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TMI Blog2023 (7) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... In Venture Global Engineering vs. Satyam Computer Services Ltd. [ 2010 (8) TMI 1171 - SUPREME COURT ], the Supreme Court considered a case for setting aside of an award under Explanation 1 to section 34(2)(b)(ii) which provides for the circumstances when an award would be in conflict with the public policy of India and includes the making of the award being induced or affected by fraud or corruption in one of the three sub-clauses under Explanation 1(i) - the Supreme Court in Venture Global held that concealment of relevant and material facts, which should have been disclosed before the arbitrator, would amount to an act of fraud. Russell on Arbitration, 23rd Edition, reiterates the position that an award will be obtained by fraud if the consequence of deliberate concealment is an award in favour of the concealing party. Fraud and corruption - HELD THAT:- The discussion on the definition of fraud and corruption makes it evident that an award-debtor, who seeks unconditional stay of an award, must discharge the onus of establishing a case, prima facie, that the procedure resulting in the making of the award warrants undoing of the award altogether on grounds of fraud or corruption. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court is satisfied, prima facie, that the making of the award was induced or effected by fraud or corruption. 3. According to learned counsel appearing for the petitioner, the manner in which the impugned Award was made fits in within the requirements of the second proviso to section 36(3) which contemplates unconditional stay of an award. Facts urged by the petitioner for unconditional stay of the Award 4. According to counsel, two of the claims of the respondent (claimant in the arbitration) were adjudicated on the basis of an internal note-sheet which recorded inter alia that the respondent had executed approximately Rs. 87.6% of the work which translated to Rs. 18.26 crores. Counsel submits that several of the claims were awarded on the basis of the note-sheet which constitutes about 70% of the awarded sum. Counsel places documents to show that the internal note-sheet was taken on record in the arbitration proceedings in a manner which would fall under the fraud and corruption exception contained in the second proviso to section 36(3). Counsel submits that the document was disallowed from being tendered during the cross-examination of the claimant's witness but was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The first proviso to section 36(3) requires the Court to consider the provisions of the CPC for grant of stay of a money decree where the arbitral award is for payment of money. The second proviso, which is relevant for the present adjudication, was inserted by the Amendment Act of 2021 but with retrospective effect from 23rd October, 2015. The second proviso reads as under: Provided further that where the Court is satisfied that a prima facie case is made out that,- (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, Was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award. Explanation.-For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were (Amendment) Act, 2015 (3 of 2016). 8. The second proviso to section 36(3) hence requires a prima facie case to be made out by the award-debtor and the Court being satisfied of the case made out that the arbitration agreement/contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Macnaghten as : But fraud is infinite in variety; sometimes it is audacious and unblushing; sometimes it pays a sort of homage to virtue, and then it is modest and retiring; it would be honesty itself if it could only afford it. But fraud is fraud all the same; and it is the fraud, not the manner of it, which calls for the interposition of the Court. 13. Directing the gaze to India, section 17 of the Indian Contract Act, 1872, defines fraud as- 17.- Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract- (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent. Explanation.-Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection being found between the concealment and the award. Corruption 18. Stroud's Judicial Dictionary, Fourth Edition defines 'corruption' as; Corruption; in an arbitrator means moral obliquity: it is a false and misleading metaphor to speak of an arbitrator's honest mistake, whether it be of excess or defect as 'constructive corruption . 19. In Bibhuranjan Gupta vs. The King; ILR 1949 2 Cal 440, a learned Single Judge of this Court opined that corruptly was different from dishonestly or fraudulently and explained that, although the user may not be dishonest or fraudulent, it may nevertheless be corrupt if the user is designed to curb or prevent the course of justice. 20. In Emperor vs. Rama Nana Hagavne; AIR 1922 Bom 99, a Division Bench of the Bombay High court, presided over by Chief Justice Macleod, also differentiated between the words corruptly and dishonestly as used in section 24 of the Indian Penal Code, 1860 but included the intention of causing wrongful gain or wrongful loss. The Court dwelt on using false evidence and defined corrupt as anything which has been changed so as to become putrid, vitiated, tainted and further opined that bribery is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n advantage over the award-debtor. The concealment must also amount to deception such as the award-debtor being led to believe a certain set of facts which the award-holder knew to be false and untrue at the time of presenting the facts. The arbitrator's role in the making of the award is the other limb which must be established, prima facie, as an additional/alternative argument on fraud or corruption. 24. Fraud, as is commonly understood, has the potential to vitiate and undo all attendant and consequent happenings as a ripple-effect of unraveling the layers of cover and concealment of the truth. The fraud must be plain and indefensible on the face of the record so that the Court is not required to venture into the depths of the facts presented. The Court must be alarmed and taken aback, even at first blush, of the extent of deception and cunning. The act must be so flagrant so as to undo and upend the award on the egregiousness alone. 25. In a similar vein, the expression corruption , as used in the second proviso to section 36(3), would not only be a case of the arbitrator being dishonest. It would require something of a moral turpitude or an unjust departure from ethical s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n permitted on the earlier occasions. The arbitrator thus concluded that there was no dispute as to the existence of the document and that the petitioner/award-debtor was hesitant to disclose the document. 30. Significantly, the impugned Award records that the Arbitrator allowed the claimant/respondent award-holder to disclose the photocopy of the document subject to the petitioners verifying the Progress Report from the copy disclosed and that the petitioner also filed a set of objections with regard to the relevance of the document which have been dealt with in the impugned Award. The Arbitrator has come to a specific finding with regard to the evidentiary value of the document. 31. This Court refrains from any further reference to the impugned Award since that would be a matter to be considered for setting aside of the Award. 32. The only question which arises from the above is whether the petitioner/ award-holder was kept in the dark as to the note-sheet being taken on record. Admittedly, this is not so, as the petitioner's advocate-on-record was present on the date when a copy of the note sheet was taken on record. It is also incorrect to even suggest that the petitioner d ..... 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