In Kerala State Road Transport Corporation v. Varghese, (2003) 12 SCC 293, observing that recovery after retirement amounts to cut from retiral dues and causes irreparable loss and injury to a retired employee, as retirement dues are the only source of livelihood. Apex Court in the case of Ram Dayal Rai v. Jharkhand State Electricity Board, (2005) 3 SCC 501, held that even 5% cut out from the total amount of pension payable to the appellant was an irreparable loss and injury. Court in this case while dealing with a recovery due to overstay in official accommodation, had held:
“If the petitioner’s benefit is cut at 5% out of the total amount of pension payable to the appellant, the appellant will suffer an irreparable loss and injury since, after retirement, the pensionary benefit is the only amount available to eke out a livelihood for the retired employees of the Government.”
Similarly, recovery of an amount from the dues of deceased employee to which his widow is entitled, on the ground that he was paid an excess amount due to wrong fixation of pay cannot be justified after his death. Moreover, in the absence of any finding forthcoming that deceased employee was wrongly benefited for his representation and fraud, no such amount already paid is liable to be recovered. Savitri Pathak v. State of U.P., 2018 (2) AWC 3056.
Fraudulently obtained order of appointment or approval can be recalled by the authority concerned. In such cases, merely because the employee continued in service for a number of years, on the basis of fraudulently obtained order, cannot get any equity in his favour or any estoppels against the employer/authority. When appointment or approval has been obtained by a person on the basis of forged documents, it would amount to misrepresentation and fraud on the employer. It would create no equity in his favour or any estoppel against the employer to cancel such appointment or approval since “Fraud and justice never dwell together.” Committee of Management v. State of U.P., (2018) 1 UPLBEC 610.
Fraudulently obtained order of appointment or approval can be recalled by the authority concerned. In such cases merely because the employee continued in service for a number of years, on the basis of fraudulently obtained order, cannot get any equity in his favour or any estoppels against the employer/authority. When appointment or approval has been obtained by a person on the basis of forged documents, it would amount to misrepresentation and fraud on the employer. It would create no equity in his favour or any estoppels against the employer to cancel such appointment or approval since “Fraud and justice never dwell together”. Committee of Management v. State of U.P., (2018) 1 UPLBEC 610.
Corruption is antithesis of good governance and democratic politics. It is said, that when corruption is pervasive, it permeates every aspect of people’s lives. It can affect the air they breathe, the water they drink and the food they eat. Going further, some more terminology can also be given to different shades of corruption like, financial corruption, cultural corruption, moral corruption, idealogical corruption etc. The fact remains that from whatever angle it is looked into, the ultimate result borne out is that, and the real impact of corruption is, the poor suffers most, the poverty grows darker, and rich become more richer.
In Secretary, Jaipur Development Authority v. Daulat Mal Jain, (1997) 1 SCC 34 it was held as under:
“When satisfaction sought in the performance of duties is for mutual personal gain, the misuse is usually termed as ‘corruption’”.
In High Court of Judicature at Bombay v. Shirishkumar Rangrao Patil, (1997) 6 SCC 339, the court held:
“Corruption, appears to have spread everywhere. No facet of public function has been left unaffected by the putrefied stink of ‘corruption’. ‘Corruption’ thy name is depraved and degraded conduct…..In the widest connotation, ‘corruption’ includes improper or selfish exercise of power and influence attached to a public office.”
In B.R. Kapur v. State of T.N., (2001) 7 SCC 231, it was held:
“scope of ‘corruption’ in the governing structure has heightened opportunism and unscrupulousness among political parties, causing them to marry and divorce one another at will, seek opportunistic alliances and coalitions often without the popular mandate.”
In State of A.P. v. V. Vasudeva Rao, (2004) 9 SCC 319, the Hon’ble Court stated as under:
“The word ‘corruption’ has wide connotation and embraces almost all the spheres of our day-to-day life the world over. In a limited sense, it connotes allowing decisions and actions of a person to be influenced not by rights or wrongs of a cause, but by the prospects of monetary gains or other selfish considerations.” In the Matter of I.F.C.A.I. v. D.K. Agrawal F.C.A., 2017 (123) ALR 374.
“Fraud” is a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment. Fraud can be of different forms and hues. Its ingredients are an intention to deceive, use of unfair means, deliberated concealment of material facts, or abuse of position of confidence. The Black’s Law Dictionary defines “fraud” as a concealment or false representation through a statement or conduct that injures another who relies on it.
