R.F.NARIMAN, J. - (1.) These two appeals being Civil Appeal No. 5145 of 2016 by Avitel Post Studioz Ltd. ["Avitel India"] and its promoters [the "Jain family"],and the cross appeal being Civil Appeal No. 5158 of 2016 by HSBC PL Holdings (Mauritius) Ltd. ["HSBC"], impugn the interlocutory judgment and order passed in the appeal under section 9 of the Arbitration and Conciliation Act, 1996 ["1996 Act"] dated 31.07.2014. To dispose of the said appeals, we refer to the facts in Civil Appeal No. 5145 of 2016. The brief facts necessary to appreciate the controversy that arises in the present case are as follows: (i) On 21.04.2011, a Share Subscription Agreement ["SSA"] was entered into between HSBC and the Appellants. HSBC made an investment in the equity capital of Avitel India for a consideration of USD 60 million in order to acquire 7.8% of its paid-up capital. This SSA contained an arbitration clause which reads as follows:- "16. DISPUTE RESOLUTION 16.1. Arbitration 16.1.1. Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretatio N. Radhakrishnan Vs. Maestro Engineers; 2010 1 Scc 72, breach or termination shall be referred to and finally resolved by binding arbitration at the Singapore International Arbitration Centre ("SIAC") in accordance with the International Arbitration Rules in force at the date of this Agreement ("Rules"), which Rules are deemed to be incorporated by reference into this clause and as may be amended by the rest of this clause. 16.1.2. The seat of arbitration shall be Singapore. 16.1.3. The language of the arbitration proceedings shall be English. 16.1.4. The arbitration tribunal shall consist of three (3) arbitrators: the claimant party shall nominate one (1) arbitrator, the respondent party shall nominate one (1) arbitrator and the two (2) arbitrators thus appointed shall nominate the third arbitrator who shall be the presiding arbitrator (the "Arbitration Tribunal"). If there is more than one claimant party and/or more than one respondent party, the claimant parties (for the purposes of this Clause 16.1 together a "party") shall together designate one (1) arbitrator and the respondent parties (for the purposes of this Clause 16.1 together a "party") shall together designate one (1) arbitrator. If within 30 days of a request from the other party to do so, a party fails to designate an arbitrator, or if the two (2) arbitrators fail to designate the third arbitrator within 30 days after the confirmation of the appointment of the second arbitrator, the appointment shall be made, upon request of a party, by the SIAC council in accordance with the Rules. 16.1.5. If within 14 days of a request from the other party to do so, a party fails to nominate an arbitrator, or if the two (2) arbitrators fail to nominate the third arbitrator within 14 days after the confirmation of the appointment of the second arbitrator, the appointment shall be made, upon request of a party, by the SIAC council in accordance with the Rules. 16.1.6. The parties waive any right to apply to any court of law and/or other judicial authority to determine any preliminary point of law and/or review any question of law and/or the merits, insofar as such waiver may be validly made. The parties shall not be deemed, however, to have waived any right to challenge any award on the ground that the tribunal lacked substantive jurisdiction and/or the ground of serious irregularity affecting the tribunal, the proceedings or the award to the extent allowed by the law of the seat of the arbitration. 16.1.7. Nothing in this Clause 16.1 shall be construed as preventing any party from seeking conservatory or interim relief in any court of competent jurisdiction. 16.1.8. Any award of the arbitration tribunal shall be made in writing and shall be final and binding on the parties from the day it is made and the parties agree to be bound thereby and to act accordingly. The parties undertake to carry out the award without delay. 16.1.9. During the conduct of any arbitration proceedings pursuant to this Clause 16.1, this Agreement shall remain in full force and effect in all respects except for the matter under arbitration and the parties shall continue to perform their obligations hereunder, except for those obligations involved in the matter under dispute, and to exercise their rights hereunder. 