TMI Blog2023 (3) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2022 ( Impugned Judgment ) passed by the Learned Single Judge in O.M.P. (Comm.) No. 11/2021, filed by Respondent No. 1 ( Antrix ) under Section 34 of the Arbitration Act (hereinafter referred to as Section 34 Petition ) to challenge the ICC Arbitral Award dated 14.09.2015 (hereinafter referred to as the ICC Award ) passed in favour of the Respondent No. 2 ( Devas ). The Ld. Single Judge, vide the Impugned Judgment has set aside the ICC Award under Section 34 of the Arbitration Act on the grounds that it suffers from fraud, patent illegality and is in conflict with the public policy of India. BRIEF BACKGROUND 2. The Appellant herein ( Devas Employees Mauritius Pvt. Ltd. or DEMPL ) is a company incorporated under the laws of Mauritius and is a shareholder, owning 3.48% of the issued and paid-up equity share capital of Respondent No. 2/ Devas Multimedia Private Limited ( Devas ). Respondent No. 2 is a company incorporated under the Companies Act, 1956 which has since been wound up under the provisions of the Companies Act, 2013 and is represented in the present proceedings through its Official Liquidator. 3. The Respondent No.1/Antrix Corporation Limited, is a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portable mobile receivers including mobile phones, mobile video/audio receivers for vehicles etc. Antrix was to lease out to Devas five numbers of C X S transponders, each of 8.1 MHz capacity, and five numbers of S X C transponders, each of 2.7 MHz capacity, on the Primary Satellite 1 (PS1). It was agreed that the leased capacity would be delivered by Antrix to Devas, i.e. a fully operational and ready PS-1 satellite was to be delivered within 30 months of the agreement, with a further grace period of six months. Devas obtained approvals from the Foreign Investment Promotion Board (FIPB) during the period between May 2006 and September 2009. It is stated that Devas also obtained an Internet Service Provider (ISP) License from the Department of Telecommunications on 02.05.2008. Devas then also obtained permission from the Department of Telecommunications on 31.03.2009 for providing Internet Protocol Television (IPTV) Services within the scope of the terms and conditions of Internet Service Provider (ISP) License. 5. The Agreement dated 28.01.2005 was terminated by Antrix by a Communication dated 25.02.2011 which stated that the Government of India had taken a policy decision not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings before the ICC Arbitral Tribunal, the Central Bureau of Investigation ( CBI ) registered an FIR on 16.03.2015 alleging criminal conspiracy, criminal misconduct, cheating and other corrupt practices on the part of Devas and its officers. A charge-sheet in respect of the FIR was filed against Devas, its officers and certain other individuals by the CBI on 11.08.2016. The CBI filed a supplementary charge-sheet in respect of the FIR on 08.01.2019. 9. Subsequent to the publishing of the ICC Award, on 19.11.2015, Antrix filed a petition under Section 34 of the Arbitration Act before the Addl. City Civil and Sessions Judge, Bengaluru, Karnataka, challenging the ICC Award. Subsequently, on 10.11.2016, Antrix filed an amendment application (hereinafter referred to as the first amendment application ) to incorporate subsequent events and take additional grounds. Thereafter, on 04.11.2020, the Hon ble Supreme Court passed an order in SLP No. 28434/2018 to transfer the Petition filed by Antrix under Section 34 of the Arbitration Act from the Court in Bengaluru to the Delhi High Court and stayed the ICC Award in the interim. On 12.01.2021, Antrix filed another amendment applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ap the benefits of their fraudulent action, would send wrong message to international investors, namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores. 11. It is in the aforestated factual background that the Ld. Single Judge has pronounced the Impugned Judgment under Section 34 of the Arbitration Act by which the ICC Award has been set aside on the grounds that the ICC Award suffers from patent illegality, fraud and is in conflict with the public policy of India. The learned Single Judge has placed reliance upon the Judgment of the Apex Court passed in Civil Appeal No.5766/2021. The learned Single Judge held that the Judgment of the Apex Court passed in Civil Appeal No.5766/2021 deals with the same parties and the finding therein would operate as res judicata. The learned Single Judge also held that the Judgments are admissible and the Court is bound to take judicial notice of the same. The learned Single Judge held that the since the issue of fraud has been established by the Judgment of the Apex Court in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited (2010) 4 SCC 518 relied upon by Mr. Suhail Dutt learned Senior Counsel for DEMPL on the question of delay in seeking amendment of the objections are not applicable to the facts of the present case. 164. The Supreme Court of India in Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131 examined the scope of judicial interference with the arbitral awards and held as under: 27. For a better understanding of the role ascribed to Courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engg. Construction Co. Ltd. v. NHAI [Ssangyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong [Ssangyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] are noted as under : (SCC pp. 169-71, paras 34-41) 34. What is clear, therefore, is that the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with. 37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law , namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality. 38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of the arbitral awards. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions. 29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian law would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644]. In Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644], this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the national economic interest , and disregarding the superior Courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy of Indian law and neither can it be brought within the confines of patent illegality as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ground of morality in this context has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs on some issues are contradicted by the findings on other issues and are also contradicted by the reasoning given to reach the said conclusions. 