TaxTMI 
TaxTMI 
2017 (7) TMI 1471
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....putes that had arisen between VAS and the Judgment Debtor (hereafter 'ZTE') in relation to their agreement dated 01.01.2003. 2. ZTE has opposed the enforcement of the impugned awards on two grounds. First, ZTE claims that the arbitral procedure was not in accordance with the agreement between the parties inasmuch as the parties had agreed that the disputes would be submitted to the Singapore International Arbitration Centre (hereafter 'SIAC'). However, SIAC had declined to administer the arbitration. According to ZTE, the arbitral tribunal constituted by ICC had no authority or jurisdiction to make the impugned awards. Second, ZTE claims that the impugned awards were obtained by fraud inasmuch as VAS was struck off from the Register of Companies pursuant to an application voluntarily made by it under Section 560 of the Companies Act, 1956 (hereafter 'the Companies Act'). This was also notified in the Official Gazette on 03.02.2007 and VAS ceased to exist with effect from the said date. However, this fact was concealed from the arbitral tribunal as well as from ZTE. ZTE claims that since the impugned awards were obtained by fraud, they are null and void. Factual Context 3. VAS -....
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....s not in accordance with the Agreement and ICC had no authority to administer the arbitral proceedings in this case. ZTE also nominated Ms Gao Fei as its arbitrator subject to and without prejudice to its objections to ICC's jurisdiction. 11. On 18.11.2005, the ICC Court, being prima facie satisfied that an arbitration agreement under the ICC Rules may exist, decided that the arbitration shall proceed. This decision was administrative in nature. And, subsequently the controversy was referred to the arbitral tribunal for a decision on its jurisdiction in terms of Article 6(2) of the ICC Rules. Accordingly, the ICC Court confirmed the appointment of Mr N K Goyal and Ms Gao Fei, the arbitrators nominated by the respective parties, as co- arbitrators. 12. In terms of the ICC Rules, on 09.12.2005, the ICC Court appointed the Chairman of the arbitral tribunal (Mr Tan Kok Quan, SC). 13. The arbitral tribunal considered Clause 8 of the Agreement and held that it had the jurisdiction to adjudicate the disputes. The preliminary order to the aforesaid effect was issued by Mr Tan Kok Quan, the chairman of the arbitral tribunal, on 05.08.2008. 14. The said order dated 05.08.2008 was car....
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....d that it could not administer the arbitration between the parties under the ICC Rules. And, under the ICC Rules, no other institution is allowed to administer any arbitration case applying the ICC Rules. In view of the above, the arbitral tribunal concluded that in terms of Clause 8 of the Agreement, the arbitral tribunal had the jurisdiction to adjudicate the disputes under the ICC Rules. 21. Insofar as the issue regarding termination of the Agreement in July 2003 was concerned, ZTE asserted that a verbal notice of termination was given to VAS as evidenced by its letter dated 25.09.2004 and that the Agreement stood terminated after six months from July 2003. VAS disputed the same and contended that no notice of termination was issued in July 2003 and the letter dated 25.09.2004 was received by VAS on 18.10.2004; VAS claimed that the said letter was antedated to deprive VAS of the commission that it was entitled to receive under a MoU dated 11.10.2004. 22. The minutes of the meeting dated 06.09.2003 held between the parties were examined by the arbitral tribunal. The said minutes inter alia recorded that ZTE had appreciated the work of VAS and agreed to take up the matter of del....
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....bitral tribunal delivered the partial award awarding the amounts as set out hereunder:- "(1) US$ 62,500.00 (being US$ 90,000.00 less US$ 25,000.00) if Respondent is able to produce the TDS Certificate within 15 days of the date of Respondent's receipt of the Partial Award. If the Respondent does not produce the TDS Certificate by that date, then the Award is for the sum of US$ 65,000.00 and interest at the rate of 6% per annum from 22 August 2005 until payment on: (a) The sum of US$ 62,500.00 if the TDS Certificate is produced within 15 days of the date of the Respondent's receipt of this Partial Award; (b) Alternatively, the sum of US$ 65,000.00 if the said TDS Certificate is not produced under (a). (2) US$ 812,569.00 for the value of purchase orders issued to the Respondent by ITI/TCIL between 13 January 2003 and 12 January 2005 and interest on the said sum of US$ 812,569.00 at the rate of 6% per annum from 22 August 2005 until payment." 28. The issue of costs was reserved for adjudication under the final award. VAS submitted the details of costs for recovery of all costs and expenditure incurred in respect of the arbitration proceedings, aggregating US$ 3,67,500....
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....eal was directly contrary to the Singapore High Court's earlier decision in Insigma Technology Co. Ltd.(supra) and, therefore, were perverse and wholly unsustainable. 32. Next, Mr Ganju contended that VAS had obtained the impugned awards by fraud and by concealing that it was struck off the Register of Companies in December 2006. He submitted that prior to invoking the arbitration clause, VAS had made an application under the Simplified Exit Scheme, 2003 for the name of the company to be struck off from the Register of Companies under Section 560 of the Companies Act. He submitted that this fact and the fact that VAS's name was removed from the Register of Companies was concealed from the arbitral tribunal. VAS had applied for restoration of the company in December 2009 (Co. Pet. No.72/2009), which was subsequently dismissed. He submitted that ZTE was not made aware of this fact till VAS approached this Court for execution of the impugned awards and filed the execution petition (Ex.P. No.334/2010). The said petition was withdrawn on 23.09.2011 as VAS was not a legal entity at the material time. He submitted that VAS was restored on the Register of Companies pursuant to a fresh app....
