection, reliance was placed in a decision of this Court in the 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 an....
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.... in its impugned judgment: " The above decision squarely applies to the facts of the present case. In the present case as well there is allegation of running rival firm, interference with the smooth administration of the firm. As already stated since the suit has been filed for declaration to declare 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 ....
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....rishnan judgment has now recognised that notwithstanding the mandate in section 8 of the 1996 Act and the use of the word "shall" therein as opposed to the word "may" as used in Section 34 of the 1940 Act, there would be an element of discretion available to Court while considering a petition to effectively stay 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 ne....
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....l authority cannot be imported in section 48(2) (a) of the Arbitration Act otherwise it would be amount to expanding scope of section 48 (2) (a) while enforcing of an award. On this issue, the learned senior counsel placed reliance on the judgment of the Supreme Court in case of Abdul Kadir Shamsuddin Bubere vs. Madhav 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 ma....
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....ly in matters of accounts, which would be enough to dispose a court to take the matter out of the forum which the parties themselves have chosen. This to our mind is clear even from the decision in Russel's case . In that case there were allegations of constructive and actual fraud by one brother against the other and it was 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 ....
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....o the suit to arbitration under Section 8 of the Act? Re: Question (iv) 32. The nature and scope of issues arising for consideration in an application under Section 11 of the Act for appointment of arbitrators, are far narrower than those arising in an application under Section 8 of the Act, seeking reference of the parties to a suit to arbitration. 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....
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....excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the Legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by a public fora (courts and Tribunals), may by necessary implication stand excluded 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 e....
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....s recognize that there are matters which cannot be decided by means of arbitration. 41. Mustill and Boyd in their Law and Practice of Commercial Arbitration in England [2nd - 1989 Edition], have observed thus: In practice therefore, the question has not been whether a particular dispute is capable of settlement 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. .... 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 ....
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.... the petitioner had invested US $ 60 million in respondent No.1 company based on the representations made by the respondents which included the deal with British Broadcasting Corporation (BBC), respondent No.1 having the benefit of number of material contracts with parties such as Kinden Holdings S.P.C. (Kinden), Strategic Publicity & Advertising WLL (SPAC), Purple Passion Productions Limited (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 sip....
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....the case of liquidation of the company. 33. Learned senior counsel submits that the present petition is not maintainable since the entire cause of action raised by the Petitioner is based on the alleged fraudulent conduct of the Respondent. It is submitted that any matter relating to the question of fraud in not arbitrable and has to be decided by the civil court. It is submitted that matters relating to fraud 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 fr....
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....point an arbitrator in the case of issues relating to fraud, the same logic ought to apply in case of Section 34 and 48 of the Act. It is submitted that rule relating to reference to arbitration is mandatory and not discretionary. Reliance is placed on the Judgment of Supreme Court in case of Hindustan Petroleum v. Pink city midway Petroleums (2003) 6 SCC 503 paragraph 14. 37. It is submitted that Once the Court finds 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 arbitr....
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....on agreement as such, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement. But that is only a rebuttable presumption." 43. Learned senior counsel placed reliance on clause 16.4 of the agreement and would submit that the said clause does not oust Indian law but merely ousts part of part I of the Arbitration Act. Hence even looking at Clause 16.4 of the 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....
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....Act however make it clear that an arbitral award will be set aside if the court finds that "the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force". 47. Reliance is also placed on para from Law and Practice of commercial Arbitration in England (2nd Edn. 1989) which is extracted as under : " In practice therefore, the question has not been whether a particular dispute is capable of settlement 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 t....
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....g SPA Italy (2002) 3 Bom CR 554 has held unlike a domestic award wherein an aggrieved party can file objections under Section 34 of the Act, the scheme of a foreign award is different. In the case of a foreign award, the aggrieved person is not required to challenge the same unless the Court finds it enforceable upon a Petition filed by a person in whose favour the award is made. It is submitted that even if the Respondents wished to challenge the award on any ground, 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. ....
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.... to be given great weight by this Court. While the report may not be determinative of the issue at hand, it is certainly presumptively correct. Learned senior counsel distinguished the Judgment of Supreme court in case of Vishnu Dutt Sharma v. Daya Sapra (2009) 13 SCC 729 and placed reliance on Section 5 of the Evidence Act and submits that all the findings of EOW report are directly in issue in the present case and hence the same can be proved in the Court. It is submitted 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....
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....f the shares of the company before a petition under Section 397/398 of the Companies Act can be maintained. In so far as allegation regarding fraud in respect of BBC contract is concerned, it is submitted that there was, in fact, no suggestion that there was an almost concluded BBC contract. 58. Learned senior counsel submits that a subsidiary of HSBC Bank Plc (the parent of Petitioner), namely HAV3 had invested a sum of 10 million USD in for 10% of the Respondent No.1 Company. 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 submit....
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....greement between the petitioner and the respondents. Even after signing the agreement, petitioner was enquiring about BBC contract and had permitted the respondent no.1 to use the equipments till BBC contract was signed. It is pointed out that the Purple Passion Productions Limited was dissolved on 29th November, 2010. Inspite thereof, in the list of contract as on 21st October, 2011, the said contract was continued to be shown as pending contract with the respondents. It is submitted 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 be....
