Case: AVITEL POST STUDIOZ LIMITED AND ORS Vs. HSBC PI HOLDING (MAURITIUS) LIMITED

To dispose of the said appeals, we refer to the facts in Civil Appeal No. 5145 of 2016. The brief facts necessary to appreciate the controversy that arises in the present case are as follows:(i) On 21.04.2011, a Share Subscription Agreement [ SSA] was entered into between HSBC and the Appellants. HSBC made an investment in the equity capital of Avitel India for a consideration of USD 60 million in order to acquire 7.8% of its paid-up capital. This SSA contained an arbitration clause which reads as follows:-16. DISPUTE RESOLUTION16.1.1. Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach or termination shall be referred to and finally resolved by binding arbitration at the Singapore International Arbitration Centre ( SIAC) in accordance with the International Arbitration Rules in force at the date of this Agreement ( Rules), which Rules are deemed to be incorporated by reference into this clause and as may be amended by the rest of this clause.16.1.2. The seat of arbitration shall be Singapore.16.1.3. The language of the arbitration proceedings shall be English.16.1.4. The arbitration tribunal shall consist of three (3) arbitrators: the claimant party shall nominate one (1) arbitrator, the respondent party shall nominate one (1) arbitrator and the two (2) arbitrators thus appointed shall nominate the third arbitrator who shall be the presiding arbitrator (the Arbitration Tribunal). If there is more than one claimant party and/or more than one respondent party, the claimant parties (for the purposes of this Clause 16.1 together a party) shall together designate one (1) arbitrator and the respondent parties (for the purposes of this Clause16.1 together a party) shall together designate one (1) arbitrator. If within 30 days of a request from the other party to do so, a party fails to designate an arbitrator, or if the two (2) arbitrators fail to designate the third arbitrator within 30 days after the confirmation of the appointment of the second arbitrator, the appointment shall be made, upon request of a party, by the SIAC council in accordance with the Rules.16.1.5. If within 14 days of a request from the other party to do so, a party fails to nominate an arbitrator, or if the two (2) arbitrators fail to nominate the third arbitrator within 14 days after the confirmation of the appointment of the second arbitrator, the appointment shall be made, upon request of a party, by the SIAC council in accordance with the Rules.16.1.6. The parties waive any right to apply to any court of law and/or other judicial authority to determine any preliminary point of law and/or review any question of law and/or the merits, insofar as such waiver may be validly made. The parties shall not be deemed, however, to have waived any right to challenge any award on the ground that the tribunal lacked substantive jurisdiction and/or the ground of serious irregularity affecting the tribunal, the proceedings or the award to the extent allowed by the law of the seat of the arbitration.16.1.7. Nothing in this Clause 16.1 shall be construed as preventing any party from seeking conservatory or interim relief in any court of competent jurisdiction.16.1.8. Any award of the arbitration tribunal shall be made in writing and shall be final and binding on the parties from the day it is made and the parties agree to be bound thereby and to act accordingly. The parties undertake to carry out the award without delay.16.1.9. During the conduct of any arbitration proceedings pursuant to this Clause 16.1, this Agreement shall remain in full force and effect in all respects except for the matter under arbitration and the parties shall continue to perform their obligations hereunder, except for those obligations involved in the matter under dispute, and to exercise their rights hereunder.The costs and expenses of the arbitration, including the fees of the arbitration and the Arbitration Tribunal, shall be borne equally by each Party to the dispute or claim and each Party shall pay its own fees, disbursements and other charges of its counsel, except as may be determined by the Arbitration Tribunal. The Arbitration Tribunal would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts.16.3. Final and BindingIt is agreed by the Parties that any award made by the Arbitration Tribunal shall be final and binding on each of the Parties that were parties to the dispute.16.4. Application of Arbitration ActSave for section 9, Part 1 of the Indian Arbitration and Conciliation Act, 1996 (the Arbitration Act), the provisions of Part 1 of the Arbitration Act shall not apply to the terms of this Agreement.