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....enge the decision of the arbitral tribunal and had also extensively relied on the decision rendered in Insigma Technology Co. Ltd. v. Alstom Technology Ltd. (supra). However, the appeal was dismissed with costs on 16.01.2009 and the said decision had become final. He submitted that admittedly Singapore High Court was a court of competent jurisdiction and thus its decision regarding the objections raised by ZTE would operate as res judicata and it would not be open for ZTE to re-agitate the same issues. 37. He next submitted that the objections now sought to be raised by ZTE were also raised before the Division Bench of this Court in Co. App. no. 25/2012, filed by ZTE. He drew the attention of this Court to various observations made by the Division Bench in the aforementioned order dated 14.03.2013 and submitted that the same makes it amply clear that the Division Bench had not accepted the said objections; therefore, ZTE's objections ought to meet the same fate in the present proceedings. Reasoning and Conclusion 38. The first and foremost question to be addressed is whether the enforcement of the impugned awards are liable to be declined on the grounds as mentioned in Section 48....
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....the Arbitral Tribunal, shall be appointed by the Court, unless the parties have agreed upon another procedure for such appointment, in which case the nomination will be subject to confirmation pursuant to Article 9. Should such procedure not result in a nomination within the time limit fixed by the parties or the Court, the third arbitrator shall e appointed by the Court." 40. In terms of the said Rules, the ICC Court confirmed the appointment of Mr N K Goyal nominated as an arbitrator by VAS. Further, Ms Gao Fei, who was nominated as an arbitrator by ZTE, subject to its objection as to jurisdiction, was confirmed as the co-arbitrator by the ICC Court. In terms of the ICC Rules, the Chairman of the arbitral tribunal (Mr Tan Kok Quan, SC) was appointed by the ICC Court. Thus, indisputably, the appointment of the arbitral tribunal was in terms of the ICC Rules. 41. There is also no dispute that the arbitral procedure followed by the arbitral tribunal was in conformity with the ICC Rules, and, thus, was in accordance with the Agreement between the parties. The only controversy that remains is with respect to the institutional administrative assistance rendered in the context of the ....
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....plays a pivotal role in administration of the arbitration conducted under the ICC Rules including the appointment of an arbitrator and approval and scrutiny of the awards. 46. It is clear from the plain reading of the arbitration clause, that the parties had agreed that arbitration would be conducted under the ICC Rules. This would also imply that the parties had agreed to the ICC Court playing the role specifically provided under the ICC Rules. Plainly, there was little scope for SIAC to be substituted in place of the ICC Court. 47. The second and more important reason is that SIAC had declined to administer the arbitration conducted under the ICC Rules and ICC had also clarified that the ICC Court was the only body authorized to administer the arbitration under the ICC Rules. This clarification was subsequently expressly included in Article 1(2) of the ICC Rules. 48. By a letter dated 27.05.2005, VAS informed ZTE of the aforesaid communications received from SIAC and ICC and stated that in view of the clarifications given by SIAC and ICC, VAS was proposing to prefer the disputes in accordance with the ICC Rules to ICC and sought the response from ZTE. VAS further stated that i....
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....e ICC Rules of Arbitration. Pursuant to the ICC Rules, the ICC Court plays an important role in several stages of the arbitration, such as the scrutiny of awards, and no Award can be rendered by the Arbitral Tribunal until it has been approved by the Court in accordance with Article 27 of the ICC Rules. 25. As the parties have agreed that any dispute should be resolved by arbitration, for the reasons set out above, on a true and proper construction, the Arbitral Tribunal by a majority (Ms Gao Fei dissenting) finds that Clause 8 confers jurisdiction on this arbitral tribunal to adjudicate the disputes under ICC Rules." 51. This Court concurs with the conclusion of the arbitral tribunal - as also upheld by the Singapore High Court - that submission of disputes to SIAC for an arbitration to be conducted under the ICC Rules was not workable. 52. The immediate question that follows is whether the part of the clause requiring the disputes to be submitted to SIAC was severable from the remaining clause. It is well settled that the doctrine of severability or the Blue Pencil Rule is applicable where a part of the contract, which is void or unenforceable, can be severed from the main co....
