TMI Blog2017 (2) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention that the impugned Award is an attempt by the Respondents to enforce the put option rights under Clause 5.2 of RSHA. The pleadings make it clear that the Respondents did not choose to enforce the “put option.” The Petitioners were bound by the clauses of the contract. In the decision of State of Haryana v. Jage Ram AIR [1980 (4) TMI 300 - SUPREME COURT ], the Supreme Court observed that “those who contract with open eyes must accept the burdens of the contract along with its benefits.” No ground has been made out by the Petitioners to demonstrate that the impugned majority Award suffers from any legal infirmity attracting Section 34 of the Act. The threshold for a successful challenge to an Award in a petition under Section 34 of the Act is indeed very high and unless the reasoning in the impugned Award is so perverse as to shock the judicial conscience or lead to violation of Section 28 (3) of the Act the Court, the Court would not like to interfere. In the present petition, none of the grounds under Section 34 of the Act stand attracted. The impugned Award is, accordingly, upheld and the petition is dismissed with costs of ₹ 50,000 which would be paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Z for Information Technology / Information Technology Enabled Services. They had also entered into agreements with the Petitioners for the development of other projects viz., the Technika Project and the Technova Project. However, the Respondents are stated to have exited from the agreements in respect of the above two projects in January and May, 2010. According to the Petitioners, however, the present disputes arising out of the implementation of the Galaxia Agreements are tied inextricably to the conduct of the Respondents vis-a-vis the Technika and Technova Projects. Relevant clauses of the Restated SHA and SSPA 5. There was a termination agreement dated 11th July 2009 in terms of which the SHA and SSPA were brought to an end. On 2nd July, 2009, the parties entered into a Restated Share Holders Agreement ( RSHA‟) and a Restated Share Subscription and Purchase Agreement ( RSSPA‟) which substituted the earlier SHA and SSPA. These are referred to as the Amended Galaxia Agreements‟. The RSHA envisaged inter alia that the first stage of the Galaxia Project would be completed no later than two years from the closing date; the Petitioners would have two nom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction of Respondent Nos. 1 and 2 on or before the Long Stop Date. One was the execution of the Facility Agreement; the other was the disbursal of the first instalment of the Term Loan Facility of an amount not less than ₹ 13.47 crores by the lender to Respondent No. 3 on the terms and conditions set forth in the Facility Agreement and the sanction letter. The parties confirmed that the time frames specified in Clause 5.1.1 were hard timelines and that time is of the essence under this agreement. The conditions would not be subject to delays due to force majeure (Clause 23.20) or any delays or time taken to obtain any government approvals and would not be extended for any reason whatsoever. 9. Under Clause 5.2 of the RSHA, there were Put Option Rights. Clause 5.2.1 stated that in the event the conditions subsequent were not fulfilled by the Long Stop Date, the Investors (Respondent Nos. 1 and 2) shall have the right, though not the obligation, to require the Promoters, to acquire all but not less than all of the shares held by the Investors (put option shares) and the Promoters shall be required to purchase such put option shares within 30 (thirty) business days o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0:50. 13. It is pointed out that the grant of Term Loan Facility and the execution of the Facility Agreement being a major decision required an affirmative vote of at least one nominee director of the Investors. According to the Petitioners, the Respondents failed to take steps to execute the Facility Agreement. It is further stated that the Respondents willingly extended the Long Stop Date from 31st August, 2009 to 10th October, 2009. Even thereafter, the Respondents took no steps to act in furtherance of the sanction letters to enable the execution of the Facility Agreement or further extend the Long Stop Date after 10th October, 2009 . By the time the Respondents brought in the Investors‟ Share Subscription Money (in mid December), the Long Stop Date had long expired. 