The Bombay High Court ruled that Disputes can be referred to arbitration even if there is fraud that has been played between contractual parties.
The present application is filed under Section 11 of the Arbitration and Conciliation Act, 1996 seeking the appointment of a Sole Arbitrator to adjudicate upon the disputes and differences between the Applicant and the Respondent arising out of the Service Level Agreement (“SLA”) dated 3rd May, 2014. The Arbitration Agreement between the parties can be found at Clause 21 of the SLA.
Advocate Kapadia contended that the SLA is dated 3rd May, 2014 and hence the period of three years came to an end on 2nd May, 2017. However, the claim of the Applicant is in relation to the services rendered and invoices raised for the period after 2nd May, 2017.
The single judge bench of Justice B. P. Colabawalla noted that it is the case of the Respondent themselves that the alleged fraud is that the former employees of the Respondent (in connivance with the Applicant) continued to avail of the services of the Applicant beyond the expiry of the SLA merely to siphon off the funds of the Respondent unlawfully.
The court stated that the Respondent availed of the services of the Applicant even after the expiry of the term of 3 years. The contract itself contemplates that the same can be extended. According to the Applicant, by availing the services of the Applicant, the Respondent by its conduct extended the term of the SLA.
The court ordered that by consent of parties, Mikhail Behl, an advocate of the Court is hereby appointed to act as a Sole Arbitrator to decide the disputes and differences between the Applicant and the Respondent arising out of and/or in connection with and/or in relation to the Service Level Agreement dated 3rd May, 2014.
The court further ordered that the parties immediately consent to a further extension of up to six months to complete the Arbitration should the Sole Arbitrator find it necessary.
“The Respondent is at liberty to raise all questions of jurisdiction within the meaning of Section 16 of the Arbitration Act. All contentions in that regard are expressly kept open on both sides. It is made clear that any observations made by me herein are only prima facie and tentative and shall not bind the Arbitral Tribunal while deciding any issue of jurisdiction. It is however made clear that the Respondent shall not be allowed to contend before the Arbitral Tribunal that there does not exist an Arbitration Agreement as the same has been expressly admitted before me today”, the court added.
Case title: One Point One Solutions Ltd v/s Reliance Nippon Life Insurance Company Ltd
Citation: COMMERCIAL ARBITRATION APPLICATION NO. 96 OF 2021