DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, ANDHRA PRADESH

SUBJECT

ALTERNATE DISPUTE RESOLUTION

PROJECT TITLE

World Sport Group (Mauritius) Ltd v MSM Satellite ( Singapore) Pte Ltd- A Case Study

NAME OF THE FACULTY

Assistant Prof. R.V Vishnu Kumar

NAME OF THE CANDIDATE

S.S .NAMRATHA

ROLL NUMBER

17LLB075

SEMESTER – VI

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 ACKNOWLEDGMENT

I want to express my gratitude to respected faculty, who gave me this very good opportunity to
do research on World Sport Group(Mauritius) Ltd v MSM Satellite( Singapore) Pte Ltd- A Case
Study.

Secondly, I would like to thank the team DSNLU, who provided me assistance through various
online resources to accomplish this project.

S.S.NAMRATHA

17LL075

SEMESTER 6

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 TABLE OF CONTENTS

Abstract 4
Introduction 6
What is Arbitrability? 7
Background of the Case 8

Facts of the Case 9

Cause of Action 11
Issues and Contentions 13-15
Findings of the Supreme Court 16
Judgement 17
Analyzation of the Case with reference to other decided cases 18
Outcome of Project, Suggestions and Conclusion 24-26

ABSTRACT

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Topic: World Sport Group(Mauritius) Ltd v MSM Satellite( Singapore) Pte Ltd- A Case Study

Citation: AIR 2014 SC 968

This case it has been clearly evident that the India is being more aware of arbitration. The case
concerned allegations of fraud. The relevant contracts included an arbitration clause referring
disputes to arbitration in Singapore under the ICC (International Chamber of Commerce) Rules.
The Bombay High Court considered the courts a more appropriate forum to consider allegations
of fraud and issues relating to public funds. The Supreme Court overturned the decision.
Referring to both the Indian arbitration legislation and the New York Convention, the Court
considered that the allegations of fraud did not impact on the validity of the arbitration
agreement. Furthermore, the fact that fraud was alleged did not render the agreement inoperative
or incapable of being performed. As such, the agreement to arbitrate stood.

a case, wherein the approach of judiciary was emphatically pro-arbitration, thereby reaffirming
the value and strength of arbitration as a viable means of dispute resolution. The case is of
significance as it reflects and reiterates the BALCO position.

The case is an example of a successful attempt which confirms the changing approach of the
Indian judiciary towards International Commercial Arbitration. The decision was welcome by
the international community and is a major pillar in the changing jurisprudence of arbitration law
in India. The case comes as relief to foreign parties who deal with Indian parties. The paper gives
detailed analysis of the facts, argument and judgment of the case. The conclusion follows with an
insight into the recent trend of Indian judiciary towards allegation of fraud in the Arbitration
agreement, where the seat is abroad.

The Indian judiciary is determined keep a close watch on the practice of international arbitration
in the country and perform its role of a guardian to promote and encourage speedy, neutral,
effective arbitration proceedings and enforcement of award in the country. India is all set to take
on the world arbitration market with its best foot forward.

Objective/Aim of the Study

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The object of analyzing the case law World Sport Group(Mauritius) Ltd v MSM
Satellite( Singapore) Pte Ltd to find out what are the allegation of fraud included in the case,
which is considered to be one of the most vexatious issue.

Significance of Study

The whole project of analyzing the case law World Sport Group(Mauritius) Ltd v MSM Satellite(
Singapore) Pte Ltd helps us in knowing what is arbitrability and arbitrability of fraud in India
and what is the law laid down on this issue.

Scope of Study

The project deals with analyzing the case laws relating to the cases where allegations of fraud in
arbitration were made and how the law has been laid down by the Honorable Courts through
different case laws and what is the present law laid down by the Court.

Research Methodology

The Researcher has adopted doctrinal and analytical method of research and has collected
relevant data from various online sources and other secondary sources.

Hypothesis

After analyzing the cases relating to issue of arbitrability of fraud, it can be found how, apart
from mere allegation of fraud, the parties who made such allegation have to prove the serious
and the grave nature of those allegations and how it is affecting the parties.

INTRODUCTION

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This case is all about the “arbitrability” and helps us to know the “Arbitrability of fraud in
India”. It is clearly evident how the legal mechanism is making a shift to arbitration and other
ADR Mechanisms, which are acting as an alternatives to the court and helping in reducing the
burden on courts, While arbitration has its advantages, various jurisdictions have limited the
extent to which arbitration can be permitted to be proceeded forward due to the existing laws of a
particular state. One of such limitations has been where allegations of fraud are invoked to stop
any arbitration proceedings.

The word “arbitrability” simply refers to the capabilities of classes of disputes that can be
decided upon by private-bodies such as an arbitral tribunal. Any arbitrable dispute is a subject-
matter that is not barred to be adjudicated upon in an arbitration proceeding due to existence of
any national legislation or a judicial precedent.

