'2.7 The Issues to be Determined and the Questions put to the Parties by the Sole Arbitrator at the Hearing

It was stated in the TOR that "the issues to be determined by the Sole Arbitrator shall be those resulting from the Parties' submissions, including forthcoming submissions, and which are relevant to adjudication of the Parties' respective claims, counterclaims and defences, without prejudice to the provisions of Article 19 of the ICC Rules. In particular, the Sole Arbitrator may have to consider the following issues (but not necessarily all of these and only these, and not in the following order) in one or several awards:

. . . . . . . . .

4. The First Claim: Claim Based on Misrepresentation

4.1 Admissibility and Jurisdiction with respect to the Claim of Misrepresentation Based on Tort

Since the hearing . . . and in particular through its Post-Hearing Brief Claimant has dropped a claim of misrepresentation based on contract and instead has pressed for a claim of misrepresentation based on tort of deceit . . .

As noted in section 3.1 above, in view of Claimant's withdrawal at the hearing and in the Post-Hearing Brief of a claim of misrepresentation based on contract and instead the re-characterization of such claim as a claim of misrepresentation based on tort, and Respondent's objection to this matter, the Sole Arbitrator will first have to satisfy itself whether:

(1) Under the applicable rules of procedure, i.e. the ICC Rules 1998, Claimant's claim based on tort which was definitively presented only at the hearing and in the Post-Hearing Brief is admissible;

(2) A claim of misrepresentation based on tort as presented by Claimant falls within the scope of the Arbitration Clause;

(3) In view of contractual remedies available to Claimant in respect of a claim based on misrepresentation, the Sole Arbitrator can entertain a claim of misrepresentation founded on tort.

4.1.1 Respondent's Position

Respondent contends that:

- Article 19 of the ICC Rules prevents a party from making new claims or counterclaims which fall outside the limits of the Terms of Reference. The Terms of Reference contain no reference to a claim of misrepresentation based on tort. Thus, it is too late for Claimant to fall back on the remedy of tort because rescission of a contract, [sic] places Claimant in a tremendously embarrassing situation, because Sections 64 and 65 of the Indian Contract Act would require it to restore advantages and benefits received under the contract . . .

- The language of the Arbitration Clause in this case is not as wide to cover a claim based on tort, it is confined to contract claims . . . Whether a given dispute comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself, it is a question of what the Parties intended to provide and what language they employ. Clause 30(a) of the Shareholder's Agreement speaks about "all disputes arising out of or in connection with this Agreement". The arbitration agreement between the Parties only covers disputes out of or in connection with the Agreement which means all contractual disputes and the arbitration agreement does not cover any claim in tort. The Sole Arbitrator, therefore, has no jurisdiction to entertain a claim based on tort. Any assumption of jurisdiction by the Arbitrator may render the award unenforceable under Indian law. While it is indeed true that the Supreme Court of India in Renusagar Power Co. Ltd v. General Electric Co. [AIR 1985 SC 1156 (1984) 3 SCC 679] and in other cases has held that expression such as "arising out of" or "in connection with" are to be construed widely to encompass all possible disputes concerning the contract, it does not extend to cover a claim in tort . . .

- Furthermore, neither the TOR nor the Issues to be determined as set out in the TOR, even remotely suggest any claim of Claimant based on tort, and, therefore, any entertainment of such claim which goes beyond the TOR and the Issues to be determined can vitiate and affect the enforceability of the award . . .

- It is now an accepted legal position that there may be concurrent contractual and tortuous [sic] duties owed to the same plaintiff who has a choice of proceeding either in tort or in contract except when he must rely on a specific term of the contract, as distinct from any duty of reasonable care implicit in the particular relationship brought about by the contract, in which case he has to depend exclusively on his contractual claim. As Clause 1(a) of the Shareholder's Agreement has been all along relied upon, Claimant, clearly, is precluded from claiming under tort and any such claim is inadmissible.

