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Sunday, January 26, 2014

Arbitration & Conciliation Act - Facilitation Deed - Allegations of Fraud - invoke of arbitration clause - agreement was rescinded -court can not grant injunction against the invoke of arbitration clause and arbitration proceedings- suit filed as the Facilitation deed was rescinded on the ground of fraud, the appellant was not entitled to invoke arbitration clause - Single bench refused to grant interim injunction - in appeal Division Bench granted interim injunction - Apex court held that single bench is correct and set aside the orders of Division Bench on the Ground that if the court finds the fraud played on agreement , then only court can decline to refer for arbitration but not on mere allegation as per sec. 45 read with clause 9 of agreement = World Sport Group (Mauritius) Ltd. … Appellants Versus MSM Satellite (Singapore) Pte. Ltd. … Respondent = 2014 ( January - Vol - 1) Judis.nic.in/ S.C./ file name =41175

Arbitration & Conciliation Act - Facilitation Deed - Allegations of Fraud -  invoke of arbitration clause - agreement was rescinded -court can not grant injunction against the  invoke of arbitration clause and arbitration proceedings- suit filed as the Facilitation deed was rescinded on the ground of fraud, the appellant was not entitled to invoke arbitration clause - Single bench refused to grant interim injunction - in appeal Division Bench granted interim injunction - Apex court held that single bench is correct and set aside the orders of Division Bench on the Ground that  if the court finds the fraud played on agreement , then only court can decline to refer for arbitration but not on mere allegation as per sec. 45 read with clause 9 of agreement =
whether the Division  Bench  of
the Bombay High Court could have passed the order of injunction  restraining
the arbitration at Singapore between the parties. =

On  30.06.2010,  the
respondent filed a second suit, Suit No.1828  of  2010,  before  the  Bombay
High Court against the appellant for inter alia a declaration  that  as  the
Facilitation Deed stood rescinded, the appellant was not entitled to  invoke
the arbitration clause in the Facilitation Deed.  
The respondent also  filed
an  application  for  temporary  injunction  against  the   appellant   from
continuing with the  arbitration  proceedings  commenced  by  the  appellant
under the aegis of ICC.

6.    On 09.08.2010, the learned Single  Judge  of  the  Bombay  High  Court
dismissed the application for temporary injunction of the respondent  saying
that it would be for the arbitrator to  consider  whether  the  Facilitation
Deed was void on  account  of  fraud  and  misrepresentation  and  that  the
arbitration must, therefore, proceed and the Court could  not  intervene  in
matters governed by the arbitration clause.  
The respondent  challenged  the
order of the learned Single Judge before the Division Bench  of  the  Bombay
High Court and by the impugned order, the Division Bench of the Bombay  High
Court allowed the appeal, set aside the order of the  learned  Single  Judge
and passed an order of temporary injunction restraining the  arbitration  by
ICC.  
Aggrieved, the appellant has filed this appeal. =


We are unable to accept the first contention of Mr.  Venugopal  that
as Clause 9 of the Facilitation  Deed  provides  that  any  party  may  seek
equitable relief in a court of competent jurisdiction in Singapore, or  such
other court that may have jurisdiction over the  parties,  the  Bombay  High
Court  had  no  jurisdiction  to  entertain  the  suit  and   restrain   the
arbitration proceedings at Singapore because of the principle of  Comity  of
Courts.= 

“Judicial comity.  The principle in accordance with which  the  courts

      of one state or jurisdiction will give effect to the laws and judicial
      decisions of another, not as  a  matter  of  obligation,  but  out  of
      deference and respect.”
In the present case no decision  of  a  court
of foreign country or no law of a foreign country has been cited  on  behalf
of the appellant to contend that the courts in India  out  of  deference  to
such  decision  of  the  foreign  court  or  foreign  law  must  not  assume
jurisdiction to restrain  arbitration  proceedings  at  Singapore.
 On  the
other hand, as has been rightly submitted by Mr. Subramanium, under  Section
9 of the CPC, the courts in India have jurisdiction to try all  suits  of  a
civil nature excepting suits of which  cognizance  is  either  expressly  or
impliedly  barred.   Thus,  the  appropriate  civil  court  in   India   has
jurisdiction to entertain the suit and pass appropriate orders in  the  suit
by virtue of Section 9 of the CPC and Clause  9  of  the  Facilitation  Deed
providing that courts in Singapore or any other  court  having  jurisdiction
over the parties can be approached for equitable relief could not  oust  the
jurisdiction of the appropriate civil court conferred by Section  9  of  the
CPC. 
 “CHAPTER I
                         NEW YORK CONVENTION AWARDS
      44.  Definition.  In  this  Chapter,  unless  the  context   otherwise
      requires, “foreign award”  means  an  arbitral  award  on  differences
      between  persons  arising  out   of   legal   relationships,   whether
      contractual or not, considered as commercial under the law in force in
      India, made on or after the 11th day of October, 1960 -


        (a) in pursuance of an agreement  in  writing  for  arbitration  to

           which the Convention set forth in the  First  Schedule  applies,
           and


        (b) in one of such territories as  the  Central  Government,  being

           satisfied that reciprocal provisions  have  been  made  may,  by
           notification in the Official Gazette, declare to be  territories
           to which the said Convention applies.


      45. Power of judicial authority  to  refer  parties  to  arbitration.-

      Notwithstanding anything contained in Part I or in the Code  of  Civil
      Procedure, a judicial authority, when seized of an action in a  matter
      in respect of which the parties have made an agreement referred to  in
      section 44, shall, at the request of one of the parties or any  person
      claiming through or under  him,  refer  the  parties  to  arbitration,
      unless it finds that the said agreement is null and void,  inoperative
      or incapable of being performed.”
It will be clear from clauses 1, 2 and 3 of the New York Convention  as  set
out in the First Schedule of the Act  that  the  agreement  referred  to  in
Section 44 of the Act is an agreement in writing  under  which  the  parties
undertake to submit to arbitration all or any differences which have  arisen
or which may arise between them.  Thus, the court will decline to refer  the
parties to arbitration only if it finds that the  arbitration  agreement  is
null and void, inoperative or incapable of being performed. =

Section  45
of the Act does not provide that the court will not  refer  the  parties  to
arbitration if the allegations of fraud have to be inquired  into.   
Section 45 provides that only if the court finds that the arbitration  agreement  is
null and void, inoperative or incapable of being performed, it will  decline
to refer the parties to arbitration.

33.     The Division Bench of the High court has  further  held  that  since
the earlier  suit  (Suit  No.1869  of  2010)  was  pending  in  court  since
25.06.2010 and that suit was  inter-connected  and  inter-related  with  the
second suit (Suit No.1828 of 2010), the court could not allow  splitting  of
the matters and disputes to be decided by the court in India  in  the  first
suit and by arbitration abroad in regard  to  the  second  suit  and  invite
conflicting verdicts on the issues which are inter-related.  
This  reasoning
adopted by the Division Bench of the  Bombay  High  Court  in  the  impugned
judgment is alien to the provisions of Section 45 of the Act which does  not
empower the court to decline a reference to arbitration on the  ground  that
another suit on the same issue is pending in the Indian court.

34.     We make it clear that 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.  
To quote Redfern And Hunter  On  International  Arbitration
(Fifth Edition page 134 para 2.141)
      “Where allegations of fraud in the procurement  or  performance  of  a
      contract are alleged, there appears to be no reason for  the  arbitral
      tribunal to decline jurisdiction.”

