Full Judgment Text
$-2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of decision: 11 October, 2018
+ ARB.P. 525/2018 & Crl.M.A. 34071/2018
ICETRAIL LOGISTICS PVT. LTD. ..... Petitioner
Through: Mr.Dayan Krishanan, Sr.
Adv.with Mr.Vijay Kaundal
and Mr.Nitish K.Sharma,
Advs.
versus
KUEHNE +NAGEL PVT. LTD. ..... Respondent
Through: Mr.Sudhir Nandrajog, Sr. Adv.
with Ms.Radhika Dubey,
Ms.Ruchi Choudhary and
Mr.Gaurav Gupta, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has been
filed by the petitioner seeking appointment of a Sole Arbitrator for
adjudicating the disputes that have arisen between the parties in
relation to the Agreement dated April, 2013. The said Agreement
contains an Arbitration Agreement in form of Clause 22 thereof,
which is reproduced hereinbelow:
“22. It is mutually decided by both the parties that in
case of any dispute or difference of opinion arising out
of or in connection with this agreement (including the
ARB.P.525/2018 Page 1
validity or interpretation hereof) shall be referred for
settlement to Mr. Peter Gaehwiler, who is presently the
Asia Pacific CFO of the Second Party. Only if the
difference is not resolved, the unresolved issue, dispute
or difference of opinion shall be settled through
arbitration in India in accordance with the provisions
of the Indian Arbitration & Conciliation Act, 1996. The
venue of the arbitration shall be Delhi/NCR. The
arbitration award shall be fully binding on both the
Parties.”
2. The disputes having arisen between the parties, the petitioner
invoked the Arbitration Agreement vide notice dated 09.05.2018.
3. The respondent in its reply dated 24.05.2018, while dealing the
claims of the petitioner, inter-alia stated as under:
“3 a. Recently, KN has learned certain information
that raises suspicions regarding the validity of the
Agreement and the manner in which it was executed.
Our investigation into this matter is ongoing, and we
hereby reserve the right to challenge the Agreement
itself and its signing as procured by fraud on the part
of Icetrail and those acting in concert with it. Given
that the surrounding circumstances may permeate the
Agreement itself and the Agreement may be fraudulent
and therefore invalid, the Parties cannot be relegated
to arbitration with respect to issues or disputes arising
from and/or connected with the Agreement.”
4. As the respondent did not agree on the appointment of an
Arbitrator, the present petition was filed by the petitioner.
5. The respondent in its reply to the petition has again reiterated
that the Agreement in question is a result of fraud exercised by
Mr.Peter Gaehwiler who was the Director of the respondent
company. In support of this contention, learned senior counsel for
ARB.P.525/2018 Page 2
the respondent draws my attention to the Minutes of Meeting of the
Board of Directors of the respondent Company held on 09.04.2013
and submits that by way of said Minutes, Mr.Peter Gaehwiler
authorised himself to execute the contract with the petitioner without
disclosing that he had an interest in the petitioner company inasmuch
as he was dealing with the Directors of the petitioner company in
relation to some business transaction. He places reliance on e-mails
dated 09.11.2012 and 25.11.2012 addressed by Mr.Peter Gaehwiler
to certain persons including the Directors of the petitioner company.
6. He further submits that though the Minutes of Meeting of the
Board of Directors records that the final copy of the Agreement has
been placed before the Board, the e-mail of the same date shows that
only a draft of the proposed Agreement had been exchanged. He
submits that the recording in the Minutes of Meeting is itself
incorrect.
7. Learned senior counsel for the respondent has further stated
that when the said Agreement was signed, the respondent was
already in the process of carrying out due diligence of the petitioner
company and as a matter of internal policy of the respondent, the
respondent does not execute any Agreement before the completion of
such due diligence process. Mr.Peter Gaehwiler was aware of the
pendency of the due diligence process and also the policy of the
respondent company and still entered into and executed the said
Agreement. He also places reliance on an e-mail dated 05.11.2015
purportedly received by the respondent from one Mr.Suranjan De,
former CEO of the petitioner company, making complaints regarding
ARB.P.525/2018 Page 3
procedural violations committed by the petitioner in relation to the
various statutory compliance.
8. He further submits that the petitioner did not even have the
necessary licence for carrying out the work of custom clearing agent
and realising this fact, an employee of the respondent company had
been transferred to the rolls of the petitioner thereby causing legal
ramifications to the respondent inasmuch as it has been made subject
to penalty proceedings vide order dated 10.01.2017 passed by the
Customs, Excise and Service Tax Appellate Tribunal, New Delhi.
9. I have considered the submissions made by the learned senior
counsel for the respondent, however, I do not find any reason for
denying the appointment of an Arbitrator to adjudicate the disputes
that have arisen between the parties in relation to the Agreement
dated April, 2013.
10. Section 11(6A) of the Act confines the scope of scrutiny of this
Court only to the extent of the existence of an Arbitration Agreement
between the parties. Such existence cannot be denied and is not
disputed by the respondent. The only allegation is that the Agreement
has been obtained as a result of fraud exercised on the respondent.
11. I have already narrated the above circumstances that have been
alleged by the respondent in support of this plea of fraud. Only to
form a prima facie opinion, it is seen that the Agreement was
executed in April, 2013. Admittedly, it was given effect to by the
respondent as well. The Agreement got its approval from the Board
of Directors of the respondent and presently there is no allegation
against the other Members of the Board of Directors of the
ARB.P.525/2018 Page 4
respondent company. The due diligence on which reliance has been
placed is also dated 16.08.2013. It is not shown why the Agreement
was not terminated by the respondent, though at least five years have
passed since then.
