SC on scope of arbitration proceedings.


Court :
Supreme Court of India

Brief :
The bench comprising of Justice A.K. Patnaik and Justice Fakkir Mohamed Ibrahim Kalifulla set aside the order passed by Bombay High Court restraining World Sport Group from proceeding with arbitration against MSM Satellite over dispute of facilitation fee for acquiring broadcast rights of the Indian Premier League (IPL)

Citation :
SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd. [(2011) 14 SCC 66] Premium Nafta Products Ltd. v. Fili Shipping Company Ltd. & Ors. [2007] UKHL 40] N. Radhakrishnan v. Maestro Engineers & Ors. [(2010) 1 SCC 72] Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak [AIR 1962 SC 406]

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.   895    OF 2014

(Arising out of S.L.P. (C) No. 34978 of 2010)

Reportable

 

World Sport Group (Mauritius) Ltd.                  … Appellants

Versus

MSM Satellite (Singapore) Pte. Ltd.                 …

Respondent

A. K. PATNAIK, J.

Leave granted.

J U D G M E N T

2. This is an appeal against the order dated 17.09.2010 

of  the Division Bench of  the Bombay High Court  in 

Appeal (Lodging) No.534 of 2010.

Facts:

3. The  facts  very  briefly  are  that  on  30.11.2007  the 

Board of Control for Cricket in India (for short ‘BCCI’) 

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invited tenders for IPL (Indian Premier League) Media 

Rights for a period of ten years from 2008 to 2017 on 

a worldwide basis.  Amongst the tenders submitted, 

the bid of World Sports Group India (for short ‘WSG 

India’)  was  accepted  by  BCCI.   By  a  pre-bid 

arrangement,  however,  the respondent  was  to  get 

the media rights for the sub-continent for the period 

from 2008 to 2010.  Accordingly, on 21.01.2008 BCCI 

and  the  respondent  entered  into  a  Media  Rights 

License Agreement for the period from 2008 to 2012 

for  a sum of  US$274.50 million.   After  the first IPL 

season,  the BCCI  terminated the agreement  dated 

21.01.2008 between BCCI and the respondent for the 

Indian  sub-continent  and  commenced  negotiations 

with WSG India.  On 14.03.2009, the respondent filed 

a  petition  under  Section  9  of  the  Arbitration  and 

Conciliation Act, 1996 (for short ‘the Act’) against the 

BCCI  before  the  Bombay  High  Court  praying  for 

injunction  against  the  BCCI  from  acting  on  the 

termination  letter  dated  14.03.2009  and  for 

preventing BCCI  from granting the rights under the 

agreement  dated  21.01.2008  to  any  third  party. 

Pursuant to the negotiations between BCCI and WSG 

India,  BCCI  entered  into  an  agreement  with  the 

appellant whereunder the media rights for the Indian 

sub-continent  for  the  period  2009  to  2017  was 

awarded to the appellant for a value of Rs.4,791.08 

crores.   To operate  the media  rights  in India,  the 

appellant was required to seek a sub-licensee within 

seventy  two hours.   Though,  this  time period was 

extended twice, the appellant was not able to get a 

sub-licensee.   Thereafter,  the appellant  claimed to 

have allowed media rights  in India to  have lapsed 

and  then  facilitated  on  25.03.2009,  a  new Media 

Rights License Agreement between the BCCI and the 

respondent for the Indian sub-continent for the same 

contract value of Rs.4,791.08 crores.  BCCI and WSG 

India, however, were to continue with the Rest of the 

World media rights.

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4. On  25.03.2009,  the  appellant  and  the  respondent 

also executed the Deed for  Provision of  Facilitation 

Services (hereinafter  referred to as ‘the Facilitation 

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Deed’) whereunder the respondent was to pay a sum 

of Rs.425 crores to the appellant as facilitation fees. 

Clause 9 of  the Facilitation Deed dated 25.03.2009 

between the appellant and the respondent was titled 

‘Governing Law’ and read as follows:

“9. GOVERNING LAW

This Deed shall be governed by and construed

in accordance with the laws of  England and

Wales,  without  regard  to  choice  of  law 

principles. All actions or proceedings arising in 

connection with,  touching upon or relating to

this Deed, the breach thereof and/or the scope

of  the  provisions  of  this  Section  shall  be

submitted  to  the  International  Chamber  of

Commerce  (the  “Chamber”)  for  final  and

binding  arbitration  under  its  Rules  of

Arbitration,  to  be  held  in  Singapore,  in  the

English  language  before  a  single  arbitrator

who shall be a retired judge with at least ten

years  of  commercial  experience.  The

arbitrator  shall  be  selected  by  mutual

agreement  of  the  Parties,  or,  if  the  Parties

cannot  agree,  then by striking from a list of

arbitrators  supplied  by  the  Chamber.  If  the

Parties are unable to agree on the arbitrator,

the Chamber shall  choose one for them.  The

arbitration shall  be a confidential  proceeding,

closed  to  the  general  public.  The  arbitrator

shall assess the cost of the arbitration against

the  losing  party.  In  addition,  the  prevailing

party  in  any  arbitration  or  legal  proceeding

relating to this  Deed shall  be entitled to all

reasonable  expenses  (including,  without

limitation,  reasonable  attorney’s  fees).

Notwithstanding the foregoing,  the arbitrator

may require that such fees be borne in such 

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other manner as the arbitrator determines is

required in order for this arbitration provision

to be enforceable under  applicable law.  The

arbitrator shall issue a written opinion stating

the  essential  findings  and  conclusions  upon

which  the  arbitrator’s  award  is  based.  The

arbitrator  shall  have  the  power  to  enter

temporary restraining orders and preliminary

and permanent injunctions. No party shall  be

entitled  or  permitted  to  commence  or

maintain  any  action  in  a  court  of  law with

respect  to  any  matter  in  dispute  until  such

matter  shall  have  been  submitted  to

arbitration as herein provided and then only

for the enforcement of the arbitrator’s award;

provided,  however,  that  prior  to  the

appointment of the arbitrator or for remedies

beyond the jurisdiction of an arbitrator, at any

time, any party may seek equitable relief in a

court  of  competent  jurisdiction in Singapore,

or such other court that may have jurisdiction

over  the Parties,  without  thereby waiving its

right  to  arbitration  of  the  dispute  or

controversy under  this section.  THE PARTIES

HEREBY WAIVE THEIR RIGHT  TO JURY TRIAL

WITH RESPECT  TO ALL  CLAIMS AND ISSUES

ARISING  UNDER,  IN  CONNECTION  WITH,

TOUCHING UPON OR RELATING TO THIS DEED,

THE BREACH THEREOF AND/OR THE SCOPE OF

THE PROVISIONS OF THIS SECTION, WHETHER

SOUNDING  IN  CONTRACT  OR  TORT,  AND

INCLUDING  ANY  CLAIM  FOR  FRAUDULENT

INDUCEMENT THEREOF.”

