Chy v Cia

• Jurisdiction: Singapore
• Judge: Sir Vivian Ramsey IJ
• Judgment Date: 11 February 2022
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1 of 2021 (Summons No 5567 of 2020)

CHY and another

and

CIA

[2022] SGHC(I) 3

Sir Vivian Ramsey IJ

Originating Summons No 1 of 2021 (Summons No 5567 of 2020)

Singapore International Commercial Court

Arbitration — Award — Recourse against award — Setting aside — Arbitral award contemplating performance of contract which allegedly breached foreign law — Whether arbitral award in conflict with public policy of Singapore because it allegedly compelled parties to perform illegal act punishable by criminal sanctions in foreign state — Article 34(2)(b)(ii) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Award — Recourse against award — Setting aside — Arbitral award contemplating performance of contract which allegedly breached foreign law — Whether court entitled to reopen findings of fact and/or law made by arbitral tribunal — Article 34(2)(b)(ii) UNCITRAL Model Law on International Commercial Arbitration

Held, dismissing the application and striking out the plaintiffs' expert evidence in Indian law:

(1) On an application to set aside an award under Art 34(2)(b)(ii), the court could reopen findings of law but, in the absence of fraud and other vitiating factors, the court could not reopen findings of fact made by the arbitral tribunal: at [36].

(2) In this case, the relevant findings were findings of fact. The relevant agreements were governed by Indian law and not by Singapore law. The findings of fact and findings of Indian law made by the Tribunal were all findings of fact and could not be opened up on this Application: at [40] and [44].

(3) On those findings of fact and Indian law, the Tribunal held that the terms of the SHA and the Letter Agreement did not give rise to a violation of the FEMA Regulations. The failure on the part of the plaintiffs to procure a third party purchaser and their repudiation of their obligation to do so constituted a clear breach with consequences as to damages. Accordingly, the court could not reopen those findings of fact and there was no basis on which the plaintiffs could challenge the Award because the terms of the SHA and Letter Agreement were a violation of FEMA Regulations so that enforcement of an illegal contract would be in conflict with the public policy of Singapore: at [50] and [51].

(4) The plaintiffs' submission that the award of damages requiring them to pay the Put Price as damages and, upon receipt, to direct a transfer of shares was effectively payment of assured returns and would be a breach of the FEMA Regulations and unlawful under Indian law again sought to open up the findings of fact by the Tribunal under Indian law. That analysis required, first, consideration of whether in the Arbitration, the plaintiffs raised the point that an award by the Tribunal of damages amounting to the Put Price and the transfer of shares would be contrary to FEMA. During the Arbitration, the plaintiffs made it clear that on payment of damages in favour of the defendant, there would be a transfer of shares as part of the Award and did not object that such an award would be contrary to the FEMA Regulations. The plaintiffs could not therefore open up that finding which proceeded on the basis that there was no objection. If, in fact, they had objected, the decision of the Tribunal to the contrary would have been a finding of fact which could not be opened up on this Application: at [52] to [55].

(5) The Tribunal was referred to the relevant Indian law concerning the impact of FEMA on an award of damages and made its finding of damages based on that. It was clear that the Tribunal made its findings on the basis of submissions on Indian law in which the cases cited were also authorities cited to the court in relation to the contention that the award of damages and transfer of shares was contrary to FEMA: at [56] to [61].

(6) It became clear that the plaintiffs' complaint was essentially that the Tribunal had assessed damages wrongly and had not taken mitigation into account. The plaintiffs were in fact challenging the Award on findings of fact including Indian law by seeking to open up the way in which the Tribunal had assessed damages and/or had dealt with mitigation. As the award of damages by the Tribunal was made on the basis of submissions of Indian law, the court could not open up such findings of facts. Even if there had been a finding of law, the court would be entitled to assume that the arbitrators appointed were of undoubted competence and ability: at [62] to [65].

(7) The plaintiffs' challenge to the Award on the basis that, in arriving at its award of damages, the Tribunal ignored the requirement of proof of loss for the grant of damages under s 73 of the Indian Contract Act 1872 (Act No 9 of 1872) (India) failed because it was also a finding of fact which could not be opened up: at [66] to [68].

(8) Even if the court could review the Tribunal's findings on Indian law and came to a contrary view on the findings, there was no palpable and indisputable illegality. There was no element of corruption or illicit practice. This would still not have engaged the public policy of Singapore so that the Award would have been set aside under Art 34(2)(b)(ii) of the Model Law: at [69] to [76].

