TaxTMI 
TaxTMI 
2020 (8) TMI 858
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....e of the said appeals, we refer to the facts in Civil Appeal No. 5145 of 2016. The brief facts necessary to appreciate the controversy that arises in the present case are as follows: (i) On 21.04.2011, a Share Subscription Agreement ["SSA"] was entered into between HSBC and the Appellants. HSBC made an investment in the equity capital of Avitel India for a consideration of USD 60 million in order to acquire 7.8% of its paid-up capital. This SSA contained an arbitration Clause which reads as follows: 16. DISPUTE RESOLUTION 16.1. Arbitration 16.1.1. Any 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 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. 16.1.2. The seat of arbitration shall....
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....m the day it is made and the parties agree to be bound thereby and to act accordingly. The parties undertake to carry out the award without delay. 16.1.9. During the conduct of any arbitration proceedings pursuant to this Clause 16.1, this Agreement shall remain in full force and effect in all respects except for the matter under arbitration and the parties shall continue to perform their obligations hereunder, except for those obligations involved in the matter under dispute, and to exercise their rights hereunder. 16.2. Costs The costs and expenses of the arbitration, including the fees of the arbitration and the Arbitration Tribunal, shall be borne equally by each Party to the dispute or claim and each Party shall pay its own fees, disbursements and other charges of its counsel, except as may be determined by the Arbitration Tribunal. The Arbitration Tribunal would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts. 16.3. Final and Binding It is agreed by the Parties that any aw....
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....been siphoned off to companies in which the Jain family had a stake. (iv) As disputes arose between the parties, on 11.05.2012, notices of arbitration were issued by HSBC to the Singapore International Arbitration Centre ["SIAC"] to commence arbitral proceedings. On 14.05.2012, the SIAC appointed Mr. Thio Shen Yi, SC, as an Emergency Arbitrator pursuant to an application dated 11.05.2012. On 17.05.2012, the Appellants' challenge to the appointment of the Emergency Arbitrator was considered by the SIAC and rejected. On 25.05.2012, the Appellants filed their response to the notices of arbitration. (v) The Emergency Arbitrator then passed two Interim Awards dated 28.05.2012 and 29.05.2012, in the SSA and the SHA, respectively, in favour of HSBC, directing the Appellants and Avitel Dubai to refrain from disposing of or dealing with or diminishing the value of their assets up to USD 50 million, and permitting HSBC to deliver a copy of the Interim Awards to financial institutions in India and the UAE with which any of the Appellants hold or may hold or be signatory to accounts, together with a request that the financial institutions freeze such accounts ....
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....hand would be governed by Singapore law. It held that the unanimous "final partial award on jurisdiction" dated 17.12.2012, delivered by the Arbitral Tribunal in Singapore, upholding the jurisdiction of the Arbitral Tribunal to proceed, had not been challenged in Singapore by the Appellants, and further held that this being the case, since HSBC has a good chance of success in the final arbitral proceedings, the aforesaid order to deposit the shortfall in the account so as to maintain a balance of USD 60 million was passed. (x) An appeal against the order of the learned Single Judge was disposed of by the impugned judgment and order of the Division Bench dated 31.07.2014, returning a prima facie finding that since Singapore law governs the arbitration agreement, there was no need to interfere with the findings of the learned Single Judge in this respect. Further, it was held that there is no estoppel in filing the present proceeding despite the Emergency Awards being passed in Singapore as the Section 9 petition could be maintained on a plain reading of the arbitration agreement itself. It was further held that an issue of fraud in the context of Sections 17 and 18 of....
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.... 21.2 Finds that the Respondents jointly and severally represented to the Claimant the following: a. the Avitel Group's propriety stereoscopy technology was superior to that of its competitor; b. Avitel Dubai played an important role in the Avitel Group's business; c. the Avitel Group was in advanced negotiations with the BBC and that the BBC Contract was close to execution; d. the Claimant's investment was required and was to be utilized for purchasing equipment in order to enable Avitel Dubai to service the BBC Contract; e. the Avitel Group had the benefit of the Material Contracts with Kinden, SPAC and Purple Passion with a total value of approximately USD 658 million; f. the Avitel Group's key customers Kinden, SPAC and Purple Passion as well as Avitel Dubai's key supplier, Digital Fusion, and key service provider, Highend, were all independent and legitimate companies; g. the representations and warranties contained in Clauses 6.1 and 6.2 of the SSA and in Clauses 7.1, 7.3, 7.5, 8, 10 and 11 of Schedule 3 of the SSA to be true, complete, accurat....
