INDIA HOUSEHOLD AND HEALTHCARE LTD. versus LG HOUSEHOLD AND HEALTHCARE LTD.

Citation: [2007] 3 S.C.R. 726 · Decided: 08-03-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

A 
B 
INDIA HOUSEHOLD AND HEALTHCARE LTD. 
v. 
LG HOUSEHOLD AND HEALTHCARE LTD. 
MARCH 8, 2007 
[S.B. SINHA, J.] 
Arbitration and Conciliation Act, 1996-Section 11(5) and (6)-
Appointment of arbitrator-Application under-Maintainability of-Held: 
Not maintainable since the arbitration agreement was vitiated by fraud-
C High Court passed injunction order that the applicant was restrained from 
taking any action in terms of the agreement and the same became Jina/-
Doctrine of comity or amity required a Court not to pass order in conflict 
with another order passed by competent court of law-Procedure and 
mechanism agreed by the parties not complied with-Applicant did not 
D appoint its arbitrator nor called upon the other party to appoint its arbitrator 
in terms or the arbitration agreement-A/so, the relief sought fell outside the 
scope of arbitration agreement. 
The petitioner and the respondent entered into Memorandum of 
Understanding. Thereafter, the parties entered into a licence agreement which 
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contain1~d an arbitration clause and in terms thereof parties if agreed could 
appoint a common arbitrator or otherwise one arbitrator could be appointed 
by each of the parties to the agreement. Dispute arose in regard to the use of 
Logo L.G. It is alleged that the respondent did not appoint arbitrator inspite 
of notice. Respondent contended that the purported MOU and licence 
F agreement were vitiated by fraud. Respondent filed suit for injunction against 
petitioners. High Court granted injunction and restrained the petitioners from 
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acting on the MOU and the licence agreement. Hence the present application 
by the petitioners under section 11(5) and (6) of Arbitration and Conciliation 
Act, 1996 for appointment of arbitrator. 
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Dismissing the petition, the Court 
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HELD: I. I. Where existence of an. arbitration agreement can be found, 
apart from the existence of the original agreement, the Courts would construe 
the agreement in such a manner so as to uphold the arbitration agreement. 
726 
INDtA HOUSEHOLD A~D HEALTHCARE LTD ,._ LtJ HOL'SEHOLD AND HEALTIKARE L 11) 
727 
-..-1 
However, when a question of fraud is raised, the same has to be considered A 
differently. Fraud, as is well known, vitiates all salemn acts. A contract would 
mean a valid contract; an arbitration agreement would mean an agreement 
which is enforceable in law. (Para 10( (732-E( 
SBP & Co. v. Patel Engineering Ltd. and Anr., (2005) 8 SCC 618; 
Hamza Haji v. State of Kera/a and Anr., (2006) 7 SCC 416; Prem Singh and B 
Ors. v. Birbal and Ors., (2006) 5 C 353 and Jai Narain Parasrampuria (Dead) 
and Ors. v. Pushpa Devi Saraf and Ors., (2006) 7 SCC 756, relied on. 
1.2. The power exercised by Chief Justice or his designate under section 
11(5) & (6) of Arbitration and Conciliation Act, 1996 is no longer an C 
administrative power. The purported arbitration agreement is an international 
commercial arbitration agreement. Section 16 of the 1996 Act which is in 
Chapter 4 of Part I thereof may not, thus, be applicable in this case. Even if it 
applies, the jurisdiction of the arbitrator to determine his own jurisdiction is 
on the basis of that arbitration clause which may be treated as an agreement D 
independent of the other terms of the contract and his decision that the contract 
is null and void shall not entail ipso jure the validity of the arbitration clause. 
But. the question would be different where the entire contract containing the 
arbitration agreement stands vitiated by reason of fraud of this magnitude. It 
may be noticed that Part II of the 1996 Act contains a provision for approaching 
the court. Section 45 of the 1996 Act contains a non-obstante clause. E 
Therefore, a judicial authority, may entertain an application at the instance 
of a party which alleges that there exists an arbitration agreement whereupon 
judicial authority may refer the parties to arbitration, save and except in a 
case where it finds that the said agreement is null and void, inoperative and 
incapable of being performed. Section 8 of the 1996 Act, however, is differently F 
worded. Thus, as and when a question in regard to the validity or otherwise of 
the artitration agreement arises, a judicial authority would have the 
jurisdiction under certain circumstances to go into the said question. 
(Paras 12 and 13) (733-E, F, G, H; 734-A) 
1.3. Not only the parties to the agreement but also those officers who G 
have negotiated on behalf of tbe respe

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