5. The  respondent  made  three  payments  totaling 

Rs.125 crores to the appellant under the Facilitation Deed 

during  2009  and  did  not  make  the  balance  payment. 

Instead,  on  25.06.2010,  the  respondent  wrote  to  the 

appellant rescinding the Facilitation Deed on the ground 

that it was voidable on account of misrepresentation and 

fraud.   On  25.06.2010,  the  respondent  also  filed  Suit 

No.1869  of  2010  for  inter  alia a  declaration  that  the 

Facilitation  Deed  was  void  and  for  recovery  of  Rs.125 

crores already paid to the appellant.  On 28.06.2010, the 

appellant  acting under Clause 9 of  the Facilitation Deed 

sent a request for arbitration to ICC Singapore and the ICC 

issued a notice to the respondent to file its answer to the 

request for arbitration.  In the meanwhile, on 30.06.2010, 

the respondent filed a second suit, Suit No.1828 of 2010, 

before the Bombay High Court  against the appellant  for 

inter alia a declaration that as the Facilitation Deed stood 

rescinded,  the appellant  was  not  entitled to  invoke the 

arbitration clause in the Facilitation Deed.  The respondent 

also filed an application for temporary injunction against 

the  appellant  from  continuing  with  the  arbitration 

proceedings commenced by the appellant under the aegis 

of ICC.

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6. On  09.08.2010,  the  learned  Single  Judge  of  the 

Bombay  High  Court  dismissed  the  application  for 

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temporary  injunction  of  the  respondent  saying  that  it 

would  be  for  the  arbitrator  to  consider  whether  the 

Facilitation  Deed  was  void  on  account  of  fraud  and 

misrepresentation  and  that  the  arbitration  must, 

therefore,  proceed and the Court  could not  intervene in 

matters  governed  by  the  arbitration  clause.   The 

respondent  challenged  the  order  of  the  learned  Single 

Judge before the Division Bench of the Bombay High Court 

and by  the impugned order,  the Division Bench of  the 

Bombay  High  Court  allowed  the  appeal,  set  aside  the 

order of the learned Single Judge and passed an order of 

temporary  injunction  restraining  the  arbitration  by  ICC. 

Aggrieved, the appellant has filed this appeal.

Contentions on behalf of the appellant:

7. Mr.  K.K.  Venugopal,  learned senior  counsel  for  the 

appellant,  submitted that the Division Bench of the High 

Court failed to appreciate that the Bombay High Court had 

no jurisdiction to pass an order of injunction restraining a 

foreign  seated  international  arbitration  at  Singapore 

between the parties, who were not residents of India.  In 

this  context,  he referred to Clause 9 of  the Facilitation 

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Deed which stipulated that any party may seek equitable 

relief in a court of competent jurisdiction in Singapore, or 

such  other  court  that  may  have  jurisdiction  over  the 

parties.  He submitted that on the principle of Comity of 

Courts,  the Bombay High Court  should have refused to 

interfere  in  the  matter  and  should  have  allowed  the 

parties  to  resolve their  dispute  through ICC arbitration, 

subject  to  the  jurisdiction  of  the  Singapore  courts  in 

accordance with Clause 9 of the Facilitation Deed.

8. Mr.  Venugopal  next  submitted  that  the  Division 

Bench of  the High Court  failed to appreciate that  under 

Section 45 of the Act, the Court seized of an action in a 

matter  in  respect  of  which  the  parties  have  made  an 

agreement  referred  to  in  Section  44  has  to  refer  the 

parties to arbitration,  unless it finds that the agreement 

referred to in Section 44 is null  and void,  inoperative or 

incapable  of  being  performed.   He  submitted  that  the 

agreement  referred  to  in  Section  44  of  the  Act  is  ‘an 

agreement in writing for arbitration’ and, therefore, unless 

the  Court  finds  that  the  agreement  in  writing  for 

arbitration is  null  and void,  inoperative or  incapable of 

being performed,  the Court  will  not  entertain a dispute 

covered by the arbitration agreement and refer the parties 

to the arbitration.  In support of this submission, he relied 

on  the  decision  of  this  Court  in  Chloro  Controls  India 

Private Limited v.  Seven Trent  Water  Purification Inc.  & 

Ors.  [(2013) 1 SCC 641].

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9. Mr.  Venugopal  submitted that the Division Bench of 

the  High  Court,  instead  of  examining  whether  the 

agreement  in  writing for  arbitration  was  null  and void, 

inoperative or incapable of being performed, has held that 

the  entire  Facilitation  Deed  was  vitiated  by  fraud  and 

misrepresentation  and  was,  therefore,  void.   He 

vehemently  submitted  that  it  was  for  the  arbitrator  to 

decide whether the Facilitation Deed was void on account 

of fraud and misrepresentation as has been rightly held by 

the learned Single Judge and it was not for the Court to 

pronounce on whether the Facilitation Deed was void on 

account  of  fraud and misrepresentation.   He referred to 

Article 6(4) of the ICC Rules of Arbitration which permits 

the Arbitral  Tribunal  to  continue to exercise jurisdiction 

and adjudicate  the claims  even if  the main contract  is 

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alleged to be null  and void or  non-existent  because the 

arbitration  clause  is  an  independent  and  distinct 

agreement.   He  submitted  that  this  principle  of 

Kompetenz Kompetenz has been recognized in Section 16 

of  the  Act  under  which  the  Arbitral  Tribunal  has  the 

competence  to rule on its  own jurisdiction and on this 

point  relied  on  National  Insurance  Co.  Ltd.  v.  Boghara 

Polyfab Pvt. Ltd. [(2009) 1 SCC 267] and Reva Electric Car  

Company Private Ltd.  v.  Green Mobil [(2012) 2 SCC 93]. 

He submitted that as a corollary to this principle,  Courts 

have also held that  unless  the arbitration clause itself, 

apart from the underlying contract, is assailed as vitiated 

by fraud or  misrepresentation,  the Arbitral  Tribunal  will 

have jurisdiction to decide all issues including the validity 

and scope of  the arbitration agreement.   He submitted 

that in the present case, the arbitration clause itself was 

not assailed as vitiated by fraud or misrepresentation.  In 

support of this argument, he relied on the decision of the 

House of  Lords  in  Premium Nafta  Products  Ltd.   v.  Fili  

Shipping  Company  Ltd.  &  Ors. [2007]  UKHL  40],  the 

decision of the Supreme Court of United States in Buckeye 

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Check Cashing, Inc. v.  John Cardegna et al [546 US 440 

(2006)] and the decision of this Court in Branch Manager, 

Magma  Leasing  and  Finance  Ltd.  &  Anr.  v.  Potluri  

Madhavilata & Anr. [(2009) 10 SCC 103]. 

