Case: Swiss Timing Limited Vs. Organising Committee, Commonwealth Games 2010, Delhi

Another factor that weighed with Court in dismissing the Petition, it appears, is that the Petitioner did not conform to the procedure concerning appointment of the Arbitrator before filing the Petition under Section 11 (6). 33. This case is clearly distinguishable and hence is not applicable into the facts and circumstances of the present case because of the following reasons: Firstly, there has been no conviction in the present case, though the trial has been going on against the officials of both the parties. Secondly, there is no injunction or any other order restraining the Petitioner from invoking the Arbitration Clause. Lastly, all the conditions precedent for invoking the arbitration clause have been satisfied by the Petitioner, as observed earlier. 34. The respondent had relied on the judgment of this Court in Guru Granth Saheb Sthan Meerghat Vanaras Vs. Ved Prakash & Ors. [(2013) 7 SCC 622] This judgment reiterates the normal rule which was stated by the Constitution Bench of this Court in M.S.Sheriff Vs. State of Madras in relation to the simultaneous prosecution of the criminal proceeding with the civil suit. In the aforesaid case, the Constitution Bench had observed as follows:- “14. … It was said that the simultaneous prosecution of these matters will embarrass the accused. … but we can see that the simultaneous prosecution of the present criminal proceedings out of which this appeal arises and the civil suits will embarrass the accused. We have therefore to determine which should be stayed.15. As between the civil and the criminal proceedings we are of the opinion that the criminal matters should be given precedence. There is some difference of opinion in the High Courts of India on this point. No hard-and-fast rule can be laid down but we do not consider that the possibility of conflicting decisions in the civil and criminal courts is a relevant consideration. The law envisages such an eventuality when it expressly refrains from making the decision of one court binding on the other, or even relevant, except for certain limited purposes, such as sentence or damages. The only relevant consideration here is the likelihood of embarrassment.16. Another factor which weighs with us is that a civil suit often drags on for years and it is undesirable that a criminal prosecution should wait till everybody concerned has forgotten all about the crime. The public interests demand that criminal justice should be swift and sure; that the guilty should be punished while the events are still fresh in the public mind and that the innocent should be absolved as early as is consistent with a fair and impartial trial. Another reason is that it is undesirable to let things slide till memories have grown too dim to trust.This, however, is not a hard-and-fast rule. Special considerations obtaining in any particular case might make some other course more expedient and just. For example, the civil case or the other criminal proceeding may be so near its end as to make it inexpedient to stay it in order to give precedence to a prosecution ordered under Section 476. But in this case we are of the view that the civil suits should be stayed till the criminal proceedings have finished.” 35. The purpose of the aforesaid solitary rule is to avoid embarrassment to the accused. In contrast, the findings recorded by the arbitral tribunal in its award would not be binding in criminal proceedings. Even otherwise, the Constitution Bench in the aforesaid case has clearly held that no hard and fast rule can be laid down that civil proceedings in all matters ought to be stayed when criminal proceedings are also pending. As I have indicated earlier in case the award is made in favour of the petitioner herein, the respondents will be at liberty to resist the enforcement of the same on the ground of subsequent conviction of either the Chairman or the officials of the contracting parties. 36. It must also notice here that the Petitioners relied upon an earlier order of this court in the case of M/s Nussli (Switzerland) Ltd. (supra). The aforesaid order, however, seems to have been passed on a consensus between the learned counsel for the parties. This is evident from the following observations in the aforesaid order: “In view of the aforesaid order, learned senior counsel for both the parties have agreed that the parties have agreed that the matter ought to be referred to Arbitration. However, Mr. Gopal Subramaniam, learned senior counsel appearing for the Respondent, submits that serious issued would arise which are currently under investigation of the CBI, which may ultimately culminate into certain conclusions which could result in the invalidation of the contract from inception.He has, however, very fairly stated that there would be no impediment for the arbitral Tribunal to look into all the issues including the allegations which are pending with the CBI in investigation.I am of the opinion that the submission made by the learned senior counsel is in accordance with the law settled, not only by this Court, but in other jurisdictions also concerning the international commercial arbitrations.” The aforesaid excerpt clearly shows that Mr. Gopal Subramaniam, had very fairly agreed to proceed with arbitration. The decision of this Court in M/s Nussli (Switzerland) Ltd. (supra) has not laid down any law. 37. As noticed earlier, the petitioners have already nominated Hon’ble Mr. Justice S.N. Variava, Former Judge of this Court, having his office at Readymoney Mansion, 2nd floor, Next to Akbarallys, Veer Nariman Road, Fort, Mumbai – 400 001, as their arbitrator. I hereby nominate. Hon’ble Mr. Justice B.P. Singh, Former Judge of this Court, R/o A-7, Neeti Bagh, 3rd Floor, New Delhi – 110 049, as the second Arbitrator and Hon’be Mr. Justice Kuldip Singh, Former Judge of this Court, R/o H.No. 88, Sector 10A, Chandigarh – 160 010, as the Chairman of the Arbitral Tribunal, to adjudicate the disputes that have arisen between the parties, on such terms and conditions as they deem fit and proper.