The judicial approach towards the concept of the arbitrability of fraud in India has witnessed a
general skepticism across the bench from the very beginning. A critical perusal of early cases
dealing with allegations of fraud would reveal that judges usually expressed a general pessimism
towards private adjudicatory mechanisms such as arbitral tribunals in being competent to
appreciate intricate procedural questions of facts and evidence.

This allegations of fraud, which are alleged by the parties has been one of the most vexatious
issue in arbitration in India, With the catena of judicial pronouncements by Supreme Court it led
to a conclusion that even a even a hint of any fraudulent activity could take disputes out of an
arbitrator's jurisdiction. To further focus on the impact of allegation on the fraud in India we
have to look upon the Arbitration and Conciliation Act, 1996 and International Arbitration and
the position with regard to domestic and international arbitrations under the act, with a particular
emphasis on the change in law resulting from the recent Supreme Court decisions. For a very
long period of time in the Indian Arbitration there has been a issue regarding the arbitrability of
fraud, which has been haunting the arbitral regime for a long period of time.

What is Arbitrability?

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This concept helps in understanding whether a particular dispute can be attributed to arbitration
or cannot be attributed to arbitration. If suppose the subject matter is not arbitrable, then the
arbitral tribunal will have a limited jurisdiction and has to submit back the matter to the domestic
courts.

This arbitrability of disputes might vary from one country to another due the different policies
and it also depends on the law governing the arbitrability of dispute which might vary as well.

The non-arbitrability of a dispute renders the arbitration agreement invalid. As a result, the
tribunal would lack jurisdiction and the award might not be recognized and enforced.

The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under:1

(i) Whether the disputes are capable of adjudication and settlement by arbitration? That
is, whether the disputes, having regard to their nature, could be resolved by a private
forum chosen by the parties (the arbitral tribunal) or whether they would exclusively
fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the
disputes are enumerated or described in the arbitration agreement as matters to be
decided by arbitration or whether the disputes fall under the `excepted matters'
excluded from the purview of the arbitration agreement.
(iii) Whether the parties have referred the disputes to arbitration?.

So, even in the present case, the dispute was regarding the whether the allegations of fraud would
oust the jurisdiction of arbitration. Whether that subject matter which involved the allegation of
fraud will be an attributable matter to arbitration or not? However, The Supreme Court has
clearly held that, “Mere allegations of fraud simplicitor would not take away from the
arbitrability of a dispute where a valid arbitration agreement was in existence.”2

Background of the case

1
Booz-Allen & Hamilton Inc vs Sbi Home Finance Ltd, (2011) 5 SCC 532
2
A Ayyasamy v A Paramasivam & Ors ,Civil Appeal Nos 8245 & 8246 of 2016

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The brief background of the case is, Both the World Sport Group(Mauritius) Ltd(WSG) and
MSM Satellite( Singapore) Pte Ltd(MSM) entered into a Facilitation Deed, for provision of
facilitation services, The entire dispute started for obtaining the media rights for the Indian sub-
continent from the Board of Cricket Control of India. In this regards WSG and MSM entered
into a Deed. Whereby MSM would pay WSG a facilitation fee to acquire the rights to broadcast
IPL matches in India. Subsequently, MSM withheld a part of the facilitation payment and
rescinded the Facilitation Deed, alleging fraud and misrepresentation by WSG on the grounds
that WSG’s media rights to IPL in India had lapsed.

Further, MSM agreed to pay WSG an amount of Rupees 4,250,000,000 as facilitation fees.

The Facilitation Deed was governed by English Law and parties had agreed to settle their
disputes through arbitration before the International Chamber of Commerce (“ICC”), with a seat
of arbitration in Singapore (“Arbitration Agreement”).

Eventually, MSM rescinded the Facilitation Deed alleging certain misrepresentations and fraud
against WSG and initiated a civil action before the Bombay HC for inter alia a declaration that
the Facilitation Deed was void an for recovery of sums already paid to WSG.

WSG filed a request for arbitration with ICC and ICC issued notice to the MSM to file its
answer. In response MSM filed initiated a fresh action seeking an anti-arbitration injunction
against WSG from proceeding with the ICC arbitration.

In the present modern legal requirements, The Supreme Court in this case has eased the
arbitrability of cases involving allegations of fraud for referring such matters and parties to
foreign seated arbitrations.

The trend of such pro-arbitration judgments delivered by the Indian judiciary is on the rise and
the Supreme Court is constantly stabilizing the global normative best practices of international
commercial arbitration in India.

Case Title: World Sport Group (Mauritius) Ltd v MSM Satellite( Singapore) Pte Ltd.

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Citation: AIR 2014 SC 968

Bench: A.K. Patnaik, Fakkir Mohamed Ibrahim Kalifulla

Facts of the Case

The facts of the case are as follows, on 30.11.2007, tenders for IPL (Indian Premier League)
Media Rights, were invited by the Board of Control for Cricket in India (for short 'BCCI') for a
period of ten years from 2008 to 2017 on a worldwide basis.

The bid which has been submitted by World Sports Group (WSG) India was accepted by BCCI,
and now based on the bid arrangement, the respondent has to get the media rights for a period of
ten years i.e from 2008 to 2010.

