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Arbitration & Conciliation Act – Facilitation Deed – Allegations of Fraud – invoke of arbitration clause – agreement was rescinded -court can not grant injunction against the invoke of arbitration clause and arbitration proceedings- suit filed as the Facilitation deed was rescinded on the ground of fraud, the appellant was not entitled to invoke arbitration clause – Single bench refused to grant interim injunction – in appeal Division Bench granted interim injunction – Apex court held that single bench is correct and set aside the orders of Division Bench on the Ground that if the court finds the fraud played on agreement , then only court can decline to refer for arbitration but not on mere allegation as per sec. 45 read with clause 9 of agreement = World Sport Group (Mauritius) Ltd. … Appellants Versus MSM Satellite (Singapore) Pte. Ltd. … Respondent = 2014 ( January – Vol – 1) Judis.nic.in/ S.C./ file name =41175

Arbitration & Conciliation Act – Facilitation Deed – Allegations of Fraud –  invoke of arbitration clause – agreement was rescinded -court can not grant injunction against the  invoke of arbitration clause and arbitration proceedings- suit filed as the Facilitation deed was rescinded on the ground of fraud, the appellant was not entitled to invoke arbitration clause – Single bench refused to grant interim injunction – in appeal Division Bench granted interim injunction – Apex court held that single bench is correct and set aside the orders of Division Bench on the Ground that  if the court finds the fraud played on agreement , then only court can decline to refer for arbitration but not on mere allegation as per sec. 45 read with clause 9 of agreement =

whether the Division  Bench  of

the Bombay High Court could have passed the order of injunction  restraining

the arbitration at Singapore between the parties. =

 

On  30.06.2010,  the

respondent filed a second suit, Suit No.1828  of  2010,  before  the  Bombay

High Court against the appellant for inter alia a declaration  that  as  the

Facilitation Deed stood rescinded, the appellant was not entitled to  invoke

the arbitration clause in the Facilitation Deed.  

The respondent also  filed

an  application  for  temporary  injunction  against  the   appellant   from

continuing with the  arbitration  proceedings  commenced  by  the  appellant

under the aegis of ICC.


6.    On 09.08.2010, the learned Single  Judge  of  the  Bombay  High  Court

dismissed the application for temporary injunction of the respondent  saying

that it would be for the arbitrator to  consider  whether  the  Facilitation

Deed was void on  account  of  fraud  and  misrepresentation  and  that  the

arbitration must, therefore, proceed and the Court could  not  intervene  in

matters governed by the arbitration clause.  

The respondent  challenged  the

order of the learned Single Judge before the Division Bench  of  the  Bombay

High Court and by the impugned order, the Division Bench of the Bombay  High

Court allowed the appeal, set aside the order of the  learned  Single  Judge

and passed an order of temporary injunction restraining the  arbitration  by

ICC.  

Aggrieved, the appellant has filed this appeal. =

 


We are unable to accept the first contention of Mr.  Venugopal  that

as Clause 9 of the Facilitation  Deed  provides  that  any  party  may  seek

equitable relief in a court of competent jurisdiction in Singapore, or  such

other court that may have jurisdiction over the  parties,  the  Bombay  High

Court  had  no  jurisdiction  to  entertain  the  suit  and   restrain   the

arbitration proceedings at Singapore because of the principle of  Comity  of

Courts.= 


“Judicial comity.  The principle in accordance with which  the  courts

      of one state or jurisdiction will give effect to the laws and judicial

      decisions of another, not as  a  matter  of  obligation,  but  out  of

      deference and respect.”

In the present case no decision  of  a  court

of foreign country or no law of a foreign country has been cited  on  behalf

of the appellant to contend that the courts in India  out  of  deference  to

such  decision  of  the  foreign  court  or  foreign  law  must  not  assume

jurisdiction to restrain  arbitration  proceedings  at  Singapore.

 On  the

other hand, as has been rightly submitted by Mr. Subramanium, under  Section

9 of the CPC, the courts in India have jurisdiction to try all  suits  of  a

civil nature excepting suits of which  cognizance  is  either  expressly  or

impliedly  barred.   Thus,  the  appropriate  civil  court  in   India   has

jurisdiction to entertain the suit and pass appropriate orders in  the  suit

by virtue of Section 9 of the CPC and Clause  9  of  the  Facilitation  Deed

providing that courts in Singapore or any other  court  having  jurisdiction

over the parties can be approached for equitable relief could not  oust  the

jurisdiction of the appropriate civil court conferred by Section  9  of  the

CPC. 

 “CHAPTER I

                         NEW YORK CONVENTION AWARDS

      44.  Definition.  In  this  Chapter,  unless  the  context   otherwise

      requires, “foreign award”  means  an  arbitral  award  on  differences

      between  persons  arising  out   of   legal   relationships,   whether

      contractual or not, considered as commercial under the law in force in

      India, made on or after the 11th day of October, 1960 –

(a) in pursuance of an agreement  in  writing  for  arbitration  to

           which the Convention set forth in the  First  Schedule  applies,

           and

(b) in one of such territories as  the  Central  Government,  being

           satisfied that reciprocal provisions  have  been  made  may,  by

           notification in the Official Gazette, declare to be  territories

           to which the said Convention applies.

45. Power of judicial authority  to  refer  parties  to  arbitration.-

      Notwithstanding anything contained in Part I or in the Code  of  Civil

      Procedure, a judicial authority, when seized of an action in a  matter

      in respect of which the parties have made an agreement referred to  in

      section 44, shall, at the request of one of the parties or any  person

      claiming through or under  him,  refer  the  parties  to  arbitration,

      unless it finds that the said agreement is null and void,  inoperative

      or incapable of being performed.”

It will be clear from clauses 1, 2 and 3 of the New York Convention  as  set

out in the First Schedule of the Act  that  the  agreement  referred  to  in

Section 44 of the Act is an agreement in writing  under  which  the  parties

undertake to submit to arbitration all or any differences which have  arisen

or which may arise between them.  Thus, the court will decline to refer  the

parties to arbitration only if it finds that the  arbitration  agreement  is

null and void, inoperative or incapable of being performed. =

 

Section  45

of the Act does not provide that the court will not  refer  the  parties  to

arbitration if the allegations of fraud have to be inquired  into.   

Section 45 provides that only if the court finds that the arbitration  agreement  is

null and void, inoperative or incapable of being performed, it will  decline

to refer the parties to arbitration.

