TaxTMI 
TaxTMI 
2020 (8) TMI 858
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....cts 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 be Singapore. 16.1.3. The language of the arbitration proceedings s....
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....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 award made by the Arbitration Tribunal shall be final and binding on each of the Parties that were parties to the dispute. 16.4. Application of Arb....
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.... 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 consistent with the Interim Awards. On 27.07.2012, the Emergency Arbitrator made an amendment to Interim Awards dated 28.05.2012 and 29.05.2012 passed in the SSA and the SHA, respectively, granti....
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....l 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 the Indian Contract Act, 1872 ["Contract Act"] referred to want of free consent, and was a well-accepted ground that would vitiate the contract, rendering it voidable. After referring to various judgments of this Court, it was he....
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....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, accurate and not misleading; 21.3 Finds that the Respondents made the representations and/or warranties in order to induce the Claimant to invest in the First Respondent; 21.4 Finds that the Claimant did rely on the representations and/or warranties in making its investment in the First Respondent....
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....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 which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.19 Awards to the Claimant and Orders the Respondents to pay all the costs of this arbitration in the total amount of SGD 827,615.67 as follows: (a) the amount of SGD 29,235.88 in respect of the Emergency Arbitrator's fees and expenses; (b) the amount of SGD 756,513.19 in respect of the Tribunal's fees and expenses....
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....port 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 foreign award in India would not be possible. It was from this prism that a prima facie case had to be made out Under Section 9 of the 1996 Act. They, therefore, attacked both the Single Judge order and the Division Bench judgment, stating that a prima facie case for enforcement of such foreign awards cannot possibly refer to the Singapore law on fraud being alleged in arbitral proceedings, but can only refer to Indian law. They further argued that the Division Bench of the Bombay High C....
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....asamy 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 owned or controlled by the Jain family. He said that these issues are predominantly civil law issues to be decided inter parties. He further argued that insofar as Mr. Christopher Lau SC's alleged bias is concerned, this was not the time or place to go into such allegations, which would only be fully met in the Section 48 proceedings which are pending. He indicated that in any case, this Foreign Final Award was unanimous and consisted of two other arbitrators, Dr. Michael C. Pryl....
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....cation 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 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." This Court referred to the fact that the words of this Sub-section leave a wide discretion with the Court to consider whether an order for filing an agreement should be made and reference thereon should also be made. Various English judgments were referred to. Russel v. Russel, [1880] 14 Ch D 471 was referred to for the proposition that the Co....
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....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 was held that notwithstanding the fact that the issue and the evidence in support of it might bear upon the conduct of a certain person and of those who attended him and so might involve a question similar to that of fraud or no fraud, that was no ground for refusing stay. It is only when serious allegations of fraud are made which it is desirable should be tried in open court that a court would be justified in refusing to order the arbitration agreement to be filed and in refusing to make a reference. (at pp. 714-716) T....
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....ecessarily 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 Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503 ["Hindustan Petroleum"], in which it was stated that it is mandatory for a civil court to refer to arbitration a dispute that arises between parties with an arbitration agreement, Under Section 8 of the 1996 Act. We may only note at this stage that this judgment was not dealt with at all by the Court. On the contrary, a judgment delivered Under Section 20(4) of the 1940 Act was referred to, in order to arrive at the conclusion arrived at by the Court. 7. In Afcons Infrastructure Ltd. v....
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....on 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 among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.) 38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and publi....
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.... 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 Hindustan Petroleum (supra) which was brought to the notice of the Court was not dealt with at all. Further, the provisions of Sections 5 and 16 of the 1996 Act were also not referred to. Section 5 of the 1996 Act states as follows: 5. Extent of judicial intervention.--Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. Section 16(1) of the 1996 Act states: 16. Competence of arbitral tribunal to Rule on its jurisdiction.--(1) The arbitral tribunal may Rule on its own jurisdiction, including ruling on any objection....
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....overned 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 Section 20(4) of the 1940 Act were made. Also, the approach of the 1940 Act is made clear by Section 35(1), which is set out hereinbelow: 35. Effect of legal proceedings on arbitration.--(1) No reference nor award shall be rendered invalid by reason only of the commencement of legal proceedings upon the subject-matter of the reference, but when legal proceedings upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted Under Section 34, be invalid. xxx xxx xxx Thus, even where arbitral proceedings are ongoing,....