170. Additionally, findings on fraud returned by the Supreme Court by its Judgment dated 17.01.2022 clearly establish that award contravenes the fundamental policy of Indian law being in conflict with the most basic notions of justice and is also contrary to the national economic interest having also violated the FIPB Policies and the provisions of FIMA and PMLA and thus antithetical to the fundamental policy of Indian law. 171. The Supreme Court by its judgment dated 17.01.2022 has held that the very seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas and thus every part of the plant that grew out of those seeds, such as the Agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud. 172. It has held that a product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and that allowing Devas and its shareholders to reap the benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge or this Hon ble Court. In support of this argument, he places reliance upon the decision in State of Gujarat v. Utility Users Welfare Association, (2018) 6 SCC 21. The said Judgment relies upon the inversion test propounded by Professor Wambaugh to identify the ratio decidendi of a judgment. The inversion test has been followed by courts to imply that the ratio decidendi includes those propositions which are absolutely necessary for the decision of the case. He, therefore, contends that paragraphs 13.5 and 13.6 of the judgment of the Apex Court do not constitute ratio decidendi, and hence was not binding upon the learned Single Judge while deciding a challenge to an award under Section 34 of the Arbitration Act. 16. Mr. Dutt further relies upon the decision of the Apex Court in Divisional Controller v. Mahadeva Shetty, (2003) 7 SCC 197, to argue that the scope and authority of a precedent should not be expanded by a court beyond the needs of a given situation and the only thing binding as an authority upon courts is the principle upon which the case is decided. Casual expressions by a Judge cannot be considered to be ratio decidendi and would at best constitute obi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 20. Mr. Dutt further submits that every statement made by the Apex Court in Civil Appeal No.5766/2021 would also not be binding upon the High Court under Article 141 of the Constitution of India. He places reliance on the decision of the Apex Court in Municipal Committee, Amritsar v. Hazara Singh, (1975) 1 SCC 794 . He states that statements in the Judgment which constitute obiter dicta would not be binding upon the High Court under Article 141 of the Constitution of India. He states that the findings on fraud arrived at by the Supreme Court, being findings of fact would not be binding upon the Ld. Single Judge under Article 141 of the Constitution while dealing with a petition under Section 34 of the Arbitration Act. It is his submission that as a consequence of the aforesaid, the applicability of Section 57 of the Evidence Act to the proceedings under Section 34 of the Arbitration Act would not arise. 21. It is stated by Mr. Dutt that the decision of the Hon ble Supreme Court in Peerless General Finance and Invest Company Ltd. v. CIT, (2020) 18 SCC 625, is consistent with the decision in Hazara Singh (supra). He submits that the statement in Peerless (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Mr. Dutt that all material facts in relation to fraud were known to Antrix prior to the termination of the Devas Agreement, and the failure of Antrix to make any pleadings regarding the same before the Arbitral Tribunal or in its Petition filed under Section 34 of the Arbitration Act on 19.11.2015, indicate that Antrix had elected not to take fraud as a ground to challenge the ICC Award. 26. It is further submitted by Mr. Dutt that while the CBI registered its FIR against Devas and its officials on 16.03.2015, the Petition under Section 34 was filed by Antrix only on 19.11.2015, that is eight (8) months after the date of registration of the FIR. He states that while the first amendment application was filed on 10.11.2016, the second amendment application was filed on 12.01.2021 to introduce the ground of fraud as a challenge to the ICC Award in the Section 34 Petition, and the same has not been decided by the learned Single Judge. He submits that the FIR registered by the CBI contains all the material facts that Antrix sought to introduce by way of its two amendment applications. He further submits that the learned Single Judge has overcome the argument of delay in introduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the making of the award under challenge and that Antrix has failed to establish any such causative link. He places reliance upon the decision by the Singapore Court of Appeal in Bloomberry Resorts Hotels Inc. v. Global Gaming Philippines LLC, (2021) SGCA 9, to buttress his argument. 30. Mr. Dutt argues that the ground of fraud to challenge the ICC Award under the Section 34 Petition has been introduced by Antrix by way of two amendment applications, both of which have been filed beyond the prescribed period of 3 months and 30 days provided for under Section 34(3) of the Arbitration Act has passed, and the applications are thus barred by limitation. He submits that for setting aside an arbitral award under Section 34 of the Arbitration Act, no ground of challenge can be raised after the time limit prescribed under Section 34(3) Arbitration Act. He relies upon the decision in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75, and P. Radha Bai v. P. Ashok Kumar, (2019) 13 SCC 445, in support of this argument. Mr. Dutt submits that the limitation period under Section 34(3) of the Arbitration Act commences from the date on which a party receives the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fraud including the arbitral award is infected by the poison of fraud. Secondly, the subject matter in both the proceedings are the same and in the present case the winding up proceedings and the petition under Section 34 are primarily dealing with the fraudulent actions of Devas. Thirdly, the contesting parties in both the proceedings are the same since the parties in the winding up proceedings and in the present case are Devas, Antrix and DEMPL. Fourthly, the decision in the former proceedings was made by a competent court. He states that the Apex Court being the highest court in the country was competent to decide the appeal filed against the order of the NCLAT which had upheld the order of the NCLT which in turn had allowed the application under Section 271 of the Companies Act, 2013 for winding up of Respondent No.2 on the ground that the company had been formed for a fraudulent purpose and that the affairs of the company were being conducted in a fraudulent manner. Lastly, the decision of the Hon ble Supreme Court dated 17.01.2022 in Civil Appeal No.5766/2021 has attained finality and had been delivered after hearing all the parties. The learned ASG, therefore, submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that these observations are not standalone observations but rather form part of a string of findings on fraud made by the Hon ble Supreme Court commencing from paragraph 12.8 of the decision in Civil Appeal No.5766/2021. The said paragraphs should thus be read in the context of the rest of the judgment and not as standalone paragraphs. He places reliance upon the decision in Director of Settlements, A.P. and Others v. M.R. Apparao, (2002) 4 SCC 638, and State of Haryana v. Ranbir Alias Rana, (2006) 5 SCC 167 , to buttress his argument. 35. Without prejudice to the aforesaid argument, the Ld. ASG argues that even an obiter of the Hon ble Supreme Court is binding under Article 141 of the Constitution on the High Courts. He relies upon the decision in Peerless General Finance and Investment Company Ltd. v. CIT, (2020) 18 SCC 625, to support this argument. The learned ASG, therefore, submits that the learned Single Judge was bound by the findings of the Apex Court on fraud under Article 141 of the Constitution of India. He states that the contention of the Appellant that these are only findings on fact and, therefore, would not be covered by Article 141 of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No.5766/2021 has dealt with the question of whether the discovery of fraud being subsequent to the termination of the Devas Agreement would render the proceedings under Section 271 of the Companies Act barred by limitation. He submits that the grounds pertaining to fraud before the Hon ble Supreme Court and before the learned Single Judge are the same, and if the plea of limitation has been rejected by the Apex Court, the learned Single Judge has not made an error as the question of limitation is a mixed question of fact and law. 39. Learned ASG submits that the initial application under Section 34 of the Arbitration Act was filed within the time period specified under Section 34(3) of the Arbitration Act. He submits that the Arbitration Act does not prescribe a time period within which an amendment application to a Petition under Section 34 of the Arbitration Act must be filed. He submits that the aforesaid provision applies only to the initial application filed under Section 34(1) of the Arbitration Act and not to amendment applications filed subsequently. 