16.2. Costs The costs and expenses of the arbitration, including the fees of the arbitration and the Arbitration Tribunal, shall be borne equally by each Party to the dispute or claim and each Party shall pay its own fees, disbursements and other charges of its counsel, except as may be determined by the Arbitration Tribunal. The Arbitration Tribunal would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts. 16.3. Final and Binding It is agreed by the Parties that any award made by the Arbitration Tribunal shall be final and binding on each of the Parties that were parties to the dispute. 16.4. Application of Arbitration Act Save for section 9, Part 1 of the Indian Arbitration and Conciliation Act, 1996 (the "Arbitration Act"), the provisions of Part 1 of the Arbitration Act shall not apply to the terms of this Agreement." (ii) On 06.05.2011, the aforesaid parties entered into a Shareholders' Agreement ["SHA"] which defined the relationship between the parties after the SSA dated 21.04.2011 had been entered into. The SHA also contained an arbitration clause which was identical to the arbitration clause contained in the SSA. It is the case of HSBC that a representation had been made by Appellants No. 2-4 (the Jain family)that the Appellants were at a very advanced stage of finalising a contract with the British Broadcasting Corporation ["BBC"] to convert the BBC's film library from 2D to 3D. This contract was expected to generate a revenue of USD 300 million in the first phase, and ultimately over USD 1 billion. It is the further case of HSBC that this investment of USD 60 million was required by Avitel India to purchase equipment for Avitel Post Studioz FZ LLC ["Avitel Dubai"] to service the BBC contract (Avitel Dubai is a 100% subsidiary of Avitel Holdings Ltd., Mauritius ["Avitel Mauritius"], which, in turn, is a 100% subsidiary of Avitel India. Avitel India, Avitel Mauritius, and Avitel Dubai are collectively referred to as the "Avitel Group"). (iii) In early April 2012, HSBC grew suspicious about the Avitel Group's business of digitising films and Ernst and Young and KPMG Dubai were appointed to inquire into and return findings as to the business activities of the Avitel Group. It is the further case of HSBC that they discovered, thanks to certain preliminary findings of Ernst and Young and KPMG Dubai, inter alia, that the purported BBC contract was non-existent and was set up by the Appellants to induce HSBC into investing the aforesaid money of USD 60 million in the shares of Appellant No. 1. It is also HSBC's case that though Avitel Dubai received the entire investment proceeds of USD 60 million on or about 10.05.2011, it appeared that around USD 51 million were not used to purchase any equipment to service the BBC contract, but appeared to have been siphoned off to companies in which the Jain family had a stake. (iv) As disputes arose between the parties, on 11.05.2012, notices of arbitration were issued by HSBC to the Singapore International Arbitration Centre ["SIAC"] to commence arbitral proceedings. On 14.05.2012, the SIAC appointed Mr. Thio Shen Yi, SC, as an Emergency Arbitrator pursuant to an application dated 11.05.2012. On 17.05.2012, the Appellants' challenge to the appointment of the Emergency Arbitrator was considered by the SIAC and rejected. On 25.05.2012, the Appellants filed their response to the notices of arbitration. (v) The Emergency Arbitrator then passed two Interim Awards dated 28.05.2012 and 29.05.2012, in the SSA and the SHA, respectively, in favour of HSBC, directing the Appellants and Avitel Dubai to refrain from disposing of or dealing with or diminishing the value of their assets up to USD 50 million, and permitting HSBC to deliver a copy of the Interim Awards to financial institutions in India and the UAE with which any of the Appellants hold or may hold or be signatory to accounts, together with a request that the financial institutions freeze such accounts consistent with the Interim Awards. On 27.07.2012, the Emergency Arbitrator made an amendment to Interim Awards dated 28.05.2012 and 29.05.2012 passed in the SSA and the SHA, respectively, granting further relief to HSBC by, inter alia, directing the Appellants and Avitel Dubai to cease and desist from prohibiting or inhibiting Ernst and Young and KPMG Dubai from conducting investigations into the financial affairs of Avitel Dubai and Avitel Mauritius. (vi) On 30.07.2012, HSBC filed Arbitration Petition No. 1062 of 2012 under section 9 of the 1996 Act in the Bombay High Court, inter alia seeking directions to call upon the Appellants to deposit a security amount to the extent of HSBC's claim in the arbitration proceedings that had