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....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. We thus add one more category of cases i.e. Category (vii), namely, cases arising out of trust deed and the Trusts Act, 1882, in the list of six categories of cases specified by this Court in para 36 at pp. 546-47 of the decision rendered in Booz Allen & Hamilton Inc. [Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 : (2011) 2 SCC (Civ) 781] which as held above cannot be decided by the arbitrator(s). [This judgment was referred to with approval in Vidya Drolia and Ors. v. Durga Trading Corporation, at paragraph 30]. 11. Now comes the important judgment in Ayyasamy (supra). Two separate judgments were delivered by a Division Bench of this Court. Sikri, J., after referring to the judgments in Abdul Kadir (supra), N. Radhakrishnan (supra), Swiss Ti....
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....n 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 that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can side-track the agreement by dismissing the application Under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the valid....
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....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 contrast, the scheme of the 1996 Act has made a radical departure from the position under the erstwhile enactment. A marked distinction is made in Section 8 where no option has been left to the judicial authority but to refer parties to arbitration. Abdul Kadir [Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406] explains the position under the Arbitration Act, 1940. The present legislation on the subject embodies a conscious departure which is intended to strengthen the efficacy of arbitration. xxx xxx xxx 43. Hence, the allegations of criminal wrongdoing or of statutory violation would not detract from the jurisdiction of the Arbitral Tribunal to resolve a dispute arising out of a civil or contractual relationship on the basis of the jurisdiction conferred by the arbitra....
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.... 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 judicial authority to carefully sift through the materials for the purpose of determining whether the defence is merely a pretext to avoid arbitration. It is only where there is a serious issue of fraud involving criminal wrongdoing that the exception to arbitrability carved out in N. Radhakrishnan [N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 : (2010) 1 SCC (Civ) 12] may come into existence. 45.2. Allegations of fraud are not alien to ordinary civil courts. Generations of judges have dealt with such allegations in the context of civil and commercial disputes. If an allegation of fraud can be adjudicated upon in the course of a trial before an ordinary civil court, there is no reason or justification to exclude such disputes from the ambit and purview of a claim in arbitration. The parties who enter into commercial deali....
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....nt, 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 question of law, complicated questions of fact or allegations of fraud, corruption etc. [NOTE: This amendment is proposed in the light of the Supreme Court decisions (e.g. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72) which appear to denude an arbitral tribunal of the power to decide on issues of fraud etc.] (at p. 50) He then referred to the fact that the aforesaid Sub-section was not inserted by Parliament by the 2015 Amendment Act, which largely incorporated other amendments proposed by the Law Commission. His argument therefore was that N. Radhakrishnan (supra) not having been legislatively overruled, cannot now be said to be in any way deprived of its precedential value, as Parliament has taken note of the proposed Section 16(7) in the 246th Law Commission Report, and has expressly chosen not to enact it. For this proposition, he referred to La Pintada (supra). ....
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.... 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 the Law Lords did so with regret and reluctance. The real reason why London, Chatham and Dover Railway Co. v. South Eastern Railway Co., [1893] A.C. 429 ["London Railway Case"] could not be overruled via a common law (as opposed to a statutory) route was because the statutory route regarded the award of interest on debts as a remedy to which a creditor should not be entitled to as of right, but only as a matter of discretion; whereas the common law route granted them such interest as a matter of right. If, in overruling the London Railway Case (supra), two parallel remedies would be created, this would lead to an inconsistent position in law, as a result of which, no departure was made from the 1893 decision. Also, in the words of Lord Brandon, it was held: In any event the only remaining loophole of injustice to creditors paid late is small, has existed for many years and does not seem to require closing urgently. (at pp. 130....
