Karnataka High Court
Act Digital Home Entertainment vs M/S. Helapuri Cable Vision Llp on 26 May, 2023
Author: R. Devdas
Bench: R. Devdas
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF MAY, 2023
BEFORE
THE HON' BLE MR.JUSTICE R. DEVDAS
CIVIL MISCELLEANEOUS PETITION NO. 362/2021
BETWEEN
1. ACT DIGITAL HOME ENTERTAINMENT
PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
TRADE CENTRE, 4TH FLOOR
NO 49/4, RACE COURSE ROAD
BANGALORE- 560001
REP HERE IN BY ITS
GENERAL MANGER-LEGAL
MR C.N.SURESH BABU.
2. HCV DIGITAL ENTERTAINMENT
PRIVATE LIMITED
HAVING ITS REGISTED OFFICE AT
2ND AND 3RD FLOOR
NO 1, INDIAN EXPRESS BUILDING
QUEENS ROAD
BANGALORE-560001
REP HERE IN BY ITS
GENERAL MANAGER- LEGAL
MR C N SURESH BABU.
...PETITIONERS
(BY SRI. T. SURYANARAYANA, SENIOR COUNSEL FOR
SMT. BHAVANI KUMAR, ADVOCATE)
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AND
1. M/S. HELAPURI CABLE VISION LLP
HAVING REGISTERED OFFICE AT
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
REP BY ITS DESIGNATED PARTNER
GADE KUMARA SRIRAMA BHOGENDRA RAO
2. GADE KUMAR SRIRAMA BHOGENDRA RAO
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DISTRICT - 534002
ANDHRA PRADESH
AND AT
BLAZE COLOUR LAB
Rr PET, ELURU,
WEST GODAVARI DISTRICT - 534002.
ANDHRA PRADESH
AND RESIDING AT
D.No. 4-97, NEAR SIVALAYAM
ELURU, MANDALAM MADEPALLE
MADEPALLE - 534 004.
ANDHRA PRADESH
3. BANKA KRISHNA RAO
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE
CHANAKYAPURI COLONY, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH
AND RESIDING AT
No. 23B-9-23/3, KARANAM
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VARI STREET, WARD No. 14, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
4. SATYANARAYANA VARAPRASAD BANKA
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE
CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH
AND RESIDING AT
24C-6/1-21, CHANAKYAPURI COLONY,
2 ROAD, 2/24, JHANSI NILAYAM,
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
5. SRINIVASA RAO GADAMSETTI
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE
CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND R/AT D NO 4-7-9
AGARAHARAM
KESARPALLI VARI VEEDHI
AGRAHARAM, ELURU
WEST GODAVARI DIST 534001
ANDHRA PRADESH
6. RAJANI GADE
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
-4-
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 4-97, NEAR SIVALAYAM
ELURU, MANDALAM MADEPALLE
MADEPALLE - 534 004.
WEST GODAVARI DISTRICT
ANDHRA PRADESH.
7. VENKATA SURYANARAYANA
MURTHY CHODAY
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 20B-2-02
DONGALA MANDAPAM
ELURU, WEST GODAVARI DISTRICT- 534 001.
ANDHRA PRADESH
8. CHANDRA MOHANA RAO CHEVURI
PARTNER
M/S HELAPURI CABLER VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 6D-7-7
MARKENDEYA SWAMY TEMPLE ROAD
SOUTHERN STREET, ELURU
WEST GODAVARI DISTRICT - 534 001.
ANDHRA PRADESH
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SINCE DECEASED REPRESENTED BY
HIS LEGAL REPRESENTATIVES
8(a) Mrs. CHEVURI SAILAJA
W/O LATE CHEVURI CHANDRA MOHANA RAO
AGED ABOUT 50 YEARS
8(b) Mrs. CHEVURI ANUSHA
D/o LATE CHEVURI CHANDRA MOHANA RAO
W/O GUDIVADA SAIRAM
AGED ABOUT 26 YEARS
8.(c) Ms. CHEVURI NAINISHA
D/o LATE CHEVURI CHANDRA MOHANA RAO
AGED ABOUT 23 YEARS
ALL ARE RESIDING AT
D.No. 6D-7-7,
MARKENDEYA SWAMY TEMPLE ROAD
SOUTHERN STREET, ELURU
WEST GODAVARI DISTRICT - 534 001.
9. SRINIVAS RAO BODDANI
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
FLAT No. 417, VIBHAV FORT
NEAR AMBICA THEATER, ELURU
WEST GODAVARI DISTRICT - 534 001.
