AVITEL POST STUDIOZ LIMITED & ORS. versus HSBC PI HOLDINGS (MAURITIUS) LIMITED

Citation: [2020] 10 S.C.R. 791 · Decided: 19-08-2020 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 3 judgment(s) · cites 15 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
791
AVITEL POST STUDIOZ LIMITED & ORS.
v.
HSBC PI HOLDINGS (MAURITIUS) LIMITED
(Civil Appeal No. 5145 of 2016)
AUGUST 19, 2020
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Arbitration and Conciliation Act, 1996 – s. 9 – Contract Act,
1872 – ss. 17 and 18 – A Share Subscription Agreement (SSA) and
Shareholders’ Agreement (SHA) was entered into between the
claimant and the appellants – Both SSA and SHA contained an
identical arbitration clause – It was alleged that the appellants made
a representation that they 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 first phase,
and ultimately over USD 1 billion – Pursuant thereto, the claimant
made an investment in the equity capital of the appellants for a
consideration of USD 60 million in order to acquire 7.8% of its
paid up capital – The claimant discovered that the purported BBC
contract was non-existent and was set up by the appellants to induce
the claimants into investing the aforesaid money of USD 60 million
in the shares of Appellants – It was also alleged that the entire
investment proceeds of USD 60 million was siphoned off to
Companies in which the appellants had a stake – As dispute arose
between the parties, the notices of arbitration were issued by the
claimant to the Singapore International Arbitration Centre to
commence arbitral proceedings – The Emergency Arbitrator passed
two interim awards in favour of the claimant – The claimant filed
application u/s. 9 of the 1996 Act – The Single Judge of the High
Court directed appellants to deposit any shortfall in their account
so as to maintain a balance of USD 60 million – The Division Bench
of the High Court, however, directed appellants to deposit half of
USD 60 million i.e. at USD 30 million – By a final award, the Arbitral
Tribunal held that the claimant was entitled to damages in the total
amount of USD 60 million plus interest and costs – The Foreign
[2020] 10 S.C.R. 791
791
A
B
C
D
E
F
G
H
792
SUPREME COURT REPORTS
[2020] 10 S.C.R.
award was challenged by the appellants u/s. 34 before the High
Court – The petition u/s. 34 was dismissed by the High Court – An
appeal u/s. 37 of the 1996 Act was also dismissed – Meanwhile, the
claimant moved the High Court for the enforcement of the Foreign
Final award – Before the Supreme Court, the appellant contended
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 – The
claimant countered that issues were predominantly civil law issues
to be decided inter parties – After hearing the parties, the Court
formulated question: Whether there is a strong prima facie case
made out in favour of the claimant in the s. 9 proceedings – Whether
balance of convenience tilts in favour of the claimant – Held: On a
conspectus of facts and following Supreme Court judgments, the
issues raised and answered in the Foreign Final award would
indicate that there is no such fraud as would vitiate the arbitration
clause in the SSA entered into between the parties as it is clear that
this clause has to be read as an independent clause – Further, any
finding that the contract itself is either null and void or voidable as
a result of fraud or misrepresentation does not entail the invalidity
of the arbitration clause – Further, the impersonation, false
representation made and diversion of funds are all inter parties,
having no ‘public flavour’ and attract the ‘fraud exception’ – A
reading of the Foreign Final award would show that a strong prima
facie case was made out as the award holds the BBC transaction as
a basis on which the contract was entered into and the USD 60
million paid by the claimant, which would fall within fraudulent
inducement to enter into contract u/s. 17 of the Contract Act – The
order passed by the Single Judge of the High Court to keep aside
USD 60 million was fair – However, the reduction of USD 60 million
to USD 30 million by the Division Bench of the High Court was not
justified – The claimant has made out a strong prima facie case
necessitating that USD 60 million, being the principal amount
awarded to them, is kept apart in the manner indicated by the Single
Judge of the High Court – The balance of convenience is also in its
favour.
A
B
C
D
E

Excerpt shown. Read the full judgment & AI analysis in Lexace.