2012 (8) TMI 349 - Board - Companies Law

Arbitration - Singaporean company alleged misrepresentation and fraud on part of Indian companies - A joint venture agreement was entered into between Indian telecom companies and a Singaporean company to carry on telecome business in India after 2G Spectrum licences were granted by Telecom Department - Subsequently a shareholders agreement was also entered into - In both agreements there was an arbitration clause for referring any disputes between parties to arbitration, seated at Singapore Held that - Parties are referred to Arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre as contemplated under Article 13 of the SSA entered into between the parties - Company Law Board was bound to refer parties to foreign arbitration at Singapore

Issues Involved:
1. Application under Section 45 of the Arbitration and Conciliation Act, 1996.
2. Allegations of fraud and misrepresentation.
3. Breach of Share Subscription Agreement (SSA) and Shareholders Agreement (SHA).
4. Jurisdiction of Company Law Board (CLB) versus Arbitration.
5. Validity and enforceability of arbitration agreements.
6. Abandonment of arbitration rights.

Detailed Analysis:

1. Application under Section 45 of the Arbitration and Conciliation Act, 1996:
The primary issue was whether the parties should be referred to arbitration under Section 45 of the Act of 1996. The court had to determine if the arbitration agreement was null and void, inoperative, or incapable of being performed. The SSA and SHA contained clauses for dispute resolution through arbitration, which survived even after termination of the agreements. The court concluded that all conditions under Section 45 were satisfied, thus mandating referral to arbitration.

2. Allegations of Fraud and Misrepresentation:
Telenor alleged that the Indian Strategic Partners (ISP) committed fraud by making false representations and warranties, leading to the execution of the SSA and SHA. Telenor claimed that these misrepresentations induced them to invest in the joint venture. The court noted that the allegations of fraud were rooted in contract and should be adjudicated by the Arbitral Tribunal as per the agreed dispute resolution mechanism.

3. Breach of Share Subscription Agreement (SSA) and Shareholders Agreement (SHA):
The SSA and SHA were central to the dispute, with Telenor claiming that the ISP breached these agreements. The court highlighted that the SSA and SHA contained arbitration clauses, which were still in effect. The court emphasized that the parties had agreed that any termination of these agreements would only become effective upon an arbitral award, thus reinforcing the need for arbitration.

4. Jurisdiction of Company Law Board (CLB) versus Arbitration:
The court examined whether the CLB should adjudicate the dispute or refer it to arbitration. It was determined that the issues raised in the petitions were contractual disputes between the parties and fell within the scope of the arbitration agreements. The court held that the CLB should not exercise jurisdiction over matters that were contractually agreed to be resolved through arbitration.

5. Validity and Enforceability of Arbitration Agreements:
The court found that the arbitration agreements in the SSA and SHA were valid, enforceable, and not rendered null and void, inoperative, or incapable of being performed. Both parties had invoked arbitration clauses in the past, and the arbitration process had already commenced. The court underscored that the arbitration agreements were binding and should be honored.

6. Abandonment of Arbitration Rights:
Telenor argued that the ISP abandoned their arbitration rights by filing Company Petition No. 33. The court rejected this argument, stating that mere invocation of the CLB's jurisdiction did not constitute abandonment of arbitration rights. The court noted that both parties continued to engage in arbitration proceedings even after filing petitions with the CLB, indicating no unequivocal intention to abandon arbitration.

Conclusion:
The court allowed the application under Section 45 of the Arbitration and Conciliation Act, 1996, referring the parties to arbitration as per the SSA and SHA agreements. The court emphasized that the disputes were rooted in contractual breaches and should be resolved through arbitration, as agreed by the parties. The Company Petition No. 32 was disposed of accordingly.

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