SWISS TIMING LIMITEDversusORGANISING COMMITTEE, COMMONWEALTH GAMES 2010 DELHI

                          [2014] 6 S.C.R. 514


A                      SWISS TIMING LIMITED
                                   v.
     ORGANISING COMMITTEE, COMMONWEALTH GAMES
                          2010 DELHI
             (Arbitration Petition No. 34 of 2013)
8                           MAY 28, 201'4

                  [SURINDER SINGH NIJJAR, J.]

          Arbitration and Conciliation Act, 1996- s. 5, 8, 11(4), (6)
C   and 16, 45 - Application for appointment of arbitrator and
    constitution of the arbitral tribunal - Maintainability of -
    Foreign Company-petitioner entering into an agreement with
    Organising Committee, CWG-respondent for providing certain
    services - Disputes over payment - Foreign Company
D   invoking arbitration clause - Objections by respondent that
    petitioner did not follow dispute resolution mechanism, it
    engaged in corrupt, fraudulent or coercive practices, rendering
    the agreement void ab initio; criminal proceedings vrere going
    on in trial court, thus arbitration and criminal proceedings
E   would lead to conflicting conclusions - Held: Arbitration
    application is maintainable - It cannot be said thal since a
    criminal case has been registered against the Chci.rman of
    the Organising Committee and some other officials of the
    petitioner, the Supreme Court would have no jurisddion to
F   make a reference to arbitration - Whenever contract is said
    to be void-ab-initio, the Courts exercising jurisdiction urss. 8
    and 11 are not rendered powerless to refer the disputes to
    arbitration - No inherent risk of prejudice to any of the pa.ties
    in permitting arbitration to proceed simultaneously to fhe
    criminal proceedings - In an eventuality where award is
G   rendered by arbitral tribunal, and criminal proceedilgs result
    in conviction rendering the underlying conract void,
    necessary plea can be taken on the basis of t~ conviction
    to resist the execution/enforcement of the award, If the matter

H                                 514
      SWISS TIMING LTD. v. ORGANISING COMMITTEE,            515
                COMMONWEALTH GAMES

is not referred to arbitration and criminal proceedings result      A
in an acquittal leaving no ground for claiming that underlying
contract is void or voidable, it would be undesirable delaying
the arbitration - On facts, balance of convenience tilted more
in favour of permitting the arbitration proceedings to continue
rather than to bring the same to a grinding halt - Thus, Arbitral   B
Tribunal constituted, nominating second arbitrator and
Chairman of the Arbitral Tribunal.

     The petitioner-foreign company entered into an
agreement with the respondent-CWG Committee for C
providing timing, scoring and result systems to conduct
Commonwealth Games, 2010. In consideration of its
services, the petitioner was to receive certain amount,
Since the respondent disputed its liability to pay the',
amounts, the petitioner invoked arbitration under clause
38.6 of the agreement and nominated Justice S.N. D
Variava, former Judge of Supreme Court of India as
arbitrator on its behalf. A notice to this effect was served
on the respondent. A reminder was also issued.
Thereafter, the petitioners filed the instant petition under
section 11 (4) read with section 11 (6) of the Arbitration and E
Conciliation Act, 1996 seeking appointment of nominee
arbitrator of the respondent and to constitute the arbitral
tribunal by appointing the presiding arbitrator in order to
adjudicate the disputes arisen between the parties.
                                                               F
     The respondent raised preliminary objections that the
petitioner did not follow the dispute resolution
mechanism as provided in the agreement; that the
respondent had invited the petitioner for amicable
resolution of the dispute; that the contract stoods vitated G
and is void ab initio since the petitioner had engaged in
corrupt, fraudulent or coercive practices, they were not
entitled to any payment whatsoever in respect of the
contract, thus, there was no basis to invoke arbitration
clause; that a criminal case was registered under Section
                                                                    H
    516       SUPREME COURT REPORTS             [2014] 6 S.C.R.


A 120-B, read with Sections 420, 427, 488 and 477 IPC and
  Section 13(2) read with Section 13(1)(d) of the Prevention
  of Corruption Act against the then Chairman of the
  Organising Committee and other officialS" of the
  respondent and some officials of petitioner and as such
B respondent sought to invoke non-liability clause whereby
  it could terminate the agreement in case of corrupt,
  fraudulent, collusive or coercive practice in connection
  with the agreement; that due to the pendency of the
  criminal proceedings in the trial court, the petition ought
c not to be entertained and in case the arbitration
  proceeding continues simultaneously with the criminal
  trial, there would be conflicting conclusions leading to
  unnecessary confusion.

          Allowing the arbitration petition, the Court
D                                                                 I
       HELD: 1.1. It cannot be said that the petition is not
  maintainable for non-compliance with Clause 38.3 of the
  Dispute Resolution Clause. A perusal of the
  correspondence placed on the record of the petition
E clearly shows that not only the petitioner but even the
  ambassadors of the various· governments had made
  considerable efforts to resolve the issue without having
  to take recourse to formal arbitration. It is only when all
  these efforts failed, that the petitioner communicated to
F the respondent its intention to commence arbitration by
  letter /notice. This was preceded by various letters which
  clearly reflect the efforts made by the petitioner to resolve
  disputes through discussions and negotiations before
  sending the notice invoking arbitration clause. [Para 15)
G [529-C-E, G]

      1.2. The second preliminary objection that the
  contract stood vitiated and is void-ab-initio in view of
  Clauses 29, 30 and 34 of the agreement, is without any
  substance. UnCler Clause 29, both sides have given a
H warranty not to indulge in corrupt practices to induce
     SWISS TIMING LTD. v. ORGANISING COMMITTEE,           517
               COMMONWEALTH GAMES

execution of the Agreement. Clause 34 empowers the               A
Organising Committee to terminate ·the contract after
deciding that the contract was executed in breach of the
undertaking given in Clause 29 of the Contract. These are
allegations which will have to be established in a proper
forum on the basis of the oral and documentary evidence,         B
produced by the parties, in support of their respective
claims. The objection taken is to the manner in which the
grant of the contract was manipulated in favour of the
petitioner. The second ground is that the rates charged
by the petitioner were exorbitant. Both these issues can         c
be taken care of in the award. Certainly if the respondent
is able to produce sufficient evidence to show that the
similar services could have been procured for a lesser
price, the arbitral tribunal would take the same into
account whilst computing the amounts payable t~ the
                                                                 D
petitioner. It cannot be said that whenever a contract is
said to be void-ab-initio, the Courts exercising jurisdiction
under Section 8 and Section 11 of the Arbitration Act,
1996 are rendered powerless to refer the disputes to
arbitration. [Para 17] [529-G, H; 530-A-E]
                                                                 E
     1.3. The concept of separability of the arbitration
clause/agreement from the underlying contract has been
statutorily recognised under Section 16 of the Arbitration
Act, 1996. Having provided for resolution of disputes
through arbitration, parties cannot be permitted to avoid        F
arbitration, without satisfying the Court that it will be just
and in the interest of all the parties not to proceed with
the arbitration. Section 5 of the Arbitration Act provides
that the Court shall not intervene in the arbitration
process except in accordance with the provisions                 G
contained in Part I of the Arbitration Act. This policy of
least interference in arbitrf!tion proceedings recognises
the general principle that the function of Courts in matters
relating to arbitration is to support arbitration process. A
conjoint reading of Section 5 and Section 16 would make          H
    518       SUPREME COURT REPORTS             [2014] 6 S.C.R.

