In Brief
This landmark Supreme Court judgment addresses the arbitrability of disputes involving fraud allegations in commercial contracts. HSBC invested USD 60 million in Avitel India based on representations about a BBC contract that turned out to be false. The Court held that mere allegations of fraud do not render a dispute non-arbitrable. Only 'serious fraud' that permeates the entire contract, including the arbitration clause itself, or affects the public domain excludes arbitration. An arbitration clause is an independent agreement capable of surviving fraud findings against the main contract. The Court upheld the foreign arbitral award finding fraudulent misrepresentation and awarded HSBC USD 60 million plus interest. Notably, the judgment clarified that civil and criminal proceedings can run simultaneously, and criminal failure doesn't affect civil arbitrability. The measure of damages for fraudulent misrepresentation is the actual loss flowing from the transaction, not merely share-value difference."
The lawyer headnote and full judgment text are available to registered users.