10. Mr.  Venugopal  submitted that the Division Bench of 

the High Court relied on the decision in N. Radhakrishnan 

v. Maestro Engineers & Ors. [(2010) 1 SCC 72] to hold that 

serious  allegations  of  fraud can only be enquired by  a 

Court  and not  by an arbitrator,  but  the Division Bench 

failed to appreciate that in  N.  Radhakrishnan v.  Maestro 

Engineers & Ors. (supra) this Court relied on Abdul Kadir  

Shamsuddin Bubere v.  Madhav Prabhakar Oak [AIR 1962 

SC 406] in which it was observed that it is only a party 

against  whom a  fraud  is  alleged  who  can  request  the 

Court  to inquire into the allegations of  fraud instead of 

allowing  the  arbitrator  to  decide  on  the  allegations  of 

fraud.   In the present  case,  the respondent  has alleged 

fraud  against  the  appellant  and  thus  it  was  for  the 

appellant to make a request to the Court to decide on the 

allegations of  fraud instead of  referring the same to the 

arbitrator,  and no such request  has  been made by the 

appellant.   He  further  submitted  that  in  any  case  the 

judgment  of  this  Court  in  N.  Radhakrishnan v.  Maestro 

Engineers & Ors. (supra) was rendered in the context of 

domestic  arbitration  in  reference  to  the  provisions  of 

Section 8 of the Act.  He submitted that the language of 

Section 45 of  the Act,  which applies to an international 

arbitration, is substantially different from the language of 

Section 8 of the Act and it will be clear from the language 

of  Section  45  of  the  Act  that  unless  the  arbitration 

agreement  is null  and void,  inoperative or  incapable of 

being performed,  the parties will  have to be referred to 

arbitration  by  the  Court.   In  the  present  case,  the 

respondent  has  not  made  out  that  the  arbitration 

agreement  is null  and void,  inoperative or  incapable of 

being performed.  

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11. Mr.  Venugopal  submitted  that  the  High  Court  has 

taken a view that Clause 9 forecloses an open trial  in a 

court  of  law except  to the extent  permitted therein and 

the parties have to  necessarily submit  themselves  to a 

confidential  proceeding  which  is  closed  to  the  general 

public.   He submitted that  the Bombay High Court  thus 

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appears to have held that Clause 9 is opposed to public 

policy and, in particular, Sections 23 and 28 of the Indian 

Contract Act,  1872.  He submitted that  in any case the 

arbitration  agreement  contained  in  Clause  9  of  the 

Facilitation Deed cannot be held to be opposed to public 

policy and void under  Sections 23 and 28 of  the Indian 

Contract Act, 1872.  This will be clear from Exception 1 of 

Section 28 of  the Indian Contract Act,  1872, which says 

that  the  section  shall  not  render  illegal  a  contract,  by 

which two or more persons agree that any dispute which 

may arise between them in respect of any subject or class 

of  subjects shall  be referred to arbitration and that  only 

the  amount  awarded  in  such  arbitration  shall  be 

recoverable  in  respect  of  the  dispute  so  referred.   He 

explained  that  under  the  American  Law,  in  a  suit  for 

common law where the value of claim is more than US$20, 

the right to jury trial is preserved and this applies even in 

relation  to  claims  for  breach  of  contract  and  for  this 

reason,  the parties made a provision in Clause 9 of  the 

Facilitation  Deed  waiving  their  right  to  jury  trial  with 

respect  to  all  claims  and  issues  arising  under,  in 

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connection  with,  touching  upon  or  relating  to  the 

Facilitation  Deed.   He  submitted  that  this  provision  in 

Clause  9 of  the Facilitation Deed cannot,  therefore,  be 

held to be opposed to public policy.                   

12. Mr.  Venugopal  next  submitted that  the crux of  the 

case  of  the  respondent  is  set  out  in  its  letter  dated 

25.06.2010 to the appellant in which it was alleged that 

‘in view of the false misrepresentations and fraud played 

by WSGM the deed is voidable at the option of our client  

and  thus  our  client  rescinds  the  deed  with  immediate  

effect’.   In other words,  the respondent’s case is that  it 

was induced to enter into the Facilitation Deed on account 

of the misrepresentation by the appellant and was led to 

believe  that  it  was  paying  the  facilitation  fees  to  the 

appellant  to allow the rights  of  the appellant  under  an 

alleged  agreement  dated  23.03.2009  to  lapse,  but  the 

respondent  subsequently  discovered  that  there  was  no 

agreement  dated  23.03.2009  and  the  rights  of  the 

appellant  had  come  to  an  end  on  24.03.2009.   He 

submitted that the appellant has denied these allegations 

of the respondent in its affidavit-in-reply filed before the 

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Bombay  High  Court  and  that  there  was  no  false 

representation and fraud as alleged by the respondent. 

He submitted that the Facilitation Deed was executed by 

the senior  executives of  the parties and in the case of 

respondent,  it was signed by Michael  Grindon,  President, 

International,  Sony Picture Television,  and the appellant 

and the respondent had entered into the Facilitation Deed 

after consulting their sports media experts and after a lot 

of negotiations. He submitted that in fact a Press Release 

was issued by the respondent  on 23.04.2010, which will 

go to show that there was no misrepresentation and fraud 

by the appellant before the Facilitation Deed was signed 

by the parties, and thus the entire case of the respondent 

that  the  Facilitation  Deed  was  vitiated  by 

misrepresentation and fraud is false. 

13. Mr.  Venugopal  finally submitted that it will  be clear 

from the language of  the letter dated 25.06.2010 of the 

respondent  to  the  appellant  that  according  to  the 

respondent  the  Facilitation  Deed  was  voidable  at  the 

option  of  the  respondent.   He  submitted  that  under 

Section 45 of  the Act,  the Court  will  have to  refer  the 

parties to the arbitration unless it finds that the arbitration 

agreement  is  ‘null  and  void’.   He  argued  that  an 

agreement which is voidable at the option of one of the 

parties is not  the same as the agreement  which is void 

and,  therefore,  the  Division  Bench  of  the  High  Court 

should have referred the parties to arbitration instead of 

restraining the arbitration.   According to Mr.  Venugopal, 

this is a fit case in which this Court should set aside the 

impugned order of  the Division bench of  the High Court 

and restore the order of  the learned Single Judge of  the 

High Court.   

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Contentions on behalf of the respondent:

14.  In  reply,  Mr.  Gopal  Subramanium,  learned  senior 

counsel  appearing for the respondent,  submitted that 

the  Division  Bench  of  the  Bombay  High  Court  has 

rightly restrained the arbitration proceedings under the 

aegis  of  ICC  as  the  Facilitation  Deed,  which  also 

contains the arbitration agreement in Clause 9, is void 

because  of  fraud  and  misrepresentation  by  the 

appellant.   He submitted that  Section 45 of  the Act 

makes it clear that the Court will not refer the parties 

to arbitration if  the arbitration agreement  is null  and 

void, inoperative or incapable of being performed and 

as  the  respondent  has  taken  the  plea  that  the 

Facilitation  Deed,  which  contained  the  arbitration 

agreement,  is  null  and  void  on  account  of 

misrepresentation  and fraud,  the  Court  will  have  to 

decide  whether  the  Facilitation  Deed  including  the 

arbitration agreement in Clause 9 was void on account 

of  fraud and misrepresentation by the appellant.   He 

submitted that the respondent filed the first suit in the 

Bombay  High  Court  (Suit  No.1869  of  2010)  for 

declaring the Facilitation Deed as null and void but in 

the  said  suit,  the  appellant  did  not  file  a  written 

statement and instead issued the notice for arbitration 

only to frustrate the first suit and in the circumstances 

the respondent was compelled to file the second suit 

(Suit No.1828 of 2010) for an injunction restraining the 

arbitration.