(ii) On 06.05.2011, the aforesaid parties entered into a Shareholders Agreement [ SHA] which defined the relationship between the parties after the SSA dated 21.04.2011 had been entered into. The SHA also contained an arbitration clause which was identical to the arbitration clause contained in the SSA. It is the case of HSBC that a representation had been made by Appellants No. 2-4 (the Jain family) that the Appellants were at a very advanced stage of finalising a contract with the British Broadcasting Corporation [ BBC] to convert the BBCs film library from 2D to 3D. This contract was expected to generate a revenue of USD 300 million in the first phase, and ultimately over USD 1 billion. It is the further case of HSBC that this investment of USD 60 million was required by Avitel India to purchase equipment for Avitel Post Studioz FZ LLC [ Avitel Dubai] to service the BBC contract (Avitel Dubai is a 100% subsidiary of Avitel Holdings Ltd., Mauritius [ Avitel Mauritius], which, in turn, is a 100% subsidiary of Avitel India. Avitel India, Avitel Mauritius, and Avitel Dubai are collectively referred to as the Avitel Group).(iii) In early April 2012, HSBC grew suspicious about the Avitel Groups business of digitising films and Ernst & Young and KPMG Dubai were appointed to inquire into and return findings as to the business activities of the Avitel Group. It is the further case of HSBC that they discovered, thanks to certain preliminary findings of Ernst & Young and KPMG Dubai, inter alia, that the purported BBC contract was non-existent and was set up by the Appellants to induce HSBC into investing the aforesaid money of USD 60 million in the shares of Appellant No. 1. It is also HSBCs case that though Avitel Dubai received the entire investment proceeds of USD 60 million on or about 10.05.2011, it appeared that around USD 51 million were not used to purchase any equipment to service the BBC contract, but appeared to have been siphoned off to companies in which the Jain family had a stake.(iv) As disputes arose between the parties, on 11.05.2012, notices of arbitration were issued by HSBC to the Singapore International Arbitration Centre [ SIAC] to commence arbitral proceedings. On 14.05.2012, the SIAC appointed Mr. Thio Shen Yi, SC, as an Emergency Arbitrator pursuant to an application dated 11.05.2012. On 17.05.2012, the Appellants challenge to the appointment of the Emergency Arbitrator was considered by the SIAC and rejected. On 25.05.2012, the Appellants filed their response to the notices of arbitration.(v) The Emergency Arbitrator then passed two Interim Awards dated 28.05.2012 and 29.05.2012, in the SSA and the SHA, respectively, in favour of HSBC, directing the Appellants and Avitel Dubai to refrain from disposing of or dealing with or diminishing the value of their assets up to USD 50 million, and permitting HSBC to deliver a copy of the Interim Awards to financial institutions in India and the UAE with which any of the Appellants hold or may hold or be signatory to accounts, together with a request that the financial institutions freeze such accounts consistent with the Interim Awards. On 27.07.2012, the Emergency Arbitrator made an amendment to Interim Awards dated 28.05.2012 and 29.05.2012 passed in the SSA and the SHA, respectively, granting further relief to HSBC by, inter alia, directing the Appellants and Avitel Dubai to cease and desist from prohibiting or inhibiting Ernst & Young and KPMG Dubai from conducting investigations into the financial affairs of Avitel Dubai and Avitel Mauritius.(vi) On 30.07.2012, HSBC filed Arbitration Petition No. 1062 of 2012 under section 9 of the 1996 Act in the Bombay High Court, inter alia seeking directions to call upon the Appellants to deposit a security amount to the extent of HSBCs claim in the arbitration proceedings that had begun under both the SSA and the SHA.(vii) On 03.08.2012, a learned Single Judge of the Bombay High Court passed an interim order under the section 9 petition, inter alia directing the Corporation Bank to allow the Appellants to withdraw a sum of INR 1 crore from their account on or before 09.08.2012, but not to allow any further withdrawals until further orders, till which time, the account was to remain frozen.