Media Rights License Agreement between the parties:

The BCCI and respondents entered into a Media Rights License Agreement on 21.01.2008; The
period of this license agreement was from 2008 to 2012 and the consideration amount of the
agreement was 274.50 million USD.

Termination of Media License Agreement:

After the first IPL, BCCI has terminated the media license agreement, for the Indian sub-
continent and commenced negotiations with WSG India and there were negotiations taking place
between BCCI and WSG.

Filing of Petition under Section 9 of Arbitration and Conciliation Act, 1996:

The respondents have filed a petition under Section 9 of Arbitration and Conciliation Act, 1996
against BCCI before Bombay High Court, praying for injunction against BCCI and also asked
for prevention of giving those rights to third parties.

Agreement between BCCI and WSG for the media rights for the Indian sub-continent: Pursuant
to negotiations between the BCCI and the appellants, there was an agreement between them for
the media rights in the Indian Subcontinent for a period between for the period 2009 to 2017.

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And this agreement was for a value of Rs.4,791.08 crores. To operate the media rights in India,
the appellant was required to seek a sub-licensee within seventy two hours.

However, this time period was extended twice, the appellant was not able to get a sub-licensee.
Thereafter, the appellant claimed to have allowed media rights in India to have lapsed and then
facilitated on 25.03.2009.

New Media License Agreement between BCCI and MSM (respondents):

After the lapse of media license agreement between appellants and BCCI, the same contract was
entered into by the BCCI with the respondents for the same value of Rs 4,791.08 crores.

Facilitation deed

On 25.03.2009, the appellant and the respondent also executed the Deed for Provision of
Facilitation Services (hereinafter referred to as 'the Facilitation Deed') where under the
respondent was to pay a sum of Rs.425 crores to the appellant as facilitation fees. Cl. 9 of the
Facilitation Deed dated 25.03.2009 between the appellant and the respondent was titled
'Governing Law'.

Key Points in the deed:

 The deed shall be governed by the laws of England and Wales.

 In case of any disputes or in case if there is any breach, the same shall be referred to
International Chamber of Commerce, for arbitration
 The seat of arbitration will be at Singapore.
 There shall be an appointment of a single arbitrator, who shall be a retired judge with at
least ten years of commercial experience.
 The parties can select the arbitrator with mutual consent, if not then the Chamber will
chose an arbitrator.
 No party shall be entitled or permitted to commence or maintain any action in a court of
law with respect to any matter in dispute until such matter shall have been submitted to
arbitration as herein provided and then only for the enforcement of the arbitrator's award.
 The arbitrators have power to enter temporary restraining orders and preliminary and
permanent injunctions.

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 Cause of Action

Initially, the respondents made a payment of Rs 125 Crores to the appellants as per the
facilitation deed in three different installment, but later the respondents failed to make the
payment for the balance amount. On 25.06.2010, the respondent wrote to the appellant
rescinding the Facilitation Deed on the ground that it was voidable on account of
misrepresentation and fraud.

The Facilitation Deed in which the arbitration clause is incorporated came to be executed by the
defendant at Mumbai and the fraudulent inducement on the part of the defendant resulting in the
plaintiff entering into the Facilitation Deed took place in Mumbai and the rescission of the
Facilitation Deed on the ground that it was induced by fraud of defendant has also been issued
from Mumbai. Thus, the cause of action for filing the suit arose within the jurisdiction of the
Bombay High Court and the Bombay High Court had territorial jurisdiction to entertain the suit
u/s. 20 of the CPC

 Filing of First Suit before HC:

The respondent has even filed a civil suit for the declaration of facilitation deed to be void and
also claimed for recovery of 125 crores which they have paid to appellants.

 Reference of the dispute to arbitration as per Clause 9 of the deed

According to the Clause 9 of the Facilitation Deed, any dispute between the parties would be
referred to arbitration.

The appellant as per Clause 9 of the deed has made a request for arbitration at ICC, Singapore,
and the ICC issued a notice to the respondent to file its answer to the request for arbitration.

 Filing of Second Suit before HC:

Meanwhile, the respondents filed a second suit in 2010, before the Bombay High Court against
the appellant for inter alia a declaration that as the Facilitation Deed stood rescinded, the
appellant was not entitled to invoke the arbitration clause in the Facilitation Deed. The

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respondent also filed an application for temporary injunction against the appellant from
continuing with the arbitration proceedings commenced by the appellant under the aegis of ICC.

Decision of Single Judge of Bombay High Court

The learned Single Judge of the Bombay High Court dismissed the application for temporary
injunction of the respondent saying that it would be for the arbitrator to consider whether the
Facilitation Deed was void on account of fraud and misrepresentation and that the arbitration
must, therefore, proceed and the Court could not intervene in matters governed by the arbitration
clause.

Against this decision of single judge, the respondents have challenged the order in Division
Bench of Bombay HC.

Decision of Division Bench of Bombay High Court (Impugned Judgment)

The Division Bench of the Bombay High Court allowed the appeal, set aside the order of the
learned Single Judge and passed an order of temporary injunction restraining the arbitration by
ICC.