A it clear that all matters including the issue as to whPther
  the main contract was void/voidable can be referred to
  arbitration. Otherwise, it would be a handy tool available
  to the unscrupulous parties to avoid arbitration, by
  raising the bogey of the underlying contract being void.
B [Para 26] [536-E-H; 537-A]

         1.4. Whenever a plea is taken to avoid arbitration on
    the ground that the underlying contract is void, the Court
    is required to ascertain the true nature of the defence.
    Often, the terms "void" and "voidable" are confused and
C   used loosely and interchangeably with each other.
    Therefore, the Court ought to examine the plea by
    keeping in mind the relevant statutory provisions in the
    Contract Act, 1872, defining the terms "void" and
    "voidable". Undoubtedly, in cases, where the Court can
D   come to a conclusion that the contract is void without
    receiving any evid~nce, it would be justified in declining
    reference to arbitration but such cases would be few and
    isolated. These would be cases where the Court can
    readily conclude that the contract is void upon a
E   meaningful reading of the contract document itself.
    However, it would not be possible to shut out arbitration
    even in cases where the defence taken is that the
    contract is v.oidable. In exercising powers under Section
    11 (6) of the Arbitration Act, the Court has to keep in view
F   the provisions contained in Section 8 of the Arbitration
    Act, which provides that a reference to arbitration shall
    be made if a party applies not later than when submitting
    his first statement on the substance of the dispute. In
    contrast, Section 45 of the said Act permits the Court to
G   decline reference to arbitration in case the Court finds
    that the agreement is null and void, inoperative or
    incapable of being performed. [Para 27, 28] [537-8-C-F-H;
    538-F-H; 539-A-C]

          1.5. To shut out arbitration at the initial stage would
H
   ·" SWISS TIMING LTD. v. ORGANISING COMMITTEE,         519
                COMMONWEALTH GAMES

  destroy the very purpose for which the parties had A
  entered into arbitration. Furthermore, there is no inherent
  risk of prejudice to any of the parties in permitting
  arbitration to proceed simultaneously to the criminal
  proceedings. In an eventuality where ultimately an award
  is rendered by arbitral tribunal, and the criminal 8
  proceedings result in conviction rendering the underlying
  contract void, necessary plea can be taken on the basis
  of the conviction to resist the execution/enforcement of
  the award. .
               Conversely, if the matter is not referred\
                                                           to
  arbitration and the criminal proceedings result in an c
  acquittal and thus leaving little or no ground for claiming
  that the underlying contract is void or voidable, it would
  have the wholly undesirable result of delaying the
  arbitration. Therefore, the Court ought to act with caution
  and circumspection whilst examining the plea that the 0
  main contract is void or voidable. The Court ought to
  decline reference to arbitration only where the Court can
  reach the conclusion that the contract is void on a
. meaningful reading of the contract document itself
  without the requirement of any further proof. [Para 29] E
  [539-C-G]

      1.6. In the instant case, it is pleaded that the manner
 in which the contract was made between the petitioner
 and the respondent was investigated. by the CBI. As a
 part of the investigation, the CBI had seized all the original F
 documents and the record from the office of the
 respondent. After investigation, the criminal case was
 registered. It is claimed that in the event the Chairman of
 the Or~anising Committee and the other officials who
 manipulated the grant of contract in favour of the , G
 respordent are found guilty in the criminal trial, no
 amourt would be payable to the petitioner. Therefore, it
 would be appropriate to await the decision of the criminal
 proceedings before the arbitral tribunal is constituted to
 go i~to the alleged disputes between the parties. The H
    520     SUPREME COURT REPORTS            [2014] 6 S.C.R.


A submission made by the counsel for the respondents that
  since a criminal case has been registered against the
  Chairman of the Orgar1ising Committee and some other
  officials of the petitioner, this Court would have no
  jurisdiction to make a reference to arbitration, cannot be
B accepted. The balance of convenience is tilted more in
  favour of permitting the arbitration proceedings to
  continue rather than to bring the same to a grinding halt.
  [Para 25, 30] [539-G-H; 540-A-C; 536-D]

C      1.7. The defence of the contract being void is now-a-
  days taken routinely along with the other usu I grounds,
  to avoid/delay reference to arbitration. Su h ground
  needs to be summarily rejected unless the e is clear
  indication that the defence has a reasonable chance of
  success. In the instant case, the plea was nev r taken till
D the rnstant petition was filed in this Court. arlier, the
  respondents were only impressing upon the etitioners
  to supply certain information. Therefore, it !would be
  appropriate, that the Arbitral Tribul'}al examin~ whether
  there is any substance in the plea of fraud ndw sought
E to be raised by the respondents. [Para 31] [54p-D-F]

       1.8. The purpose of the solitary rule     is~ to avoid
  embarrassment to the accused. In contrast, th·i findings
  recorded by the arbitral tribunal in its award would not
F be binding in criminal proceedings. Even otherwise it has
  been held in M.S.Sheriff case that no hard and 1fast rule
  can be laid down that civil proceedings in all matters
  ought to be stayed when criminal proceedings are also
  pending. In case the award is made in favour of the
G petitioner, the respondents would be at liberty to resist
  the enforcement of the same on the ground of
  subsequent conviction of either the Chairman or the
  officials of the contracting parties. [Para 35] [543-C-E]

      1.9. The petitioners had already nominated Ho;i'ble
H Mr. Justice S.N. Variava, Former Judge of this Cou.r\ as
       SWISS TIMING LTD. v. ORGANISING COMMITTEE,            521
                 COMMONWEALTH GAMES

 their arbitrator. Hon'ble Mr. Justice B.P. Singh, Former          A
 Judge of this Court, is nominated as the second Arbitrator
 and Hon'be Mr. Justice Kuldip Singh, Former Judge of
 this Court is nominated as the Chairman of the Arbitral
 Tribunal, to adjudicate the disputes that have arisen
 between the parties, on such terms and conditions as              B
 they deem fit and proper. The Registry would
 communicate the order to the Chairman of the Arbitral
 Tribunal, as well as, to. the Second Arbitrator to enable
 them to enter upon the reference and decide the matter
 as expeditiously as possible. [Paras 37, 38] [544-D-G]            c
     Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway
 Petroleums (2003) 6 SCC 503 - affirmed.

      India Household and Healthcare Ltd. Vs. LG Household
                           •
 and Healthcare Ltd. 2007 (5) SCC 510:2007 (3) SCR 726 -           D
 distinguished.