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....imant's Preference Subscription Shares and Equity Subscription Shares (as defined in the SSA) in Avitel India are to be cancelled forthwith; 21.15 Awards to the Claimant and Orders the Respondents to pay damages in the amount of USD 60 million in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.16 Awards to the Claimant and Orders the Respondents to pay interest on the sum of USD 60 million from 6 May 2011 to the date of this Final Award at the rate of 4.25% per annum in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.17 Orders in terms identical to the orders in the Interim Award (as amended by the Addendum and Amendment to Interim Award dated 15 June 2012 and by the Amendment to Interim Award dated 27 July 2012), which orders are to remain in force up to and including the date on which the Respondents comply with all other orders in this Final Award; 21.18 Awards to the Claimant and Orders the Respondents to pay the Claimant's legal and other costs amounting to USD 1,652,890.14 in respect of whic....
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....ve serious criminal offences such as forgery and impersonation, then it is clear that under Indian law, such dispute would not be arbitrable. In fact, they stated that a criminal complaint was filed by HSBC against the Appellants dated 16.01.2013, alleging offences Under Sections 420, 467, 468, read with Section 120B of the Indian Penal Code, 1860, with the Economic Offences Wing, Mumbai ["EOW"], resulting in an FIR being registered. However, the EOW informed HSBC that a closure report was filed before the concerned Magistrate in Mumbai. This closure report was then accepted. HSBC then filed a protest petition seeking rejection of the closure report, which was dismissed by the learned Magistrate on 05.05.2018. This order passed by the Magistrate was in turn challenged by HSBC in Writ Petition (Criminal) No. 5659 of 2018, which petition is still pending. They then argued that, ultimately, in enforcement proceedings in India, the gateways of Section 48 of the 1996 Act have to be met. "The public policy of India" is contained in the judgments of this Court regarding serious allegations of fraud made in arbitral proceedings, and if HSBC cannot pass this gateway, then enforcing a foreig....
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.... judgment in President of India and La Pintada Compania Navigacion S.A., [1985] A.C. 104 ["La Pintada"]. 3. Mr. Harish Salve, learned Senior Advocate appearing on behalf of the Respondent, HSBC, countered all these submissions by relying upon several judgments of this Court, including the recent judgment in Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710 ["Rashid Raza"]. According to the learned Senior Advocate, this judgment has, with great clarity, explained the judgment in A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386 ["Ayyasamy"], which in turn had explained N. Radhakrishnan (supra), as referring only to such serious allegations of fraud as would vitiate the arbitration Clause along with the agreement, and allegations of fraud which are not merely inter parties, but affect the public at large. He argued that a reading of the pleadings in the present case would show that neither of these two tests has been met. He also copiously read from the Foreign Final Award dated 27.09.2014, which found not merely on impersonation, which was one small leg on which it stood, but also on siphoning off or diversion of a substantial portion of the USD 60 million paid by HSBC into companies ....
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....en allegations of fraud are raised by one of the parties to the arbitration agreement. The law on this point has its origins in a judgment under the Arbitration Act, 1940 ["1940 Act"], the predecessor to the 1996 Act, which repealed the 1940 Act. Thus, in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, [1962] 3 SCR 702 ["Abdul Kadir"], disputes arose out of an agreement between the parties, which contained an arbitration clause. Consequently, Respondents No. 1 and 2 filed an application Under Section 20 of the 1940 Act, as it then stood. This application was opposed by the Appellant on four grounds before the Hon'ble Supreme Court. The fourth ground is important from our point of view and reads thus: xxx xxx xxx (4) The Respondents had made allegations of fraud against the Appellant in their application and that was also a ground for not referring the dispute to arbitration. (at p. 707) In dealing with this ground, the Court first referred to Section 20(4) of the 1940 Act, which laid down that "where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the ar....
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....tor questions of account, even when those questions do involve misconduct amounting even to dishonesty on the part of some partner? I do not see it. I do not say that in many cases 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 Russel's case [1880 14 Ch D 471] to order an arbitration agreement to be filed and will not make a reference. We may in this connection refer to Minifie v. Railway Passengers Assurance Co. [(1881) 44 LT 552]. There the question was whether certain proceedings should be stayed; and it....
