Delhi High Court
Rrb Energy Limited vs Vestas Wind Systems And Anr. on 15 April, 2015
Author: V.K.Shali
* HIGH COURT OF DELHI AT NEW DELHI
+ C.S. (OS) No.999/2014
Decided on : 15th April, 2015
RRB ENERGY LIMITED ...... Plaintiff
Through: Mr. P.V.Kapur, Sr.Adv. with
Mr.Samiron Borkataky,
Mr.Indranil Ghosh,
Mr.Tashi Sherpa,
Mr.Sidhant Kapur,
Mr.Abhay Kapur, and
[
Mr. Biswajit Choudhury, Advocates.
Versus
VESTAS WIND SYSTEMS AND ANR. ... Defendants
Through: Mr. Sandeep Sethi, Senior Advocate with
Mr. Sulabh Rewari,
Mr. Arjun Pall, and
Ms.Poorvi Satija
Advocates for D-1.
Mr. Raj Shekhar Rao,
Mrs. Tine Abraham,
Mr. Aravind Varma and
Mr.Saurajay Prakas Nanda, Advocates
for D-2.
CORAM:
HON'BLE MR. JUSTICE V.K. SHALI
V.K. SHALI, J.
IA No.6426/2014 (u/O 39 Rs 1 & 2 r/w Sections 94 & 151 CPC)
1. The present order shall dispose of application bearing IA No.6426/2014
under Order 39 Rule 1 & 2 CPC read with Section 94 & 151 CPC filed
along with the main suit.
CS(OS) No.999/2014 Page 1
In the main suit, the plaintiff has prayed for the following reliefs
a) Pass a decree for declaration that the memorandum of
understanding dated 23.01.2012 is a legal, valid and
binding agreement between the plaintiff and the
defendant No.1 .
b) Pass a decree of permanent injunction restraining the
defendant No.1 from proceedings with the ICC Case
No.19554/CYK.
2. In order to appreciate the facts and the issue involved, it would be better
to refer to the parties by their initial names because there is other
litigation pending in this very court where the defendant No.1 is the
plaintiff and the defendant No.2 in the present case, is the defendant No.3
and plaintiff is the defendant No.1 in those proceedings. In those cases
there is one more party Rakesh Bakshi who along with ECO RRB is
alleged to be controlling 99% shares of the plaintiff in the present case.
These suits initiated by defendant No.1 are bearing No.1448 and
1449/2013. The four parties to which three would be referred to are
plaintiff as 'RRB', defendant No.1 as 'Vestas' and the defendant No.2 in
the present suit as 'Henrik Norremark'. The fourth party is Mr.Rakesh
Bakshi who is not a party in present case.
3. RRB is a company duly incorporated on 1st December 1987 under the
laws of India and was formerly known as Vestas RRB India Limited. The
plaintiff was originally incorporated as a Joint Venture between RRB
Consultants and Engineers Private Limited and the Vestas for the purpose
CS(OS) No.999/2014 Page 2
of manufacturing Vestas type Wind Electric Generators ('WEG' for
short).
4. The Vestas is a company incorporated under the laws of the Denmark and
is engaged in the business of manufacturing, selling and installing wind
turbines and WEG's. The Henrik Norremark is the former Chief
Financial Officer of the Vestas.
5. During the subsistence of the aforesaid joint venture agreement, Vestas is
alleged to have entered into an agreement with NEG Micon A/S during
the year 2004, which was a wholly owned subsidiary in India, namely
NEG Micon India Pvt. Ltd. As a consequence of which disputes arose
between the parties (RRB and Vestas) leading to the signing of a
Settlement Agreement dated 11th May 2006 to settle the differences.
6. In accordance with the aforementioned Settlement Agreement, the
plaintiff continued to use the name 'VERB' following the exit of the
Vestas and the name was subsequently changed to RRB Energy Limited
with effect from 25th April 2008.
7. Post the settlement agreement the RRB and the Vestas continued their
commercial relationship and subsequently entered into two more
Memorandum of Understandings dated 18th September 2011 and 23rd
January 2012, which were signed by the Henrik Norremark who was the
then Chief Financial Officer (hereinafter referred to as 'CFO') of the
CS(OS) No.999/2014 Page 3
Vestas. Another MOU dated 30th September 2011 was also entered into
between a subsidiary of the Vestas, namely Wind Power Invest A/S and
an associate company of the Plaintiff, namely Eco RRB Infra Private
Limited. The said MOU was also signed by Mr. Henrik Norremark herein
for and on behalf of the subsidiary of Vestas.
8. Disputes and differences arose between the RRB and the Vestas, and their
subsidiary/ associate companies wherein the Vestas has questioned the
veracity, genuineness and the legality of the aforementioned three MOU's
purported to have been signed between them.
9. The MOU's dated 18th September 2011 and 23rd January 2012 are the
subject matter of CS(OS) No. 1448 of 2013 filed by the Vestas while the
MOU dated 30 September 2011 is the subject matter of CS (OS) No.
1449 of 2013 filed by the subsidiary of Vestas. It may also be pertinent
here to mention that on 23.01.2012 there were two MOUs signed between
the parties, one MOU was for writing off the debt and the other for
rescheduling the repayment by RRB to Vestas.
10. The RRB and Mr. Bakshi have been arrayed as defendant Nos. 1 & 2
respectively in the aforesaid suits while Mr. Henrik Norremark has been
impleaded as defendant no. 3 in the said suits.
11. In both the aforementioned suits the Vestas has prayed for a grant of
declaration to the effect that MOU's are void and the same should be
cancelled on the ground that Mr. Henrik Norremark was not authorised
CS(OS) No.999/2014 Page 4
to sign the above stated 3 MOU's and the same have been executed
fraudulently and without any legal authority and in collusion with RRB,
but it may be pertinent hereto mention that in Suit No.1448 Vestas have
not specifically stated which of the two MOUs dated 23.01.2012, it wants
to be declared a null and void meaning thereby that in the absence of the
same, both the MOUs purported to have been executed on 23.01.2012 are
being assailed by the Vestas.
12. It may be pertinent here to reproduce the exact para in Suit No.1448 to
see what has been alleged by Vestas with regard to Henrik Norremark, its
CFO and RRB.
"7: The Plaintiff (Vestas) states that Defendant Nos. 1
to 3 (*RRB, Mr.Rakesh Bakshi and Henrik Norremark)
have colluded and connived With each other to
perpetrate a fraud of a grave and egregious nature
whereby they have jointly in collusion with each other
purported to write off Rs.29,90,00,000 (Rupees Twenty
Nine Crores and Ninety Lakhs, only) and DKK
1,296,749 (Danish Kroner One Million Two Hundred
and Ninety Six Thousand Seven Hundred and Forty
Nine only) owed to the Plaintiff by purported
Memorandums of Understanding (''MOUs'') dated 18
September 2011 and 23 January 2012. Defendant Nos.