40. The Ld. ASG places reliance upon the decision of the Hon ble Supreme Court in State of Maharashtra v. Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the IPR for it exists with Devas, has committed contractual fraud. The Apex Court has also held that the Devas Agreement was in contravention of the SATCOM Policy. b. Statutory Fraud The Ld. ASG submits that the findings on fraud rendered by the Hon ble Supreme Court in its decision attract all the five clauses of Section 17 of the Indian Contract Act, 1872 read with Section 271(c) of the Companies Act, 2013, and thus constitutes statutory fraud. c. Public Fraud against the Nation and its exchequer The Ld. ASG submits that the Apex Court in paragraphs 9.13, 9.15, 13.1 and 13.5 of its Judgment passed in Civil Appeal No.5766/2021 establish that Devas and DEMPL have committed a public fraud against the nation and its exchequer and, thus, cannot be permitted to reap the benefit of their fraud. He, therefore, submits that the findings on fraud rendered by the Apex Court in its Judgment passed in Civil Appeal No.5766/2021 staring at its face, the learned Single Judge was bound by those findings and could not have upheld an award which is the outcome of an agreement which was fraudulent in nature from its inception. 43. The Ld. ASG has contended that the awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the public policy of India. He places reliance upon the decision in State of Chhattisgarh v Sal Udyog, (2022) 2 SCC 275 , to buttress his argument. 45. The Ld. ASG further submits that an interpretation where the Court is not permitted to act on its own under Section 34 would run contrary to the intention of the Legislature which has given the power to the Court to go into the question as to whether the making of the award was induced or affected by fraud or corruption or is in contravention with the public policy of Indian law without any pleadings or any findings by the Tribunal or any pleading in the application moved under Section 34 of the Arbitration Act. He suggests that the power of the Court is not circumscribed by pleadings while deciding the question arising under Section 34(2)(b) of the Arbitration Act. He submits that fetters cannot be put upon the exercise of this power when the Parliament has not placed any such limitation on it. He submits that the powers of the Court under Section 34 and 37 are broad and should not be interpreted in a narrow manner. 46. It is submitted by the Ld. ASG that in the facts of the present case, Section 34(2)(b)(ii) is clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll actions, transactions and agreements entered into by Devas are also affected by fraud and would stand vitiated. The Hon ble Supreme Court has made this observation in paragraphs 13.5 13.6 of its decision in Civil Appeal No.5766/2021, which as stated earlier, are findings binding upon the Ld. Single Judge and this Court. 50. It is further submitted by the Ld. ASG that if Devas and DEMPL are permitted to reap the benefits of the ICC Award, after the Apex Court has given a finding that Devas was formed for a fraudulent purpose and its affairs were being conducted in a fraudulent manner, it would lead to an absurdity. He submits that the facts surrounding the fraudulent actions of Devas and DEMPL have attained finality and the parties must face the consequences. 51. The learned ASG further contended that Article 144 of the Constitution of India mandates that all authorities shall act in aid of the Supreme Court of India. He states that once the Apex Court had given a finding that the company was incorporated for a fraudulent and unlawful purpose and the affairs of the company have been conducted in a fraudulent manner, then while testing the correctness of an award which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sues in the petition under Section 34 of the Arbitration Act were not directly and substantially in issue in Civil Appeal No.5766/2021. Further, the Supreme Court while deciding an appeal arising out of proceedings initiated under Section 271(c) of the Companies Act, 2013 cannot be considered to be a Court competent to decide a challenge to enforcement of an award under Section 34 of the Arbitration Act. c. Article 144 of the Constitution of India is inapplicable to the present case. 55. In order to decide the issue at hand in a constructive manner, it is only appropriate that this Court deals with the each of the aforesaid aspects individually. 56. It is the submission of the Appellants that paragraphs Nos.13.5 13.6 of the judgment passed by the Apex Court in Civil Appeal No.5766/2021 only constitute obiter dicta and not ratio decidendi. Paragraph 13 of the said judgment reads as under: 13. Miscellenous Grounds 13.1 Apart from the above main grounds of attack, which we have dealt in extenso, the learned senior counsel for the appellants also made a few supplementary submissions. One of them was that a lis between two private parties cannot become the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a dagger. What if the company is allowed to continue to exist and also enforce the arbitration awards for amounts totalling to tens of thousands of crores of Indian Rupees (The ICC award is stated to be for INR 10,000 crores and the 2 BIT awards are stated to be for INR 5,000 crores) and eventually the Criminal Court finds all shareholders guilty of fraud? The answer to this question would be abhorring. 13.4 Lastly, it was contended that the actual motive behind Antrix seeking the winding up of Devas, is to deprive Devas, of the benefits of an unanimous award passed by the ICC Arbitral tribunal presided over by a former Chief Justice of India and the two BIT awards and that such attempts on the part of a corporate entity wholly owned by the Government of India would send a wrong message to international investors. 13.5 We do not find any merit in the above submission. If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance. If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 154, wherein the Court, relying upon the decision of the House of Lords in Quinn v. Leathem, [1901] A.C. 495, stated as under: 12. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it. On this topic this is what Earl of Halsbury L.C. said in Quinn v. Leathem [[1901] AC 495]: Now before discussing the case of Allen v. Flood, [1898] AC 1 and what was decided therein, there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not and could not pass muster. When pressed with such misuse of this ruling, the High Court repelled it. The law of food adulteration, as also the right approach to decisions of this Court, have been set out correctly there: Judicial propriety, dignity and decorum demand that being the highest judicial tribunal in the country even obiter dictum of the Supreme Court should be accepted as binding. Declaration of law by that Court even if it be only by the way has to be respected. But all that does not mean that every statement contained in a judgment of that Court would be attracted by Article 141. Statements on matters other than law have no binding force. Several decisions of the Supreme Court are on facts and that Court itself has pointed out in Gurcharan Singh v. State of Punjab [1972 FAC 549] and Prakash Chandra Pathak v. State of Uttar Pradesh [AIR 1960 SC 195 : 1960 Cri LJ 283] that as on facts no two cases could be similar, its own decisions which were essentially on questions of fact could not be relied upon as precedents for decision of other cases. (emphasis supplied) 59. In Krishena Kumar v. Union of India, (1990) 4 SCC 207 , another Constitution Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. The concrete decision alone is binding between the parties to it, but it is the abstract ratio decidendi, ascertained on a consideration of the judgment in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h arose for consideration in the case in which the judgment was delivered. An obiter dictum as distinguished from a ratio decidendi is an observation by the Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a binding effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see Ballabhadas Mathurdas Lakhani v. Municipal Committee, Malkapur [(1970) 2 SCC 267 : AIR 1970 SC 1002] and AIR 1973 SC 794 [ (sic)] ). When the Supreme Court decides a principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity and non-minority). On behalf of the petitioners/applicants it was submitted that the answers given to the questions, as set out at the end of the majority judgment, lay down the true ratio of the judgment. It was submitted that any observation made in the body of the judgment had to be read in the context of the answers given. We are unable to accept this submission. The answers to the questions, in the majority judgment in Pai case [(2002) 8 SCC 481] are merely a brief summation of the ratio laid down in the judgment. The ratio decidendi of a judgment has to be found out only on reading the entire judgment. In fact, the ratio of the judgment is what is set out in the judgment itself. The answer to the question would necessarily have to be read in the context of what is set out in the judgment and not in isolation. In case of any doubt as regards any observations, reasons and principles, the other part of the judgment has to be looked into. By reading a line here and there from the judgment, one cannot find out the entire ratio decidendi of the judgment. We, therefore, while giving our clarifications, are disposed to look into other parts of the judgment other than those p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. ( See State of Orissa v. Sudhansu Sekhar Misra [(1968) 2 SCR 154 : AIR 1968 SC 647] and Union of India v. Dhanwanti Devi [(1996) 6 SCC 44].) A case is a precedent and binding for what it explicitly decides and no more. The words used by Judges in their judgments are not to be read as if they are words in an Act of Parliament. In Quinn v. Leathem [1901 AC 495 : 85 LT 289 : (1900-03) All ER Rep 1 (HL)] the Earl of Halsbury, L.C. observed that every judgment must be read as applicable to the particular facts proved or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recedent, and yet may wish to state them so that those who later may have the duty of investigating the same point will start with some guidance. This is the matter which the judge himself is alone capable of deciding, and any judge who comes after him must ascertain which course he has adopted from the language used and not by consulting his own preference. 15. Although the said observation of Devlin, J. has been subjected to some criticism, it throws some light on the subject; but may not be treated to be an authority. (emphasis supplied) 66. In Laxmi Devi v. State of Bihar, (2015) 10 SCC 241 , apropos the principles relevant in ascertaining ratio decidendi and obiter dictum, the Hon ble Supreme Court has stated as under: 21. Since heavy reliance has been placed by the State on Satendra Prasad Jain v. State of U.P. [Satendra Prasad Jain v. State of U.P., (1993) 4 SCC 369] and Lt. Governor of H.P. v. Avinash Sharma [Lt. Governor of H.P. v. Avinash Sharma, (1970) 2 SCC 149], we must sedulously determine their ratios. This would, therefore, be the apposite time and place for a brief discussion on the contours and connotations of the term ratio decidendi , w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decidendi in any judgment. The central idea, in the words of Professor Wambaugh, is as under: In order to make the test, let him first frame carefully the supposed proposition of law. Let him then insert in the proposition a word reversing its meaning. Let him then inquire whether, if the court had conceived this new proposition to be good, and had it in mind, the decision could have been the same. If the answer be affirmative, then, however excellent the original proposition may be, the case is not a precedent for that proposition, but if the answer be negative the case is a precedent for the original proposition and possibly for other propositions also. [ Eugene Wambaugh, The Study of Cases (Boston: Little, Brown Co., 1892) at p. 17.] 114. In order to test whether a particular proposition of law is to be treated as the ratio decidendi of the case, the proposition is to be inversed i.e. to remove from the text of the judgment as if it did not exist. If the conclusion of the case would still have been the same even without examining the proposition, then it cannot be regarded as the ratio decidendi of the case. This test has been followed to imply that the ratio deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Comp Cas 12] , and then held as follows : (Sahara Investment case [CIT v. Sahara Investment (India) Ltd., 2003 SCC OnLine All 1688 : (2004) 266 ITR 641] , SCC OnLine All paras 12-15 19) 69. From a reading of the aforesaid decisions, the following principles emerge pertaining to the contours, connotations, meaning, ambit, scope and binding nature of ratio decidendi and obiter dicta: 69.1 It is the ratio decidendi of a judgment which has the binding force of law under Article 141 of the Constitution of India and not obiter dicta. An obiter may however carry considerable weight which ought to be examined by the subsequent judge. 69.2 The ratio of a decision must be understood within the context of the facts of the decision, and it is essentially the application of law to the facts of a particular case. An observation on facts by a Court cannot be considered to be the ratio of a judgment. It is the general principles on which the decision is based and would include a pre-existing rule/law, which may be statutory or judge-made, and a minor premise of the facts of the particular case in consideration. Every point raised in issue before the court which is argued and decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of India and two BIT awards, and such attempts on the part of a corporate entity, wholly owned by the Government of India, would send a wrong message to international investors. This argument was specifically rejected by the Apex Court by holding that if the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, then every part of the plant that grew out of those seeds, such as the agreement, disputes, awards, etc., would be infected with the poison of fraud. It can, therefore, be said that the observations made by the Supreme Court in paragraph 13 of its Judgment passed in Civil Appeal No.5766/2021 were made in response to issues which were raised and agitated before it. 71. It is also pertinent to mention