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2017 Supreme(Del) 1961
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
M/S VALUE ADVISORY SERVICES – DECREE HOLDER
Versus
M/S ZTE CORPORATION – JUDGMENT DEBTOR
EX.P.198 OF 2012
Decided On : 03-07-2017
For the Decree Holder : Mr Jeevesh Nagrath, Mr Pratham Sharma and Mr Rohan Ganpathy
For the Judgment Debtor :Mr T. K Ganju, Senior Advocate with Mr Vijay Kaundal and Mr Rupesh Gupta
The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, and the impugned awards were obtained by fraud.
Headnote:
ARBITRATION - ENFORCEMENT OF FOREIGN AWARDS - GROUNDS FOR DECLINING ENFORCEMENT - COMPOSITION OF ARBITRAL AUTHORITY OR ARBITRAL PROCEDURE NOT IN ACCORDANCE WITH AGREEMENT OF PARTIES - INTERPRETATION OF ARBITRATION CLAUSE - SEVERABILITY OF INVALID OR UNWORKABLE PART OF ARBITRATION CLAUSE - JURISDICTION OF ARBITRAL TRIBUNAL - FRAUD - REMOVAL OF COMPANY'S NAME FROM REGISTER OF COMPANIES - RESTORATION OF COMPANY'S NAME - EFFECT.
Fact of the Case:
VAS filed a petition for enforcement of partial and final awards delivered by an arbitral tribunal constituted under the Rules of Arbitration of the International Chamber of Commerce (ICC Rules). ZTE opposed the enforcement on grounds that the arbitral procedure was not in accordance with the agreement between the parties and that the impugned awards were obtained by fraud as VAS was struck off from the Register of Companies.
Finding of the Court:
The court held that the arbitration clause was severable and that the part requiring disputes to be submitted to SIAC was not workable. The court also held that the arbitral tribunal had jurisdiction to adjudicate the disputes under the ICC Rules. The court further held that VAS did not commit fraud by concealing that its name had been struck off the Register of Companies and that the restoration of VAS's name on the Register of Companies placed VAS in the same position as if its name had not been struck off.
Issues: 1. Whether the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties? 2. Whether the impugned awards were obtained by fraud? 3. Whether the restoration of VAS's name on the Register of Companies placed VAS in the same position as if its name had not been struck off?
Ratio Decidendi: 1. The court held that the arbitration clause was severable and that the part requiring disputes to be submitted to SIAC was not workable. The court also held that the arbitral tribunal had jurisdiction to adjudicate the disputes under the ICC Rules. 2. The court held that VAS did not commit fraud by concealing that its name had been struck off the Register of Companies. 3. The court held that the restoration of VAS's name on the Register of Companies placed VAS in the same position as if its name had not been struck off.
Final Decision: The court allowed the petition for enforcement of the partial and final awards.
VIBHU BAKHRU, J.
Introduction
1. Value Advisory Services (hereafter “VAS”) has filed the present petition for enforcement of the partial award dated 09.11.2009 and the final award dated 23.07.2010 (hereafter “the impugned awards”) under Sections 47 and 49 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act'). The impugned awards were delivered by an arbitral tribunal constituted under the Rules of Arbitration of the International Chamber of Commerce (hereafter “the ICC Rules”) pursuant to a request for arbitration filed by VAS with the Secretariat of the International Court of Arbitration (hereafter “the ICC Court”) of the International Chamber of Commerce (hereafter “ICC”). The impugned awards were made in respect of disputes that had arisen between VAS and the Judgment Debtor (hereafter “ZTE”) in relation to their agreement dated 01.01.2003.
2. ZTE has opposed the enforcement of the impugned awards on two grounds. First, ZTE claims that the arbitral procedure was not in accordance with the agreement between the parties inasmuch as the parties had agreed that the disputes would be submitted to the Singapore International Arbitration Centre (hereafter “SIAC”). However, SIAC had declined to administer the arbitration. According to ZTE, the arbitral tribunal constituted by ICC had no authority or jurisdiction to make the impugned awards. Second, ZTE claims that the impugned awards were obtained by fraud inasmuch as VAS was struck off from the Register of Companies pursuant to an application voluntarily made by it under Section 560 of the Companies Act, 1956 (hereafter “the Companies Act”). This was also notified in the Official Gazette on 03.02.2007 and VAS ceased to exist with effect from the said date. However, this fact was concealed from the arbitral tribunal as well as from ZTE. ZTE claims that since the impugned awards were obtained by fraud, they are null and void.
Factual Context
3. VAS - a company incorporated under the laws of India - is primarily engaged in the business of providing consultancy services in the field of telecommunication in India.
4. ZTE is a company incorporated under the laws of the People’s Republic of China and is, inter alia engaged in the business of supplying telecom equipment for telecommunication projects.
5. On 13.01.2003, ZTE and VAS entered into the agreement dated 01.01.2003 (hereafter “the Agreement”) whereby VAS was appointed to render consultancy services and to develop the market of ZTE’s products in India. The Agreement was for a period of two years commencing from 13.01.2003. In consideration for its services, VAS was to receive a total consideration of US$5000/- per month in advance and commission of 4% of total value of the order on every new purchase order received from ITI/TCIL (exclusively limited to reservation quota).
6. Disputes arose between the parties in regard to the amounts payable to VAS under the Agreement; ZTE claimed that the Agreement was terminated prior to expiry of its term, that is, in July 2003.
7. The Agreement included an arbitration clause (Clause 8), which provided for disputes to be settled under the ICC Rules and by an arbitral tribunal of three arbitrators to be constituted under the said rules. However, the arbitration clause also provided that the disputes would be submitted to SIAC.
8. On 22.04.2005, VAS wrote to the SIAC and ICC for clarification in regard to Clause 8 of the Agreement. In response to the same, on 14.05.2005, SIAC replied that it will not be able to administer the arbitration case under the ICC Rules. ICC also sent a communication on 19.05.2005 inter alia stating that no other arbitration institution is permitted to administer arbitration cases under the ICC Rules.
9. In view of the response received from the SIAC and ICC, VAS sent a communication dated 27.05.2005 to ZTE, informing it that in view of the clarifications, VAS proposed to refer the disputes to ICC. However, VAS received no response to its aforesaid communica