2 and 3 along with an RRB Group Company ECO RRB
also entered into a fraudulent scheme, by a purported
MOU dated 30 September 2011 (which is the subject
matter of a separate suit bearing no. 1449), under which
huge sums of money being EURO 14,586,970 (EURO
Fourteen Million Five Hundred and Eighty Six
Thousand Nine Hundred and Seventy One Only}, then
amounting to Rs.95,28,99,529/- (Rupees Ninety Five
CS(OS) No.999/2014 Page 5
Crores Twenty Eight Lakhs Ninety Nine Thousand Five
Hundred and Twenty Nine Only) was remitted to ECO
RRB and Defendant No. 2 without the knowledge or
authority of Plaintiff, and/or its subsidiary Wind Power
Invest A/S. The Defendants have by a secret scheme of
deceit, connived amongst themselves to execute the
aforesaid two MOUs which are the subject matter of the
present suit in order to defraud the Plaintiff of its
rightful and admitted dues thereby causing wrongful
loss to the Plaintiff and wrongful gain to themselves.
82. The Plaintiff further states that to Defendant Nos. 1
and 2's knowledge, Mr. Norremark had no authority on
behalf of the Plaintiff to sign and execute the purported
MOU dated 23 January 2012 and was in clear
contravention to the signature rules at Vestas."
(* mark has been put to clarify the names of the parties.)
13. A perusal of the aforesaid two paras clearly shows that the Vestas are
alleging fraud, deceit and collusion which is of grave and egregious
nature between RRB and its employee Henrik Norremark in signing the
MOU dated 23.01.2012 which includes both MOUs. It is further alleged
that because of these MOUs a wrongful loss has been caused to Vestas
and a wrongful gain to RRB. A thing is said to be done fraudulently
according to Section 52 of the Indian Penal Code, 1860 in case it causes
wrongful loss to one and/or wrongful gain to the other. But it is not sine
qua non for making a case of fraud if it causes only wrongful loss to one
party who is the aggrieved party.
CS(OS) No.999/2014 Page 6
14. By virtue of this MOU the Vestas is purported to have written off Rs.
Approximately 30 crores. It is also alleged by this very MOU and the
MOU dated 18.09.2011, Sh.Rakesh Bakshi and Mr.Henrik Norremark
along with RRB group of companies had entered into a fraudulent
scheme under which a huge sums of money being equivalent to almost 96
crores was remitted to ECO RRB, the predecessor of the RRB Company.
15. So far as Henrik Norremark is concerned, he has already filed his reply in
both the suits i.e. 1448 and 1449 initiated by Vestas. He has taken the
stand that he had served CFO in Vestas for almost 18 years and during
this tenure, he had signed nearly 700 contracts for Vestas. During this
period no special power of attorney was ever required to be obtained by
him or actually obtained by him as it was incongruous to his very
appointment and the purpose for which he was appointed. It is stated by
him that there were three exceptions only to his when an opposite side
has asked for a specific authority. Also in these three cases, the contract
value was exceptionally high being well over 842 crores or so, thus, in
both these cases Henrik has owned the documents signed by him on
23.01.2012 and other documents.
16. The present suit concerns one of the MOU dated 23rd January 2012 ("Suit
MOU" for short) entered into between the RRB and the Vestas which was
also signed by Mr. Henrik Norremark on behalf of the Vestas.
CS(OS) No.999/2014 Page 7
17. RRB has averred that the Vestas has denied the validity of the Suit MOU
that is dated 23.01.2012 and has further disputed the signatures of Mr.
Henrik Norremark on the ground that they have been fraudulently affixed
by the RRB.
18. RRB on the other hand has stated that Vestas is trying to seek a recovery
of payment of over Rs. 30 crores by denying Mr Henrik Norremark's
authority to sign the Suit MOU, Vestas has impliedly alleged his
complicity in the manufacturing/ fabrication of the suit MOU.
19. For the purposes of resolution of all the disputes, between RRB and
Vestas, the Settlement Agreement of 11th May 2006 under clause 11.0
provided for an Arbitration as a mode to settle disputes between the
parties therein and further the MOU's also contain a similar worded
arbitration which is not disputed by either parties.
20. In addition to this the MOUs both dated 23.01.2012 also contain an
agreement for arbitration for disputes resolution. The MOUs read as
under:
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding. (hereinafter
referred to as the MOU). is Made between Vestas
Wind Systems A/S (hereinafter 'referred to as
VWS), a Company .organized 'under the laws of
Denmark and .having its Registered Office at'
Herieager 44, 8200 Aarhus N., Denmark of the
first part and RRB Energy Limited, formerly
known as Vestas RRE; India ltd.:(hereinafter
referred to as RRBEL), a Company 'organized
under the laws of the Republic of India and having
its Registered Office, .cum Works at GA-1/6-1-
Extension, Mohan Co -operative Industrial Estate,
CS(OS) No.999/2014 Page 8
Mathura Road, New Delhi - 110 044 of the second
part.
The expressions VWS and RRBEL wherever- the
context may admit shall include 'their respective -
successors, administrators, assigns, liquidators
and receivers.
Whereas 'VWS and ARBEL had signed a
Settlement Agreement (hereinafter referred to as
the SA) .on 11 May 2006. The SA became
effective on 4 September 2006 and was
terminated on 12 April 2008, except, in respect
of certain obligations, specifically described in
the SA, which, have continued to remain In force
even beyond 12 April 2008.
In terms of SA, VWS is under obligation . to
provide regular, timely and uninterrupted
supply .of all .material-components, parts and
goods required for Its various WEG models in
India and till such time that RRBEL becomes
self sufficient to produce the said models at
par with those produced by VWS itself.
Consequently, on request .of RRBEL, VWS
and/or Its 'designated affiliate(s) have been
supplying components/parts to RRBEL to meet
its requirements. In this regard, VWS among
others has raised an Invoice No.2631 (1) dated
25 February 2011 for DKK 1,296,749 towards
installation charges of Mould. In this regard,
RRBEL has represented that this invoice has to
be reviewed in the light of the discussions held
on 15 September 2010 whereby VWS has agreed
to supply 1 No.23 meter Blade line to RRBEL
and the MOU dated 18 September 2011 signed
between VWS and RRBEL whereby settlement
has been reached with regard to the pending
obligations.
RRBEL states that the amount of this invoice is
not payable to VWS and has requested VWS to
take a view in the matter. Considering the
discussions already held and agreement reached
for supply of 1 No.23 meter blade line and
settlement reached on the pending obligations
and past relationship of a former joint venture
partner, VWS agrees to withdraw Its Invoice
No.26311 dated 25 February 2011 for DKK
1,296,749 raised earlier on RRBEL. VWS
agrees to write off this amount of DKK
1,296,749 and as such RRBEL shall not be
required to pay this amount to VWS.
In the case of VWS to Vestas Wind Systems a/s,
headgear 44, 8200 Aarhus N Denmark, and in the
CS(OS) No.999/2014 Page 9
case of RRBEL to RRB Energy Limited, GA-
1/B1 Extension, Mohan Cooperative Industrial
Estate Mathura Road, Delhi-110044, India or to
such other address as the party may notify in
writing from time to time.
