Gujarat High Court
C/Lpa/462/2017 Cav Judgment vs Gujarat State Petroleum Corporation ... on 18 August, 2017
Author: Anant S.Dave
Bench: Anant S. Dave, A.Y. Kogje
C/LPA/462/2017 CAV JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL NO. 462 of 2017 In SPECIAL CIVIL APPLICATION NO. 4210 of 2017 With CIVIL APPLICATION NO. 4125 of 2017 In LETTERS PATENT APPEAL NO. 462 of 2017 With LETTERS PATENT APPEAL NO. 463 of 2017 In SPECIAL CIVIL APPLICATION NO. 4211 of 2017 With CIVIL APPLICATION NO. 4126 of 2017 In LETTERS PATENT APPEAL NO. 463 of 2017 FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE ANANT S. DAVE and HONOURABLE MR.JUSTICE A.Y. KOGJE 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?Page 1 of 40
HC-NIC Page 1 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT IVRCL LIMITED....Appellant(s) Versus GUJARAT STATE PETROLEUM CORPORATION LIMITED &
2....Respondent(s) Appearance:
MR MIHIR THAKORE Senior Advocate with MR AS VAKIL, Advocate for the Appellant(s) No. 1 MR BHARGAV KARIA for BHARGAV KARIA & ASSO, ADVOCATE for the Respondent(s) No. 2 MR ASPI M KAPADIA, CAVEATOR for the Respondent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE ANANT S. DAVE and HONOURABLE MR.JUSTICE A.Y. KOGJE Date : 18/08/2017 COMMON CAV JUDGMENT (PER : HONOURABLE MR.JUSTICE ANANT S. DAVE) Both these appeals under Clause 15 of the Letters Patent are filed against common oral order dated 14.3.2017 passed by the learned Single Judge of this Court in Special Civil Application No.4210 of 2017 and 4211 of 2017 in exercise of powers under Articles 226 and 227 of the Constitution of India. Before learned Single Judge, challenge was to the common order dated 18.2.2017 passed by learned Arbitral Tribunal on impleadment applications preferred by respondent no.1 to join appellant / petitioner as respondent no.2 in two arbitration proceedings pertaining to the dispute in connection with Joint Operating Page 2 of 40 HC-NIC Page 2 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Agreement (for short, "JOA").
2 The above two arbitration proceedings are with regard to `South Diyur Block' and `North Hap'y Block' between respondent no.1GSPC and respondent no.2Alkor Petro Limited (Alko). The JOA is entered into between respondent no.1, respondent no.2 and another party being Geo Global Resources (Barbados) Inc. (GGR) to define their rights, interest and obligation in connection with concession agreement dated 9.3.2008 viz. the contract entered into by them with Arab Republic of Egypt and Ganoub EIWasi Holding Petroleum Company (GANOPE) for the development, exploration, extraction and production of hydrocarbon resources viz. for oil exploration for the above two blocks in Egypt.
3 For deciding the issue involved in these appeals, facts which are not seriously disputed by the respondent and taken from LPA 462/2017 records are as under: 3.1 The Respondent No.1 GSPC is incorporated as a Petrochemical Company.
3.2 The Appellant is incorporated under the provisions of the Companies Act, 1956.
Page 3 of 40HC-NIC Page 3 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.3 The Respondent No.2 Alkor is incorporated. According to the Respondent No.1 GSPC (Paragraph 5.1 of the Statement of Claim) the Respondent No.2 Alkor was under the control of a different promoter group namely Gorlas Group. Further, according to the Respondent No.1 GSPC, the Respondent No.2 Alkor was incorporated by the said Gorlas Group to venture in oil and gas exploration and production. All the erstwhile ventures of the Respondent No. 2 Alkor were with Respondent No. 1 GSPC and the Respondent No.2 Alkor was a Special Purpose Vehicle. The Respondent No. 2 Alkor had 5 blocks in Yemen and Egypt where the Respondent No.lGSPC was the operator.
3.4 According to the Respondent No.1 GSPC, the Appellant acquired 100% stake in the Respondent No.2 Alkor and at this point of time, according to the Respondent No. l GSPC the Respondent No.2 Alkor had 5 blocks in Yemen and Egypt where the Respondent No.1 GSPC was the operator. According to Respondent No.1 GSPC, since 2007, the Appellant is running the operations of the Respondent No.2 Alkor.