The Bombay HC had, in the impugned Judgment, held that disputes where allegation of fraud
and serious malpractice on the part of a party are in issue, it is only the court which can decide
these issues through furtherance of judicial evidence by the party and these issues cannot be
properly gone into by the arbitrator, thereby granting the anti-arbitration injunction sought for.
This decision of the Bombay HC was the only judgment where an Indian Court had held
allegations of fraud as a bar to foreign seated arbitrations, though such findings were prevalent in
the sphere of domestic arbitrations.

Aggrieved, the appellant has filed this appeal, A Civil Appeal was filed in the Supreme Court
against the order of the Division Bench of the Bombay High Court.

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 Issues

 Does The High Court Of Bombay Have The Jurisdiction To Preside Over The Matter
Which Is To Be Decided Through An International Arbitration?
 Would Clause 9 of The Facilitation Deed Will Also Be Null And Void?
 Whether the mere allegation of fraud by one party against the other would be sufficient to
Exclude the subject matter of the dispute from arbitration?

Contentions

 Contentions on behalf of appellants (WSG)

The appellants contended that the Division Bench has failed to appreciate that the Bombay High
Court had no jurisdiction to pass an order of injunction restraining a foreign seated international
arbitration at Singapore between the parties, who were not residents of India.

They further submitted that as per Clause 9, the Bombay High Court should have refused to
interfere in the matter and should have allowed the parties to resolve their dispute through ICC
arbitration, subject to the jurisdiction of the Singapore courts in accordance with Cl. 9 of the
Facilitation Deed.

The further most important submission by the appellants was that, the Division Bench of the
High Court failed to appreciate that u/s. 45 of the Act, the Court seized of an action in a matter in
respect of which the parties have made an agreement referred to in S. 44 has to refer the parties
to arbitration, unless it finds that the agreement referred to in S. 44 is null and void, inoperative
or incapable of being performed.

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He further submitted that the Division bench of Bombay High Court instead of examining
whether the deed was null and void has itself declared the entire Facilitation Deed was vitiated
by fraud and misrepresentation and was, therefore, void so there was clear submission by the
counsel on behalf of appellants that for the arbitrator to decide whether the Facilitation Deed was
void on account of fraud and misrepresentation as has been rightly held by the learned Single
Judge and it was not for the Court to pronounce on whether the Facilitation Deed was void on
account of fraud and misrepresentation.

Reliance placed on Art. 6(4) of the ICC Rules of Arbitration

The counsel on behalf of appellants have placed a reliance on Art. 6(4) of the ICC Rules of
Arbitration, which permits the Arbitral Tribunal to continue to exercise jurisdiction and
adjudicate the claims even if the main contract is alleged to be null and void or non-existent
because the arbitration clause is an independent and distinct agreement.

Further Reliance was placed on Kompetenz and Kompetenz Principle under Section 16 of the
Act:

Corollary to this principle, Courts have also held that unless the arbitration clause itself, apart
from the underlying contract, is assailed as vitiated by fraud or misrepresentation, the Arbitral
Tribunal will have jurisdiction to decide all issues including the validity and scope of the
arbitration agreement.

In the present case, the respondent has alleged fraud against the appellant and thus it was for the
appellant to make a request to the Court to decide on the allegations of fraud instead of referring
the same to the arbitrator, and no such request has been made by the appellant.

Regarding the application of Section 45 of the Act:

The language of S. 45 of the Act, which applies to an international arbitration, is substantially

different from the language of S. 8 of the Act and it will be clear from the language of S. 45 of
the Act that unless the arbitration agreement is null and void, inoperative or incapable of being
performed, the parties will have to be referred to arbitration by the Court. In the present case, the
respondent has not made out that the arbitration agreement is null and void, inoperative or
incapable of being performed.

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So, the appellants submit that the Division Bench should have referred the matter to arbitration
instead of restraining them from arbitration.

 Contentions on behalf of Respondents (MSM)

The Contention of respondents was Division Bench has rightly decided the matter and restrained
the present appellants and was even right in holding that Clause 9 of the agreement was void
because of fraud and misrepresentation by appellants.

Respondent’s contention regarding Section 45 of the Act:

S. 45 of the Act makes it clear that the Court will not refer the parties to arbitration if the
arbitration agreement is null and void, inoperative or incapable of being performed and as the
respondent has taken the plea that the Facilitation Deed, which contained the arbitration
agreement, is null and void on account of misrepresentation and fraud, the Court will have to
decide whether the Facilitation Deed including the arbitration agreement in Cl. 9 was void on
account of fraud and misrepresentation by the appellant.

Jurisdiction of Bombay High Court as per Section 9 of CPC:

Further Submission by the respondents was based on Section 9 of Civil Procedure Code, which
confers jurisdiction on jurisdiction to try all civil suits except suits which are either expressly or
impliedly barred. He submitted that the Bombay High Court, therefore, had the jurisdiction to try
both the first suit and the second suit and there was no express or implied bar in S. 45 of the Act
restraining the Bombay High Court to try the first suit and the second suit.