4.0 All matters arising out of relating to this
MOU shall be governed by and construed in
accordance with the laws in India.
5.0 To the extent permissible under Indian law,
all dispute, should any develop between VWS
and RRBEL arising out of or relating to this
MOU or any Memorandum of Understanding in
furtherance hereof or the breach, termination or
in validity thereof shall be finally settled by
arbitration, in the English language, in
conformity with the rules of conciliation and
arbitration of the International Chamber of
Commerce of Paris by one or more arbitrators
appointed in accordance with such rules for the
time being in force. The arbitration shall take
place in New Delhi, India if recourse to
arbitration is asked by VWS or Copenhagen,
Denmark if asked by RRBEL
6.0 This MOU shall come into force on valid
execution of MOU by both the parties.
In witness whereof the parties herein have set
their hands to this MOU in their capacity as
authorised representative at the respective places
and on the respective dates mentioned below.
For Vestas Wind System A/S For RRB Energy Limited
Signature: Sd/- Signature Sd/-
Date:23.01.2012 Date:23.01.2012
Name: Henrik Norremark Name: R.K.Sachdeva"
MEMORANDUM OF UNDERSTANDING
(SUIT MOU)
This Memorandum of Understanding. (hereinafter
referred to as the MOU). is Made between Vestas
Wind Systems A/S (hereinafter 'referred to as
VWS), a Company .organized 'under the laws of
Denmark and .having its Registered Office at'
Herieager 44, 8200 Aarhus N., Denmark of the
first part and RRB Energy Limited, formerly
CS(OS) No.999/2014 Page 10
known as Vestas RRE; India ltd.:(hereinafter
referred to as RRBEL), a Company 'organized
under the laws of the Republic of India and having
its Registered Office, .cum Works at GA-1/6-1-
Extension, Mohan Co -operative Industrial Estate,
Mathura Road, New Delhi - 110 044 of the second
part.
The expressions VWS and RRBEL wherever- the
context may admit shall include 'their respective -
successors, administrators, assigns, liquidators
and receivers.
Whereas 'VWS and ARBEL had signed a
Settlement Agreement (hereinafter referred to as
the SA) .on 11 May 2006. The SA became
effective on 4 September 2006 and was
terminated on 12 April 2008, except, in respect
of certain obligations, specifically described in
the SA, which, have continued to remain In force
even beyond 12 April 2008.
In terms of SA, VWS is under obligation . to
provide regular, timely arid uninterrupted supply
.of all .material-components, parts and goods
required for Its various WEG models in India
and till such time that RRBEL becomes self
sufficient to produce the said models at par with
those produced by VWS itself.
... .... .... ... .... ... .... .... ..
Whereas RRBEL has represented to VWS
that the operations of R RRBEL have suffered due
to certain internal and external factors including
adverse market conditions, global meltdown,
reduction in turnover, which has affected the ability
of RRBEL to meet its repayment
liabilities/obligations to its bankers and its
suppliers. The lender Banks of RRBEL, who have
sanctioned working capital facilities to RRBEL
have referred the matter to a corporate debt
restructuring forum for the efficient restructuring of
corporate debt of RRBEL which has become
overdue. RRBEL, has requested VWS to consider
extending support to RRBEL in this difficult period
in the form of concessions and/or grant time to pay
the amount in instalments.
And whereas considering the present position of
RRBEL, past relationship of a former joint
venture partner and taking note of the
possibilities of likely delays in recovery, VWS
agrees to the following:
a) The overall dues quantum payable by
RRBEL to VWS and its designated affiliate
CS(OS) No.999/2014 Page 11
(s) is Euro 4667452.98 DKK 13,836.24 and
USD 1804.11. RRBEL is permitted to pay the
outstanding dues to VWS and its affiliates in
3 (three) equal yearly instalments. The same
shall be payable without any accrual of
internet and no further claim in this regard
shall be entertained at any point of time
whatsoever.
b) The first instalment of the outstanding dues
will become payable during the year 2014 and
thereafter the remaining 2 instalments will be
paid during the years 2015 and 2016.
4.0 All matters arising out of relating to this
MOU shall be governed by and construed in
accordance with the laws in India.
5.0 To the extent permissible under Indian law,
all dispute, should any develop between VWS and
RRBEL arising out of or relating to this MOU or
any Memorandum of Understanding in
furtherance hereof or the breach, termination or in
validity thereof shall be finally settled by
arbitration, in the English language, in conformity
with the rules of conciliation and arbitration of
the International Chamber of Commerce of Paris
by one or more arbitrators appointed in
accordance with such rules for the time being in
force. The arbitration shall take place in New
Delhi, India if recourse to arbitration is asked by
VWS or Copenhagen, Denmark if asked by
RRBEL
6.0 This MOU shall come into force on valid
execution of MOU by both the parties.
In witness whereof the parties herein have set
their hands to this MOU in their capacity as
authorised representative at the respective places
and on the respective dates mentioned below.
For Vestas Wind System A/S For RRB Energy Limited
Signature: Sd/- Signature Sd/-
Date:23.01.2012 Date:23.01.2012
Name: Henrik Norremark Name: R.K.Sachdeva"
CS(OS) No.999/2014 Page 12
21. It's the case of the plaintiff that the defendant no. 1, suppressing the Suit
MOU, invoked the Arbitration Agreement contained in the Settlement
Agreement and sent a request for arbitration to the ICC on 20 th June 2013
claiming that the Plaintiff is in breach of its obligations under the
Settlement Agreement and accordingly claimed the payment of the
outstanding dues.
22. In response, the RRB objecting to the request for arbitration. It is stated
that RRB without prejudice filed its submissions on 16th August 2013
claiming that the request for arbitration was in breach of the terms of the
Suit MOU and the there was no occasion for the defendant no.1 to make
any monetary claim beyond the terms of the said Suit MOU.
Nevertheless, the ICC decided that the arbitration should continue and the
plaintiff and the defendant no. 1 have submitted their respective pleadings
on, inter alia, the aforesaid issue before the arbitral tribunal.
23. The RRB has prayed before this court for a decree of declaration, that the
Suit MOU dated 23rd January 2012 is a legal, valid and binding
agreement between the plaintiff and the defendant no. 1. Further has
prayed for a decree of permanent injunction restraining the defendant no.
1 from proceeding before the arbitral tribunal.
24. The learned counsel of the plaintiff has averred that the arbitral tribunal
does not have the requisite jurisdiction to adjudicate upon the issue of
genuineness and validity of the MOU dated 23.01.2014 because the
CS(OS) No.999/2014 Page 13
defendant has denied the signatures of Henrik Norremark and in effect
has alleged fabrication and forgery of the document by RRB and Henry
Norremark, inter alia, for the reason that Mr. Henrik Norremark is neither
a party to the arbitration proceedings nor is the presently under the
employment of the defendant no. 1. His presence and stand is necessary
to adjudicate the validity and legality of the Suit MOU as the defendant
no. 1 has disputed the signatures of Mr Henrik Norremark and his
authority in case it is believed that the same has been signed by him. It is
further stated that by denying the signatures of Mr. Henrik Norremark,
the defendant no. 1 has impliedly alleged his complicity in the fabrication
of the Suit MOU.
