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2020 (8) TMI 858 - SC - Indian LawsArbitration proceedings - Foreign Final Award - the extent to which HSBC could be said to have a strong prima facie case in the enforcement proceedings Under Section 48 which are pending before the Bombay High Court? - whether irreparable prejudice would be caused to HSBC if protective orders were not issued in its favour, and generally, whether the balance of convenience tilts in its favour and to what extent? HELD THAT:- Where arbitral proceedings are ongoing, such proceedings become invalid the moment legal proceedings upon the whole of the subject matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire. As against this, Sections 5, 8 and 16 of the 1996 Act reflect a completely new approach to arbitration, which is that when a judicial authority is shown an arbitration Clause in an agreement, it is mandatory for the authority to refer parties to arbitration bearing in mind the fact that the arbitration Clause is an agreement independent of the other terms of the contract and that, therefore, a decision by the arbitral tribunal that the contract is null and void does not entail ipso jure the invalidity of the arbitration clause. There can be no doubt whatsoever after reading the issues and some of the material findings in the Foreign Final Award that the issues raised and answered are the subject matter of civil as opposed to criminal proceedings. The fact that a separate criminal proceeding was sought to be started and may have failed is of no consequence whatsoever - a reading of the Foreign Final Award in this case would show that a strong prima facie case has indeed been made out as the Award holds the BBC transaction as a basis on which the contract was entered into and the USD 60 million paid by HSBC, which would clearly fall within fraudulent inducement to enter into a contract Under Section 17 of the Contract Act. Such a contract would be voidable at the instance of HSBC. Also, the findings on the siphoning off of monies that were meant to be allocated for the performance of the BBC contract would attract the tort of deceit. The measure of damages for such fraudulent misrepresentation is not the difference between the value of the shares on the date of making the contract and the value HSBC would have received, if it had resold those shares in the market, after the purchase. The matter is remanded to the ADJ, Mohali for fresh disposal in accordance with law.
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