- Claimant has at the last possible moment sought to base its claim on torts, founding the same on a fiduciary obligation, as they cannot put it on any other footing. The suggestion by Claimant that a fiduciary obligation based on the Indian Partnership Act 1932 or based on the Shareholder's Agreement existed is denied. Such a fiduciary obligation if at all existing would mean a duty not to harm the interest of the JV Company, which statement yet again militates against a claim of misrepresentation based on tort . . .

4.1.2 Claimant's Position

Claimant contends that the damages it is entitled to, whether in contract or tort, are the same . . . Claimant further contends that it claims remedies for misrepresentation based on tort from the same facts that it had pleaded already for misrepresentation based on contract. . . . Claimant contends:

". . . by far the larger amount of my paperwork in the brief submitted is devoted to the contractual aspect. But, from the same facts, tort and contract provide remedies, and I claim the remedy on tort.

To use the phrase that is often used where rights in tort and remedy can both be pursued together, the party waives the contract and takes his stand on the tort." . . .

Claimant further contends that:

- It is accepted in Indian law that where a tort claim arises and is connected with the performance or the formation of a contract, then it does fall within the arbitration clause if the arbitration clause is sufficiently wide to incorporate it. The arbitration clause in this case is very wide to incorporate a claim of tort connected to the contract;

- Respondent has never in its written replies taken the stand that the consideration of a particular claim falls outside the jurisdiction of the Sole Arbitrator. Under the ICC Rules challenges as to jurisdiction or scope of powers of the arbitrator should be taken at the very first instance;

- By basing its claim of misrepresentation on tort Claimant is not raising a new claim as such a claim finds its place in its Statement of Claim under Prayer A. The Prayer sufficiently accommodates the specific pleading made in tort;

- The purpose of pleading is to put the other side on notice as to what is the case it is required to meet. Claimant has since the beginning of this arbitration requested the return of the entire amounts it has put into the Company;

- The facts that Claimant has to prove whether it proceeds in contract or in tort are precisely the same; the ingredients are precisely the same. The two ingredients are that there must be a deception and there must be, by the other side, an acting on that deception. . . .

Further, Claimant contends that:

- According to the Law of Arbitration and Conciliation (Saraf and Jhunjhunuwala, p. 238) ". . . When the recourse to the contract is made to ascertain whether a dispute is one arising out of contract or in connection with the contract, then the dispute as such would fall within the scope of the arbitration clause and the arbitrators would have the jurisdiction to decide the same" . . .

- A claim in tort on the basis of misrepresentation is a challenge to the validity of the contract, that the contract was procured by misrepresentation. The Indian Supreme Court has stated in Khardah Co. v. Raymen & Co. that the expression "arising out of" or "concerning" or "in connection with" or "inconsequence of" or "relating to this contract" are of sufficient amplitude to take in a dispute as to the validity of the agreement . . .

- It is an established position in common law (which has been followed by Indian Courts) that a tort claim can be referred to in arbitration if it is closely connected with or arises out of the contract. The Indian Supreme Court has approved this position in several important judgments, including the Renusagar Power Co. Ltd. v. General Electric Co. (1984) 4 SCC 679 [CIII PHB (e)] at paragraphs 47 & 48 and Tarapore Co. v. Cochin Shipyard Ltd. (1984) 2 SCC 680, CIII PHB (f) at paragraphs 42 & 43] . . .

- A claim of tort of misrepresentation is a matter, which was inextricably linked to the formation of the contract and as such is closely connected and falls within the four corners of the arbitration clause . . .

- Respondent's argument that Claimant cannot waive a contract and go to tort as the contract solely determines the rights and obligations of the Parties, is based on the assumption that there exist no duties between the Parties and is obsolete law . . .