Hence, it has been rightly held by the learned Single Judge  of  the  Bombay
High Court that  it  is  for  the  arbitrator  to  decide  this  dispute  in
accordance with the arbitration agreement.

35.   For the  aforesaid  reasons,  we  allow  the  appeal,  set  aside  the
impugned judgment of the Division Bench of the High Court  and  restore  the
order of the learned Single Judge.  The parties shall bear their own  costs.

   2014 ( January - Vol - 1) Judis.nic.in/ S.C./ file name  =41175
                              
A.K. PATNAIK, FAKKIR MOHAMED IBRAHIM KALIFULLA

                    Reportable

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL No.   895  OF 2014
                (Arising out of S.L.P. (C) No. 34978 of 2010)

World Sport Group (Mauritius) Ltd.                  … Appellants

                                   Versus


MSM Satellite (Singapore) Pte. Ltd.                 … Respondent





                               J U D G M E N T

A. K. PATNAIK, J.



      Leave granted.


   2. This is an appeal against the order dated 17.09.2010 of  the  Division
      Bench of the Bombay High Court in Appeal (Lodging) No.534 of 2010.

Facts:

   3. The facts very briefly are that
on 30.11.2007 the Board of Control for
      Cricket in India (for short ‘BCCI’) invited tenders  for  IPL  (Indian
      Premier League) Media Rights for a period of ten years  from  2008  to
      2017 on a worldwide basis.
Amongst the tenders submitted,
the bid  of
      World Sports Group India (for short ‘WSG India’) was accepted by BCCI.
     
By a pre-bid arrangement, however, the  respondent  was  to  get  the
      media rights for the sub-continent for the period from 2008  to  2010.
   
Accordingly, on 21.01.2008 BCCI and  the  respondent  entered  into  a
      Media Rights License Agreement for the period from 2008 to 2012 for  a
      sum of US$274.50 million.   
After  the  first  IPL  season,  the  BCCI
      terminated  the  agreement  dated  21.01.2008  between  BCCI  and  the
      respondent for the Indian  sub-continent  and  commenced  negotiations
      with WSG India.  
On 14.03.2009, the respondent filed a petition  under
      Section 9 of the Arbitration and Conciliation  Act,  1996  (for  short
      ‘the Act’) against the BCCI before the Bombay High Court  praying  for
      injunction against the BCCI from  acting  on  the  termination  letter
      dated 14.03.2009 and for preventing  BCCI  from  granting  the  rights
      under the agreement dated 21.01.2008 to any third party.  
Pursuant  to
      the negotiations between BCCI and WSG  India,  BCCI  entered  into  an
      agreement with the appellant  whereunder  the  media  rights  for  the
      Indian sub-continent for the period 2009 to 2017 was  awarded  to  the
      appellant for a value of Rs.4,791.08 crores.
To  operate  the  media
      rights in India, the appellant was required  to  seek  a  sub-licensee
      within seventy two hours.   
Though,  this  time  period  was  extended
      twice, the appellant was not able to get a sub-licensee.   
Thereafter,
      the appellant claimed to have allowed media rights in  India  to  have
      lapsed and then facilitated on 25.03.2009, a new Media Rights  License
      Agreement between the BCCI and the  respondent  for  the  Indian  sub-
      continent for the same contract value of Rs.4,791.08 crores.  
BCCI and WSG India, however, were to continue with the Rest of the World  media
      rights.

   4. On 25.03.2009, the appellant and the respondent also executed the Deed
      for Provision of Facilitation Services  (hereinafter  referred  to  as
      ‘the Facilitation Deed’) whereunder the respondent was to pay a sum of
      Rs.425 crores to the appellant as facilitation fees.
Clause 9 of  the
      Facilitation Deed dated  25.03.2009  between  the  appellant  and  the
      respondent was titled ‘Governing Law’ and read as follows:

   “9. GOVERNING LAW
       This Deed shall be governed by and construed in accordance  with  the
       laws  of  England  and  Wales,  without  regard  to  choice  of   law
       principles. All actions or proceedings arising  in  connection  with,
       touching upon or relating to this Deed, the breach thereof and/or the
       scope of the provisions of this Section shall  be  submitted  to  the
       International Chamber of  Commerce  (the  “Chamber”)  for  final  and
       binding arbitration under its Rules of Arbitration,  to  be  held  in
       Singapore, in the English language before  a  single  arbitrator  who
       shall be a retired judge  with  at  least  ten  years  of  commercial
       experience. The arbitrator shall be selected by mutual  agreement  of
       the Parties, or, if the Parties cannot agree, then by striking from a
       list of arbitrators supplied by  the  Chamber.  If  the  Parties  are
       unable to agree on the arbitrator, the Chamber shall choose  one  for
       them. The arbitration shall be a confidential proceeding,  closed  to
       the general public. The arbitrator  shall  assess  the  cost  of  the
       arbitration against the losing party.  In  addition,  the  prevailing
       party in any arbitration or legal proceeding relating  to  this  Deed
       shall be entitled to  all  reasonable  expenses  (including,  without
       limitation,  reasonable   attorney’s   fees).   Notwithstanding   the
       foregoing, the arbitrator may require that such fees be borne in such
       other manner as the arbitrator determines is required  in  order  for
       this arbitration provision to be enforceable  under  applicable  law.
       The arbitrator shall issue a written opinion  stating  the  essential
       findings and conclusions upon which the arbitrator’s award is  based.
       The arbitrator shall have the power to  enter  temporary  restraining
       orders and preliminary and permanent injunctions. No party  shall  be
       entitled or permitted to commence or maintain any action in  a  court
       of law with respect to any matter in dispute until such matter  shall
       have been submitted to arbitration as herein provided and  then  only
       for the enforcement of the  arbitrator’s  award;  provided,  however,
       that prior to the appointment  of  the  arbitrator  or  for  remedies
       beyond the jurisdiction of an arbitrator, at any time, any party  may
       seek equitable  relief  in  a  court  of  competent  jurisdiction  in
       Singapore, or such other court that may have  jurisdiction  over  the
       Parties, without thereby waiving its  right  to  arbitration  of  the
       dispute or controversy under this section. 

THE PARTIES  HEREBY  WAIVE
       THEIR RIGHT TO JURY TRIAL WITH  RESPECT  TO  ALL  CLAIMS  AND  ISSUES
       ARISING UNDER, IN CONNECTION WITH, TOUCHING UPON OR RELATING TO  THIS
       DEED, THE BREACH THEREOF AND/OR THE SCOPE OF THE PROVISIONS  OF  THIS
       SECTION, WHETHER SOUNDING IN CONTRACT  OR  TORT,  AND  INCLUDING  ANY
       CLAIM FOR FRAUDULENT INDUCEMENT THEREOF.”