     N. Radhakrishnan .Vs. Maestro Engineers & Ors. (2010)
 1 SCC 72:2009 (15) SCR 371 - per incuriam.

.      Mis Nussli (Swtizerland) Ltd. Vs. Organizing Commit.        E
· C9mmonwealth Game. 2010 Unreported Order of
  Supreme Court dt. 11.04.2012; Guru Granth Saheb Sthan
  Meerghat Vanaras Vs. Ved Prakash & Ors. (2013) 7 SCC
  622; M.S.Sheriff vs. State of Madras 1954 SCR 1229; P.
  Anand Gajapathi Raju & Ors. Vs. P. V. G. Raju (Dead) & Ors.      F
  (2000) 4 SCC 539:2000 (2) SCR 684; Today Homes &
  Infrastructure Pvt. Ltd. Vs. Ludhiana Improvement Trust & Anr.
  2013 (2) Arb. LR 241 (SC) - referred to.
                      Case Law Reference:                          G
     (201 O) 1 sec 12          Per incuriam        Para 21
     (2ci13) 1 sec 622         Referred to         Para 13, 34
     (2003) 6 sec 503          Referred fo         Para 20,
                                                                   I-'
    522       SUPREME COURT REPORTS                [2014] 6 S.C.R.


A         (2000) 4 sec 539         Referred to          Para 20, 21
          2013 (2) Arb. LR 241 (SC) Referred to         Para 22
          2007 (5) SCC 510         Distinguished        Para 32
          1954 SCR 1229            Referred to          Para 34
B
        CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
    34 of 2013.
      Section 11 (4) read with Section 11 (6) of the Arbitration
C and Conciliation Act, 1996.
        Sharan Thakur, Percival Billimoria, Siddhartha Barua,
    Siddharth Thakur, Vijay Kumar Paradesi, Atul N., Dr. Sushi!
    Balwada for the Petitioner.
D      Rohit K. Aggarwal, Garima Ghose, Chanchal Kumar
    Ganguli for the Respondent.
          The Judgment of the Court was delivered by
       SURINDER SINGH NIJJAR,J. 1. This is a petition under
E Section 11 (4) read with Section 11 (6) of the Arbitration and
  Conciliation Act, 1996 (hereinafter referred to as "the
  Arbitration Act"), with a prayer to appoint the nominee arbitrator
  of the Respondent and to further constitute the arbitral tribunal,
  by appointing the presiding arbitrator in order to adjudicate the
  disputes that have arisen between the parties.
F
         2. The relevant facts as set out in the Arbitration Petition
    are as under:-
       3. The Petitioner is a company duly incorporated under the
  laws of Switzerland, having its registered office in Corgemont,
G Switzerland. The respondent is the Organising Committee,
  Commonwealth Games, 2010. It is a society registered under
  the Societies Registration Act, 1860 (hereinafter referred to as
  "the Organising Committee"), established for the primary
  purpose of planning, organi~ing and delivering the
H Commonwealth Games, 2010 Delhi (hereinafter referred to as
     SWISS TIMING LTD. v. ORGANISING COMMITTEE,               523
   COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.)

"Commonwealth Games") and having its registered office in             A
New Delhi, India.

      4. The petitioner entered into an agreement dated 11th
 March, 2010 with the respondent for providing timing, score and
 result systems ('TSR systems/services") as well as supporting
                                                                      B
 services required to conduct the Commonwealth Games.
 According to the petitioner, Clause 11.1 of the aforesaid
 agreement stipulated the fees, as set out in Schedule 3, which
 shall be paid to the petitioner for performance of the obligations
 contained in the agreement. The aforesaid Schedule 3 gives
 details of the amounts which were to be paid, in instalments,        C
 by the Organising Committee. The service provider/Petitioner
was to submit monthly tax invoices, detailing the payments to
 be made by the Organising Committee. These invoices were
 to be paid within 30 days of the end of the month in which the
.tax invoices were received by the Organising Committee. All          D
 payrnents were to be made in Swiss Francs, unless the parties
 agree otherwise in writing. Clause 11.5 provides that on the
 date of the agreement, the service provider must provide the
 Performance Bank Guarantee to the Organising Committee to
 secure the performance of its obligations under the agreement.       E
 Certain other obligations are enumerated in the other clauses,
which are not necessary to be noticed for the purposes of the
 decision of the present petition.

      5. It is also noteworthy that in consideration of the           F
petitioner's services as stipulated in the agreement, the
petitioner was to receive a total amount of CHF 24,990,000/-
(Swiss Francs Twenty Four Million Nine Hundred and Ninety
Thousand only). It was also provided in Schedule 3 that payment
of the 5% of the total service fees was to be made upon               G
completion of the Commonwealth Games. Accordingly, the
petitioner sent the invoice No. 33574 dated 27th October, 2010
for the payment of CHF 1,249,500 (Swiss Francs One Million
Two Hundred Forty Nine Thousand Five Hundred only). This
represents the remaining 5% which was to be paid upon
                                                                      H
        524       SUPREME COURT REPO~TS                  [2014] 6 S.C.R.


    A   completion of the Commonwealth Games on 27th October,
        2010. The petitioner had also paid to the Organising
        Committee a sum of Rs. 15,00,000/- (INR 1.5 million) as
        Earnest Money Deposit (EMO), for successfully completing the
        TSR services as provided in the agreement.
    B
              6. According to the petitioner, the respondent defaulted in
        making the payment without any justifiable reasons. Not only
       the amount was not paid to the petitioner, the respondent sent
        a letter dated 15th December, 2010 asking the petitioner to
    C extend the Bank Guarantee till 31st January, 2011. The
        petitioner informed the respondent that the Bank Guarantee had
        already been terminated and released on completion of the
        Commonwealth Games in October, 2010. It is also the case
        of the petitioner that there is no provision in the service
        agreement for extension of the Bank Guarantee. The petitioner
    D reiterated its claim for the aforesaid amount. Through letter
        dated 26th January, 2011, the petitioner demanded repayment
        of Rs. 15 lakhs deposited as EMO. Instead of making the
        payment to the petitioner and other companies, the respondent
     ·,issued a Press Communique on 2nd February, 2011 declaring
    E that part payments to nine foreign vendors, including the
        petitioner, have been withheld for "non-performance of the
        contract". The petitioner is said to have protested against the
/       aforesaid communique through letter dated 4th February, 2011.
        It was reiterated that the petitioner had satisfactorily performed
    F the obligations in the service agreement of 11th March, 2010.
        Since the respondent was disputing its liability to pay the
        amounts, the petitioner served a formal Dispute Notification on
        the respondent under Clause 38 of the agreement.

    G      7. The petitioner further points out that on 7th February,
      2011, the respondent called upon the petitioner to fulfil its
      alleged outstanding obligations under the agreement including
      handing over of the Legacy Boards, completion of the
      formalities of the material, which were required to be shipped
    H out and to fulfil certain other requirements as set out in its earlier
    SWISS TIMING LTD. v. ORGANISING COMMITTEE,               525
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

e-mails. in order to prepare the "agreement closure report". The A
respondent also stated that they were not addressing the issue
of invoking the Dispute Resolution Clause as they were
interested in settling the dispute amicably. The petitioner pleads
that the respondent failed in its commitment for payments
towards services rendered·, not only towards the petitioner but B
also towards other international companies from Australia,
Belgium, England, France, Germany, Italy, the Netherlands and
Switzerland, which had provided various services to the
respondent at, the Commonwealth Games. It also appears that
collective letters were written on behalf of various companies      c
by the ambassadors of the concerned countries, to the Finance
Minister of India indicating the default in payments of the
amounts due. The petitioners, therefore, claim that they were
left with no alternative but to invoke arbitration as provided under
Clause 38.6 of the agreement. The petitioners have nominated
                                                                     0
the arbitrator on its behalf namely Justice S.N. Variava, former
Judge of the Supreme Court of India. A notice to this effect was
served on the respondent through a communication dated 22nd ' ·
April, 2013. Since no response was received a reminder was
issued on 29th May, 2013. Upon such failure, the petitioners
have filed the present petition.                                     E

      8. In the counter affidavit all the averments made by the
petitioners have been denied, as being incorrect in facts and
in law. The respondents have raised two preliminary objections,
which are as follows:-                                              F

      (i)   The petitioner has not followed the dispute
            resolution mechanism as expressly provided in the
            agreement dated 11th March, 2010. No efforts have
            been made by the petitioner to seek resolution of       G
            the dispute as provided under Clause 38. On the
            other hand, the respondent through numerous
            communications invited the petitioner for amicable
            resolution of the dispute. The respondent relies on
            communications dated 3rd January, 2011, 9th
                                                                    H
    526          SUPREME COURT REPORTS              [2014] 6 S.C.R.


