TMI Blog2022 (11) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... by the High Court of Judicature for the State of Telangana at Hyderabad in Arbitration Application No. 55 of 2020 whereby the High Court dismissed the application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as Act of 1996 , for the sake of convenience) filed by the appellant herein. 3. The appellant herein M/ s. Meenakshi Solar Power Pvt. Ltd. is engaged in the business of producing power through running and operating thermal/solar/hydro power plants. The respondent No.1 M/s. Abhyudaya Green Economic Zones Pvt. Ltd. is the owner of 4.128 MW Solar PV Power Project located in 20 acres at Kummera Village, Chevella Mandal, Ranga Reddy District, Telangana. Respondent Nos. 2 and 3 are promoters and 100% shareholders of respondent No.1 Company. Respondent No. 4M/ s. Meenakshi Power Pvt. Ltd. is an affiliate of the appellant herein and is a proforma respondent in the present case while the other three respondents are the contesting respondents. 4. Succinctly stated, the facts of the case are that the power project of respondent No.1 herein is generating power and has a twenty year Power Purchase Agreement with Telangana State S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents and the appellant herein filed an application before the Commercial Court, City Civil Court, Hyderabad vide COP No.27 of 2020 under Section 9 of the Act of 1996, seeking to restrain the respondents from alienating their shares in the Company. The Commercial Court was pleased to grant an adinterim injunction restraining the respondents from alienating their shares vide order dated 19.06.2020. 8. The appellant herein sent a letter dated 22.06.2020 invoking the arbitration clause as a means of dispute resolution in terms of Clause 10 of the Share Purchase Agreement and called upon respondent Nos. 1 to 3 to settle the disputes through arbitration. The appellant herein appointed one Dr. P.V. Amarnadha Prasad, Engineer and Techno Legal Consultant, Hyderabad as its arbitrator and vide such letter requested respondent Nos. 1 to 3 to appoint their nominee arbitrator and to constitute an Arbitral Tribunal of three members to adjudicate upon the dispute between the parties. On receiving no response to the aforesaid notice, the aggrieved appellant herein filed an application under Section 11(6) of the Act of 1996 which came to be dismissed vide impugned judgment and order passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venture Capital was meant only to protect the interests of the financier so that it does not act coercively against respondent No.1. The Tripartite Agreement had no clauses in it to deal with the interse rights and obligations of appellant herein and its affiliate respondent No.4 and respondent Nos. 1 to 3 and was therefore incapable of substituting the Share Purchase Agreement dated 24.09.2018. 11.6 That the High Court erred in not attempting to appreciate the composite intention of both the parties, the nature and purpose of the commercial transaction, the documents and material on record, the conduct and correspondence of the parties. 12. Per contra, learned counsel appearing for respondent Nos.1 to 3 supported the judgment and order passed by the High Court and contended that no interference of this Court is required. The submissions of the learned counsel for the respondent No.1 to 3 are epitomized as under: 12.1 That the appellant herein failed miserably in making complete payment of the purchase of shares from respondent Nos. 2 and 3 and in fulfilling its obligation before the expiry of the Share Purchase Agreement i.e., as on 10.11.2018, when the Share Purchase Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as right in holding that owing to novation, the invocation of arbitration under Share Purchase Agreement was untenable. This Court has clearly set out the principle that an agreement will be novated with the introduction of new parties by mutual agreement. The respondents relied on the case of Union of India vs. Kishorilal Gupta and Bros. (1960) 1 SCR 493, Young Achievers vs. IMS Learning Resources Pvt. Ltd. (2013) 10 SCC 535 and M.B.S Impex Pvt. Ltd. vs. Minerals and Metals Trading Corporation (2020) 5 ALD 185. 12.6 That the High Court has rightly comprehended the intention behind the two agreements and the contention of the appellant that the Tripartite Agreement was a recovery mechanism is untrue and thus unsustainable. Moreover, the Tripartite Agreement governing the transaction makes no mention of the lapsed Share Purchase Agreement intentionally. The appellant was replaced by respondent No.4 in the Tripartite Agreement and IFCI Capital Venture was added as a party and was also given a right to invoke the agreement. Thus, the Tripartite Agreement is a completely different and new agreement between different parties containing different terms and conditions and does not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 15. As far as the issues in the first category are concerned, the Chief Justice or his designate is bound to decide. With regard to the issues falling under the second category, when they are raised in an application under Section 11 of the Arbitration Act, the Chief Justice or his designate may decide them or may leave it open with a direction to the Arbitral Tribunal to decide the same. But if the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re examine the same issue. As far as the issues which arise in the third category are concerned, they have to be dealt with exclusively by the Arbitral Tribunal such as excepted or excluded matters. It would also include merits of any claim involved in arbitration. 16. In Vidya Drolia (supra), it has been further observed in relation to the aforesaid three categories in Boghara Polyfab Pvt. Ltd. (supra). The first category of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal contract has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void; in the latter case, as the original contract is extinguished by the substituted one, the arbitration clause of the original contract perishes with it; and (6) between the two falls many categories of disputes in connection with a contract, such as the question of repudiation, frustration, breach, etc. In those cases, it is the performance of the contract that has come to an end, but the contract is still in existence for certain purposes in respect of disputes arising under it or in connection with it. As the contract subsists for certain purposes, the arbitration clause operates in respect of these purposes. Even if the performance of the contract has come to an end, the contract can still be in existence for certain purposes in respect of disputes arising under it or in connection with it. 19. In view of the aforesaid discussion, we find that High Court was not right in dismissing the petition under Section 11(6) of the Act of 1996 filed by the appellant herein by giving a finding on novation of the Share Purchase Agreement between the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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