5.    The respondent made three  payments  totaling  Rs.125  crores  to  the
appellant under the Facilitation Deed during  2009  and  did  not  make  the
balance payment.
Instead,  on  25.06.2010,  the  respondent  wrote  to  the
appellant rescinding the  Facilitation  Deed  on  the  ground  that  it  was
voidable on account of misrepresentation  and  fraud.  
On  25.06.2010,  the
respondent also filed Suit No.1869 of 2010  for  inter  alia  a  declaration
that the Facilitation Deed was  void  and  for  recovery  of  Rs.125  crores
already paid to the appellant.  
On 28.06.2010, the  appellant  acting  under
Clause 9 of the Facilitation Deed sent a  request  for  arbitration  to  ICC
Singapore and the ICC issued a notice to the respondent to file  its  answer
to the request for  arbitration.   
In  the  meanwhile,  on  30.06.2010,  the
respondent filed a second suit, Suit No.1828  of  2010,  before  the  Bombay
High Court against the appellant for inter alia a declaration  that  as  the
Facilitation Deed stood rescinded, the appellant was not entitled to  invoke
the arbitration clause in the Facilitation Deed.  
The respondent also  filed
an  application  for  temporary  injunction  against  the   appellant   from
continuing with the  arbitration  proceedings  commenced  by  the  appellant
under the aegis of ICC.

6.    On 09.08.2010, the learned Single  Judge  of  the  Bombay  High  Court
dismissed the application for temporary injunction of the respondent  saying
that it would be for the arbitrator to  consider  whether  the  Facilitation
Deed was void on  account  of  fraud  and  misrepresentation  and  that  the
arbitration must, therefore, proceed and the Court could  not  intervene  in
matters governed by the arbitration clause.  
The respondent  challenged  the
order of the learned Single Judge before the Division Bench  of  the  Bombay
High Court and by the impugned order, the Division Bench of the Bombay  High
Court allowed the appeal, set aside the order of the  learned  Single  Judge
and passed an order of temporary injunction restraining the  arbitration  by
ICC.  
Aggrieved, the appellant has filed this appeal.

Contentions on behalf of the appellant:

7.     Mr.  K.K.  Venugopal,  learned  senior  counsel  for  the  appellant,
submitted that the Division Bench of the High  Court  failed  to  appreciate
that the Bombay  High  Court  had  no  jurisdiction  to  pass  an  order  of
injunction  restraining  a  foreign  seated  international  arbitration   at
Singapore between the parties, who were not residents  of  India.
In  this
context, he referred to Clause 9 of the Facilitation Deed  which  stipulated
that  any  party  may  seek  equitable  relief  in  a  court  of   competent
jurisdiction in Singapore, or such other court that  may  have  jurisdiction
over the parties.
He submitted that on the principle of Comity  of  Courts,
the Bombay High Court should have refused to interfere  in  the  matter  and
should have allowed  the  parties  to  resolve  their  dispute  through  ICC
arbitration,  subject  to  the  jurisdiction  of  the  Singapore  courts  in
accordance with Clause 9 of the Facilitation Deed.

8.    Mr. Venugopal next submitted that  the  Division  Bench  of  the  High
Court failed to appreciate that under Section  45  of  the  Act,  the  Court
seized of an action in a matter in respect of which the  parties  have  made
an agreement referred  to  in  Section  44  has  to  refer  the  parties  to
arbitration, unless it finds that the agreement referred to  in  Section  44
is  null  and  void,  inoperative  or  incapable  of  being  performed.
 He
submitted that the agreement referred to in Section 44 of  the  Act  is  ‘an
agreement in writing for  arbitration’  and,  therefore,  unless  the  Court
finds that the agreement in  writing  for  arbitration  is  null  and  void,
inoperative or incapable of being performed, the Court will not entertain  a
dispute covered by the arbitration agreement and refer the  parties  to  the
arbitration.
In support of this submission, he relied on  the  decision  of
this Court in Chloro Controls India Private Limited  v.  Seven  Trent  Water
Purification Inc. & Ors.  [(2013) 1 SCC 641].

9.    Mr. Venugopal submitted that the Division Bench  of  the  High  Court,
instead of examining whether the agreement in writing  for  arbitration  was
null and void, inoperative or incapable of being performed,  has  held  that
the entire Facilitation Deed was vitiated  by  fraud  and  misrepresentation
and was, therefore, void.  
He vehemently  submitted  that  it  was  for  the
arbitrator to decide whether the Facilitation Deed was void  on  account  of
fraud and misrepresentation as has been rightly held by the  learned  Single
Judge and it was not for the Court to pronounce on whether the  Facilitation
Deed was void on account of fraud and  misrepresentation.   He  referred  to
Article 6(4) of the ICC Rules of  Arbitration  which  permits  the  Arbitral
Tribunal to continue to exercise  jurisdiction  and  adjudicate  the  claims
even if the main contract is alleged to be null  and  void  or  non-existent
because the arbitration clause is an  independent  and  distinct  agreement.
He submitted that this principle of Kompetenz Kompetenz has been  recognized
in Section 16  of  the  Act  under  which  the  Arbitral  Tribunal  has  the
competence to rule on its own jurisdiction  and  on  this  point  relied  on
National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. [(2009) 1 SCC  267]
and Reva Electric Car Company Private Ltd. v.  Green  Mobil  [(2012)  2  SCC
93].
He submitted that as a corollary to this principle, Courts  have  also
held that unless the arbitration clause itself, apart  from  the  underlying
contract, is  assailed  as  vitiated  by  fraud  or  misrepresentation,  the
Arbitral Tribunal will have jurisdiction to decide all issues including  the
validity and scope of the arbitration agreement.  He submitted that  in  the
present case, the arbitration clause itself was not assailed as vitiated  by
fraud or misrepresentation.  In support of this argument, he relied  on  the
decision of the House of Lords in  Premium  Nafta  Products  Ltd.   v.  Fili
Shipping Company Ltd. & Ors. [2007] UKHL 40], the decision  of  the  Supreme
Court of United States in Buckeye Check Cashing, Inc. v.  John  Cardegna  et
al [546 US 440 (2006)] and the decision of this  Court  in  Branch  Manager,
Magma Leasing and Finance Ltd. & Anr. v. Potluri Madhavilata & Anr.  [(2009)
10 SCC 103].

10.   Mr. Venugopal submitted that the Division  Bench  of  the  High  Court
relied on the decision in N.  Radhakrishnan  v.  Maestro  Engineers  &  Ors.
[(2010) 1 SCC 72] to hold that serious allegations  of  fraud  can  only  be
enquired by a Court and not by an arbitrator, but the Division Bench  failed
to appreciate that in N. Radhakrishnan v. Maestro Engineers &  Ors.  (supra)
this Court relied on Abdul Kadir Shamsuddin Bubere v. Madhav  Prabhakar  Oak
[AIR 1962 SC 406] in which it was observed that it is only a  party  against
whom a fraud is alleged who can  request  the  Court  to  inquire  into  the
allegations of fraud instead of allowing the arbitrator  to  decide  on  the
allegations of fraud.  In the  present  case,  the  respondent  has  alleged
fraud against the appellant and thus it was for  the  appellant  to  make  a
request to the Court to decide  on  the  allegations  of  fraud  instead  of
referring the same to the arbitrator, and no such request has been  made  by
the appellant.
He further submitted that in any case the judgment  of  this
Court in N. Radhakrishnan v. Maestro Engineers & Ors. (supra)  was  rendered
in the context of domestic arbitration in reference  to  the  provisions  of
Section 8 of the Act.  
He submitted that the language of Section 45  of  the
Act,  which  applies  to  an  international  arbitration,  is  substantially
different from the language of Section 8 of the Act and  it  will  be  clear
from the language of Section 45 of  the  Act  that  unless  the  arbitration
agreement is null and void, inoperative or  incapable  of  being  performed,
the parties will have to be referred to arbitration by the  Court.   
In  the
present  case,  the  respondent  has  not  made  out  that  the  arbitration
agreement is null and void, inoperative or incapable of being performed.