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....ration. This Court, after considering the judgment in Abdul Kadir (supra), extracted one sentence from the said judgment at p. 714 as follows: 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. This sentence, according to the learned Division Bench, being the ratio in Abdul Kadir (supra), would necessarily mean that wherever serious allegations of fraud are raised in a case in which there is an arbitration agreement, they should be tried in a court of law. In the fact situation before the Court, the Court found that the Appellant had made serious allegations against the Respondents alleging that they were committing malpractices in the account books and had manipulated the finances of the partnership firm. This, according to the learned Division Bench of this Court, was enough to dismiss the Section 8 application. We may also refer to the fact that the Appellant's counsel had relied upon the judgment in Hindus....
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....;36. The well-recognised 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 solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely amo....
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....not by Arbitral Tribunals. 47. The scheme relating to adjudication of mortgage suits contained in Order 34 of the Code of Civil Procedure, replaces some of the repealed provisions of the Transfer of Property Act, 1882 relating to suits on mortgages (Sections 85 to 90, 97 and 99) and also provides for implementation of some of the other provisions of that Act (Sections 92 to 94 and 96). Order 34 of the Code does not relate to execution of decrees, but provides for preliminary and final decrees to satisfy the substantive rights of mortgagees with reference to their mortgage security. 9. We now come to a learned Single Judge's judgment in Swiss Timing (supra). There is no doubt that this judgment delivered by a learned Single Judge under a Section 11 jurisdiction cannot be said to be a binding precedent [see Associated Contractors (supra) at paragraph 17]. However, the learned Judge's reasoning has strong persuasive value which we are inclined to adopt. The learned Single Judge first held that the judgment in P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539, was not brought to the notice of this Court in N. Radhakrishnan (supra). The judgment of Hindu....
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....the Applicant as Plaintiff and the other parties as Defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable. It will be seen from Section 20 of the 1940 Act, as was held in Abdul Kadir (supra), that a wide discretion is vested in the Court if sufficient cause is made out not to refer parties to arbitration. It was in that context that the observations in Abdul Kadir (supra) as to serious allegations of fraud triable in a civil court, being "sufficient cause" shown Under Se....
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....amely, disputes arising under trust deeds governed by the Trusts Act, 1882. Here, it was held that a consideration of the Trusts Act would show that the intention of the legislature was to confer jurisdiction only on civil courts for deciding disputes arising under the Trusts Act, which would amount to an implied bar on other proceedings including arbitral proceedings. The Court therefore found: 53. We, accordingly, hold that the disputes relating to trust, trustees and beneficiaries arising out of the trust deed and the Trusts Act, 1882 are not capable of being decided by the arbitrator despite existence of arbitration agreement to that effect between the parties. A fortiori, we hold that the application filed by the Respondents Under Section 11 of the Act is not maintainable on the ground that firstly, it is not based on an "arbitration agreement" within the meaning of Sections 2(1)(b) and 2(1)(h) read with Section 7 of the Act and secondly, assuming that there exists an arbitration agreement (Clause 20 of the trust deed) yet the disputes specified therein are not capable of being referred to private arbitration for their adjudication on merits. 54. ....
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....ss Timing Ltd. [Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 : (2014) 3 SCC (Civ) 642] was a judgment rendered while dealing with Section 11(6) of the Act and Section 11 essentially confers power on the Chief Judge of India or the Chief Justice of the High Court as a designate to appoint an arbitrator, which power has been exercised by another Hon'ble Judge as a delegate of the Chief Justice. This power of appointment of an arbitrator Under Section 11, by the Court, notwithstanding the fact that it has been held in SBP & Co. v. Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] as a judicial power, cannot be deemed to have precedential value and, therefore, it cannot be deemed to have overruled the proposition of law laid down in N. Radhakrishnan [N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12]. 25. In view of our aforesaid discussions, we are of the opinion that mere allegation of fraud simpliciter may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the court, while dealing with Section 8 of the Act, finds tha....