- The ESSO v. Mardon case confirms that Claimant may either recover in tort or contract. Treitel in his Law of Contract (10th edition, page 916) confirms that the content of a contractual duty of care is often the same as that of the duty of care which the law of tort would impose . . . A careless statement inducing a contract may give rise to liability in tort for misrepresentation and in contract for breach of collateral warranty . . .

- Respondent's allegation that Claimant's reliefs do not contain reference to tort is not justified. In ICC arbitration it is quite common for claimants to refer to a particular event or cause of action and claim reliefs thereunder without listing all the sub-categories or indeed the legal basis for such claims. In the body of pleadings made in the Detailed Statement of Claim the claim of misrepresentation has also been pleaded both under contract and tort;

- With respect to Respondent's argument that Claimant's reliance on tort constitutes a new claim and falls outside the Terms of Reference, whilst Claimant would concede that the legal basis for the claim is not expressly referred to, the claim is clearly present. Misrepresentation can have a basis in contract and in tort. Claimant had claimed misrepresentation both in contract and in tort. The facts are identical. In fact, the legal position is that a claim for misrepresentation is always a matter of fact and not of law. The legal ground of the claim is a separate issue and does not convert an existing claim into a new claim. . .

- In any case it cannot be the case that Respondent was unaware that Claimant had pleaded a case of misrepresentation, that it had expressly referred to tort in its pleadings if not in the relief sought . . .

- The financial consequences that flow from a claim in tort approximate and are identical with prayer A in the Detailed Statement of Claim. . . .

- Despite the fact that Claimant expressly pleaded a claim in torts of misrepresentation, fraud and deceit in its Detailed Statement of Claim and it also referred to acts of fraud and deceit committed by Respondent, Respondent in its defence elected not to deal with this argument. As such, Respondent must be deemed to have waived any objections it can have to the pleadings of tort per se . . .

- Respondent itself has made counterclaims which can only be considered as claims based on tort . . .

- The Sole Arbitrator can address claims in tort providing that a dispute though not arising under the contract is inextricably connected with or indisputably linked with a contract, it can be said that the dispute is connected with the contract . . .

4.1.3 The Sole Arbitrator's Findings and Conclusions

4.1.3.A. In deciding whether to proceed to consider the merits of the claim of misrepresentation based on tort or to reject it as being a new claim the Sole Arbitrator is guided by the ICC Rules of Arbitration, in particular Article 19 of such Rules. Article 19 of the ICC Rules provides:

"After the Terms of Reference have been signed or approved by the Court, no party shall make new claims or counterclaims which fall outside the limits of the Terms of Reference unless it has been authorized to do so by the Arbitral Tribunal, which shall consider the nature of such new claims or counterclaims, the stage of the arbitration and other relevant circumstances."

It is generally agreed that Article 19 of the 1998 Rules, which has replaced Article 16 of the previous Rules, permits greater flexibility and gives broad discretion to the Sole Arbitrator in deciding whether to allow or not to allow new claims or counterclaims (Yves Derains and Eric Schwartz, A Guide to the New ICC Rules of Arbitration, Kluwer, 1998, p. 248; Craig, Park and Paulsson's Annotated Guide to the 1998 ICC Arbitration Rules, Oceana Publications, 1998, p. 121). In exercising his broad discretion in this respect the Sole Arbitrator shall take into account the nature of such new claims or counterclaims, the stage of the proceedings and the relevant circumstances. In particular, the Sole Arbitrator shall take into consideration whether:

- The claim of misrepresentation based on tort is founded on the same facts as the claims already at issue in this arbitration, provided that this would not unduly interfere with the efficiency of the proceedings;

- The claim of misrepresentation based on tort is for the same relief, or it is otherwise linked directly or indirectly to the claims already before the Sole Arbitrator;

- Respondent had the opportunity to respond to the introduction of the claim of misrepresentation based on tort and to the merits of such claims in these arbitration proceedings.