25. The learned counsel for the plaintiff relying on the observations made by
the Apex court in Booz Allen and Hamilton Inc. V. SBI Home Finance
Limited and Ors; (2011) 5 SCC 532 wherein it was held that where a
dispute involves serious questions of law or complicated questions of
fact, such as forgery, creation of bogus documents, manipulations and
similar serious allegations of fraud which would depend Upon detailed
oral and documentary evidence, such disputes can only be settled in a
court and cannot be properly gone into by an Arbitrator. The Ld. Senior
Counsel for the RRB has also relied upon N. Radhakrishnan v.Maestro
Engineers, (2010) 1 SCC 72) and Abdul Qadir v. Madhav Prabhakar, AIR
1962 SC 406.
CS(OS) No.999/2014 Page 14
26. The learned counsel for the RRB relaying on the judgment rendered in
SBP & Co. Vs. Patel Engineering; (2005) 8 SCC 618 has clarified that
neither the existence of an Arbitration Agreement per se nor S.5 read with
S. 16 of the Arbitration Act 1996 are a "bar" to the institution or trial of a
civil suit or "bar" to oust the jurisdiction of a civil court. On the
institution of a suit the defendant, who claims that there exists an
arbitration agreement between him and the plaintiff in respect of the
subject matter of the suit, has two choices- he may acquiesce in the
abandonment of the arbitration agreement and submit to the jurisdiction
of the civil court or apply under S.8 of the Arbitration and Conciliation
Act 1996 and request the civil court to refer the parties to arbitration.
Further if such application is made then before referring or declining to
refer the parties to arbitration the civil court will be "entitled to, has to
and is bound to decide the jurisdictional issue raised" such as that an
arbitral tribunal has no jurisdiction to decide on disputes involving
allegations of fraud or clandestine operations of business or creation of
bogus documents, as the Vestas has alleged in the present case.
27. It is averred by the learned counsel of the RRB that 5 other agreements
have been executed between the parties and all have been signed by the
Henrik Norremark on behalf of the Vestas and therefore there was no
opportunity for RRB to doubt the authority of Mr. Henrik Norremark who
was the CFO of Vestas.
CS(OS) No.999/2014 Page 15
28. It is alleged by the learned counsel of the RRB that the Vestas has
resorted to the same methodology as applied for the suit MOU for
denying their execution, that is, to first feign ignorance regarding the
existence of the MOU's and subsequently claim being unaware of the
execution of the MOU's by any person in the office of the Vestas and
finally allege lack of authority on the part of Henrik Norremark to sign
the said MOU's.
29. The learned senior counsel for RRB submits that in view of the aforesaid
similarity in the stand taken by the Vestas/ its subsidiary with regard to
the aforesaid MOU's, it's pertinent that the same must be tried by a single
forum. Multiplicity of proceedings before different forums would result
in confusion on account of inconsistent fact finding and perhaps
dramatically opposite conclusions which in turn would lead to delay in
justice.
30. The learned Senior Counsel of RRB further averred that Mr. Henrik
Norremark presently resides in the United States/ Denmark. He is
therefore not subject to the jurisdiction of the ICC or the Indian Courts
and is no more an employee of the Vestas and consequently securing his
presence as a witness is next to impossible for it. In order to achieve the
ends of justice it is therefore warranted that this court try the matter on
merits and pass an order of declaration and injunction as prayed for in the
present petition.
CS(OS) No.999/2014 Page 16
31. The learned Senior Counsel for RRB has clarified on the point that the
present suit is not bared under S. 34, 41(h) and 41(i) of the Specific Relief
Act, 196. The remedy by way of arbitration is not an equally efficacious
forum because arbitral tribunal is not a competent forum to try serious
allegations of fraud etc. and that Henrik Norremark who is a
necessary/proper party to the dispute is not a party to the arbitration
agreement. Further even though the arbitration agreement is domestic yet
it is ICC arbitration and the RRB has already been made to pay
substantial amount of money and fees as advance for costs.
32. The learned counsel for the Vestas has raised questions on the
maintainability of the present suit. It is asserted that the suit is barred by
law under S. 5 and S. 16 of the Arbitration and Conciliation Act, 1996
("Act"). Reliance is placed on the judgement of the Apex Court in
Kvaerner Cementation India Limited v/s. Bajranglal Agarwal and
Another (2012) 5 SCC 214 (TAB 1) where it was held as under:
" ..The learned single judge of Bombay High Court
came to hold that in view of the Section 5 of the
Arbitration and Conciliation Act, 1996 read with Section
16 thereof since the arbitral tribunal has the power and
jurisdiction to make rule on its own jurisdiction, the
Civil court would not pass any injunction against any
arbitral proceeding." (Emphasis Supplied)
33. The learned counsel for the Vestas has further relied on the judgment
delivered by the Honourable Supreme Court in SBP & Co. v/s Patel
Engineering (2005) 8 SCC 618 wherein it was held that the only remedy
CS(OS) No.999/2014 Page 17
available when arbitration proceedings are pending is to file objections
before the tribunal under S. 16 of the Act. Thereafter if the tribunal
proceeds with the matter, it is open to the parties to challenge the same tht
is the award under S.34 of the Arbitration and Conciliation Act 1996.
34. The learned counsel for the Vestas has also placed reliance on the
judgment of this court in Shri Roshan Lal Gupta vs. Shri Parasram
Holdings Pvt. Ltd. And Anr., OMP 205/1997 and RSA 131/2002 where
it was held as follows:
20. Section 32 of the 1940 Act, barred a suit for
decision upon the existence, effect and validity of an
arbitration agreement; however Section 33 thereof
permitted the court to determine the existence or
validity of the agreement. The 1996 Act, however,
marks a change in this regard. There is no equivalent
to the Sections 32 and 34 of the old Act. On the
contrary, S. 16 has been introduced and S. 34
providing for recourse against an arbitral award
expressly makes the validity of the arbitration
agreement a ground for setting aside the arbitral award.
A peremptory S. 5 prohibiting the jurisdiction of the
Courts as expressly provided under the act has also
been introduced. If inspite of the said change, this
court is to hold that a suit is maintainable where the
contract containing the arbitration clause is challenged
on the ground of forgery and the court in such suit
is empowered to injunct arbitration proceeding (as
otherwise no purpose would be served by such suit),
in my view, it would tantamount to negating the
effect of the change in the statute. It may also be
noticed that the arbitration is normally provided for in
commercial agreements and where under after the
disputes have arisen, one of the parties is always
interested in delaying the disposal of the claims of the
other. In fact, the parties while providing the
arbitration in commercial contracts do so for the
CS(OS) No.999/2014 Page 18
reasons of expediency. If notwithstanding the aforesaid
material the changes between the old and the new act,
it is to be held that a suit as a present one is
maintainable, it would give a tool in the hands of the
party wanting to delay the disposal of the claims of the
other; in such case suits would be instituted and stay of
arbitration proceedings would be sought."