(9) The defendant's application to strike out the plaintiffs' expert evidence on Indian law was allowed. Given that it was not appropriate for the court to open up findings of the Tribunal on Indian law, the opinions on Indian law were irrelevant: at [77] to [79].

[Observation: The court noted that the Privy Council, in Betamax Ltd v State Trading Corp (Mauritius)[2021] UKPC 14, interpreted the Court of Appeal's decision in AJU v AJT[2011] 4 SLR 739 as holding that “in the absence of fraud or other vitiating factors … a decision of fact or law within the jurisdiction of the arbitral tribunal was final and binding”. The court left it to the Court of Appeal in a case where it did arise, to decide whether findings of law could be reopened by the court or whether the only possibility of reopening findings arose in exceptional cases: at [40].]

Case(s) referred to

AJU v AJT [2011] 4 SLR 739 (folld)

AKN v ALC [2015] 3 SLR 488 (refd)

BBA v BAZ [2020] 2 SLR 453 (refd)

Betamax Ltd v State Trading Corp (Mauritius) [2021] UKPC 14 (refd)

CBX v CBZ [2020] 5 SLR 184 (refd)

CEB v CEC [2020] 4 SLR 183 (refd)

Cruz City 1 Mauritius Holdings v Unitech Ltd (2017) 3 Arb LR 20 (Delhi) (refd)

Finelvet AG v Vinava Shipping Co Ltd (The Chrysalis) [1983] 1 WLR 1469 (refd)

Gokul Patnaik v Nine Rivers Capital Ltd [2021] 3 SLR 22 (refd)

NTT Docomo Inc v Tata Sons Ltd (2017) SCC OnLine Del 8078 (refd)

Omnium de Traitement et de Valorisation SA v Hilmarton Ltd [1999] 2 Lloyd's Rep 222 (refd)

PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597; [2007] 1 SLR 597 (refd)

Soleimany v Soleimany [1999] QB 785 (refd)

Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd [1999] QB 740, HC (Eng) (refd)

Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd [2000] QB 288, CA (Eng) (refd)

Facts

In or around 2010, the defendant, CIA, agreed to invest in the plaintiffs, CHY and CHZ, companies incorporated under the laws of India. The first plaintiff was a majority shareholder in the second plaintiff. The defendant and the plaintiffs (the “Parties”) entered into a number of agreements pursuant to which the defendant acquired a total of 1,340,000 shares in the second plaintiff. These agreements included a shareholders agreement (the “SHA”) and a letter of agreement between the first plaintiff and the defendant (the “Letter Agreement”).

Clause 10.1 of the SHA obliged the plaintiffs to list the second plaintiff on the Bombay Stock Exchange (“BSE”) or the National Stock Exchange (“NSE”) or to make a public offer of the second plaintiff's shares on those exchanges by 30 June 2012. If the plaintiffs failed to comply with cl 10.1, this would give rise to the defendant's right (the “Put Right”) under cll 11.1 and 11.2 to “require [the first plaintiff], if legally able or otherwise to arrange a third party, to purchase, at the option of [the defendant], all or a portion of [the defendant's shares in the second plaintiff]” at the “Put Price” (ie, the “Put Option”).

By 30 June 2012, the second plaintiff's shares had not been listed on the BSE or NSE and no public offer had been made for the sale of the shares on the said exchanges. After some failed negotiations, the defendant informed the first plaintiff that it would be exercising the Put Option by way of a notice (the “Put Notice”). The first plaintiff responded that it would not recognise or act on the Put Notice for various reasons, including that the Put Option was contrary to Indian law.

The defendant commenced the underlying arbitration (the “Arbitration”). In a final award dated 19 June 2020 made under the auspices of the International Chamber of Commerce (the “Award”), the majority of the arbitral tribunal (the “Tribunal”) held that the first plaintiff had wrongfully challenged the validity and enforceability of the Put Option and wrongfully refused and/or failed to complete the acquisition of the Put Shares. The Tribunal made orders requiring the plaintiffs to pay damages to the defendant and, on payment, for the defendant to transfer its shares in the second plaintiff to the first plaintiff or a party specified by the first plaintiff. The dissenting member of the Tribunal found that the Put Option was invalid and unenforceable under regulations made under India's Foreign Exchange Management Act 1999 (Act No 42 of 1999) (India) (the “FEMA Regulations” and “FEMA”, respectively).

The plaintiffs filed the present setting-aside application (the “Application”) under Art 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) on the basis that the Award was in conflict with the public policy of Singapore. The defendant also applied to strike out the plaintiffs' expert evidence in Indian law.

Legislation...