(viii) Meanwhile, the Appellants challenged the jurisdiction of the three- member Arbitral Tribunal comprising of Mr. Christopher Lau, SC as its Chairman, and Dr. Michael C. Pryles and Justice (Retd.) Ferdino I. Rebello as co-arbitrators [ Arbitral Tribunal] set up under the auspices of the SIAC. On 25.09.2012, the Arbitral Tribunal decided that this would be decided as a preliminary issue. On 17.12.2012, the Arbitral Tribunal passed a unanimous final partial award on jurisdiction, dismissing the jurisdictional challenge, and stating that since Singapore law governs the arbitration agreement, allegations of fraud and complicated issues relating to facts are arbitrable.(ix) Meanwhile, in the section 9 petition pending before the Bombay High Court, an order was passed by a learned Single Judge dated 22.01.2014, in which the Appellants were directed to deposit any shortfall in their account with the Corporation Bank so as to maintain a balance of USD 60 million. The learned Single Judge gave prima facie findings that the seat of arbitration was at Singapore and that the arbitration agreement was governed by Singapore law; hence, arbitrability of the dispute at hand would be governed by Singapore law. It held that the unanimous final partial award on jurisdiction dated 17.12.2012, delivered by the Arbitral Tribunal in Singapore, upholding the jurisdiction of the Arbitral Tribunal to proceed, had not been challenged in Singapore by the Appellants, and further held that this being the case, since HSBC has a good chance of success in the final arbitral proceedings, the aforesaid order to deposit the shortfall in the account so as to maintain a balance of USD 60 million was passed.(x) An appeal against the order of the learned Single Judge was disposed of by the impugned judgment and order of the Division Bench dated 31.07.2014, returning a prima facie finding that since Singapore law governs the arbitration agreement, there was no need to interfere with the findings of the learned Single Judge in this respect. Further, it was held that there is no estoppel in filing the present proceeding despite the Emergency Awards being passed in Singapore as the section 9 petition could be maintained on a plain reading of the arbitration agreement itself. It was further held that an issue of fraud in the context of sections 17 and 18 of the Indian Contract Act, 1872 [ Contract Act] referred to want of free consent, and was a well- accepted ground that would vitiate the contract, rendering it voidable. After referring to various judgments of this Court, it was held that there was a distinction between the suitability and arbitrability of disputes, and on the facts of the present case, it could not be said that the dispute was not arbitrable because of an allegation of fraud made by HSBC. After then referring to the claim statement of HSBC before the Arbitral Tribunal at Singapore, it was held that the allegations of fraud and misrepresentation were primarily in the context of fraud and misrepresentation as defined in sections 17 and 18 of the Contract Act, thus establishing a civil profile of the disputes that had arisen between the parties. However, after referring to certain judgments on interim mandatory injunctions, the High Court prima facie found that HSBC had carried out due diligence by engaging leading agencies like Ernst & Young and Clifford Chance. Also, it was held that the measure of damages that may ultimately be awarded may not be the amount of loss ultimately sustained by HSBC, but can at best be the difference between the price paid by HSBC in acquiring Avitel Indias shares and the price HSBC would have received had it resold the said shares in the market. This being the case, and an interim mandatory injunction being in the nature of equitable relief, the Division Bench was of the opinion that the interest of justice would be served if the Appellants are directed to deposit an additional amount equivalent to USD 20 million in its Corporation Bank account, so that the total deposit in the said account is maintained at half the said figure of USD 60 million, i.e., at USD 30 million. The appeal against the order dated 22.01.2014 was therefore partly allowed.