In addition to these judgments the Ld. Senior Counsel for the Vestas
has placed reliance on following judgements: Spentex Industries Ltd.
Vs Dunavant SA and Anr. ILR(2009)Supp.(1)Delhi57, Airport
Authority of India vs. Hindustan Steel Works Construction Ltd. 2009
(Suppl. 1) Arb LR 343 (Delhi) (DB), Shree Krishna Vanaspati
Industries (P) Ltd. Vs. Virgoz Oils and Fats PTE Ltd. & Anr. 2009 (6)
RAJ 511(Del), Shree Subhalaxmi Fabrics (P) Ltd. v. Chand Mal
Baradia and Others) 2005 10 SCC 704, Aurohill Global Commodities
Ltd. V. Maharashtra STC Ltd. (2007) 7 SCC 120, The Handicrafts &
Handlooms Exports Corporation of India Ltd v. Ashok Metal
Corporation & Anr.; 2010 (117) DRJ 370, Bhushan Steel Ltd.
v.Singapore International Arbitration Centre and Anr; ILR (2010) VI
Delhi 295, Oval Investment Pvt.Ltd v. Indiabulls Financial Services
Ltd; (2009) 4 Arb.L.R. 284; Ultra Home Constructions (P) Ltd.
v.Choice Hotels International Inc.& Ors; 2012 (1) Arb L.R. 318
(Delhi), ITE India Private Ltd. v. Shree Mukesh Sharma; 2006 (1)
Arb.L.R.155 and Chatterjee Petrochem v. Haldia Petrochemicals;
(2014) 1 Comp.L.J. 24 (SC). All these judgements are essentially
CS(OS) No.999/2014 Page 19
deciding the issue on case to case basis with one common thread that
jurisdiction of a civil court is ousted where there is an arbitration
agreement between the parties even of one of the parties challenges
the validity of the arbitration agreement or the competence of the
arbitral forum to decide the issue.
35. The learned counsel of the Vestas has categorically stated that as far as
the issue of the impleadment of Henrik Norremark goes there are catena
of judgments where the court has held otherwise. For the aforesaid the
learned counsel has relied on the judgment rendered in ITE India Private
Limited v/s Shree Mukesh Sharma 2006 (1) Arb LR 155, wherein it was
held as under:
" By piercing the corporate veil, the court went into the
issue of whether the Plaintiff Company was a party to
Arbitration Agreement and held that, in light of
Kvaerner, the Court must refer these questions to the
Arbitral Tribunal. In the case, Plaintiff, a registered
Company, approached the Court with a Suit for
Declaration and Injunction against the Defendant from
proceeding with the Arbitration under ICC Rules in
terms of shareholders agreement between Defendant
no. 1, Defendant no. 2, a company and Defendant no.
3; Defendant no. 1being the major share holder in
Plaintiff Company. An ad interim injunction was
sought in that matter and the stand taken by the
Plaintiff was that since the Plaintiff Company was not
a party to the Arbitration Agreement, the claims could
not be referred to Arbitration. Per contra, Defendant
no. 2 adopted the stance that Plaintiff Company was
only an alter ego of defendant no. 1 who is the major
shareholder in the Company. Bharti was distinguished
on the point that unlike Bharti, in this case the Court
CS(OS) No.999/2014 Page 20
could not come to the conclusion that the agreement
was null, void or inoperative. Sukanya was
distinguished on the posit that there was no question of
bifurcation of claim, partially governed by the
Arbitration Agreement and partially falling out of it."
36. The learned counsel for Vestas has stated by way of clarification that the
bar of Section 5 of the Act may not be available in the case of an
arbitration with its seat outside India pursuant to the decision in Bharat
Aluminium Technical Services Inc. (2012) 9 SCC 552. However, the
present arbitration proceedings have their seat in New Delhi, and the suit
is therefore barred due to S.5 and S.16 of the Arbitration and Conciliation
Act 1956. Moreover, this is an arbitration without the intervention of the
court in which the court need not interfere.
37. The learned counsel for Vestas has averred that the plaintiff's contention
that defendant no.1 should have filed an application under S. 8 of the
Arbitration and Conciliation Act 1996 is entirely misconceived. It is
further averred that an application under S. 8 of the Arbitration and
Conciliation Act 1996 is unnecessary as the prayer seeking declaration
with respect to the validity of the Suit MOU is already the subject matter
of the dispute pending before the arbitral tribunal and the second prayer
of injunction is nothing but a challenge to the jurisdiction of the arbitral
tribunal and is also therefore not required to be referred to the arbitral
tribunal as the same is seized of the matter. It is the case of Vestas that
the suit impugns the arbitration proceedings and since such a suit is
CS(OS) No.999/2014 Page 21
barred by law, it has preferred an application under Order VII Rule 11 of
the CPC, 1908 which can also be treated as an application under Section
8(1) of the Act.
38. In furtherance of the aforementioned arguments the learned senior
counsel for the Vestas has stated that the judgments relied on by the
plaintiff do not apply in the instant case as in the present facts, the dispute
has already been submitted by parties (by consent) to the Arbitral
Tribunal for adjudication. Further the learned senior counsel for the
Vestas has stated that even if it's is presumed that an application under
S.8(1) of the Arbitration and Conciliation Act 1996 ('the Act') was made
S.8(3) clearly stipulates that such an arbitration can proceed pending an
application under S. 8(1) of the Act. Thus it is hardly any basis to injunct
the pending arbitral proceedings.
39. The learned senior counsel for the Vestas relying on the decision
rendered by the Apex Court in National Insurance Company Limited vs.
Boghara Polyfab Private limited (2009) 1 SC 267, wherein the
honourable Supreme Court has referred to the decision in SBP and Co.
Vs. Patel Engineering (2005) 8 SCC 618 and stated that such issues were
for the arbitral tribunal to decide. This was particularly so, when the
reference to arbitration has been made without the intervention of the
Court. Reliance has further been placed on the observations made in
Chloro Controls India Private Limited vs. Severn Trent Water
CS(OS) No.999/2014 Page 22
Purification Inc. And Others (2013) 1 SCC 641 wherein the while
approving the judgment rendered in National Insurance Company
Limited, observed that the said decision is in conformity with the decision
rendered in SBP & Co. (supra).
40. The learned Senior Counsel for Vestas has tried to distinguish the
judgment rendered in Booz Allen and Hamiliton Inc.(supra) which has
been relied upon by the plaintiff on the ground that the said case
categorically states that certain cases are reserved for public fora as a
matter of public policy such as disputes relating to rights and liability
which give rise to or arise out of criminal offence and since the present
case is a claim for money, hence the judgment rendered in the aforesaid
case is not applicable to the instant case.
41. The learned senior counsel for the Vestas has also contended that RRB
has submitted to the jurisdiction of the Tribunal and having done so it
was too late in the day to have raised an objection regarding the
jurisdiction of the Tribunal.
42. It was also contended that RRB has failed to satisfy the three
requirements which must exist for the grant of an injunction and therefore
they do not deserve any injunction to be granted.
