Category Archives: Arbitration

In the matter of Parsvnath Developers Ltd v. Future Retail Limited (ARB.P. 14/2020) before Hon’ble Delhi High Court [decided on 12.04.2022], the petitioner moved an application under section 11(6) of the Arbitration and Conciliation Act, 1996 (“1996 Act”) for appointment of the presiding arbitrator in a dispute that erupted between the parties in relation to the Sub-License Agreement. Under the said agreement, the petitioner had sub-licensed certain area of the Parsvnath Mall to the Respondent for running a departmental store under the name of ‘Big Bazaar’.

The dispute arose on account of the introduction of service tax on the service of renting/licensing of immovable properties for commercial use with effect from 01.06.2007 under the Finance Act, 2007 enacted by the Government of India.  As per the Petitioner, the Respondent was liable to bear the additional burden of service tax. However, the Respondent failed to reimburse the service tax paid by the Petitioner. It was contended by the Respondent that it was liable to pay any service tax since there was no stipulation contained in the Sub-License Agreement for payment of service tax. Between the period of period 01.06.2007 to 31.12.2017, the amount payable added up to Rs. 4,27,93,994/- towards service tax and GST.

When the parties approached the Hon’ble High Court, the moot question for determination was since the main Agreement is not sufficiently stamped whether the petition for appointment of an arbitrator is required to be rejected?

The Hon’ble Court referred to the judgments in N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Limited & Ors (2021) 4 SCC 379 and Garware Wall Ropes Limited v. Coastal Marine Constructions & Engineering Limited (2019) 9 SCC 209 wherein the Hon’ble Supreme Court held that non-payment or deficiency of stamp duty did not invalidate the main contract.  By virtue of doctrine of severability, the arbitration agreement or arbitration clause in a main contract is an independent agreement. It does not require mandatory registration. Therefore, invalidation of main contract on account of non-stamping, insufficient stamping or non-registration does not necessarily affect the arbitration agreement adversely.

The Court also referred to the law laid down in the matter of Vidya Drolia and Ors. v. Durga Trading Corporation (2021) 2 SCC 1 wherein a thumb rule of non-interference was laid down by the Hon’ble Supreme Court at the stage of reference unless it is found that the disputes ex facie are not arbitrable or the principal agreement is plainly invalid and unenforceable. It was held that the Courts would abstain from carrying out any adjudicatory exercise in respect of any contentious issue at a pre-reference stage.

The Court went on to further affirm the settled position by virtue of Section 6A of the  Arbitration and Conciliation Act, 1996 which lays down plainly that the scope of examination under Section 11 of the Arbitration and Conciliation Act, 1996 is confined to the existence of an Arbitration Agreement. The Court in this regard referred to the judgment in Duro Felguera, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729. The Court also went on to analyse Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman (2019) 8 SCC 714 and Bharat Sanchar Nigam Limited and Ors. v.Nortel Networks India Pvt. Ltd. (2021) 5 SCC 738.It was held in the matter of Bharat Sanchar Nigam Limited  that “It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.” Similarly in the matter of NCC Limited v. Indian Oil Corporation Limited (2019) SCC OnLine Del 6964, it was held that “Thus, unless it is in a manner of speech, a chalk and cheese situation or a black and white situation without shades of grey, the concerned Court hearing Section 11 petition should follow the more conservative course of allowing parties to have their say before the Arbitral Tribunal”.

The Court therefore concluded that although there was an existing dispute as to whether the contract was sufficiently stamped or not and the same was contentious issue in the light of the arguments forwarded by the petitioner that Agreement was in the nature of leave and license and did not create any interest in respect of the premises in question, in favour of the respondent. In the light of same position of law, the Court further stated that the question of limitation, which is a mixed question of law and facts, is also required to be examined, not at the pre-reference stage by the Court but subsequently by the Arbitral Tribunal. The Court referred to the judgment in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd (2020) 2 SCC 455. In the said judgment the Hon’ble Apex Court made the following observation:

In view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator. Sub-section (1) of Section 16 provides that the Arbitral Tribunal may rule on its own jurisdiction, “including any objections” with respect to the existence or validity of the arbitration agreement. Section 16 is as an inclusive provision, which would comprehend all preliminary issues touching upon the jurisdiction of the Arbitral Tribunal. The issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16, and not the High Court at the pre-reference stage under Section 11 of the Act. Once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator.