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....tration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject-matter rather than relegating the parties to arbitration, then alone such an application Under Section 8 should be rejected. Chandrachud, J., in a separate judgment, referred to the judgment in N. Radhakrishnan (supra) and then held: 40. The above extract from the judgment in N. Radhakrishnan [N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12] relies extensively on the view propounded in Abdul Kadir [Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406]. The decision in Abdul Kadir [Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406] arose under the Arbitration Act, 1940 and was in the context of the provisions of Section 20. In Abdul Kadir [Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406], this Court emphasised that Sub-section (4) of Section 20 of the Arbitration Act, 1940 left a wide discretion in the court. In contra....
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....ow such a plea would be a plain misreading of the judgment in N. Radhakrishnan [N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12]. As I have noted earlier, that was a case where the Appellant who had filed an application Under Section 8 faced with a suit on a dispute in partnership had raised serious issues of criminal wrongdoing, misappropriation of funds and malpractice on the part of the Respondent. It was in this background that this Court accepted the submission of the Respondent that the arbitrator would not be competent to deal with matters "which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation". Hence, it is necessary to emphasise that as a matter of first principle, this Court has not held that a mere allegation of fraud will exclude arbitrability. The burden must lie heavily on a party which avoids compliance with the obligation assumed by it to submit disputes to arbitration to establish the dispute is not arbitrable under the law for the time being in force. In each such case where an objection on the ground of fraud and criminal wrongdoing is raised, it is for the judicia....
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....mstances seldom arise: as a practical matter, it is relatively unusual that a party will seek to procure an agreement to arbitrate by fraud, even in those cases where it may have committed fraud in connection with the underlying commercial contract. (See also in this context International Arbitration Law and Practice by Mauro Rubino-Sammartano [2nd Edn., p. 179].) Mr. Saurabh Kirpal took exception to Sikri, J.'s judgment in that Sikri, J. did not refer to paragraph 52 of the 246th Law Commission Report and its aftermath. Paragraph 52 of the 246th Law Commission Report reads as follows: 52. The Commission believes that it is important to set this entire controversy to a rest and make issues of fraud expressly arbitrable and to this end has proposed amendments to Section 16. (at p. 28) The Law Commission then added, by way of amendment, a proposed Section 16(7) as follows: Amendment of Section 16 10. In Section 16, After Sub-section (6), insert Sub-section "(7) The arbitral tribunal shall have the power to make an award or give a ruling notwithstanding that the dispute before it involves a serious....
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....from the London, Chatham and Dover Railway case has now been removed, to a large extent by legislative intervention, and to a lesser extent by judicial qualification of the scope of the decision itself. My second main reason is that, when Parliament has given effect by legislation to some recommendations of the Law Commission in a particular field, but has taken what appears to be a policy decision not to give effect to a further such recommendation, any decision of your Lordships' House which would have the result of giving effect, by another route, to the very recommendation which Parliament appears to have taken that policy decision to reject, could well be regarded as an unjustifiable usurpation by your Lordships' House of the functions which belong properly to Parliament, rather than as a judicial exercise in departing from an earlier decision on the ground that it has become obsolete and could still, in a limited class of cases, continue to cause some degree of injustice. (at pp. 129-130) One can see from the speeches of the other Law Lords, with what great reluctance they allowed the appeal and set aside the Court of Appeal's judgment. Each of t....
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....s reason also, Parliament may have left it to the courts to work out the fraud exception. In any case, we have pointed out that dehors any such provision, the ratio in N. Radhakrishnan (supra), being based upon a judgment under the 1940 Act, and without considering Sections 5, 8 and 16 of the 1996 Act in their proper perspective, would all show that the law laid down in this case cannot now be applied as a precedent for application of the fraud mantra to negate arbitral proceedings. For the reasons given in this judgment, the House of Lords' decision would have no application inasmuch as N. Radhakrishnan (supra) has been tackled on the judicial side and has been found to be wanting. 13. The judgment in Ayyasamy (supra) was then applied in Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678. After extracting paragraph 25 from Sikri, J.'s judgment and paragraph 48 of Chandrachud, J.'s judgment in Ayyasamy (supra), the Court held: 37. It is only where serious questions of fraud are involved, the arbitration can be refused. In this case, as contended by the Appellants there were no serious allegations of fraud; the allegations levelled against As....