A                 January, 2011, 10th January, 2011, 1st February,
                  2011 and 2nd February, 2011.

          (ii)    The contract stands vitated and is void ab initio in
                  view of Clauses 29, 30 and 34 of the Agreement
                  dated 11th March, 2010. Hence, the petitioner is not
B                 entitled to any payment whatsoever in respect of the
                  contract and is lia.ble to reimburse the payments
                  already made. Therefore, there is no basis to
                  invoke arbitration clause.

c      The respondent points out that a combined reading of
  Clause 29 and Clause 34 would show that the petitioner had
  warranted that it will never engage in corrupt, fraudulent,
  collusive or coercive practices in connection with the
  agreement. The petitioner would be liable to indemnify the
D Respondent against all losses suffered or incurred as resulta
  of any breach of the agreement or any negligence, unlawful
  conduct or wilful misconduct. The respondent may terminate the
  agreement whenever it determines that the petitioner had
  engaged in any corrupt, fraudulent, collusive or coercive
E practice in connection with the agreement. The respondent
  seeks to establish the aforesaid non-liability clause on the basis
  of registration of Criminal Case being CC No. 22 of 2011 under
  Section 120-B, read with Sections 420, 427, 488 and 477 IPC
  and Section 13(2) read with Section 13(1 )(d) of the Prevention
F of Corruption Act against Suresh Kalmadi, the then Chairman
  of the Organising Committee and other officials of the
  respondent alongwith some officials of the petitioner, namely
  Mr. S. Chianese, Sales & Marketing Manager, Mr. Christophe
  Bertaud, General Manager and Mr. J. Spiri, Multi Sports Events
  & Sales Manager.
G
       9. It is further the case of the respondent that due to the
  pendency of the criminal proceedings in the trial court, the
  present petition ought not to be entertained. In case the
  arbitration proceeding continues simultaneously with the
H criminal trial, there is real danger of conflicting conclusions by
       SWISS TIMING LTD,.v. ORGANISING COMMITTEE,             527
     COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

the two fora, leading to unnecessary confusion.                      A

      10. I have heard the learned counsel for the parties.

    11. The submissions made in the petition as well as in the
counter affidavit have been reiterated before me by the learned
counsel. I have given due consideration to the submissions           B
made by the learned counsel for the parties.

     12. The learned counsel for the petitioners has relied on
an unreported Order of this Court dated 11th April, 2012 in Ml
s Nussli (Swtizerland) Ltd. Vs. Organizing Commit.                   c
Commonwealth Game. 2010, wherein the dispute in almost
identical circumstances have been referred to arbitration.               /




      13. On the other hand, learned counsel for the respondent
has relied on a judgment of this Court in N. Radhakrishnan v. D
Maestro Engineers & Ors 1• He has also relied upon Guru
Granth Saheb Sthan Meerghat Vanaras Vs. Ved Prakash &
Ors 2 . Reliance is also placed on India Household and
Healthcare Ltd. Vs. LG Household and Healthcare Ltd3 .

     14. The procedure for Dispute Resolution has been               E
provided in Clause 38 of the agreement, which is as under:-

      "38. Dispute Resolution
      38.1 If a dispute arises between the parties out of or
      relating to this Agreement (a "Dispute"), any party seeking    F
      to ·resolve the Dispute must do so strictly in accordance
      with the provisions of this clause. Compliance with the
      provisions of this clause is a condition precedent to
      seeking a resolution of the Dispute at the arbitral tribunal
      constituted in accordance with this clause 38.                 G


1.   (201 O) 1 sec 72.
2.   (2013) 7 sec 622.
3.   2007 (5) sec 51 o.                                              H
    528        SUPREME COURT REPORTS                [2014].6 S.C.R.


A         38.2 During a Dispute, each party must continue to
          perform its obligations under this Agreement.

          38.3 A party seeking to resolve the Dispute must notify the
          existence and nature of the Dispute to the other party ("the
B         Notification"). Upon receipt of the Notification the Parties
          must use their respective reasonable endeavours to
          negotiate to resolve the Dispute by discussions between
          Delhi 2010 (or a person it nominates) and the Service
          Provider (or a person it nominates). If the Dispute has not
c         been resolved within 10 Business Days of receipt of the
          Notification (or such other period as agreed in writing by
          the parties) then the parties must refer the Dispute to the
          Chairman of Delhi 2010 and the Chief Executive Officer
          or its eq11ivalent) of the Service Provider.
D         38.4 If the Dispute has not been settled within 5 Business
          Days of referral under Clause 38.3, the Dispute shall be
          settled by arbitration in accordance with the following
          clauses.

E         38.5 For any dispute arising after 31 July, 2010, the
          relevant period in clause 38.3 is 48 hours and the relevant
          period in clause 38.4 is 24 hours.

          38.6 The Dispute shall be referred to a tribunal consisting
          of three Arbitrators, one to be nominated by each party,
F
          with the presiding Arbitrator to be nominated by the two
          arbitrators nominated by the parties. The Arbitrators shall
          be retired judges of the Supreme Court or High Courts of
          India. However, the Presiding Arbitrator shall be a retired
          Supreme Court Judge.
G
          38. 7 The place of arbitration shall be New Delhi. All
          arbitration proceedings shall be conducted in English in
          accordance with the provisions of the Arbitration and
          Conciliation Act, 1996 as amended from time to time.
H
    SWISS TIMING LTD. v. ORGANISING COMMITTEE,                   529
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

     38.8 The arbitration award will be final and binding upon          A
     the parties, and each party will bear its own costs of
     arbitration and equally share the fees of the arbitral tribunal
     unless the arbitral tribunal decides otherwise.

     38.9 This clause 38 will not affect each party's rights to
                                                                        B
     seek interlocutory relief in a court of competent jurisdiction."

      15. I am unable to agree with the submission made by the
learned counsel for the respondent that the petitioner has not
satisfied the condition precedent under Clause 38.3. A perusal
of the correspondence placed on the record of the petition              c
clearly shows that not only the petitioner but even the
ambassadors of the various governments had made
considerable efforts to resolve the issue without having to take
recourse to formal arbitration. It is only when all these efforts
failed, that the petitioner communicated to the respondent its          D
intention to commence arbitration by letter /notice dated 22nd
April, 2013. This was preceded by letters dated 4th February,
2011, 14th March, 2011 and 20th April, 2011 which clearly
reflect the efforts made by the petitioner to resolve disputes
through discussions and negotiations before sending the notice          E
invoking arbitration clause.