In the light of the discussion the Hon’ble Court appointed an arbitrator for the adjudication of the disputes between the parties.

In the matter before the Division Bench of the Hon’ble Delhi High Court [Eveready Industries India Ltd. v. KKR India Financial Services Limited FAO(OS) (COMM) 2/2021 and CM APPL. 173/2021 & 2166/2021 decided on 07.02.2022], the Hon’ble Court once again elaborated on the applicability of Group Companies Doctrine to arbitration agreements when dealing with applications under section 9 of the Arbitration and Conciliation Act, 1996.

The issues arise out of the default in repayment of a loan granted in favour of two Indian companies. There were two personal guarantors and an obligor for the said loan.  Since there was an arbitration agreement, the Lender (Respondent No. 1) which is a non-banking financial Company, moved an application under section 9 of the Arbitration and Conciliation Act, 1996 seeking an order to restrain the borrowers, guarantors and the obligor from dealing with their assets along with seeking similar order for restraining the appellants, which were stated as “Reference Entities” in the loan documents. In order to justify the same, the Respondent No. 1 invoked the Group Companies Doctrine stating that credit facility under the loan agreement was advanced to borrowers after due verification of the credit worthiness of the group companies including the appellants. The Ld. Single Judge granted the injunction against the appellants wherein they were restrained from selling, transferring, alienating, disposing, assigning, dealing or encumbering or creating third party rights on the assets and from carrying out any change in their capital structure, or any corporate or debt restructuring, during pendency of the arbitral proceedings. The order was challenged before the Division Bench of the Hon’ble High Court.

After hearing the parties at length, the Hon’ble Court first discussed the origin and scope of the Group Companies Doctrine. The doctrine was propounded in the case of Dow Chemicals v. Isover Saint Gobain ICC Case No. 4131, YCA 1984. The Hon’ble Supreme Court applied the doctrine for the first time in Chloro Controls India v Sereven Trent Water Purification (2013) 1 SCC 641. The Supreme Court, while acknowledging the nature of modern business transactions which are carried out through multiple agreements creating intrinsically related transactions between the parties within a corporate group, clarified that a third party or a non-signatory can be subjected to an arbitration agreement without its consent but only in exceptional cases and propounded two legal theories on the basis of which an arbitration agreement may also bind a non-signatory – one on the good faith principle when there is a clear intention of parties to bind a non-signatory and second on legal principle of principal and the agent. In such circumstances, the arbitration agreement entered into by one of the entity in the group can bind the non-signatories and affiliates or the parent company.

The Court held that in addition to examine the aspect whether composite reference of third parties would serve the ends of justice, the Court shall also look at the issue from the “touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute.” The Court further added that “The principle of ‘composite performance’ would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other.”  

The doctrine was applied in Cheran Properties Ltd. V. Kasturi& Sons Ltd. (2018) 16 SCC 413to enforce an award against a non-signatory. In Mahanagar Telephone Nigam Ltd V. Canara Bank, (2019) SCC Online SC 995, the Court went on to  established the test of “single economic entity” or “single economic reality”. The court explained through illustrations as to when a non-signatory is held to be bound. For instance, a non-signatory is bound when the entity is engaged in the negotiation or performance of the commercial contract. It is also construed to be bound when it made statements indicating its intention to be bound by the contract. The Court also elaborated that an entity in a group is bound when the nature of transaction is composite. A composite transaction refers to “where the performance of the agreement may not be feasible without the aid, execution, and performance of the supplementary or the ancillary agreement, for achieving the common object, and collectively having a bearing on the dispute.” The Court also explained that the Doctrine is also applicable where there is a tight group structure with strong organizational and financial links, “so as to constitute a single economic unit, or a single economic reality”. The Court illustrated that this will apply in particular when the funds of one company are used to financially support or re-structure other members of the group.