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....ooz Allen (supra). When Afcons (supra) refers in paragraph 27(iv) to "cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion, etc.", this must now be understood in the sense laid down in Ayyasamy (supra) and Rashid Raza (supra). When it comes to paragraph 27(vi) in Afcons (supra), and paragraph 36(i) in Booz Allen (supra), namely, cases involving prosecution for criminal offences, it is also important to remember that the same set of facts may have civil as well as criminal consequences. Thus, in K.G. Premshanker v. Inspector of Police, (2002) 8 SCC 87 ["Premshanker"], this Court had to answer a reference made to it as follows: 7. This Court on 9-11-1998, passed the following order: "Since we are of the view that the judgment of this Court in V.M. Shah v. State of Maharashtra [(1995) 5 SCC 767 : 1995 SCC (Cri.) 1077] which has been relied upon by Mr. Gopal Subramaniam, learned Senior Counsel appearing for the Petitioner, requires reconsideration, we refer this petition to a larger Bench for disposal. Let the record be placed before Hon. the Chief Justice for necessary orders. The observations in V.M. S....
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....Court was not required to consider the earlier decision of the Constitution Bench in M.S. Sheriff case [AIR 1954 SC 397 : 1954 Cri. LJ 1019] as well as Sections 40 to 43 of the Evidence Act. Likewise, in P. Swaroopa Rani v. M. Hari Narayana, (2008) 5 SCC 765, this Court laid down the proposition: 11. It is, however, well settled that in a given case, civil proceedings and criminal proceedings can proceed simultaneously. Whether civil proceedings or criminal proceedings shall be stayed depends upon the facts and circumstances of each case. (See M.S. Sheriff v. State of Madras [AIR 1954 SC 397], Iqbal Singh Marwah v. Meenakshi Marwah [(2005) 4 SCC 370 : 2005 SCC (Cri.) 1101] and Institute of Chartered Accountants of India v. Assn. of Chartered Certified Accountants (2005) 12 SCC 226 : (2006) 1 SCC (Cri.) 544) In Syed Askari Hadi Ali Augustine Imam v. State (Delhi Admn.), (2009) 5 SCC 528, it was held: 24. If primacy is to be given to a criminal proceeding, indisputably, the civil suit must be determined on its own merit, keeping in view the evidence brought before it and not in terms of the evidence brought in the criminal proceeding. The question ....
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....as under: (IA p. 212) ... It is conceded that the findings in a civil proceeding are not binding in a subsequent prosecution founded [upon] the same or similar allegations. Moreover, the police investigation was stopped, and it cannot be said with certainty that no more information could be obtained. But even if it were not, it is the duty of a criminal court when a prosecution for a crime takes place before it to form its own view and not to reach its conclusion by reference to any previous decision which is not binding [upon] it. (emphasis added) 15. In P. Swaroopa Rani v. M. Hari Narayana [(2008) 5 SCC 765 : (2008) 3 SCC (Cri.) 79 : AIR 2008 SC 1884] this Court has held as under: (SCC pp. 769-71, paras 11, 13 & 18) "11. It is, however, well settled that in a given case, civil proceedings and criminal proceedings can proceed simultaneously. Whether civil proceedings or criminal proceedings shall be stayed depends upon the facts and circumstances of each case. ... xxx xxx xxx 13. Filing of an independent criminal proceeding, although initiated in terms of some observations made by the civil court, ....
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....s neither any statutory nor any legal principle that findings recorded by the court either in civil or criminal proceedings shall be binding between the same parties while dealing with the same subject-matter and both the cases have to be decided on the basis of the evidence adduced therein. However, there may be cases where the provisions of Sections 41 to 43 of the Evidence Act, 1872, dealing with the relevance of previous judgments in subsequent cases may be taken into consideration. To complete the review of case law on the subject, we may finally refer to Guru Granth Saheb Sthan Meerghat Vanaras v. Ved Prakash, (2013) 7 SCC 622, wherein this Court, after referring to the previous case law on the subject held as follows: 17. In K.G. Premshanker [K.G. Premshanker v. Inspector of Police, (2002) 8 SCC 87 : 2003 SCC (Cri.) 223] the effect of the above provisions (Sections 40 to 43 of the Evidence Act) has been broadly noted thus: (SCC p. 97, para 30) 30. ... (4) if the criminal case and civil proceedings are for the same cause, judgment of the civil court would be relevant if conditions of any of Sections 40 to 43 are satisfied, but it cannot be sai....
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....Section 238, infra., with intent to deceive another party thereto or his agent, or to induce him to enter into the contract-- (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent. Explanation.--Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak See Section 143, infra., or unless his silence is, in itself, equivalent to speech. Section 10 of the Contract Act states that all agreements are contracts if they are made with the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Section 14 states that consent is sa....