begun under both the SSA and the SHA. (vii) On 03.08.2012, a learned Single Judge of the Bombay High Court passed an interim order under the section 9 petition, inter alia directing the Corporation Bank to allow the Appellants to withdraw a sum of INR 1 crore from their account on or before 09.08.2012, but not to allow any further withdrawals until further orders, till which time, the account was to remain frozen. (viii) Meanwhile, the Appellants challenged the jurisdiction of the three-member Arbitral Tribunal comprising of Mr. Christopher Lau, SC as its Chairman, and Dr. Michael C. Pryles and Justice (Retd.) Ferdino I. Rebello as co-arbitrators ["Arbitral Tribunal"] set up under the auspices of the SIAC. On 25.09.2012, the Arbitral Tribunal decided that this would be decided as a preliminary issue. On 17.12.2012, the Arbitral Tribunal passed a unanimous "final partial award on jurisdiction", dismissing the jurisdictional challenge, and stating that since Singapore law governs the arbitration agreement, allegations of fraud and complicated issues relating to facts are arbitrable. (ix) Meanwhile, in the section 9 petition pending before the Bombay High Court, an order was passed by a learned Single Judge dated 22.01.2014, in which the Appellants were directed to deposit any shortfall in their account with the Corporation Bank so as to maintain a balance of USD 60 million. The learned Single Judge gave prima facie findings that the seat of arbitration was at Singapore and that the arbitration agreement was governed by Singapore law; hence, arbitrability of the dispute at hand would be governed by Singapore law. It held that the unanimous "final partial award on jurisdiction" dated 17.12.2012, delivered by the Arbitral Tribunal in Singapore, upholding the jurisdiction of the Arbitral Tribunal to proceed, had not been challenged in Singapore by the Appellants, and further held that this being the case, since HSBC has a good chance of success in the final arbitral proceedings, the aforesaid order to deposit the shortfall in the account so as to maintain a balance of USD 60 million was passed. (x) An appeal against the order of the learned Single Judge was disposed of by the impugned judgment and order of the Division Bench dated 31.07.2014, returning a prima facie finding that since Singapore law governs the arbitration agreement, there was no need to interfere with the findings of the learned Single Judge in this respect. Further, it was held that there is no estoppel in filing the present proceeding despite the Emergency Awards being passed in Singapore as the section 9 petition could be maintained on a plain reading of the arbitration agreement itself. It was further held that an issue of fraud in the context of sections 17 and 18 of the Indian Contract Act, 1872 ["Contract Act"] referred to want of free consent, and was a well-accepted ground that would vitiate the contract, rendering it voidable. After referring to various judgments of this Court, it was held that there was a distinction between the "suitability" and "arbitrability" of disputes, and on the facts of the present case, it could not be said that the dispute was not arbitrable because of an allegation of fraud made by HSBC. After then referring to the claim statement of HSBC before the Arbitral Tribunal at Singapore, it was held that the allegations of fraud and misrepresentation were primarily in the context of "fraud" and "misrepresentation" as defined in sections 17 and 18 of the Contract Act, thus establishing a civil profile of the disputes that had arisen between the parties. However, after referring to certain judgments on interim mandatory injunctions, the High Court prima facie found that HSBC had carried out due diligence by engaging leading agencies like Ernst and Young and Clifford Chance. Also, it was held that the measure of damages that may ultimately be awarded may not be the amount of loss ultimately sustained by HSBC, but can at best be the difference between the price paid by HSBC in acquiring Avitel India's shares and the price HSBC would have received had it resold the said shares in the market. This being the case, and an interim mandatory injunction being in the nature of equitable relief, the Division Bench was of the opinion that the interest of justice would be served if the Appellants are directed to deposit an additional amount equivalent to USD 20 million in its Corporation Bank account, so that the total deposit in the said account is maintained at