The issue of arbitrability of fraud has arisen on numerous occasions and there exist conflicting decisions of the Apex Court on this issue. While it has been held in Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra, (2012) 2 SCC 144 that when fraud is of such a nature that it vitiates the arbitration agreement, it is for the court to decide on the validity of the arbitration agreement by determining the issue of fraud, there exists two parallel lines of judgments on the issue of whether an issue of fraud is arbitrable. In this context, a two Judge Bench of the Supreme Court while adjudicating on an application under section 8 of the Arbitration and Conciliation Act, 1996 in N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72, held that an issue of fraud is not arbitrable. The decision was ostensibly based on the decision of the three Judge Bench of the Supreme Court in Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406. However, the said three Judge Bench decision (which was based on the finding in Russel v. Russel, (1880) LR 14 Ch D 471) is only an authority for the proposition that a party against whom an allegation of fraud is made in a public forum, has a right to defend himself in that public forum.
A distinction has also been made by certain High Courts between a serious issue of fraud and a mere allegation of fraud and the former has been held to be not arbitrable. The Supreme Court in Meguin GmbH v. Nandan Petrochem Ltd., (2016) 10 SCC 422 in the context of an application filed under Section 11 has gone ahead and appointed an arbitrator even though issues of fraud were involved. A. Ayyasamy v. A. Parmasivam, (2016) 10 SCC 386.
In cases where there is no oral evidence adduced and documentary evidence is not proved or exhibited by witnesses, it cannot be read into evidence for proving guilt of the employee. It is for this reason that many unscrupulous employer/establishment/department fabricate documents for proving charge against innocent employee and punish him without proving the same, thus denying a reasonable opportunity to him to defend himself. Sita Ram v. State of U.P., 2015 (1) ESC 178.
Redfern and Hunter on International Arbitration (5th Edition) published by the Oxford University Press has explained the meaning of these words “inoperative or incapable of being performed” used in the New York Convention, thus:
“At first sight it is difficult to see a distinction between the terms ‘inoperative’ and ‘incapable of being performed’. However, an arbitration clause is inoperative where it has ceased to have effect as a result, for example, of a failure by the parties to comply with a time-limit, or where the parties have by their conduct impliedly revoked the arbitration agreement. By contrast, the expression ‘incapable of being performed’ appears to refer to more practical aspects of the prospective arbitration proceedings. It applies, for example, if for some reason it is impossible to establish the arbitral tribunal.”
Albert Jan Van Den Berg, in an article titled “The New York Convention, 1958—An Overview” published in the website of ICCA (www.arbitration-icca.org/media/0/12125884227980/newyorkconventionof1958overview.pdf) referring to Artcile II(3) of the New York Convention, states:
“The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence.
The word ‘inoperative’ can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties.
The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into motion. This may happen where the arbitration clause is too vaguely worded, or other terms of the contract contradict the parties intention to arbitrate, as in the case of the so-called co-equal forum selection clauses. Even in these cases, the courts interpret the contract provisions in favour of arbitration.”
The book Recognition and Conferment of Foreign Arbitral Awards: A Global Commentary on the New York Convention by Kronke, Nacimiento, et al (ed.) (2010) says:
“Most authorities hold that the same schools of thought and approaches regarding the term null and void also apply to terms inoperative and incapable of being performed. Consequently, the majority of authorities do not interpret these terms uniformly, resulting in an unfortunate lack of uniformity.
The term inoperative refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject-matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time-limit for initiating the arbitration or rendering the award has expired, provided that it was the parties’ intent no longer to be bound by the arbitration agreement due to the expiration of this time-limit.
Finally, several authorities have held that the arbitration agreement ceases to have effect if the parties waive arbitration. There are many possible ways of waiving a right to arbitrate. Most commonly, a party will waive the right to arbitrate if, in a court proceeding, it fails to properly invoke the arbitration agreement or if it actively pursues claims covered by the arbitration agreement.”
Thus the arbitration agreement does not become “inoperative or incapable of being performed” where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in Section 45 of the Arbitration and Conciliation Act, 1996 on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 were decisions rendered in the context of domestic arbitration and not in the context of arbitrations under the New York Convention to which Section 45 of the Act applies. In the case of such arbitrations covered by the New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties. World Sport Group (Mauritius) Ltd. V. MSM Satellite (Singapore) PTE Ltd., (2014) 11 SCC 639.