M/S Greenfinch Team Management vs. M/S Bundl Technologies PVT LTD

Facts

M/s Greenfinch Team Management Pvt Ltd. (Petitioner) filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of a retired High Court Judge as a sole arbitrator to adjudicate disputes with M/s Bundl Technologies Pvt Ltd. (Respondent). The parties had entered into a Master Services Agreement dated 11.04.2019, which contained an arbitration clause. The Petitioner invoked the arbitration clause via a legal notice dated 29.12.2020. The Respondent rejected the request, contending that no services were availed and no amounts were payable, and further alleged that the Petitioner had engaged in fraud with GST authorities, which had initiated action against the Petitioner. The Petitioner argued that the existence of a dispute necessitated arbitration.

Held

The Court held that the alleged fraud involving GST authorities, as contended by the Respondent, is not a valid reason to deny arbitration between the Petitioner and Respondent. The Court reasoned that the alleged fraud was concerning a third party (GST authorities) and not the validity of the agreement between the Petitioner and Respondent. Therefore, the decision in A. Ayyasamy v. Paramasivam was not applicable, as that case dealt with fraud going to the root of the contract itself, thereby negating the arbitration clause. The Court found no impediment to the appointment of an arbitrator. The Respondent stated they had no objection to the appointment of the Petitioner's nominee as the sole arbitrator. Accordingly, the Court appointed Sri. P. Vishwanath Shetty, Former Judge of the High Court, as the sole arbitrator. The Court explicitly stated that it had not expressed any opinion on the merits of the matter, and all issues and contentions were left open for the arbitrator to decide. The arbitration was to be conducted under the aegis of the Bangalore Arbitration Centre.

Key Issues

1. Whether the alleged fraud involving GST authorities, as contended by the Respondent, is a valid ground to deny the appointment of an arbitrator for disputes between the Petitioner and Respondent, and if so, under which provision of law? The Petitioner argued that the existence of a dispute between the parties is undeniable and therefore, the matter must be referred to arbitration as per the agreement. The Respondent argued that the Petitioner's alleged involvement in fraud with GST authorities, for which notices were issued by the GST authorities, precludes the matter from being referred to arbitration. The Respondent relied on the Supreme Court decision in A. Ayyasamy v. Paramasivam, [(2016) 10 SCC 386], to contend that matters involving fraud touching upon the public domain cannot be referred to arbitration.