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...., a distinction is made between a contract being obtained by fraud and performance of a contract (which is perfectly valid) being vitiated by fraud or cheating. The latter would fall outside Section 17 of the Contract Act, in which the remedy for damages would be available, but not the remedy for treating the contract itself as being void (see pp. 311-312). This is for the reason that the words "with intent to deceive another party thereto or his agent" must be read with the words "or to induce him to enter into the contract", both sets of expressions speaking in relation to the formation of the contract itself. This is further made clear by Sections 10, 14 and 19, which have already been referred to hereinabove, all of which deal with "fraud" at the stage of entering into the contract. Even Section 17(5) which speaks of "any such act or omission as the law specially deals to be fraudulent" must mean such act or omission under such law at the stage of entering into the contract. Thus, fraud that is practiced outside of Section 17 of the Contract Act, i.e., in the performance of the contract, may be governed by the tort of deceit, which would lead to damages, but not rescission of t....
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..... In Smith New Court Securities Ltd. v. Scrimgeour Vickers (Asset Management) Ltd.,: [1996] 4 All ER 769, the Appellant, Smith New Court ["SMC"] purchased shares in a company, Ferranti International Signal Inc. ["F. Inc."], which had been pledged to a bank as security for a loan made by the bank to a client. SMC was given the impression that it was in competition with two other bidders for the shares and, therefore, bid a very high price for the shares. When the share price collapsed as a result of a major fraud, SMC investigated the circumstances of its purchase and discovered that the two other bidders were not there at the time of the sale. SMC then brought proceedings against the first Defendant, Scrimgeour Vickers (Asset Management) Ltd., and the bank, claiming damages for fraudulent misrepresentation. The House of Lords referred to the leading judgment in Doyle v. Olby (Ironmongers) Ltd., [1969] 2 All ER 119(Queen's Bench) ["Doyle"], and held: Doyle v. Olby (Ironmongers) Ltd. establishes four points. First, that the measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing f....
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....he Plaintiff is entitled to recover consequential losses caused by the transaction; (7) the Plaintiff must take all reasonable steps to mitigatehis loss once he has discovered the fraud. (at pp. 778-779) Likewise, in the same judgment Lord Steyn, after referring to the seminal judgment in Doyle [supra] stated the law thus: The logic of the decision in Doyle v. Olby (Ironmongers) Ltd. justifies the following propositions. (1) The Plaintiff in an action for deceit is not entitled to be compensated in accordance with the contractual measure of damage, i.e. the benefit of the bargain measure. He is not entitled to be protected in respect of his positive interest in the bargain. (2) The Plaintiff in an action for deceit is, however, entitled to be compensated in respect of his negative interest. The aim is to put the Plaintiff into the position he would have been in if no false representation had been made. (3) The practical difference between the two measures was lucidly explained in a contemporary case note on Doyle v. Olby (Ironmongers) Ltd.: G.H. Treitel, "Damages for Deceit" (1969) 32 M.L.R....
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.... That brings me to the perceived difficulty caused by the date of transaction rule. The Court of Appeal [1994] 1 W.L.R. 1271, 1283G, referred to the rigidity of "the Rule in Waddell v. Blockey (1879) 4 Q.B.D. 678, which requires the damages to be calculated as at the date of sale." No doubt this view was influenced by the shape of arguments before the Court of Appeal which treated the central issue as being in reality a valuation exercise. It is right that the normal method of calculating the loss caused by the deceit is the price paid less the real value of the subject matter of the sale. To the extent that this method is adopted, the selection of a date of valuation is necessary. And generally the date of the transaction would be a practical and just date to adopt. But it is not always so. It is only prima facie the right date. It may be appropriate to select a later date. That follows from the fact that the valuation method is only a means of trying to give effect to the overriding compensatory rule: Potts v. Miller, 64 C.L.R. 282, 299, per Dixon J. and County Personnel (Employment Agency) Ltd. v. Alan R. Pulver & Co. [1987] 1 W.L.R. 916, 925-926, per Bingham L.J. Moreov....
