2014 (7) TMI 1253 - HC - Indian Laws

Interim mandatory injunction - Arbitration and Conciliation - restraining the appellants from withdrawing the amounts retained by the Corporation Bank in the appellants account to the extent of USD 60 Million and in the event the balance in the said account with the Corporation Bank is less than USD 60 Million, a direction to the appellants to deposit the short fall in the said account, so as to maintain the balance of USD 60 Millions - Held that - As noticed an interim mandatory injunction can only be granted in exceptional cases and that too preserve or restore status quo of the last non-contesting status, which preceded the controversy. The grant of interim mandatory injunction must not amount to grant of pre trial decree. Such relief is essentially an equitable relief and discretion in that regard has to be exercised in light of facts and circumstances of each case. In the facts and circumstances of the present case, we are of the opinion that interests of justice would be served, if the appellants are directed to deposit an additional amount equivalent to USD 20 Million in its Corporation Bank Account at Mumbai, so that total deposit in the said account is maintained at USD 30 Million. This is on the basis that the HSBC can be said to have made out a fairly strong case, of a standard higher than a mere prima-facie case, for an award of such amount in the arbitral proceedings at Singapore. This direction to deposit, is certainly, without prejudice to the rights and contentions of the parties before the Arbitral Tribunal at Singapore. Accordingly, we may not be taken to have expressed any final opinion either upon the merits of the contentions of either parties or quantum of damages. Thus we partly allow the present appeal. The direction to the appellants to deposit the shortfall in the Corporation Bank Account at Mumbai, so as to maintain balance of USD 60 Million is substituted by a direction to the appellants to deposit the shortfall in the said account, so as to maintain a balance of USD 30 Million within four weeks from today. Save and except the aforesaid modification, rest of the directions in the impugned judgment and order dated 22 January 2014, are hereby upheld and maintained.

Summary

Issues Involved:
1. Jurisdiction of the arbitration agreement.
2. Applicability of Indian law versus Singapore law.
3. Allegations of fraud and their arbitrability.
4. Enforcement of interim awards.
5. Merits of the interim mandatory injunction.

Detailed Analysis:

1. Jurisdiction of the Arbitration Agreement:
The appellants contended that the arbitration agreement should be governed by Indian law, referencing clauses 15 and 16 of the SSA. They argued that the arbitration in Singapore was without jurisdiction. However, the court found that the arbitration agreement was governed by Singapore law, as specified in the SSA and SHA, and the seat of arbitration being Singapore confirmed this. The appellants were estopped from raising jurisdictional issues due to the finality of the jurisdictional awards by the Singapore Arbitral Tribunal.

2. Applicability of Indian Law versus Singapore Law:
The appellants argued that Indian law should govern the arbitration agreement. However, the court noted that clause 16.4 of the SSA explicitly excluded Part I of the Indian Arbitration and Conciliation Act, 1996, except for Section 9. The court upheld that the law governing the arbitration agreement was indeed Singapore law, as the parties had expressly or impliedly agreed to this arrangement.

3. Allegations of Fraud and Their Arbitrability:
The appellants asserted that serious allegations of fraud and criminality were not arbitrable under Indian law, referencing various Supreme Court judgments. However, the court distinguished between the suitability and arbitrability of disputes, noting that allegations of fraud and misrepresentation under Sections 17 and 18 of the Indian Contract Act, 1872, do not render a dispute non-arbitrable. The court also referenced the Supreme Court's decision in Swiss Timing Ltd., which clarified that issues of fraud could be arbitrable.

4. Enforcement of Interim Awards:
The appellants contended that the proceedings under Section 9 of the Act were essentially for the enforcement of an emergency award, which was not permissible. The court found that Section 9 allowed for interim measures before, during, or after arbitral proceedings. The court noted that the parties had retained the right to invoke Section 9, and the interim measures granted were within the jurisdiction of the Indian courts.

5. Merits of the Interim Mandatory Injunction:
The appellants challenged the interim mandatory injunction, arguing that the standard of proof for allegations of fraud in civil cases should be beyond a reasonable doubt. The court clarified that the standard in civil cases is the preponderance of probability. The court found that the prima facie findings of fraud and misrepresentation were supported by material evidence. However, the court modified the interim mandatory injunction, reducing the required deposit from USD 60 million to USD 30 million, considering the equities and the need to avoid granting a pre-trial decree.

Conclusion:
The court upheld the jurisdiction of the Singapore Arbitral Tribunal, affirmed the applicability of Singapore law to the arbitration agreement, and confirmed the arbitrability of fraud allegations. The court also validated the interim measures under Section 9 of the Act but modified the interim mandatory injunction to require a deposit of USD 30 million instead of USD 60 million. The appeal was partly allowed with no order as to costs.