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2014 (1) TMI 1842 - SC - Indian LawsApplication for temporary injunction - whether the Division Bench of the Bombay High Court could have passed the order of injunction restraining the arbitration at Singapore between the parties? Held that - 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. 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. 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. Appeal allowed.
Issues Involved
1. Jurisdiction of the Bombay High Court to restrain foreign arbitration. 2. Applicability of Section 45 of the Arbitration and Conciliation Act, 1996. 3. Validity of the arbitration agreement in light of allegations of fraud and misrepresentation. 4. Public policy considerations and the legality of Clause 9 of the Facilitation Deed. 5. The impact of pending suits on the decision to refer parties to arbitration. Detailed Analysis Jurisdiction of the Bombay High Court to Restrain Foreign Arbitration The appellant contended that the Bombay High Court had no jurisdiction to pass an order of injunction restraining a foreign-seated international arbitration at Singapore, citing Clause 9 of the Facilitation Deed. However, the court found that under Section 9 of the CPC, Indian courts have jurisdiction to try all suits of a civil nature except those expressly or impliedly barred. The court held that the Bombay High Court had territorial jurisdiction as the cause of action arose within its jurisdiction. The principle of comity of courts did not apply as no foreign court decision or law was cited that would require deference. Applicability of Section 45 of the Arbitration and Conciliation Act, 1996 Section 45 mandates that a judicial authority must refer parties to arbitration unless the arbitration agreement is found to be null and void, inoperative, or incapable of being performed. The court noted that the appellant had made a request to refer the parties to arbitration at Singapore through its affidavit. The court emphasized that the Bombay High Court was obliged to refer the parties to arbitration unless it found the agreement to be null and void, inoperative, or incapable of being performed. Validity of the Arbitration Agreement in Light of Allegations of Fraud and Misrepresentation The respondent argued that the Facilitation Deed, including the arbitration agreement, was void due to fraud and misrepresentation. The court referred to the principle of separability, which means that the arbitration agreement is independent of the main contract. The court found that the grounds for rescinding the Facilitation Deed did not affect the arbitration agreement in Clause 9, which remained valid and enforceable. The court held that it was for the arbitrator to decide on the validity of the Facilitation Deed. Public Policy Considerations and the Legality of Clause 9 of the Facilitation Deed The Division Bench of the High Court had held that Clause 9 was void for being opposed to public policy and for being an agreement in restraint of legal proceedings. However, the Supreme Court found this reasoning erroneous. Clause 9 was consistent with the policy of the Arbitration and Conciliation Act, 1996, and was saved by Exception 1 to Section 28 of the Indian Contract Act, 1872. The court also noted that the right to a jury trial is not available under Indian laws, making the Division Bench's finding on this point incorrect. The Impact of Pending Suits on the Decision to Refer Parties to Arbitration The Division Bench had also reasoned that the existence of an earlier suit (Suit No.1869 of 2010) pending in court and its interconnection with the second suit (Suit No.1828 of 2010) justified not referring the parties to arbitration. The Supreme Court found this reasoning alien to the provisions of Section 45, which does not empower the court to decline a reference to arbitration on the ground of another pending suit. Conclusion The Supreme Court allowed the appeal, set aside the judgment of the Division Bench of the Bombay High Court, and restored the order of the learned Single Judge. The court reiterated that it is for the arbitrator to decide the disputes in accordance with the arbitration agreement, and the parties were referred to arbitration as per Clause 9 of the Facilitation Deed. The parties were ordered to bear their own costs.
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