IMPORTANT POINT
The main legal point established in the judgment is the requirement of a prima facie case for fraud under the second proviso to section 36(3) of The Arbitration and Conciliation Act, 1996, and the interpretation of fraud under section 17 of the Contract Act, 1872.

JUDGMENT :

Moushumi Bhattacharya, J.

1. The petitioner/award-debtor seeks unconditional stay of an Arbitral Award dated 21.6.2022 under the second proviso to section 36(3) of The Arbitration and Conciliation Act, 1996.

2. The respondent invoked arbitration proceedings after the petitioner terminated the contract, seeking specific performance of the Gas Supply and the Purchase Agreement (GSPA) and damages. The Arbitral Tribunal held the termination of the GSPA to be wrongful and illegal and awarded a sum of Rs.58,50,45,169/- to the respondent along with damages. The respondent presently claims an amount of Rs.101,39,93,149/- as the outstanding amount due to the respondent/award-holder.

3. The petitioner prays for unconditional stay on the ground that the Arbitration Agreement was induced by fraud.

4. Learned counsel appearing for the petitioner/award-debtor makes the argument under 2 heads, namely, that the Agreement dated 11.5.2011 was executed in violation of the order passed by the Petroleum and Natural Gas Regulatory Board (PNGRB) and an order dated 25.3.2011 passed by the Delhi High Court. Counsel submits that any act done in violation of order of Court is non est. The second argument is that the GSPA is vitiated by fraud and misrepresentation as the respondent/award-holder deliberately failed to disclose show-cause notices of 3.12.2010 and 15.12.2010 which were issued to the respondent to stop any incremental activity with immediate effect till the matter was decided by the PNGRB. Counsel submits that the petitioner was hence fraudulently induced to enter into the GSPA with the respondent which was clearly voidable on the ground of fraud. It is also submitted that fraud cannot be put into any straight jacket definition and that the facts of the present case must be seen in the context of the order passed by the PNGRB and the Delhi High Court.

5. Learned counsel appearing for the respondent/award-holder places the relevant facts to deny that there was any violation of the PNGRB or the Delhi High Court orders or fraud in the form of suppression or otherwise on the part of the respondent. Counsel submits that one of the witnesses of the petitioner had himself relied upon the respondent’s Balance Sheets for the relevant financial years which disclosed the orders passed by PNGRB and the Delhi High Court. Counsel submits that the orders were in the public domain i.e. on the website of the respondent.

6. The brief facts which are undisputed and relevant to the matter are narrated below.

7. The question of the Arbitration Agreement being induced or effected by fraud rides on the orders passed by the PNGRB and the Delhi High Court. Therefore, both these issues are being dealt with together.

8. The petitioner/award-debtor’s case is that the petitioner was induced into executing the Agreement and proceeding with the same without any knowledge of the orders passed by the PNGRB and the Delhi High Court, by which, according to the petitioner, the respondent was restrained from laying the pipelines for supply of the gas under the terms of the agreement. The questions which hence become germane are whether

(i) there was any restraint on the respondent, at the material point of time, to execute the agreement with the petitioner or proceed with the same, and

(ii) If yes, whether the respondent suppressed the orders of the PNGRB or the Delhi High Court for the purpose of inducing the petitioner to execute the Agreement?

Did the respondent act in contravention of any order?

9. With regard to the first point, the records show that the initial show-cause notice of PNGRB dated 3.12.2010, which directed the respondent to stop incremental activity, was challenged before the Delhi High Court. The Delhi High Court passed the final order dated 21.1.2011 directing PNGRB to hear the parties and the reply of the respondent. PNGRB passed an order dated 18.3.2011, whereby the respondent was not restrained from supplying or selling Coal Bed Methane (CBM) gas to its cu