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15.   Mr.   Subramanium submitted that  Section 9 of  the 

Code  of  Civil  Procedure,  1908  (for  short  ‘the  CPC’) 

confers upon the court jurisdiction to try all civil  suits 

except  suits  which  are either  expressly  or  impliedly 

barred.   He submitted that  the Bombay High Court, 

therefore, had the jurisdiction to try both the first suit 

and  the  second  suit  and  there  was  no  express  or 

implied bar  in Section 45 of  the Act  restraining the 

Bombay High Court to try the first suit and the second 

suit.  He submitted that in India as well as in England, 

Courts  have  power  to  issue  injunctions  to  restrain 

parties from proceeding with arbitration proceedings in 

foreign countries.   In support  of  this  submission,  he 

relied on  V.O.  Tractoroexport,  Moscow v.  Tarapore & 

Company and Anr.  [(1969) 3 SCC 562] and  Oil  and 

Natural Gas Commission v. Western Company of North  

America [(1987) 1 SCC 496].  He also relied on Russel 

on  Arbitration,  para  7-056,  7-058,  and  Claxton 

Engineering  v.  Txm olaj  –  es  gaz  Kutao  Ktf [2011] 

EWHC 345 (COMM.).

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16.   Mr. Subramanium relying on the decision of this Court 

in Chloro Controls India Private Limited v. Seven Trent  

Water Purification Inc. & Ors.   (supra)  submitted that 

Section 45 of the Act casts an obligation on the court to 

 

determine  the  validity  of  the  agreement  at  the 

threshold itself because this is an issue which goes to 

the root of the matter and a decision on this issue will 

prevent  a  futile  exercise  of  proceedings  before  the 

arbitrator.  He submitted that under Section 45 of the 

Act  the  Court  is  required  to  consider  not  only  a 

challenge  to  the  arbitration  agreement  but  also  a 

serious  challenge  to  the  substantive  contract 

containing  the  arbitration  agreement.   He  cited  the 

decision of  this Court  in  SMS Tea Estates (P)  Ltd.  v.  

Chandmari  Tea  Co.  (P)  Ltd. [(2011)  14  SCC  66]  in 

support  of  this  argument.   He  submitted  that  the 

contention on behalf  of  the appellant  that  the Court 

has  to  determine  only  whether  the  arbitration 

agreement contained in the main agreement is void is, 

therefore, not correct.

1

17.  Mr. Subramanium next submitted that in cases where 

allegations  of  fraud  are  prima  facie  made  out,  the 

judicial  trend  in  India  has  been  to  have  them 

adjudicated by the Court.  In this context, he referred 

to  the  decisions  of  this  Court  in  Abdul  Kadir  

Shamsuddin Bubere v. Madhav Prabhakar Oak (supra), 

Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. 

[(1999) 5 SCC 688] and  N.  Radhakrishnan v.  Maestro 

Engineers & Ors. (supra).  In reply to the submission of 

Mr.  Venugopal  that  it  was  only  the  parties  against 

whom the allegations are made who can insist on the 

allegations  being  decided  by  the  Court,  Mr. 

Subramanium submitted  that  in  the  decision  of  the 

Madras High Court in H.G. Oomor Sait v. O Aslam Sait 

[(2001)  3  CTC  269  (Mad)]  referred  to  in  N.  

Radhakrishnan v. Maestro Engineers & Ors. (supra) the 

situation was reverse.

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18.  Mr. Subramanium next submitted that the facts in this 

case  prima  facie  establish  that  a  grave  fraud  was 

played by the appellant not only upon the respondent 

but also on the BCCI.  He argued that the Facilitation 

Deed ultimately deals with media rights belonging to 

the BCCI and it has been held by this Court in M/s Zee 

Tele Films Ltd. & Anr. v. Union of India & Ors. [AIR 2005 

SC 2677] that BCCI is a public body.  He submitted that 

the  Division  Bench  of  the  Bombay  High  Court  has, 

therefore,  rightly taken the view that  the disputes in 

this case cannot  be kept  outside the purview of  the 

Indian  Courts  and if  arbitration  is  allowed  to  go  on 

without  BCCI,  the interest  of  BCCI  will  be adversely 

affected.   He  submitted  that  having  regard  to  the 

magnitude of  fraud alleged in the present  case,  the 

disputes were incapable of  being arbitrated.   Relying 

on Booz Allen & Hamilton v. SBI Home Finance [(2011) 

5 SCC 532], Haryana Telecom Ltd. v. Sterlite Industries  

(India)  Ltd.  (Supra),  India Household and Healthcare 

Ltd. v. LG Household and Healthcare Ltd. [(2007) 5 SCC 

510]  and  N.  Radhakrishnan v.  Maestro Engineers & 

Ors. (supra),  he  submitted  that  such  allegations  of 

fraud can only be inquired into by the court and not by 

the arbitrator.  

Findings of the Court:

2

19. The question that we have to decide is whether the 

Division  Bench  of  the  Bombay  High  Court  could  have 

passed the order of injunction restraining the arbitration at 

Singapore between the parties.   As  various contentions 

have been raised by Mr.  Venugopal,  learned counsel  for 

the appellant, in support of the case of the appellant that 

the Division Bench of  the Bombay High Court  could not 

have  passed  the  order  of  injunction  restraining  the 

arbitration at Singapore, we may deal with each of these 

contentions  separately  and  record  our  findings.   While 

recording  our  findings,  we  will  also  deal  with  the 

submissions made by Mr. Gopal Subramanium on behalf of 

respondent in reply to the contentions of Mr. Venugopal. 

We will also consider the correctness of the findings of the 

Division Bench of the Bombay High Court separately.

20.   We are unable to accept the first contention of Mr. 

Venugopal  that  as  Clause  9  of  the  Facilitation  Deed 

provides  that  any  party  may  seek  equitable  relief  in a 

court of competent jurisdiction in Singapore, or such other 

court  that  may  have  jurisdiction  over  the  parties,  the 

Bombay High Court  had no jurisdiction to  entertain the 

suit and restrain the arbitration proceedings at Singapore 

because of the principle of Comity of Courts.   In Black’s 

Law  Dictionary,  5

th

 Edition,  Judicial  Comity,  has  been 

explained in the following words:

2

2

“Judicial comity.  The principle in accordance

with  which  the  courts  of  one  state  or

jurisdiction will  give effect  to  the laws  and

judicial decisions of another, not as a matter

of  obligation,  but  out  of  deference  and

respect.”