He submitted that u/s. 45 of the Act the Court is required to consider not only a challenge to the
arbitration agreement but also a serious challenge to the substantive contract containing the
arbitration agreement

They submit that the appellants have played a grave fraud which is prima facie established in the
case.

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The most important contention was that “such allegations of fraud can only be inquired into by
the court and not by the arbitrator”.

Applying the principle of separability to the facts of this case, the respondent rescinded the
Facilitation Deed by notice dated 25.06.2010 to the appellant, so the arbitration proceedings
cannot be taken place.

Findings of the Supreme Court

1) Whether the Division Bench of the Bombay High Court could have passed the order of
injunction restraining the arbitration at Singapore between the parties?

The contention of appellants that the Bombay High Court, had no jurisdiction to entertain the suit
and restrain the arbitration proceedings at Singapore because of the principle of Comity of
Courts.

The Supreme Court has interpreted the word “Judicial Comity” in this case, which means that
courts of one state or jurisdiction will give effect to the laws and judicial decisions of another
state or jurisdiction, not as a matter of obligation but out of deference and mutual respect.

On the other hand, since the respondents have rightly submitted that according to Section 9 of
CPC, the courts in India have jurisdiction to try all suits of a civil nature excepting suits of which
cognizance is either expressly or impliedly barred. Since the cause of action for filing the suit
arose within the jurisdiction of the Bombay High Court and the Bombay High Court had
territorial jurisdiction to entertain the suit u/s. 20 of the CPC.

2) Discussion on “Principle of Separability”

The invalidity or rescission of the main contract does not necessarily entail the invalidity or
rescission of the arbitration agreement. The arbitration agreement must be treated as a "distinct
agreement" and can be void or voidable only on grounds which relate directly to the arbitration
agreement. Of course there may be cases in which the ground upon which the main agreement is
invalid is identical with the ground upon which the arbitration agreement is invalid.

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Similarly, if a party alleges that someone who purported to sign as agent on his behalf had no
authority whatever to conclude any agreement on his behalf that is an attack on both the main
agreement and the arbitration agreement.

Applying the principle of separability to the facts of this case, After expiry of the 2nd extension
the media rights had automatically reverted to BCCI at 3 a.m. on March 24, 2009 and thus at the
time of execution of the Deed, WSGM did not have any rights to relinquish and/or to facilitate
the procurement of India Subcontinent media rights for the IPL from BCCI and thus no
facilitation services could have been provided by WSGM.

So, the respondent contention that, the facilitation fees need not be paid to appellants but The
Supreme Court has held that agreement contained in Cl. 9 of the Facilitation Deed, which is
independent of and separate from the main Facilitation Deed and does not get rescinded as void
by the letter dated 25.06.2010 of the respondent. The Division Bench of the Bombay High Court,
therefore, could not have refused to refer the parties to arbitration on the ground that the
arbitration agreement was also void along with the main agreement..

3) Whether Clause 9 of agreement is attributable to arbitration or not?

Clause 9 of the Facilitation Deed states inter alia that all actions or proceedings arising in
connection with, touching upon or relating to the Facilitation Deed, the breach thereof and/or the
scope of the provisions of the Section shall be submitted to the ICC for final and binding
arbitration under its Rules of Arbitration. This arbitration agreement in Cl. 9 is wide enough to
bring this dispute within the scope of arbitration.

Judgement

The decision rendered by the learned single Judge of High court that, the arbitrator to decide this
dispute in accordance with the arbitration agreement. The appeal was allowed and the decision
given by the Division Bench High Court was set aside and the decision by the learned single
judge was restored and upheld.

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The SC held that mere allegation of fraud simplicitor would not be a ground to nullify the effect
of an arbitration agreement between the parties. Only in those cases where the courts, while
dealing with Section 8 of the Act, find that there are very serious allegations of fraud which
make a clear case of criminal offence or where allegations of fraud are so complicated that it
becomes absolutely essential that such complex issues can be decided only by a civil court on the
appreciation of the voluminous evidence, should the court avoid the arbitration agreement by
dismissing a Section 8 application and proceed with trying the suit on merits. The SC held that
the allegations in this case were not so serious that an arbitrator would be unable to rule on it and
directed the parties to arbitration. To save the time of parties, the SC also appointed an arbitrator
for the present dispute.

Analyzation of the Case

The Supreme Court has applied the doctrine of separability and has endeavored to maintain the
sanctity of arbitral tribunals and interdict their abuse by parties who despite the existence of an
arbitration clause in the agreement attempt to invoke the jurisdiction of Courts by merely
alleging defaults in the agreement and thereby frustrating the purpose of arbitral tribunals, viz.
resolution of disputes in a fair, speedy and efficacious manner.

The Court has provided a succinct and unambiguous interpretation of Section 45 of the Act as
regards when a judicial authority is required to relegate the dispute between parties to Arbitration
and when the authority must refuse to do the same under Part II of the Act.

The Court has distinguished between domestic and international arbitrations and in doing so,
held that in the case of international arbitrations with seat outside India and covered by part II of
the Act, the Court cannot decline to make a reference of the dispute to Arbitration on the ground
that allegations of fraud or misrepresentation have to be inquired into while deciding the dispute
between the parties.