43. The issues which need to be considered by this court are essentially three
fold. The first issue which the court has to consider is whether the Section
5 read with Section 16 confers an absolute bar on the judicial authority to
CS(OS) No.999/2014 Page 23
entertain a suit in a case where there is an arbitration clause between the
parties.
44. Secondly whether the filing of an application under Section 8 of the
Arbitration and Conciliation Act, 1996 is a mandatory requirement or
whether an application filed under Order 7 Rule 11 CPC can be treated as
an application under Section 8 of the Act.
45. The third issue is whether in a case where there are allegations of fraud,
forgery, manipulation, collusion alleged by one party, the disputes are
arbitrable or not and whether in the light of these broad principles, the
facts of the present case warrant entertainment of the present suit for
declaration and grant of permanent injunction as well as grant of
temporary injunction during the pendency of the main suit.
46. There is no dispute about the fact that by now a catena of judgments have
laid down that the scope of judicial intervention in cases where there is an
arbitration clause is very limited. The scope of intervention is envisaged
under Section 34 of the Arbitration and Conciliation Act, 1996 meaning
thereby that at the initial stage if any person or a party has raised an
objection with regard to the validity of the arbitration clause or the
competence of the arbitral tribunal to adjudicate the dispute then under
Section 16 of the Arbitration and Conciliation Act, 1996, the Tribunal
itself has the jurisdiction to decide the said issue and it is not open to such
CS(OS) No.999/2014 Page 24
a party to rush to the court for an adjudication. Section 5 of the Act
reinforces this principle by a non obstante clause that there cannot be any
judicial intervention. Suffice it would be here to refer to the observations
of one of the judgments of the apex court in Kvaerner Cementation India
Limited's case(supra) in this regard which are as under. Though the
judgment is of 2001, it was reported in 2012, and, by that time, number of
other judgments had been pronounced including Booz Allen and
N.Radhakrishan.
"1. ...The learned single Judge of Bombay High Court
came to hold that in view of Section 5 of the Arbitration
and Conciliation Act, 1996 read with Section 16 thereof
since the arbitral Tribunal has the power and jurisdiction
to make rule on its own jurisdiction, the Civil Court
would not pass any injunction against an arbitral
proceeding." (emphasis supplied)
Section 5 of the Act is not restricted to a bar to a suit
questioning the existence or validity of an arbitration
agreement. Even in Kvaerner, the reference to questions
pertaining to the existence or validity of the arbitration
agreement are by way of examples-
"3. There cannot be any dispute that in absence of any
arbitration clause in the agreement, no dispute could be
referred for arbitration to an arbitral tribunal. But, bearing
in mind the very object with which the Arbitration and
Conciliation Act, 1996 has been enacted and the
provisions thereof contained in S.16 conferring the power
on the Arbitral Tribunal to rule on its own jurisdiction
including ruling on any objection with respect to
existence or validity of the arbitration agreement, we have
no doubt in our mind that the Civil court cannot have
jurisdiction to go into that question.
4. A bare reading of Section 16 makes it explicitly clear
that Arbitral Tribunal has the power to rule on its own
jurisdiction even when any objection with respect to
CS(OS) No.999/2014 Page 25
existence or validity of the arbitration agreement is
raised and a conjoint reading of sub-section (2)(4) and
(6) of S.16 would make it clear that such a decision
would be amenable to be assailed within the ambit of
S.34 of the Act.
5. In this view of the matter, we see no infirmity with the
impugned order so as to be interfered by this Court. The
petitioner who is a party to the arbitral proceedings may
raise the question of jurisdiction of the Arbitrator as
well as the objection on the ground of non-existence of
any arbitration agreement in the so called dispute in
question and such an objection being raised, the
Arbitrator would do well in disposing of the same as
preliminary issue so that it may not be necessary to go
into the entire gamut of arbitration proceedings."
(emphasis supplied).
5. The present suit is also barred due to section 16 of the
Act. It is imperative to note that the ICC arbitration
proceedings have been commenced without the
intervention of a civil court, be it under Section 8 or under
Section 11 of the Act. In these circumstances, and
pending arbitration proceedings, it is not open to plaintiff
to file a suit seeking a stay against the arbitration
proceedings. The Supreme Court in SBP & Co. vs. Patel
Engineering (2005) 8 SCC 618 (TAB 17)(paras 12, 20
and 95) has held that the only remedy available when
arbitration proceedings are pending is to file objections
before the tribunal under Section 16 of the Act (which is
precisely what the Plaintiff has already done). Thereafter,
if the tribunal proceeds with the matter, it is open to the
Plaintiff to challenge the award in terms of Section 34 of
the Act."
47. However, notwithstanding the aforesaid principle that the judicial
intervention cannot be there at the stage of pre-Section stage, there have
been instances where the courts have entertained the suits for declaration
and permanent injunction and in all such suits, there have been
allegations of fraud, forgery, etc.
CS(OS) No.999/2014 Page 26
48. This view has been taken as early as in the year 1962 in Abdul Qadir's
case (supra) that a dispute where there are serious allegations of fraud is
not an arbitrable dispute and recently in two cases, the apex court in
Booze Allen & N. Radhakrishnan's cases (supra) has echoed the same
views that cases where there are allegations of fraud, the dispute will not
be arbitrable.
49. It may be pertinent here to refer to the observations of 246 th Law
Commission Report wherein it has suggested amendments to Section 16
of the Arbitration and Conciliation Act, 1996 for incorporation of a
provision to clarify the position that even in cases where there are
allegations of fraud, the arbitral tribunal will have the jurisdiction to
decide its own jurisdiction and arbitrate the dispute between the parties.
50. The Law Commission has taken note of the fact that there is divergence
of views between the different High Courts where two views have been
expressed, one is in favor of the civil court having jurisdiction in cases of
serious fraud and the other view encompasses that even in cases of
serious fraud, the arbitral tribunal will rule on its own jurisdiction. It may
be pertinent here to reproduce the observations of the Law Commission
as contained in Para 50 & 51 which are as under:
"50. The issue of arbitrability of fraud has arisen on
numerous occasions and there exist conflicting
decisions of the Apex Court on this issue. While it has
been held in Bharat Rasiklal v. Gautam Rasiklal,
(2012) 2 SCC 144 that when fraud is of such a nature
CS(OS) No.999/2014 Page 27
that it vitiates the arbitration agreement, it is for the
Court to decide on the validity of the arbitration
agreement by determining the issue of fraud, there
exists two parallel lines of judgments on the issue of
whether an issue of fraud is arbitrable. In this context,
a 2 judge bench of the Supreme Court, while
adjudicating on an application under section 8 of the
Act, in Radhakrishnan v. Maestro Engineers, 2010 1
SCC 72 held that an issue of 28 fraud is not arbitrable.
This decision was ostensibly based on the decision of
the three judge bench of the Supreme Court in Abdul
Qadir v. Madhav Prabhakar, AIR 1962 SC 406.
However, the said 3 judge bench decision (which was
based on the finding in Russel v. Russel [1880 14 Ch.
