Arbitration
proceedings, including Section 9, are initiated pursuant to an Arbitration
Agreement, where under, terms and conditions of Arbitration are reduced in
writing. The parties are at liberty to choose the seat & venue of
arbitration and also the applicable law. Recently, the Hon’ble Bombay High
Court in Avitel Post Studioz Ltd & ors.Vs HSBC PI Holdings (Mauritius) Ltd dealt an interesting issue, wherein under, the Parties agreed
that laws of Singapore will be applicable to arbitration proceeding, and
with regard to the Indian Law, applicability of Part-I of the Arbitration
and Conciliation Act, 1996 was excluded except Section 9 of the Act. Award
was passed as per the laws of Singapore in favour of the Respondent,
thereafter, Respondent approached the Hon’ble Court under Section 9 of the Act.
Appellant denied the applicability of the Singapore law and also the award
passed under the laws of Singapore. After perusing the Arbitration Agreement, the
Hon’ble Court rejected the contention of
the Appellant and held as under:
22] In our
opinion, there is no necessity to decide the submission premised upon the
principle of issue estoppel in
the present proceedings. This is because we are satisfied that in the present
case the law governing arbitration would be the law of Singapore. Clause 15 of
the SSA, provides that agreement shall be governed by and construed in accordance
with the law of Republic of India without regard to applicable conflict of laws
principles. Clause 16 of SSA, provides that the seat of arbitration shall be at
Singapore and the arbitration shall be in accordance with SIAC Rules. Further,
Clause 16.4 of the SSA makes it clear that save and except section 9 of the
Act, Part I thereof is not to apply to the terms of the arbitration agreement.
The Supreme Court in National Thermal
Power Corporation (supra) and Sumitomo Heavy Industries Ltd. (supra) has
held that normally the law of arbitration agreement is the same as the
substantive law of contract, unless a different intention is either expressed
or implied. In light of categorical provisions contained in SSA and SHA, it is
clear that the parties have expressly or in any case by implication agreed that
the law of arbitration shall be the SIAC Rules, i.e., laws of Singapore.
24] In any
case, if the entire decision of the Supreme Court in Bharat Aluminium (supra) is to be regarded as having only a
prospective effect, even then the principles in cases of National Thermal Power Corporation (supra)
and Sumitomo Heavy Industries Ltd. (supra), would apply. In fact, this
is the case set up by the appellants themselves. Therefore, even by applying
the principles in the said cases to the facts and circumstances of the present
case, we cannot fault the decision of the learned Single Judge that the parties
either expressly, or in any case by implication intended to exclude the applicability
of Part I of the Act, save and except section 9 of the Act thereof. This is
clear from reference to Clause 16 of, as well as analogous clauses in, the SHA.”
The
Appellant further contended that the Tribunal is not competent to deal with
fraud and misrepresentation, especially, when the Respondent has lodged FIR against
Appellant. The Hon’ble High Court rejected this contention also and in an very
interesting way, held as under;
30] Having
considered the aforesaid submissions and having perused the decisions as
aforesaid, we are of the opinion, that said judgments do not lay down any
general or peremptory rule that allegations of fraud, in all cases, are
incapable of settlement by arbitration under the law of India. There is a real though
subtle difference between 'suitability'
and 'arbitrability' in the
context of subject matter of disputes. In order to be conscious of this
difference, regard shall have to be had to the nature of allegations, the
context in which the same are made and the ultimate relief which is being
applied for on basis of such allegations. If the subject matter of dispute has
an eminently civil profile, then it may not be proper to conclude that the
subject matter of dispute is incapable of settlement by arbitration, merely because
fraud or misrepresentation as defined under Section 17 and 18 of the Indian
Contract Act, 1872 may have been alleged as one of the grounds for questioning
the contract.
31]
In the context of provisions of Contract Act 1872, fraud and misrepresentation
are some of the well accepted grounds for questioning validity of a contract by
the entity, upon whom the same are alleged to have been practised. Section 10
of the Contract Act, 1872 provides that all agreements are contracts, if they
are made by free consent of the parties, competent to contract, for lawful
consideration, with lawful object which is not expressly declared to be void.
Therefore, 'free consent' is
one of the essential ingredients for a valid contract under the Contract Act.
Section 13 of the Contract Act provides that two or more persons are said to
consent, when they agree upon the same thing in the same sense. Section 14 of
the Contract Act provides that a consent is said to be 'free' when it is not caused, inter alia by 'fraud'
as defined under section 17 or 'misrepresentation'
as defined under section 18 of the Contract Act. Sections 17 and 18 of the Contract
Act define in great details, the expressions 'fraud' and 'misrepresentation'.
The principle difference between fraud and misrepresentation is that in
cases of fraud the person, who makes the representation does not himself
believe it to be true, whilst in cases of misrepresentation, the person himself
believes it to be true. Thus, 'fraud' and 'misrepresentation' as defined under sections 17 and 18 of the Contract Act are well
accepted grounds which would vitiate 'free consent' and consequently the
contract itself. Therefore, as a general rule, it cannot be said that the
moment allegations of fraud and misrepresentation are made in the context of a
contract, the subject matter of the dispute is rendered incapable of resolution.”
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