2023 (3) TMI 839 - DELHI HIGH COURT

Validity of ICC Arbitral Award - The termination of the Devas Agreement by Antrix was disputed by Devas - Whether the ICC Award suffers from patent illegality, fraud and is in conflict with the public policy of India - binding nature of the the judgment in DEVAS MULTIMEDIA PRIVATE LTD. VERSUS ANTRIX CORPORATION LTD. & ANR. [2022 (1) TMI 774 - SUPREME COURT] - applicability of principles of res judicata - The petitioner contended that the the Judgment of the Apex Court are at best obiter dicta and do not constitute ratio decidendi

HELD THAT:- It is summarised as under:

a) The findings of the Apex Court in its Judgment in DEVAS MULTIMEDIA PRIVATE LTD. while upholding the findings of the NCLT and NCLAT, noted that Devas was incorporated for a fraudulent purpose and that its affairs were being conducted in a fraudulent manner. The Apex Court has given these findings after being aware of the fact that an arbitral award has been passed in favour of Devas and the same is under challenge in a petition under Section 34 of the Arbitration Act. The Apex Court has repelled the contention of Devas that the application for winding up was filed only to circumvent the enforcement of the arbitral award. Without the findings rendered by the Apex Court regarding fraud, the Apex Court could not have come to the conclusion that Devas had been incorporated for fraudulent purposes and that its affairs were being conducted in a fraudulent manner and, therefore, the order of winding up Devas under Section 271(c) of the Companies Act, 2013 was correct. These findings, therefore, become the ratio and not the obiter of the case and therefore, were binding on the learned Single Judge under Article 141 of the Constitution of India. It is settled law that even obiter of a judgment of the Hon’ble Supreme Court is binding on all Courts subordinate to it. The Apex Court in PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. VERSUS RESERVE BANK OF INDIA [1992 (1) TMI 337 - SUPREME COURT] has reiterated that though the focus of the Apex Court may not be directly on a partiuclar point, yet, a pronouncement by the Apex Court, even if it cannot be called the ratio decidendi of the judgment, will still be binding on the High Courts.

b) The proceedings before the Apex Court in DEVAS MULTIMEDIA PRIVATE LTD. are formal proceedings between the same parties i.e., Antrix, Devas and DEMPL, arising out of the same factual matrix, and the issue of the effect of fraudulent actions of Devas was directly and substantially in issue before the Hon'ble Supreme Court. The issue of fraud was raised and agitated before the Apex Court in Civil Appeal No.5766/2021 and has been heard and finally decided by the Apex Court which was competent to render the findings on the issue before it. As a consequence, the findings of the Apex Court in its Judgment in Civil Appeal No.5766/2021, particularly Paragraphs No. 12 and 13, would be binding between the parties on the basis of the principle of res judicata.

c) Article 144 of the Constitution of India mandates every authority to aid in enforcing the orders and decrees of the Supreme Court. The Apex Court in DEVAS MULTIMEDIA PRIVATE LTD. has held that Devas was incorporated for fraudulent purposes and the affairs of the company were being conducted in a fraudulent manner, and therefore, the agreement, from which the present arbitration arises, was a product of fraud. After such a finding has been rendered by the Apex Court, it was not open for the learned Single Judge to come to the conclusion that the award, which has been held to be a product of fraud, would still be enforceable in the country. Such a finding by the learned Single Judge would be against the spirit of Article 144 of the Constitution of India.

d) The phrase “the Court finds that”, which finds mention in Section 34(2)(b) of the Arbitration Act, enables the Court to look into attendant circumstances to form its own opinion as to whether the award is in conflict with public policy of India or not. As a corollary, it follows that the Court would also have the power to discover on its own, whether the making of an award is induced or affected by fraud or corruption or is in violation of Section 75 or 81 of the Arbitration Act. This phrase has been interpreted by the Court, as an enabling provision, allowing the Court while deciding an application under Section 34 of the Arbitration Act to grant leave to amend an application under Section 34 of the Arbitration Act, if the peculiar circumstances of the case so warrant and it is so required in the interest of justice.

e) In view of the various Judgments of the Hon'ble Supreme Court interpreting Section 34 of the Arbitration Act, the amendments to Section 34 of the Arbitration Act and in view of the categorical findings of the Apex Court in its Judgment passed in DEVAS MULTIMEDIA PRIVATE LTD. , nothing prevented the learned Single Judge from relying on those findings and using them for the purpose of setting aside the ICC Award under Section 34 of the Arbitration Act on the ground that the agreement itself was a product of fraud and, therefore, the making of award is automatically induced by fraud and corruption. The findings by the Apex Court, which is the highest Court of the land, could not have been ignored by the learned Single Judge and those findings would automatically become the findings of the learned Single Judge while considering an application under Section 34 of the Arbitration Act for which there was no necessity of a specific pleading. From a comprehensive reading of the Impugned Judgment, it is evident that the learned Single Judge has applied his mind to the amendment applications and has taken it into consideration while deciding the petition under Section 34 of the Arbitration Act and the issue as to whether the making of award was vitiated by fraud or corruption.

f) The principle of “fraud vitiates all solemn acts” is applicable not only to the primary proceedings, but also to all collateral proceedings that arise out of the same facts and circumstances. The act of fraud is an anathema to all equitable principles and every transaction tainted with fraud must be viewed with disdain by Courts. In the instant case, the Supreme Court in DEVAS MULTIMEDIA PRIVATE LTD.has held that the commercial relationship between Devas and Antrix is a product of fraud, and as a consequence, the Devas Agreement, the ICC Award, and all other disputes arising out of the transaction would be tainted by fraud. Permitting Devas and its shareholders to reap the benefits of the ICC Award would amount to this Court perpetuating the fraud. Such a view would be against all principles of justice, equity and good conscience.

g) The learned Single Judge has not made an error in setting aside the ICC Award on the grounds of fraud and it being in conflict with the public policy of India. Accordingly, the challenge to the Impugned Judgment by the Appellant, on the ground that the Ld. Single Judge could not consider the grounds of public policy and fraud under Section 34 fails.

Appeal dismissed.