11.   Mr. Venugopal submitted that the High Court  has  taken  a  view  that
Clause 9 forecloses an open trial in a court of law  except  to  the  extent
permitted therein and the parties have to necessarily submit  themselves  to
a confidential proceeding  which  is  closed  to  the  general  public.   He
submitted that the Bombay High Court thus appears to have held  that  Clause
9 is opposed to public policy and, in particular, Sections 23 and 28 of  the
Indian Contract Act, 1872.  He submitted that in any  case  the  arbitration
agreement contained in Clause 9 of the Facilitation Deed cannot be  held  to
be opposed to public policy and void under Sections 23 and 28 of the  Indian
Contract Act, 1872.  This will be clear from Exception 1 of  Section  28  of
the Indian Contract Act, 1872, which says that the section shall not  render
illegal a contract, by which two or more  persons  agree  that  any  dispute
which may arise between them in respect of any subject or class of  subjects
shall be referred to arbitration and that only the amount  awarded  in  such
arbitration shall be recoverable in respect of the dispute so referred.   He
explained that under the American Law, in a suit for common  law  where  the
value of claim is more than US$20, the right to jury trial is preserved  and
this applies even in relation to claims for breach of contract and for  this
reason, the parties made a provision in Clause 9 of  the  Facilitation  Deed
waiving their right to jury trial with respect  to  all  claims  and  issues
arising under,  in  connection  with,  touching  upon  or  relating  to  the
Facilitation Deed.  He submitted that this provision  in  Clause  9  of  the
Facilitation Deed cannot,  therefore,  be  held  to  be  opposed  to  public
policy.

12.   Mr. Venugopal next  submitted  that  the  crux  of  the  case  of  the
respondent is set out in its letter dated 25.06.2010  to  the  appellant  in
which it was alleged that ‘in  view  of  the  false  misrepresentations  and
fraud played by WSGM the deed is voidable at the option of  our  client  and
thus our client rescinds the deed with immediate effect’.
 In  other  words,
the respondent’s case is that it was induced to enter into the  Facilitation
Deed on account of the misrepresentation by the appellant  and  was  led  to
believe that it was paying the facilitation fees to the appellant  to  allow
the rights of the appellant under an alleged agreement dated  23.03.2009  to
lapse,  but  the  respondent  subsequently  discovered  that  there  was  no
agreement dated 23.03.2009 and the rights of the appellant had  come  to  an
end on 24.03.2009.   He  submitted  that  the  appellant  has  denied  these
allegations of the respondent in its  affidavit-in-reply  filed  before  the
Bombay High Court and that there was no false representation  and  fraud  as
alleged by the respondent.  He submitted  that  the  Facilitation  Deed  was
executed by the senior  executives  of  the  parties  and  in  the  case  of
respondent, it was signed  by  Michael  Grindon,  President,  International,
Sony Picture Television, and the appellant and the  respondent  had  entered
into the Facilitation Deed after consulting their sports media  experts  and
after a lot of negotiations. He submitted that in fact a Press  Release  was
issued by the respondent on 23.04.2010, which will go  to  show  that  there
was no misrepresentation and fraud by the appellant before the  Facilitation
Deed was signed by the parties, and thus the entire case of  the  respondent
that the Facilitation Deed was vitiated by misrepresentation  and  fraud  is
false.

13.   Mr. Venugopal finally  submitted  that  it  will  be  clear  from  the
language of the letter dated 25.06.2010 of the respondent to  the  appellant
that according to the respondent the Facilitation Deed was voidable  at  the
option of the respondent.  He submitted that under Section 45  of  the  Act,
the Court will have to refer the parties to the arbitration unless it  finds
that the arbitration agreement is  ‘null  and  void’.   He  argued  that  an
agreement which is voidable at the option of one of the parties is  not  the
same as the agreement which is void and, therefore, the  Division  Bench  of
the High Court should have referred the parties to  arbitration  instead  of
restraining the arbitration.  According to Mr.  Venugopal,  this  is  a  fit
case in which this  Court  should  set  aside  the  impugned  order  of  the
Division bench of the High Court  and  restore  the  order  of  the  learned
Single Judge of the High Court.

Contentions on behalf of the respondent:
14.  In reply, Mr. Gopal Subramanium, learned senior counsel  appearing  for
    the respondent, submitted that the Division Bench  of  the  Bombay  High
    Court has rightly restrained the arbitration proceedings under the aegis
    of ICC as the Facilitation Deed, which  also  contains  the  arbitration
    agreement in Clause 9, is void because of fraud and misrepresentation by
    the appellant.  He submitted that Section 45 of the Act makes  it  clear
    that the Court  will  not  refer  the  parties  to  arbitration  if  the
    arbitration agreement is null and  void,  inoperative  or  incapable  of
    being performed and as the  respondent  has  taken  the  plea  that  the
    Facilitation Deed, which contained the arbitration  agreement,  is  null
    and void on account of misrepresentation and fraud, the Court will  have
    to decide  whether  the  Facilitation  Deed  including  the  arbitration
    agreement in Clause 9 was void on account of fraud and misrepresentation
    by the appellant.  He submitted that the respondent filed the first suit
    in the Bombay High Court  (Suit  No.1869  of  2010)  for  declaring  the
    Facilitation Deed as null and void but in the said suit,  the  appellant
    did not file a written statement  and  instead  issued  the  notice  for
    arbitration only to frustrate the first suit and  in  the  circumstances
    the respondent was compelled to file the second suit  (Suit  No.1828  of
    2010) for an injunction restraining the arbitration.

15.   Mr.  Subramanium submitted  that  Section  9  of  the  Code  of  Civil
    Procedure,  1908  (for  short  ‘the  CPC’)  confers   upon   the   court
    jurisdiction to try all  civil  suits  except  suits  which  are  either
    expressly or impliedly barred.  He submitted that the Bombay High Court,
    therefore, had the jurisdiction to try  both  the  first  suit  and  the
    second suit and there was no express or implied bar in Section 45 of the
    Act restraining the Bombay High Court to try  the  first  suit  and  the
    second suit.  He submitted that in India as well as in  England,  Courts
    have power to issue injunctions to restrain parties from proceeding with
    arbitration proceedings  in  foreign  countries.   In  support  of  this
    submission, he relied on  V.O.  Tractoroexport,  Moscow  v.  Tarapore  &
    Company and Anr. [(1969) 3 SCC 562] and Oil and Natural  Gas  Commission
    v. Western Company of North America [(1987) 1 SCC 496].  He also  relied
    on Russel on Arbitration, para 7-056, 7-058, and Claxton Engineering  v.
    Txm olaj – es gaz Kutao Ktf [2011] EWHC 345 (COMM.).

16.   Mr. Subramanium relying on  the  decision  of  this  Court  in  Chloro
    Controls India Private Limited v. Seven Trent Water Purification Inc.  &
    Ors.  (supra) submitted that Section 45 of the Act casts  an  obligation
    on the court to determine the validity of the agreement at the threshold
    itself because this is an issue which goes to the root of the matter and
    a decision on this issue will prevent a futile exercise  of  proceedings
    before the arbitrator.  He submitted that under Section 45  of  the  Act
    the  Court  is  required  to  consider  not  only  a  challenge  to  the
    arbitration agreement but also a serious challenge  to  the  substantive
    contract containing the arbitration agreement.  He cited the decision of
    this Court in SMS Tea Estates (P) Ltd. v. Chandmari  Tea  Co.  (P)  Ltd.
    [(2011) 14 SCC 66] in support of this argument.  He submitted  that  the
    contention on behalf of the appellant that the Court  has  to  determine
    only whether the arbitration agreement contained in the  main  agreement
    is void is, therefore, not correct.