(xi) By a Final Award in the SSA dated 27.09.2014 [ Foreign Final Award], the Arbitral Tribunal held as follows:21. FORMAL FINAL AWARD21.1 The Tribunal has carefully considered the oral and documentary evidence as well as the submissions of the Parties and given due weight thereto and rejecting all submissions to the contrary hereby makes, issues and publishes this Final Award and for the reasons set out above FINDS, AWARDS, ORDERS AND DECLARES as follows:21.2 Finds that the Respondents jointly and severally represented to the Claimant the following:a. the Avitel Groups propriety stereoscopy technology was superior to that of its competitor;b. Avitel Dubai played an important role in the Avitel Groups business;c. the Avitel Group was in advanced negotiations with the BBC and that the BBC Contract was close to execution;d. the Claimants investment was required and was to be utilized for purchasing equipment in order to enable Avitel Dubai to service the BBC Contract;e. the Avitel Group had the benefit of the Material Contracts with Kinden, SPAC and Purple Passion with a total value of approximately USD 658 million;f. the Avitel Groups key customers Kinden, SPAC and Purple Passion as well as Avitel Dubais key supplier, Digital Fusion, and key service provider, Highend, were all independent and legitimate companies;g. the representations and warranties contained in Clauses 6.1 and 6.2 of the SSA and in Clauses 7.1, 7.3, 7.5 , 8, 10 and 11 of Schedule 3 of the SSA to be true, complete, accurate and not misleading;21.3 Finds that the Respondents made the representations and/or warranties in order to induce the Claimant to invest in the First Respondent;21.4 Finds that the Claimant did rely on the representations and/or warranties in making its investment in the First Respondent;21.5 Finds that the representations and/or warranties referred to in paragraph 21.2 (a) to (g) above were false and/or misleading;21.6 Finds that the Respondents made the representations and/or warranties referred to in paragraph 21.2 (a) to (g) above knowing that these were false and/or without belief in their truth;21.7 Finds that the Respondents are jointly and severally liable to the Claimant in tort for deceit;21.8 Finds that the Respondents are jointly and severally liable to the Claimant for fraudulent misrepresentation under the Contract Act;21.9 Finds that the Respondents are jointly and severally liable to the Claimant for breach of warranty;21.10 Finds that the Second, Third and Fourth Respondents are to jointly and severally indemnify the Claimant for the loss of its investment in the amount of USD 60 million as well as for the costs of and associated with this arbitration and associated court actions;21.11 Finds that the Claimant in respect of its claim for fraudulent misrepresentation and its claim in tort for deceit is entitled to damages in the total amount of USD 60 million;21.12 Finds that the Claimant is entitled to interest on the sum of USD 60 million from 6 May 2011 to the date of this Final Award at the rate of 4.25 % per annum;21.13 Finds that the Claimant is entitled to its legal and other costs as well as the costs of the arbitration in the total amount of SGD 827,615.67 comprising of the following:(a) the amount of SGD 29,235.88 in respect of the Emergency Arbitrators fees and expenses(b) the amount of SGD 756,513.19 in respect of the Tribunals fees and expenses;(c) the amount of SGD 41,866.60 in respect of SIAC administrative fees and expenses;21.14 Finds that upon the Respondents paying in full and unconditionally the sums awarded to the Claimant in paragraphs 21.15, 21.16, 21.18, 21.19 below, the Claimants Preference Subscription Shares and Equity Subscription Shares (as defined in the SSA) in Avitel India are to be cancelled forthwith;21.15 Awards to the Claimant and Orders the Respondents to pay damages in the amount of USD 60 million in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable;21.16 Awards to the Claimant and Orders the Respondents to pay interest on the sum of USD 60 million from 6 May 2011 to the date of this Final Award at the rate of 4.25% per annum in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable;21.17 Orders in terms identical to the orders in the Interim Award (as amended by the Addendum and Amendment to Interim Award dated 15 June 2012 and by the Amendment to Interim Award dated 27 July 2012), which orders are to remain in force up to and including the date on which the Respondents comply with all other orders in this Final Award;21.18 Awards to the Claimant and Orders the Respondents to pay the Claimants legal and other costs amounting to USD 1,652,890.14 in respect of which award the First, Second, Third and Fourth Respondents are jointly and severally liable;21.19 Awards to the Claimant and Orders the Respondents to pay all the costs of this arbitration in the total amount of SGD 827,615.67 as follows:(a) the amount of SGD 29,235.88 in respect of the Emergency Arbitrators fees and(b) the amount of SGD 756,513.19 in respect of the Tribunals fees and expenses;(c) the amount of SGD 41,868.60 in respect of SIAC administrative fees