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2018 Supreme(Del) 2145
IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
Icetrail Logistics Pvt. Ltd. - Petitioner
Versus
Kuehne Nagel Pvt. Ltd. - Respondent
ARB.P. 525 of 2018 & Crl.M.A. 34071 of 2018
Decided On : 11-10-2018
For the Petitioners: Mr.Dayan Krishanan, Sr. Adv. with Mr.Vijay Kaundal and Mr.Nitish K.Sharma, Advs.
For the Respondents: Mr.Sudhir Nandrajog, Sr. Adv. with Ms.Radhika Dubey, Ms.Ruchi Choudhary and Mr.Gaurav Gupta, Advs.
Mere allegations of fraud may not nullify the effect of an arbitration agreement, and a strict inquiry into allegations of fraud is needed before rejecting an application for arbitration.
Headnote:
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11 - Clause 22 of the Agreement - Section 11(6A)
Fact of the Case:
The petitioner filed a petition seeking the appointment of a Sole Arbitrator for adjudicating disputes arising from an Agreement. The respondent alleged that the Agreement was obtained through fraud and resisted the appointment of an Arbitrator.
Finding of the Court:
The court found no reason to deny the appointment of an Arbitrator as the existence of the Arbitration Agreement was not disputed. The court held that the plea of fraud could not be accepted prima facie and should be adjudicated by the Arbitrator.
Issues: The issues revolved around the alleged fraud in obtaining the Agreement and the respondent's resistance to the appointment of an Arbitrator.
Ratio Decidendi: The court relied on Section 11(6A) of the Arbitration and Conciliation Act, 1996, and the Supreme Court's decision in A.Ayyasamy v. A.Paramasivam and Ors. to determine that mere allegations of fraud may not nullify the effect of an arbitration agreement. The court emphasized the need for a strict and meticulous inquiry into allegations of fraud before rejecting an application for arbitration.
Final Decision: The court allowed the petition and appointed a Sole Arbitrator to adjudicate the disputes, emphasizing that all pleas of the parties shall remain open before the Arbitrator.
NAVIN CHAWLA, J.
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 herein below:
“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 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 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, makin