     16. It is evident from the counter affidavit filed by the
respondents that the disputes have arisen between the parties
out of or relating to the agreement dated 11th March, 2010.
On the one hand, the respondent disputes the claims made by             F
the petitioner and on the other, it takes the plea that efforts were
made to amicably put a "closure to the agreement". I,
therefore, do not find any merit in the submission of the
respondent that the petition is not maintainable for non-
compliance with Clause 38.3 of the Dispute Resolution Clause.           G

    17. The second preliminary objection raised by the
respondent is on the ground that the contract stands vitiated
and is void-ab-initio in view of Clauses 29, 30 and 34 of the
agreement dated 11th March, 2010. I am of the considered                H
    530      SUPREME COURT REPORTS                [2014] 6 S.C.R.


A .opinion that the aforesaid preliminary objection is without any
   substance. Under Clause 29, both sides have given a warranty
   not to indulge in corrupt practices to induce execution of the
   Agreement. Clause 34 empowers the Organising Committee
   to terminate the contract after deciding that the contract was
B executed in breach of the undertaking given in Clause 29 of
  ·the Contract. These are allegations which will have to be
   established in a proper forum on the basis of the ora! and
   documentary evidence, produced by the parties, in support of
   their respective claims. The objection taken is to the manner
C in which the grant of the contract was manipulated in favour of
   the petitioner. The second ground is that the rates charged by
   the petitioner were exorbitant. Both these issues can be taken
   care of in the award .. Certainly if the respondent is able to
   produce sufficient evidence to show that the similar services
   could have been procured for a lesser price, the arbitral tribunal
0
   would take the same into account whilst computing the amounts
   payable to the petitioner. As a pure question of law, I am unable
   fo accept the very broad proposition that whenever a contract
   is said to be void-ab-initio, the Courts exercising jurisdiction
   under Section 8 and Section 11 of the Arbitration Act, 1996
E are rendered powerless to refer the disputes to arbitration.

        18. However, the respondent has placed strong reliance
  on the judgment of this Court in N. Radhakrishnan (supra). In
  that case, disputes had arisen between the appellant and the
F respondent, who were partners in a firm known as Maestro
  Engineers. The appellant had retired from the firm.
  Subsequently, the appellant alleged that he continued to be a
  partner. The respondent filed a Civil Suit seeking a declaration
  that the appellant is not a partner of the firm. In this suit, the
G appellant filed.an application under Section 8 of the Arbitration
  Act seeking reference of the dispute to the arbitration. The plea
  was rejected by the trial court and the High Court in Civil
  Revision. This Court also rejected the prayer of the appellant
  for reference of the dispute to arbitration. This Court found that
H subject matter of the dispute was within the ambit of the
     SWISS TIMING LTD. v. ORGANISING COMMITTEE,              531
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

arbitration clause. It was held as under :                          A

    "14. The learned counsel for the respondents further
    argued that the subject-matter of the suit being OS No. 526
    of 2006 was a different one and it was not within the ambit
    of the a·rbitration clause of the partnership deed dated 7-     B
    4-2003 and that the partnership deed had ceased to exist
    after the firm was reconstituted due to the alleged
    retirement of the appellant. Therefore, the trial court was
    justified in not referring the matter to the arbitrator.

    15. The appellant had on the other hand contended that          C
    the subject-matter of the suit was within the ambit of the
    arbitration clause since according to him the dispute
    related to his retirement and the settlement of his dues
    after he was 'deemed to have retired according to the
    respondents. Further, it was his contention that the            D
    partnership deed dated 6-12-2005 was not a valid one as
    it was not framed in compliance with the requirements
    under the Partnership Act, 1932. Therefore; the argument
    of the respondents that the subject-matter of the suit did
    not fall within the ambit of the arbitration clause of the      E
    original partnership deed dated 7-4-2003 cannot be
    sustained. We are in agreement with the contention of the
    appellant to this effect.

    16. It is clear from a perusal of the documents that there
                                                                    F
    was a clear dispute regarding the reconstitution of the
    partnership firm and the subsequent deed framed to that
    effect. The dispute was relating to the continuation of the
    appellant as a partner of the firm, and especially when the
    respondents prayed for a declaration to the effect that the
    appellant had ceased to be a partner of the firm after his      G
    retirement, there is no doubt in our mind that the dispute
    squarely fell within the purview of the arbitration clause of
    the partnership deed dated 7-4-2003. Therefore, the
    arbitrator was competent to decide the matter relating to
    the existence of the original deed and its validity to that     H
    532       . SUPREME COURT REPORTS                [2014] 6 S.C.R.


A         effect. Thus, the contention that the subject-matter of the
          suit before the 1st Additional District Munsiff Court at
          Coimbatore was beyond the purview of the arbitration
          clause, cannot be accepted."

8
          19. Having found that the subject matter of the suit was
  within the jurisdiction of the arbitration, it was held that the
  disputes can not be referred to arbitration. This Court approved
  the finding of the High Court that since the case relates to
  allegations of fraud and serious malpractices on the part of the
  respondents, such a situation can only be settled in court
C through furtherance of detailed evidence by either parties and
  such a situation can not be properly gone into by the arbitrator.
  In my opinion, the aforesaid observations runs counter to the
  ratio of the law laid down by this Court in Hindustan Petroleum
  Corpn. Ltd. Vs. Pinkcity Midway Petroleums4, wherein this
D Court in Paragraph 14 observed as follows:

          "If in an agreement between the parties before the civil
          court, there is a clause for arbitration, it is mandatory for
          the civil court to refer the dispute to an arbitrator. In the
E         instant case the existence of an arbitral clause in the
          agreement is accepted by both the parties as also by the
          courts below. Therefore, in view of the mandatory language
          of Section 8 of the Act, the courts below ought to have
          referred the dispute to arbitration."
F      20. In my opinion, the observations in Hindustan
  Petroleum Corpn. Ltd. (supra) lays down the correct law.
  Although, reference has been made to the aforesaid
  observations in N. Radhakrishnan (supra) but the same have
  not been distinguished. A Two Judge Bench of this Court in P.
G Anand Gajapathi Raju & Ors. Vs. P. V. G. Raju (Dead) & Ors. 5,
  had earlier considered the scope of the provisions contained
  in Section 8 and observed as follows:-


H 4.   (2003) 6 sec 503.
       SWISS TIMING LTD. v. ORGANISING COMMITIEE,               533
     COMMONWE((LTH GAMES [SURINDER SINGH NIJJAR, J.]