and expenses;21.20 Declares the Second, Third and Fourth Respondents jointly and severally liable to indemnify the Claimant for the loss of its investment in the amount of USD 60 million together with interest thereon for the period and at the rate specified in paragraph 21.16 hereinabove and the Claimants legal costs, related expenses as well as the costs of this arbitration as specified in paragraph 21.19 hereinabove;21.21 Declares and Orders that upon the Respondents paying in full and unconditionally the sums awarded to the Claimant in paragraphs 21.15, 21.16, 21.18, 21.19 hereinabove and all costs arising out of and incidental to the cancellation of the Claimants Preference Subscription Shares and Equity Subscription Shares (as defined in the SSA) in Avitel India, that the said shares be cancelled and that in this regard, the Parties take the requisite steps to effect the said cancellation within 30 days of receipt of such payment.Initially, this Foreign Final Award was challenged by the Appellants in a section 34 proceeding in the Bombay High Court. By a judgment dated 28.09.2015, the section 34 petition was dismissed as being not maintainable. An appeal under section 37 of the 1996 Act was dismissed on 05.05.2017. Meanwhile, HSBC moved the Bombay High Court on 15.04.2015 to enforce the Foreign Final Award in the SSA dated 27.09.2014, which enforcement proceedings are still pending.25. In this case, the Appellant is an angel investor in the shares of Avitel India. By a letter dated 04.07.2016, the Appellant herein expressed his concern on the observations and the freezing of the companys bank account by the Bombay High Court vide orders dated 22.01.2014 and 31.07.2014. The Appellant attended a meeting of the Board of Directors of Avitel India on 11.07.2016, in which the Chairman of the company, i.e., Mr. Pradeep Jain, explained to the Appellant in some detail as to the proceedings filed by HSBC against the company and the orders passed by the Arbitrators and Courts therein. The Chairman expressed a view that, ultimately, they were likely to succeed in this litigation. The Appellant stated that he was not satisfied with this point of view and asked for the return of the money invested along with interest at the rate of 12% per annum. The Chairman stated that the amounts invested by the Appellant were in equity shares, which were the fixed capital of the company, and any return of such investment is not permissible in law. The Appellant then stated the following, which is recorded in the Minutes of the Board Meeting dated 11.07.2016:Mr. Savla stated that he would like to peruse the documents in detail and would not rest content till full justification is made available, if need so arises for redressal of issues involved. He requested that the disputes be decided by an Arbitrator. The Board unanimously consented that any disputes raised by Mr. Ravindra Savla, so long as they are arbitrable under law, shall be referred to arbitration in accordance with Indian law. Mr. Ravindra Savla stated that he would examine the papers provided to him and determine his further course of action.Mr. Ravindra Savla further requested that a copy of the Minutes of this Meeting of the Board of Directors be made available to him. The Chairman accepted the said request.26. Almost immediately, the Appellant filed a section 9 petition under the 1996 Act before the learned ADJ, Mohali, which was decided by a judgment dated 03.08.2016, in which the learned ADJ held that the Board Resolution dated 11.07.2016 only showed that any disputes raised by the Appellant shall be referred to arbitration in accordance with Indian law, provided they are arbitrable disputes. It was then held that as serious allegations of fraud were raised by HSBC in the dispute between HSBC and the Avitel Group/Jain family, such dispute would not be arbitrable as per Indian law. Even otherwise, according to the learned ADJ, this dispute (i.e., the dispute between HSBC and the Avitel Group/Jain family) is pending adjudication before the Supreme Court of India, and any decision made by that Court shall have a direct bearing on the dispute between the parties in this case also. It was, therefore, held:11. In view of the detailed discussion made above, this court can safely conclude that the petitioner is a shareholder and has no specific separate arbitration agreement, so no arbitrable dispute arises, as per Indian law, which may be referred to arbitration or for which, provisions of section 9 of Arbitration and Conciliation Act can be involved for protection of