In Brief
HSBC invested USD 60 million in Avitel India based on alleged false representations about a BBC contract. When the BBC contract proved non-existent and funds were allegedly diverted, HSBC initiated arbitration in Singapore. The Singapore arbitral tribunal found fraudulent misrepresentation and awarded USD 60 million damages. In enforcement proceedings before Indian courts, Avitel claimed the fraud allegations rendered the dispute non-arbitrable under Indian law. The Supreme Court held that mere fraud allegations do not exclude arbitrability; only serious fraud vitiating the arbitration clause itself or fraud with public-law dimensions does. The Court clarified that civil claims for fraudulent misrepresentation are arbitrable even where criminal proceedings exist on similar facts. Damages for fraudulent inducement should fully compensate the victim for actual loss, not merely market differential. The Court upheld HSBC's strong prima facie case and ordered USD 60 million to be kept in escrow.",
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