This is a welcome decision for foreign parties having arbitration agreements with Indian counter-
parts. Before this judgment was delivered, Indian parties were increasing challenging

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arbitrability of disputes where allegations of fraud were made against them, relying of the
Supreme Court’s own decision in the case of N. Radhakrishnan v. Masestro Engineers & Ors.3

By this decision the Supreme Court has limited the applicability of its decision in N
Radhakrishnan to domestic arbitrations hence clarifying that, allegations of fraud against a party
or consequential rescission of the main agreement is not a bar on arbitrability of disputes
between the parties under Indian Law, when the seat of arbitration is outside India.

MSM case is one of the important recent example this judicial trend. Through the ruling of
MSM, It becomes clear that international commercial arbitration in India has undergone a sea
change in the last few years and will continue to do so. This trend would need to continue in
order to ensure that India becomes a global hub for arbitration.

The decision of the Supreme Court has eased the difficulty of foreign parties having agreement
with Indian counter – parts, with an arbitration clause. Before this ruling the, the Indian parties
when alleged of fraud used to approach Indian courts to decide the matter pertaining to allegation
of fraud.

The Supreme Court clarified the position of the law, ruling that allegation of fraud is not a bar to
refer parties to foreign seated arbitrations and that the law doesn’t require a formal application to
refer parties to arbitration. The court further remarked that, if the arbitration agreement providing
foreign seat should be referred only by such seat but the court also remarked that if the
agreement is null and void or inoperative or incapable of being performed then the domestic
court will have the jurisdiction.The decision provides some sort of clarity in this area, reflecting
the changing attitude of Indian court towards international arbitration.

The decision has successfully applied the doctrine of separability, maintaining the sanctity of the
arbitral tribunals which would in return, will discourage abuse by the parties who intents at
frustrating the purpose of arbitral tribunal by invoking the jurisdiction of the court despite having
an arbitration clause in the agreement, thereby adding unnecessary burden on the tribunal,
making it difficult to resolve disputes in fair, speedy and effective manner.

3
(2010) 1 SCC 72

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It can be clearly deduced that Indian judiciary is taking a pro-arbitration approach. It has shifted
from being highly interventionist in arbitration matter to giving arbitration its own much needed
importance and bestowed its trust in the mechanism of arbitration.

The decision of the Supreme Court is another welcome step that will serve to reduce the risk of
court interference in foreign-seated arbitrations. The court’s willingness to consider the position
adopted internationally and to confine its jurisdiction on that basis is a positive sign and
consistent with the pro-arbitration jurisprudence recently emanating from the Supreme Court, in
particular in the context of foreign seated arbitrations. Parties must, however, be mindful that
where an allegation of fraud goes to the arbitration agreement itself, a reference to arbitration
may still be refused. Parties must also be mindful that the decision of the Supreme Court in
World Sport Group only extends to foreign-seated arbitration. In an India-seated arbitration the
position is still governed by the decision in Radhakrishnan and issues of fraud are less likely to
be referred to arbitration.

How the MSM Case has to be viewed?

This Decision of Supreme Court has paved a way that will serve as a welcome step to reduce the
courts interface in foreign seated arbitration, The position of court for considering the position
which has been adopted internationally can be treated as a very positive and significant step,
especially in regard to context of foreign seated arbitrations. However it has to be noted that,
where an allegation of fraud goes to arbitration agreement itself, a reference to arbitration the
position is still governed by decision of Supreme Court in World Sport Group only extends to a
foreign seated arbitration. In Indian-seated arbitration the position is still being governed by
decision in RadhaKrishnan Case and issues of fraud are less likely to be referred to arbitration.

This can be considered as the most welcoming decision by the foreign parties having agreements
with Indian Counter parts, through this decision the Supreme Court has limited the applicability
of its decision of RadhaKrishna only to domestic arbitrations.

To clarify it simply, this can be viewed as the allegations of fraud against a party or
consequential recession of the main agreement is not a bar on arbitrarily of disputes between the
parties under the Indian law, when the seat of arbitration is outside India.

What was the distinction made by the Supreme Court in this case?

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The Court has distinguishes between domestic arbitrations covered under Part I of the Act and
the international arbitration covered under Part II of the Act, It has held that Section 45 of the
Act mandates that in cases where the parties have an arbitration agreement, the court shall, at the
request of either party refer the dispute to arbitration, unless it finds that arbitration agreement is
null and void, inoperative or incapable of being performed.

The Court has further enunciated that the arbitration agreement does not become “inoperative or
incapable of being performed” where allegations of fraud have to be inquired into and the court
cannot refuse to refer the parties to arbitration on that ground.

Application of Doctrine of Seperability

The Court relied on the decision of House of Lords 4 and has applied the doctrine of seperabilty
and held that “The ground of challenge to the Facilitation deed does not in any manner affect the
arbitration agreement contained in Clause 9 of the facilitation deed, which is independent of and
separate from the main facilitation deed and does not get rescinded as void by the letter dated 25-
6-2010 of the respondents”.