Thus, what is meant by the principle of  “comity” is that 

courts of  one state or  jurisdiction will  give effect to the 

laws and judicial decisions of another state or jurisdiction, 

not  as a matter  of  obligation but  out  of  deference and 

mutual respect.  In the present case no decision of a court 

of foreign country or no law of a foreign country has been 

cited on behalf of the appellant to contend that the courts 

in India out of  deference to such decision of  the foreign 

court  or  foreign  law  must  not  assume  jurisdiction  to 

restrain  arbitration  proceedings  at  Singapore.   On  the 

other  hand,  as  has  been  rightly  submitted  by  Mr. 

Subramanium,  under Section 9 of the CPC,  the courts in 

India  have  jurisdiction  to  try  all  suits  of  a  civil  nature 

excepting suits of which cognizance is either expressly or 

impliedly barred.  Thus, the appropriate civil court in India 

has jurisdiction to entertain the suit and pass appropriate 

orders in the suit by virtue of  Section 9 of  the CPC and 

Clause 9 of the Facilitation Deed providing that courts in 

Singapore or any other court having jurisdiction over the 

parties can be approached for equitable relief  could not 

oust  the  jurisdiction  of  the  appropriate  civil  court 

conferred by Section 9 of the CPC.  We find that in para 64 

of  the  plaint  in  Suit  No.1828  of  2010  filed  before  the 

Bombay High Court by the respondent, it is stated that the 

Facilitation  Deed  in  which  the  arbitration  clause  is 

incorporated came to  be executed by the defendant  at 

Mumbai and the fraudulent inducement on the part of the 

defendant  resulting  in  the  plaintiff  entering  into  the 

Facilitation Deed took place in Mumbai and the rescission 

of the Facilitation Deed on the ground that it was induced 

by fraud of defendant has also been issued from Mumbai. 

Thus, the cause of action for filing the suit arose within the 

jurisdiction of  the Bombay High Court  and the Bombay 

High Court had territorial jurisdiction to entertain the suit 

under Section 20 of the CPC.

2

21. Any  civil  court  in  India  which  entertains  a  suit, 

however,  has to follow the mandate of the legislature in 

Sections 44 and 45 in Chapter I of Part II of the Act, which 

are quoted hereinbelow:

2

“CHAPTER I

NEW YORK CONVENTION AWARDS

44.  Definition.  In  this  Chapter,  unless  the

context  otherwise  requires,  “foreign  award”

means  an  arbitral  award  on  differences

between  persons  arising  out  of  legal

relationships,  whether  contractual  or  not,

considered  as  commercial  under  the  law in

force in India, made on or after the 11th day of

October, 1960 -

(a) in pursuance of an agreement in writing

for arbitration to which the Convention set

forth in the First Schedule applies, and

(b) in one of such territories as the Central

Government,  being  satisfied  that

reciprocal  provisions  have  been  made

may,  by  notification  in  the  Official

Gazette, declare to be territories to which

the said Convention applies.

45.  Power  of  judicial  authority  to  refer

parties  to  arbitration.-  Notwithstanding

anything contained in Part I or in the Code of

Civil  Procedure,  a  judicial  authority,  when

seized of  an action in a matter in respect of

which the parties  have made an agreement

referred to in section 44, shall, at the request

of  one of  the parties or any person claiming

through  or  under  him,  refer  the  parties  to

arbitration,  unless  it  finds  that  the  said 

2

agreement  is  null  and  void,  inoperative  or

incapable of being performed.”

The  language  of  Section  45  of  the  Act  quoted  above 

makes it clear that notwithstanding anything contained in 

Part I or in the Code of Civil Procedure, a judicial authority, 

when seized of an action in a matter in respect of which 

the  parties  have  made  an  agreement  referred  to  in 

Section 44, shall,  at the request of one of the parties or 

any  person  claiming  through  or  under  him,  refer  the 

parties  to  arbitration,  unless  it  finds  that  the  said 

agreement  is null  and void,  inoperative or  incapable of 

being performed.  Thus, even if, under Section 9 read with 

Section 20 of  the CPC,  the Bombay High Court  had the 

jurisdiction to entertain the suit, once a request is made 

by one of  the parties or any person claiming through or 

under him to refer the parties to arbitration, the Bombay 

High Court was obliged to refer the parties to arbitration 

unless it found that the agreement referred to in Section 

44 of the Act was null and void, inoperative or incapable of 

being performed.  In the present case, the appellant may 

not  have  made  an  application  to  refer  the  parties  to 

arbitration, but Section 45 of the Act does not refer to any 

application as such.   Instead,  it  refers to the request of 

one of the parties or any person claiming through or under 

him to refer the parties to arbitration.   In this case,  the 

appellant may not have made an application to refer the 

parties to arbitration at Singapore but has filed an affidavit 

in  reply  to  the  notice  of  motion  and  has  stated  in 

paragraphs 3, 4 and 5 of this affidavit that the defendant 

had  already  invoked  the  arbitration  agreement  in  the 

Facilitation  Deed  and  the  arbitration  proceedings  have 

commenced and that the suit was an abuse of the process 

of court.  The appellant had thus made a request to refer 

the parties to arbitration at Singapore which had already 

commenced.

2

22. Section 45 of  the Act  quoted above also makes  it 

clear that even where such request is made by a party, it 

will not refer the parties to arbitration, if it finds that the 

agreement  is null  and void,  inoperative or  incapable of 

being performed.  As the very language of Section 45 of 

the Act clarifies the word “agreement”  would mean the 

agreement referred to in Section 44 of the Act.  Clause (a) 

of Section 44 of the Act refers to “an agreement in writing 

for  arbitration to which the Convention set  forth  in the 

First Schedule applies.”  The First Schedule of the Act sets 

out the different Articles of the New York Convention on 

the  Recognition  and  Enforcement  of  Foreign  Arbitral 

Awards,  1958.  Article II  of  the New York Convention is 

extracted hereinbelow:

2

“1. Each Contracting State shall  recognize an

agreement in writing under which the parties

undertake to submit  to arbitration all  or any

differences which have arisen or  which may

arise between them in respect of defined legal

relationship,  whether  contractual  or  not,

concerning  a  subject-matter  capable  of

settlement by arbitration.

2.  The  term  “agreement  in  writing”  shall

include an arbitral  clause in a contract or an

arbitration agreement,  signed by the parties

or  contained  in  an  exchange  of  letters  or

telegrams.

3.  The  court  of  a  Contracting  State,  when

seized of  an action in a matter in respect of

which the parties  have made an agreement

within the meaning of this article, shall, at the

request of one of the parties, refer the parties

to  arbitration,  unless  it  finds  that  the  said

agreement  is  null  and  void,  inoperative  or

incapable of being performed.”

It will  be clear from clauses 1,  2 and 3 of the New York 

Convention as set out in the First Schedule of the Act that 

the agreement referred to in Section 44 of the Act is an 

agreement in writing under which the parties undertake to 

submit  to  arbitration all  or  any  differences  which  have 

arisen or which may arise between them.  Thus, the court 

will decline to refer the parties to arbitration only if it finds 

that the arbitration agreement is null and void, inoperative 

or incapable of being performed.  