 

33.     The Division Bench of the High court has  further  held  that  since

the earlier  suit  (Suit  No.1869  of  2010)  was  pending  in  court  since

25.06.2010 and that suit was  inter-connected  and  inter-related  with  the

second suit (Suit No.1828 of 2010), the court could not allow  splitting  of

the matters and disputes to be decided by the court in India  in  the  first

suit and by arbitration abroad in regard  to  the  second  suit  and  invite

conflicting verdicts on the issues which are inter-related.  

This  reasoning

adopted by the Division Bench of the  Bombay  High  Court  in  the  impugned

judgment is alien to the provisions of Section 45 of the Act which does  not

empower the court to decline a reference to arbitration on the  ground  that

another suit on the same issue is pending in the Indian court.

 

34.     We make it clear that we have  not  expressed  any  opinion  on  the

dispute  between  the  appellant  and  the  respondent  as  to  whether  the

Facilitation  Deed  was  voidable  or  not   on   account   of   fraud   and

misrepresentation.  

Clause 9 of the  Facilitation  Deed  states  inter  alia

that all actions or proceedings arising in connection  with,  touching  upon

or relating to the Facilitation Deed, the breach thereof  and/or  the  scope

of the provisions of the Section shall be submitted to  the  ICC  for  final

and binding arbitration under its Rules of  Arbitration.   

This  arbitration

agreement in Clause 9 is wide enough to bring this dispute within the  scope

of arbitration.  

To quote Redfern And Hunter  On  International  Arbitration

(Fifth Edition page 134 para 2.141)

      “Where allegations of fraud in the procurement  or  performance  of  a

      contract are alleged, there appears to be no reason for  the  arbitral

      tribunal to decline jurisdiction.”

 

Hence, it has been rightly held by the learned Single Judge  of  the  Bombay

High Court that  it  is  for  the  arbitrator  to  decide  this  dispute  in

accordance with the arbitration agreement.

 

35.   For the  aforesaid  reasons,  we  allow  the  appeal,  set  aside  the

impugned judgment of the Division Bench of the High Court  and  restore  the

order of the learned Single Judge.  The parties shall bear their own  costs.

 

 

2014 ( January – Vol – 1) Judis.nic.in/ S.C./ file name  =41175

A.K. PATNAIK, FAKKIR MOHAMED IBRAHIM KALIFULLA

 

 

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 895 OF 2014
(Arising out of S.L.P. (C) No. 34978 of 2010)

World Sport Group (Mauritius) Ltd. … Appellants

Versus
MSM Satellite (Singapore) Pte. Ltd. … Respondent

J U D G M E N T

A. K. PATNAIK, J.

Leave granted.
2. This is an appeal against the order dated 17.09.2010 of the Division
Bench of the Bombay High Court in Appeal (Lodging) No.534 of 2010.

Facts:

3. The facts very briefly are that on 30.11.2007 the Board of Control for
Cricket in India (for short ‘BCCI’) invited tenders for IPL (Indian
Premier League) Media Rights for a period of ten years from 2008 to
2017 on a worldwide basis. Amongst the tenders submitted, the bid of
World Sports Group India (for short ‘WSG India’) was accepted by BCCI.
By a pre-bid arrangement, however, the respondent was to get the
media rights for the sub-continent for the period from 2008 to 2010.
Accordingly, on 21.01.2008 BCCI and the respondent entered into a
Media Rights License Agreement for the period from 2008 to 2012 for a
sum of US$274.50 million. After the first IPL season, the BCCI
terminated the agreement dated 21.01.2008 between BCCI and the
respondent for the Indian sub-continent and commenced negotiations
with WSG India. On 14.03.2009, the respondent filed a petition under
Section 9 of the Arbitration and Conciliation Act, 1996 (for short
‘the Act’) against the BCCI before the Bombay High Court praying for
injunction against the BCCI from acting on the termination letter
dated 14.03.2009 and for preventing BCCI from granting the rights
under the agreement dated 21.01.2008 to any third party. Pursuant to
the negotiations between BCCI and WSG India, BCCI entered into an
agreement with the appellant whereunder the media rights for the
Indian sub-continent for the period 2009 to 2017 was awarded to the
appellant for a value of Rs.4,791.08 crores. To operate the media
rights in India, the appellant was required to seek a sub-licensee
within seventy two hours. Though, this time period was extended
twice, the appellant was not able to get a sub-licensee. Thereafter,
the appellant claimed to have allowed media rights in India to have
lapsed and then facilitated on 25.03.2009, a new Media Rights License
Agreement between the BCCI and the respondent for the Indian sub-
continent for the same contract value of Rs.4,791.08 crores. BCCI and
WSG India, however, were to continue with the Rest of the World media
rights.

4. On 25.03.2009, the appellant and the respondent also executed the Deed
for Provision of Facilitation Services (hereinafter referred to as
‘the Facilitation Deed’) whereunder the respondent was to pay a sum of
Rs.425 crores to the appellant as facilitation fees. Clause 9 of the
Facilitation Deed dated 25.03.2009 between the appellant and the
respondent was titled ‘Governing Law’ and read as follows:
“9. GOVERNING LAW
This Deed shall be governed by and construed in accordance with the
laws of England and Wales, without regard to choice of law
principles. All actions or proceedings arising in connection with,
touching upon or relating to this Deed, the breach thereof and/or the
scope of the provisions of this Section shall be submitted to the
International Chamber of Commerce (the “Chamber”) for final and
binding arbitration under its Rules of Arbitration, to be held in
Singapore, in the English language before a single arbitrator who
shall be a retired judge with at least ten years of commercial
experience. The arbitrator shall be selected by mutual agreement of
the Parties, or, if the Parties cannot agree, then by striking from a
list of arbitrators supplied by the Chamber. If the Parties are
unable to agree on the arbitrator, the Chamber shall choose one for
them. The arbitration shall be a confidential proceeding, closed to
the general public. The arbitrator shall assess the cost of the
arbitration against the losing party. In addition, the prevailing
party in any arbitration or legal proceeding relating to this Deed
shall be entitled to all reasonable expenses (including, without
limitation, reasonable attorney’s fees). Notwithstanding the
foregoing, the arbitrator may require that such fees be borne in such
other manner as the arbitrator determines is required in order for
this arbitration provision to be enforceable under applicable law.
The arbitrator shall issue a written opinion stating the essential
findings and conclusions upon which the arbitrator’s award is based.
The arbitrator shall have the power to enter temporary restraining
orders and preliminary and permanent injunctions. No party shall be
entitled or permitted to commence or maintain any action in a court
of law with respect to any matter in dispute until such matter shall
have been submitted to arbitration as herein provided and then only
for the enforcement of the arbitrator’s award; provided, however,
that prior to the appointment of the arbitrator or for remedies
beyond the jurisdiction of an arbitrator, at any time, any party may
seek equitable relief in a court of competent jurisdiction in
Singapore, or such other court that may have jurisdiction over the
Parties, without thereby waiving its right to arbitration of the
dispute or controversy under this section. THE PARTIES HEREBY WAIVE
THEIR RIGHT TO JURY TRIAL WITH RESPECT TO ALL CLAIMS AND ISSUES
ARISING UNDER, IN CONNECTION WITH, TOUCHING UPON OR RELATING TO THIS
DEED, THE BREACH THEREOF AND/OR THE SCOPE OF THE PROVISIONS OF THIS
SECTION, WHETHER SOUNDING IN CONTRACT OR TORT, AND INCLUDING ANY
CLAIM FOR FRAUDULENT INDUCEMENT THEREOF.”
5. The respondent made three payments totaling Rs.125 crores to the
appellant under the Facilitation Deed during 2009 and did not make the
balance payment. Instead, on 25.06.2010, the respondent wrote to the
appellant rescinding the Facilitation Deed on the ground that it was
voidable on account of misrepresentation and fraud. On 25.06.2010, the
respondent also filed Suit No.1869 of 2010 for inter alia a declaration
that the Facilitation Deed was void and for recovery of Rs.125 crores
already paid to the appellant. On 28.06.2010, the appellant acting under
Clause 9 of the Facilitation Deed sent a request for arbitration to ICC
Singapore and the ICC issued a notice to the respondent to file its answer
to the request for arbitration. In the meanwhile, on 30.06.2010, the
respondent filed a second suit, Suit No.1828 of 2010, before the Bombay
High Court against the appellant for inter alia a declaration that as the
Facilitation Deed stood rescinded, the appellant was not entitled to invoke
the arbitration clause in the Facilitation Deed. The respondent also filed
an application for temporary injunction against the appellant from
continuing with the arbitration proceedings commenced by the appellant
under the aegis of ICC.