3.5 Concession Agreement is executed between the Arab Republic of Egypt, Egyptian National Gas Holding Company, the Respondent No.1 GSPC, Geo Page 4 of 40 HC-NIC Page 4 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Global Resources and Respondent No.2 Alkor. Despite having full knowledge that the Appellant was the holding company of the Respondent No.2 Alkor, the said Concession Agreement made no reference to the Appellant, nor is the Appellant made party to the said Concession Agreement.
3.6 Various letters are addressed / exchanged by and between the Respondent No.1 GSPC and Respondent No.2 Alkor, calling 2011 upon the Respondent No.2 Alkor to remit Respondent No.2 Alkor's share of expenditure to meet the joint venture obligations. No demand is made nor any letter is addressed by the Respondent No.1 GSPC to the Appellant.
3.7 At this stage, a Joint Operating Agreement for South Diyur Block ("J0A") (AnnexureZ of the SCA) and for North Hap'y Block are executed between the Respondent No.1 GSPC, Geo Global Resources (Barbados) Inc. and the Respondent No.2 Alkor for oil exploration in Egypt. The said two JOAs contain the arbitration clause (Article 18) which has led to two arbitration proceedings Viz. arbitration proceeding for South Diyur Block and arbitration proceeding for North Hap'y Block. Undisputedly the Appellant is not a party to the JOAs nor do the JOAs make any reference to the Appellant, nor Page 5 of 40 HC-NIC Page 5 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT does it disclose any intention to make the Appellant liable for the financial obligations of the Respondent No.2 Alkor arising out of the (two) I OAS.
3.8 According to the Respondent No.1 GSPC, the Respondent No.2 Alkor made payments of the cash calls / JIB (Joint Interest Billing) to the Respondent No.1 GSPC under the (two) JOAs dated 18.07.2011 upto February, 2012.
3.9 Again various letters are addressed by the Respondent No.1 GSPC to the Respondent No.2 Alkor calling upon the Respondent No.2 Alkor to remit its share of expenditure to meet the joint venture obligations. No letter is addressed to the Appellant, there is no reference to the Appellant, nor is there any intention to bind the Appellant for the financial obligations of the Respondent No.2 Alkor under the (two) JOAs dated 18.07.2011.
3.10 A common letter is addressed by the Respondent No.1 GSPC to the Respondent No.2 Alkor (for South Diyur and North Hap'y Block Block) enlisting the cash calls which have allegedly remained unpaid by the Respondent No.2 Alkor, refers to the JOAs dated 18.07.2011 and states that the Respondent No.1 GSPC shall be Page 6 of 40 HC-NIC Page 6 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT constrained to invoke default provisions of the JOAs dated 18.07.2011 against the Respondent No.2 Alkor to protect the rights of the Respondent No.1 GSPC. The said letter is also not addressed to the Appellant nor any demand is made upon the Appellant.
3.11 Then, in the letter of the Respondent No.2 Alkor to the Respondent No.1 GSPC (in reply to letter dated 01.11.2012), it is denied and disputed the claim of the Respondent No.1 GSPC and in fact, stating that the Respondent No.1 GSPC has defaulted on many counts, requesting for an operating Committee Meeting, exploration advisor committee meeting etc. Another letter (Annexure3 of the SCA) of the Respondent No.1 GSPC to the Respondent No.2 Alkor describing it as the final notice of default for outstanding cash calls / JIB for both the blocks (i.e. South Diyur Block and North Hap'y Block), calling upon the Respondent No.2 Alkor to make payment within seven business days, failing which bank guarantee in relation to both the blocks will be encashed, Respondent No.2 Alkor's participating interest will be forfeited in accordance with the JOAs dated 18.07.2011 and the Respondent No.1 GSPC will initiate arbitration proceedings against the Respondent No.2 Alkor. No such notice was issued to the Page 7 of 40 HC-NIC Page 7 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Appellant, much less any notice disclosing intention to initiate arbitration proceedings against the Appellant.
3.12 Email (Annexure4 of the SCA) is stated to have been addressed by the Respondent No.2 Alkor to the Respondent No.1 GSPC attaching therewith a "Note on Alkor Petroo". The said note makes reference to the Appellant. No copy of the said email and the attachment is sent to the Appellant nor is the Appellant a signatory to the said "Note on Alkor Petroo".