“Allegation of Fraud”

To take a look on how the law has changed through a cantena of cases are as follows:

In Abdul Kadir Shamsuddin Bubere v Madhav Prabhkar, there were serious allegations of
fraud and the court has held that the serious allegations of fraud were held by the court to be a
sufficient ground for not making a reference to arbitration. The Supreme Court opined that
merely because of some allegations which were made such as the accounts are not correct or that
certain items are exaggerated and so on are not enough to induce the court to refuse to make a
reference to arbitration.

4
Premium Nafta Products Ltd v Fili Shipping Company Ltd& Ors (2007) UKHL 40

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The same principle was followed in the case of N Radhakrishnan v Maestro Engieers and Ors,
However, judgment of Radhakrishnan was held to be per incuriam in Swiss Timing Ltd v
Common Wealth Games where the application under Section 11 of the Act was allowed holding
that a plea of ‘serious fraud’ can be adequately taken care of even by arbitrator.

The issue of arbitrability of fraud appears to have been settled by the Supreme Court in A.
Ayyasamy vs. A. Paramasivam and Ors, wherein it was laid down that allegation of fraud
simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties.
It may be done where there are very serious allegations of fraud which make a virtual case of
criminal offence or where allegations of fraud are so complicated that it becomes absolutely
essential that such complex issues can be decided only by a civil court on the appreciation of the
voluminous evidence that needs to be produced. The court further held that the judgment in
Swiss Timing did not overrule the N. Radhakrishnan judgment (passed under Section 8 of the
Act), as it was passed under Section 11 of the Act and therefore, cannot be deemed to have
precedential value. In cases of domestic arbitrations, the judgment in A. Ayyasamy has settled
that a mere allegation of fraud simplicitor is arbitrable and an allegation of serious fraud is non-
arbitrable. However, any specific criteria for determining an allegation of ‘fraud’ to be ‘mere’ or
of a ‘serious’ nature has not been laid down by the Supreme Court. It may be inferred from the
judgment that any allegation of ‘fraud’ which makes a virtual case of criminal offence or is of
such a nature that permeates the entire contract, and subsequently makes it a subject matter of
right in rem, would be treated as ‘serious frauds.

Pro-Arbitration Judgment in 2016

Delivering a pro-arbitration judgment, the division bench of the Hon'ble Supreme Court of India
(SC) comprising of Justices A K Sikri and Dr D Y Chandrachud, in the case of A Ayyasamy v A
Paramasivam & Ors5, has held that unless the fraud in question is of a serious and complicated
nature, the jurisdiction of the arbitrator would not be ousted. Mere allegations of fraud would not
take away from the arbitrability of a dispute where a valid arbitration agreement was in
existence.

By Virtue of this judgment, the SC has certainly settled the controversy over the arbitrability of
fraud and further laid to rest the dispute regarding the applicability of the principle brought out
5
Civil Appeal Nos 8245 & 8246 of 2016

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by the Swiss Timing case over the judgment passed in N. Radhakrishnan. The judgment also
guides on the approach to be followed by the court while deciding an application under Section 8
of the Act where the defence of fraud is raised. Further, while discussing international
jurisprudence on the subject of arbitrability, it states that in keeping with other common law
jurisdictions, India should evolve towards strengthening the institutional efficacy of arbitration.
The judgment is a departure from the principle of arbitrability of fraud when it comes to foreign
seated arbitration vis-à-vis domestic arbitration where the SC has held that in the case of
arbitrations covered by New York Convention, the Court can decline to make a reference only if
it comes to the conclusion that the arbitration agreement is null and void and not on the ground
of fraud.

While this judgment is a welcome step and in the right direction, however it would still leave the
determination regarding the seriousness of the fraud to the subjective adjudication of the court.
Therefore not only would fraud be required to be specifically pleaded, the fraud pleaded would
necessarily require to be of a serious and grave nature.

On the facts of the case the court held that the allegation of fraudulent misrepresentation went to
the question of whether World Sports Mauritius acted lawfully in assigning its rights to MSM
but, even if such an allegation was accepted, it did not impact the validity of the arbitration
agreement which was separable from the rest of the contract. On that basis, the court refused to
hold that the arbitration agreement was “null and void”.

The court then considered what amounts to “inoperative or incapable of being performed”. The
court recognized that there were different interpretations given to the term by different
commentators, but held that irrespective of the interpretation adopted, an “arbitration agreement
does not become ‘inoperative or incapable of being performed’ where allegations of fraud have
to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in
Section 45 of the Act on the ground that allegations of fraud have been made by the party which
can only be inquired into by the court and not by the arbitrator.”

The court referred to the decision in Radhakrishnan but held that it only applied in the context of
domestic arbitrations.

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The various other contentions raised by MSM, including the contention that a public body such
as the BCCI was involved and therefore it was in public interest for the courts to consider the
matter which contention was accepted by the Bombay High Court were rejected. The Supreme
Court categorically held that such a ground did not fall within the exceptions in Section 45 of the
Arbitration Act and therefore cannot form the basis for refusing to refer a matter to arbitration.