17.  Mr. Subramanium next submitted  that  in  cases  where  allegations  of
    fraud are prima facie made out, the judicial trend in India has been  to
    have them adjudicated by the Court.  In this context, he referred to the
    decisions of this Court in  Abdul  Kadir  Shamsuddin  Bubere  v.  Madhav
    Prabhakar Oak (supra),  Haryana  Telecom  Ltd.  v.  Sterlite  Industries
    (India) Ltd.  [(1999)  5  SCC  688]  and  N.  Radhakrishnan  v.  Maestro
    Engineers & Ors. (supra).
In reply to the submission of  Mr.  Venugopal
    that it was only the parties against whom the allegations are  made  who
    can  insist  on  the  allegations  being  decided  by  the  Court,   Mr.
    Subramanium submitted that in the decision of the Madras High  Court  in
    H.G. Oomor Sait v. O Aslam Sait [(2001) 3 CTC 269 (Mad)] referred to  in
    N. Radhakrishnan v. Maestro Engineers & Ors. (supra) the  situation  was
    reverse.

18.  Mr. Subramanium next submitted that the facts in this case prima  facie
    establish that a grave fraud was played by the appellant not  only  upon
    the respondent but also on the BCCI.  He argued  that  the  Facilitation
    Deed ultimately deals with media rights belonging to the BCCI and it has
    been held by this Court in M/s Zee Tele Films Ltd. & Anr.  v.  Union  of
    India & Ors. [AIR 2005  SC  2677]  that  BCCI  is  a  public  body.   He
    submitted that  the  Division  Bench  of  the  Bombay  High  Court  has,
    therefore, rightly taken the view that the disputes in this case  cannot
    be kept outside the purview of the Indian Courts and if  arbitration  is
    allowed to go on without BCCI, the interest of BCCI  will  be  adversely
    affected.  He submitted that having regard to  the  magnitude  of  fraud
    alleged in the present  case,  the  disputes  were  incapable  of  being
    arbitrated.  Relying on Booz  Allen  &  Hamilton  v.  SBI  Home  Finance
    [(2011) 5 SCC 532], Haryana Telecom Ltd. v. Sterlite Industries  (India)
    Ltd. (Supra), India Household and Healthcare Ltd. v.  LG  Household  and
    Healthcare Ltd. [(2007) 5 SCC 510]   and  N.  Radhakrishnan  v.  Maestro
    Engineers & Ors. (supra), he submitted that such  allegations  of  fraud
    can only be inquired into by the court and not by the arbitrator.

Findings of the Court:

19.   The question that we have to decide is whether the Division  Bench  of
the Bombay High Court could have passed the order of injunction  restraining
the arbitration at Singapore between the parties.   As  various  contentions
have been raised by Mr. Venugopal, learned counsel  for  the  appellant,  in
support of the case of the appellant that the Division Bench of  the  Bombay
High Court could not have passed the order  of  injunction  restraining  the
arbitration at Singapore,  we  may  deal  with  each  of  these  contentions
separately and record our findings.  While recording our findings,  we  will
also deal with the submissions made by Mr. Gopal Subramanium  on  behalf  of
respondent in reply to the contentions  of  Mr.  Venugopal.   We  will  also
consider the correctness of the  findings  of  the  Division  Bench  of  the
Bombay High Court separately.

20.     We are unable to accept the first contention of Mr.  Venugopal  that
as Clause 9 of the Facilitation  Deed  provides  that  any  party  may  seek
equitable relief in a court of competent jurisdiction in Singapore, or  such
other court that may have jurisdiction over the  parties,  the  Bombay  High
Court  had  no  jurisdiction  to  entertain  the  suit  and   restrain   the
arbitration proceedings at Singapore because of the principle of  Comity  of
Courts.  In Black’s Law Dictionary, 5th Edition, Judicial Comity,  has  been
explained in the following words:


      “Judicial comity.  The principle in accordance with which  the  courts
      of one state or jurisdiction will give effect to the laws and judicial
      decisions of another, not as  a  matter  of  obligation,  but  out  of
      deference and respect.”



Thus, what is meant by the principle of  “comity”  is  that  courts  of  one
state or jurisdiction will give effect to the laws  and  judicial  decisions
of another state or jurisdiction, not as a matter of obligation but  out  of
deference and mutual respect.
In the present case no decision  of  a  court
of foreign country or no law of a foreign country has been cited  on  behalf
of the appellant to contend that the courts in India  out  of  deference  to
such  decision  of  the  foreign  court  or  foreign  law  must  not  assume
jurisdiction to restrain  arbitration  proceedings  at  Singapore.
 On  the
other hand, as has been rightly submitted by Mr. Subramanium, under  Section
9 of the CPC, the courts in India have jurisdiction to try all  suits  of  a
civil nature excepting suits of which  cognizance  is  either  expressly  or
impliedly  barred.   Thus,  the  appropriate  civil  court  in   India   has
jurisdiction to entertain the suit and pass appropriate orders in  the  suit
by virtue of Section 9 of the CPC and Clause  9  of  the  Facilitation  Deed
providing that courts in Singapore or any other  court  having  jurisdiction
over the parties can be approached for equitable relief could not  oust  the
jurisdiction of the appropriate civil court conferred by Section  9  of  the
CPC.
We find that in para 64 of the plaint in Suit No.1828  of  2010  filed
before the Bombay High Court by  the  respondent,  it  is  stated  that  the
Facilitation Deed in which the arbitration clause is  incorporated  came  to
be executed by the defendant at Mumbai and the fraudulent inducement on  the
part  of  the  defendant  resulting  in  the  plaintiff  entering  into  the
Facilitation  Deed  took  place  in  Mumbai  and  the  rescission   of   the
Facilitation Deed on the ground that it was induced by  fraud  of  defendant
has also been issued from Mumbai.  Thus, the cause of action for filing  the
suit arose within the jurisdiction of the Bombay High Court and  the  Bombay
High Court had territorial jurisdiction to entertain the suit under  Section
20 of the CPC.

21.   Any civil court in India which entertains  a  suit,  however,  has  to
follow the mandate of the legislature in Sections 44 and 45 in Chapter I  of
Part II of the Act, which are quoted hereinbelow:


                                 “CHAPTER I
                         NEW YORK CONVENTION AWARDS
      44.  Definition.  In  this  Chapter,  unless  the  context   otherwise
      requires, “foreign award”  means  an  arbitral  award  on  differences
      between  persons  arising  out   of   legal   relationships,   whether
      contractual or not, considered as commercial under the law in force in
      India, made on or after the 11th day of October, 1960 -


        (a) in pursuance of an agreement  in  writing  for  arbitration  to
           which the Convention set forth in the  First  Schedule  applies,
           and


        (b) in one of such territories as  the  Central  Government,  being
           satisfied that reciprocal provisions  have  been  made  may,  by
           notification in the Official Gazette, declare to be  territories
           to which the said Convention applies.


