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High Court of Delhi
V.K. SHALI, J.
RRB Energy Limited – Plaintiffs
Versus
Vestas Wind Systems & Another – Defendant
C.S. (OS) No. 999 of 2014
Decided On : 15-04-2015
Arbitration - Jurisdiction - Fraud - Serious allegations of fraud - Maintainability of suit - Arbitration and Conciliation Act, 1996, Sections 5, 8, 16, 34 - Specific Relief Act, 1963, Sections 34, 41(h), 41(i) - In a suit for declaration and injunction, the court held that serious allegations of fraud are not arbitrable and the civil court has jurisdiction to entertain the suit. The court also held that the filing of an application under Section 8 of the Arbitration and Conciliation Act, 1996 is a mandatory requirement and an application filed under Order 7 Rule 11 CPC cannot be treated as an application under Section 8 of the Act.
Fact of the Case:
The plaintiff, RRB, filed a suit for declaration that a Memorandum of Understanding (MOU) dated 23rd January 2012 is a legal, valid and binding agreement between the plaintiff and the defendant No.1, Vestas. RRB also prayed for a decree of permanent injunction restraining Vestas from proceeding with the ICC Case No.19554/CYK. Vestas contended that the MOU was forged and fabricated by RRB and its Chief Financial Officer, Mr. Henrik Norremark, and that the dispute was arbitrable.
Finding of the Court:
The court held that the allegations of fraud in the instant case were serious and could not be treated as a simplicitor case of recovery of Rs.30 crores before the arbitral tribunal. The court also held that Vestas had waived and abandoned its right to have the dispute adjudicated by an arbitral tribunal by filing two suits in the civil court and that the application filed by Vestas under Order 7 Rule 11 CPC could not be treated as an application under Section 8 of the Arbitration and Conciliation Act, 1996.
Issues: 1. Whether the suit was barred under Sections 5 and 16 of the Arbitration and Conciliation Act, 1996? 2. Whether the filing of an application under Section 8 of the Arbitration and Conciliation Act, 1996 was a mandatory requirement? 3. Whether the allegations of fraud in the instant case were serious and not arbitrable? 4. Whether Vestas had waived and abandoned its right to have the dispute adjudicated by an arbitral tribunal by filing two suits in the civil court?
Ratio Decidendi: 1. The court held that the jurisdiction of the civil court is barred at a pre objection stage except where there are egregious/serious allegations of fraud involved. A serious allegation of fraud is the one that is prima facie supported by documentary evidence so as to prima facie convince the court that there are real allegations of fraud which need to be investigated by the court. 2. The court held that the filing of an application under Section 8 of the Arbitration and Conciliation Act, 1996 is a mandatory requirement and an application filed under Order 7 Rule 11 CPC cannot be treated as an application under Section 8 of the Act. 3. The court held that the allegations of fraud in the instant case were serious and could not be treated as a simplicitor case of recovery of Rs.30 crores before the arbitral tribunal. 4. The court held that Vestas had waived and abandoned its right to have the dispute adjudicated by an arbitral tribunal by filing two suits in the civil court.
Final Decision: The court allowed the application and injuncted the arbitral tribunal from proceeding ahead with the matter.
IA No.6426/2014 (u/O 39 Rs 1 & 2 r/w Sections 94 & 151 CPC)
1. The present order shall dispose of application bearing IA No.6426/2014 under Order 39 Rule 1 & 2 CPC read with Section 94 & 151 CPC filed along with the main suit.
In the main suit, the plaintiff has prayed for the following reliefs
a) Pass a decree for declaration that the memorandum of understanding dated 23.01.2012 is a legal, valid and binding agreement between the plaintiff and the defendant No.1
b) Pass a decree of permanent injunction restraining the defendant No.1 from proceedings with the ICC Case No.19554/CYK.
2. In order to appreciate the facts and the issue involved, it would be better to refer to the parties by their initial names because there is other litigation pending in this very court where the defendant No.1 is the plaintiff and the defendant No.2 in the present case, is the defendant No.3 and plaintiff is the defendant No.1 in those proceedings. In those cases there is one more party Rakesh Bakshi who along with ECO RRB is alleged to be controlling 99% shares of the plaintiff in the present case. These suits initiated by defendant No.1 are bearing No.1448 and 1449/2013. The four parties to which three would be referred to are plaintiff as ‘RRB’, defendant No.1 as ‘Vestas’ and the defendant No.2 in the present suit as ‘Henrik Norremark’. The fourth party is Mr.Rakesh Bakshi who is not a party in present case.
3. RRB is a company duly incorporated on 1st December 1987 under the laws of India and was formerly known as Vestas RRB India Limited. The plaintiff was originally incorporated as a Joint Venture between RRB Consultants and Engineers Private Limited and the Vestas for the purpose of manufacturing Vestas type Wind Electric Generators (‘WEG’ for short).
4. The Vestas is a company incorporated under the laws of the Denmark and is engaged in the business of manufacturing, selling and installing wind turbines and WEG’s. The Henrik Norremark is the former Chief Financial Officer of the Vestas.
5. During the subsistence of the aforesaid joint venture agreement, Vestas is alleged to have entered into an agreement with NEG Micon A/S during the year 2004, which was a wholly owned subsidiary in India, namely NEG Micon India Pvt. Ltd. As a consequence of which disputes arose between the parties (RRB and Vestas) leading to the signing of a Settlement Agreement dated 11th May 2006 to settle the differences.
6. In accordance with the aforementioned Settlement Agreement, the plaintiff continued to use the name ‘VERB’ following the exit of the Vestas and the name was subsequently changed to RRB Energy Limited with effect from 25th April 2008.
7. Post the settlement agreement the RRB and the Vestas continued their commercial relationship and subsequently entered into two more Memorandum of Understandings dated 18th September 2011 and 23rd January 2012, which were signed by the Henrik Norremark who was the then Chief Financial Officer (hereinafter referred to as ‘CFO’) of the Vestas. Another MOU dated 30th September 2011 was also entered into between a subsidiary of the Vestas, namely Wind Power Invest A/S and an associate company of the Plaintiff, namely Eco RRB Infra Private Limited. The said MOU was also signed by Mr. Henrik Norremark herein for and on behalf of the subsidiary of Vestas.
8. Disputes and differences arose between the RRB and the Vestas, and their subsidiary/ associate companies wherein the Vestas has questioned the veracity, genuineness and the legality of the aforementioned three MOU’s purported to have been signed between them.
9. The MOU’s dated 18th September 2011 and 23rd January 2012 are the subject matter of CS(OS) No. 1448 of 2013 filed by the Vestas while the MOU dated 30 September 2011 is the subject matter of CS (OS) No. 1449 of 2013 filed by the subsidiary of Vestas. It may also be pertinent here to mention that on 23.01.2012 there were two MOUs signed between the parties, one MOU was for writing off the debt and the other for r
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