      "8. In the matter before us, the arbitration agreement            A
      covers all the disputes between the parties in the
      proceedings before us and even more than that. As
      already noted, the arbitration agreement satisfies the
      requirements of Section 7 of the new Act. The language
      of Section 8 is peremptory. It is, therefore, obligatory for      B
      the Court to refer the parties to arbitration in terms of their
      arbitration agreement. Nothing remains to be decided in
      the original action or the appeal arising therefrom. There
      is no question of stay of the proceedings till the arbitration
      proceedings conclude and the award becomes final in               c
      terms of the provisions of the new Act. All the rights,
      obligations and remedies of the parties would now be
      governed by the new Act including the right to challenge
      the award. The court to which the party shall have recourse
      to challenge the award would be the court as defined in
                                                                        D
      clause (e) of Section 2 of the new Act and not the court to
      which an application under Section 8 of the new Act is
      made. An application before a court under Section 8
      merely brings to the court's notice that the subject-matter
      of the action before it is the subject-matter of an arbitration
      agreement. This would not be such an application as               E
      contemplated under Section 42 of the Act as the court
      trying the action may or may not have·had jurisdiction to
      try the suit to start with or be the competent court within
      the meaning of Section 2(e) of the new Act."
                                                                        F
     21. This judgment was not even brought to the notice of
the Court in N. Radhakrishnan (supra). In my opinion, judgment
in N. Radhakrishnan (supra) is per incuriam on two grounds:
Firstly, the judgment in Hindustan Petroleum Corpn. Ltd.
(supra) though referred has not been distinguished but at the           G
same time is not followed also. The judgment in P. Anand
Gajapathi Raju & Ors. (supra) was not even brought to the
notice of this Court. Therefore, the same has neither been
followed nor considered. Secondly, the provision contained in
5.   (2000) 4 sec 539.                                                  H
    534      SUPREME COURT REPORTS                    [2014] 6 S.C.R.


A   Section 16 of the Arbitration Act, 1996 were also not brought
    to the notice by this Court. Therefore, in my opinion, the
    judgment in N. Radhakrishnan (supra) does not lay down the
    correct law and can not be relied upon.

       22. As noticed above, the attention of this Court was not
8
  drawn to the provision contained in Section 16 of the Arbitration
  Act, 1996 in the case of N. ·Radhakrishnan (supra). Section
  16 provides that the Arbitral Tribunal would be competent to rule
  on its own jurisdiction including ruling on any objection with
  regard to existence or validity of the arbitration agreement. The
C Arbitration Act emphasises that an arbitration clause which
  forms part of a contract shall be treated as an agreement
  independent of the other terms of the contract. It further
  provides that a decision by the Arbitral Tribunal that the contract
  is null and void shall not entail ipso jure the invalidity of the
D arbitration clause. The aforesaid provision came up for ,
  consideration by this Court in Today Homes & Infrastructure
  Pvt. Ltd. Vs. Ludhiana Improvement Trust & An~.

       23. In the aforesaid case, the designated Judge of the
E Punjab & Haryana High Court had refused to refer the disputes ·
  to arbitration. The High Court had accepted the plea that since
  the underlying contract was void, the arbitration clause perished .
  with it. The judgment of the High Court was challenged in this
  Court, by filing a Special Leave Petition. Before this Court it
F was submitted by the appellant that the High Court treated the
  application under Section 11 (6) of the Arbitration Act as if it
  was deciding a suit but without adducing evidence. Relying on
  SBP & Co. Vs. Patel Engineering Ltd., it was submitted that
  the High Court was only required to conduct a preliminary
G enquiry as to whether there was a valid arbitration agreement;
  o~ whether it was a stale claim. On the other hand, it was
  submitted by the respondents that once the High Court had
  found the main agreement to be void, the contents thereof
  including the arbitration clause are also rendered void.
H 6. 2013 (7) SCALE 327: 2013 (2) Arb. LR 241 (SC).
   SWlSS TIMING LTD. v. ORGANISING COMMITTEE,                535
 COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

    24. This Court rejected the aforesaid submission of the          A
respondents with the following observations :

    "13. We have carefully considered the submissions made
    on behalf of the respective parties and we are of the view
    that the learned designated Judge exceeded the bounds            B
    of his jurisdiction, as envisaged in SBP & Co. (supra). In
    our view, the learned designated Judge was not required
    to undertake a detailed scrutiny of the merits and de-
    merits of the case, almost as if he was deciding a suit. The
    learned Judge was only required to decide such                   C
    preliminary issues such as jurisdiction to entertain the
    application, the existence of a valid arbitration agreement,
    whether a live claim existed or not, for the purpose of
    appointment of an arbitrator. By the impugned order, much
    more than what is contemplated under Section 11 (6) of the
    1996 Act was sought to be decided, without any evidence          D
    being adduced by the parties. The issue regarding the
    continued existence of the arbitration agreement,
    notwithstanding the main agreement itself being declared
    void, was considered by the 7-Judge Bench in SBP & Co.
    (supra) and it was held that an arbitration agreement could      E
    stand independent of the main agreement and did not
    necessarily become otiose, even if the main agreement,
    of which it is a part, is declared void.

    14. The same reasoning was adopted by a member of this           F
    Bench (S.S. Nijjar, J.), while deciding the case of Reva
    Electric Car Company Private Limited Vs. Green Mobil
    [(2012) 2 SCC 93], wherein the provisions of Section 16(1)
    in the backdrop of the doctrine of kompetenz kompetenz
    were considered and it was inter alia held that under            G
    Section 16(1 ), the legislature makes it clear that while
    considering any objection with regard to the existence or
    validity of the arbitration agreement, the arbitration clause,
    which formed part of the contract, had to be treated as an
    agreement independent of.the other terms of the contract.
                                                                     H
    536        SUPREME COURT REPORTS                  [2014] 6 S.C.R.


A         Reference was made in the said judgment to the
          provisions of Section 16(1)(b) of the 1996 Act, which
          provides that even if the arbitral tribunal concludes that the
          contract is null and void, it should not result, as a matter of
          law, in an automatic invalidation of the arbitration clause.
8         It was also held that Section 16(1 )(a) of the 1996 Act
          presume~ the existence of a valid arbitration clause and
          mandates the same to be treated as an agreement
          independent of the other terms of the contract. By virtue
                                                 •
          of Section 16( 1)(b) of the 1996 Act, the arbitration clause
c         continues to be enforceable, notwithstanding a declaration
          that the contract was null and void.

         25. Keeping in view the aforesaid observations made by
   this Court, I see no reason to accept the submission made by
   the learned counsel for the respondents that since a criminal
0
   case has been registered against the Chairman of the
  .Organising Committee and some other officials of the
   petitioner, this Court would have no jurisdiction to make a
   reference to arbitration.

E       26. As noticed above, the concept of separability of the
  arbitration clause/agreement from the underlying contract has
  been statutorily recognised by this country under Section 16 of
  the Arbitration Act, 1996. Having provided for resolution of
  disputes through arbitration, parties can not be permitted to
F avoid arbitration, without satisfying the Court that it will be just
  and in the interest of all the parties not to proceed with the
  arbitration. Section 5 of the Arbitration Act provides that the
  Court shall not intervene in the arbitration process except in
  accordance with the provisions contained in Part I of the
G Arbitration Act. This policy of least interference in arbitration
  proceedings recognises the general principle that the function/
  of Courts in matters relating to arbitration is to support
  arbitration process. A conjoint reading of Section 5 and Section
  16 would make it clear that all matters including the issue as
H to whether the main contract was void/voidable can be referred
    SWISS TIMING LTD. v. ORGANISING COMMITTEE,                537
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

to arbitration. Otherwise, it would be a handy tool available to     A
the unscrupulous parties to avoid arbitration, by raising the
bogey of the underlying contract being void.