      45. Power of judicial authority  to  refer  parties  to  arbitration.-
      Notwithstanding anything contained in Part I or in the Code  of  Civil
      Procedure, a judicial authority, when seized of an action in a  matter
      in respect of which the parties have made an agreement referred to  in
      section 44, shall, at the request of one of the parties or any  person
      claiming through or under  him,  refer  the  parties  to  arbitration,
      unless it finds that the said agreement is null and void,  inoperative
      or incapable of being performed.”



The language of Section 45 of the Act  quoted  above  makes  it  clear  that
notwithstanding anything contained in  Part  I  or  in  the  Code  of  Civil
Procedure, a judicial authority, when seized of an action  in  a  matter  in
respect of which the parties have made an agreement referred to  in  Section
44, shall, at the request of one of  the  parties  or  any  person  claiming
through or under him, refer the parties  to  arbitration,  unless  it  finds
that the said agreement is null and void, inoperative or incapable of  being
performed.
Thus, even if, under Section 9 read with Section 20 of the  CPC,
the Bombay High Court had the jurisdiction to entertain  the  suit,  once  a
request is made by one of the parties or  any  person  claiming  through  or
under him to refer the parties to arbitration, the  Bombay  High  Court  was
obliged to refer the  parties  to  arbitration  unless  it  found  that  the
agreement referred  to  in  Section  44  of  the  Act  was  null  and  void,
inoperative or incapable of being  performed.   In  the  present  case,  the
appellant may  not  have  made  an  application  to  refer  the  parties  to
arbitration, but Section 45 of the Act does not refer to any application  as
such.  Instead, it refers to the request  of  one  of  the  parties  or  any
person claiming through or under him to refer the  parties  to  arbitration.
In this case, the appellant may not have made an application  to  refer  the
parties to arbitration at Singapore but has filed an affidavit in  reply  to
the notice of motion and has stated  in  paragraphs  3,  4  and  5  of  this
affidavit that the defendant had already invoked the  arbitration  agreement
in the Facilitation Deed and the arbitration proceedings have commenced  and
that the suit was an abuse of the process of court.  The appellant had  thus
made a request to refer the parties to arbitration at  Singapore  which  had
already commenced.

22.   Section 45 of the Act quoted above  also  makes  it  clear  that  even
where such request is made by a party, it will  not  refer  the  parties  to
arbitration, if it finds that the agreement is null  and  void,  inoperative
or incapable of being performed.
As the very language of Section 45 of  the
Act clarifies the word “agreement” would mean the agreement referred  to  in
Section 44 of the Act.  Clause (a) of Section 44 of the Act  refers  to  “an
agreement in writing for arbitration to which the Convention  set  forth  in
the First Schedule applies.”
The First Schedule of the  Act  sets  out  the
different Articles of  the  New  York  Convention  on  the  Recognition  and
Enforcement of Foreign Arbitral Awards, 1958.
Article II of  the  New  York
Convention is extracted hereinbelow:

      “1. Each Contracting State shall recognize  an  agreement  in  writing
      under which the parties undertake to submit to arbitration all or  any
      differences which have arisen or  which  may  arise  between  them  in
      respect of defined legal relationship,  whether  contractual  or  not,
      concerning a subject-matter capable of settlement by arbitration.


      2. The term “agreement in writing” shall include an arbitral clause in
      a contract or an arbitration  agreement,  signed  by  the  parties  or
      contained in an exchange of letters or telegrams.


      3. The court of a Contracting State, when seized of  an  action  in  a
      matter in respect of which the parties have made an  agreement  within
      the meaning of this article, shall, at  the  request  of  one  of  the
      parties, refer the parties to arbitration, unless it  finds  that  the
      said agreement is null and void, inoperative  or  incapable  of  being
      performed.”



It will be clear from clauses 1, 2 and 3 of the New York Convention  as  set
out in the First Schedule of the Act  that  the  agreement  referred  to  in
Section 44 of the Act is an agreement in writing  under  which  the  parties
undertake to submit to arbitration all or any differences which have  arisen
or which may arise between them.  Thus, the court will decline to refer  the
parties to arbitration only if it finds that the  arbitration  agreement  is
null and void, inoperative or incapable of being performed.

23.   According to Mr.  Subramanium,  however,  as  the  main  agreement  is
voidable on account of fraud and misrepresentation by the appellant,  clause
9 of the main agreement which contains the arbitration agreement in  writing
is also null and void.  In support of his submission, he cited the  decision
of this Court in SMS Tea Estates (P) Ltd. v.  Chandmari  Tea  Co.  (P)  Ltd.
(supra).  Paragraphs 12 and 13 of the judgment of  this  Court  in  SMS  Tea
Estates  (P)  Ltd.  v.  Chandmari  Tea  Co.  (P)  Ltd.  (supra)  are  quoted
hereinbelow:

      “12. When a contract  contains  an  arbitration  agreement,  it  is  a
      collateral term relating to the resolution of disputes,  unrelated  to
      the performance of the contract. It is  as  if  two  contracts—one  in
      regard to the substantive terms of the main  contract  and  the  other
      relating to resolution of  disputes—had  been  rolled  into  one,  for
      purposes  of  convenience.  An  arbitration  clause  is  therefore  an
      agreement independent of the  other  terms  of  the  contract  or  the
      instrument. Resultantly, even if the contract or  its  performance  is
      terminated or comes to an end on account of  repudiation,  frustration
      or breach of contract, the arbitration agreement would survive for the
      purpose of resolution of disputes arising under or in connection  with
      the contract.


      13. Similarly, when an instrument or deed of transfer (or  a  document
      affecting immovable property) contains an arbitration agreement, it is
      a collateral term relating to resolution of disputes, unrelated to the
      transfer or transaction affecting the immovable property. It is as  if
      two  documents—one  affecting   the   immovable   property   requiring
      registration and the other relating to resolution of disputes which is
      not compulsorily registerable—are rolled  into  a  single  instrument.
      Therefore, even if  a  deed  of  transfer  of  immovable  property  is
      challenged as not valid  or  enforceable,  the  arbitration  agreement
      would remain unaffected for the  purpose  of  resolution  of  disputes
      arising with reference to the deed of transfer.”





In the aforesaid case, this Court has held that if the  document  containing
the main agreement is not found to be duly  stamped,  even  if  it  contains
arbitration clause, it cannot be acted upon because Section 35 of the  Stamp
Act bars the said document from being acted upon, but  if  the  document  is
found  to  be  duly  stamped  but  not  registered  though  required  to  be
compulsorily registered, the court can act upon  the  arbitration  agreement
which is a collateral term of  the  main  agreement  and  is  saved  by  the
proviso to Section 49 of the Registration Act.
Thus, as per  the  aforesaid
decision of this Court in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co.  (P)
Ltd. (supra),  the  court  will  have  to  see  in  each  case  whether  the
arbitration agreement is also void, unenforceable or inoperative along  with
the main agreement or whether the arbitration agreement  stands  apart  from
the main agreement and is not null and void.