6. On 09.08.2010, the learned Single Judge of the Bombay High Court
dismissed the application for temporary injunction of the respondent saying
that it would be for the arbitrator to consider whether the Facilitation
Deed was void on account of fraud and misrepresentation and that the
arbitration must, therefore, proceed and the Court could not intervene in
matters governed by the arbitration clause. The respondent challenged the
order of the learned Single Judge before the Division Bench of the Bombay
High Court and by the impugned order, the Division Bench of the Bombay High
Court allowed the appeal, set aside the order of the learned Single Judge
and passed an order of temporary injunction restraining the arbitration by
ICC. Aggrieved, the appellant has filed this appeal.

Contentions on behalf of the appellant:

7. Mr. K.K. Venugopal, learned senior counsel for the appellant,
submitted that the Division Bench of the High Court failed to appreciate
that the Bombay High Court had no jurisdiction to pass an order of
injunction restraining a foreign seated international arbitration at
Singapore between the parties, who were not residents of India. In this
context, he referred to Clause 9 of the Facilitation Deed which stipulated
that any party may seek equitable relief in a court of competent
jurisdiction in Singapore, or such other court that may have jurisdiction
over the parties. He submitted that on the principle of Comity of Courts,
the Bombay High Court should have refused to interfere in the matter and
should have allowed the parties to resolve their dispute through ICC
arbitration, subject to the jurisdiction of the Singapore courts in
accordance with Clause 9 of the Facilitation Deed.

8. Mr. Venugopal next submitted that the Division Bench of the High
Court failed to appreciate that under Section 45 of the Act, the Court
seized of an action in a matter in respect of which the parties have made
an agreement referred to in Section 44 has to refer the parties to
arbitration, unless it finds that the agreement referred to in Section 44
is null and void, inoperative or incapable of being performed. He
submitted that the agreement referred to in Section 44 of the Act is ‘an
agreement in writing for arbitration’ and, therefore, unless the Court
finds that the agreement in writing for arbitration is null and void,
inoperative or incapable of being performed, the Court will not entertain a
dispute covered by the arbitration agreement and refer the parties to the
arbitration. In support of this submission, he relied on the decision of
this Court in Chloro Controls India Private Limited v. Seven Trent Water
Purification Inc. & Ors. [(2013) 1 SCC 641].

9. Mr. Venugopal submitted that the Division Bench of the High Court,
instead of examining whether the agreement in writing for arbitration was
null and void, inoperative or incapable of being performed, has held that
the entire Facilitation Deed was vitiated by fraud and misrepresentation
and was, therefore, void. He vehemently submitted that it was for the
arbitrator to decide whether the Facilitation Deed was void on account of
fraud and misrepresentation as has been rightly held by the learned Single
Judge and it was not for the Court to pronounce on whether the Facilitation
Deed was void on account of fraud and misrepresentation. He referred to
Article 6(4) of the ICC Rules of Arbitration which permits the Arbitral
Tribunal to continue to exercise jurisdiction and adjudicate the claims
even if the main contract is alleged to be null and void or non-existent
because the arbitration clause is an independent and distinct agreement.
He submitted that this principle of Kompetenz Kompetenz has been recognized
in Section 16 of the Act under which the Arbitral Tribunal has the
competence to rule on its own jurisdiction and on this point relied on
National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. [(2009) 1 SCC 267]
and Reva Electric Car Company Private Ltd. v. Green Mobil [(2012) 2 SCC
93]. He submitted that as a corollary to this principle, Courts have also
held that unless the arbitration clause itself, apart from the underlying
contract, is assailed as vitiated by fraud or misrepresentation, the
Arbitral Tribunal will have jurisdiction to decide all issues including the
validity and scope of the arbitration agreement. He submitted that in the
present case, the arbitration clause itself was not assailed as vitiated by
fraud or misrepresentation. In support of this argument, he relied on the
decision of the House of Lords in Premium Nafta Products Ltd. v. Fili
Shipping Company Ltd. & Ors. [2007] UKHL 40], the decision of the Supreme
Court of United States in Buckeye Check Cashing, Inc. v. John Cardegna et
al [546 US 440 (2006)] and the decision of this Court in Branch Manager,
Magma Leasing and Finance Ltd. & Anr. v. Potluri Madhavilata & Anr. [(2009)
10 SCC 103].