Applying the principles to the facts and circumstances of the case, the Court found that the facility was extended to the borrower companies for repayments of existing loans of one of the appellants. The appellant was therefore beneficiary of the loan. The appellant however had contended that it had no obligation to either repay, or secure the facility. As per the loan documents any entity controlled by the two guarantors was included in the promoter group. One of the guarantors was the Vice Chairman and Managing Director of the appellant. His father was the Chairman. The other guarantor and cousin of the first guarantor was the director of the appellant. The Court stated that while a managing director as per the Companies Act is entrusted with substantial powers of the management of the affairs of the company, a promoter has control over the affairs of the company. In the same manner, the guarantors held similar positions in the other two appellants also. Moreover, the borrower companies and guarantors and their families were part of the promoter group. They had control over the reference entities which included the appellants.

The Court then went on to further observe that the promoter group held a substantial portion of Eveready Industries Ltd. The two borrower companies and Eveready Industries Ltd. were promoters of one of the appellants. The Court after extensively reviewing the shareholding pattern of the group entities observed that as per the loan documents all security providers, along with guarantors, were also obligors and  the borrowers, guarantors and promoter group were restrained from selling, transferring or disposing off, the shareholding in borrowers. A similar bar on selling, transferring, or disposing off shares of any reference entities held by the promoter group without prior consent of the lenders was also provided for. In the loan documents there were several terms and conditions to be observed with respect to the reference entities which showed that the group entities including the appellants consciously sought to provide comfort and binding assurance to the lender so as to secure their loans, by binding the reference entities in every way. To state few of such terms and conditions, it was provided in the loan documents that promoter group, borrowers and obligors or any of their directors were obliged to ensure that they did not appear in the RBI’s list of defaulters and ECGS caution list; reference entities were to be protected from any material adverse effect ; operations of the reference entities had to be in compliance with applicable laws; there was obligation on borrowers to maintain the corporate character of the reference entities and to maintain transparency in the matter of maintenance of the accounts of the reference entities; Event of Default clause set out in loan agreement provided defaults that were with respect to reference entities etc.

The Court therefore concluded that the intention of the parties was clearly to bind the appellants i.e. the reference entities. It was further stated by the Court that the email exchanges clearly showed that the appellants had not just knowledge of the loan agreement, they acknowledged their obligations under the loan agreement. Further, it confirmed that the appellants were intended by all parties, including the appellants, to be bound by the terms of loan document.

The Court, therefore concluded that the ‘tight group structure’ is writ large from the overlapping shareholding pattern in the group, guarantors holding important positions in the appellant companies and a perceivable involvement of the appellant towards giving promise of performance under the loan documents. The Court further stated in strong terms that had there been no security of assets and shareholding of the reference entities/appellants, the Respondent No. 1 would not have extended the loan to the borrower companies. The Court held that respondents as lenders heavily relied on the assets, shareholding and the valuation of the reference entities/appellants and rejected “the contention placed by the Appellants that their assets could be only reached after lifting the corporate veil.” The Court further clarified that “The reason why the assets of the Appellants are liable to be preserved is, because it was the underlying financial strength of the Appellants, on the basis of which the loan was extended by the Lenders/ Respondents. The borrowers have no assets of their own, so it becomes imperative to protect these assets for the aid of the Arbitral tribunal.” The Court finally dismissed the appeal imposing the cost of Rs. 2 lakhs each.

Hon’ble Division Bench of the Delhi High Court recently in the matter of Jivanlal Joitaram Patel v. National Highways Authority of India[FAO (OS)(COMM) 70/2017] reaffirmed the position of law regarding when can the fee of the Arbitral Tribunal shall be fixed as per Schedule IV of the Arbitration and Conciliation Act, 1996 and what does the term ‘sum in dispute’ imply.