     27. I am of the opinion that whenever a plea is taken to
avoid arbitration on the ground that the underlying contract is
                                                                     B
void, the Court is required to ascertain the true nature of the
defence. Often, the terms "void' and "voidable" are confused
and used loosely and interchangeably with each other.
Therefore, the Court ought to examine the plea by keeping in
mind the relevant statutory provisions in the Indian Contract Act,
1872, defining the terms "void' and "voidable". Section 2, the       C
interpretation clause defines some of the relevant terms as
follows:-

      "2(g) An agreement not enforceable by law is said to be
            void;                                                    D

      2(h) An agreement enforceable by law is a contract;

      2(i)   An agreement which is enforceable by law at the
             option of one or more of the parties thereto, but not
             at the option of the other or others, is a voidable     E
             contract;

      20)    A contract which ceases to be enforceable by law
             becomes void when it ceases to be enforceable."
                                                                     F
     The aforesaid clauses clearly delineate and differentiate
between term "void" and "voidable". Section 2(j) cl.early
provides as to when a voidable contract would reach the stage
of being void. Undoubtedly, in cases, where the Court can
CO!Jle to a conclusion that the contract is void without receiving
any evidence, it would be justified in declining reference to        s
arbitration but such cases would be few and isolated. These
would be cases where the Court can readily conclude that the
contract is void upon a meaningful reading of the contract
document itself. Some examples of where a contract may fall
in this category would be :-
             538         SUPREME COURT REPORTS               [2014] 6 S.C.R.


         A         (a)    Where a contract is entered into by a person, who
                          has not attained the age of majority (Section 11 );

                   (b)    Where both the parties are under a mistake as to
                          a matter of fact essential to the agreement (Section
                          19);
         B
                   (c)    Where the consideration or object of the contract
                          is forbidden. by law or is of such a nature that, if
                          permitted, it would defeat the provisions of any law
                          or where the object of the contract is to indulge in
         c                any immoral activity or would be opposed to public
                          policy. Glaring examples of this would be where a
                          contract is entered into between the parties for
                          running a prostitution racket, smuggling drugs,
                          human trafficking and any other activities falling in
         D                that category.

                   (d)    Similarly, Section 30 renders wagering contracts as
                          void. The only exception to this is betting on horse
                          racing. In the circumstances noted above, it may not
                          be necessary for the Court to take any further
         E
                          evidence. apart from reading the contract document
                          itself. Therefore, whilst exercising jurisdiction under
                          Section 11 (6) of the Arbitration Act, the Court could
                          decline to make a reference to arbitration as the
                          contract would be patently void.
         F
                28. However, it would not be possible to shut out arbitration
           even in cases where the defence taken is that the contract is
           voidable. These would be cases which are covered under the
           circumstances narrated in Section 12 - unsoundness of mind;
         G Section 14 - absence of free consent, i.e. where the consent
           is said to be vitiated as it was obtained by Coercion (Section
           15), Undue Influence (Section 16), Fraud (Section 17) or
           Misrepresentation (Section 18). Such a contract will only
           become void when the party claiming lack of free consent is
         H


... ·"
     SWISS TIMING LTD. v. ORGANISING COMMITTEE,               539
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

able to prove the same and thus rendering contract void. This         A
indeed is the provision contained in Section 2(j) of the Indian
Contract Act. In exercising powers under Section 11 (6) of the
Arbitration Act, the Court has to keep in view the provisions
contained in Section 8 of the Arbitration Act, which provides
that a reference to arbitration shall be made if a party applies      B
not later than when submitting his first statement on the
substance of the dispute. In contrast, Section 45 of the
aforesaid Act permits the Court to decline reference to
arbitration in case the Court finds that the agreement is null
and void, inoperative or incapable of being performed.                c
     29. To shut out arbitration at the initial stage would destroy
the very purpose for which the parties had entered into
arbitration. Furthermore, •there is no inherent risk of prejudice
to any of the parties in permitting arbitration to proceed
simultaneously to the criminal proceedings. In an eventuality         D
w~e ultimately an award is rendered by arbitral tribunal, and
the criminal proceedings result in conviction h!ndering the
underlying contract void, necessary plea can be taken on the
basis of the conviction to r~sist the execution/enforcement of
the award. Conversely, if the matter is not referred to arbitration   E
and the criminal proceedings result in an acquittal and thus
leaving little or no ground for claiming that the underlying
contract is void or voidable, it would have the wholly undesirable
result of delaying the arbitration. Therefore, I am of the opinion
that the Court ought to act with caution and circumspection           F
whilst examining the plea that the main contract is void or
voidable. The Court ought to decline reference to arbitration
only where the Court can reach the conclusion that the contract
is void on a meaningful reading of the contract document itself
without the requirement of any further proof.                         G

     30. In the present case, it is pleaded that the manner in
which the contract was made between the petitioner and the
respondent was investigated by the CBI. As a part of the
investigation, the CBI had seized all the original documents and
                                                                      H
    540      SUPREME COURT REPORTS                  [2014] 6 S.C.R.


A the record from the office of the respondent. After investigation,
  the criminal case CC No.22 of 2011 has been registered, as
  noticed earlier. It is claimed that in the event the Chairman of
  the Organising Committee and the other officials who
  manipulated the grant of contract in favour of the respondent
B are found guilty in the criminal trial, no amount would be payable
  to the petitioner. Therefore, it would be appropriate to await the
  decision of the criminal proceedings before the arbitral tribunal
  is constituted to go into the alleged disputes between the
  parties. I am unable to accept the aforesaid submission made
c by the learned counsel for the respondents, for the reasons
  stated in the previous paragraphs. The balance of convenience
  is tilted more in favour of permitting the arbitration proceedings
  to continue rather than to bring the same to a grinding halt.

        31. ~must also notice here that the defence of the contract
D being void is now-a-days taken routinely along with the other
  usual grounds, to avoid/delay reference to arbitration. In my
  opinion, such ground needs to be summarily rejected unless
  there is clear indication that the defence has a reasonable
  G)lance of success. In the present case, the plea was never'.
E taken till the present petition was filed in this Court. Earlier, the
  respondents were only impressing upon the petitioners to
  supply certain information. Therefore, it would be appropriate,
  let the Arbitral Tribunal examine whether there is any substance
  in the plea of fraud now sought to be raised by the respondents.
F
       32. The Respondent also relied on the judgment of this
  Court in India Household and Healthcare Ltd. (supra), wherein
  the application under section 11 (6) of the Arbitration Act was
  dismissed. This case, however, will not come in the way of
G referring the matter to arbitration since it is clearly
  distinguishable from the present case. In India Household and
  Healthcare Ltd. (supra), the substantive/underlying contract
  containing the arbitration clause was entered into by the parties
  on 08.05.2004. This agreement, however, was preceded by a
H Memorandum of Understanding ("MoU") dated 1.11.2003. It
    SWISS TIMING LTD. v. ORGANISING COMMITTEE,               541
  COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