at this juncture that the Apex Court had also analysed the facts and the documents which were placed before the NCLT/NCLAT, the authenticity of which were never questioned or denied by Devas. This is apparent from a reading of Paragraph 12.8 of the Apex Court's Judgment passed in Civil Appeal No.5766/2021 Relevant portions of Para 12.8 of the said judgment reads as under: 12.8. ...... (iii) But the documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough mobile phones was not in existence at that time, which is why the proposal made by Forge Advisors included an expectation that such a service may be launched by the end of 2006. It was with this expectation/promise that an Agreement was entered into on 28.01.2005 but this so-called new national service was never launched as promised in 2006. The launch of the services was not linked to the provision of a S-band satellite by Antrix, at least at the time when negotiations took place; ***** (vi) Therefore, the finding of the Tribunal, (a) that a public largesse was doled out in favour of Devas, in contravention of the public policy in India; (b) that Devas enticed Antrix/ISRO to enter into an MoU followed by an Agreement by promising to provide something that was not in existence at that time and which did not come into existence even later; (c) that the licenses and approvals were for completely different services; and (d) that the services offered were not within the scope of SATCOM Policy etc. are actually borne out by records; (vii) There is no denial of the fact that Devas offered a bouquet of services known as (a) Devas S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) SATCOM Policy perceived telecommunication and broadcasting services to be independent of each other and also mutually exclusive. Therefore, a combination of both was not permitted by law. It is especially so since no deliberation took place with the Ministry of Information and Broadcasting. Moreover, unless ICC allocates space segment, to a private player, the same becomes unlawful. This is why the conduct of the affairs of the company became unlawful; **** (xiii) It is on record that the minutes of the meeting of the Sub Committee dated 06.01.2009 were manipulated and the experimental licence was granted on 07.05.2009. Only thereafter, the original minutes were restored on 20.11.2009 and that too after protest....... (emphasis supplied) 72. In order to determine as to what is the ratio of a particular decision, the Courts have applied the inversion test which has been propounded by Eugene Wambaugh, a Professor at the Harvard Law School, who published a classic text book called The Study of Cases in the year 1892. The Apex Court has taken aid of this test in State of Gujarat v. Utility Users' Welfare Assn (supra) wherein after applying the said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt of the judgment as a whole, it is apparent that the observations made in paragraphs 13.5 and 13.6 are an application of law to the facts of the case, and thus ought to be construed as being a part of the ratio decidendi. The observations made by the Apex Court cannot be considered to be stray observations on issues which were not necessary to be adjudicated upon by the Court while dealing with the issues which were under consideration before the Apex Court. The observations of the Apex Court in paragraph Nos.13.5 13.6 are, therefore, in the nature of ratio and are binding on the learned Single Judge under Article 141 of the Constitution of India. 75. In view of the above, the submission of the learned Senior Counsel for the Appellant herein that the findings in Civil Appeal No.5766/2021 have been rendered in the context of deciding an application under Section 271(c) of the Companies Act, 2013, and, therefore, were in a completely different context which are inapplicable while deciding an application under Section 34 of the Arbitration Act and, therefore, are not binding, cannot be accepted. 76. Having dealt with the first aspect of the argument put forth by the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right litigated between the parties i.e. the facts on which the right is claimed or denied and the law applicable to the determination of that issue. Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party affected by the decision will not be precluded from challenging the validity of that order under the rule of res judicata, for a rule of procedure cannot supersede the law of the land. 78. Recently, the Apex Court in Jamia Masjid (supra) has laid down the twin test to determine whether an issue has been conclusively decided in the previous suit/proceeding. The relevant paragraphs of the aforesaid decision are reproduced as under: 48. In view of the authorities cited above, the twin test that is used for the identification of whether an issue has been conclusively decided in the previous suit is: A. Whether the adjudication of the issue was necessary for deciding on the principle issue ( the necessity test ); and B. Whether the judgment in the suit is based upon the decision on that issue ( the essentialit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stated above, to the facts of the present case, it is clear that the principle of res judicata will apply in the present case and is binding upon the parties. 81. As a natural consequence of the principle of res judicata in the present case, the findings and observations of the Supreme Court in Paragraphs No.12 and 13 of its Judgment passed in Civil Appeal No.5766/2021, pertaining to the fraudulent actions and affairs of Devas and its shareholders would become binding between the parties and cannot be brought into question in the present proceedings. The relevants extracts of Paragraphs No.12 of the said Judgment are reproduced as under: 12.4 On the basis of the pleadings, the documents produced and the submissions made, NCLT recorded the following findings namely, (i) that the incorporation of Devas was with fraudulent intention to grab the prestigious contract in question, in connivance and collusion with the then officials of Antrix; (ii) that it is not in dispute that at the time of entering into the contract, Devas did not have the technology, infrastructure or experience to perform their obligations under the Agreement; (iii) that one of the subscribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ix) that in any case the experimental licence was to establish Wireless Telegraph Station in India under the India Telegraph Act, 1885, without which experimental trials could not have been conducted; (x) that Devas obtained IPTV licence as part of ISP licence, which has nothing to do with what was offered as DEVAS services; (xi) that the agreement dated 28.01.2005 made no reference of IPTV; (xii) that undeniably, Devas services cannot be provided with ISP licences; (xiii) that after bringing an amount of Rs 579 crores into India, a major portion was taken out of India; (xiv) that the only business activity carried on by Devas was to provide ISP services in a particular locality in Bangalore for a few residents and that too for a short duration, which made Devas earn a revenue of Rs. 80,000/; (xv) that the diversion of Rs. 489 crores and Rs. 58 crores for non ISP purposes is violative of ISP licence, which comes squarely within the ambit of Section 27l(c); (xvi) that Devas fraudulently approached FIPB through the ISP route to avoid scrutiny by Department of Space; (xvii) that the investors of Devas actually became shareholders and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments, none of which is challenged as fabricated or inadmissible. Though it is sufficient for us to stop at this, let us go a little deeper to find out whether there was any perversity in the findings recorded by the Tribunals and whether such findings could not have been reached by any reasonable standards. 