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....p;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 Astonfield is that Appellant 1 Ameet Lalchand Shah misrepresented by inducing the Respondents to pay higher price for the purchase of the equipments. There is, of course, a criminal case registered against the Appellants in FIR No. 30 of 2015 dated 5-3-2015 before the Economic Offences Wing, Delhi. Appellant 1 Ameet Lalchand Shah has filed Criminal Writ Petition No. 619 of 2016 before the High Court of Delhi for quashing the said FIR. The said writ petition is stated to be pending and therefore, we do not propose to express any views in this regard, lest, it would prejudice the parties. Suffice to say that the allegations cannot be said to be so serious to refuse to refer the parties to arbitration. In any event, the arbitrator appointed can very well examine the allegations regarding fraud. 14. In a recent judgment reported as Rashid Raza (supra), this Court referred to Sikri, J.'s judgment in Ayyasamy (supra) and then held: 4. The principles of law laid....
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.... 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. Shah v. State of Maharashtra, 1995 (5) SCC 767, which led to the reference, are set out in paragraph 11 as follows: 11. In the background of the aforesaid facts, we would refer to the observations made in V.M. Shah case [(1995) 5 SCC 767 : 1995 SCC (Cri.) 1077] which are as under: (SCC p. 770, para 11) 11. As seen that the civil court after full-dressed trial recorded the finding that the Appellant had not come into possession through the Company but had independent tenancy rights from the principal landlord and, therefore, the decree for eviction was negatived. Until that finding is duly considered by the appellate court after weighing the evidence afresh and if it so warranted reversed, the findings bind the parties. The findings, recorded by the criminal court, stand superseded by the findings recorded by the civil court. Thereby, the findings of the civil court get precedence over the findings recorded by the trial court, in particular, in summary trial for offences li....
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.... own merit, keeping in view the evidence brought before it and not in terms of the evidence brought in the criminal proceeding. The question came up for consideration in K.G. Premshanker v. Inspector of Police [(2002) 8 SCC 87 : 2003 SCC (Cri.) 223] ...... 25. It is, however, significant to notice that the decision of this Court in Karam Chand Ganga Prasad v. Union of India [(1970) 3 SCC 694], wherein it was categorically held that the decisions of the civil courts will be binding on the criminal courts but the converse is not true, was overruled ...... Axiomatically, if judgment of a civil court is not binding on a criminal court, a judgment of a criminal court will certainly not be binding on a civil court. In Kishan Singh v. Gurpal Singh (2010) 8 SCC 775, the Court referred to all the relevant judgments on the subject and ultimately held thus: 13. In V.M. Shah v. State of Maharashtra [(1995) 5 SCC 767 : 1995 SCC (Cri.) 1077] this Court has held as under: (SCC p. 770, para 11) 11. As seen that the civil court after full-dressed trial recorded the finding that the Appellant had not come into possession through the Company but had independent tenancy rights....
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....although initiated in terms of some observations made by the civil court, is not barred under any statute. ... xxx xxx xxx 18. It goes without saying that the Respondent shall be at liberty to take recourse to such a remedy which is available to him in law. We have interfered with the impugned order only because in law simultaneous proceedings of a civil and a criminal case are permissible. 16. In Iqbal Singh Marwah v. Meenakshi Marwah [(2005) 4 SCC 370 : 2005 SCC (Cri.) 1101] this Court held as under: (SCC pp. 389-90, para 32) 32. Coming to the last contention that an effort should be made to avoid conflict of findings between the civil and criminal courts, it is necessary to point out that the standard of proof required in the two proceedings is entirely different. Civil cases are decided on the basis of preponderance of evidence while in a criminal case the entire burden lies on the prosecution and proof beyond reasonable doubt has to be given. There is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the bas....
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....it cannot be said that the same would be conclusive except as provided in Section 41. Section 41 provides which judgment would be conclusive proof of what is stated therein. Moreover, the judgment, order or decree passed in previous civil proceedings, if relevant, as provided Under Sections 40 and 42 or other provisions of the Evidence Act then in each case the court has to decide to what extent it is binding or conclusive with regard to the matters decided therein. In each and every case the first question which would require consideration is, whether the judgment, order or decree is relevant; if relevant, its effect. This would depend upon the facts of each case. 18. In light of the above legal position, it may be immediately observed that the High Court was not at all justified in staying the proceedings in the civil suit till the decision of criminal case. Firstly, because even if there is a possibility of conflicting decisions in the civil and criminal courts, such an eventuality cannot be taken as a relevant consideration. Secondly, in the facts of the present case there is no likelihood of any embarrassment to the Defendants (Respondents 1 to 4 herein) as the....