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....consistent view expressed by this Court (See: Sudhir Gopi v Indira Gandhi National Open University and Anr: 2017 SCC OnLineDel 8345, Falcon Progress Ltd. v. Sara International Ltd.: 238 (2017) DLT 565 and Cruz City 1 Mauritius Holdings v. Unitech Limited: 239 (2017) DLT 649). Thus, the party against whom a foreign award is sought to be enforced is to be provided full opportunity to provide evidence to show that the arbitral tribunal lacked the jurisdiction to make the foreign award. In Shin-Etsu Chemical Co. Ltd. (supra), the Supreme Court held that a finding regarding an arbitration agreement rendered under Section 45 of the Act would only be a prima facie finding and would not preclude a full examination at the post award stage. There can be no quarrel to this proposition. However, the onus to prove that the arbitral tribunal lacked jurisdiction or that any of the other grounds as set out under Section 48(1) of the Act are attracted, lies squarely on a party challenging the enforcement of the foreign award. Thus, ZTE was required to provide all material necessary for establishing that enforcement of the impugned awards ought to be declined as the arbitral proceedings were not in ....
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....ties) by the arbitral tribunal constituted in terms of the said rules. 57. The decision of this Court in Marina World Shipping Corporation Ltd. (supra) is wholly inapplicable in the facts of the present case. In that case, a co-ordinate bench of this Court had held that this Court was not satisfied "even prima facie that there was, in fact, an arbitration agreement between Marina and Jindal". Plainly, in absence of an arbitration agreement, the question of an arbitral award did not arise. 58. The decision of this Court in the case of AM Rasool Const. & Engg. Services Pvt. Ltd. (supra) also does not further ZTE's case in any manner. In that case, the parties had agreed that the disputes would be referred to the sole arbitration of the "Project Director" and he could arbitrate the dispute himself or refer the same to another officer of the Corporation (respondent therein). However, there was no person who was holding the post of Project Director at the material time and the arbitrator was appointed by the Chairman cum Managing Director of the Corporation. The matter came to be considered by the Court in the context of the Arbitration Act, 1940 and it was held that the appointme....
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....a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury in ensues therefrom .....". 63. In S. P. Chengalvaraya Naidu (dead) by LRs v. Jagannath (dead) by LRs and Ors.(supra), the Supreme Court held that fraud "is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage". 64. The issue whether VAS has committed a fraud must be considered in the context of the disputes between the parties. The claims made by VAS are essentially for recovery of consultancy fees in terms of the Agreement between the parties. The Agreement was valid for a period of two years commencing from 13.01.2003. There is no dispute that VAS was a validly constituted entity during the subsistence of the Agreement. ZTE failed and neglected to pay the amounts due to VAS and this led to the disputes between the parties. Indisputably, VAS was a validly constituted company at the time when arbitration clause was invoked and the arbitral tribuna....
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....hereafter no longer entitled to the property purchased through his clerk (Jagannath). Notwithstanding that Jagannath had no interest in the property purchased, he filed a suit for partition without disclosing the Release Deed executed in favour of Chunilal and obtained a decree. It is in this context that the Supreme Court held that Jagannath had obtained preliminary decree by playing a fraud on the Court. It is in this context that the Court explained that "a fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage." 68. The foundation of fraud rests on deception to acquire, in substance, an illegitimate gain. There is little possibility of sustaining an allegation of fraud where the party accused of fraud does not seek to acquire anymore than what it is legitimately entitled to. In the present case, there can be little doubt that the amounts awarded are legitimately due and payable by ZTE to VAS. ZTE has not advanced any contention to challenge the impugned award on merits. Thus, in effect, what ZTE seeks to contend is th....
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.... regarding the arbitral proceedings or the impugned awards. 75. It is also relevant to note that ZTE did not accept the decision of the Company Court in Co. Pet. 200/2011 and had appealed against the said decision before the Division Bench of this Court on several grounds including that VAS had suppressed the fact that its name had been struck off the Register of Companies from the arbitral tribunal and also from this Court in other proceedings. The appeal (Co. App. 25/2012) preferred by ZTE was rejected by the Division Bench of this Court by an order dated 14.03.2013 and the order dated 08.02.2012 was affirmed. While dismissing ZTE's appeal, the Division Bench in its order observed as under:- "16. On no count can the petitioners succeed. This appears to be a classic case where the appellant is making desperate effort by one way to ward off its liability which he admittedly owes to the company in terms of the Arbitral Awards which has been passed against him. It is also not a case where the appellant would be remediless, he has the option to contest the Award at the time as and when the execution proceedings are filed by the company." 76. The Special Leave Petition (SLP No.2394....
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....ng its name being struck off the Register of Companies from the arbitral tribunal, was left open to be decided. On the strength of these observations, it was contended on behalf of ZTE that the aforesaid order must not be construed as restoring the name of VAS on the Register of Companies from the day it was struck off. This contention is unpersuasive as the effect of the order dated 08.02.2012 read with Section 560(7) of the Companies Act leaves no room for doubt that the effect of restoring VAS to its original status is that it is deemed that its name was never struck off the Register of Companies. However, the question whether the impugned awards are vitiated on account of fraud and on account of VAS concealing from the arbitral tribunal that its name had been struck off the Register of Companies have been considered on merits. 81. It is also relevant to mention that an application under Section 560(6) of the Companies Act can be made any time within a period of 20 years from the publication in the Official Gazette. The provisions of Section 560(7) must be given its natural meaning. The enactment makes a specific provision whereby the existence of the company, even during the p....