half the said figure of USD 60 million, i.e., at USD 30 million. The appeal against the order dated 22.01.2014 was therefore partly allowed. (xi) By a Final Award in the SSA dated 27.09.2014 ["Foreign Final Award"], the Arbitral Tribunal held as follows: "21. FORMAL FINAL AWARD 21.1 The Tribunal has carefully considered the oral and documentary evidence as well as the submissions of the Parties and given due weight thereto and rejecting all submissions to the contrary hereby makes, issues and publishes this Final Award and for the reasons set out above FINDS, AWARDS, ORDERS AND DECLARES as follows: 21.2 Finds that the Respondents jointly and severally represented to the Claimant the following: a. the Avitel Group's propriety stereoscopy technology was superior to that of its competitor; b. Avitel Dubai played an important role in the Avitel Group's business; c. the Avitel Group was in advanced negotiations with the BBC and that the BBC Contract was close to execution; d. the Claimant's investment was required and was to be utilized for purchasing equipment in order to enable Avitel Dubai to service the BBC Contract; e. the Avitel Group had the benefit of the Material Contracts with Kinden, SPAC and Purple Passion with a total value of approximately USD 658 million; f. the Avitel Group's key customers Kinden, SPAC and Purple Passion as well as Avitel Dubai's key supplier, Digital Fusion, and key service provider, Highend, were all independent and legitimate companies; g. the representations and warranties contained in Clauses 6.1 and 6.2 of the SSA and in Clauses 7.1, 7.3, 7.5 , 8, 10 and 11 of Schedule 3 of the SSA to be true, complete, accurate and not misleading; 21.3 Finds that the Respondents made the representations and/or warranties in order to induce the Claimant to invest in the First Respondent; 21.4 Finds that the Claimant did rely on the representations and/or warranties in making its investment in the First Respondent; 21.5 Finds that the representations and/or warranties referred to in paragraph 21.2 (a) to (g) above were false and/or misleading; 21.6 Finds that the Respondents made the representations and/or warranties referred to in paragraph 21.2 (a) to (g)above knowing that these were false and/or without belief in their truth; 21.7 Finds that the Respondents are jointly and severally liable to the Claimant in tort for deceit; 21.8 Finds that the Respondents are jointly and severally liable to the Claimant for fraudulent misrepresentation under the Contract Act; 21.9 Finds that the Respondents are jointly and severally liable to the Claimant for breach of warranty; 21.10 Finds that the Second, Third and Fourth Respondents are to jointly and severally indemnify the Claimant for the loss of its investment in the amount of USD 60 million as well as for the costs of and associated with this arbitration and associated court actions; 21.11 Finds that the Claimant in respect of its claim for fraudulent misrepresentation and its claim in tort for deceit is entitled to damages in the total amount of USD 60 million; 21.12 Finds that the Claimant is entitled to interest on the sum of USD 60 million from 6 May 2011 to the date of this Final Award at the rate of 4.25 % per annum; 21.13 Finds that the Claimant is entitled to its legal and other costs as well as the costs of the arbitration in the total amount of SGD 827,615.67 comprising of the following: (a) the amount of SGD 29,235.88 in respect of the Emergency Arbitrators fees and expenses (b) the amount of SGD 756,513.19 in respect of the Tribunal's fees and expenses; (c) the amount of SGD 41,866.60 in respect of SIAC administrative fees and expenses; 21.14 Finds that upon the Respondents' paying in full and unconditionally the sums awarded to the Claimant in paragraphs 21.15, 21.16, 21.18, 21.19 below, the Claimant's Preference Subscription Shares and Equity Subscription Shares (as defined in the SSA) in Avitel India are to be cancelled forthwith; 21.15 Awards to the Claimant and Orders the Respondents to pay damages in the amount of USD 60 million in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.16 Awards to the Claimant and Orders the Respondents to pay interest on the sum of USD 60 million from 6 May 2011 to the date of this Final Award at the rate of 4.25% per annum in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.17 Orders in terms identical to the orders in the Interim Award (as amended by the Addendum and Amendment to Interim Award dated 15 June 2012 and by the