14. By an Agreement dated 31st August, 2009, the parties agreed to extend the period for the fulfilment of the Conditions Precedent in the [RSHA] and the [RSSPA] for a further period of 25 (Twenty Five) days and accordingly the Conditions Precedent to Closing shall be fulfilled by the' Promoters, to the complete satisfaction of the Investors, on or before 25 September 2009. The Parties have also h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the Respondents/Investors, a total sum of ₹ 45,00,27,747 was brought in by the Investors towards the Galaxia Project and the payments were made as under: (a) ₹ 55 lakhs to Respondent No. 3; (b) ₹ 4.73 crores to Petitioner No.2 (c) ₹ 5.72 crores to Petitioner No. 4; and (d) ₹ 34,00,27,747 (Rupees thirty four crores twenty seven hundred and forty seven only) to Respondent No. 3. 20. On 17th December, 2009, Petitioner Nos. 1 to 4 received confirmation that ₹ 4.50 crores had been transferred from the designated bank account to Petitioner No. 4 in partial repayment of the Promoters‟ Loan. Shortly thereafter, on 17th December, 2009 itself, counsel for the Petitioner sent an email to the Investors purporting to terminate inter alia the SHA, SSPA, RSHA, RSSPA, the termination agreement and any and all documents to or flowing from the aforementioned agreements. Constitution of the AT 21. On 6th February, 2010, the Respondents sent their notice of invocation of arbitration to the Petitioners nominating a former Chief Justice of India ( M1‟) as their Arbitrator. On 18th February, 2010, the Respondents sent a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he timelines stipulated hereinabove, for any reason whatsoever, or in the event any of the Promoters have failed to fulfil any of their obligations herein or if the Promoters have committed a breach of the terms of this Agreement or if any other act or omissions that has such effect is committed or omitted, then without prejudice to any other rights of the Investors under the Galaxia Agreements, the Investors shall have the right, to be exercised in their sole and absolute discretion, to recommence the Galaxia Arbitration in accordance with the provisions of the Galaxia Agreements. It is jointly and severally, agreed and acknowledged by the Promoters that in such an event, as stated above, the Investors shall be entitled to all rights that ensue in their favour under this Agreement or otherwise including the right to claim and to forthwith receive the entire outstanding amount of or any such otherwise payable to and claimed by the Investors. The Promoters unambiguously and unequivocally acknowledge and declare that the amounts agreed to be paid to the Investors, i.e., the entire Galaxia Consideration, in terms of this Agreement are undisputed and payable to the Investors. 25. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Court on 14th March, 2013. Was the AT right in rejecting the challenge? 31. One of the first grounds of challenge in the present petition is whether the negation of the challenge by the AT was valid. 32. The submission of the Petitioners is that as per Clause 23.22.2 (b) of the RSHA read with Clause 18.2 (b) of the RSSPA, the parties had agreed upon the arbitrators nominated having (i) the requisite experience, knowledge and understanding of Indian real estate laws, regulations, and conventions and practices ; and (ii) each Arbitrator would have at least five years‟ experience with construction and/or management of the projects similar to the Galaxia Project. 33. According to the Petitioners, neither the Chairman nor M1 possessed the requisite qualifications. It is further submitted that while M2 disclosed to the ICC that he did not possess the requisite qualification, M1 made no such disclosure despite evidently being unable to satisfy the requirements. However, it is stated that since there was no objection to the nominee arbitrator of the Petitioner, his appointed stood confirmed. It is further submitted that M1 failed to answer in his email dated 1st Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M1. 37. Mr. Sanjeev Puri, learned Senior counsel appearing for the Respondents referred to the ICC rules, regulations and procedures which the parties had expressly agreed to. Mr. Puri pointed out that the correspondence exchanged with the ICC Secretariat for a period of one year prior to the Settlement Agreement entered into between the parties on 28th May, 2010 and even thereafter. Mr. Puri submitted unless the decision of the ICC Court can be shown to be perverse, it does not call for any interference. According to Mr. Puri, there cannot be differing no yardsticks - one for the Petitioners‟ nominees and another for that of the Respondents. In this regard he relied on the decision in Rail India Technical and Economic Services Limited v. Ravi Constructions 2002 (1) Kar LJ 419. 