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....ud as defined in Section 17. Importantly, the Section goes on to say that consent is said to be so caused when it would not have been given but for the existence, inter alia, of such fraud. Where such fraud is proved, and consent to an agreement is caused by fraud, the contract is voidable at the option of the party whose consent was so caused. This is provided by Section 19 of the Contract Act which reads as follows: 19. Voidability of agreements without free consent.-- When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made had been true. Exception.--If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.....
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....n a separate concurring judgment, Mukherjea, J. went into what in English law was considered as a tort (see pp. 44-49). The learned Judge concluded as follows: "Thus tort is a civil injury other than a breach of contract which is capable of sustaining an action for unliquidated damages in a court of law. If the appropriate remedy is not a claim for unliquidated damages but for injunction or some other relief, it would not rank as a tort though all the same it would be an actionable wrong." (at p. 48) Likewise, in Ellerman & Bucknall Steamship Co. Ltd. v. Sha Misrimal Bherajee, [1966] Supp SCR 92, the Court referred to the tort of deceit as follows: "Deceit is a false statement of a fact made by a person knowingly or recklessly with the intent that it shall be acted upon by another who does act upon it and thereby suffers damage"; see A Textbook of the Law of Tort by Winfield, 5th Edn., at p. 379." (at p. 99) On the facts, it was then concluded: "Now let us look at the relevant facts of the present case. It was one of the terms of the contract between the seller and the buyer that the goods should be packed in new fibre drums. The standard of good order and condition o....
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....as at the transaction date of the asset acquired: although the point is not adverted to in the judgments, the basis on which the damages were computed shows that there can be circumstances in which it is proper to require a Defendant only to bring into account the actual proceeds of the asset provided that he has acted reasonably in retaining it. Third, damages for deceit are not limited to those which were reasonably foreseeable. Fourth, the damages recoverable can include consequential loss suffered by reason of having acquired the asset. (at p. 777) In this judgment of Lord Browne-Wilkinson, a useful summary of the principles that apply in assessing the damages payable where the Plaintiff has been induced to enter into a contract by a fraudulent misrepresentation, are stated as follows: In sum, in my judgment the following principles apply in assessing the damages payable where the Plaintiff has been induced by a fraudulent misrepresentation to buy property: (1) the Defendant is bound to make reparation for all the damage directly flowing from the transaction; (2) although such damage need not have been foreseeable, it must have been directly cau....
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....ave been a good one, he will do best under the first contractual measure (under which he may recover something even if the actual value of what he has recovered is greater than the price). (4) Concentrating on the tort measure, the remoteness test whether the loss was reasonably foreseeable had been authoritatively laid down in The Wagon Mound in respect of the tort of negligence a few years before Doyle v. Olby (Ironmongers) Ltd. was decided: Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd. (The Wagon Mound) [1961] A.C. 388. Doyle v. Olby (Ironmongers) Ltd. settled that a wider test applies in an action for deceit. (5) The dicta in all three judgments, as well as the actual calculation of damages in Doyle v. Olby (Ironmongers) Ltd., make clear that the victim of the fraud is entitled to compensation for all the actual loss directly flowing from the transaction induced by the wrongdoer. That includes heads of consequential loss. (6) Significantly in the present context the Rule in the previous paragraph is not tied to any process of valuation at the date of the transaction. It is squarely based on the overriding compensatory principle, wide....
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....ular date. Such a course will be appropriate whenever the overriding compensatory Rule requires it. An example of such a case is to be found in Cemp Properties (U.K.) Ltd. v. Dentsply Research & Development Corporation [1991] 2 E.G.L.R. 197, 201, per Bingham L.J. There is in truth only one legal measure of assessing damages in an action for deceit: the Plaintiff is entitled to recover as damages a sum representing the financial loss flowing directly from his alteration of position under the inducement of the fraudulent representations of the Defendants. The analogy of the assessment of damages in a contractual claim on the basis of cost of cure or difference in value springs to mind. In Ruxley Electronics and Construction Ltd. v. Forsyth [1996] A.C. 344, 360G, Lord Mustill said: "There are not two alternative measures of damages, as opposite poles, but only one; namely, the loss truly suffered by the promisee." In an action for deceit the price paid less the valuation at the transaction date is simply a method of measuring loss which will satisfactorily solve many cases. It is not a substitute for the single legal measure: it is an application of it. (at pp. 793-794) 20. A....
