TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1842
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....eriod from 2008 to 2012 for a sum of US$274.50 million. After the first IPL season, the BCCI terminated the agreement dated 21.01.2008 between BCCI and the respondent for the Indian sub-continent and commenced negotiations with WSG India. On 14.03.2009, the respondent filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') against the BCCI before the Bombay High Court praying for injunction against the BCCI from acting on the termination letter dated 14.03.2009 and for preventing BCCI from granting the rights under the agreement dated 21.01.2008 to any third party. Pursuant to the negotiations between BCCI and WSG India, BCCI entered into an agreement with the appellant whereunder the media rights for the Indian sub-continent for the period 2009 to 2017 was awarded to the appellant for a value of Rs. 4,791.08 crores. To operate the media rights in India, the appellant was required to seek a sub-licensee within seventy two hours. Though, this time period was extended twice, the appellant was not able to get a sub-licensee. Thereafter, the appellant claimed to have allowed media rights in India to have lapsed and then facilitated on 25.03.....
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....ntitled or permitted to commence or maintain any action in a court of law with respect to any matter in dispute until such matter shall have been submitted to arbitration as herein provided and then only for the enforcement of the arbitrator's award; provided, however, that prior to the appointment of the arbitrator or for remedies beyond the jurisdiction of an arbitrator, at any time, any party may seek equitable relief in a court of competent jurisdiction in Singapore, or such other court that may have jurisdiction over the Parties, without thereby waiving its right to arbitration of the dispute or controversy under this section. THE PARTIES HEREBY WAIVE THEIR RIGHT TO JURY TRIAL WITH RESPECT TO ALL CLAIMS AND ISSUES ARISING UNDER, IN CONNECTION WITH, TOUCHING UPON OR RELATING TO THIS DEED, THE BREACH THEREOF AND/OR THE SCOPE OF THE PROVISIONS OF THIS SECTION, WHETHER SOUNDING IN CONTRACT OR TORT, AND INCLUDING ANY CLAIM FOR FRAUDULENT INDUCEMENT THEREOF." 5. The respondent made three payments totaling Rs. 125 crores to the appellant under the Facilitation Deed during 2009 and did not make the balance payment. Instead, on 25.06.2010, the respondent wrote to the appellant rescind....
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....on over the parties. He submitted that on the principle of Comity of Courts, the Bombay High Court should have refused to interfere in the matter and should have allowed the parties to resolve their dispute through ICC arbitration, subject to the jurisdiction of the Singapore courts in accordance with Clause 9 of the Facilitation Deed. 8. Mr. Venugopal next submitted that the Division Bench of the High Court failed to appreciate that under Section 45 of the Act, the Court seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44 has to refer the parties to arbitration, unless it finds that the agreement referred to in Section 44 is null and void, inoperative or incapable of being performed. He submitted that the agreement referred to in Section 44 of the Act is 'an agreement in writing for arbitration' and, therefore, unless the Court finds that the agreement in writing for arbitration is null and void, inoperative or incapable of being performed, the Court will not entertain a dispute covered by the arbitration agreement and refer the parties to the arbitration. In support of this submission, he relied on the decision of this....
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....on the decision in N. Radhakrishnan v. Maestro Engineers & Ors. [(2010) 1 SCC 72] to hold that serious allegations of fraud can only be enquired by a Court and not by an arbitrator, but the Division Bench failed to appreciate that in N. Radhakrishnan v. Maestro Engineers & Ors. (supra) this Court relied on Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak [AIR 1962 SC 406] in which it was observed that it is only a party against whom a fraud is alleged who can request the Court to inquire into the allegations of fraud instead of allowing the arbitrator to decide on the allegations of fraud. In the present case, the respondent has alleged fraud against the appellant and thus it was for the appellant to make a request to the Court to decide on the allegations of fraud instead of referring the same to the arbitrator, and no such request has been made by the appellant. He further submitted that in any case the judgment of this Court in N. Radhakrishnan v. Maestro Engineers & Ors. (supra) was rendered in the context of domestic arbitration in reference to the provisions of Section 8 of the Act. He submitted that the language of Section 45 of the Act, which applies to an internationa....