24.    The House of Lords has explained this principle  of  separability  in
Premium Nafta Products Ltd. v. Fili Shipping Company Ltd.   &  Ors.  (supra)
thus:

       “17. The principle of separability enacted in section  7  means  that
       the  invalidity  or  rescission  of  the  main  contract   does   not
       necessarily entail the invalidity or rescission  of  the  arbitration
       agreement.  The arbitration agreement must be treated as a  “distinct
       agreement” and can be void or voidable only on grounds  which  relate
       directly to the arbitration agreement.  Of course there may be  cases
       in which the ground upon which  the  main  agreement  is  invalid  is
       identical with the ground upon which  the  arbitration  agreement  is
       invalid.  For example, if the  main  agreement  and  the  arbitration
       agreement are contained in the same document and one of  the  parties
       claims that he never agreed to anything in the document and that  his
       signature was forged, that will be an attack on the validity  of  the
       arbitration agreement.  But the ground of attack is not that the main
       agreement was invalid.  It is that the signature to  the  arbitration
       agreement, as a “distinct agreement”, was forged.   Similarly,  if  a
       party alleges that someone who purported to  sign  as  agent  on  his
       behalf had no authority whatever to conclude  any  agreement  on  his
       behalf, that is  an  attack  on  both  the  main  agreement  and  the
       arbitration agreement.


       18. On the other hand, if (as in this case) the  allegation  is  that
       the agent exceeded his authority by entering into a main agreement in
       terms which were not authorized or for improper reasons, that is  not
       necessarily an attack on the arbitration agreement.  It would have to
       be shown that whatever the terms of the main agreement or the reasons
       for which the agent concluded it, he would have had no  authority  to
       enter into an arbitration agreement.  Even if the allegation is  that
       there was no concluded agreement (for example, that terms of the main
       agreement remained to be agreed) that is not necessarily an attack on
       the arbitration  agreement.   If  the  arbitration  clause  has  been
       agreed, the patties will be presumed to have intended the question of
       whether there was  a  concluded  main  agreement  to  be  decided  by
       arbitration.”







25.   Applying the principle of separability to the facts of this case,  the
respondent rescinded the Facilitation Deed by  notice  dated  25.06.2010  to
the appellant on the following grounds stated in  the  said  notice  by  its
lawyers:




      “1. Reference is made to the Deed for  the  Provison  of  Facilitation
      Services dated March 25, 2009 (the “Deed”) between World  Sport  Group
      (Mauritius) Limited (“WSGM”) and our client.  
Under the Deed, which is
      styled as a facilitation agreement, our  client  agreed  to  pay  WSGM
      “facilitation” fees for the “facilitation” services stated  thereunder
      to have been provided by WSGM.  
The underlying consideration  for  the
      payments by our client to WSGM, in fact were the  representation  made
      by WSGM that : (a) WSGM, had executed  in  India  (“BCCI”)  whereunder
      WSGM had been unfettered Global  Media  Rights  (“the  said  rights”),
      including  the  Indian  Subcontinent  (implying  thereby  as   natural
      corollary that the earlier Media Rights agreement dated March 15, 2009
      between WSGM and BCCI along with its restrictive conditions  had  been
      mutually terminated); (b) WSGM could thereafter relinquish  the  Media
      Rights for the Indian Subcontinent in favour of our  client  for  said
      valuable consideration to enable our client to  enter  into  a  direct
      agreement with BCCI; (c) the said rights were subsisting with WSGM  at
      the time of execution of the Deed, i.e, March 25, 2009; and  (d)  WSGM
      had relinquished those rights in favour of BCCI to enable BCCI and our
      client to execute a direct Media  Rights  License  Agreement  for  the
      Indian Subcontinent.


      2.  BCCI has recently brought to the attention of our client that  the
      Global Media Rights agreement between WSGM and BCCI  dated  March  23,
      2009 does not exist and in terms of Clause 13.5 of the agreement dated
      March 15, 2009, after expiry of the 2nd extension the media rights had
      automatically reverted to BCCI at 3 a.m. on March 24, 2009 and thus at
      the time of execution of the Deed, WSGM did not  have  any  rights  to
      relinquish and/or to facilitate the procurement of India  Subcontinent
      media rights for the IPL from BCCI and thus no  facilitation  services
      could have been provided by WSGM.


      3.  In view of the above, it is evident  that  the  representation  by
      WSGM that WSGM relinquished its Indian Subcontinent media  rights  for
      the IPL in favour of our client to pay the “facilitation”  fees  under
      the Deed.


      4. Taking cognizance of the same,  BCCI’s  Governing  council  at  its
      meeting held at Mumbai, India on June 25, 2010 appropriately  executed
      an amendment to Media Rights License Agreement dated  March  25,  2009
      between BCCI and our client  by  deleting,  inter  alia,  clause  10.4
      thereof.


      5. On its part, and in view of the  false  representations  and  fraud
      played by WSGM, the Deed is voidable at the option of our  client  and
      thus our client rescinds the Deed with immediate effect.”



The ground taken by respondent to rescind  the  Facilitation  Deed  thus  is
that  the  appellant  did  not  have  any  right  to  relinquish  and/or  to
facilitate the procurement of Indian subcontinent media rights for  the  IPL
from BCCI and no facilitation services  could  have  been  provided  by  the
appellant and  therefore  the  representation  by  the  appellant  that  the
appellant relinquished its Indian subcontinent media rights for the  IPL  in
favour of the respondent  for  which  the  appellant  had  to  be  paid  the
facilitation fee under the deed was false and accordingly  the  Facilitation
Deed was voidable at the option  of  the  respondent  on  account  of  false
representation and fraud.  This ground  of  challenge  to  the  Facilitation
Deed does not in any manner affect the arbitration  agreement  contained  in
Clause 9 of the Facilitation Deed, which  is  independent  of  and  separate
from the main Facilitation Deed and does not get rescinded as  void  by  the
letter dated 25.06.2010 of  the  respondent.   The  Division  Bench  of  the
Bombay High Court, therefore, could not have refused to  refer  the  parties
to arbitration on the ground that the arbitration agreement  was  also  void
along with the main agreement.

26.    Mr.  Gopal  Subramanium’s  contention,  however,  is  also  that  the
arbitration agreement was inoperative or incapable  of  being  performed  as
allegations of fraud could be enquired into by the  court  and  not  by  the
arbitrator.  The authorities on the meaning of  the  words  “inoperative  or
incapable of  being  performed”  do  not  support  this  contention  of  Mr.
Subramanium.  The words “inoperative or incapable  of  being  performed”  in
Section 45 of the Act have been taken from Article II (3) of  the  New  York
Convention as set out in para 22 of this judgment.  Redfern  and  Hunter  on
International  Arbitration  (Fifth  Edition)   published   by   the   Oxford
University Press has explained the meaning of these  words  “inoperative  or
incapable of being performed” used in the New York Convention at  page  148,
thus:

         “At first sight it is difficult to see a distinction  between  the
         terms ‘inoperative’ and ‘incapable of being  performed’.  However,
         an arbitration clause is inoperative where it has ceased  to  have
         effect as a result, for example, of a failure by  the  parties  to
         comply with a time limit, or  where  the  parties  have  by  their
         conduct impliedly revoked the arbitration agreement.  By contrast,
         the expression ‘incapable of being performed’ appears to refer  to
         more practical aspects of the prospective arbitration proceedings.
          It applies, for example, if for some reason it is  impossible  to
         establish the arbitral tribunal.”



27.       Albert Jan Van Den  Berg  in  an  article  titled  “The  New  York
Convention, 1958 – An Overview” published in          the  website  of  ICCA
[www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of-
1958_overview.pdf], referring to Article II(3) of the New  York  Convention,
states:


         “The words “null and void” may  be  interpreted  as  referring  to
         those cases where the arbitration agreement is  affected  by  some
         invalidity right from the beginning, such as lack of  consent  due
         to misrepresentation, duress, fraud or undue influence.




