TMI Blog2020 (5) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... TECHNICAL SERVICE, INC AND OTHERS [ 2012 (9) TMI 912 - SUPREME COURT] prospectively overruled the decision in Bhatia International and held that Parti of the Act would not apply in cases of international arbitration where the seat of arbitration is outside India. Pursuant to the 246th Report of the Law Commission, the Arbitration and Conciliation (Amendment) Ordinance, 2015 was promulgated, which was published in the Gazette of India on 23rd October, 2015 and came into effect immediately. The Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as 'the Amendment Act') brought about various amendments in the Act, one of them being enactment of Section 2(ii) whereby Section 2(2) was amended by inserting a proviso. Provisions of Sections 9, 27 and 37(1)(a) and 37(3) of the Act were made applicable to international commercial arbitration where the place of arbitration is outside India and the arbitral award is enforceable under the provisions of Part II of the Act, subject, however, to an agreement to the contrary. Thus, in effect, the position in law went back to the stage prior to the decision in the case of BALCO - In view of the amendment to Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as 'Minda'). A JVA was executed and signed on 30.05.1986 between Minda, for and on behalf of M/s. Jay Industries, and respondent no. 1 to establish a JV, i.e. applicant no. 2. By means of a memorandum of family settlement dated 14.02.1988, Minda and Sons acquired all interests in M/s. Jay Industries, a partnership firm, in respect of the JVA and the JV. Transfer of interest was intimated to respondent no. 1 and was acknowledged and assented to by it. 7. Thereafter, Minda acquired the entire interest of M/s. Jay Industries in respect of the JV, through a family settlement executed on 21.02.2013 and finally, the said interest was transferred to applicant no. 1 through a settlement deed executed on 12.05.2019. Thus, applicant no. 1 now has the entire interest of M/s. Jay industries in respect of the JV, i.e. M/s. Jay Ushin Ltd. 8. Applicant no. 2 is a JV with applicant no. 1 as its Managing Director. Respondent no. 1 is a corporation incorporated in Japan, with one of its main business concerns being development, designing, manufacturing, sales, etc. of control machines, mechanical and electrical systems and components for automotive. Respondent no. 2 is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trolling Shareholder 30.30% 1,171,106 Respondent No. 1 (M/s U-Shi Ltd.) 26% 10,04,645 Public/ Body Corporates/ NRI/ Others 43.70% 16,88,749 11. Applicant no. 1 has been the controlling shareholder of the JV, holding and controlling the single largest group of shareholders and promoters, i.e. 30.30% and has been the Managing Director since 15.04.1988 and a promoter. Respondent no. 1 has not had a nominee director in the Board of JV since 2012. 12. Pursuant to Clause 6.2 of JVA, JV and respondent no. 1 further executed agreements for technical assistance, which primarily expanded the scope of their technical collaboration and this led to the transfer of technical know-how from respondent no. 1 to JV and licence rights to exercise industrial proprietorship. The most recent LTAA is dated 17.02.2014 by which respondent no. 1 granted to the JV, non-exclusive, non-transferable and royalty bearing licence to use technical information and patents to manufacture, assemble and sell agreed products. The LTAA imposed an important restricti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open offer to purchase shares, in excess of its existing 26% voting share capital in claimant no. 2, as per the India's Takeover Code; (b) in the alternative, to restrain respondents from exercising their rights as shareholders, in respect of shares purchased via open offer which are in excess of its existing 26% voting share capital in claimant no. 2, until the conclusion of the present dispute; (c) in the alternative, to grant an interim mandatory injunction to transfer the shares acquired via open offer, which are in excess of its existing 26% voting share capital in claimant no. 2, to claimant no. 1 at the prevailing market rate (in Aug. 2019) when it ought to have made the pre-emptive offer to claimant no. 1 to comply with JVA and LTAA, and until such time restrain respondents from exercising their rights as shareholders, in respect of shares purchased via open offer which are in excess of its existing 26% voting share capital in claimant no. 2, from the date of said purchase to the date of said transfer; (d) an order directing the respondents to pay the costs incurred (and to be incurred) by the claimants in pursuing this application for emergency measures; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transactions, involving the public-at-large, which would be irreversible, resulting in grave consequences and setbacks to the applicants as well as to the investors and the securities market. It would be impossible to ascertain the measure of loss and hence, damages would not be the appropriate compensation. 21. In the alternative, it is submitted that a prohibitory interim injunction be granted restraining the respondents from alienating their shares and exercising any rights in respect of the shares purchased via open offer, in excess of 26% held by them, till the arbitral tribunal decides the matter finally. Reliance is placed on a decision of this court in Ravi Mittal vs. Kumkum Mittal in Execution Petition No. 137/2010, dated 28.10.2014 to argue that such interim injunctions are common. 