Amendment to Interim Award dated 27 July 2012), which orders are to remain in force up to and including the date on which the Respondents comply with all other orders in this Final Award; 21.18 Awards to the Claimant and Orders the Respondents to pay the Claimant's legal and other costs amounting to USD 1,652,890.14 in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable; 21.19 Awards to the Claimant and Orders the Respondents to pay all the costs of this arbitration in the total amount of SGD 827,615.67 as follows: (a) the amount of SGD 29,235.88 in respect of the Emergency Arbitrator's fees and expenses; (b) the amount of SGD 756,513.19 in respect of the Tribunal's fees and expenses; (c) the amount of SGD 41,868.60 in respect of SIAC administrative fees and expenses; 21.20 Declares the Second, Third and Fourth Respondents jointly and severally liable to indemnify the Claimant for the loss of its investment in the amount of USD 60 million together with interest thereon for the period and at the rate specified in paragraph 21.16 hereinabove and the Claimant's legal costs, related expenses as well as the costs of this arbitration as specified in paragraph 21.19 hereinabove; 21.21 Declares and Orders that upon the Respondents' paying in full and unconditionally the sums awarded to the Claimant in paragraphs 21.15, 21.16, 21.18, 21.19 hereinabove and all costs arising out of and incidental to the cancellation of the Claimant's Preference Subscription Shares and Equity Subscription Shares (as defined in the SSA) in Avitel India, that the said shares be cancelled and that in this regard, the Parties take the requisite steps to effect the said cancellation within 30 days of receipt of such payment." Initially, this Foreign Final Award was challenged by the Appellants in a section 34 proceeding in the Bombay High Court. By a judgment dated 28.09.2015, the section 34 petition was dismissed as being not maintainable. An appeal under section 37 of the 1996 Act was dismissed on 05.05.2017. Meanwhile, HSBC moved the Bombay High Court on 15.04.2015 to enforce the Foreign Final Award in the SSA dated 27.09.2014, which enforcement proceedings are still pending.
(2.) Mr. Mukul Rohatgi, learned Senior Advocate and Mr. Saurabh Kirpal, learned counsel, appearing on behalf of the Appellants, took us through the Single Judge order and the Division Bench judgment, and then referred to the Indian law on the allegations of fraud made in arbitral proceedings, which, according to them, show that if the transaction entered into between the parties involve serious criminal offences such as forgery and impersonation, then it is clear that under Indian law, such dispute would not be arbitrable. In fact, they stated that a criminal complaint was filed by HSBC against the Appellants dated 16.01.2013, alleging offences under sections 420, 467, 468, read with section 120B of the Indian Penal Code, 1860, with the Economic Offences Wing, Mumbai ["EOW"], resulting in an FIR being registered. However, the EOW informed HSBC that a closure report was filed before the concerned Magistrate in Mumbai. This closure report was then accepted. HSBC then filed a protest petition seeking rejection of the closure report, which was dismissed by the learned Magistrate on 05.05.2018. This order passed by the Magistrate was in turn challenged by HSBC in Writ Petition (Criminal) No. 5659 of 2018, which petition is still pending. They then argued that, ultimately, in enforcement proceedings in India, the gateways of section 48 of the 1996 Act have to be met. "The public policy of India" is contained in the judgments of this Court regarding serious allegations of fraud made in arbitral proceedings, and if HSBC cannot pass this gateway, then enforcing a foreign award in India would not be possible. It was from this prism that a prima facie case had to be made out under section 9 of the 1996 Act. They, therefore, attacked both the Single Judge order and the Division Bench judgment, stating that a prima facie case for enforcement of such foreign awards cannot possibly refer to the Singapore law on fraud being alleged in arbitral proceedings, but can only refer to Indian law. They further argued that the Division Bench of the Bombay High Court had relied upon a Single Judge judgment of this Court reported as Swiss Timing Ltd. vs. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 ["Swiss Timing"] which had held the judgment in N. Radhakrishnan vs. Maestro Engineers, (2010) 1 SCC 72 ["N. Radhakrishnan"] per incuriam, vitiating the entire Division Bench judgment. This is clear because a Single Judge judgment of this Court under section 11 of the 1996 Act has no precedential value as has correctly been held in State of West Bengal vs. Associated Contractors, (2015) 1 SCC 32 ["Associated Contractors"]. Mr. Rohatgi also indicated that Mr. Christopher Lau, SC, the Chairman of the Arbitral Tribunal in the Singapore proceedings was biased, in that HSBC was a client of the firm to which he belonged, and this is one of the important grounds taken up in the section 48 proceeding which is pending in the Bombay High Court. He also sought to raise an argument (for the first time before us) that the award being insufficiently stamped could not be looked at and that this would also go to show that there is no prima facie case in order to sustain the interim mandatory orders passed by the Division Bench of the High Court. It was further added that Report No. 246 of the Law Commission of India on 'Amendment to the Arbitration and Conciliation Act, 1996' of August 2014 ["246th Law Commission Report"] had recommended that a section 16(7) be added so as to do away with the ratio of N. Radhakrishnan (supra). However, Parliament thought it fit, when it passed the Arbitration and Conciliation (Amendment) Act, 2015 ["2015 Amendment Act"], not to incorporate such a section, showing that N. Radhakrishnan (supra) holds the field and that, therefore, serious questions of fraud raised, like in the present arbitral proceedings, would render such dispute inarbitrable. For this proposition, they relied heavily on the House of Lords judgment in President of India and La Pintada Compania Navigacion S.A., [1985] A.C. 104 ["La Pintada"].
(3.) Mr. Harish Salve, learned Senior Advocate appearing on behalf of the Respondent, HSBC, countered all these submissions by relying upon several judgments of this Court, including the recent judgment in Rashid Raza vs. Sadaf Akhtar, (2019) 8 SCC 710 ["Rashid Raza"]. According to the learned Senior Advocate, this judgment has, with great clarity, explained the judgment in A. Ayyasamy vs. A. Paramasivam, (2016) 10 SCC 386 ["Ayyasamy"], which in turn had explained N. Radhakrishnan (supra), as referring only to such serious allegations of fraud as would vitiate the arbitration clause along with the agreement, and allegations of fraud which are not merely inter parties, but affect the public at large. He argued that a reading of the pleadings in the present case would show that neither of these two tests has been met. He also copiously read from the Foreign Final Award dated 27.09.2014, which found not merely on impersonation, which was one small leg on which it stood, but also on siphoning off or diversion of a substantial portion of the USD 60 million paid by HSBC into companies owned or controlled by the Jain family. He said that these issues are predominantly civil law issues to be decided inter parties. He further argued that insofar as Mr. Christopher Lau SC's alleged bias is concerned, this was not the time or place to go into such allegations, which would only be fully met in the section 48 proceedings which are pending. He indicated that in any case, this Foreign Final Award was unanimous and consisted of two other arbitrators, Dr. Michael C. Pryles and Justice (Retd.) Ferdino I. Rebello, retired Chief Justice of the Allahabad High Court. He also asked us not to go into the stamping aspect of the Foreign Final Award inasmuch as it was raised here for the first time without any proper pleading; if properly pleaded, then his client would have had an opportunity to rebut the same to show that there was no insufficiency of stamp duty paid. Mr. Salve therefore supported the ultimate order of the learned Single Judge of the Bombay High Court, and said that the Division Bench ought not to have reduced the amount of USD 60 million to half, i.e., USD 30 million without any reasoning worth the name, particularly because the Foreign Final Award had held that the USD 60 million was to be paid by way of damages with interest and costs, the shares in HSBC's name standing cancelled. Once it is clear that the aforesaid shares stood cancelled, it is clear that the 7.8% of the paid-up share capital of Avitel India that was held by HSBC reverts to Avitel India. This being the case, there would be no awarding of the difference between market value of the shares as on the date of breach and USD 60 million, as the shares are back in the hands of Avitel India.;