ANDHRA PRADESH.
10 . SAI JYOTHI BANKA
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
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ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
No. 23B-9-23/3, KARANAM VARI STREET
WARD No.14, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
11 . RAMA DEVI KURALLA
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No.23B-3-12
NEAR LAKSHMI GANAPATHI TEMPLE
KASTHURI VARI VEEDI
RR PET, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
12 . RAVI KIRAN BANKA
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
No. 23B-9-23/3
KARANAM VARI STREET
WARD No. 14, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
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13 . UMAMAHESHWARA RAO TANUKU
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 2-88-1, NEAR PANCHAYATHI OFFICE
SATRAMPADU, ELURU
WEST GODAVARI DISTRICT - 534 007.
ANDHRA PRADESH.
14 . JHANSI RANI BANKA
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 23B-9-23/3
KARANAM VARI STREET
WARD No.14, ELURU
WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH
15 . SAITEJ KURALLA
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 23B-3-12
NEAR LAKSHMI GANAPATHI TEMPLE
KASTHURI VARI VEEDI
RR PET, ELURU
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WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
16 . VENKATA CHALAPATHI RAO MOTHEY
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.NO. 6C-7-7
SOUTHERN VEEDHI, ELURU
WEST GODAVARI DISTRICT - 534 001
ANDHRA PRADESH
17 . NAGAJYOTHI MOTHEY
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.NO 6C-7-7
SOUTHERN VEEDHI
ELURU, WEST GODAVARI DIST- 534001
ANDHRA PRADESH
18 . SAILAJA CHEVURI
PARTNER
M/S HELAPURI CABLE VISION LLP
2/24, 2ND LANE CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DIST 534002
ANDHRA PRADESH
AND RESIDING AT
D.No. 6D-7-7
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MARKENDEYA SWAMY TEMPLE ROAD
SOUTHERN STREET, ELURU
WEST GODAVARI DISTRICT - 534 001.
ANDHRA PRADESH.
19 . SRINIVAS KURELLA
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH
AND RESIDING AT
D.No.23B-3-12
NEAR LAKSHMI GANAPATHI TEMPLE
KASTHURI VARI VEEDI, RR PET
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
20 . MANOJ KUMAR MOTHEY
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DISTRICT- 534 002.
ANDHRA PRADESH
AND RESIDING AT
D.No. 6C-7-7, SOUTHERN VEEDHI
ELURU, WEST GODAVARI DISTRICT - 534 001.
ANDHRA PRADESH.
21 . CHODAY PADMA SAILAJA
PARTNER
M/s. HELAPURI CABLE VISION LLP
2/24, 2ND LANE, CHANAKYAPURI COLONY
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH.
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AND RESIDING AT
D.No. 20B-2-02
DONGALA MANDAPAM
ELURU, WEST GODAVARI DISTRICT - 534 001.
ANDHRA PRADESH.
22 . WISDOM INTEGRATED NETWORK
PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
D.No. 20A-5-16/A POWER PET
ELURU, WEST GODAVARI DISTRICT - 534 002.
ANDHRA PRADESH
REPRESENTED BY ITS DIRECTOR.
...RESPONDENTS
(BY SRI. K.G. KAMATH, ADVCOATE FOR R1 TO R21
SRI. ARVIND KAMATH, SENIOR COUNSEL ALONG WITH
SMT. LEKHA G.D., ADVOCATE FOR
SRI. D.C. PRAKASH, ADVOCATE FOR R22)
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SEC.11(5) OF THE ARBITRATION AND CONCILIATION ACT 1996,
PRAYING THIS HON'BLE COURT TO APPOINT AN ARBITRATOR ON
BEHALF OF THE PARTIES IN TERMS OF CLAUSE 8 OF THE SPA
(ANNEXURE-A TO THE PETITION) R/W CLAUSE C(III) OF THE NON-
COMPETE AGREEMENT (ANNEXURE-B TO THE PETITION), SO AS TO
CONSTITUTE THE ARBITRAL TRIBUNAL, TO ADJUDICATE UPON AND
DETERMINE THE DISPUTES/DIFFERENCES BETWEEN THE PARTIES
ARISING UNDER THE SAID AGREEMENT AND ETC.
THIS CIVIL MISCELLEANEOUS PETITION HAVING BEEN
HEARD AND RESERVED ON 17.01.2023 AND COMING ON FOR
PRONOUNCEMENT OF ORDERS, THIS DAY, THE COURT MADE THE
FOLLOWING:
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ORDER
This Civil Miscellaneous Petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as 'the Act' for short) seeking appointment of a sole Arbitrator in terms of the arbitration clause contained in the Share Purchase Agreement (hereinafter referred to as 'SPA', for short) dated 15.11.2019.