The Sole Arbitrator notes that the claim of misrepresentation was made in the TOR and maintained in the Detailed Statement of Claim. However, it was clear from these documents and in particular from Claimant's request for a declaration to rescind the Shareholder's Agreement in item 1 of its Relief Sought in the TOR and from its specific reliance on Article 19 of the Indian Contract Act in its Detailed Statement of Claim . . . that Claimant had principally characterized this claim as a claim based on the law of contract. Nevertheless in the latter submission Claimant had made the statement that its remedy for rescission and restitution was made not only under the provisions of the Contract Act but also under the law of tort for a negligent misrepresentation or a negligent misstatement . . .

At the hearing . . . Claimant definitively stated that it was now relying on the law of tort for its claim of misrepresentation and in its Post-Hearing Brief Claimant maintained that position by amending its Prayer for Relief to the extent that it was no longer pressing for rescission of the contract but only for restitution of its interest, as already presented under the claim of misrepresentation based on contract, as damages arising from misrepresentation based on tort. However, in making the claim of misrepresentation based on tort Claimant does not rely on any new facts. This matter is also taken note of in Respondent's Post-Hearing Brief . . . Nor does Claimant press for new remedies. Claimant is still seeking restitution of its interest as identified in item 1 of the Relief Sought in the TOR and in prayer A of its Detailed Statement of Claim, however, now characterized as damages arising from fraudulent/negligent misrepresentation. In the Sole Arbitrator's view this action by Claimant does not constitute a new claim but a new legal characterization of a claim already presented in the Terms of Reference. Nor has Claimant's assertion of a claim of misrepresentation based on tort led to the introduction of a new prayer for relief. The introduction of the claim of misrepresentation based on tort has not led to any undue interference with the proceedings. In fact, the Parties have exhausted the same stages of the proceedings, which were ordered all along, and before the introduction of the claim of misrepresentation based on tort.

Finally, Respondent has not contended that the introduction of the claim of misrepresentation based on tort has in any way affected its ability to present its defences generally or with respect to the claim of misrepresentation based on tort. Indeed, the Parties were given the opportunity at the hearing to comment on this new assertion by Claimant . . . Respondent has taken this opportunity and has presented its arguments against the acceptance of this claim and also, in particular, with respect to the merits of a claim of misrepresentation based on tort. Thus, Respondent has not been deprived of its right to respond to this claim nor it [sic] experienced any inconvenience in defending itself in this regard. Respondent took the opportunity to respond to this claim at the hearing. It has also taken the opportunity to respond to this claim in its Post-Hearing Brief . . .

However, Respondent has raised concerns about the fact that in considering the financial consequences attached to a misrepresentation based on contract regard should be had to Articles 64 and 65 of the Indian Contract Act to the effect of requiring the party avoiding the contract on ground of misrepresentation to return all benefits received under the contract when restituting its interest. At this juncture, the Sole Arbitrator does not find it necessary to speculate whether this re-characterization of the claim of misrepresentation by Claimant may have consequences in terms of application of Articles 64 and 65 of the Indian Contract Act, which are the requirements to be taken into account when dealing with a claim of misrepresentation based on contract. The Sole Arbitrator will bear this matter in mind when it becomes necessary to consider the financial consequences attached to a claim of misrepresentation based on tort and as to whether an equivalent principle to the one specified in Articles 64 and 65 of the Indian Contract Act might be relevant. The Sole Arbitrator notes, however, that the introduction of the claim of misrepresentation based on tort has not resulted in any substantial increase in the amount or the elements of restitution/damages sought by Claimant under its First Claim, except to the extent expressly reserved in the TOR due to the continuing character of certain costs constituting the elements of Claimant's First Claim.

Accordingly, the Sole Arbitrator concludes that the introduction of the Claim of misrepresentation based on tort by Claimant is not a new claim but only a re-characterization in legal terms of an existing claim. In any event, the presentation of such claim at the hearing is acceptable in view of the nature of the claim, its direct link with the claims and facts already presented and in view of the circumstances.'