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2025 Supreme(Online)(DEL) 1222
IN THE HIGH COURT OF DELHI AT NEW DELHI
Subramonium Prasad, J
Bentwood Seating System (P) Ltd. – Appellant
Versus
Airport Authority of India & Anr. – Respondent
ARB. A. (COMM.) 55/2023 & I.A. 25113/2023, I.A. 25114/2023, I.A. 3993/2024
For the Appellant :Mr. S.D. Singh, Mr. Kamla Prasad, Mrs. Meenu Singh, Mr. Siddharth Singh, Advocates.
For the Respondent:Mr. Digvijay Rai, Mrs. Chetna Rai, Mr. Archit Mishra & Mr. Raghib Ali Khan, Advocates with Mr. Gagan
Kochar, Sr. Manager (Law), AAI.
Serious allegations of fraud render disputes non-arbitrable, necessitating civil court adjudication rather than arbitration.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 37(2)(a) - Commercial Court Act - Section 13 - Appeal against Arbitral Tribunal's order declaring dispute non-arbitrable due to fraud - Tribunal found allegations of fraud serious enough to warrant civil court adjudication rather than arbitration. (Paras 1, 10, 26)
(B) Fraud - Definition and implications - Allegations of fraud must be substantiated; serious fraud claims are non-arbitrable and require civil court intervention. (Paras 16, 18, 24)
(C) Jurisdiction of Arbitral Tribunal - Tribunal cannot adjudicate on matters requiring examination of external witnesses or documents, especially in cases of serious fraud. (Paras 10, 26)
Facts of the case:
The Appellant, claiming to be the Indian Associate of a foreign manufacturer, submitted forged documents to qualify for a tender. The Respondents discovered the fraud through investigations, leading to the Tribunal's ruling on non-arbitrability.
Findings of Court:
The Tribunal concluded that the nature of fraud involved necessitated civil court adjudication due to its complexity and the need for external evidence.
Issues: The main issue was whether the Tribunal's decision on non-arbitrability due to fraud was valid.
Ratio Decidendi: The court upheld the Tribunal's finding that serious allegations of fraud are non-arbitrable and should be resolved in civil court, emphasizing the need for thorough examination of evidence.
Result: Appeal dismissed.
JUDGMENT
1. The present Appeal has been filed under Section 37(2)(a) of the Arbitration and Conciliation Act, 1996 (hereinafter 'Act of 1996') read with Section 13 of the Commercial Court Act by the Appellant against the Orders dated 14.08.2023 and 16.08.2023 passed by the Ld Arbitral Tribunal while adjudicating the disputes which have arisen between the parties i.e. the Appellant and the Respondents-herein under a Tender No.Tech 06/2017 (Tender ID 2017_AAI_150_1), dated 02.11.2017 for 'Supply and Comprehensive Annual Maintenance Contract (CAMC of 4000 Nos. passengers baggage trolleys) Stainless Style type for various airports' wherein the Ld. Arbitral Tribunal has held that the dispute is not arbitrable on the ground of fraud played by the Appellant.
2. Shorn of unnecessary details, the facts in brief, leading to the filing of the instant appeal are as under:-
i. It is stated that the Respondents had invited bids for 'Supply and Comprehensive Annual Maintenance Contract (CAMC of 4000 Nos. Passengers Baggage Trolleys ("PBTs")) Stainless Style type for various airports'. The relevant Clauses of the Tender dated 02.11.2017, which are necessary for adjudication of instant appeal, are as under:
"(a) Clauses from Section A of the Tender Document
1.2 Eligibility conditions for participating in the Tender:
1.2.3-Experience (For Original Item Manufacturers);
The firm should have successfully completed similar works which should include supply of at least 400 nos passenger baggage trolleys during last 7 years ending 31st March 2017 and should be either of the following:
a) three completed works costing not less than the value of Rs.2.17 crore each
Or
b) two completed works costing not less than the value of 2.71 crore each
Or
c) one completed work costing not less than the value of 4.34 crore.
d) Multiple completed works costing not less than the value of Rs.5.42 crore in aggregate.
1.2.4-Satisfactory Performance Certificate: The Firm should submit satisfactory performance certificate from two end users for the works carried out w.e.f. 01.04.2010 to 31.03.2017 out of which at least one work should be from an airport for supply of passenger baggage trolleys.
***
"Clause 1.2.6 (For Indian Associate -Applicable in case of a foreign bidder): (i) The Indian Associate (IA) should be authorized by Original Item Manufacturer (OIM). The Indian Associate should be in the business of manufacturing/fabricating of Stainless Steel goods/products/material carrying/trolleys mounted equipment/passenger baggage trolleys/maintenance of equipment/machineries for a minimum period of last 3 years (as on 31st March, 2017).
(ii) The Original Item Manufacturer should meet the eligibility requirements i.e. Profile, Resources, Experience and Satisfactory Performance Certificate of Clause 1.2.1, 1.2.2, 1.2.3 and 1.2.4 above;
(iii) Indian Associate (IA) of OIM should have current authorization from OIM firm authorizing it as its authorized Indian Agent for the tender, shall be submitted;
(iv) Indian Associate (IA) shall submit an undertaking stating that its firm or its Partners or its Directors have not been blacklisted or any case is pending or any complaint regarding irregularities is pending in India or abroad, by any global international body like World Bank/International Monetary Fund/World Health Organization etc. or any Indian State/Central Government Department or Public Sector undertaking of India.
(v) Only one Indian Associate (IA) shall be authorized by OIM firm for the offered product in the tender.
(b) Clauses from Section B:
Clause 2.25.6: Prototype of Passenger Baggage Trolley (PBT) should be produced for inspection within 15 days from the date of placement of Purchase Order.
***
Clause 2.3: the contractor is to deliver the stores/materials as per the T&Cs mentioned in this tender document and purchase order. If the contractor fails to complete the supply as per the delivery schedule given in this tender document, the purchaser has the right to cancel the order or get