2. Respondent No.1, a Limited Liability Partnership was engaged in Cable Television and Broadband business in the State of Andhra Pradesh. Respondents No.2 to 21 are the partners of the Limited Liability Partnership. Respondent No.1 owned 9999 shares in M/s.Helapuri Cable Vision LLP, (respondent No.1) and respondent No.2 held 1 share. The petitioners herein entered into a Share Purchase Agreement dated 15.11.2019 to purchase 100% of the shares from respondents No.1 and 2, for a consideration of Rs.10,50,00,000/- (Rupees Ten Crores and Fifty Lakhs only). The sellers, viz., respondents No.1 and 2 herein bound -12- themselves by a non-compete clause, agreeing not to directly or indirectly engage in any manner or capacity in the same business i.e., in the business of Cable T.V.
operation/business/networks, for a period of 3 years from the date of the execution of the agreement. It is the contention of the petitioners that in violation of the said "Non-Compete Agreement", respondents No.1 and 2, along with some of their partners are engaged in the prohibited activities, joining hands with respondent No.22 and are running the business in the name and style of "WIN T.V.".
3. The petitioners therefore issued a legal notice dated 13.02.2021 calling upon the respondents to cease and desist from engaging in any activity which would violate the non- compete obligations under the SPA and the "Non-Compete Agreement". It is contended that despite such legal notice having been received by the respondents, some of the respondents attended and actively participated in the launch of "WIN T.V." on 15.02.2021, thereby violating the "Non- -13- Compete Agreement". However, respondents No.1 to 21 gave a reply on 01.03.2021 denying the execution of the SPA and the "Non-Compete Agreement" and also stated that they have not indulged in any such activity. It is contended by the petitioners that some of its customers have been poached or attempted to be poached by the respondents by forcefully taking away/swapping the "Set Top Boxes" (STBs). It is stated that many of the customers have complained to the petitioners in this regard. It is contended that respondent No.22 was incorporated on 13.11.2020 soon after the final payment under the SPA was received by respondents No.1 and 2 on 24.08.2020. It is contended that respondent No.22 was incorporated mischievously in the names of the nominees of the erstwhile partners of respondents No.1 and 2. It is contended that the petitioners have suffered irreparable loss/ damage and injury to their valuable and legitimate rights under the SPA and the "Non-Compete Agreement". -14-
4. The petitioners got issued one more legal notice dated 27.05.2021 invoking the arbitration clause, nominating a retired District Judge as the proposed sole arbitrator from their side and called upon respondents No.1 and 2 to appoint the sole arbitrator to adjudicate the lis between the parties. Respondents No.1 to 21 got issued a reply dated 22.06.2021 declining to appoint an arbitrator on the ground that respondent No.22 is not a party to the SPA and "Non-Compete Agreement". Reference was also made to the interlocutory application in I.A.No.3 in Commercial A.A.No.53/2021 and striking out respondent No.22 herein from the array of parties.
5. Statement of objections have been filed at the hands of respondent No.22 herein on the same lines, i.e., raising a contention that since respondent No.22 is not a party to the SPA and "Non-Compete Agreement" entered into between the petitioners and respondents No.1 and 2, the prayer made in the petition cannot be granted. It is contended that for the -15- same reason, the petition may be dismissed insofar as respondent No.22 is concerned.
6. Learned Counsels for the respondents have placed reliance on the following decisions of the Hon'ble Supreme Court:
(i) Pravin Electricals Pvt.Ltd., Vs. Galaxy Infra and Engineering Pvt. Ltd., (2021) 5 SCC 671 and
(ii) State of Kerala Vs. M M Mathew and Others, AIR 1978 SC 1571.
Learned Counsels have also sought to place reliance on a decision of the Delhi High Court in the case of Shapoorji Pallonji and Co., Pvt. Ltd., Vs. Rattan India Power Ltd., and Others, reported in 2021 SCC OnLine Del 3688.