10. Mr. Venugopal submitted that the Division Bench of the High Court
relied on the decision in N. Radhakrishnan v. Maestro Engineers & Ors.
[(2010) 1 SCC 72] to hold that serious allegations of fraud can only be
enquired by a Court and not by an arbitrator, but the Division Bench failed
to appreciate that in N. Radhakrishnan v. Maestro Engineers & Ors. (supra)
this Court relied on Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak
[AIR 1962 SC 406] in which it was observed that it is only a party against
whom a fraud is alleged who can request the Court to inquire into the
allegations of fraud instead of allowing the arbitrator to decide on the
allegations of fraud. In the present case, the respondent has alleged
fraud against the appellant and thus it was for the appellant to make a
request to the Court to decide on the allegations of fraud instead of
referring the same to the arbitrator, and no such request has been made by
the appellant. He further submitted that in any case the judgment of this
Court in N. Radhakrishnan v. Maestro Engineers & Ors. (supra) was rendered
in the context of domestic arbitration in reference to the provisions of
Section 8 of the Act. He submitted that the language of Section 45 of the
Act, which applies to an international arbitration, is substantially
different from the language of Section 8 of the Act and it will be clear
from the language of Section 45 of the Act that unless the arbitration
agreement is null and void, inoperative or incapable of being performed,
the parties will have to be referred to arbitration by the Court. In the
present case, the respondent has not made out that the arbitration
agreement is null and void, inoperative or incapable of being performed.

11. Mr. Venugopal submitted that the High Court has taken a view that
Clause 9 forecloses an open trial in a court of law except to the extent
permitted therein and the parties have to necessarily submit themselves to
a confidential proceeding which is closed to the general public. He
submitted that the Bombay High Court thus appears to have held that Clause
9 is opposed to public policy and, in particular, Sections 23 and 28 of the
Indian Contract Act, 1872. He submitted that in any case the arbitration
agreement contained in Clause 9 of the Facilitation Deed cannot be held to
be opposed to public policy and void under Sections 23 and 28 of the Indian
Contract Act, 1872. This will be clear from Exception 1 of Section 28 of
the Indian Contract Act, 1872, which says that the section shall not render
illegal a contract, by which two or more persons agree that any dispute
which may arise between them in respect of any subject or class of subjects
shall be referred to arbitration and that only the amount awarded in such
arbitration shall be recoverable in respect of the dispute so referred. He
explained that under the American Law, in a suit for common law where the
value of claim is more than US$20, the right to jury trial is preserved and
this applies even in relation to claims for breach of contract and for this
reason, the parties made a provision in Clause 9 of the Facilitation Deed
waiving their right to jury trial with respect to all claims and issues
arising under, in connection with, touching upon or relating to the
Facilitation Deed. He submitted that this provision in Clause 9 of the
Facilitation Deed cannot, therefore, be held to be opposed to public
policy.

12. Mr. Venugopal next submitted that the crux of the case of the
respondent is set out in its letter dated 25.06.2010 to the appellant in
which it was alleged that ‘in view of the false misrepresentations and
fraud played by WSGM the deed is voidable at the option of our client and
thus our client rescinds the deed with immediate effect’. In other words,
the respondent’s case is that it was induced to enter into the Facilitation
Deed on account of the misrepresentation by the appellant and was led to
believe that it was paying the facilitation fees to the appellant to allow
the rights of the appellant under an alleged agreement dated 23.03.2009 to
lapse, but the respondent subsequently discovered that there was no
agreement dated 23.03.2009 and the rights of the appellant had come to an
end on 24.03.2009. He submitted that the appellant has denied these
allegations of the respondent in its affidavit-in-reply filed before the
Bombay High Court and that there was no false representation and fraud as
alleged by the respondent. He submitted that the Facilitation Deed was
executed by the senior executives of the parties and in the case of
respondent, it was signed by Michael Grindon, President, International,
Sony Picture Television, and the appellant and the respondent had entered
into the Facilitation Deed after consulting their sports media experts and
after a lot of negotiations. He submitted that in fact a Press Release was
issued by the respondent on 23.04.2010, which will go to show that there
was no misrepresentation and fraud by the appellant before the Facilitation
Deed was signed by the parties, and thus the entire case of the respondent
that the Facilitation Deed was vitiated by misrepresentation and fraud is
false.

13. Mr. Venugopal finally submitted that it will be clear from the
language of the letter dated 25.06.2010 of the respondent to the appellant
that according to the respondent the Facilitation Deed was voidable at the
option of the respondent. He submitted that under Section 45 of the Act,
the Court will have to refer the parties to the arbitration unless it finds
that the arbitration agreement is ‘null and void’. He argued that an
agreement which is voidable at the option of one of the parties is not the
same as the agreement which is void and, therefore, the Division Bench of
the High Court should have referred the parties to arbitration instead of
restraining the arbitration. According to Mr. Venugopal, this is a fit
case in which this Court should set aside the impugned order of the
Division bench of the High Court and restore the order of the learned
Single Judge of the High Court.

Contentions on behalf of the respondent:
14. In reply, Mr. Gopal Subramanium, learned senior counsel appearing for
the respondent, submitted that the Division Bench of the Bombay High
Court has rightly restrained the arbitration proceedings under the aegis
of ICC as the Facilitation Deed, which also contains the arbitration
agreement in Clause 9, is void because of fraud and misrepresentation by
the appellant. He submitted that Section 45 of the Act makes it clear
that the Court will not refer the parties to arbitration if the
arbitration agreement is null and void, inoperative or incapable of
being performed and as the respondent has taken the plea that the
Facilitation Deed, which contained the arbitration agreement, is null
and void on account of misrepresentation and fraud, the Court will have
to decide whether the Facilitation Deed including the arbitration
agreement in Clause 9 was void on account of fraud and misrepresentation
by the appellant. He submitted that the respondent filed the first suit
in the Bombay High Court (Suit No.1869 of 2010) for declaring the
Facilitation Deed as null and void but in the said suit, the appellant
did not file a written statement and instead issued the notice for
arbitration only to frustrate the first suit and in the circumstances
the respondent was compelled to file the second suit (Suit No.1828 of
2010) for an injunction restraining the arbitration.

15. Mr. Subramanium submitted that Section 9 of the Code of Civil
Procedure, 1908 (for short ‘the CPC’) confers upon the court
jurisdiction to try all civil suits except suits which are either
expressly or impliedly barred. He submitted that the Bombay High Court,
therefore, had the jurisdiction to try both the first suit and the
second suit and there was no express or implied bar in Section 45 of the
Act restraining the Bombay High Court to try the first suit and the
second suit. He submitted that in India as well as in England, Courts
have power to issue injunctions to restrain parties from proceeding with
arbitration proceedings in foreign countries. In support of this
submission, he relied on V.O. Tractoroexport, Moscow v. Tarapore &
Company and Anr. [(1969) 3 SCC 562] and Oil and Natural Gas Commission
v. Western Company of North America [(1987) 1 SCC 496]. He also relied
on Russel on Arbitration, para 7-056, 7-058, and Claxton Engineering v.
Txm olaj – es gaz Kutao Ktf [2011] EWHC 345 (COMM.).