         The word “inoperative” can be said to cover those cases where  the
         arbitration  agreement  has  ceased  to  have  effect,   such   as
         revocation by the parties.




         The words “incapable of being performed” would seem  to  apply  to
         those cases where the arbitration cannot be effectively  set  into
         motion.  This may happen  where  the  arbitration  clause  is  too
         vaguely worded, or other terms  of  the  contract  contradict  the
         parties’ intention to arbitrate, as in the case of  the  so-called
         co-equal forum selection clauses.  Even in these cases, the courts
         interpret the contract provisions in favour of arbitration.”



28.   The book ‘Recognition and Conferment of  Foreign  Arbitral  Awards:  A
Global Commentary on the New York  Convention’  by  Kronke,  Nacimiento,  et
al.(ed.) (2010) at page 82 says:
         “Most authorities hold  that  the  same  schools  of  thought  and
         approaches regarding the term null and  void  also  apply  to  the
         terms inoperative and incapable of being performed.  Consequently,
         the  majority  of  authorities  do  not  interpret   these   terms
         uniformly, resulting in an unfortunate lack of  uniformity.   With
         that caveat, we shall give an overview of typical  examples  where
         arbitration agreements were held to be (or not to be)  inoperative
         or incapable of being performed.


         The terms  inoperative  refers  to  cases  where  the  arbitration
         agreement has ceased to have effect by the time the court is asked
         to refer the parties to arbitration.  For example, the arbitration
         agreement ceases to have effect  if  there  has  already  been  an
         arbitral award or  a  court  decision  with  res  judicata  effect
         concerning the same subject matter and parties.  However, the mere
         existence of multiple proceedings is not sufficient to render  the
         arbitration agreement inoperative.  Additionally, the  arbitration
         agreement  can  cease  to  have  effect  if  the  time  limit  for
         initiating the arbitration or rendering  the  award  has  expired,
         provided that it was the parties’ intent no longer to be bound  by
         the arbitration agreement due  to  the  expiration  of  this  time
         limit.


         Finally,  several  authorities  have  held  that  the  arbitration
         agreement ceases to have effect if the parties waive  arbitration.
         There are many possible ways of  waiving  a  right  to  arbitrate.
         Most commonly, a party will waive the right to arbitrate if, in  a
         court proceeding, it fails  to  properly  invoke  the  arbitration
         agreement  or  if  it  actively  pursues  claims  covered  by  the
         arbitration agreement.”

29.  Thus,  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.  N.  Radhakrishnan  v.  Maestro
Engineers & Ors.  (supra)  and  Abdul  Kadir  Shamsuddin  Bubere  v.  Madhav
Prabhakar Oak (supra) were decisions rendered in  the  context  of  domestic
arbitration and not in the  context  of  arbitrations  under  the  New  York
Convention to which Section 45 of the Act applies.   In  the  case  of  such
arbitrations covered by the New York Convention, the Court  can  decline  to
make a reference of a dispute covered by the arbitration agreement  only  if
it comes to the conclusion that the arbitration agreement is null and  void,
inoperative or incapable of being performed, and  not  on  the  ground  that
allegations of fraud or misrepresentation have to  be  inquired  into  while
deciding the disputes between the parties.

30.   We may now consider the correctness of the findings  of  the  Division
Bench of the High Court in the impugned judgment.   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.  In view of  the  provisions  of  Section  45  of  the  Act,  the
Division Bench of the High Court was required to only consider in this  case
whether Clause 9 of the Facilitation Deed which  contained  the  arbitration
agreement was null and void, inoperative or incapable of being performed.

31.   The Division Bench of the High Court has further held  that  Clause  9
of the Facilitation Deed insofar as it restricted the right of  the  parties
to move the courts for appropriate relief  and  also  barred  the  right  to
trial by a jury was void for being opposed to public policy as  provided  in
Section 23 of the Indian Contract Act, 1872 and was also void for  being  an
agreement in restraint of the legal proceedings in view  of  Section  28  of
the said Act.  Parliament has made the  Arbitration  and  Conciliation  Act,
1996 providing domestic arbitration and international arbitration as a  mode
of resolution of disputes between the parties and Exception 1 to Section  28
of the Indian Contract Act, 1872 clearly states that Section  28  shall  not
render illegal a contract, by which two  or  more  persons  agree  that  any
dispute which may arise between them in respect of any subject or  class  of
subjects shall be referred to arbitration and that only the  amount  awarded
in such arbitration shall be  recoverable  in  respect  of  the  dispute  so
referred.
Clause 9 of the Facilitation Deed is consistent with this  policy
of the legislature as reflected in the  Arbitration  and  Conciliation  Act,
1996 and is saved by Exception 1 to Section 28 of the Indian  Contract  Act,
1872.  
The right to jury trial is not  available  under  Indian  laws.   The
finding of the Division Bench of the High Court, therefore,  that  Clause  9
of the Facilitation Deed is opposed to  public  policy  and  is  void  under
Sections 23 and 28 of the Indian Contract Act, 1872 is clearly erroneous.

32.     The Division  Bench  of  the  High  Court  has  also  held  that  as
allegations of fraud and serious malpractices on the part of  the  appellant
are in issue, it is only the court which can  decide  these  issues  through
furtherance of judicial evidence by either party and these issues cannot  be
properly gone into by the arbitrator.
As we have already held,  
Section  45
of the Act does not provide that the court will not  refer  the  parties  to
arbitration if the allegations of fraud have to be inquired  into.   
Section 45 provides that only if the court finds that the arbitration  agreement  is
null and void, inoperative or incapable of being performed, it will  decline
to refer the parties to arbitration.

33.     The Division Bench of the High court has  further  held  that  since
the earlier  suit  (Suit  No.1869  of  2010)  was  pending  in  court  since
25.06.2010 and that suit was  inter-connected  and  inter-related  with  the
second suit (Suit No.1828 of 2010), the court could not allow  splitting  of
the matters and disputes to be decided by the court in India  in  the  first
suit and by arbitration abroad in regard  to  the  second  suit  and  invite
conflicting verdicts on the issues which are inter-related.  
This  reasoning
adopted by the Division Bench of the  Bombay  High  Court  in  the  impugned
judgment is alien to the provisions of Section 45 of the Act which does  not
empower the court to decline a reference to arbitration on the  ground  that
another suit on the same issue is pending in the Indian court.

34.     We make it clear that 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.  
To quote Redfern And Hunter  On  International  Arbitration
(Fifth Edition page 134 para 2.141)
      “Where allegations of fraud in the procurement  or  performance  of  a
      contract are alleged, there appears to be no reason for  the  arbitral
      tribunal to decline jurisdiction.”

Hence, it has been rightly held by the learned Single Judge  of  the  Bombay
High Court that  it  is  for  the  arbitrator  to  decide  this  dispute  in
accordance with the arbitration agreement.

35.   For the  aforesaid  reasons,  we  allow  the  appeal,  set  aside  the
impugned judgment of the Division Bench of the High Court  and  restore  the
order of the learned Single Judge.  The parties shall bear their own  costs.


                                          .....……………..……………………….J.
                                    (A. K. Patnaik)




                          …....…………..………………………..J.
                                 (Fakkir Mohamed Ibrahim Kalifulla)
New Delhi,
January 24, 2014.
-----------------------
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