2014 (1) TMI 1825 - HC - Indian Laws

Arbitration and Conciliation - order and direction seeked against respondents to deposit monies to the extent of the claims of the petitioner under Share Subscription Agreement and Share Holders Agreement including the investment of approximately US 60 million and cost and/or in the alternative to provide adequate and satisfactory security in regard to the claims of the petitioner - Petitioner seeks injunction restraining the respondents from dealing with their assets including bank accounts with Corporation Bank - Held that - Having taken a view that law of Singapore would apply to the parties in this proceedings and under laws of Singapore respondents would have remedy of challenge the interim awards before the appropriate court at Singapore and the respondents not having challenged the said jurisdictional award and interim award in my view the said jurisdictional award and interim award made by the arbitral tribunal between the same parties arising out the same agreement in the arbitration proceedings have become final and conclusive on the issue of jurisdiction and the respondents are barred by the principles of estoppel in re-agitating the same issue in this proceedings. Learned senior counsel is right in his submission that the question as to whether the arbitral tribunal being less suitable or it would be more convenient or appropriate for a civil court to decide allegations of fraud etc. is not a ground available under Section 48 (2)(a) of the Arbitration Act. In my view only such cases which cannot decided by the arbitrators can be covered by Section 48(2)(a). The dispute raised by the petitioner before the arbitral tribunal related to the rights of the petitioner in personam and could be considered by the arbitral tribunal and there is no bar contemplated under Section 48 (2)(a) in the arbitral tribunal adjudicating upon such dispute. Petitioner has made out a case for interim measures. In one of the arbitration proceeding out of the two arbitral tribunal has already rendered a final award. In my view petitioner has good chances of succeeding in the arbitration proceedings. If the interim measures are not granted in favour of the petitioner even if petitioner succeeds in arbitration proceedings petitioner would not be able to recover any amount from the respondents. Thus balance of convenience is in favour of the petitioner and against the respondents. Pursuant to the ad interim order passed by this Court respondents have been already restrained from withdrawing the amount lying in the account of the respondents with Corporation bank other than the amount allowed to be withdrawn. The said order is in force since 3/8/2012. Respondents have not filed any appeal against the said order. The respondents have rendered an undertaking to return the amount allowed to be withdrawn by this Court in this proceedings. Respondents have also not paid fees of the arbitral tribunal. Pursuant to the order passed by Division Bench on 30/01/2013 respondent No.1 has been directed to deposit Rs. 1.40 cores equivalent to 3, 35, 000 Singapore dollars with the Corporation bank in a separate fixed deposit towards arrears of contribution of arbitration fees to be paid by respondent No.1 and has directed that the said order is passed without prejudice to rights and contentions of the parties keeping all contentions open. Respondents are restrained from withdrawing the amounts retained by the Corporation Bank in the accounts of the respondents to the extent of USD 60 million. In the event of the balance in the said accounts with the Corporation bank of the respondents less than USD 60 million respondents are directed to deposit the shortfall in the said account so as to maintain the balance of USD 60 million within four weeks from today.

Issues Involved:
1. Jurisdiction and Governing Law: Whether the arbitration agreement is governed by Singapore law or Indian law.
2. Allegations of Fraud: Whether allegations of fraud, forgery, and misrepresentation can be adjudicated by an arbitral tribunal.
3. Estoppel and Res Judicata: Whether the respondents are estopped from challenging the arbitral tribunal's jurisdictional award.
4. Maintainability of Section 9 Petition: Whether the petition under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable.
5. Interim Measures: Whether the petitioner is entitled to interim measures under Section 9 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Jurisdiction and Governing Law:
The court examined the clauses of the Share Subscription Agreement (SSA) and Share Holders Agreement (SHA) which stipulated that the agreements would be governed by Indian law, but the arbitration would be conducted in Singapore under Singapore International Arbitration Centre (SIAC) rules. The court concluded that the arbitration agreement is governed by Singapore law, as the seat of arbitration was Singapore and the parties had expressly excluded the applicability of Part I of the Indian Arbitration and Conciliation Act, 1996, except for Section 9. The court relied on precedents from the Supreme Court and the Bombay High Court to affirm that the law of the seat of arbitration (Singapore) governs the arbitration agreement.

2. Allegations of Fraud:
The court addressed whether allegations of fraud and misrepresentation can be adjudicated by an arbitral tribunal. It referred to the Supreme Court's decision in N. Radhakrishnan v. Maestro Engineers, which held that serious allegations of fraud are better suited for adjudication by a civil court. However, the court distinguished this case by noting that the arbitral tribunal in Singapore had already rendered a jurisdictional award affirming its competence to adjudicate such issues under Singapore law. The court also noted that under Indian law, there is no absolute bar on arbitrators adjudicating allegations of fraud, and such matters can be referred to arbitration depending on the facts of each case.

3. Estoppel and Res Judicata:
The court held that the principles of estoppel and res judicata apply to the arbitral tribunal's jurisdictional award, which had become final and conclusive as the respondents had not challenged it. The court cited several judgments to support the view that once an issue has been decided by a competent forum, it cannot be re-agitated in subsequent proceedings. The respondents were thus estopped from challenging the arbitral tribunal's jurisdiction in the current proceedings.

4. Maintainability of Section 9 Petition:
The court ruled that the petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim measures, is maintainable. The court noted that the parties had expressly agreed to the applicability of Section 9, even though other parts of Part I of the Act were excluded. The court rejected the respondents' argument that the petition was an attempt to enforce the interim award without complying with Section 48 of the Act, clarifying that the petition sought independent interim reliefs.

5. Interim Measures:
The court found that the petitioner had made out a case for interim measures, as there was a prima facie case of misrepresentation and fraud by the respondents. The court noted that the petitioner had good chances of succeeding in the arbitration proceedings and that if interim measures were not granted, the petitioner might not be able to recover the invested amount even if it succeeded in the arbitration. The court restrained the respondents from withdrawing amounts from their accounts with Corporation Bank and directed them to maintain a balance equivalent to USD 60 million.

Conclusion:
The court concluded that the arbitration agreement is governed by Singapore law, and the arbitral tribunal has jurisdiction to adjudicate allegations of fraud. The respondents are estopped from challenging the tribunal's jurisdictional award. The petition under Section 9 is maintainable, and the petitioner is entitled to interim measures to secure the claim amount.

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