16. Mr. Subramanium relying on the decision of this Court in Chloro
Controls India Private Limited v. Seven Trent Water Purification Inc. &
Ors. (supra) submitted that Section 45 of the Act casts an obligation
on the court to determine the validity of the agreement at the threshold
itself because this is an issue which goes to the root of the matter and
a decision on this issue will prevent a futile exercise of proceedings
before the arbitrator. He submitted that under Section 45 of the Act
the Court is required to consider not only a challenge to the
arbitration agreement but also a serious challenge to the substantive
contract containing the arbitration agreement. He cited the decision of
this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd.
[(2011) 14 SCC 66] in support of this argument. He submitted that the
contention on behalf of the appellant that the Court has to determine
only whether the arbitration agreement contained in the main agreement
is void is, therefore, not correct.

17. Mr. Subramanium next submitted that in cases where allegations of
fraud are prima facie made out, the judicial trend in India has been to
have them adjudicated by the Court. In this context, he referred to the
decisions of this Court in Abdul Kadir Shamsuddin Bubere v. Madhav
Prabhakar Oak (supra), Haryana Telecom Ltd. v. Sterlite Industries
(India) Ltd. [(1999) 5 SCC 688] and N. Radhakrishnan v. Maestro
Engineers & Ors. (supra). In reply to the submission of Mr. Venugopal
that it was only the parties against whom the allegations are made who
can insist on the allegations being decided by the Court, Mr.
Subramanium submitted that in the decision of the Madras High Court in
H.G. Oomor Sait v. O Aslam Sait [(2001) 3 CTC 269 (Mad)] referred to in
N. Radhakrishnan v. Maestro Engineers & Ors. (supra) the situation was
reverse.

18. Mr. Subramanium next submitted that the facts in this case prima facie
establish that a grave fraud was played by the appellant not only upon
the respondent but also on the BCCI. He argued that the Facilitation
Deed ultimately deals with media rights belonging to the BCCI and it has
been held by this Court in M/s Zee Tele Films Ltd. & Anr. v. Union of
India & Ors. [AIR 2005 SC 2677] that BCCI is a public body. He
submitted that the Division Bench of the Bombay High Court has,
therefore, rightly taken the view that the disputes in this case cannot
be kept outside the purview of the Indian Courts and if arbitration is
allowed to go on without BCCI, the interest of BCCI will be adversely
affected. He submitted that having regard to the magnitude of fraud
alleged in the present case, the disputes were incapable of being
arbitrated. Relying on Booz Allen & Hamilton v. SBI Home Finance
[(2011) 5 SCC 532], Haryana Telecom Ltd. v. Sterlite Industries (India)
Ltd. (Supra), India Household and Healthcare Ltd. v. LG Household and
Healthcare Ltd. [(2007) 5 SCC 510] and N. Radhakrishnan v. Maestro
Engineers & Ors. (supra), he submitted that such allegations of fraud
can only be inquired into by the court and not by the arbitrator.

Findings of the Court:

19. The question that we have to decide is whether the Division Bench of
the Bombay High Court could have passed the order of injunction restraining
the arbitration at Singapore between the parties. As various contentions
have been raised by Mr. Venugopal, learned counsel for the appellant, in
support of the case of the appellant that the Division Bench of the Bombay
High Court could not have passed the order of injunction restraining the
arbitration at Singapore, we may deal with each of these contentions
separately and record our findings. While recording our findings, we will
also deal with the submissions made by Mr. Gopal Subramanium on behalf of
respondent in reply to the contentions of Mr. Venugopal. We will also
consider the correctness of the findings of the Division Bench of the
Bombay High Court separately.

20. We are unable to accept the first contention of Mr. Venugopal that
as Clause 9 of the Facilitation Deed provides that any party may seek
equitable relief in a court of competent jurisdiction in Singapore, or such
other court that may have jurisdiction over the parties, the Bombay High
Court had no jurisdiction to entertain the suit and restrain the
arbitration proceedings at Singapore because of the principle of Comity of
Courts. In Black’s Law Dictionary, 5th Edition, Judicial Comity, has been
explained in the following words:
“Judicial comity. The principle in accordance with which the courts
of one state or jurisdiction will give effect to the laws and judicial
decisions of another, not as a matter of obligation, but out of
deference and respect.”

Thus, what is meant by the principle of “comity” is that courts of one
state or jurisdiction will give effect to the laws and judicial decisions
of another state or jurisdiction, not as a matter of obligation but out of
deference and mutual respect. In the present case no decision of a court
of foreign country or no law of a foreign country has been cited on behalf
of the appellant to contend that the courts in India out of deference to
such decision of the foreign court or foreign law must not assume
jurisdiction to restrain arbitration proceedings at Singapore. On the
other hand, as has been rightly submitted by Mr. Subramanium, under Section
9 of the CPC, the courts in India have jurisdiction to try all suits of a
civil nature excepting suits of which cognizance is either expressly or
impliedly barred. Thus, the appropriate civil court in India has
jurisdiction to entertain the suit and pass appropriate orders in the suit
by virtue of Section 9 of the CPC and Clause 9 of the Facilitation Deed
providing that courts in Singapore or any other court having jurisdiction
over the parties can be approached for equitable relief could not oust the
jurisdiction of the appropriate civil court conferred by Section 9 of the
CPC. We find that in para 64 of the plaint in Suit No.1828 of 2010 filed
before the Bombay High Court by the respondent, it is stated that the
Facilitation Deed in which the arbitration clause is incorporated came to
be executed by the defendant at Mumbai and the fraudulent inducement on the
part of the defendant resulting in the plaintiff entering into the
Facilitation Deed took place in Mumbai and the rescission of the
Facilitation Deed on the ground that it was induced by fraud of defendant
has also been issued from Mumbai. Thus, the cause of action for filing the
suit arose within the jurisdiction of the Bombay High Court and the Bombay
High Court had territorial jurisdiction to entertain the suit under Section
20 of the CPC.

21. Any civil court in India which entertains a suit, however, has to
follow the mandate of the legislature in Sections 44 and 45 in Chapter I of
Part II of the Act, which are quoted hereinbelow:
“CHAPTER I
NEW YORK CONVENTION AWARDS
44. Definition. In this Chapter, unless the context otherwise
requires, “foreign award” means an arbitral award on differences
between persons arising out of legal relationships, whether
contractual or not, considered as commercial under the law in force in
India, made on or after the 11th day of October, 1960 –
(a) in pursuance of an agreement in writing for arbitration to
which the Convention set forth in the First Schedule applies,
and
(b) in one of such territories as the Central Government, being
satisfied that reciprocal provisions have been made may, by
notification in the Official Gazette, declare to be territories
to which the said Convention applies.
45. Power of judicial authority to refer parties to arbitration.-
Notwithstanding anything contained in Part I or in the Code of Civil
Procedure, a judicial authority, when seized of an action in a matter
in respect of which the parties have made an agreement referred to in
section 44, shall, at the request of one of the parties or any person
claiming through or under him, refer the parties to arbitration,
unless it finds that the said agreement is null and void, inoperative
or incapable of being performed.”