12.8. The following undisputed facts emerge from the documents placed before the Tribunal. The authenticity of these documents were never in question or denied: (i) An agreement of a huge magnitude, for leasing out five numbers of C X S transponders each of 8.1 MHz capacity and five numbers of S X C transponders each of 2.7 MHz capacity on the Primary Satellite-I (PS-I), was surprisingly and shockingly entered into by Antrix with Devas, without same being preceded by any auction/tender process. It appears from the letter dated 27.09.2004 sent by DEVAS LLC, USA to Shri K.R. Sridhara Murty, Executive Director of Antrix with copies to Dr. G. Madhavan Nair, Chairman, ISRO and others that Shri Ramachandran Viswanathan, met the then Chairman of ISRO and other officials in Bangalore in April-2003 and they met once again in Washington D.C. during the visit of the then Chairm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations Centre was constituted purportedly to examine the technical feasibility, risk management including possibilities of alternate uses of space segment, financial and market aspects and time schedule. According to the Report submitted by this Committee, DEVAS was conceived as a new national service expected to be launched by the end of 2006 that would deliver video, multimedia and information services via high powered satellite to mobile receivers in vehicles and mobile phones across India. The catch here lies in the fact that while it was possible to deliver some of these services via terrestrial mode, it was not possible at that point of time to provide this bouquet of services via satellite. Even today satellite phones are beyond the reach of a common man. Mobile receivers or devices which can simply receive audio and video content are different from mobile phones, which are capable of providing a two way communication. The technology for providing the services through mobile phones was not in existence at that time, which is why the proposal made by Forge Advisors included an expectation that such a service may be launched by the end of 2006. It was with this expectation/pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 2013, namely, the formation of the company for a fraudulent and unlawful purpose was clearly made out; (x) The kind of licenses obtained such as ISP and IPTV licenses and the object for which FIPB approvals were taken but showcased as those sufficient for fulfilling the obligations under the Agreement dated 28.01.2005 demonstrated that the affairs of the company were conducted in a fraudulent manner. This is fortified by the fact that a total amount of Rs.579 crores was brought in, but almost 85% of the said amount was siphoned out of India, partly towards establishment of a subsidiary in the US, partly towards business support services and partly towards litigation expenses. We do not know if the amount of Rs.233 crores taken out of India towards litigation services, also became a part of the investment in a more productive venture, namely, arbitration. The manner in which a misleading note was put to the cabinet and the manner in which the minutes of the meeting of TAG sub-committee were manipulated, highlighted by the Tribunal, also shows that the affairs of the company were conducted in a fraudulent manner. Thus, the second limb of Section 271(c), namely, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orance and escape the allegations of fraud. 12.9. An argument was advanced by the learned senior counsel for the appellants, on the basis of a statement contained in the order of NCI.AT that the allegations are prima facie made out, that a company cannot be ordered to be wound up on the basis of prima facie findings. The standard of proof required for winding up of a company cannot be prima facie. 82. The last aspect of the argument put forth by Mr. Dutt on the binding nature of the Civil Appeal No.5766/2021 pertains to the applicability of Article 144 of the Constitution of India in the present case. Article 144 reads as under: All authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. 83. Article 144 of the Constitution of India mandates that all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. The term aid mandates all authorities, civil and judicial which means all Courts to act in aid of the Supreme Court. The scope of Article 144 of the Constitution of India has been succinctly laid down by the Apex Court in Kantaru Rajeevaru (supra) wherein the Apex Court has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for challenging an arbitral award must be specifically pleaded and the Court cannot suo motu discover grounds of fraud and public policy. His contention is that Antrix has sought to introduce the grounds of challenge to the arbitral award relating to fraud and public policy of India by way of two amendment applications, which are barred by limitation and have not been decided by the Ld. Single Judge. He therefore has argued that it is erroneous on the part of the Ld. Single Judge to set aside the ICC Award on the grounds of fraud or the award being in conflict with the public policy of India. 86. Per contra, the ld. ASG, arguing for Respondent No. 1, has stated that the two amendment applications are not barred by limitation and the Courts have adequate power to exercise discretion and allow the amendment applications, which bring on record subsequent facts pertaining to the fraudulent conduct of Devas and its shareholders. He states that these facts are material for effective adjudication of the case and do not amount to raising fresh grounds in an ongoing proceedings. He has also argued that under the scheme of Section 34 of the Arbitration Act, it is not necessary for a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.] (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther note, however, that in the same paragraph, BVU states that there must be a causative link between any concealment aimed at deceiving the arbitral tribunal and the decision in favour of the concealing party. The appellants say that this link relates to the word induced in s 24(a) of the IAA and that therefore the word affected that follows induced must necessarily cover different and likely broader situations such as where an award is tainted by fraud (a) either in relation to the arbitration; or (b) where there is potentially fraud in the performance of the underlying contract. We comment that these two examples given by the appellants are in fact quite different: the first one is just a rephrasing of the trite proposition that fraud in the conduct of the arbitration is not permitted. The second (fraud in the performance of the underlying contract) makes no sense because if there was an allegation in the arbitration of fraud in the performance of the underlying contract, then of course that would be an issue determined by the arbitral tribunal, properly within its remit. If no allegation of fraud in performance was made by either party, then fraud would play no part i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy of India. On the other hand, Section 24 of the SIAA, is an additional ground, separate from the ground of award is in conflict with the public policy of this State which is provided for under Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration. Thus, the two provisions, while couched in similar terms, are different in