In 2018, an appeal was disposed of by the Hon’ble Delhi High Court appointing a sole arbitrator in a dispute between the Appellant and the Respondent. As per the order, the arbitral tribunal was required to fix the fee as per Schedule IV of the Arbitration and Conciliation Act, 1996 (hereinafter “1996 Act”). On entering reference, the Arbitral Tribunal vide its procedural order determined the total amount of claim and a total amount of counter claim along with the interest. Vide a subsequent procedural order, the Tribunal determined its fees in terms of ratio of the judgment of Hon’ble High Court in Rail Vikas Nigam Vs. Simplex Infrastructure Ltd. Both the parties objected to the fees. Therefore, the Arbitral tribunal heard both the parties on the question as to whether counter claim(s) is/are to be included cumulatively along with the claims in the expression “sum in dispute” appearing in the 4^th Schedule of the 1996, or the claim amount and counter claim amount are to be separately considered in terms of proviso to Section 38(1) of the Act. The Arbitral Tribunal held that applicable arbitral fee has to be assessed separately for the claim, and counter claim. The reasoning inter alia was based on the ground that proviso to Section 38(1) of the Act carves out a specific exception providing for Arbitral Tribunal to fix a separate fee for claims and counter claims. It was further observed by the Ld. Arbitral tribunal that “…combining claims and counter claims for the purposes of determining fee under the 4^th Schedule could result in inequitable situations contrary to the express language of Section 38(1) of the Act.” The Ld. Arbitral Tribunal drew a parallel from the law and practice in civil suits where the court fees is determined separately in case of counter claims.

The parties filed application before the Hon’ble Court seeking clarification regarding the moot question. Both the parties were not in dispute regarding the correctness of the decision in Delhi State Industrial Infrastructure Development Corporation Ltd. Vs. Bawana Infra Development Pvt. Ltd., 2018 SCC OnLine Del 9241 wherein it was held that “sum in dispute” would include both – the claim and counter claim amounts taken cumulatively. It was held that Sections 38(1) does not have any bearing on the interpretation of 4^th Schedule. The Hon’ble Court approved the decision in Delhi State Industrial Infrastructure Development Corporation Ltd. and held that proviso to Section 38(1) of the Act will apply only when the Arbitral Tribunal fixes its own fee and not when fees has to be fixed as per 4^th Schedule of 1996 Act.  Therefore, Section 38(1) of the Act cannot be resorted to for interpretation of the expression “sums in dispute” provided under 4^th Schedule.

The Hon’ble Court clarified that unlike in a civil suit where the counter claim can be with respect to entirely different transaction, the counter claim in an arbitration proceeding has to necessarily arise from the same contract and arbitration agreement. This is the reason why the court fees in case of a counter claim is to be calculated and affixed separately. The Court observed that “[T]herefore, in the context of arbitration proceedings it may not be correct to say that counter claim would be an “independent” cause of action”.

The Court further relied upon the judgment in National Highways Authority of India Vs. Gayatri Jhansi Roadways Limited 2019 SCC OnLine SC 906 wherein the Hon’ble Supreme Court held that if there is an agreement between the parties which lays down the fee structure for the arbitral tribunal then the fee will be fixed in terms of the agreement between the parties and not the 4^th Schedule to the Act. Therefore, it was concluded by the Hon’ble Court that Sections 31(8), 31A and Section 38(1) of the 1996 Act of the 1996 Act has no application in interpreting the expression ‘sums in dispute’ as provided in Schedule IV of the 1996 Act or in determination of Arbitral Tribunal fees if the fee structure has been expressly agreed between the parties.

In the recent case of Ratnam Sudesh Iyer v. Jackie Kakubhai Shroff [Civil Appeal No. 6112 of 2021], dispute arose between two parties who were shareholders in the investment holding company called Atlas Equifin Private Limited, India (‘Atlas’) which held 11,05,829 equity shares of Rs.10 each in Multi Screen Media Pvt. Ltd. (‘MSM’). The Appellant, who was based in Singapore, with an intention to sell its share in Atlas entered into a placement instruction in 2005 with the Respondent which authorised Standard Chartered Bank (‘SCB’) as their agent to identify the purchaser for the appellant’s shares in Atlas. However, the Respondent challenged the placement instruction and alleged that his signature was forged. The respondent lodged a complaint with the Economic Offences Wing, Mumbai Police (‘EOW’) in 2010 against both the appellant and the SCB.  Subsequently, the Parties decided to settle the matter and entered into a Deed of Settlement dated 03.01.2011 which provided, amongst other things, that respondent would withdraw all complaints and proceedings filed against the appellant and going forward shall not write any letter or communication or complaint to any police authority/ies and/or any other judicial, quasi-judicial authority or statutory authority or any person or entity complaining about the subject matter of the Settlement Deed.

