Bombay High Court
Ravi Arya And 4 Ors vs Palmview Overseas Limited And 9 Ors on 17 December, 2018
Author: K.R.Shriram
Bench: K.R.Shriram
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY AND ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION (L) NO.3049 OF 2018
IN
SUIT (L) NO.1676 OF 2018
Ravi Arya and Ors. ....Applicants/Plaintiffs
Vs.
Palmview Overseas Limited and Ors. ....Defendants
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Mr. Harsh Jagtiani, senior advocate a/w. Mr. Sharan Jagtiani, Mr. Mayur
Khandeparkar, Ms. Apurva M. and Ms. Bhavi Vora I/b. Mr. Siddesh S. Bhole
for applicants/plaintiffs.
Mr. D.D. Madon, Mr. Pradeep Sancheti and Mr. Kevic Setalvad, senior
advocates a/w. Mr. Nilav Bandopadhya, Mr. Vinay Bhanushali, Mr. Ruptesh
and Mr. Pushkraj Deshpande I/b. Mr. Vinay Bhanushali for defendant no.1.
Mr. Gaurav Mehta a/w. Mr. Manvendra Mishra and Mr. Akash Karmarkar
I/b. Khaitan and Company for defendant no.2.
Mr. G.S. Godbole a/w. Mr. Rahul Soman and Mr. A.P. Shirke I/b. Mr. Rahul
Soman for defendant no.3.
Mr. F.E. Devitre, senior advocate a/w. Mr. Karl Tamboly, Mr. Vivek Vashi,
Ms. Alya Khan, Ms. Aditi Bhansali and Mr. Yash I/b. Vashi and Vashi for
defendant nos.4 to 8.
----
CORAM : K.R.SHRIRAM, J.
DATE : 17th DECEMBER 2018 P.C.: 1 This notice of motion is taken out for the following reliefs :
(a) That pending the hearing and disposal of the present suit this Hon'ble Court be pleased to pass an order or temporary injunction restraining defendant nos.1 to 8 from proceeding further with the arbitration proceedings invoked by defendant no.1 company pursuant to the invocation notice dated 30th April 2018;
(b) That pending the hearing and disposal of the present suit this Hon'ble Court be pleased to pass an order of temporary injunction restraining defendant no.1 and/or defendant no.2 company and/or defendant nos.4 to 8 or anyone acting on their behalf from invoking arbitration under Clause 16 of the shareholder's agreement.
Urgent ad-interim reliefs are being sought in terms of these prayers.
Gauri Gaekwad
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2 Defendant no.2 is the company that was promoted by plaintiffs
as a group and defendant nos.4 to 7 as a group. For convenience, plaintiffs group is referred to as Ravi Arya Group and defendant nos.4 to 7 is referred to as Pawan Arya Group.
3 Pursuant to Shareholders Agreement dated 25th March 2009, defendant no.1 acquired 49% of equity shares of defendant no.2. The remaining 51% of equity shares in defendant no.2 is split equally between Ravi Arya Group and Pawan Arya Group. Each group holds 25.5% of the equity shares of defendant no.2. Plaintiff no.1 and defendant no.4, who are brothers, have been at loggerheads for some time and there are various proceedings pending in different forum. In one of the proceedings, the Hon'ble Supreme Court of India had also appointed Hon'ble Mr. Justice S.J. Vazifdar (Retd.), former Chief Justice of Punjab and Haryana High Court, as a Mediator. I am informed that the mediation has failed and the report will be filed in due course.
4 Before the mediation process commenced, certain disputes had arisen between defendant no.1 and defendant no.2 and Ravi Arya Group and Pawan Arya Group.
5 Mr. Jagtiani appearing for Ravi Arya Group states that the disputes are stage managed only to keep the Ravi Arya Group out of its rights under the consent terms which they had entered into and which is Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 3/9 10.NMSL-3049-2018.doc also the subject mater of an SLP filed in the Hon'ble Supreme Court of India. According to Mr. Jagtiani, in furtherance of this sinister motive, defendant no.1 in collusion with Pawan Arya Group, invoked arbitration vide letter dated 30th April 2018 against defendant no.2 and the two groups and appointed Hon'ble Mr. Justice Deepak Verma (Retd.) as its Arbitrator. By a letter dated 30th May 2018 signed by defendant no.3, who is the company secretary of defendant no.2, defendant no.2 (without consulting with Ravi Arya Group) informed the advocates for defendant no.1 that they have nominated and appointed Mr. Justice Mohit Shah (Retd.) as their Arbitrator. The two Arbitrators appointed Mr. Justice C.K. Thakker (Retd.) as presiding Arbitrator and Justice Thakker confirmed his acceptance by a letter dated 8th June 2018.