The language of Section 45 of the Act quoted above makes it clear that
notwithstanding anything contained in Part I or in the Code of Civil
Procedure, a judicial authority, when seized of an action in a matter in
respect of which the parties have made an agreement referred to in Section
44, shall, at the request of one of the parties or any person claiming
through or under him, refer the parties to arbitration, unless it finds
that the said agreement is null and void, inoperative or incapable of being
performed. Thus, even if, under Section 9 read with Section 20 of the CPC,
the Bombay High Court had the jurisdiction to entertain the suit, once a
request is made by one of the parties or any person claiming through or
under him to refer the parties to arbitration, the Bombay High Court was
obliged to refer the parties to arbitration unless it found that the
agreement referred to in Section 44 of the Act was null and void,
inoperative or incapable of being performed. In the present case, the
appellant may not have made an application to refer the parties to
arbitration, but Section 45 of the Act does not refer to any application as
such. Instead, it refers to the request of one of the parties or any
person claiming through or under him to refer the parties to arbitration.
In this case, the appellant may not have made an application to refer the
parties to arbitration at Singapore but has filed an affidavit in reply to
the notice of motion and has stated in paragraphs 3, 4 and 5 of this
affidavit that the defendant had already invoked the arbitration agreement
in the Facilitation Deed and the arbitration proceedings have commenced and
that the suit was an abuse of the process of court. The appellant had thus
made a request to refer the parties to arbitration at Singapore which had
already commenced.

22. Section 45 of the Act quoted above also makes it clear that even
where such request is made by a party, it will not refer the parties to
arbitration, if it finds that the agreement is null and void, inoperative
or incapable of being performed. As the very language of Section 45 of the
Act clarifies the word “agreement” would mean the agreement referred to in
Section 44 of the Act. Clause (a) of Section 44 of the Act refers to “an
agreement in writing for arbitration to which the Convention set forth in
the First Schedule applies.” The First Schedule of the Act sets out the
different Articles of the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 1958. Article II of the New York
Convention is extracted hereinbelow:

“1. Each Contracting State shall recognize an agreement in writing
under which the parties undertake to submit to arbitration all or any
differences which have arisen or which may arise between them in
respect of defined legal relationship, whether contractual or not,
concerning a subject-matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in
a contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a
matter in respect of which the parties have made an agreement within
the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration, unless it finds that the
said agreement is null and void, inoperative or incapable of being
performed.”

It will be clear from clauses 1, 2 and 3 of the New York Convention as set
out in the First Schedule of the Act that the agreement referred to in
Section 44 of the Act is an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen
or which may arise between them. Thus, the court will decline to refer the
parties to arbitration only if it finds that the arbitration agreement is
null and void, inoperative or incapable of being performed.

23. According to Mr. Subramanium, however, as the main agreement is
voidable on account of fraud and misrepresentation by the appellant, clause
9 of the main agreement which contains the arbitration agreement in writing
is also null and void. In support of his submission, he cited the decision
of this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd.
(supra). Paragraphs 12 and 13 of the judgment of this Court in SMS Tea
Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd. (supra) are quoted
hereinbelow:

“12. When a contract contains an arbitration agreement, it is a
collateral term relating to the resolution of disputes, unrelated to
the performance of the contract. It is as if two contracts—one in
regard to the substantive terms of the main contract and the other
relating to resolution of disputes—had been rolled into one, for
purposes of convenience. An arbitration clause is therefore an
agreement independent of the other terms of the contract or the
instrument. Resultantly, even if the contract or its performance is
terminated or comes to an end on account of repudiation, frustration
or breach of contract, the arbitration agreement would survive for the
purpose of resolution of disputes arising under or in connection with
the contract.
13. Similarly, when an instrument or deed of transfer (or a document
affecting immovable property) contains an arbitration agreement, it is
a collateral term relating to resolution of disputes, unrelated to the
transfer or transaction affecting the immovable property. It is as if
two documents—one affecting the immovable property requiring
registration and the other relating to resolution of disputes which is
not compulsorily registerable—are rolled into a single instrument.
Therefore, even if a deed of transfer of immovable property is
challenged as not valid or enforceable, the arbitration agreement
would remain unaffected for the purpose of resolution of disputes
arising with reference to the deed of transfer.”

In the aforesaid case, this Court has held that if the document containing
the main agreement is not found to be duly stamped, even if it contains
arbitration clause, it cannot be acted upon because Section 35 of the Stamp
Act bars the said document from being acted upon, but if the document is
found to be duly stamped but not registered though required to be
compulsorily registered, the court can act upon the arbitration agreement
which is a collateral term of the main agreement and is saved by the
proviso to Section 49 of the Registration Act. Thus, as per the aforesaid
decision of this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P)
Ltd. (supra), the court will have to see in each case whether the
arbitration agreement is also void, unenforceable or inoperative along with
the main agreement or whether the arbitration agreement stands apart from
the main agreement and is not null and void.

24. The House of Lords has explained this principle of separability in
Premium Nafta Products Ltd. v. Fili Shipping Company Ltd. & Ors. (supra)
thus:

“17. The principle of separability enacted in section 7 means that
the invalidity or rescission of the main contract does not
necessarily entail the invalidity or rescission of the arbitration
agreement. The arbitration agreement must be treated as a “distinct
agreement” and can be void or voidable only on grounds which relate
directly to the arbitration agreement. Of course there may be cases
in which the ground upon which the main agreement is invalid is
identical with the ground upon which the arbitration agreement is
invalid. For example, if the main agreement and the arbitration
agreement are contained in the same document and one of the parties
claims that he never agreed to anything in the document and that his
signature was forged, that will be an attack on the validity of the
arbitration agreement. But the ground of attack is not that the main
agreement was invalid. It is that the signature to the arbitration
agreement, as a “distinct agreement”, was forged. Similarly, if a
party alleges that someone who purported to sign as agent on his
behalf had no authority whatever to conclude any agreement on his
behalf, that is an attack on both the main agreement and the
arbitration agreement.
18. On the other hand, if (as in this case) the allegation is that
the agent exceeded his authority by entering into a main agreement in
terms which were not authorized or for improper reasons, that is not
necessarily an attack on the arbitration agreement. It would have to
be shown that whatever the terms of the main agreement or the reasons
for which the agent concluded it, he would have had no authority to
enter into an arbitration agreement. Even if the allegation is that
there was no concluded agreement (for example, that terms of the main
agreement remained to be agreed) that is not necessarily an attack on
the arbitration agreement. If the arbitration clause has been
agreed, the patties will be presumed to have intended the question of
whether there was a concluded main agreement to be decided by
arbitration.”