In return, the Appellant was to pay to the Respondent an amount of US$ 1.5 million vide banker’s cheque which was to be held in an escrow account, and was to be handed over to the respondent on confirmation by the EOW that the complaint has been withdrawn. Further, the respondent was to be paid US$ 2 million within seven (7) days of the receipt of the proceeds from the sale of MSM’s shares.

On any breach on part of the respondent, the Settlement Deed was to terminate and the US$ 1.5 million kept in escrow would then be released back to the appellant. Very soon, the disputes arose and the Arbitration Clause was triggered when both the parties alleged breach of the terms of the Settlement Deed. The Appellant filed a Section 9 of the Arbitration and Conciliation Act, 1996 (the “Act”) application claiming that the amount should not be released to the respondent on account of the breach of the Deed of Settlement since the wife of the Respondent wrote an e-mails to the Appellant which were defamatory and therefore sought interim relief against the respondent, his wife, and the escrow agent. In the court proceedings the wife of the respondent was dropped from the array of parties and the matter was referred to arbitration with the direction that the escrow agent would hand over the cheque for US$ 1.5 million only after the direction of the arbitrator.

One of the claims of the Appellant before the Arbitrator was the refund of US$ 1.5 million with 18 per cent interest per annum.

The learned arbitrator made the final award on 10.11.2014, awarding a claim for liquidated damages of US$ 1.5 million in favour of the appellant, as per the Deed of Settlement. The award further held that the respondent would not be entitled to the second cheque of US$ 2 million held in escrow, on account of the respondent’s breach of the Deed of Settlement.

Against the Award, the Respondent preferred an application under Section 34 of the Act and the Appellant moved an application under section 36. Consequently, the respondent also filed for stay of the enforcement of the award which was granted and the Bombay High Court finally set aside the award vide judgment dated 19.05.2020. The Appellant filed an appeal under section 37 of the Act which was dismissed by the Division Bench of the Bombay High Court vide impugned judgment dated 20.04.2021. The High Court also granted interim protection against withdrawal of the amount specified under the Deed of Settlement for a limited period of time. In the Special Leave Petition while issuing notice on 02.08.2021, the interim arrangement by the High Court was extended.

The following questions arose for consideration:

Whether the award arose out of an international commercial arbitration and what is the distinction between a domestic award arising from an international commercial arbitration and a purely domestic award? Further, whether the test for interference was made more stringent by the amendment in respect of a domestic award arising from an international commercial arbitration?

The Court, on the nature of Award, held that since the Appellant was based out of Singapore, it would be an international commercial arbitration in term of section 7 of the Act.  The Court observed that vide  the Arbitration and Conciliation (Amendment) Act, 2015 (‘2015 Amendment Act’), Explanations to Section 34(2) of the said Act as well Sub-Section 2A to Section 34 were inserted and therefore, beyond doubt, the “scope of interference by the Court became more restrictive with the amendments coming into force. “

While interpreting the provision under sub- section 2A of Section 34 of the Act, the Court observed that “the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment” and that “… the judgments of the learned Single Judge and the Division Bench decide the challenge to the award on the plea of patent illegality without noticing this distinction.” The Court observed that both the courts proceeded on the basis that the award cannot be sustained in either situation, i.e. for a purely domestic award or a domestic award arising from an international commercial arbitration.

The Court then proceeded to answer the question whether the 2015 Amendment Act would apply in the facts of the present case?

While observing that Section 34 proceedings in the matter commenced prior to 23.10.2015, the Court observed that the law provided under Section 26 of the 2015 Amendment Act as to when the amendment would apply in this regard was well settled.  The Court also referred to the decision in Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. & Ors. (2018) 6 SCC 287 in this regard. The Court clarified that “The judgment derived that the intention of the legislature was to mean that the 2015 Amendment Act is prospective in nature and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the said Act, on or after the 2015 Amendment Act, and to court proceedings which had commenced on or after the 2015 Amendment Act came into force.”