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.... ii. if so, did the Respondents make the representations and/or warranties in order to induce the Claimant to invest in Avitel India; iii. if so, was the Claimant so induced and did it rely on the Respondents' representations and/or warranties; iv. if so, were any of these representations and/or warranties untrue; v. if so, have any of the Respondents made such representations and/or warranties knowing that these were false and/or without belief in their truth, or recklessly and without caring whether these representations and/or warranties were true or false; vi. if so, are any of the Respondents liable to the Claimant in tort for deceit; vii. if so, are any of the Respondents liable to the Claimant for fraudulent misrepresentation pursuant to the relevant provisions of the Contract Act; viii. if so, is the Claimant entitled to damages for fraudulent misrepresentation pursuant to the relevant provisions of the Contract Act; ix. If so, are any of the Respondents liable to the Claimant for breach of warranty; x. If so, are any of the Respondents t....
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.... Wylde of HSBC [A copy of this statement is exhibited to the Witness Statement of Mr. van Schalkwyk, at RVS-I pp. 2 to 3]; (ii) a series of payments was then made by Avitel Dubai as follows: a. on 15 May 2011 the Avitel Dubai Account was debited in the amount of USD 6 million and which amount was credited to an Emirates NBD account held in the name of Highend. This was followed by multiple small transfers out of Highend's bank account to a number of miscellaneous accounts [Witness Statement of Mr. van Schalkwyk, at para. 17(b)(i)]; b. on 23 May 2011, the Avitel Dubai Account was debited in the amount of USD 12.22 million and which amount was credited to the same Emirates NBD account held in the name of Highend. This amount was in turn transferred to an entity identified as Avitel Limited on 30 May 2011 whose full beneficial ownership Mr. van Schalkwyk has not been able to confirm [Witness Statement of Mr. van Schalkwyk, at para. 17(b) (ii)]; c. on 9 June 2011 the Avitel Dubai Account was debited in the amount of USD 10 million which amount was then credited to a different Emirates NBD bank account which is also held in....
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....ost of the representations made by the Avitel Group and the Jain family to HSBC were false in that: 8.70 The Tribunal notes that the Respondents have not denied the accuracy of the following a. the Avitel Group did not have a direct relationship with the BBC and was not close to signing the BBC Contract; b. Avitel Dubai's offices had been closed for a period of time; c. Mr. Siddhartha Jain was a forty nine percent shareholder in Highend as well as in Digital Fusion at the material time; d. Mr. Siddhartha Jain is the sole signatory of and therefore controls Highend's and Digital Fusion's bank accounts with Emirates NBD; e. Mr. Siddhartha Jain was co-signatory (together with one Mr. Ankit Garg) of SPAC's bank accounts with Emirates NDB; f. Kinden was not in existence between 12 October 2010 and 26 October 2011; g. Mr. Boban Idiculla who is the sole shareholder and director of Kinden, is also the sole signatory of and therefore controls Cralton's bank accounts with Emirates NDB; h. Purple Passion, which was wholly owned by Mr. Siddh....
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....Highend's, Digital Fusion's, SPAC's and Cralton's various bank accounts with Emirates NDB (see paragraph 8.20 above), the Tribunal accepts the Claimant's submission that none of these entities were independent and legitimate companies. As for Mr. van Schalkwyk's evidence, as there is no evidence adduced which would challenge the veracity and reliability of Mr. van Schalkwyk's evidence, the Tribunal sees no reason to disregard his evidence. In the Tribunal's view he is a credible witness; d. the Claimant's investment was required and was to be utilized for purchasing equipment in order to enable Avitel Dubai to service the BBC Contract. In light of the circumstances referred to in paragraph 8.68 above, the Tribunal accepts the Claimant's submission that its investment has been siphoned off by the Respondents; e. the representations and/or warranties contained in Clause 6.2.1 of the SSA because the information provided to the Claimant prior to and during the negotiations and the preparations of the SSA had not been provided by the Respondents and its/or their representatives and advisors in good faith and had been ....
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....th Kinden and Purple Passion did not exist at the Completion Date; k. the representations and warranties contained in Clause 8 of Schedule 3 of the SSA because if the accounts did not give a true and fair view of the assets, liabilities and state of affairs of Avitel India and the Subsidiaries, all Tax Returns relating to Avitel India and the Subsidiaries or the Business or the assets of Avitel India and each of the Subsidiaries could not have been correct in all material respects; l. the representations and warranties contained in Clause 11 of Schedule 3 of the SSA because the Respondents falsely represented and warranted that Avitel India and each of the Subsidiaries were in material compliance with all applicable laws which in light of the Tribunal's findings in paragraphs 8.72(a) to (j) above, could not have been the case; m. the representations and warranties contained in Clause 6.1 of the SSA because in light of the Tribunal's findings in paragraphs 8.72(a) to (k) above, not every representation and warranty made in the SSA and in Schedule 3 of the SSA was true, complete, accurate and not misleading at the Completion Date. ....