38. The above submissions have been considered. To begin with, a reference requires to be made to the rules of arbitration of the ICC which have been in force since 1st January, 1998. The arbitration clause in the instant case clearly states that the law governing the arbitration would be the rules of the ICC. They have in that sense got incorporated into the agreement by reference. In terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of M1 is no different from that of M2, the Respondents‟ nominee. Although the arbitration clause in the agreement between the parties required the Arbitrator to have the requisite experience, knowledge and understanding of Indian real estate laws, regulations, conventions and practices and at least five years‟ experience with construction and/or management of the projects similar to the Galaxia Project, clearly the parties themselves by nominating M1 and M2 as their respective Arbitrators decided to waive the tsrict adherence to the above qualifications. Additionally, as far as the Petitioners are concerned, having nominated M2 an Arbitrator whose qualifications were no different from that of M1, not only did not object to his continuation after receiving his declaration given to the ICC on 13th April, 2010 but selectively chose to raise a challenge only vis-a-vis the Respondents‟ nominee M1. The challenge to M1, therefore, does not appear to be bona fide. 44. The Petitioners not only challenged M1 but Chairman of the AT as well. The challenge in terms of the ICC Rules had to be decided only by the ICC Court. The challenge was negatived by the ICC Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. In Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Limited (supra), it was explained that due regard had to be given to the qualifications in the agreement. However, that was not a case where the parties themselves waived such a requirement as in the present case. With the Petitioners having themselves nominated M1 whose qualifications were no different from M2, it is plain that neither party chose to adhere to what the agreement required as regards the qualification of the Arbitrator. Likewise, the decisions in Supriya Kumar Saha v. Union of India (supra) and Alcove Industries Limited v. Oriental Structural Engineers Limited (supra) are clearly distinguishable on facts. In Union of India v. M.P. Gupta (supra), the question was whether a sole Arbitrator could have been appointed when the provision required two gazetted Railway officers to be appointed as arbitrators. The facts here are different inasmuch as the Petitioners have themselves nominated M2 who did not strictly fulfil the qualifications and did not raise an objection on that score even after receiving his declaration which made it clear that he did not possess the requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that according to the Petitioners a sum of ₹ 45,00,27,747 was indeed brought in by the Respondents for the various projects. The Petitioners themselves do not dispute that the following amounts were paid: S.No. AMOUNT PAID TO 1. INR 55,00,000/- Respondent No. 3 (The Company) and OMP (COMM) 154/2016 Page 23 of 27 transferred into an Escrow Account controlled by the Respondents. 2. INR 4,73,00,000/- Petitioner No. 2 3. INR 5,72,00,000/- Petitioner No. 4 4. INR 34,00,27,747/- The Company Total INR 45,00,27,747/- 52. The Petitioners have also not disputed that out of the above ₹ 45 crores a sum of ₹ 11 crores was transferred on 17th December, 2009 into the accounts of the Petitioners directly and on the same date the Petitioners terminated the RSHA and the RSPSA leading to invocation of the arbitration clause and also seeking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the selling of the Galaxia Project land was the only method by which the investment could be returned as was ordered by this Court in OMP No.99/2011 in Alpha Tiger Cyprus Investments No. 3 v. Shakti Nath and that the auction has been arranged on 11th April, 2017. 57. The Respondents on the other hand point out that they were not exercising the put option. They were exercising their right to recover damages. Clause 18.3.2 of the RSHA makes it explicit that it is open to the Respondents to either enforce the put option under clause 18.3 of the RSHA or claim damages for breach of contract under Section 73 of the ICA. 58. There is no merit in the contention that the impugned Award is an attempt by the Respondents to enforce the put option rights under Clause 5.2 of RSHA. The pleadings make it clear that the Respondents did not choose to enforce the put option. The Petitioners were bound by the clauses of the contract. In the decision of State of Haryana v. Jage Ram AIR 1980 SC 2018, the Supreme Court observed that those who contract with open eyes must accept the burdens of the contract along with its benefits. 59. The AT examined the Respondents‟ claim as one f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