6 On 7th June 2018, Ravi Arya Group sent an email to defendant no.3 questioning his decision to nominate Mr. Justice Mohit Shah as Arbitrator of defendant no.2 since Justice Mr. Mohit Shah has in his letter accepting appointment, indicated that he was involved in 39 arbitrations in which there are some arbitrations between the same parties or related parties in connected or similar contracts. Defendant no.3 replied to Ravi Arya Group stating that he did it in the best interest of defendant no.2 because between 30th April 2018 until 30th May 2018, when he responded to the letter invoking arbitration, he did not receive any instructions from either the Ravi Arya Group or the Pawan Arya Group. He also confessed that Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 4/9 10.NMSL-3049-2018.doc he did not approach any promoter group for appointment of the Arbitrator but relied upon a Board Resolution passed on 15 th March 2018 whereby he was appointed as a Constituted Attorney of the company to appoint the Arbitrator.
7 Mr. Jagtiani pointed out the said resolution authorised defendant no.3 and one more person to appoint Arbitrators and it did not say "or" or "jointly" or "severally" the Constituted Attorney could appoint an Arbitrator. Mr. Jagtiani also submitted that the power given under the Board Resolution was only to do ministerial acts that is to say sign on behalf of the company but defendant no.3 cannot take unilateral decision, without consulting any of the promoters, who should be appointed as Arbitrator on behalf of defendant no.2. Therefore, defendant no.3 had no authority to appoint Mr. Justice Mohit Shah as the Arbitrator and hence the constitution of the Tribunal was illegal and not in consonance with law. 8 These objections, I must note, were raised by Ravi Arya Group in the first meeting of the Arbitral Tribunal held on 25 th July 2018. Paragraph 2 and 3 of the minutes of the meeting held on 25 th July 2018 read as under :
At the outset, Mr. Jagtiani, learned senior advocate appearing for Ravi Arya Group, raised an objection against constitution of Tribunal. He submitted that one group of the respondent company cannot, without the consent of the other group, nominate an Arbitrator. Hence, the constitution of Arbitral Tribunal is not legal and in consonance with law. Mr. Jagtiani also pointed out that in a dispute pending before the Hon'ble Supreme Court, Hon'ble Mr. Justice Vazifdar has been appointed Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 5/9 10.NMSL-3049-2018.doc as a mediator to resolve the disputes between the two Arya groups and if the said disputes are resolved, the Ravi Arya Group would no longer be interested in pursuing the above objection against the constitution of the Tribunal.
Mr. Singh for the claimant and Mr. Mishra for respondent no.1 company submitted that the constitution of the Tribunal is in accordance with law and whatever objection Ravi Arya Group intends to take, can be taken by filing an application under Section 16 of Arbitration and Conciliation Act, 1996. The learned counsel further submitted that the dispute pending before the Hon'ble Supreme Court is in relation to an immovable property which has nothing to do with the present arbitral proceedings arising from the Shareholders Agreement.
(emphasis supplied)
9 In the second minutes of the meeting held on 14 th September 2018 the objections of the Ravi Arya Group was reiterated as recorded in paragraphs 2, 3 and 4 which read as under :
2. It may be stated that Palm View Investment Overseas Ltd.- Claimant initiated arbitral proceedings against Arya Iron and Steel Co. Pvt. Ltd.
for resolution of disputes between the said parties. Palm View Investment (Claimant) nominated Hon'ble Mr. Justice Deepak Verma, Former Judge, Supreme Court of India as an Arbitrator, while Arya Iron and Steel Co. Pvt. Ltd., nominated Hon'ble Mr. Justice Mohit Shah, Former Chief Justice, Bombay High Court as an Arbitrator. Both the nominated Arbitrators then appointed Hon'ble Mr. Justice C.K. Thakker, Former Judge, Supreme Court of India as the Presiding Arbitrator, Constitution of Arbitral Tribunal was thus complete.
3. The Arbitral Tribunal vide notice dated 04.07.2018 fixed First/Preliminary Meeting on 25.07.2018 at 10:00 AM at Mumbai for issuing procedural directions. Ravi Arya Group (one of the respondents) remains present through Senior Advocate Mr. Jagtiani and raised objections against constitution of Tribunal. The Tribunal heard the learned Advocates for the parties and the matter was adjourned.
4. Even in the second meeting held on 14.09.2018, Mr. Jagtiani, learned Senior Advocate appearing for the Ravi Arya Group raised objections against constitution of Arbitral Tribunal. He contended that the proceedings initiated by the claimant and Pawan Arya Group are collusive in nature. Hence, nomination of Hon'ble Mr. Justice Deepak Verma by the claimant as also nomination of Hon'ble Mr. Justice Mohit Shah by respondent no.1 company is not in accordance with law. If it is so, nomination of Hon'ble Justice C.K. Thakker by two Arbitrators also is not in consonance with law and the Arbitral Tribunal cannot be said to be legally and validly constituted. The learned counsel also submitted Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 6/9 10.NMSL-3049-2018.doc that the proceedings are pending before the Hon'ble Supreme Court as also before the Mediator appointed by the Hon'ble Supreme Court. He, therefore, submitted that the Arbitral Tribunal may not issue procedural directions.