their meaning, scope and applicability. Therefore, in light of the same, we find that the Appellants reliance upon the decision in Bloomberry Resorts and Hotels (supra) is misplaced, and the same is not applicable to the facts of the present case. 91. Having said that, it would be appropriate to understand how Courts in India, have interpreted the ground of an arbitral award being in conflict with the public policy of India, as provided for under Explanation 1(i) of Section 34(2)(b)(ii) of the Arbitration Act. 92. In Renusagar Power Co. Ltd. v. General Electric Co, (1994) Supp (1) SCC 644, the Court, was dealing with the enforcement of an arbitral award under the Foreign Awards (Recognition and Enforcement) Act, 1961. However, in order to interpret the words public policy , the Court relied upon Article V of the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India and the recognition and enforcement of the award of the Arbitral Tribunal cannot be questioned on the ground that it is contrary to the public policy of the State of New York. IV. Meaning of public policy‟ in Section 7(1)(b)(ii) of the Act 46. While observing that from the very nature of things, the expressions public policy , opposed to public policy or contrary to public policy are incapable of precise definition this Court has laid down: (SCC p. 217, para 92) Public policy connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. (See : Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156, 217 : 1986 SCC (L S) 429 : (1986) 1 ATC 103 : (1986) 2 SCR 278, 372].) ***** 63. In view of the absence of a workable definition of international public policy we find it difficult to construe the expression public policy in Article V(2)(b) of the New York Convention to mean international public policy. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant extracts of the decision are reproduced as under: 17. It will be seen that none of the grounds contained in sub-section (2)(a) of Section 34 deal with the merits of the decision rendered by an arbitral award. It is only when we come to the award being in conflict with the public policy of India that the merits of an arbitral award are to be looked into under certain specified circumstances. 18. In Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , the Supreme Court construed Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961: 7. Conditions for enforcement of foreign awards. ( 1) A foreign award may not be enforced under this Act *** (b) if the Court dealing with the case is satisfied that *** (ii) the enforcement of the award will be contrary to the public policy. In construing the expression public policy in the context of a foreign award, the Court held that an award contrary to (i) The fundamental policy of Indian law, (ii) The interest of India, (iii) Justice or morality, would be set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conscience of the court. Such award is opposed to public policy and is required to be adjudged void. *** 74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that: (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. (2) The court may set aside the award: (i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the heads contained in Saw Pipes [(2003) 5 SCC 705 : AIR 2003 SC 2629] judgment, we will first deal with the head fundamental policy of Indian law . It has already been seen from Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law. ***** 29. It is clear that the juristic principle of a judicial approach demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective. 30. The audi alteram partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows: 18.Equal treatment of parties. The pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score [ Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows: General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong . It is very important to bear this in mind when awards of lay arbitrators are challenged.] . Once it is found that the arbitrators approach is not arbitrary or capricious, then he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations to the said section are interesting for they explain to us the scope of the expression morality : (j) A, who is B's Mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1000 rupees to A. The agreement is void, because it is immoral. (k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Penal Code, 1860. ***** 39. This Court has confined morality to sexual morality so far as Section 23 of the Contract Act, 1872 is concerned, which in the context of an arbitral award would mean the enforcement of an award say for specific performance of a contract involving prostitution. Morality would, if it is to go beyond sexual morality necessarily cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. However, interference on this ground would also be only if something shocks the court's conscience. Patent Illegality 40. We now come to the fourth head of public policy, namely, patent illegality. It must be remembered that under the Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions both of law and of fact. The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other, which, though it is to be regretted, is now, I think firmly established viz. where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established. *** Now the regret expressed by Williams, J. in Hodgkinson v. Fernie [(1857) 3 CB (NS) 189 : 140 ER 712] has been repeated by more than one learned Judge, and it is certainly not to be desired that the exception should be in any way extended. An error in law on the face of the award means, in Their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. 35. It is important to notice that the ground for interference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice . This again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under public policy of India , would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. ***** 44. In Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , this Court dealt with a challenge to a foreign award u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality . What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... morality, such as prostitution, or awards seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day. [ Ssangyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] 96. The question of the power of a Court dealing with an application under Section 34 of the Arbitration Act to suo motu discover grounds of fraud and introduce additional grounds to a Section 34 application by way of an amendment application, even after the period prescribed in the statute has been answered by the Hon ble Supreme Court in its decisions in Hindustan Construction Company (supra) and Sal Udyog (supra). 97. In Hindustan Construction Company (supra) the Court was dealing with an amendment application for incorporation of additional grounds in an application under Section 34 or an appeal under Section 37. Similar to the present case, the amendment application had been filed after the period of limitation prescribed under Section 34(3). The Court in its decision has held as under: 29. There is no doubt that the application for setting aside an arbitral award under Section 34 of the 1996 Act has to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al award cannot be entertained after the period of three months plus the grace period of thirty days as provided in the proviso to sub-section (3) of Section 34, but, in our view, by an independent ground the Division Bench meant a ground amounting to a fresh application for setting aside an arbitral award. The dictum in the aforesaid decision was not intended to lay down an absolute rule that in no case an amendment in the application for setting aside the arbitral award can be made after expiry of period of limitation provided therein. 