his interest qua the shares purchased by him. Therefore, I do not find that any prima-facie case is made out in favour of applicant. Even balance of convenience is not in favour of the applicant and no irreparable loss will be caused to the applicant, if this application is not allowed. Thus no ground is made out for grant of relief under section 9 of the Act and section 151 of CPC and the application stands dismissed accordingly. File be consigned to the record room.. An appeal was filed against this judgment to the Punjab and Haryana High Court. A learned Single Judge of the High Court, by the impugned judgment dated 02.09.2016, held that the final relief sought for is the return of an invested amount with interest together with cancellation of the shares. Such disputes would be governed by the Companies Act, 2013. Therefore, following some of the judgments of the Supreme Court, the remedy for arbitration sought by the Appellant would be barred by implication in view of the provisions of the Companies Act, 2013. After discussing the fraud exception in some detail and stating that serious allegations of fraud and impersonation are not arbitrable, the High Court concluded:For the foregoing reasons, I am of the view that primarily, the appellant is trying to make out a case of parity with the case of HSBC, which is already a matter sub-judice before the Competent Court, but as per the facts narrated above, I am of the view that the prima facie allegation of fraud, as already noticed above, would not fall in the realm of arbitrable dispute and therefore, rightly so, the court below has declined to grant the interim relief as sought. I do not intend to differ with the order under challenge. No ground for interference is made out. The appeal is dismissed.

Reasoning:
5. First and foremost, it is correct to state that this prima facie case would necessarily depend upon what is the substantive law in India qua arbitrability when allegations of fraud are raised by one of the parties to the arbitration agreement.It will be seen from section 20 of the 1940 Act, as was held in Abdul Kadir (supra), that a wide discretion is vested in the Court if sufficient cause is made out not to refer parties to arbitration. It was in that context that the observations in Abdul Kadir (supra) as to serious allegations of fraud triable in a civil court, being sufficient cause shown under section 20(4) of the 1940 Act were made. Also, the approach of the 1940 Act is made clear by section 35(1), which is set out hereinbelow:35. Effect of legal proceedings on arbitration.—(1) No reference nor award shall be rendered invalid by reason only of the commencement of legal proceedings upon the subject-matter of the reference, but when legal proceedings upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted under Section 34, be invalid.xxx xxx xxxThus, even where arbitral proceedings are ongoing, such proceedings become invalid the moment legal proceedings upon the whole of the subject matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire. As against this, sections 5, 8 and 16 of the 1996 Act reflect a completely new approach to arbitration, which is that when a judicial authority is shown an arbitration clause in an agreement, it is mandatory for the authority to refer parties to arbitration bearing in mind the fact that the arbitration clause is an agreement independent of the other terms of the contract and that, therefore, a decision by the arbitral tribunal that the contract is null and void does not entail ipso jure the invalidity of the arbitration clause. Even otherwise, N. Radhakrishnan (supra) did not refer to the ratio of Abdul Kadir (supra) correctly. As has been seen by us hereinabove, Abdul Kadir (supra) held that serious allegations of fraud are not made out when allegations of moral or other wrongdoing inter parties are made. In particular, it was held that discrepancies in account books are the usual subject matter in account suits, which are purely of a civil nature. For all these reasons, we are broadly in agreement with the observations of Nijjar, J. rendering N. Radhakrishnan (supra) lacking in precedential value.11. Now comes the important judgment in Ayyasamy (supra). Two separate judgments were delivered by a Division Bench of this Court. Sikri, J., after referring to the judgments in Abdul Kadir (supra), N. Radhakrishnan (supra), Swiss Timing (supra), and Booz Allen (supra), then referred to the 246 th Law Commission Report, in particular to paragraphs 50 and 51 thereof.12. It is a little difficult to apply this