12. As far as the e-mail received from Mr.Suranjan De is
concerned, it is also dated 05.11.2015. It is again not shown what
further action has been taken by the respondent to avoid the
Agreement after receipt of the said e-mail.
13. On the other hand, learned senior counsel for the petitioner has
drawn my attention to the e-mail dated 26.12.2017 by which the
petitioner had raised certain claims on the respondent. This was
followed by a letter dated 08.01.2018 and a notice dated 20.01.2018.
The respondent replied to the said notice vide its letter dated
06.04.2018, however, there was no allegation of the Agreement
executed between the parties being vitiated by fraud. It is only after
the petitioner had invoked the Arbitration Agreement that a vague
allegation of fraud, as has been reproduced hereinabove, was raised
by the respondent in its reply dated 24.05.2018.
14. Therefore, prima facie at this stage the plea of the respondent
that the Agreement between the parties is vitiated by fraud cannot be
accepted. In any case this is a matter for trial and for the Arbitrator to
adjudicate after receiving the evidence from the parties.
15. The Supreme Court in A.Ayyasamy v. A.Paramasivam and
Ors. , (2016) 10 SCC 386, has summarised the law as to when
allegations of fraud vitiate the Arbitration Agreement and stated as
under:
ARB.P.525/2018 Page 5
“25 . In view of our aforesaid discussions, we are of
the opinion that mere allegation of fraud simpliciter
may not be a ground to nullify the effect of arbitration
agreement between the parties. It is only in those cases
where the court, while dealing with Section 8 of the
Act, finds that there are very serious allegations of
fraud which make a virtual case of criminal offence or
where allegations of fraud are so complicated that it
becomes absolutely essential that such complex issues
can be decided only by the civil court on the
appreciation of the voluminous evidence that needs to
be produced, the court can sidetrack the agreement by
dismissing the application under Section 8 and proceed
with the suit on merits. It can be so done also in those
cases where there are serious allegations of
forgery/fabrication of documents in support of the plea
of fraud or where fraud is alleged against the
arbitration provision itself or is of such a nature that
permeates the entire contract, including the agreement
to arbitrate, meaning thereby in those cases where
fraud goes to the validity of the contract itself of the
entire contract which contains the arbitration clause or
the validity of the arbitration clause itself. Reverse
position thereof would be that where there are simple
allegations of fraud touching upon the internal affairs
of the party inter se and it has no implication in the
public domain, the arbitration clause need not be
avoided and the parties can be relegated to arbitration.
While dealing with such an issue in an application
under Section 8 of the Act, the focus of the court has to
be on the question as to whether jurisdiction of the
court has been ousted instead of focusing on the issue
as to whether the court has jurisdiction or not. It has to
be kept in mind that insofar as the statutory scheme of
the Act is concerned, it does not specifically exclude
any category of cases as non-arbitrable. Such
categories of non-arbitrable subjects are carved out by
the courts, keeping in mind the principle of common
ARB.P.525/2018 Page 6
law that certain disputes which are of public nature,
etc. are not capable of adjudication and settlement by
arbitration and for resolution of such disputes, courts
i.e. public fora, are better suited than a private forum
of arbitration. Therefore, the inquiry of the Court,
while dealing with an application under Section 8 of
the Act, should be on the aforesaid aspect viz. whether
the nature of dispute is such that it cannot be referred
to arbitration, even if there is an arbitration agreement
between the parties. When the case of fraud is set up by
one of the parties and on that basis that party wants to
wriggle out of that arbitration agreement, a strict and
meticulous inquiry into the allegations of fraud is
needed and only when the Court is satisfied that the
allegations are of serious and complicated nature that
it would be more appropriate for the Court to deal with
the subject-matter rather than relegating the parties to
arbitration, then alone such an application under
Section 8 should be rejected.”
16. It was further held as under:
“53. The Arbitration and Conciliation Act, 1996,
should in my view be interpreted so as to bring in line
the principles underlying its interpretation in a manner
that is consistent with prevailing approaches in the
common law world. Jurisprudence in India must evolve
towards strengthening the institutional efficacy of
arbitration. Deference to a forum chosen by parties as
a complete remedy for resolving all their claims is but
part of that evolution. Minimising the intervention of
courts is again a recognition of the same principle.”
17. In view of the above, I see no impediment in appointing a Sole
Arbitrator for adjudicating the disputes that have arisen between the
parties in relation to the abovementioned Agreement.
ARB.P.525/2018 Page 7
18. I appoint Justice D.K.Jain , Former Judge of the Supreme
Court of India, (C-4/3, Ground Floor, Safdarjung Development Area,
New Delhi-110016 Mobile-9999922288) as an Arbitrator for
adjudicating the disputes that have arisen between the parties.
19. The Arbitrator shall give his disclosure under Section 12 of the
Act before proceeding with the reference.
20. All the pleas of the parties shall remain open before the Sole
Arbitrator, who shall consider the same without being influenced by
any observation made in the present order.
21. The petition is allowed in the above terms with no order as to
costs.
Crl.M.A. 34071/2018
Learned counsel for the petitioner does not press the present
application. In view of the same the application is dismissed.
NAVIN CHAWLA, J
OCTOBER 11, 2018/Arya
ARB.P.525/2018 Page 8