25. Applying the principle of separability to the facts of this case, the
respondent rescinded the Facilitation Deed by notice dated 25.06.2010 to
the appellant on the following grounds stated in the said notice by its
lawyers:
“1. Reference is made to the Deed for the Provison of Facilitation
Services dated March 25, 2009 (the “Deed”) between World Sport Group
(Mauritius) Limited (“WSGM”) and our client. Under the Deed, which is
styled as a facilitation agreement, our client agreed to pay WSGM
“facilitation” fees for the “facilitation” services stated thereunder
to have been provided by WSGM. The underlying consideration for the
payments by our client to WSGM, in fact were the representation made
by WSGM that : (a) WSGM, had executed in India (“BCCI”) whereunder
WSGM had been unfettered Global Media Rights (“the said rights”),
including the Indian Subcontinent (implying thereby as natural
corollary that the earlier Media Rights agreement dated March 15, 2009
between WSGM and BCCI along with its restrictive conditions had been
mutually terminated); (b) WSGM could thereafter relinquish the Media
Rights for the Indian Subcontinent in favour of our client for said
valuable consideration to enable our client to enter into a direct
agreement with BCCI; (c) the said rights were subsisting with WSGM at
the time of execution of the Deed, i.e, March 25, 2009; and (d) WSGM
had relinquished those rights in favour of BCCI to enable BCCI and our
client to execute a direct Media Rights License Agreement for the
Indian Subcontinent.
2. BCCI has recently brought to the attention of our client that the
Global Media Rights agreement between WSGM and BCCI dated March 23,
2009 does not exist and in terms of Clause 13.5 of the agreement dated
March 15, 2009, after expiry of the 2nd extension the media rights had
automatically reverted to BCCI at 3 a.m. on March 24, 2009 and thus at
the time of execution of the Deed, WSGM did not have any rights to
relinquish and/or to facilitate the procurement of India Subcontinent
media rights for the IPL from BCCI and thus no facilitation services
could have been provided by WSGM.
3. In view of the above, it is evident that the representation by
WSGM that WSGM relinquished its Indian Subcontinent media rights for
the IPL in favour of our client to pay the “facilitation” fees under
the Deed.
4. Taking cognizance of the same, BCCI’s Governing council at its
meeting held at Mumbai, India on June 25, 2010 appropriately executed
an amendment to Media Rights License Agreement dated March 25, 2009
between BCCI and our client by deleting, inter alia, clause 10.4
thereof.
5. On its part, and in view of the false representations and fraud
played by WSGM, the Deed is voidable at the option of our client and
thus our client rescinds the Deed with immediate effect.”

The ground taken by respondent to rescind the Facilitation Deed thus is
that the appellant did not have any right to relinquish and/or to
facilitate the procurement of Indian subcontinent media rights for the IPL
from BCCI and no facilitation services could have been provided by the
appellant and therefore the representation by the appellant that the
appellant relinquished its Indian subcontinent media rights for the IPL in
favour of the respondent for which the appellant had to be paid the
facilitation fee under the deed was false and accordingly the Facilitation
Deed was voidable at the option of the respondent on account of false
representation and fraud. This ground of challenge to the Facilitation
Deed does not in any manner affect the arbitration agreement contained in
Clause 9 of the Facilitation Deed, which is independent of and separate
from the main Facilitation Deed and does not get rescinded as void by the
letter dated 25.06.2010 of the respondent. The Division Bench of the
Bombay High Court, therefore, could not have refused to refer the parties
to arbitration on the ground that the arbitration agreement was also void
along with the main agreement.

26. Mr. Gopal Subramanium’s contention, however, is also that the
arbitration agreement was inoperative or incapable of being performed as
allegations of fraud could be enquired into by the court and not by the
arbitrator. The authorities on the meaning of the words “inoperative or
incapable of being performed” do not support this contention of Mr.
Subramanium. The words “inoperative or incapable of being performed” in
Section 45 of the Act have been taken from Article II (3) of the New York
Convention as set out in para 22 of this judgment. Redfern and Hunter on
International Arbitration (Fifth Edition) published by the Oxford
University Press has explained the meaning of these words “inoperative or
incapable of being performed” used in the New York Convention at page 148,
thus:

“At first sight it is difficult to see a distinction between the
terms ‘inoperative’ and ‘incapable of being performed’. However,
an arbitration clause is inoperative where it has ceased to have
effect as a result, for example, of a failure by the parties to
comply with a time limit, or where the parties have by their
conduct impliedly revoked the arbitration agreement. By contrast,
the expression ‘incapable of being performed’ appears to refer to
more practical aspects of the prospective arbitration proceedings.
It applies, for example, if for some reason it is impossible to
establish the arbitral tribunal.”

27. Albert Jan Van Den Berg in an article titled “The New York
Convention, 1958 – An Overview” published in the website of ICCA
[www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of-
1958_overview.pdf], referring to Article II(3) of the New York Convention,
states:
“The words “null and void” may be interpreted as referring to
those cases where the arbitration agreement is affected by some
invalidity right from the beginning, such as lack of consent due
to misrepresentation, duress, fraud or undue influence.
The word “inoperative” can be said to cover those cases where the
arbitration agreement has ceased to have effect, such as
revocation by the parties.
The words “incapable of being performed” would seem to apply to
those cases where the arbitration cannot be effectively set into
motion. This may happen where the arbitration clause is too
vaguely worded, or other terms of the contract contradict the
parties’ intention to arbitrate, as in the case of the so-called
co-equal forum selection clauses. Even in these cases, the courts
interpret the contract provisions in favour of arbitration.”