case to resurrect the ratio of N. Radhakrishnan (supra) as a binding precedent given the advance made in the law by this Court since N. Radhakrishnan (supra) was decided. Quite apart from what has been stated by us in paragraph 9 above, as to how N. Radhakrishnan (supra) cannot be considered to be a binding precedent for the reasons given in the said paragraph, we are of the view that the development of the law by this Court cannot be thwarted merely because a certain provision recommended in a Law Commission Report is not enacted by Parliament. Parliament may have felt, as was mentioned by Lord Reid in British Railways Board and Herrington, 1972 A.C. 877 [House of Lords], that it was unable to make up its mind and instead, leave it to the courts to continue, case by case, deciding upon what should constitute the fraud exception. Parliament may also have thought that section 16(7), proposed by the Law Commission, is clumsily worded as it speaks of a serious question of law, complicated questions of fact, or allegations of fraud, corruption, etc. N. Radhakrishnan (supra) did not lay down that serious questions of law or complicated questions of fact are non-arbitrable. Further, allegations of fraud, corruption, etc. is vague. For this reason also, Parliament may have left it to the courts to work out the fraud exception. In any case, we have pointed out that dehors any such provision, the ratio in N. Radhakrishnan (supra), being based upon a judgment under the 1940 Act, and without considering sections 5, 8 and 16 of the 1996 Act in their proper perspective, would all show that the law laid down in this case cannot now be applied as a precedent for application of the fraud mantra to negate arbitral proceedings. For the reasons given in this judgment, the House of Lords decision would have no application inasmuch as N. Radhakrishnan (supra) has been tackled on the judicial side and has been found to be wanting.After these judgments, it is clear that serious allegations of fraud arise only if either of the two tests laid down are satisfied, and not otherwise. The first test is satisfied only when it can be said that the arbitration clause or agreement itself cannot be said to exist in a clear case in which the court finds that the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all. The second test can be said to have been met in cases in which allegations are made against the State or its instrumentalities of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.15. At this stage, it is necessary to deal with the broad statement of the law in Afcons (supra) and Booz Allen (supra). When Afcons (supra) refers in paragraph 27(iv) to cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion, etc. , this must now be understood in the sense laid down in Ayyasamy (supra) and Rashid Raza (supra). When it comes to paragraph 27(vi) in Afcons (supra), and paragraph 36(i) in Booz Allen (supra), namely, cases involving prosecution for criminal offences, it is also important to remember that the same set of facts may have civil as well as criminal consequences.16. In the light of the aforesaid judgments, paragraph 27(vi) of Afcons (supra) and paragraph 36(i) of Booz Allen (supra), must now be read subject to the rider that the same set of facts may lead to civil and criminal proceedings and if it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of such proceeding under section 17 of the Contract Act, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so.It has been held by the Bombay High Court in Fazal D. Allana v. Mangaldas M. Pakvasa, AIR 1922 Bom 303 , that section 17 of the Contract Act only applies if the contract itself is obtained by fraud or cheating. However, a distinction is made between a contract being obtained by fraud and performance of a contract (which is perfectly valid) being vitiated by fraud or cheating. The latter would fall outside section 17 of the Contract Act, in which the remedy for damages would be available, but not the remedy for treating the contract itself as being void (see pp. 311-312). This is for the reason that the words with intent to deceive another party thereto or his agent must be read with the words or to induce him to enter into the contract, both sets of expressions speaking in relation to the formation of the contract itself. This is further made clear by sections 10, 14 and 19, which have already been referred to hereinabove, all of which deal with fraud at the stage of entering into the contract. Even section 17(5) which speaks of any such act or omission as the law