22. It is next contended that Clauses 4.1 and 7.1 relied upon by the applicants are negative covenants and courts have time and again held that where there is a negative covenant, the party seeking interim relief is not required to establish prima facie case or balance of convenience and can seek specific performance of the negative covenant between the parties. Reliance is placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order on 02.04.2020, the arbitrator's mandate continues and the arbitrator has, in paragraph 15.2.1 of the order, specifically stated so. Thus, for all purposes, an arbitral tribunal, validly constituted, is in place and the jurisdiction of this court under Section 9 of the Act cannot be invoked. 28. It is next contended that even assuming that the emergency arbitrator is not an arbitral tribunal within the meaning of Section 9(3) of the Act, applicants have already elected their remedy and lost and have not even shown or pleaded any change in circumstances, since the passing of the emergency award. The applicants cannot be permitted to have second bite at the cherry and resort to the present remedy. It is further contended that the doctrine of election postulates that when two remedies are available, the aggrieved party has the option to elect either, but not both. Having elected one of the two available remedies, by approaching the emergency arbitrator, which according to the applicants themselves was the efficacious remedy, when invoked, applicants cannot now exercise any right under Section 9 of the Act. 29. Reliance is placed on the judgment of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.05.2019, whereas Clause 9 of the deed provides that shares of applicant no. 2 would pass on to applicant no. 1 only after the death of the settler, Minda. However, Minda is still alive and thus no interest/rights have passed on to applicant no. 1, as yet. Applicant no. 1 claims to represent the entire 3030% shareholding in JV belonging to the Minda Promoter Group, but the publicly available records of applicant no. 2 show that he is not even a shareholder of applicant no. 2 presently and does not form a part of the Minda Promoter Group. Insofar as applicant no. 2 is concerned, it is not a party to the JV as it was incorporated on 14.08.1986 and was, therefore, not even in existence when the JVA was executed on 30.05.1986 and the EA order takes note of these submissions, in detail. 34. Learned senior counsel has also argued on the merits of the case by submitting that the relief sought by the applicants is to injunct respondents from complying with their obligations under the SEBI Regulations and an injunction of this nature cannot be granted. Detailed arguments have been addressed by drawing the attention of the court to various provisions of the 'regulations and the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere alternative rights are available concerning the merits or are substantive rights. The judgment relied upon in the case of National Insurance is distinguished by arguing that the said case pertained to a right of appeal under two different statutes and concerned the substantive rights. 39. Insofar as the locus of the applicants is concerned, it is submitted, relying on P.K. Mohan Ram vs. B.N. Ananthachary, (2010) 4 SCC 161, that entire interest under the JVA has vested in applicant no. 1 and he is entitled to the usufructs. Settlement deed clearly shows that Minda has made no provision reserving the right to revoke the settlement deed and thus a right is created in praesenti under Section 19 of the Transfer of Property Act, 1882. 40. It is next argued that present petition is not by way of an appeal from the decision of the emergency arbitrator. Applicants have sought to invoke the jurisdiction of this court for a decision independent of the decision of the arbitrator in terms of the judgment of this court in Raffles. Moreover, there is no provision for appeal against the interim order of the emergency arbitrator under the Japanese Arbitration Act. 41. Insofar as applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the arbitration clause shows that the parties were ad idem that in' case respondent no. 1 initiated the arbitration, then the arbitration would be held in India and under the Commercial Rules of India Commercial Arbitration Association. However, arbitration would be held in Japan and under the Rules of Japan Commercial Arbitration Association (hereinafter referred to as 'JCAA'), in case it was initiated by M/s. Jay Industries. In the present case, it is undisputed that it is an international commercial arbitration and that the emergency arbitration and regular arbitration were invoked by the Indian entity. Hence, the seat of arbitration is Japan and the rules applicable are those of the JCAA. 48. The controversy whether Part I of the Act would be applicable to international arbitration came to be decided by the Supreme Court in Bhatia International vs. Bulk Trading SA. and another, (2002) 4 SCC 105 : 2002(1) Arb. LR 675 (SC). Relevant paras of the said judgment are as under (at pages 690-691 of Arb.LR): 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a well-drafted legislation. Therefore, the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above. However, in our view, a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless. Thus, such