Delhi HC Agrees to Examine Defence Ministry's Plea on Arbitration Proceedings with AgustaWestland
(Source: Press Trust of India; published Jan 09, 2019)
NEW DELHI --- The Delhi High Court Wednesday agreed to examine a plea by the Union government seeking to restrain Anglo-Italian firm AgustaWestland from continuing with the arbitration process initiated by it in the wake of scrapping of contracts for supply of 12 VVIP choppers to the Indian Air Force.

The Centre said the arbitration proceedings cannot continue as several criminal cases were pending against AgustaWestland and recently British national Christian Michel James, an alleged middleman in the deal, has been extradited from Dubai and is lodged in Tihar jail.

Justice Prathiba M Singh issued notice to AgustaWestland on the plea filed by the Ministry of Defence and asked the company to file its reply within three weeks.

The high court, however, said that at this stage, no injunction order can be passed as it has not seen the arbitral record and none of the orders passed by the arbitral tribunal has been placed before it.

The matter has been posted for next hearing on February 28.

"The court has not seen the claims raised, nature of objections raised as also the material placed before the arbitral tribunal. Insofar as the allegations of fraud, corruption, and bribery are concerned, which have been raised in the present case, the defendant (firm) has also not been heard," the court said in an interim order.

AgustaWestland had invoked the arbitration clause in the contract for supplying 12 VVIP choppers to the Indian Air Force after the deal was scrapped in 2014.

The arbitration is pending before a tribunal comprising Prof. William W Park, Justice (retd) B N Srikrishna and Justice (retd) B P Jeevan Reddy.

During the hearing, Additional Solicitor General Pinky Anand, appearing for the ministry, argued there were several criminal proceedings going on against AgustaWestland and sought an injunction on the arbitration.

Anand submitted that Christian Michel James, an alleged middleman in the case, was arrested on December 4 last year and an investigation was currently underway.

She said the dispute is the present case is non-arbitrable as per the laws of India because serious and substantiated allegations of corrupt practices, bribery and fraud are involved in the instant case.

"The arbitral tribunal is still continuing to adjudicate the present dispute which contains serious allegations of fraud, bribery and corruption, which in accordance with the law laid down by the Supreme Court of India is not-arbitrable," the ASG said.

Section 29A of the Act makes it mandatory to complete the proceedings within 12 months (additional 6 months, in some circumstances) from the date arbitral tribunal enters upon the reference.

The argument was opposed by senior advocate Arun Kathpalia, appearing for the company, who said the present case is not governed by the provisions of Section 29A of the Act, as the arbitral proceedings had commenced much prior to the Amendment Act of 2015 coming into force.

The court, however, said that Section 29A of the Act does not apply to arbitral proceedings commenced prior to the coming into force of the Amendment Act of 2015.

"Insofar as the question as to whether the contract which includes the arbitration agreement is vitiated by fraud, as also the allegations of bribery and corruption, are concerned, in order for this court to decide the said question, the nature of the claims raised by the defendant and the nature of objections and allegations raised by the Plaintiff need to be considered.

"The arbitral record is not before the court and the defendant has also not yet been given an opportunity to respond to the case set out by the plaintiff (ministry). Whether the arbitration agreement has been nullified would require to be determined after calling for a reply from the defendant," it said.

The high court said that the question as to whether the arbitration agreement stands invalid this case, due to the allegations of corruption and fraud, "cannot be rejected at this stage".

"However, for the said purpose, the court would require the parties to complete their pleadings in the application seeking interim injunction. The court would also like the Arbitral record to be placed before it," the high court said.

(EDITOR’S NOTE: The arbitration was requested by AgustaWestland after India in 2014 unilaterally pulled of a contract to buy 12 AW101 VIP helicopters for 560 million euros, claiming the Anglo-Italian company had paid bribes to win the contract.

Neither India’s Central Bureau of Investigations (CBI) not its Enforcement Directorate (ED, police) have ever been able to find any bribes, and their investigations are continuing.

The Italian judiciary prosecuted, on the strength of undocumented Indian bribery claims, two CEOs of AW who, after having appealed their initial conviction all the way to Italy’s supreme court (Corte di Cassazione) were ultimately fully acquitted on the grounds that “no offence was committed.”

AW’s arbitration aims to be cleared of all charges and to recover its 226-million euro the surety and performance bonds that the company had placed in escrow, and which the Indian government obtained when it canceled the contract.

Note that the contract was cancelled by India’s previous Congress Party government, which was voted out of power in May 2014.

Click here for our April 2015 overview of the AW scandal.)


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