23. According to Mr. Subramanium, however, as the main 

agreement  is  voidable  on  account  of  fraud  and 

misrepresentation by the appellant, clause 9 of the main 

agreement  which  contains  the arbitration agreement  in 

writing is also null and void.  In support of his submission, 

he cited the decision of this Court in SMS Tea Estates (P)  

Ltd. v. Chandmari Tea Co. (P) Ltd. (supra).  Paragraphs 12 

and 13 of the judgment of this Court in SMS Tea Estates 

(P) Ltd. v. Chandmari Tea Co. (P) Ltd. (supra) are quoted 

hereinbelow:

2

“12.  When a contract contains an arbitration

agreement,  it  is a collateral  term relating to

the  resolution  of  disputes,  unrelated  to  the 

3

performance  of  the  contract.  It  is  as  if  two

contracts—one  in  regard  to  the  substantive

terms  of  the  main  contract  and  the  other

relating to  resolution  of  disputes—had been

rolled into one,  for purposes of  convenience.

An  arbitration  clause  is  therefore  an

agreement independent of the other terms of

the  contract  or  the  instrument.  Resultantly,

even  if  the  contract  or  its  performance  is

terminated or comes to an end on account of

repudiation, frustration or breach of contract,

the  arbitration  agreement  would survive  for

the purpose of  resolution of  disputes arising

under or in connection with the contract.

13. Similarly,  when an instrument or deed of

transfer (or a document affecting immovable

property) contains an arbitration agreement, it

is  a collateral  term relating to resolution of

disputes,  unrelated  to  the  transfer  or

transaction affecting the immovable property.

It  is as if  two documents—one affecting the

immovable property requiring registration and

the  other  relating  to  resolution  of  disputes

which  is  not  compulsorily  registerable—are

rolled  into  a  single  instrument.  Therefore,

even  if  a  deed  of  transfer  of  immovable

property  is  challenged  as  not  valid  or

enforceable,  the arbitration agreement would

remain  unaffected  for  the  purpose  of

resolution of disputes arising with reference to

the deed of transfer.”

In  the  aforesaid  case,  this  Court  has  held  that  if  the 

document containing the main agreement is not found to 

be duly stamped, even if it contains arbitration clause, it 

cannot  be acted upon because Section 35 of  the Stamp 

Act bars the said document from being acted upon, but if 

the  document  is  found  to  be  duly  stamped  but  not 

registered though required to be compulsorily registered, 

the court can act upon the arbitration agreement which is 

a collateral term of the main agreement and is saved by 

the proviso to Section 49 of the Registration Act.  Thus, as 

per the aforesaid decision of this Court in SMS Tea Estates 

(P) Ltd.  v.  Chandmari  Tea Co.  (P) Ltd. (supra),  the court 

will  have  to  see  in  each  case  whether  the  arbitration 

agreement is also void, unenforceable or inoperative along 

with  the  main  agreement  or  whether  the  arbitration 

agreement stands apart from the main agreement and is 

not null and void.

24.  The House of  Lords has explained this principle of 

separability in Premium Nafta Products Ltd. v. Fili Shipping 

Company Ltd.   & Ors. (supra) thus:

3

“17.  The principle of  separability enacted in

section  7  means  that  the  invalidity  or

rescission  of  the  main  contract  does  not

necessarily entail  the invalidity or rescission

of the arbitration agreement.  The arbitration

agreement  must  be  treated  as  a  “distinct

agreement” and can be void or voidable only

on  grounds  which  relate  directly  to  the

arbitration agreement.  Of course there may

be cases in which the ground upon which the

main  agreement  is  invalid  is  identical  with 

3

the  ground  upon  which  the  arbitration

agreement  is  invalid.   For  example,  if  the

main  agreement  and  the  arbitration

agreement  are  contained  in  the  same

document and one of the parties claims that

he never agreed to anything in the document

and that his signature was forged, that will be

an attack  on the validity  of  the arbitration

agreement.  But the ground of attack is not

that  the main agreement  was invalid.   It  is

that  the  signature  to  the  arbitration

agreement,  as  a “distinct  agreement”,  was

forged.   Similarly,  if  a  party  alleges  that

someone who purported to sign as agent on

his  behalf  had  no  authority  whatever  to

conclude any agreement on his behalf, that is

an attack on both the main agreement  and

the arbitration agreement.  

18. On the other hand, if (as in this case) the

allegation  is  that  the  agent  exceeded  his

authority by entering into a main agreement

in  terms  which  were  not  authorized  or  for

improper reasons,  that is not necessarily an

attack on the arbitration agreement.  It would

have to be shown that whatever the terms of

the main agreement or the reasons for which

the agent concluded it, he would have had no

authority  to  enter  into  an  arbitration

agreement.   Even  if  the  allegation  is  that

there  was  no  concluded  agreement  (for

example,  that terms of the main agreement

remained  to  be  agreed)  that  is  not

necessarily  an  attack  on  the  arbitration

agreement.  If the arbitration clause has been

agreed, the patties will be presumed to have

intended the question of whether there was a

concluded main agreement to be decided by

arbitration.”

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25. Applying the principle of separability to the facts of 

this case, the respondent rescinded the Facilitation Deed 

by  notice  dated  25.06.2010  to  the  appellant  on  the 

following grounds stated in the said notice by its lawyers:

“1.  Reference  is  made  to  the  Deed for  the

Provison of  Facilitation Services dated March

25, 2009 (the “Deed”)  between World Sport

Group (Mauritius)  Limited (“WSGM”)  and our

client.   Under the Deed,  which is styled as a

facilitation  agreement,  our  client  agreed  to

pay  WSGM  “facilitation”  fees  for  the

“facilitation”  services  stated  thereunder  to

have  been  provided  by  WSGM.   The

underlying consideration for the payments by

our  client  to  WSGM,  in  fact  were  the

representation  made  by  WSGM  that  :  (a)

WSGM,  had  executed  in  India  (“BCCI”)

whereunder  WSGM  had  been  unfettered

Global  Media  Rights  (“the  said  rights”),

including  the  Indian  Subcontinent  (implying

thereby  as  natural  corollary  that  the  earlier

Media  Rights  agreement  dated  March  15,

2009 between WSGM and BCCI along with its

restrictive  conditions  had  been  mutually

terminated);  (b)  WSGM  could  thereafter

relinquish  the  Media  Rights  for  the  Indian

Subcontinent  in favour  of  our  client  for  said

valuable consideration to enable our client to

enter  into a direct agreement  with BCCI;  (c)

the said rights were subsisting with WSGM at

the time of execution of the Deed, i.e, March

25,  2009;  and  (d)  WSGM  had  relinquished

those rights in favour of BCCI to enable BCCI

and our client to execute a direct Media Rights

License  Agreement  for  the  Indian

Subcontinent.  