'D. 471]) is only an authority for the proposition that a
party against whom an allegation of fraud is made in a
public forum, has a right to defend himself in that
public forum. Yet, following Radhakrishnan, it appears
that issues of fraud are not arbitrable.
51. A distinction has also been made by certain High
Courts between a serious issue of fraud and a mere
allegation of fraud and the former has been held to be
not arbitrable (See Ivory Properties and Hotels Private
Ltd v. Nusli Neville Wadia, 2011 (2) Arb LR 479
(Bom); CS Ravishankar v. CK Ravishankar, 2011 (6)
Kar LJ 417). The Supreme Court in Meguin GMBH v.
Nandan Petrochem Ltd., 2007 (5) R.A.J 239 (SC), in
the context of an application filed under section 11 has
gone ahead and appointed an arbitrator even though
issues of fraud were involved. Recently, the Supreme
Court in its judgment in Swiss Timing Ltd v
Organising Committee, Arb. Pet. No. 34/2013 dated
28.05.2014, in a similar case of exercising jurisdiction
under section 11, held that the judgment in
Radhakrishnan is per incuriam and, therefore, not good
law."
51. A perusal of the aforesaid two paragraphs would show two/three things
that Law Commission has recognized that in cases of serious fraud, courts
have entertained civil suits. Secondly, it has tried to make a distinction in
CS(OS) No.999/2014 Page 28
cases where there are allegations of serious fraud and fraud simplicitor
and thirdly it has also taken note of the fact that the apex court has
recently in Swiss Timing Ltd v Organising Committee, Arb. Pet. No.
34/2013 dated 28.05.2014 has observed that the judgment of
Radhakrishnan's case (supra) was per incuriam.
52. So far as the first observation is concerned, there can be no two opinions
about the same with regard to the factual position that as on date there is
the grey area as regards the cases of serious fraud and fraud to which I
have used the word simplicitor. I feel that the Law Commission had in
mind that there may be cases where fraud is prima facie supported by
way of evidence and where fraud is merely alleged. While as in the case
of former perhaps the arbitral tribunal may be conceived to have no
jurisdiction while as in the latter case, where there are simple allegations
of fraud without there being any prima facie proof just to forestall the
proceedings before the arbitral tribunal, in such cases the arbitral tribunal
ought to have the jurisdiction.
53. As regards the third proposition of Swiss Timing Ltd's case (supra)
wherein the apex court has observed that even in cases of fraud, the
dispute is arbitrable by the arbitral tribunal and the judgment which has
been rendered per incuriam. I feel that this position is clarified by a
recent judgment of the apex court that the judgment in Radhakrishnan's
CS(OS) No.999/2014 Page 29
case (supra) cannot be treated to be judgment being per incuriam holding
that in cases of serious allegation of fraud, the dispute is not arbitrable.
This is on account of the fact that, Mr. Kapur, the learned senior counsel
has brought to the notice of this court a recent judgment of the apex court
rendered by Hon'ble Mr.Justice R.F.Nariman in State of West Bengal &
Ors. Vs. Associated Contractors in Civil Appeal No.6691/2005 wherein
his Lordship has observed that the judgment which has been rendered in
Swiss Timing Ltd (supra) was a judgment rendered while dealing with
Section 11(6) of the Arbitration and Conciliation Act, 1996 and Section
11 of the Arbitration and Conciliation Act, 1996 essentially confers
power on the Chief Justice of India or the Chief Justice of the High Court
as a designate to appoint an arbitrator which power has been exercised by
another Hon'ble Judge as a delegate of the Chief Justice. This power of
appointment of an arbitrator under Section 11 by the court
notwithstanding the fact that it has been held in SBP & Co. Vs. Patel
Engineering; (2005) 8 SCC 618 as a judicial power, cannot be deemed to
have precedential value and, therefore, it cannot be deemed to have
overruled the proposition of law laid down in Radhakrishnan's case
(supra).
54. In addition to this, Swiss Timing Ltd's case (supra) has been rendered by
Hon'ble Mr.Justice Surinder Singh Nijjar sitting singly as a delegate of
the Chief Justice of India and his Lordship himself in a case titled Bihar
CS(OS) No.999/2014 Page 30
State Govt. Secondary School Teachers Association v. Bihar Education
Service Association & Ors.; 2012 13 SCC 33 has held that a Bench of
lesser number of judges cannot overrule the ratio laid down by the larger
number of judges and more so in a case where collateral points are
involved, yet the Hon'ble Judge has observed that the judgment in
Radhakrishan's case (supra) which was rendered by a bench of two
judges as being per incuriam while pronouncing judgment in Swiss
Timing Ltd's case (supra) where his Lordship was sitting singly. For all
these reasons, I feel that the view expressed in Swiss Timing Ltd's case
(supra) would not be applicable to the facts of the case and the dispute
cannot be referred to arbitral tribunal.
55. So far as Roshan Lal's case is concerned that being a Delhi High Court
judgment, I am purposely not referring to the same in the light of three
apex court judgments. Therefore, the aforesaid analysis, in my considered
opinion, brings me to the view that broadly speaking the jurisdiction of
the civil court is barred at a pre objection stage except where there are
egregious/serious allegations of fraud involved. In my view a serious
allegation of fraud is the one that is prima facie supported by
documentary evidence so as to prima facie convince the court that there
are real allegations of fraud which need to be investigated by the court. It
has also been observed in the judgments that wherever there are
allegations of fraud levelled against a party, then it should be at the option
CS(OS) No.999/2014 Page 31
of such a party against whom allegations of fraud are alleged that he must
be able to select the forum where he would like such allegations to be
decided meaning thereby whether he would like to continue with the
proceedings so as to contest the allegations of fraud levelled against him
in an arbitral tribunal or before ordinary civil forum and this option is to
be exercised by such a party and not by a party which is levelling the
allegations.
56. Now coming back to the application of these broad principles to the facts
of the present case. First of all what needs to be examined is that whether
there are allegations of fraud levelled in the instant case or not and
whether they can be considered to be serious or not. The case of the
Vestas is that there are no allegations of fraud levelled by them against
RRB and it is only recovery proceedings started by them before the
arbitral tribunal. The recovery proceedings have been opposed by the
RRB on the ground that Vestas through its Chief Financial Officer, Mr.
Henrik Norremark had signed a MOU on 23.01.2012 waiving off some
dues from the RRB and deferring the payment of the other. It is this
Memorandum of Settlement dated 23.01.2012 which essentially is to be
considered as to whether it is genuine and valid or not. It may be
pertinent hereto mention that before a suit for declaration was filed by
RRB, Vestas themselves have filed two suits bearing Nos. 1448 and
1449/2013 challenging certain MOUs including the ones having been
CS(OS) No.999/2014 Page 32
executed on 23.01.2012. The Memorandum of Understanding of the said
date of 23.01.2012 have been challenged by them in Suit No.1448/2013
contending that the said MOU has been forged and fabricated by their
Chief Financial Officer Mr. Henrik Norremark in collusion with RRB and
its controlling shareholder Mr. Rakesh Bakshi. These allegations have
been reproduced by me earlier in this judgment to briefly give a flavor of
the allegations levelled by them. All these MOUs are part of the same
transaction and entered pursuant to the settlement dated 11.05.2006.
