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’) 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.

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 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 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.

6. On 09.08.2010, the learned Single Judge of the Bombay High Court dismissed the application
for 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 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].

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 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 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.

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 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 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 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.

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.
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.).

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.

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.

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:

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, 5th Edition, Judicial Comity, has been explained in the following words:

“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.
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:

“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 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.

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:

“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:

“12. When a contract contains an arbitration agreement, it is a collateral term relating to the
resolution of disputes, unrelated to the 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:

“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 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.”

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.

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 2nd 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 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:

“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 , referring to Article II(3) of the New York
Convention, states:

“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:

“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.

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.

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.

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 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.

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.
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.