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]15. I am unable to agree with the submission made by the learned counsel for the respondent that the petitioner has not satisfied the condition precedent under Clause 38.3.A perusal of the correspondence placed on the record of the petition clearly shows that not only the petitioner but even the ambassadors of the various governments had made considerable efforts to resolve the issue without having to take recourse to formal arbitration. It is only when all these efforts failed, that the petitioner communicated to the respondent its intention to commence arbitration by letter /notice dated 22nd April, 2013. This was preceded by letters dated 4th February, 2011, 14th March, 2011 and 20th April, 2011 which clearly reflect the efforts made by the petitioner to resolve disputes through discussions and negotiations before sending the notice invoking arbitration clause.16. It is evident from the counter affidavit filed by the respondents that the disputes have arisen between the parties out of or relating to the agreement dated 11th March, 2010. On the one hand, the respondent disputes the claims made by the petitioner and on the other, it takes the plea that efforts were made to amicably put aI, therefore, do not find any merit in the submission of the respondent that the petition is not maintainable for non-compliance with Clause 38.3 of the Dispute Resolution Clause.17. The second preliminary objection raised by the respondent is on the ground that the contract stands vitiated and is void-ab-initio in view of Clauses 29, 30 and 34 of the agreement dated 11th March, 2010. I am of the considered opinion that the aforesaid preliminary objection is without any substance. Under Clause 29, both sides have given a warranty not to indulge in corrupt practices to induce execution of the Agreement. Clause 34 empowers the Organising Committee to terminate the contract after deciding that the contract was executed in breach of the undertaking given in Clause 29 of the Contract. These are allegations which will have to be established in a proper forum on the basis of the oral and documentary evidence, produced by the parties, in support of their respective claims. The objection taken is to the manner in which the grant of the contract was manipulated in favour of the petitioner. The second ground is that the rates charged by the petitioner were exorbitant. Both these issues can be taken care of in the award. Certainly if the respondent is able to produce sufficient evidence to show that the similar services could have been procured for a lesser price, the arbitral tribunal would take the same into account whilst computing the amounts payable to the petitioner. As a pure question of law, I am unable to accept the very broad proposition that whenever a contract is said to be void-ab-initio, the Courts exercising jurisdiction under Section 8 and Section 11 of the Arbitration Act, 1996 are rendered powerless to refer the disputes to arbitration.Having found that the subject matter of the suit was within the jurisdiction of the arbitration, it was held that the disputes can not be referred to arbitration. This Court approved the finding of the High Court that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation can not be properly gone into by the arbitrator.In my opinion, the observations in Hindustan Petroleum Corpn. Ltd. (supra) lays down the correct law. Although, reference has been made to the aforesaid observations in N. Radhakrishnan (supra) but the same have not been distinguished.Keeping in view the aforesaid observations made by this Court, I see no reason to accept the submission made by the learned counsel for the respondents that since a criminal case has been registered against the Chairman of the Organising Committee and some other officials of the petitioner, this Court would have no jurisdiction to make a reference to arbitration.I am of the opinion that whenever a plea is taken to avoid arbitration on the ground that the underlying contract is void, the Court is required to ascertain the true nature of the defence. Often, the termsare confused and used loosely and interchangeably with each other. Therefore, the Court ought to examine the plea by keeping in mind the relevant statutory provisions in the Indian Contract Act, 1872, defining the terms0. In the present case, it is pleaded that the manner in which the contract was made between the petitioner and the respondent was investigated by the CBI. As a part of the investigation, the CBI had seized all the original documents and the record from the office of the respondent. After investigation, the criminal case CC No.22 of 2011 has been registered, as noticed earlier. It is claimed that in the event the Chairman of the Organising Committee and the other officials who manipulated the grant of contract in favour of the respondent are found guilty in the criminal trial, no amount would be payable to the petitioner. Therefore, it would be appropriate to await the decision of the criminal proceedings before the arbitral tribunal is constituted to go into the alleged disputes between the parties. I am unable to accept the aforesaid submission made by the learned counsel for the respondents, for the reasons stated in the previous paragraphs. The balance of convenience is tilted more in favour of permitting the arbitration proceedings to continue rather than to bring the same to a grinding halt.