3

2.  BCCI has recently brought to the attention

of  our  client  that  the  Global  Media  Rights

agreement  between  WSGM and  BCCI  dated

March 23, 2009 does not exist and in terms of

Clause 13.5 of the agreement dated March 15,

2009,  after  expiry  of  the  2

nd

 extension  the

media  rights  had  automatically  reverted  to

BCCI at 3 a.m. on March 24, 2009 and thus at

the time of execution of the Deed, WSGM did

not  have  any  rights  to  relinquish  and/or  to

facilitate  the  procurement  of  India

Subcontinent  media  rights  for  the  IPL  from

BCCI  and thus  no  facilitation  services  could

have been provided by WSGM.

3.  In view of the above, it is evident that the

representation  by  WSGM  that  WSGM

relinquished  its  Indian  Subcontinent  media

rights for the IPL in favour of our client to pay

the “facilitation” fees under the Deed.

4.  Taking  cognizance  of  the  same,  BCCI’s

Governing  council  at  its  meeting  held  at

Mumbai, India on June 25, 2010 appropriately

executed  an  amendment  to  Media  Rights

License  Agreement  dated  March  25,  2009

between BCCI and our client by deleting, inter

alia, clause 10.4 thereof.

5.  On  its  part,  and  in  view  of  the  false

representations  and fraud played by WSGM,

the Deed is voidable at the option of our client

and  thus  our  client  rescinds  the  Deed  with

immediate effect.” 

The ground taken by respondent to rescind the Facilitation 

Deed thus is that the appellant did not have any right to 

relinquish and/or  to facilitate the procurement  of  Indian 

3

subcontinent  media rights for  the IPL from BCCI  and no 

facilitation  services  could  have  been  provided  by  the 

appellant  and  therefore  the  representation  by  the 

appellant  that  the  appellant  relinquished  its  Indian 

subcontinent  media  rights  for  the  IPL  in  favour  of  the 

respondent  for  which the appellant  had to be paid the 

facilitation fee under the deed was false and accordingly 

the Facilitation Deed was  voidable at  the option of  the 

respondent on account of false representation and fraud. 

This ground of challenge to the Facilitation Deed does not 

in any manner affect the arbitration agreement contained 

in Clause 9 of the Facilitation Deed, which is independent 

of and separate from the main Facilitation Deed and does 

not get rescinded as void by the letter dated 25.06.2010 

of  the respondent.   The Division Bench of  the Bombay 

High Court, therefore, could not have refused to refer the 

parties to arbitration on the ground that  the arbitration 

agreement was also void along with the main agreement. 

26.    Mr.  Gopal  Subramanium’s contention,  however,  is 

also  that  the  arbitration  agreement  was  inoperative  or 

incapable of being performed as allegations of fraud could 

be enquired into by the court and not by the arbitrator.  

The authorities on the meaning of the words “inoperative 

or  incapable  of  being  performed” do  not  support  this 

contention of Mr. Subramanium.  The words  “inoperative 

or incapable of being performed” in Section 45 of the Act 

have  been  taken  from Article  II  (3)  of  the  New York 

Convention  as  set  out  in  para  22  of  this  judgment. 

Redfern  and  Hunter  on  International  Arbitration  (Fifth 

Edition)  published  by  the  Oxford  University  Press  has 

explained  the  meaning  of  these  words  “inoperative  or  

incapable  of  being  performed” used  in  the  New  York 

Convention at page 148, thus:

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“At  first  sight  it  is  difficult  to  see  a

distinction  between  the  terms

‘inoperative’  and  ‘incapable  of  being

performed’.  However,  an  arbitration

clause is inoperative where it has ceased

to have effect as a result, for example, of

a failure by the parties to comply with a

time limit,  or where the parties have by

their  conduct  impliedly  revoked  the

arbitration agreement.   By contrast,  the

expression  ‘incapable  of  being

performed’  appears  to  refer  to  more

practical  aspects  of  the  prospective

arbitration  proceedings.   It  applies,  for

example,  if  for  some  reason  it  is

impossible  to  establish  the  arbitral

tribunal.”

27.     Albert Jan Van Den Berg in an article titled “The 

New York Convention,  1958 – An Overview” published in 

the  website  of  ICCA  [www.arbitration-

icca.org/media/0/12125884227980/new_york_convention_

of-1958_overview.pdf], referring to Article II(3) of the New 

York Convention, states:

3

“The  words  “null  and  void”  may  be

interpreted  as  referring  to  those  cases 

where  the  arbitration  agreement  is 

affected by some invalidity right from the

beginning, such as lack of consent due to

misrepresentation,  duress,  fraud  or

undue influence.

The  word  “inoperative”  can  be  said to

cover those cases where the arbitration

agreement  has  ceased  to  have  effect,

such as revocation by the parties.

The  words  “incapable  of  being

performed” would seem to apply to those

cases  where  the  arbitration  cannot  be

effectively  set  into  motion.   This  may

happen  where  the  arbitration  clause  is

too  vaguely  worded,  or  other  terms  of

the  contract  contradict  the  parties’

intention to arbitrate,  as in the case of

the  so-called  co-equal  forum selection

clauses.  Even in these cases, the courts

interpret the contract provisions in favour

of arbitration.”

28. The  book  ‘Recognition  and  Conferment  of  Foreign 

Arbitral  Awards: A Global  Commentary on the New York  

Convention’ by Kronke,  Nacimiento,  et  al.(ed.)  (2010)  at 

page 82 says:

3

“Most  authorities  hold  that  the  same

schools  of  thought  and  approaches

regarding  the  term  null  and  void also

apply  to  the  terms  inoperative and

incapable  of  being  performed.

Consequently, the majority of authorities

do not  interpret  these terms  uniformly,

resulting  in  an  unfortunate  lack  of

uniformity.   With  that  caveat,  we  shall

give  an  overview  of  typical  examples

where arbitration agreements were held

to  be  (or  not  to  be)  inoperative  or

incapable of being performed.

The  terms  inoperative refers  to  cases

where  the  arbitration  agreement  has

ceased to  have effect  by  the  time  the

court  is  asked  to  refer  the  parties  to

arbitration.  For example, the arbitration

agreement ceases to have effect if there

has already been an arbitral  award or a

court  decision  with  res  judicata effect

concerning the same subject matter and

parties.  However, the mere existence of

multiple proceedings is not  sufficient  to

render  the  arbitration  agreement

inoperative.   Additionally, the arbitration

agreement  can  cease  to  have  effect  if

the time limit for initiating the arbitration

or  rendering  the  award  has  expired,

provided that it was the parties’ intent no

longer  to  be  bound  by  the  arbitration

agreement  due to the expiration of  this

time limit.

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Finally, several authorities have held that

the arbitration agreement ceases to have

effect  if  the  parties  waive  arbitration.

There are many possible ways of waiving

a right  to arbitrate.   Most  commonly,  a

party will waive the right to arbitrate if, in

a  court  proceeding,  it  fails  to  properly

invoke the arbitration agreement or if it

actively pursues  claims  covered by the

arbitration agreement.”