an interpretation has to be preferred to the one adopted by the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta. It will, therefore, have to be held that the contrary view taken by these High Courts is not good law. 49. However, the Constitution Bench of Supreme Court in the case of Bharat Aluminium Co. Ltd. vs. Kaiser Aluminium Technical Services, Inc., (2012) 9 SCC 552 : 2012(3) Arb. LR 514 (SC) : 2012 SCACTC 341 (SC) (BALCO) prospectively overruled the decision in Bhatia International and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered on 10.01.2008 in terms of the ratio of the decision in Bhatia International. Thus, in order to do complete justice, we hereby order, that the law now declared by this court shall apply prospectively, to all the arbitration agreements executed hereafter. 50. Pursuant to the 246th Report of the Law Commission, the Arbitration and Conciliation (Amendment) Ordinance, 2015 was promulgated, which was published in the Gazette of India on 23rd October, 2015 and came into effect immediately. The Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as 'the Amendment Act') brought about various amendments in the Act, one of them being enactment of Section 2(ii) whereby Section 2(2) was amended by inserting a proviso. Provisions of Sections 9, 27 and 37(1)(a) and 37(3) of the Act were made applicable to international commercial arbitration where the place of arbitration is outside India and the arbitral award is enforceable under the provisions of Part II of the Act, subject, however, to an agreement to the contrary. Thus, in effect, the position in law went back to the stage prior to the decision in the case of BALCO. 51. Amended Section 2(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct till suspended, modified or terminated under Article 782. Article 77 is extracted hereunder: Article 77--Mandate of emergency arbitrator 1. The emergency arbitrator may order, modify, suspend or terminate emergency measures in accordance with Articles 71 through 74. 2. The emergency arbitrator shall make a procedural schedule for emergency measures immediately after his or her appointment. 3. The emergency arbitrator, if he or she considers a hearing necessary in order to make a determination on the emergency measures, may hold such hearing for one day only. 4. The emergency arbitrator shall make reasonable efforts to decide on the emergency measures within two weeks from his or her appointment. 5. The parties shall be bound by, and carry out, the emergency measures ordered by the emergency arbitrator. The emergency measures shall be deemed to be interim measures granted by the arbitral tribunal when it is constituted or when a substitute arbitrator is confirmed or appointed by the JCAA. The emergency measures shall remain in effect until the arbitral tribunal modifies, suspends or terminates such emergency measures under Article 782. 6. The emergency measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act cannot be invoked and the petition is not maintainable. 56. Even on the anvil of doctrine of election, applicants have to fail. Applicants had consciously chosen to tread on a path and cannot turn around only because they were unsuccessful. It also needs a mention that the pleadings in the petition are really in the nature of an appeal pointing out flaws and infirmities in the order of the emergency arbitrator. Respondents are right that this court in a petition under Section 9 of the Act cannot sit as a court of appeal to examine the order of the emergency arbitrator. 57. During the hearing, court was informed that both parties have nominated their respective nominee arbitrators and the two arbitrators are likely to appoint the third arbitrator on or before 15.05.2020. As per Rule 77 of JCAA Rules, the mandate of the emergency arbitrator is continuing and it is open to the applicants to seek appropriate relief of modification, etc. if so advised. 58. Insofar as the reliance on the judgment of this court in the case of Raffles Design by the applicants is concerned, the said judgment, in my view, would not come to the aid of the applicants. In the said judgment, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odel Law and permit the parties to approach the court for interim relief. As pointed out earlier, UNQTRAL Model Law expressly provides for courts to grant interim orders in aid to proceedings held outside the State. And, the proviso to Section 2(2) of the Act also enables a party to have recourse to Section 9 of the Act notwithstanding that the seat of arbitration is outside India. Thus, the inescapable conclusion is that since the parties had agreed that the arbitration be conducted as per SIAC Rules, they had impliedly agreed that it would not be incompatible for them to approach the courts for interim relief. This would also include the courts other than Singapore. It is relevant to mention that IAA is based on UNCITRAL Model Law and SIAC Rules are also complimentary to IAA/UNCITRAL Model law. 101. In the circumstances, the contention that the parties by agreeing that the proper law applicable to arbitration would be the law in Singapore have excluded the applicability of Section 9 of the Act cannot be accepted. 60. It is in this background that the observation was made by the court in para 105 (para 100 of Arb. LR) which is being so heavily relied upon by the learned cou ..... 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