3.13 Letter (AnnexureS of the SCA) of the Appellant to the Directors of the Respondent No.2 Alkor stating that the Board of Directors of the Appellant has resolved to extend financial support to the Respondent No.2 Alkor as may be required from time to time to enable the Respondent No.2 Alkor to continue as a growing concern. The said letter also states that the same is for the sole benefit of respondent No.2 Alkor and no other third party shall have any rights or claims directly on the Appellant.
31.4 The Respondent No.1 GSPC has not explained how it has come in possession of the letter dated 19.8.2013.
Page 8 of 40HC-NIC Page 8 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.15 Letter (Annexure6 of the SCA) of the Appellant addressed to the Chief Secretary of the State of Gujarat, referring therein to the exploration of two blocks (namely South Diyur Block Block and North Hap'y Block) in Egypt wherein the share of the Respondent No.1 GSPC was initially 50%, Geo Global was 30% and the Respondent No.2 Alkor was 20° 0 for the reasons stated therein it was requested that the proposed encashment of the letter of guarantee for the South Diyur block will built additional financial pressure on the Appellant and the Chief Secretary was requested not to propose for encashment. The said letter dated 11.10.2013 was received by the Respondent No.1 GSPC on 26.02.2014/27.02.2014.
3.16 The Respondent No.1 GSPC issued Notice (Annexure7 of the SCA) to Respondent No.2 Alkor invoking arbitration under Article 18.2 of the JOA dated 18.07.2011 in relation to the South Diyur Block and also for North Hap'y Block. The said notice is essentially the notice contemplated under Section 21 of the Arbitration Act.
3.17 No such notice was issued to the Appellant nor was the Appellant party to any endeavour to resolve differences through negotiation and conciliation etc. Page 9 of 40 HC-NIC Page 9 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.18 Reply of Respondent No.2 Alkor (Annexure8 of the SCA) to the Notice dated 26.03.2014 issued by the Respondent No.1 GSPC, challenging therein invocation of Article 18 of the JOA dated 18.07.2011 and stating that the invocation of arbitration is contrary to the provisions of the JOA dated 18.07.20 3.19 Reply of Respondent No.1 GSPC (Annexure 9 of the SCA) to the Reply dated 21.04.2014 of Respondent No.2 Alkor.
3.20 Further Reply of Respondent No.2 Alkor (Anncxure10 of the SCA) to the Reply dated 07.05.2014 issued by the Respondent No.1 GSPC. The Respondent No.1 GSPC filed before this Court Arbitration Petitions No. 42 of 2014 and No. 43 of 2014 (South Diyur Block and North Hap'y Block) Annexure11 of the SCA), both under Section 11 of the Arbitration Act for appointment of Arbitrator/s. The Appellant is not a party to the said two Arbitration Petitions nor is the Appellant even referred to in the memo of the Arbitration Petitions. This Court by common order dated 10.10.2014 AnnexureIZ of the SCA) appointed Hon'ble Justice (Retd.) M. B. Shah as the Arbitrator of Respondent No.1 GSPC and Hon'ble Justice (Retd.) D.A. Mehta as the Page 10 of 40 HC-NIC Page 10 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Arbitrator of the Respondent No.2 Alkor and both the learned Arbitrators were to select a third arbitrator [Hon'ble Justice (Retd.) C.K. Buch] to constitute the Arbitral Tribunal (i.e. Respondent No.3) for resolution of disputes "between the parties arising out of the Agreement dated 18.07.2011 (i.e. JOA)".
3.21 In the First / preliminary arbitral meeting (minutes at Annexure 13 of the SCA) the counsel for the parties (GSPC and Alkor) gave a brief overview of the disputes between the parties arising out of the (two) JOAs dated 18.07.2011 and after discussion it was directed inter alia that the Respondent No.1 GSPC shall file statement of claim, Respondent No.2 Alkor shall file statement of defence, Rejoinder by Respondent No.1 GSPC etc. 3.22 Even in the said minutes of the meeting, there is no reference to the Appellant.