29.   Thus,  the arbitration agreement  does  not  become 

“inoperative  or  incapable  of  being  performed”  where 

allegations of fraud have to be inquired into and the court 

cannot  refuse  to  refer  the  parties  to  arbitration  as 

provided  in  Section  45  of  the  Act  on  the  ground  that 

allegations of fraud have been made by the party which 

can only be inquired into  by the court  and not  by the 

arbitrator.  N. Radhakrishnan v. Maestro Engineers & Ors. 

(supra)  and  Abdul  Kadir  Shamsuddin Bubere v.  Madhav 

Prabhakar  Oak (supra)  were  decisions  rendered  in  the 

context of domestic arbitration and not in the context of 

arbitrations  under  the  New  York  Convention  to  which 

Section  45  of  the  Act  applies.   In  the  case  of  such 

arbitrations  covered  by  the  New York  Convention,  the 

Court  can  decline  to  make  a  reference  of  a  dispute 

covered by the arbitration agreement only if it comes to 

the conclusion that the arbitration agreement is null  and 

void, inoperative or incapable of being performed, and not 

on  the  ground  that  allegations  of  fraud  or 

misrepresentation have to be inquired into while deciding 

the disputes between the parties.

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30. We may now consider the correctness of the findings 

of the Division Bench of the High Court in the impugned 

judgment.  The Division Bench of the High Court has held 

that the Facilitation Deed was part of several agreements 

entered into amongst different parties commencing from 

25.03.2009 and, therefore, cannot be considered as stand 

apart  agreement  between  the  appellant  and  the 

respondent  and  so  considered  the  Facilitation  Deed  as 

contrary to public policy of India because it is linked with 

the  finances,  funds  and rights  of  the  BCCI,  which  is  a 

public body.   This approach of the Division Bench of the 

High Court  is  not  in consonance with  the provisions  of 

Section 45 of the Act, which mandates that in the case of 

arbitration  agreements  covered  by  the  New  York 

Convention,  the Court  which is seized of  the matter will 

refer  the  parties  to  arbitration  unless  the  arbitration 

agreement  is null  and void,  inoperative or  incapable of 

being performed.  In view of the provisions of Section 45 

of  the  Act,  the  Division  Bench  of  the  High  Court  was 

required to only consider in this case whether Clause 9 of 

the  Facilitation  Deed  which  contained  the  arbitration 

agreement was null and void, inoperative or incapable of 

being performed. 

4

31. The Division Bench of the High Court has further held 

that  Clause  9  of  the  Facilitation  Deed  insofar  as  it 

restricted the right of the parties to move the courts for 

appropriate relief  and also barred the right  to trial  by a 

jury  was  void  for  being  opposed  to  public  policy  as 

provided in Section 23 of  the Indian Contract Act,  1872 

and was also void for being an agreement in restraint of 

the legal proceedings in view of Section 28 of the said Act. 

Parliament has made the Arbitration and Conciliation Act, 

1996  providing  domestic  arbitration  and  international 

arbitration as a mode of  resolution of  disputes between 

the parties and Exception 1 to Section 28 of  the Indian 

Contract Act, 1872 clearly states that Section 28 shall not 

4

render  illegal  a contract,  by which two or more persons 

agree that any dispute which may arise between them in 

respect of any subject or class of subjects shall be referred 

to arbitration and that only the amount awarded in such 

arbitration shall  be recoverable in respect of the dispute 

so referred.  Clause 9 of the Facilitation Deed is consistent 

with  this  policy  of  the  legislature  as  reflected  in  the 

Arbitration  and  Conciliation  Act,  1996  and  is  saved  by 

Exception 1 to Section 28 of the Indian Contract Act, 1872. 

The right to jury trial  is not available under Indian laws. 

The  finding  of  the  Division  Bench  of  the  High  Court, 

therefore, that Clause 9 of the Facilitation Deed is opposed 

to public policy and is void under Sections 23 and 28 of 

the Indian Contract Act, 1872 is clearly erroneous. 

32.   The Division Bench of the High Court has also held 

that  as allegations of  fraud and serious malpractices on 

the part of the appellant are in issue, it is only the court 

which  can  decide  these  issues  through  furtherance  of 

judicial evidence by either party and these issues cannot 

be  properly  gone  into  by  the  arbitrator.   As  we  have 

already held, Section 45 of the Act does not provide that 

the court  will  not  refer  the parties  to  arbitration if  the 

allegations of fraud have to be inquired into.  Section 45 

provides that  only if  the court  finds that  the arbitration 

agreement  is null  and void,  inoperative or  incapable of 

being  performed,  it  will  decline  to  refer  the  parties  to 

arbitration.

33.   The Division Bench of  the High court  has further 

held that since the earlier suit (Suit No.1869 of 2010) was 

pending in court since 25.06.2010 and that suit was inter-

connected  and  inter-related  with  the  second  suit  (Suit 

No.1828 of 2010), the court could not allow splitting of the 

matters and disputes to be decided by the court in India in 

the first  suit  and by arbitration abroad in regard to the 

second suit  and invite conflicting verdicts on the issues 

which are inter-related.   This reasoning adopted by the 

Division Bench of the Bombay High Court in the impugned 

judgment is alien to the provisions of Section 45 of the Act 

which does not empower the court to decline a reference 

to arbitration on the ground that another suit on the same 

issue is pending in the Indian court.

4

34.   We make it clear that we have not expressed any 

opinion  on  the  dispute  between  the  appellant  and  the 

respondent  as  to  whether  the  Facilitation  Deed  was 

voidable or not on account of fraud and misrepresentation. 

Clause 9 of the Facilitation Deed states  inter alia that all 

actions or proceedings arising in connection with, touching 

upon  or  relating  to  the  Facilitation  Deed,  the  breach 

thereof and/or the scope of the provisions of the Section 

shall  be  submitted  to  the  ICC  for  final  and  binding 

arbitration under its Rules of Arbitration.  This arbitration 

agreement in Clause 9 is wide enough to bring this dispute 

within the scope of  arbitration.   To quote  Redfern And 

Hunter On International Arbitration (Fifth Edition page 134 

para 2.141)

“Where  allegations  of  fraud  in  the

procurement  or  performance  of  a  contract

are alleged,  there appears to be no reason

for  the  arbitral  tribunal  to  decline

jurisdiction.”

Hence, it has been rightly held by the learned Single Judge 

of  the Bombay High Court that it is for the arbitrator to 

decide  this  dispute  in  accordance  with  the  arbitration 

agreement.  

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35. For the aforesaid reasons, we allow the appeal,  set 

aside the impugned judgment of the Division Bench of the 

High Court  and restore the order  of  the learned Single 

Judge.  The parties shall bear their own costs.  

    

4

                               .....……………..……………………….J.

                                 (A. K. Patnaik)

 

…....…………..………………………..J.

                         (Fakkir Mohamed Ibrahim Kalifulla)

New Delhi,

January 24, 2014. 

 

Vineet Kumar
on 27 January 2014
Published in Civil Law
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