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....d and if so, on what basis? In answering these issues, the Arbitral Tribunal found: 7.14 The Tribunal additionally accepts the Claimant's submission and finds that the Claimant was induced by and did rely on the Respondents' further representations that, inter alia, the Avitel Group had immediate business with a value of approximately USD 1 billion with independent and legitimate customers as well as good relationships with independent and legitimate suppliers and service providers (see paragraphs 5.2(i)(l), 5.17(a.xv) and 5.17(a.xvi) above). 7.15 The Tribunal rejects the Respondents' submission and finds that Clause 6.3 of the SSA unequivocally establishes that the Claimant did rely on the representations and warranties in making its investment in Avitel India. It further found that the siphoning off of a large part of the amount of USD 60 million into companies owned or controlled by the Jain family was made out as follows: 8.20 The Claimant relies in support, inter alia, on the witness evidence of Mr. van Schalkwyk, HSBC Middle East Limited's Regional Head of Fraud Risk, who conducted an investigation into the banking activities of the J....
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....June 2011 and 14 June 2011, the Avitel Dubai Account was debited in the amounts of USD 10 million and USD 5 million respectively which amounts were credited to an Emirates NBD account held in the name of Digital Fusion. On 19 July 2011 and 26 July 2011, Digital Fusion's account was debited in the amounts USD 5 million and USD 10 million respectively which amounts were credited to an Emirates NBD account held in the name of Cralton. The account records of Cralton held with Emirates NBD show that the transfers in July 2011 totalling USD 25 million were used to make various transfers, fixed term deposits and investments between Cralton, Highend, Digital Fusion and SPAC [Witness Statement of Mr. van Schalkwyk, at para. 17(b)(iv)]; e. on 23 February 2012, the Avitel Dubai Account was debited in the amount of USD 8 million which amount was credited to the Emirates NBD account held in the name of Highend. On 28 February 2012, this account was debited in the amount of USD 7.48 million which was credited to a different Emirates NBD account held in the name of SPAC. A further debit in the amount of USD 500,000 occurred on 28 February 2012 which sum was routed through two differen....
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....Avitel Dubai since 28 June 2011. Each website was thereafter re-registered employing a proxy service called "Domains By Proxy, LLC", which provides anonymity to the owners of websites on the internet. As a result thereof, issue (iv) was answered stating: 8.72 In these circumstances and also for the reasons set out below, the Tribunal accepts the Claimant's submissions and finds that the following representations and/or warranties made by the Respondents were false and/or misleading: a. the Avitel Group had been in advanced negotiations with the BBC and a BBC Contract had been close to execution. This is because the Respondents do not deny that the Avitel Group never had a direct relationship with the BBC and was not about to sign the BBC Contract; b. at the Completion Date, the Avitel Group had the benefit of the Material Contracts with Kinden, SPAC and Purple Passion in total valued at approximately USD 658 million. This is because in effect, Kinden and Purple Passion had not been in existence at the time of the Claimant's investment; c. at the Completion Date, the Avitel Group's key customers Kinden, SPAC and Purple Passion as well as ....
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....ere had been facts or circumstances relating to the affairs of Avitel India or any Subsidiary which had not been disclosed to the Claimant and which could have had an impact on the decision of the Claimant to invest in Avitel India. In the Tribunal's view, the fact that Kinden and Purple Passion did not exist at the material time and that Highend's, Digital Fusion's and SPAC's bank accounts with Emirates NDB are controlled by Mr. Siddhartha Jain, would have had an impact on the Claimant's decision to invest in Avitel India; h. the representations and/or warranties contained in Clauses 7.1 and 7.3 of Schedule 3 of the SSA read in conjunction with the Disclosure Letter as Kinden and Purple Passion did not exist at the Completion Date such that the Material Contracts with these entities could not have existed either; i. the representations and/or warranties contained in Clause 7.5 of Schedule 3 of the SSA because Mr. Siddhartha Jain was at the Completion Date a forty nine percent shareholder of Highend and Digital Fusion so any transactions with these entities were Related Party Transactions which were not permitted pursuant to Clause 7.5 of Schedul....