3.23 The Respondent No.1 GSPC filed the Claim Statement (Annexure14 of the SCA) before the Respondent No.3 (i.e. Arbitral Tribunal) containing the following prayer inter alia:
"a b Page 11 of 40 HC-NIC Page 11 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT c d. to implead IVRCL to the present proceedings and subject to the success of our claim hold IVRCL and the Respondent jointly and severally liable towards the amount due towards the claimant."
3.24 Thus, for the first time, in January, 2015, the Appellant was sought to be impleaded and made liable for the obligations of the Respondent No.2 Alkor under the JOAs dated 18.07.2011 on the ground that the Appellant is a holding company of the Respondent No.2 Alkor, there are common directors, common address, common emails, etc. 3.25 The minutes of the second arbitral meeting at which also no effort was made by the Respondent No.1 GSPC to get a notice issued to the Appellant for consideration of the prayer contained in paragraph 10(d) of the statement of Claim.
3.26 The Respondent No. 2 Alkor filed its Written Statement.
3.27 The Respondent No.1 GSPC filed its Rejoinder.
Page 12 of 40HC-NIC Page 12 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.28 The Respondent No.1 GSPC filed the proposed issues and also filed the impleadment Application dated 11.06.2015 (Annexure 15 of the SCA) before the Respondent No.3 with the following prayers:
"a. to fix the date for hearing and deciding the issue of joinder of IVRCL, preliminary.
b. to implead IVRCL as a party to the present proceedings.
c. to grant such other and further reliefs as the Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case."
3.29 The Respondent No.2 Alkor filed its Sur rejoinder.
3.30 The Respondent No. 2 Alkor filed its Reply to the impleadment Application dated 11.06.2015.
3.31 The Respondent No.1GSPC filed before the Principal Civil Judge, Gandhinagar ("Civil Court") two Applications (South Diyur Block, North Hap'y Block) against the Respondent No.2 Alkor and the present Appellant, under Section 9 of the Arbitration Act for interim measures along Page 13 of 40 HC-NIC Page 13 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT with two separate applications for interim relief. The Civil Court was pleased to pass an exparte order below two separate applications for interim relief.
3.32 At this stage, the Respondent No.3 issued notices on the impleadment Applications (South Diyur Block, North Hap'y Block) to the Appellant and made it returnable on 17.10.2015. It was observed therein that the Appellant shall file its written submissions on or before 15.09.2015 to the impleadment application, if the Appellant is of the opinion that it cannot be joined as a party Respondent.
3.33 Being aggrieved by the exparte order dated 16.7.2015 passed by the Civil Court in Section 9 proceedings, the Appellant preferred (two) First Appeals along with Civil Application for stay before this Court. On the suggestion of this Court, the parties to the First Appeal agreed to the First Appeals being disposed of in terms of the arrangement stated in this Court's order dated 07.08.2015. The Appellant filed before the Civil Court, Application dated 09.08.2015 Exhibit 19 (South Diyur Block, North Hap'y Block) for discharging and setting aside the exparte order dated 16.7.2015.
Page 14 of 40HC-NIC Page 14 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.34 Judgment and order passed by the Civil Court dismissing the Appellant's Application Exhibit 19 and thereby confirming the exparte order dated 16.07.2015.
3.35 Being aggrieved by the judgment and order dated 20.08.2015 passed by the Civil Court, the Appellant preferred before this Court, (two) First Appeals with Civil Applications for stay.
3.36 The Appellant also preferred two Special Civil Applications and challenged the (two) notices dated 29.07.2015 (South Diyur Block, North Hap'y Block) issued by the Respondent No.3, for impleading the Appellant in the arbitration proceedings. The Respondent No.1 GSPC appeared on caveat. This Court by order dated 09.09.2015 (Annexurel7 of the SCA) issued Rule and granted interim protection to the Appellant.
3.37 This Court by common final judgment and order (Annexurel6 of the SCA) allowed the First Appeals of the Appellant and set aside the ex parte order dated 16.07.2015 passed by the Civil Court in the section 9 proceedings and directed the Civil Court to hear and finally decide the two Section 9 Applications on or before 31.01.2016. The SLPs against the same were disposed of by the Hon'ble Supreme Court by Page 15 of 40 HC-NIC Page 15 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT extending the statusquo order upto 31.01.2016.
