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TMI Blog2014 (5) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ising and delivering the Commonwealth Games, 2010 Delhi (hereinafter referred to as "Commonwealth Games") and having its registered office in New Delhi, India. 4. The petitioner entered into an agreement dated 11th March, 2010 with the respondent for providing timing, score and result systems ("TSR systems/services") as well as supporting services required to conduct the Commonwealth Games. According to the petitioner, Clause 11.1 of the aforesaid agreement stipulated the fees, as set out in Schedule 3, which shall be paid to the petitioner for performance of the obligations contained in the agreement. The aforesaid Schedule 3 gives details of the amounts which were to be paid, in instalments, by the Organising Committee. The service provider/Petitioner was to submit monthly tax invoices, detailing the payments to be made by the Organising Committee. These invoices were to be paid within 30 days of the end of the month in which the tax invoices were received by the Organising Committee. All payments were to be made in Swiss Francs, unless the parties agree otherwise in writing. Clause 11.5 provides that on the date of the agreement, the service provider must provide the Performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e obligations in the service agreement of 11th March, 2010. Since the respondent was disputing its liability to pay the amounts, the petitioner served a formal Dispute Notification on the respondent under Clause 38 of the agreement. 7. The petitioner further points out that on 7th February, 2011, the respondent called upon the petitioner to fulfil its alleged outstanding obligations under the agreement including handing over of the Legacy Boards, completion of the formalities of the material, which were required to be shipped out and to fulfil certain other requirements as set out in its earlier e-mails in order to prepare the "agreement closure report". The respondent also stated that they were not addressing the issue of invoking the Dispute Resolution Clause as they were interested in settling the dispute amicably. The petitioner pleads that the respondent failed in its commitment for payments towards services rendered, not only towards the petitioner but also towards other international companies from Australia, Belgium, England, France, Germany, Italy, the Netherlands and Switzerland, which had provided various services to the respondent at the Commonwealth Games. It also app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the agreement. The respondent seeks to establish the aforesaid non-liability clause on the basis of registration of Criminal Case being CC No. 22 of 2011 under Section 120-B, read with Sections 420, 427, 488 and 477 IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act against Suresh Kalmadi, the then Chairman of the Organising Committee and other officials of the respondent alongwith some officials of the petitioner, namely Mr. S. Chianese, Sales & Marketing Manager, Mr. Christophe Bertaud, General Manager and Mr. J. Spiri, Multi Sports Events & Sales Manager. 9. It is further the case of the respondent that due to the pendency of the criminal proceedings in the trial court, the present petition ought not to be entertained. In case the arbitration proceeding continues simultaneously with the criminal trial, there is real danger of conflicting conclusions by the two fora, leading to unnecessary confusion. 10. I have heard the learned counsel for the parties. 11. The submissions made in the petition as well as in the counter affidavit have been reiterated before me by the learned counsel. I have given due consideration to the submissions made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of three Arbitrators, one to be nominated by each party, with the presiding Arbitrator to be nominated by the two arbitrators nominated by the parties. The Arbitrators shall be retired judges of the Supreme Court or High Courts of India. However, the Presiding Arbitrator shall be a retired Supreme Court Judge. 38.7 The place of arbitration shall be New Delhi. All arbitration proceedings shall be conducted in English in accordance with the provisions of the Arbitration and Conciliation Act, 1996 as amended from time to time. 38.8 The arbitration award will be final and binding upon the parties, and each party will bear its own costs of arbitration and equally share the fees of the arbitral tribunal unless the arbitral tribunal decides otherwise. 38.9 This clause 38 will not affect each party's rights to seek interlocutory relief in a court of competent jurisdiction." 15. I am unable to agree with the submission made by the learned counsel for the respondent that the petitioner has not satisfied the condition precedent under Clause 38.3. A perusal of the correspondence placed on the record of the petition clearly shows that not only the petitioner but even the ambassadors of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. As a pure question of law, I am unable to accept the very broad proposition that whenever a contract is said to be void-ab-initio, the Courts exercising jurisdiction under Section 8 and Section 11 of the Arbitration Act, 1996 are rendered powerless to refer the disputes to arbitration. 18. However, the respondent has placed strong reliance on the judgment of this Court in N. Radhakrishnan (supra). In that case, disputes had arisen between the appellant and the respondent, who were partners in a firm known as Maestro Engineers. The appellant had retired from the firm. Subsequently, the appellant alleged that he continued to be a partner. The respondent filed a Civil Suit seeking a declaration that the appellant is not a partner of the firm. In this suit, the appellant filed an application under Section 8 of the Arbitration Act seeking reference of the dispute to the arbitration. The plea was rejected by the trial court and the High Court in Civil Revision. This Court also rejected the prayer of the appellant for reference of the dispute to arbitration. This Court found that subject matter of the dispute was within the ambit of the arbitration clause. It was held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the arbitrator. In my opinion, the aforesaid observations runs counter to the ratio of the law laid down by this Court in Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums (2003) 6 SCC 503 , wherein this Court in Paragraph 14 observed as follows: "If in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below. Therefore, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration." 