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....mergency Arbitrator in proceedings in Singapore in which the Respondents had been represented by both Indian and Singapore counsel and provided evidence. All of the above are suggestive to the Tribunal of an attempt to delay these proceedings. 20.2 The Respondents provided no witness statements and did not adduce any oral evidence before this Tribunal although the Tribunal accepts that they did so in the proceedings before the Emergency Arbitrator, namely in Mr. Yogesh Garodia's Witness Statement. In reaching its findings and its decisions, this Tribunal has considered fully the Respondents' numerous submissions and Mr. Yogesh Garodia's Witness Statement as well as the documentary evidence. The Claimant provided evidence from a number of witnesses and also documentary evidence. As the Respondents did not attend the November 2013 Oral Hearing, the Tribunal tested the evidence of the Claimant's witnesses by asking a number of questions. The Tribunal finds each of the Claimant's witnesses to be credible and it accepts their evidence part of which is corroborated by the documentary evidence submitted by the Claimant Including an email from Ms. Sarah J....
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.... reading the issues and some of the material findings in the Foreign Final Award that the issues raised and answered are the subject matter of civil as opposed to criminal proceedings. The fact that a separate criminal proceeding was sought to be started and may have failed is of no consequence whatsoever. We, therefore, hold on a conspectus of these facts, and following our judgments, that the issues raised and answered in the Foreign Final Award would indicate: (i) That there is no such fraud as would vitiate the arbitration Clause in the SSA entered into between the parties as it is clear that this Clause has to be read as an independent clause. Further, any finding that the contract itself is either null and void or voidable as a result of fraud or misrepresentation does not entail the invalidity of the arbitration Clause which is extremely wide, reading as follows: Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach or termination ...... (emphasis supplied) (ii) That the impersonation, false representations ma....
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....m, is kept apart in the manner indicated by the learned Single Judge of the Bombay High Court. The balance of convenience is also in its favour. It is clear that in case HSBC was to enforce the Foreign Final Award in India in accordance with Section 48 of the 1996 Act, irreparable loss would be caused to it unless at least the principal sum were kept aside for purposes of enforcement of the award in India. Accordingly, we dismiss Civil Appeal No. 5145 of 2016 filed by Avitel India and the Jain family, and allow Civil Appeal No. 5158 of 2016 filed by HSBC. Civil Appeal No. 9820 of 2016 25. In this case, the Appellant is an angel investor in the shares of Avitel India. By a letter dated 04.07.2016, the Appellant herein expressed his concern on the observations and the freezing of the company's bank account by the Bombay High Court vide orders dated 22.01.2014 and 31.07.2014. The Appellant attended a meeting of the Board of Directors of Avitel India on 11.07.2016, in which the Chairman of the company, i.e., Mr. Pradeep Jain, explained to the Appellant in some detail as to the proceedings filed by HSBC against the company and the orders passed by the Arbitrators and Courts th....
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....ecific separate arbitration agreement, so no arbitrable dispute arises, as per Indian law, which may be referred to arbitration or for which, provisions of Section 9 of Arbitration and Conciliation Act can be involved for protection of his interest qua the shares purchased by him. Therefore, I do not find that any prima-facie case is made out in favour of applicant. Even balance of convenience is not in favour of the Applicant and no irreparable loss will be caused to the applicant, if this application is not allowed. Thus no ground is made out for grant of relief Under Section 9 of the Act and Section 151 of Code of Civil Procedure and the application stands dismissed accordingly. File be consigned to the record room. 27. An appeal was filed against this judgment to the Punjab and Haryana High Court. A learned Single Judge of the High Court, by the impugned judgment dated 02.09.2016, held that the final relief sought for is the return of an invested amount with interest together with cancellation of the shares. Such disputes would be governed by the Companies Act, 2013. Therefore, following some of the judgments of the Supreme Court, the remedy for arbitration sought by the App....