3.38 The Civil Court allowed the two applications filed under Section 9 (South Diyur Block and North Hap'y Block).
3.39 The Appellant, the Respondent No.2 Alkor and the Respondent No.1 GSPC preferred First Appeals (three for South Diyur Block, three for North Hap'y Block) before this Court challenging the final judgment and order dated 25.01.2016 passed by the Civil Court below the two Section 9 Applications.
3.40 This Hon'ble Court by its common judgment and order (Annexure 18 of the SCA) allowed the (four) First Appeals of the Appellant, Respondent No.2 Alkor and dismissed the (two) First Appeals of the Respondent No. 1 GSPC. By the said common judgment and order the two Special Civil Applications filed by the Appellant were disposed of by directing the Respondent No.3 to decide the impleadment Applications. The SLPs filed by the Respondent No.1 GSPC against the said judgment and order dated 26.07.2016 (passed in the (six) First Appeals) are pending before the Hon'ble Supreme Court and no relief is granted.
Page 16 of 40HC-NIC Page 16 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.41 At the sixth arbitral meeting, the Respondent No.3 was pleased to issue directions directing the Appellant to file its Reply to the notice dated 29.07.2015, issued on the impleadment Applications.
3.42 The Appellant filed its Affidavitin Reply to South Diyur Block (Annexurel9 of the SCA) and North Hap'y Block to the notices dated 29.07.2015 / Impleadment Applications dated 11.06.2015.
3.43 The Respondent No.1 GSPC filed its AffidavitinRejoinder.
3.44 The Respondent No.3 by the common judgment and order (Annexure1 of the SCA) allowed the two impleadment Applications of the Respondent No.1 GSPC and thereby impleaded the Appellant as Respondent No.2 in the two arbitration proceedings (South Diyur Block, North Hap'y Block) with a direction to file the written statement on or before 15.03.2017 etc. 3.45 The Appellant filed before this Court two Special Civil Application Nos. 4210 of 2017 and 4211 of 2017 and challenged the common judgment and order dated 18.02.2017 of the Respondent No.3.
Page 17 of 40HC-NIC Page 17 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.46 The Special Civil Application is heard by the learned Single Judge on 22.02.2017, 01.03.2017, 02.03.2017 (on which date the learned 02.03.2017, Single Judge issued notice to the Respondent No.1GSPC and Respondent No.2Alkor), and 03.03.2017 & 08.03.2017 on which dates the hearing of the two Special Civil Applications concluded.
3.47 The learned Single Judge by the common impugned final judgment and order, while holding that a Petition under Articles 226 and 227 of the Constitution of India is maintainable, however, dismissed the two Special Civil Applications essentially on the ground that the Appellant shall have the remedy under the Arbitration Act i.e. under Sections 34 of 37 of the Arbitration Act and the High Court would not interdict the arbitration proceeding by permitting the Appellant to invoke powers under Articles 226 and 227 of the Constitution of India.
3.48 The Appellant has already addressed a communication / application to the Respondent No.3 Arbitral Tribunal for extending the time to file the statement of defence without submitting to the jurisdiction of the Respondent No.3.
Page 18 of 40HC-NIC Page 18 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 3.49 Hence, the present Letters Patent Appeal (for South Diyur Block) with separate Civil Application for interim relief.
4 Before learned Single Judge, learned counsel appearing for the petitioners in both the writ petitions mainly contended that the petitioner was neither a party to Concession Agreement and the petitioner being nonsignatory to the Arbitration Agreement, no arbitration agreement existed against the petitioner and, therefore, the petitioner could not have been made party to the arbitration proceedings for the dispute arising out of or in connection with JOA. Learned counsel further contended that in the matter of arbitration, prior claim or dispute is required to be raised and notice under Section 21 of the Arbitration Act is also required to be issued to a party for arbitration against him and no such prerequisite was satisfied in case of the petitioner and, therefore, the petitioner could not have been impleaded as a party in the arbitration proceedings. Further, contentions were raised that only because the petitioner being a holding company but having separate and distinct entity in law than respondent no.2, Arbitral Tribunal was not justified in joining the petitioner in the arbitration proceedings Page 19 of 40 HC-NIC Page 19 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT even by applying the principles of lifting corporate veil. There was no allegation of any fraudulent design against the petitioner in acquiring majority stake in the respondent no.2 and, therefore, the petitioner could not have been considered as a alter ego or mirror image of respondent no.2. That even in an application preferred under Section 11 of the Act, the petitioner was not joined as a party and had such an opportunity available to the petitioner in the proceedings under Section 11 of the Act, the petitioner could have well objected and contested the application on merits on the grounds available to the petitioner and finally could have challenged such an order. By impleading the petitioner unnecessarily whole rigmarole of proceedings of arbitration will have to be undergone for no reason and such an exercise ought not to have been carried out by the Arbitral Tribunal and it was prayed to quash and set aside the order of impleadment by the Arbitral Tribunal.