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....s voidable at the option of our client and thus our client rescinds the deed with immediate effect'. In other words, the respondent's case is that it was induced to enter into the Facilitation Deed on account of the misrepresentation by the appellant and was led to believe that it was paying the facilitation fees to the appellant to allow the rights of the appellant under an alleged agreement dated 23.03.2009 to lapse, but the respondent subsequently discovered that there was no agreement dated 23.03.2009 and the rights of the appellant had come to an end on 24.03.2009. He submitted that the appellant has denied these allegations of the respondent in its affidavit-in-reply filed before the Bombay High Court and that there was no false representation and fraud as alleged by the respondent. He submitted that the Facilitation Deed was executed by the senior executives of the parties and in the case of respondent, it was signed by Michael Grindon, President, International, Sony Picture Television, and the appellant and the respondent had entered into the Facilitation Deed after consulting their sports media experts and after a lot of negotiations. He submitted that in fact a Press Rele....
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....ment and instead issued the notice for arbitration only to frustrate the first suit and in the circumstances the respondent was compelled to file the second suit (Suit No.1828 of 2010) for an injunction restraining the arbitration. 15. Mr. Subramanium submitted that Section 9 of the Code of Civil Procedure, 1908 (for short 'the CPC') confers upon the court jurisdiction to try all civil suits except suits which are either expressly or impliedly barred. He submitted that the Bombay High Court, therefore, had the jurisdiction to try both the first suit and the second suit and there was no express or implied bar in Section 45 of the Act restraining the Bombay High Court to try the first suit and the second suit. He submitted that in India as well as in England, Courts have power to issue injunctions to restrain parties from proceeding with arbitration proceedings in foreign countries. In support of this submission, he relied on V.O. Tractoroexport, Moscow v. Tarapore & Company and Anr. [(1969) 3 SCC 562] and Oil and Natural Gas Commission v. Western Company of North America [(1987) 1 SCC 496]. He also relied on Russel on Arbitration, para 7-056, 7-058, and Claxton Engineering v. Txm o....
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.... rightly taken the view that the disputes in this case cannot be kept outside the purview of the Indian Courts and if arbitration is allowed to go on without BCCI, the interest of BCCI will be adversely affected. He submitted that having regard to the magnitude of fraud alleged in the present case, the disputes were incapable of being arbitrated. Relying on Booz Allen & Hamilton v. SBI Home Finance [(2011) 5 SCC 532], Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (Supra), India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd. [(2007) 5 SCC 510] and N. Radhakrishnan v. Maestro Engineers & Ors. (supra), he submitted that such allegations of fraud can only be inquired into by the court and not by the arbitrator. Findings of the Court: 19. The question that we have to decide is whether the Division Bench of the Bombay High Court could have passed the order of injunction restraining the arbitration at Singapore between the parties. As various contentions have been raised by Mr. Venugopal, learned counsel for the appellant, in support of the case of the appellant that the Division Bench of the Bombay High Court could not have passed the order of injunction r....
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....he CPC. We find that in para 64 of the plaint in Suit No.1828 of 2010 filed before the Bombay High Court by the respondent, it is stated that the Facilitation Deed in which the arbitration clause is incorporated came to be executed by the defendant at Mumbai and the fraudulent inducement on the part of the defendant resulting in the plaintiff entering into the Facilitation Deed took place in Mumbai and the rescission of the Facilitation Deed on the ground that it was induced by fraud of defendant has also been issued from Mumbai. Thus, the cause of action for filing the suit arose within the jurisdiction of the Bombay High Court and the Bombay High Court had territorial jurisdiction to entertain the suit under Section 20 of the CPC. 21. Any civil court in India which entertains a suit, however, has to follow the mandate of the legislature in Sections 44 and 45 in Chapter I of Part II of the Act, which are quoted hereinbelow: "CHAPTER I NEW YORK CONVENTION AWARDS 44. Definition. In this Chapter, unless the context otherwise requires, "foreign award" means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as....
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.... reply to the notice of motion and has stated in paragraphs 3, 4 and 5 of this affidavit that the defendant had already invoked the arbitration agreement in the Facilitation Deed and the arbitration proceedings have commenced and that the suit was an abuse of the process of court. The appellant had thus made a request to refer the parties to arbitration at Singapore which had already commenced. 22. Section 45 of the Act quoted above also makes it clear that even where such request is made by a party, it will not refer the parties to arbitration, if it finds that the agreement is null and void, inoperative or incapable of being performed. As the very language of Section 45 of the Act clarifies the word "agreement" would mean the agreement referred to in Section 44 of the Act. Clause (a) of Section 44 of the Act refers to "an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies." The First Schedule of the Act sets out the different Articles of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. Article II of the New York Convention is extracted hereinbelow: "1. Each Contracting State shall reco....
