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)
Reportable
World Sport Group (Mauritius) Ltd. … Appellants
Versus
MSM Satellite (Singapore) Pte. Ltd. …
Respondent
A. K. PATNAIK, J.
Leave granted.
J U D G M E N T
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’)
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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.
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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
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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
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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.
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6. On 09.08.2010, the learned Single Judge of the
Bombay High Court dismissed the application for
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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
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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].
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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
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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
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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.
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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
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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
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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
1
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.
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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.
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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.).
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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.
1
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.
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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:
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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, 5
th
Edition, Judicial Comity, has been
explained in the following words:
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2
“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.
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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:
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“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
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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.
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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:
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“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:
2
“12. When a contract contains an arbitration
agreement, it is a collateral term relating to
the resolution of disputes, unrelated to the
3
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:
3
“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
3
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.”
3
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.
3
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 2
nd
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
3
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:
3
“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:
3
“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:
3
“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.
3
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.
4
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.
4
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
4
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.
4
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.
4
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.
4
.....……………..……………………….J.
(A. K. Patnaik)
…....…………..………………………..J.
(Fakkir Mohamed Ibrahim Kalifulla)
New Delhi,
January 24, 2014.