7. On the other hand, learned Senior Counsel Sri.T.Suryanarayana, appearing for the petitioners contends that in the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Others, (2013) 1 SCC 641, the Hon'ble Supreme Court has clearly held -16- that a non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. It was held that courts have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exceptions. Learned Senior Counsel would further draw the attention of this Court to Cheran Properties Limited Vs. Kasturi and Sons Limited and Others (2018) 16 SCC 413, wherein it was held that there may be certain situations where even a non-signatory to an agreement could be bound by the terms of the agreement. It was held that courts have to find out the true essence of the business arrangement to unravel from a layered structure of the commercial arrangements, and to an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory. The learned Senior Counsel has also brought to the -17- notice of this Court a decision of the Delhi High Court in the case of R.V.Solutions Pvt. Ltd. Vs. Ajay Kumar Dixit and Others, 2019 SCC OnLine Del 6531, wherein, under similar circumstances it was held that defendant No.1 therein had misused the private and confidential information of the plaintiff company to solicit clients, vendors and staff of the plaintiff. The Delhi High Court held there is clearly commonality of facts which bind the defendants together. It was found that the defendants being ex-employees of the plaintiff colluded with each other in a mala fide and unlawful manner acted to cause loss and damage to the plaintiff. Since it was manifest that there is commonality in parties, commonalities of interest which would warrant reference of the matter for arbitration, the Delhi High Court referred the matter for arbitration.
8. The learned Senior Counsel would also draw the attention of this Court to an unreported decision of this Court in the case of Force Fitness (India) Private Limited Vs. -18- Bengaluru Fitness Centre Private Limited in Civil Misc.Petn.No.92/2012, dated 31.07.2015 and submits whether a particular person or party can be proceeded against by the arbitral tribunal and whether relief could be granted against such a party is an issue which can be decided by the arbitral tribunal itself.
9. Having heard the learned Senior Counsel for the petitioners and learned Counsel for the respondents, this Court finds that the only issue that requires consideration in this petition is whether the prayer made in this petition seeking appointment of a sole arbitrator could be rejected only on the ground that respondent No.22 herein is apparently not a signatory to the SPA and the "Non-Compete Agreement" or whether the sole arbitrator could be appointed while dismissing the petition as against respondent No.22.
10. Having regard to the judgments of the Hon'ble Supreme Court cited by the learned Senior Counsel for the petitioners, this Court finds that there has been a marked -19- difference in the march of law in the matter of subjecting a non-signatory to arbitration. A larger Bench of the Apex Court, in the case of Chloro Controls (supra) has held that though the scope of an arbitration agreement is limited to the parties who enter into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the "group of companies doctrine". Having regard to the decisions of various courts, more particularly, in the international context, it was held that a non-signatory party could be subjected to arbitration provided the transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non- signatory parties. It was held that intention of the parties is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. The courts were called upon to examine these aspects from the touchstone of direct relationship to the party signatory to the arbitration -20- agreement, direct commonality of the subject matter and the agreement between the parties being a composite transaction. Besides all these, the court should examine whether a composite reference to such parties would serve the ends of justice. It was held that once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parities would fall within the exception discussed in the said decision.
11. In that view of the matter, and applying the test laid down by the Hon'ble Apex Court, this Court finds that respondents No.1 and 2 have bound themselves in the SPA and the "Non-Compete Agreement" that they will not directly or indirectly indulge in similar activity of Cable T.V. operation / business/networks for a period of 3 years from the date of the execution of the agreement. The allegation of the petitioners is that the partners of respondents No.1 and 2 have indirectly established respondent No.22-Firm/Company to do the prohibited business and have therefore violated the "Non- -21- Compete Agreement". When such is the allegation, if any court or arbitral tribunal is called upon to go into such allegation, then respondent No.22 would have to be examined. Without examining the composition of respondent No.22, its incorporation, its owners/partners/directors, the truth cannot be arrived at. It is another matter as to whether any liability could be fastened on respondent No.22 and whether damages can be claimed against it. These are all matters which fall within the realm of the arbitral tribunal.
12. For the foregoing reasons, this Court is of the considered opinion that the petitioners have made out a case for appointment of a sole arbitrator. Consequently, this Court proceeds to pass the following:
ORDER
(a) The Civil Miscellaneous Petition is allowed appointing Shri.I.S.Antin, retired District Judge, as the sole arbitrator to enter reference of the disputes between the -22- petitioners and the respondents and conduct proceeding at the Arbitration and Conciliation Centre (Domestic and International), Bengaluru, according to the Rules governing the said Arbitration Centre.
(b) All contentions inter se parties are left open for adjudication in the arbitration proceedings.
(c) The office is directed to communicate this order to the Arbitration and Conciliation Centre and to Shri.I.S.Antin, retired District Judge, as required under the Arbitration and Conciliation Centre Rules, 2012.
Sd/-
JUDGE DL