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....mes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract. 13. Similarly, when an instrument or deed of transfer (or a document affecting immovable property) contains an arbitration agreement, it is a collateral term relating to resolution of disputes, unrelated to the transfer or transaction affecting the immovable property. It is as if two documents-one affecting the immovable property requiring registration and the other relating to resolution of disputes which is not compulsorily registerable-are rolled into a single instrument. Therefore, even if a deed of transfer of immovable property is challenged as not valid or enforceable, the arbitration agreement would remain unaffected for the purpose of resolution of disputes arising with reference to the deed of transfer." In the aforesaid case, this Court has held that if the document containing the main agreement is not found to be duly stamped, even if it contains arbitration clause, it cannot be acted upon because Section 35 of the Stamp Act bars the said document from being acte....
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....ould have had no authority to enter into an arbitration agreement. Even if the allegation is that there was no concluded agreement (for example, that terms of the main agreement remained to be agreed) that is not necessarily an attack on the arbitration agreement. If the arbitration clause has been agreed, the patties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration." 25. Applying the principle of separability to the facts of this case, the respondent rescinded the Facilitation Deed by notice dated 25.06.2010 to the appellant on the following grounds stated in the said notice by its lawyers: "1. Reference is made to the Deed for the Provison of Facilitation Services dated March 25, 2009 (the "Deed") between World Sport Group (Mauritius) Limited ("WSGM") and our client. Under the Deed, which is styled as a facilitation agreement, our client agreed to pay WSGM "facilitation" fees for the "facilitation" services stated thereunder to have been provided by WSGM. The underlying consideration for the payments by our client to WSGM, in fact were the representation made by WSGM that : (a) WSGM, had executed in Indi....
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....y the appellant that the appellant relinquished its Indian subcontinent media rights for the IPL in favour of the respondent for which the appellant had to be paid the facilitation fee under the deed was false and accordingly the Facilitation Deed was voidable at the option of the respondent on account of false representation and fraud. This ground of challenge to the Facilitation Deed does not in any manner affect the arbitration agreement contained in Clause 9 of the Facilitation Deed, which is independent of and separate from the main Facilitation Deed and does not get rescinded as void by the letter dated 25.06.2010 of the respondent. The Division Bench of the Bombay High Court, therefore, could not have refused to refer the parties to arbitration on the ground that the arbitration agreement was also void along with the main agreement. 26. Mr. Gopal Subramanium's contention, however, is also that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud could be enquired into by the court and not by the arbitrator. The authorities on the meaning of the words "inoperative or incapable of being performed" do not support this contention of ....
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....same schools of thought and approaches regarding the term null and void also apply to the terms inoperative and incapable of being performed. Consequently, the majority of authorities do not interpret these terms uniformly, resulting in an unfortunate lack of uniformity. With that caveat, we shall give an overview of typical examples where arbitration agreements were held to be (or not to be) inoperative or incapable of being performed. The terms inoperative refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time limit for initiating the arbitration or rendering the award has expired, provided that it was the parties' intent no longer to be bound by the arbitration agreement due to the expiration of this time ....
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....ation agreement is null and void, inoperative or incapable of being performed. In view of the provisions of Section 45 of the Act, the Division Bench of the High Court was required to only consider in this case whether Clause 9 of the Facilitation Deed which contained the arbitration agreement was null and void, inoperative or incapable of being performed. 31. The Division Bench of the High Court has further held that Clause 9 of the Facilitation Deed insofar as it restricted the right of the parties to move the courts for appropriate relief and also barred the right to trial by a jury was void for being opposed to public policy as provided in Section 23 of the Indian Contract Act, 1872 and was also void for being an agreement in restraint of the legal proceedings in view of Section 28 of the said Act. Parliament has made the Arbitration and Conciliation Act, 1996 providing domestic arbitration and international arbitration as a mode of resolution of disputes between the parties and Exception 1 to Section 28 of the Indian Contract Act, 1872 clearly states that Section 28 shall not render illegal a contract, by which two or more persons agree that any dispute which may arise betwee....