specially deals to be fraudulent must mean such act or omission under such law at the stage of entering into the contract. Thus, fraud that is practiced outside of section 17 of the Contract Act, i.e., in the performance of the contract, may be governed by the tort of deceit, which would lead to damages, but not rescission of the contract itself.18. Both kinds of fraud are subsumed within the expression fraud when it comes to arbitrability of an agreement which contains an arbitration clause.21. There can be no doubt whatsoever after reading the issues and some of the material findings in the Foreign Final Award that the issues raised and answered are the subject matter of civil as opposed to criminal proceedings. The fact that a separate criminal proceeding was sought to be started and may have failed is of no consequence whatsoever. We, therefore, hold on a conspectus of these facts, and following our judgments, that the issues raised and answered in the Foreign Final Award would indicate:(i) That there is no such fraud as would vitiate the arbitration clause in the SSA entered into between the parties as it is clear that this clause has to be read as an independent clause. Further, any finding that the contract itself is either null and void or voidable as a result of fraud or misrepresentation does not entail the invalidity of the arbitration clause which is extremely wide, reading as follows:Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach or termination ……(ii) That the impersonation, false representations made, and diversion of funds are all inter parties, having no public flavour as explained in paragraph 14 so as to attract the fraud exception.22. Thus, a reading of the Foreign Final Award in this case would show that a strong prima facie case has indeed been made out as the Award holds the BBC transaction as a basis on which the contract was entered into and the USD 60 million paid by HSBC, which would clearly fall within fraudulent inducement to enter into a contract under section 17 of the Contract Act. Such a contract would be voidable at the instance of HSBC. Also, the findings on the siphoning off of monies that were meant to be allocated for the performance of the BBC contract would attract the tort of deceit. The measure of damages for such fraudulent misrepresentation is not the difference between the value of the shares on the date of making the contract and the value HSBC would have received, if it had resold those shares in the market, after the purchase. As has been held in the judgments stated hereinabove, the measure of such damages would be to put HSBC in the same position as if the contract had never been entered into, which is, the entitlement to recover the price paid for the shares and all consequential losses. This being the case, it is difficult to accede to the Division Benchs finding as to the measure of damages in such cases.23. So far as the other points raised by M/s. Mukul Rohatgi and Saurabh Kirpal are concerned, we wish to say nothing, as any finding on these points even prima facie would prejudice the section 48 proceedings pending in the Bombay High Court. So far as the appeal of HSBC is concerned, we are of the view that it has substance in that the USD 60 million that was to be kept aside vide the Single Judges order, was fair and just in the facts of the case in that it is only the principal amount without any interest or costs that is ordered to be kept aside. Further, the reduction of USD 60 million to USD 30 million by the Division Bench is not justified given our finding on the measure of damages in the facts of this case.24. It is clarified that any finding made on facts in this judgment is only prima facie for the purpose of deciding the section 9 petition. We have held that HSBC has made out a strong prima facie case necessitating that USD 60 million, being the principal amount awarded to them, is kept apart in the manner indicated by the learned Single Judge of the Bombay High Court. The balance of convenience is also in its favour. It is clear that in case HSBC was to enforce the Foreign Final Award in India in accordance with section 48 of the 1996 Act, irreparable loss would be caused to it unless at least the principal sum were kept aside for purposes of enforcement of the award in India.28. In view of the judgment in Civil Appeal No.5145 of 2016 and Civil Appeal No.5158 of 2016, we set aside the judgments of the learned ADJ and the learned Single Judge that are impugned in this appeal, and remand the matter for adjudication afresh by the ADJ, Mohali.