Outcome of the project

This project helped in detailed analyzation of the World Sport Group(Mauritius) Ltd v MSM
Satellite( Singapore) Pte Ltd Case law and the project has been dealt in detail, and has discussed
all the issues and contentions and the observation of the court.

The case study done in this project has further helped in the understanding how the Supreme
Court has interpreted the case and how the Court has distinguished between domestic and
international arbitration under Part I and Part II of the Act accordingly.

The most important observation made in this project through the MSM further enunciated that
the arbitration agreement does not become “inoperative or incapable of being performed” where
allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to
arbitration on that ground.

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The main observation and a determining point in this project is, the allegations of fraud against a
party or consequential recession of the main agreement is not a bar on arbitrarily of disputes
between the parties under the Indian law, when the seat of arbitration is outside India.

Suggestions

 The one important suggestion in this project is, the court has to be more specific on what
amounts to serious allegation of fraud
 The court has to make a distinction when the arbitration agreement becomes null and
void and when it does not after the allegations of fraud made.
 The Law has to be made clearer, on what mere allegations are and what serious
allegations of fraud are.

Conclusion

Problem is people try to avoid international liability by resorting to various tactics in the
domestic forums thereby defeating the spirit of having an arbitration agreement. This will only
lead to a lot of mistrust and bad blood between contracting parties and ultimately this will affect
international trade and investments in India. The Supreme Court through this judgment has
decisively laid down that the arbitration law in India cannot be used to frustrate and consequently
destroy the arbitration agreement. This will only boost and promote the confidence of
international benefactors in investing in India because unlike before they have access to fair
remedies and their positions will be ameliorated as well.

Through this case the court gave us a conclusion that even if the disputes which are involving are
arbitrable. But however this case did not make any differentiation on mere allegations and

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serious allegations of fraud which was further made by Supreme Court subsequent to MSM
Case. This case was decided with its own reasoning rather than deciding the question of
arbitrability of fraud.

Parties must also be mindful that the decision of the Supreme Court in World Sport Group only
extends to foreign-seated arbitration. The Court relied heavily on the wording of the Section 45
of the Act, which provides that the court shall refer the parties to arbitration, at the request of one
of the parties, unless it finds that the said agreement is “null and void, inoperative or incapable of
being performed”. The Court held that the reference to arbitration could be rejected under
Section 45 of the Act if there was an attack on the arbitration agreement itself. Applying the
principle of seperability the Court held that the allegation of fraud, even if proved, did not impact
the validity of the arbitration agreement, as the arbitration agreement is separable from the main
contract. In the present case, the arbitration clause was not assailed as vitiated by fraud or
misrepresentation and hence the parties could be refereed to arbitration.

The position in India as of date remains that for seat within India, the Maestro case shall be
applicable and an allegation of fraud will render the arbitration agreement infructuous. However,
if the seat is outside India, the court will be governed by the law laid down in the judgment of
MSM Satellite and shall refer the dispute to arbitration, unless the arbitration agreement is “null
and void, inoperative or incapable of being performed”.

The decision raises certain serious questions as to the circumstances in which Section 45 of the
Arbitration and Conciliation Act, 1996 can be invoked and the extent of caution that needs to be
exercised to ensure that exercise of jurisdiction is not unnecessary judicial interference. This
decision once again stresses the need for extensive guidelines that the Apex Court needs to lay
down on the circumstances in which exercising of jurisdiction under Section 45 of the
Arbitration and Conciliation Act, 1996 is warranted.

The case is an example of a successful attempt which confirms the changing approach of the
Indian judiciary towards International Commercial Arbitration. The decision was welcome by
the international community and is a major pillar in the changing jurisprudence of arbitration law
in India. The case comes as relief to foreign parties who deal with Indian parties. The Indian
judiciary is determined keep a close watch on the practice of international arbitration in the
country and perform its role of a guardian to promote and encourage speedy, neutral, effective

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arbitration proceedings and enforcement of award in the country. India is all set to take on the
world arbitration market with its best foot forward.

The decision of the Supreme Court is another welcome step that will serve to reduce the risk of
court interference in foreign-seated arbitrations. The court’s willingness to consider the position
adopted internationally and to confine its jurisdiction on that basis is a positive sign and
consistent with the pro-arbitration jurisprudence recently emanating from the Supreme Court, in
particular in the context of foreign seated arbitrations. Parties must, however, be mindful that
where an allegation of fraud goes to the arbitration agreement itself, a reference to arbitration
may still be refused.

MSM case is one of the important recent example this judicial trend. Through the ruling of
MSM, It becomes clear that international commercial arbitration in India has undergone a sea
change in the last few years and will continue to do so. This trend would need to continue in
order to ensure that India becomes a global hub for arbitration.

While this judgment is a welcome step and in the right direction, however it would still leave the
determination regarding the seriousness of the fraud to the subjective adjudication of the court.
Therefore not only would fraud be required to be specifically pleaded, the fraud pleaded would
necessarily require to be of a serious and grave nature.

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