Therefore, they are intrinsically interconnected and cannot be dealt with
in isolation.
57. It may also be pertinent here to mention that in the prayer clause it has
not been specified by Vestas that they want each of the two MOUs to be
declared as null and void and having been forged - whether it is one
which tries to waive off the dues or the other by virtue of which the dues
are purported to have been re-scheduled which is involved in the present
suit No.999/2014.
58. This seems to have been left deliberately as vague so as to encompass
both the MOUs and even if it is assumed that they have not been left
deliberately vague, the court can certainly assume that both of them are
alleged to have been forged by their CFO, Mr. Henrik Norremark and the
RRB. Normally speaking, even if such an allegation would have been
made, it could have been said that it was the option of RRB to select the
CS(OS) No.999/2014 Page 33
forum whether it would like these allegations to be tried in a civil court or
before the arbitral tribunal, but in the instant case, the Vestas themselves
have gone to the civil court despite their being an arbitration clause
between them and RRB and made Mr. Henrik Norremark as a party,
thereby they have deemed to have not only abandoned, but also waived
their right to have the dispute adjudicated by an arbitral tribunal despite
there being an arbitration clause. If that be so, it is not open now to
Vestas in a suit for declaration filed by RRB seeking a declaration to the
effect that MOU dated 23.01.2012 by virtue of which the dates have been
re-scheduled being declared as legal and valid to oppose the said suit on
the ground they are only denying the signatures and the competence of
their Chief Financial Officer to sign the MOU. If this is permitted to be
done, it will tantamount to permitting the Vestas to take a stand which is
contrary to their stand taken earlier. As a matter of fact, the RRB which
in the absence of the two suits filed by Vestas would have been called
upon to produce prima facie evidence to show the allegation of fraud
being got a clear advantage on account of the admission having been
made by Vestas that the documents are forged by filing two suits
themselves in which the theme of the matter is that all the MOUs signed
on their behalf by Chief Financial Officer Mr. Henrik Norremark were
actually forged, fabricated and signed without authority and in collusion
with RRB and Mr. Rakesh Bakshi. Therefore, this admission on the part
CS(OS) No.999/2014 Page 34
of the Vestas clearly makes it a case of serious fraud, which cannot be
subject matter of an arbitrable dispute before the tribunal.
59. I have also been informed that as a matter of fact, Vestas have already
lodged a criminal complaint which has resulted in investigation against
Mr. Henrik Norremark in Denmark where the Vestas is registered.
60. This fact is also recorded in the order sheet of Suit No.1449/2013.
61. It is no argument to contend that even if Mr. Henrik Norremark is not a
party to the arbitration agreement or is not made a party before the
arbitral tribunal because he is neither a necessary nor proper party as
alleged by Vestas, he could have been summoned as a witness by RRB.
62. In my view, this submission is without any merit. This is on account of
the fact that Mr. Henrik Norremark is not only a proper but as a matter of
fact necessary party because Vestas themselves are alleging that Mr.
Henrik Norremark their Chief Financial Officer has forged, fabricated
and without any authority signed the documents namely the aforesaid
MOUs in collusion with RRB and its officials. Therefore, Mr. Henrik
Norremark is a necessary party. A party is said to be a necessary party
when its presence is necessary for the complete adjudication of the
dispute between the parties. In the instant case, in order to have the
complete adjudication of the dispute between RRB and Vestas, the
CS(OS) No.999/2014 Page 35
presence of Mr. Henrik Norremark is very essential because he is the
fulcrum of the entire dispute between the parties.
63. It may also be pertinent here to refer that Mr. Henrik Norremark has
already filed his written statement in Suit No.1448 and 1449 of 2013
denying the allegations of forgery or fraud or collusion or lack of
authority. As a matter of fact, he has taken a categorical stand that during
his tenure for 18 years for which he has worked with Vestas, he signed as
many as over 700 contracts and in all such contracts signed for and on
behalf of Vestas, at no point of time except in three, he was required to
obtain authorities and even in three cases where he had obtained special
authority to sign the contract or the settlement or the document as the
case may be, these were the cases where the opposite side had asked for
the authority and in all these three cases, the value of the contract is stated
to be well over Rs.832 crores, meaning thereby that he has denied the
allegation of forgery and it was not necessary for RRB to summon him as
a witness before the Tribunal or that the RRB had an opportunity before
the Tribunal to summon him as a witness. On the contrary since Vestas
are denying that the MOU has not been signed by Mr. Henrik Norremark,
this is a fact especially within their knowledge, it must be established by
them alone and not by RRB.
64. In the light of the aforesaid facts, I feel that not only there are allegations
of fraud in the instant case, but there are allegations of serious fraud,
CS(OS) No.999/2014 Page 36
forgery, manipulation and collusion between RRB and Mr. Henrik
Norremark as alleged by the respondent and it cannot be treated as a
simplicitor case of recovery of Rs.30 crores before the arbitral tribunal.
65. This forgery etc. is admitted by the Vestas themselves by filing two suits
and it is not open for them to now wriggle out of their stand and contest
the maintainability of the present suit because the allegations of fraud can
be decided only in a civil fora and not in an arbitral tribunal.
[[[
[
66. It may also be pertinent here to mention that not only there is a waiver
and abandonment by filing the suits regarding the jurisdiction of the
arbitral tribunal by the Vestas, but they have also chosen not to file an
application under Section 8 which is sine qua non for the purpose of
ousting the jurisdiction of the civil court. The application under Order 7
Rule 11 CPC filed by them cannot be treated equivalent to the application
under Section 8 in the light of the decision of the apex court in Sukanya
Holdings Pvt Ltd. Vs Jayesh H Pandya & Anr. AIR 2003 SC 2252.
67. The learned counsel for Vestas has vehemently argued that the suit is
barred under S.34, 41(h) and 41(i) of the Specific Relief Act, 1963 as an
equally efficacious and effective remedy is available before the arbitral
tribunal which is already seized of the matter and since RRB has
consciously participated in the proceedings he cannot be allowed to resile
CS(OS) No.999/2014 Page 37
from the same. In my view this argument holds no water on the ground
that the present matter involves a serious issue of fraud and thus involves
a matter of public importance which is not arbitrable. Moreover, it has
been stated by the learned senior counsel appearing for RRB that their
participation before the arbitral tribunal has been without prejudice to
their rights in the present suit.
68. For the reasons mentioned above, I feel that the RRB has been able to
establish that not only it has a prima facie good case but the balance of
convenience is also in its favour and that it would suffer an irreparable
loss in case the arbitral tribunal is not injuncted from proceeding with the
adjudication of the dispute so raised by the Vestas in any manner to give
finality to the said proceedings.
69. Accordingly, the application is allowed and the arbitral tribunal is
injuncted from proceeding ahead with the matter.
70. Expression of any opinion hereinbefore may not be treated as an
expression on the merits of the case.
V.K. SHALI, J.
APRIL 15, 2015
CS(OS) No.999/2014 Page 38