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....l Court will be in a better position to decide the question rather than the Arbitral Tribunal. Dr.Tulzapurkar placed reliance on the judgment of the Calcutta High Court in case of Ram Kishan Mimani & Anr. Vs. Goverdhan Das Mimani and Ors. reported in A.P. No. 126 of 2010 (Calcutta High Court) in support of the same issue. 64. On the issue raised by Mr.Rohatgi on the applicability of section 48(2) (a), it is submitted by Dr.Tulzapurkar that the question of the Arbitral Tribunal being less 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 c....
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....d. (supra) it is held by the Supreme Court that the proper law of the arbitration agreement, i.e. the law governing rights and obligations of the parties arising from their agreement to arbitrate and, in particular, their obligation to submit their disputes to arbitration and to honour an award. This includes inter alia questions as to the validity of the arbitration agreement, the validity of the notice of arbitration, the Constitution of the tribunal and the question whether an award lies within 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....
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....greement are conducted, in the absence of any agreement to the contrary in accordance with law of the country in which the arbitration is held. If such choice is not made by the parties, expressly or by necessary implication, the procedural aspect of the conduct of arbitration (as distinguished from the substantive agreement to arbitrate) will be determined by the law of the place or seat of arbitration. The question that arises in this proceedings is that in addition to the agreement that the dispute, 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 S....
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....o India and subjected to Indian legal process before the same could be executed and thus Indian law would apply and not law of Singapore. 71. The second submission of Dr.Tulzapurkar is that even if Indian law would have been made applicable, there is no bar against an arbitrator to adjudicate upon the allegations of fraud, forgery and malpractices etc. Learned senior counsel in support of his submission distinguished the judgment of the Supreme Court in case of N.Radhakrishnan (supra) and would submit 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 cann....
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.... hand is that the judgment in case of N.Radhakrishnan (supra) would squarely apply to the facts of this case in which Supreme Court has held that if the allegations of fraud, forgery and fabrication are made, though arbitration agreement exist, such allegations cannot be settled in arbitration but can be settled only by court. Reliance is also placed on the judgment of this Court in case of Goldstar Metal Solutions (supra) and judgment of the Division Bench in case of MSM Satelite (supra), submission of learned 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 Suprem....
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....cts of this case. 74. In my view judgment of Supreme Court in case of National Thermal Power Corporation (supra) is of no assistance to the respondents but assist the case of the petitioner. In view of the aforesaid reasons, I am of the view that there is no merits of the submission of the learned senior counsel for the respondents that clause 16.4 of the agreement does not oust Indian law. In my view issue of arbitrability has to be decided under the law of arbitration agreement which is law of Singapore in 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 p....
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....ence if not capable by settlement of arbitration under the laws of India cannot be enforced in India and not the allegations of fraud, fabrication and forgery etc. In my view there is no merit in the submission of Mr.Rohatgi that under law of Singapore, allegations of fraud, forgery and fabrication was not capable of settlement by arbitration. I am of the view that the subject matter of the reference was whether petitioner was entitled to claim damages from the respondents which was capable of settlement by arbitration 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 refe....
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....e principles of issue estoppel is issue applicable in case of question of fact or a question of law or to a mixed question of fact and law. The estoppel operates against the respondents and not against any law. 81. The next question that arises for consideration is even if section 48 of the Arbitration Act is pressed in service and would have been applicable at this stage, whether allegations of fraud, forgery and/or fabrication were capable of adjudication by an arbitrator under Indian law or the same would be opposed to 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 t....
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....ion made by the respondents that when a case involves substantial questions relating to facts where detailed material evidence was needed to be produced by either parties and serious allegations pertaining to fraud and malpractice were raised, the matter must be tried in a court and the arbitrator could not be competent to deal with such matters which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation. It is held by the Supreme Court that the contention of the respondents 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 Hig....
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....e property dealt with by the arbitrator". It is held that though there is a charge of malpractice and the respondents having siphoned of 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 like issues in the reference is not such that warrant of the exercise of the extra ordinary discretion which has not been recognized to negate the mandate of the 1996 Act in the present 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 th....
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....in conflict with public policy of India. 88. Supreme Court in the case of Booz Allen and Hamiltan (supra) has carved out categories of dispute which are non arbitrable such as disputes relating to rights and liabilities giving rise to or arising out of criminal offences, matrimonial disputes, child custody, guardianship matters, insolvency and winding up matters, testamentary matters, eviction or tenancy matters etc. Supreme Court has also held that where a cause/dispute is inarbitrable, court where a suit is pending will refuse to refer 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. 8....
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....t 1996, this Court is empowered to decide the matter based on evidence produced by both parties for the purpose of granting interim measures independently irrespective of the opinion of the Economic Offence Wing to the contrary. It is not in dispute that the opinion of Economic Offence Wing has not even been accepted by the learned Magistrate at this stage. I am thus not inclined to consider the correctness of the report submitted by EOW at this stage. 93. The next submission of Mr Rohatgi learned senior counsel for the respondent is that the petitioner 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 ma....
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.... between the respondents and BBC and the said representation was false on the part of the respondents to induce the petitioner to invest huge amount in respondent No.1 company. 96. Some of the correspondence on record also prima facie indicates that even there was misrepresentation on the part of the respondents in so far as M/s Purple Passion who was stated to be one of leading customer of the respondents which entity was already dissolved much prior to the date of execution of the agreements between the parties. In my prima facie view the allegations 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 ot....