28. The book ‘Recognition and Conferment of Foreign Arbitral Awards: A
Global Commentary on the New York Convention’ by Kronke, Nacimiento, et
al.(ed.) (2010) at page 82 says:
“Most authorities hold that the same schools of thought and
approaches regarding the term null and void also apply to the
terms inoperative and incapable of being performed. Consequently,
the majority of authorities do not interpret these terms
uniformly, resulting in an unfortunate lack of uniformity. With
that caveat, we shall give an overview of typical examples where
arbitration agreements were held to be (or not to be) inoperative
or incapable of being performed.
The terms inoperative refers to cases where the arbitration
agreement has ceased to have effect by the time the court is asked
to refer the parties to arbitration. For example, the arbitration
agreement ceases to have effect if there has already been an
arbitral award or a court decision with res judicata effect
concerning the same subject matter and parties. However, the mere
existence of multiple proceedings is not sufficient to render the
arbitration agreement inoperative. Additionally, the arbitration
agreement can cease to have effect if the time limit for
initiating the arbitration or rendering the award has expired,
provided that it was the parties’ intent no longer to be bound by
the arbitration agreement due to the expiration of this time
limit.
Finally, several authorities have held that the arbitration
agreement ceases to have effect if the parties waive arbitration.
There are many possible ways of waiving a right to arbitrate.
Most commonly, a party will waive the right to arbitrate if, in a
court proceeding, it fails to properly invoke the arbitration
agreement or if it actively pursues claims covered by the
arbitration agreement.”

29. Thus, the arbitration agreement does not become “inoperative or
incapable of being performed” where allegations of fraud have to be
inquired into and the court cannot refuse to refer the parties to
arbitration as provided in Section 45 of the Act on the ground that
allegations of fraud have been made by the party which can only be inquired
into by the court and not by the arbitrator. N. Radhakrishnan v. Maestro
Engineers & Ors. (supra) and Abdul Kadir Shamsuddin Bubere v. Madhav
Prabhakar Oak (supra) were decisions rendered in the context of domestic
arbitration and not in the context of arbitrations under the New York
Convention to which Section 45 of the Act applies. In the case of such
arbitrations covered by the New York Convention, the Court can decline to
make a reference of a dispute covered by the arbitration agreement only if
it comes to the conclusion that the arbitration agreement is null and void,
inoperative or incapable of being performed, and not on the ground that
allegations of fraud or misrepresentation have to be inquired into while
deciding the disputes between the parties.

30. We may now consider the correctness of the findings of the Division
Bench of the High Court in the impugned judgment. The Division Bench of
the High Court has held that the Facilitation Deed was part of several
agreements entered into amongst different parties commencing from
25.03.2009 and, therefore, cannot be considered as stand apart agreement
between the appellant and the respondent and so considered the Facilitation
Deed as contrary to public policy of India because it is linked with the
finances, funds and rights of the BCCI, which is a public body. This
approach of the Division Bench of the High Court is not in consonance with
the provisions of Section 45 of the Act, which mandates that in the case of
arbitration agreements covered by the New York Convention, the Court which
is seized of the matter will refer the parties to arbitration unless the
arbitration agreement is null and void, inoperative or incapable of being
performed. In view of the provisions of Section 45 of the Act, the
Division Bench of the High Court was required to only consider in this case
whether Clause 9 of the Facilitation Deed which contained the arbitration
agreement was null and void, inoperative or incapable of being performed.

31. The Division Bench of the High Court has further held that Clause 9
of the Facilitation Deed insofar as it restricted the right of the parties
to move the courts for appropriate relief and also barred the right to
trial by a jury was void for being opposed to public policy as provided in
Section 23 of the Indian Contract Act, 1872 and was also void for being an
agreement in restraint of the legal proceedings in view of Section 28 of
the said Act. Parliament has made the Arbitration and Conciliation Act,
1996 providing domestic arbitration and international arbitration as a mode
of resolution of disputes between the parties and Exception 1 to Section 28
of the Indian Contract Act, 1872 clearly states that Section 28 shall not
render illegal a contract, by which two or more persons agree that any
dispute which may arise between them in respect of any subject or class of
subjects shall be referred to arbitration and that only the amount awarded
in such arbitration shall be recoverable in respect of the dispute so
referred. Clause 9 of the Facilitation Deed is consistent with this policy
of the legislature as reflected in the Arbitration and Conciliation Act,
1996 and is saved by Exception 1 to Section 28 of the Indian Contract Act,
1872. The right to jury trial is not available under Indian laws. The
finding of the Division Bench of the High Court, therefore, that Clause 9
of the Facilitation Deed is opposed to public policy and is void under
Sections 23 and 28 of the Indian Contract Act, 1872 is clearly erroneous.

32. The Division Bench of the High Court has also held that as
allegations of fraud and serious malpractices on the part of the appellant
are in issue, it is only the court which can decide these issues through
furtherance of judicial evidence by either party and these issues cannot be
properly gone into by the arbitrator. As we have already held, Section 45
of the Act does not provide that the court will not refer the parties to
arbitration if the allegations of fraud have to be inquired into. Section
45 provides that only if the court finds that the arbitration agreement is
null and void, inoperative or incapable of being performed, it will decline
to refer the parties to arbitration.

33. The Division Bench of the High court has further held that since
the earlier suit (Suit No.1869 of 2010) was pending in court since
25.06.2010 and that suit was inter-connected and inter-related with the
second suit (Suit No.1828 of 2010), the court could not allow splitting of
the matters and disputes to be decided by the court in India in the first
suit and by arbitration abroad in regard to the second suit and invite
conflicting verdicts on the issues which are inter-related. This reasoning
adopted by the Division Bench of the Bombay High Court in the impugned
judgment is alien to the provisions of Section 45 of the Act which does not
empower the court to decline a reference to arbitration on the ground that
another suit on the same issue is pending in the Indian court.

34. We make it clear that we have not expressed any opinion on the
dispute between the appellant and the respondent as to whether the
Facilitation Deed was voidable or not on account of fraud and
misrepresentation. Clause 9 of the Facilitation Deed states inter alia
that all actions or proceedings arising in connection with, touching upon
or relating to the Facilitation Deed, the breach thereof and/or the scope
of the provisions of the Section shall be submitted to the ICC for final
and binding arbitration under its Rules of Arbitration. This arbitration
agreement in Clause 9 is wide enough to bring this dispute within the scope
of arbitration. To quote Redfern And Hunter On International Arbitration
(Fifth Edition page 134 para 2.141)
“Where allegations of fraud in the procurement or performance of a
contract are alleged, there appears to be no reason for the arbitral
tribunal to decline jurisdiction.”

Hence, it has been rightly held by the learned Single Judge of the Bombay
High Court that it is for the arbitrator to decide this dispute in
accordance with the arbitration agreement.

35. For the aforesaid reasons, we allow the appeal, set aside the
impugned judgment of the Division Bench of the High Court and restore the
order of the learned Single Judge. The parties shall bear their own costs.
…..……………..……………………….J.
(A. K. Patnaik)
…….…………..………………………..J.
(Fakkir Mohamed Ibrahim Kalifulla)
New Delhi,
January 24, 2014.
———————–
39

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