20. In my opinion, the observations in Hindustan Petroleum Corpn. Ltd. (supra) lays down the correct law. Although, reference has been made to the aforesaid observations in N. Radhakrishnan (supra) but the same have not been distinguished. A Two Judge Bench of this Court in P. Anand Gajap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the attention of this Court was not drawn to the provision contained in Section 16 of the Arbitration Act, 1996 in the case of N. Radhakrishnan (supra). Section 16 provides that the Arbitral Tribunal would be competent to rule on its own jurisdiction including ruling on any objection with regard to existence or validity of the arbitration agreement. The Arbitration Act emphasises that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It further provides that a decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. The aforesaid provision came up for consideration by this Court in Today Homes & Infrastructure Pvt. Ltd. Vs. Ludhiana Improvement Trust & Anr. 2013 (7) SCALE 327: 2013 (2) Arb. LR 241 (SC) 23. In the aforesaid case, the designated Judge of the Punjab & Haryana High Court had refused to refer the disputes to arbitration. The High Court had accepted the plea that since the underlying contract was void, the arbitration clause perished with it. The judgment of the High Court was challenged in this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the existence or validity of the arbitration agreement, the arbitration clause, which formed part of the contract, had to be treated as an agreement independent of the other terms of the contract. Reference was made in the said judgment to the provisions of Section 16(1)(b) of the 1996 Act, which provides that even if the arbitral tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause. It was also held that Section 16(1)(a) of the 1996 Act presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of Section 16(1)(b) of the 1996 Act, the arbitration clause continues to be enforceable, notwithstanding a declaration that the contract was null and void. 25. Keeping in view the aforesaid observations made by this Court, I see no reason to accept the submission made by the learned counsel for the respondents that since a criminal case has been registered against the Chairman of the Organising Committee and some other officials of the petitioner, this Court would have no juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can come to a conclusion that the contract is void without receiving any evidence, it would be justified in declining reference to arbitration but such cases would be few and isolated. These would be cases where the Court can readily conclude that the contract is void upon a meaningful reading of the contract document itself. Some examples of where a contract may fall in this category would be :- (a) Where a contract is entered into by a person, who has not attained the age of majority (Section 11); (b) Where both the parties are under a mistake as to a matter of fact essential to the agreement (Section 19); (c) Where the consideration or object of the contract is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law or where the object of the contract is to indulge in any immoral activity or would be opposed to public policy. Glaring examples of this would be where a contract is entered into between the parties for running a prostitution racket, smuggling drugs, human trafficking and any other activities falling in that category. (d) Similarly, Section 30 renders wagering contracts as void. The only exception to this is betting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration. Therefore, I am of the opinion that the Court ought to act with caution and circumspection whilst examining the plea that the main contract is void or voidable. The Court ought to decline reference to arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof. 30. In the present case, it is pleaded that the manner in which the contract was made between the petitioner and the respondent was investigated by the CBI. As a part of the investigation, the CBI had seized all the original documents and the record from the office of the respondent. After investigation, the criminal case CC No.22 of 2011 has been registered, as noticed earlier. It is claimed that in the event the Chairman of the Organising Committee and the other officials who manipulated the grant of contract in favour of the respondent are found guilty in the criminal trial, no amount would be payable to the petitioner. Therefore, it would be appropriate to await the decision of the criminal proceedings before the arbitral tribunal is constituted to go into the alleged disputes between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other benefit based upon the said MoU and the license agreement in any manner whatsoever. This interim order, the court noticed, was confirmed by an order dated 21.01.2006; against which no appeal was filed by the Petitioner. The Court, relying upon A Treatise on Law Governing Injunctions by Spelling and Lewis, concluded that this injunction order having not been challenged by the Petitioner has become final and also that this order restrains the invocation of the arbitration agreement contained in Agreement dated 08.05.2004. Therefore, the Court declined to refer the matter to arbitration. Another factor that weighed with Court in dismissing the Petition, it appears, is that the Petitioner did not conform to the procedure concerning appointment of the Arbitrator before filing the Petition under Section 11 (6). 33. This case is clearly distinguishable and hence is not applicable into the facts and circumstances of the present case because of the following reasons: Firstly, there has been no conviction in the present case, though the trial has been going on against the officials of both the parties. Secondly, there is no injunction or any other order restraining the Petitioner from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar its end as to make it inexpedient to stay it in order to give precedence to a prosecution ordered under Section 476. But in this case we are of the view that the civil suits should be stayed till the criminal proceedings have finished." 35. The purpose of the aforesaid solitary rule is to avoid embarrassment to the accused. In contrast, the findings recorded by the arbitral tribunal in its award would not be binding in criminal proceedings. Even otherwise, the Constitution Bench in the aforesaid case has clearly held that no hard and fast rule can be laid down that civil proceedings in all matters ought to be stayed when criminal proceedings are also pending. As I have indicated earlier in case the award is made in favour of the petitioner herein, the respondents will be at liberty to resist the enforcement of the same on the ground of subsequent conviction of either the Chairman or the officials of the contracting parties. 36. It must also notice here that the Petitioners relied upon an earlier order of this court in the case of M/s Nussli (Switzerland) Ltd. (supra). The aforesaid order, however, seems to have been passed on a consensus between the learned counsel for the par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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