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....ving also no indication of alternative hearing dates asserting that the Respondents following the issue of the EOW Final Report, required additional time to file their witness statements and to prepare for the oral hearing. The Tribunal did not find this to be persuasive as there was still time. In subsequent correspondence on 15 October 2013, the Respondents further asserted that the November 2013 Oral Hearing fell over a holiday period in India, namely the Diwali Festival. While the Tribunal accepts this, this hearing which was scheduled for and to be held in Singapore together with the substantial delay in seeking a postponement of the November 2013 Oral Hearing was not satisfactorily explained. The Respondents also sought an adjournment on the grounds, inter alia, of their inability to engage counsel. However, it appears to the Tribunal that during this period (i.e. from the time when they sought an adjournment up to the date of the November 2013 Oral Hearing), they were able to. The Tribunal also points out that although the Respondents at various stages ceased to be represented by lawyers, the letters written and signed by Mr. Yogesh Garodia either on behalf of the First Resp....
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....dia was about to and from 2 August 2011 had signed a contract with the BBC, for the BBC to use the services of Avitel India. This was false. Not only had a contract not been negotiated, let alone signed with the BBC, but the BBC had no knowledge of it. 20.4 The misrepresentations and deception of the Respondents included the arrangement of a meeting between a representative of HSBC and a person who was falsely held out by the Respondents and purported to be the Chief Technical Officer of the BBC and who falsely purported to corroborate the Respondents' misrepresentations. The representations were made prior to the conclusion of the SSA and in the SSA itself. They were made knowingly to be untrue and were fraudulent. As a result thereof, it was found that HSBC, in respect of its claim for fraudulent misrepresentation, and its claim in tort for deceit, is entitled to damages in the total amount of USD 60 million plus interest and costs as awarded. The final declaration made in the Award then reads: 21.21 [The tribunal] Declares and Orders that upon the Respondents paying in full and unconditionally the sums awarded to the Claimant in paragraphs 21.15, 21.16, 21.1....
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.... the difference between the value of the shares on the date of making the contract and the value HSBC would have received, if it had resold those shares in the market, after the purchase. As has been held in the judgments stated hereinabove, the measure of such damages would be to put HSBC in the same position as if the contract had never been entered into, which is, the entitlement to recover the price paid for the shares and all consequential losses. This being the case, it is difficult to accede to the Division Bench's finding as to the measure of damages in such cases. 23. So far as the other points raised by M/s. Mukul Rohatgi and Saurabh Kirpal are concerned, we wish to say nothing, as any finding on these points even prima facie would prejudice the Section 48 proceedings pending in the Bombay High Court. So far as the appeal of HSBC is concerned, we are of the view that it has substance in that the USD 60 million that was to be kept aside vide the Single Judge's order, was fair and just in the facts of the case in that it is only the principal amount without any interest or costs that is ordered to be kept aside. Further, the reduction of USD 60 million to USD 30 mi....
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.... decided by an Arbitrator. The Board unanimously consented that any disputes raised by Mr. Ravindra Savla, so long as they are arbitrable under law, shall be referred to arbitration in accordance with Indian law. Mr. Ravindra Savla stated that he would examine the papers provided to him and determine his further course of action. Mr. Ravindra Savla further requested that a copy of the Minutes of this Meeting of the Board of Directors be made available to him. The Chairman accepted the said request. 26. Almost immediately, the Appellant filed a Section 9 petition under the 1996 Act before the learned ADJ, Mohali, which was decided by a judgment dated 03.08.2016, in which the learned ADJ held that the Board Resolution dated 11.07.2016 only showed that any disputes raised by the Appellant shall be referred to arbitration in accordance with Indian law, provided they are arbitrable disputes. It was then held that as serious allegations of fraud were raised by HSBC in the dispute between HSBC and the Avitel Group/Jain family, such dispute would not be arbitrable as per Indian law. Even otherwise, according to the learned ADJ, this dispute (i.e., the dispute between HSBC and the ....