Does Allegations Of Fraud Vitiate Arbitration Agreement

Whether the allegations of fraud would vitiate the arbitration agreement, and what would be the measure of damages in case of contract entered into on the basis of fraud or misrepresentations, are the issues answered by the Honw'ble Supreme Court of India in its recent judgment in the case of Avitel Post Studioz Ltd. & Ors. Versus HSBC PI Holdings (Mauritius) Ltd¹.

Brief facts of the case

• The HSBC PI Holdings (Mauritius) Ltd ("HSBC") entered into a Share Subscription Agreement dated 21.04.2011 ("SSA") and a Shareholder Agreement dated 6.05.2011 ("SHA") with an Indian company namely Avitel Post Studioz Ltd. ("Avitel India") for acquiring 7.8% of paid-up capital of Avitel India for a total consideration of USD 60 million. The SHA was executed for the purpose of defining the relationship between the parties after execution of the SSA. Both these agreements had identical dispute resolution clauses providing for settlement of disputes through arbitration to be