was contended by the Respondent that both the Agreement and A
the MoU are vitiated by fraud which was fructified by a criminal
conspiracy hatched between officials representing the Petitioner
and Respondent therein. This Court also noticed that the
concerned officials of the Respondent had been convicted and
sentenced to undergo imprisonment by the Korean Criminal B
Court. Th.e said MoU was also contended by the Respondent
to be in contravention of the laws of Korea. It was further
noticed that the Respond~nt filed a suit in the Madras High
Court against the Petitioner, whereby the High Court vide
interim order dated 06.10.2005 issued an injunction and c
thereby restrained the Petitioner therein to act directly or
indirectly on the basis of MoU and the Agreement dated
08.05.2004, and to derive any other benefit based upon the said
MoU and the license agreement in any manner whatsoever.
This interim order, the court noticed, was confirmed by an order
                                                                     0
datel:I 21.01.2006; against which no appeal was filed by the
Petitioner. The Court, relying upon A Treatise on Law
Governing Injunctions by Spelling and Lewis, concluded that ·
this injunction order having not been challenged by the
Petitioner has become final and also that this order restrains
the invocation of the arbitration agreement contained in E
Agreement dated 08.05.2004. Therefore, the Court declined to
refer the matter to arbitration. Another factor that weighed with
Court in dismissing the Petition, it appears, is that the Petitioner
did not conform to the procedure concerning appointment of
the Arbitrator before filing the Petition under Section 11 (6).      F

     33. This case is clearly distinguishable and hence is not
applicable into the facts and circumstances of the present case
because of the following reasons: Firstly, there has been no
conviction in the present case, though the trial has been going     G
on against the officials of both the parties. Secondly, there is
no injunction or any other order restraining the Petitioner from
invoking the Arbitration Clause. Lastly, all the conditions
precedent for invoking the arbitration clause have been satisfied
by the Petitioner, as observed earlier.                             H
    542        SUPREME COURT REPORTS                  [2014) 6 S.C.R.


A      34. The respondent had relied on the judgment of this Court
  in Guru Granth Saheb Sthan Meerghat Vanaras Vs. Ved
  Prakash & Ors7. This judgment reiterates the normal rule which
  was stated by the Constitution Bench of this Court in M. S. Sheriff
  Vs. State of Madras in relation to the simultaneous prosecution
B of the criminal proceeding with the civil suit. In the aforesaid
  case, the Constitution Bench had observed as follows:-

          "14 .... It was said that the simultaneous prosecution of
          these matters will embarrass the accused .... but we can
          see that the simultaneous prosecution of the present
c         criminal proceedings out of which this appeal arises and
          the civil suits will embarrass the accused. We have
          therefore to determine which should be stayed.

          15. As between the civil and the criminal ·proceedings we
D         are of the opinion that the criminal matters should be given
          precedence. There is some difference of opinion in the
          High Courts of India on this point. No hard-and-fast rule can
          be laid down but we do not consider that the possibility of
          conflicting decisions in the civil and criminal courts is a
E         relevant consideration. The law envisages ~uch an
          eventuality when it expressly refrains from making the
          decision of one court binding on the other, or even reievant,
          except for certain limited purposes, such as sentence or
          damages. The only relevant consideration here is the
          likelihood of embarrassment.
F
          16. Another factor which weighs with us is that a civil suit
          often drags on for years and it is undesirable that a criminal
          prosecution should wait till everybody concerned has
          forgotten all about the crime. The public interests demand
G         that criminal justice should be swift and sure; that the guilty
          should be punished while the events are still fresh in the
          public mind and that the innocent should be absolved as
          early as is consistent with a fair and impartial trial. Another

H 7.   (2013) 7 sec 762
     SWISS TIMING LTD. v. ORGANISING COMMITTEE,                543
   COMMONWEALTH GAMES [SURINDER SINGH NIJJAR, J.]

      reason is that it is undesirable to let things slide till        A
      memories have grown too dim to trust.
      This, however, is not a hard-and-fast rule. Special
      considerations obtaining in any particular case might
      make some other course more expedient and just. For
      example, the civil case or the other criminal proceeding         B
      may be so near its end as·to make it inexpedient to stay
      it in order to· give precedence to a prosecution ordered
      under Section 4 76. But in this case we are of the view that
      the civil suits should be stayed till the criminal proceedings
      have finished."                                                  C
        35. The purpose of the aforesaid solitary rule is to avoid
  embarrassment to the accused. In contrast, the findings
  recorded by the arbitral tribunal in its award would not be
  binding in criminal proceedings. Even otherwise, the
                                                                       0
  Constitution Bench in the aforesaid case has clearly held that
  no hard and fast rule can be laid down that civil proceedings
  in all matters ought to be stayed when criminal proceedings are
  also pending. As I have indicated earlier in case the award is
  made in favour of the petitioner herein, the respondents will be
  at liberty to resist the enforcement of the same on the ground       E
. of subsequent conviction of either the Chairman or the officials
  of the contracting parties.
      36. It must also notice here that the Petitioners relied upon
 an earlier order of this court in the case of Mis Nussli
                                                                       F
 (Switzerland) Ltd. (supra). The aforesaid order, however, seems
 to have been passed on a consensus between the learned
 counsel for the parties. This is evident from the following
 observations in the aforesaid order:
     "In view 'of the aforesaid order, learned senior counsel for      G
     both the parties have agreed that the parties have agreed
     that the matter ought to be referred to Arbitration. However,
     Mr. Gopal Subramaniam, learned senior counsel
     appearing for the Respondent, submits that serious issued
     would arise which are currently under investigation of the        H
    544        SUPREME COURT REPORTS                    [2014) 6 S.C.R.


A         CBI, which may ultimately culminate into certain
          c'onclusions which could result in the invalidation of the
          contract from inception.
          He has, however, very fairly stated that there would be no
          impediment for the arbitral Tribunal to look into all the
B         issues including the allegations which are pending with the
          CBI in ir)Vestigation.
          I am of the opinion that the submission made by the
          learned senior counsel is in accordance with the law
          settled, not only by this Court, but in other jurisdictions also ,
c
          concerning the international commercial arbitrations." ·
        The aforesaid excerpt clearly shows that Mr. Gopal
    Subramaniam, had very fairly agreed to proceed with
    arbitration. The. decision of this Court in Mis Nussli
o   (Switzerland) Ltd. (supra) has not laid down any law.
       37. As noticed earlier, the petitioners have already
  nominated Hon'ble Mr. Justice S.N. Variava, Former Judge of
  this Court, having his office at Readymoney Mansion, 2nd floor,
  Next to Akbarallys, Veer Nariman Road, Fort, Mumbai - 400
E 001, as their arbitrator. I hereby nominate. Hon'ble Mr. Justice
  B.P. Singh, Former Judge of this Court, R/o A-7, Neeti Bagh,
  3rd Floor, New Delhi - 110 049, as the second Arbitrator and
  Hon'be Mr. Justice Kuldip Singh, Former Judge of this Court,
  R/o H.No. 88, Sector 10A, Chandigarh - 160 010, as the
F Chairman of the Arbitral Tribunal, to adjudicate the disputes that
  have arisen between the parties, on such terms and conditions ·
  as they deem fit and proper.          ·
       38. The Registry is directed to communicate this order to
  the Chairman of the Arbitral Tribunal, as well as, to the Second
G Arbitrator to enable them to enter upon the reference and decide
  the matter as expeditiously as possible.
        39. The Arbitration Petition is accordingly allowed with no
    order as to costs.
H Nidhi Jain                                     Arbitration petition allowed.