The Court further referred to the decision in Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India (2019) 15 SCC 131 and Hindustan Construction Company Ltd. and Anr. v. Union of India & Ors. 2019 SCC OnLine 1520, for understanding the applicability of sub-section 2A of section 34 of the Act. It was opined the said case that Section 34 as amended will apply only to Section 34 applications that have been made to the Court on or after 23.10.2015, irrespective of the fact that the arbitration proceedings may have commenced prior to that date.

The Appellant however, contended that as the Arbitration Clause in the Deed of Settlement, provided that “the Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto”, and therefore, any future amendments to the said Act shall be applicable to the arbitration in question.

Therefore, the Court proceeded to examine the impact of the phraseology used in the arbitration clause, mainly, “the Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto”.

The Court referred to S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh & Anr. (2019)2SCC488 in which the arbitration clause provided that the arbitration would be subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof. In the matter the Supreme Court opined that such general conditions of the contract cannot be taken to be an agreement between the parties to apply the provisions of the 2015 Amendment Act and the provisions of the 2015 Amendment Act would apply only in relation to arbitral proceedings commenced on or after the date of commencement of the 2015 amendment. A similar view was taken in the case of Union of India v. Parmar Construction Company (2019) 15 SCC 682. It was further observed that the provisions of the 2015 Amendment Act shall not apply to arbitral proceedings which had commenced in terms of the provisions of Section 21 of the said Act unless the parties otherwise agree.

While the above referred cases were in relation to arbitration proceedings, the matter before the Court dealt with a section 34 application which was moved before the 2015 Amendment Act came into force. In this regard, the Court referred to the case of ABB India Ltd. v. Bharat Heavy Electricals Ltd. OMP (T) (Comm) No.48/2020 decided by the Single Bench of Delhi High Court which distinguished the judgment in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited  (1999) 9 SCC 334 from Parmar Construction Company. The Court observed that Thyssen Stahlunion Gmbh dealt with Section 85(2)(a) of the said Act, which is dissimilar to Section 26 of the 2015 Amendment Act. Section 26 starts with a negative covenant which is subject to an exception in the case of an agreement between the parties, whereas the observations in Thyssen Stahlunion Gmbh were coloured by Section 85(2)(a) of the said Act which is structured differently.

The court therefore held that “the general phraseology of a clause which seeks to include any amendment to the Act would not be able to be availed of to expand the scope of scrutiny as it would appear to run contrary to the legislative intent of Section 26 of the Amendment Act..” The Court therefore reached the conclusion that it would be the pre-2015 legal position which would prevail. Keeping this in the background, the Court went on to analyse the correctness of the decisions reached by the courts below.

In the factual findings the court found that the necessary conditions of the Deed of Settlement stood satisfied since firstly, the respondent complied with the condition to withdraw all complaints and proceedings against appellant and all other named and unnamed persons before the EOW. Therefore, US $ 1.5 million, which were kept in escrow to ensure that those proceedings came to an end, had to be released to the respondent. Secondly, the sale of shares did take place, even though delayed and therefore, the respondent was also entitled to US$ 2 million which was to be paid on sale of shares. The Court further opined that it was not the case that the respondent breached clause 6 of the Settlement which provided that amount of US$ 1.5 million shall return to the Appellant in case the representations/assurances of the respondent turn out to be false or incorrect. The Court therefore concluded on facts that the effect of the arbitral award would be to deprive the respondent of the due valuation of the shares and what was paid to him to bring his complaints to an end. The court also went on to scrutinise the contents of the e-mails written by the wife of the respondent which according to the Court was never ratified by the respondent himself. Further, the wife was not party to the Deed. Although the Court found one of the wife’s e-mails as indiscreet, the Court held that this itself cannot deny the respondent of his dues.

In conclusion the court held that “We find that the arbitrator’s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. We may also note that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge and the Division Bench in this regard.”