It may be stated that the learned Senior Advocate made it clear that he or his client does not have any objection against any of the members of Arbitral Tribunal.
(emphasis supplied) 10 This objection was contested by the counsel representing by defendant no.1 and the Arbitral Tribunal in paragraphs 10, 11 and 12 decided on the objections raised by Ravi Arya Group. Paragraphs 10, 11 and 12 read as under :
10. We find substance in the arguments of the learned Advocates appearing for the claimant and for the respondent no.1 company. The claimant company has nominated Hon'ble Mr. Justice Deepak Verma as an Arbitrator. As per the Shareholders Agreement and after complying with the procedure laid down in the said Agreement, respondent no.1 company has nominated Hon'ble Mr. Justice Mohit Shah as an Arbitrator. Both the Arbitrators then appointed Hon'ble Mr. Justice C.K. Thakker as the third/presidint Arbitrator. We find no substance in any of the objections raised on behalf of the Ravi Arya Group against the constitution of the Arbitral Tribunal.
11. For the foregoing reasons, we hold that the objections raised on behalf of the Ravi Arya Group are not well founded and cannot be upheld. In our opinion, constitution of the Arbitral Tribual is in consonance with law and in pursuance of procedure laid down in Shareholders Agreement. The Tribunal will, hence, proceed to issue procedural directions.
12. Before parting with the matter, we may clarify that all the observations made hereinabove have been made only for the purpose of dealing with and deciding the objection raised by the Ravi Arya Group against the constitution of the Arbitral Tribunal. We may not be understood to have expressed any opinion one way or the other on the mertis of the matter. Hence, as and when the matter is considered on merits, it will be open to all parties to raise all objections/submissions available to them and it will also be open to the Tribunal to consider all those objections/submission without being influence and/or inhibited by the observations made in this order.
(emphasis supplied) Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 7/9 10.NMSL-3049-2018.doc 11 The Arbitral Tribunal has, therefore, held that the objection raised on behalf of Ravi Arya Group are not well founded and cannot be upheld. The Tribunal also opined that the constitution of the Arbitral Tribunal is in consonance with law and in pursuance of procedure laid down in Shareholders Agreement. The Tribunal also clarified that the observations made by the Tribunal in the order dated 28 th September 2018 (the second meeting held on 14th September 2018) were only to deal with the objections raised by Ravi Arya Group and they have not expressed any opinion one way or the other on the merits of the matter. The Tribunal, thereafter, also issued procedural directions. The minutes of the meeting held on 14th September 2018 was released on 28th September 2018 on which date the procedural directions were passed and a third minutes of the meeting was also recorded, in which it is recorded that the Senior Advocate appearing for Ravi Arya Group stated that Ravi Arya Group would not participate further in the proceedings and left the Conference Room. 12 Mr. Jagtiani has, basically, reiterated the objections that were raised before the Arbitral Tribunal. The learned Arbitrators have given a decision.
13 Section 13 (4) and (5) of the Arbitration and Conciliation Act, 1996, as amended, (the said Act) reads as under :
13. Challenge procedure.--
(4) If a challenge under any procedure agreed upon by the parties or Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 8/9 10.NMSL-3049-2018.doc under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
Section 34 (2) (v) of the said Act reads as under :
34 (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) ...........
(ii) ...........
(iii) ...........
(iv) ...........
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or ...............
Therefore, plaintiffs can raise a challenge if they are unhappy with the Arbitral Tribunal's award made, now only under sub-section 4 of Section 13 read with Section 34 (2) (v) of the said Act. 14 Section 5 of the said Act deals with the extent of judicial intervention and provides that notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this part. There is no provision in the said Act for the Court to intervene in the manner plaintiffs are seeking intervention.
Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 ::: 9/9 10.NMSL-3049-2018.doc 15 I have to also add that under Section 16(2) of the said Act, a
party can raise a plea that the arbitral tribunal does not have jurisdiction. If the Tribunal holds that it has jurisdiction, no appeal is permitted under Section 37 (2) (a). The remedy for such a party could be under sub-section 6 of Section 16 which says that a party aggrieved by an order that the Tribunal has jurisdiction, may make an application for setting aside such an arbitral award in accordance with section 34.
16 The attempt of plaintiffs is only to circumvent the provisions of the said Act. An order from this Court cannot be obtained to circumvent the provisions of the Arbitration and Conciliation Act, 1996. It is open to plaintiffs to raise their grievance once the award is given under Section 34 of the said Act.
17 I must hasten to add that I am not opining here such a grievance will be maintainable. I am only saying it is upto plaintiffs to take such steps as advised.
18 In the circumstances, considering the reliefs as sought in the notice of motion, in my view, such a notice of motion itself is not maintainable.
19 Notice of motion dismissed.
(K.R. SHRIRAM, J.) Gauri Gaekwad ::: Uploaded on - 20/12/2018 ::: Downloaded on - 27/12/2018 09:01:34 :::