33. Insofar as Bijendra Nath Srivastava [(1994) 6 SCC 117] is concerned, this Court did not agree with the view of the High Court that the trial court did not act on any wrong principle while allowing the amendments to the objections for setting aside the award under the 1940 Act. This Court highlighted the distinction between material facts and material particulars and observed that amendments sought related to material facts which could not have been allowed after expiry of limitation. Having held so, this Court even then went into the merits of objection introduced by way of amendment. In our view, a fine distinction between what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot raise such an objection in the grounds spelt out in the Section 34 petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court, would also not be available to the respondent Company having regard to the language used in Section 34(2-A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the appellant State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Section 34(2-A) of the 1996 Act, a provision which would be equally available for application to an appealable order under Section 37 as it is to a petition filed under Section 34 of the 1996 Act. In other words, the respondent Company cannot be heard to state that the grounds available for setting aside an award under sub-section (2-A) of Section 34 of the 1996 Act could not have been invoked by the Court on its own, in exercise of the jurisdiction vested in it under Section 37 of the 1996 Act. Notably, the expression used in the sub-section is the Court fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discover on its own, patent illegality in the award and set it aside under Section 34(2A). It has further held that the provision, which enables a Court to act on its own in deciding an application under Section 34, would also be available in an appeal under Section 37 of the Act. 100. The phrase the Court finds that , which finds mention in both Section 34(2)(b) and Section 34(2A), allows the Court to look into the award and discover the grounds mentioned under Section 34(2)(b) and Section 34(2A) of the Arbitration Act. Consequentially, the phrase, enables the Court, to discover suo motu, whether an award is in conflict with the public policy of India. As a corollary, having regards to Explanation 1(i) of Section 34(2)(b) of the Arbitration Act, 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. We, therefore, find no merit in the submission of the Appellant herein, that a Section 34 Court does not have the power to suo motu discover grounds of public policy or fraud and set aside an arbitral award on this basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing preceded by any auction or tender process. It is also established that the minutes of the meeting of the Sub Comittee dated 06.01.2009 were manipulated and an experimental license was granted on 07.05.2009 and the original minutes were restored on 20.11.2009 after protest. 101.3. It is also established that Devas, with a fraudulent motive and unlawful object, used the Devas Agreement to bring in money into India and divert it using dubious methods. This is evidenced by the fact that Devas brought into India an amount of Rs. 579 crores, but took out of India, an amount of Rs. 489 crores soon after. This diversion of funds has been held to be in violation of the ISP license upon which Devas was operating. 101.4. It is pertinent to note that, at the time of entering into the Devas Agreement, Devas did not have the technology, infrastructure or experience to perform their obligations under the Agreement, and even after termination of the Agreement, Devas was not carrying on any business operations in India. 102. A reading of the aforesaid facts clearly establishes that the fraudulent conduct of Devas begins from the very incorporation of the company and extends to the Devas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mind to the amendment application also and has taken it into consideration while deciding the application under Section 34 of the Arbitration Act and the issue as to whether the making of award was vitiated by fraud or corruption. 104. We therefore see no perversity in the decision of the Ld. Single Judge to set 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. 105. The last aspect to be considered is the contention of the Learned Senior Counsel for the Appellant herein that the general observations regarding fraud cannot be applied while considering an application under Section 34 of the Arbitration Act without satisfying the ingredients of Sections 17 19 of the Indian Contract Act, 1872. It is his case that a general principle of fraud cannot be applied when there are specific provisions, namely Sections 17 19 of the Indian Contract Act, 1872 and Explanation 1(i) to Section 34(2)(b)(ii) of the Arbitration Act, which would prevai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these matters. Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. 16. Fraud is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter. 17. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. 18. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. xxx 23. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. xxx 25. Although in a given case a deception may not amount to fraud, fraud is anathema to all e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata . (See Ram Chandra Singh v. Savitri Devi [(2003) 8 SCC 319] .) xxx 16. In Lazarus Estates Ltd. v. Beasley [(1956) 1 QB 702 : (1956) 1 All ER 341 : (1956) 2 WLR 502 (CA)] Lord Denning observed at QB pp. 712 and 713 : (All ER p. 345 C) No judgment of a court, no order of a minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. In the same judgment Lord Parker, L.J. observed that fraud vitiates all transactions known to the law of however high a degree of solemnity . (p. 722) These aspects were recently highlighted in State of A.P. v. T. Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Fraud is always viewed seriously by Courts and any act or conspiracy, of fraud or deception, done with a view to deprive the rights of others in relation to a property would render such a transaction void ab initio. A party which commits such fraud or deception cannot be permitted to reap its benefits, especially by taking advantage of the judicial process, including in subsequent or collateral proceedings, as doing so would result in the Court enabling the perpetuation of fraud. Such an interpretation would be absurd and would lead to disastrous outcomes. 111. We see no merit in the submission that the principle of fraud vitiates all solemn acts is a general principle and a special provision will prevail over the same. Even in instances where the subsequent proceedings or a collateral proceeding pertains to the application of a special provision on fraud, the factum of fraud having been established in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies 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 (supra) 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 Civil Appeal No.5766/2021 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Civil Appeal No.5766/2021 has held that the commercial relationship between Devas and Antrix is a product of fraud, and as a consequence, the Devas ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