5 As against above, learned counsel appearing for respondent no.1GSPC opposed invocation of extraordinary jurisdiction under Article 226 and 227 of the Constitution of India in view of certain decisions and reasoned order passed by learned Arbitral Tribunal and it was Page 20 of 40 HC-NIC Page 20 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT open for the petitioner to invoke jurisdiction of the Arbitral Tribunal and at the stage of impleadment no right of the petitioner was as such violated and even if the award is passed by the learned Arbitral Tribunal against the petitioner, a remedy under Section 34 of the Act of challenging the award on various grounds would be available. Thus, in absence of any error of law much less of jurisdiction by the Arbitral Tribunal in impleading the petitioner in arbitral proceedings, the petition lacked merit and deserved to be rejected.
6 Learned Single Judge by adverting to a decision in the case of SBP and Company v. Patel Engineering Ltd. [(2005) 8 SCC 618] of the Constitution Bench of the Apex Court quoted conclusions and also two orders of the learned Single Judge of this Court and found that the writ petition under Article 226 and 227 of the Constitution of India challenging the order of impleadment of the petitioner in arbitral proceedings by the Arbitral Tribunal was maintainable.
6.1 However, in two decisions of the Apex Court in the cases of State of Gujarat v. Renusagar Power Co. [(1988) 4 SCC 59], and Page 21 of 40 HC-NIC Page 21 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Vodafone International Holdings BV v. Union of India, [(2012) 6 SCC 613], the Apex Court has also considered the requirement of lifting veil, particularly, in matters pertaining to Company Law, Law of Contract, Law of Taxation etc. and the decision of Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. [(2013) 1 SCC 641], in which it was observed according to learned Single Judge that in a given set of circumstances, even a nonsignatory to an arbitral agreement can be subjected to arbitration proceedings and it would be futile to argue that in no case a nonsignatory to arbitral agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal so validly constituted. The above decision of the Apex Court is also relied on by a Division Bench of this Court in the judgment dated 813.10.2015 in First Appeal No.1714 and 1715 of 2015 in the case of order passed on an application preferred by respondent no.1 under Section 9 of the Act between the present parties. The above proposition of law is seriously disputed by learned senior counsel for the appellant that in Chloro Control [supra] basic and mother agreement contained certain clauses to which subsequent agreements entered into by the parties had some bearing and that is not available in the Page 22 of 40 HC-NIC Page 22 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT present case. Learned Single Judge reproduced paragraphs 6 to 25 of the judgment of Apex Court in the case of S.N.Prasad, Hitek Industries (Bihar) Limited v. Monnet Finance Ltd. [(2011) 1 SCC 320], which was relied on by the learned Senior Counsel for the petitioner in the context of the appellant, who was not a party to tripartite Loan Agreement executed amongst the lender, the borrower and the borrower's Managing Director cum Guarantor containing Arbitration clause. In the above case, the appellant was not a signatory to the above tripartite loan agreement. In the context of the contentions raised based on definitions of Arbitration Agreement and Party under Section 2 (b) and 2 (h) of the Act respectively and Section 7 defining Arbitration Agreement, ultimately, the Apex Court held in paragraph 25 that there was no Arbitration Agreement between the parties. The impleadment of the appellant, a nonsignatory in the arbitration proceedings, and the award against the appellant in such arbitration cannot be sustained and consequently both the arbitration awards came to be quashed and set aside. Another judgment relied on by learned Senior Counsel for the petitioner was in the case of Deutsche Post Bank Home Finance Limited v. Taduri Shridhar, [(2011) 11 SCC 375], wherein Page 23 of 40 HC-NIC Page 23 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Sections 7 and 11 of the Arbitration Act were considered and earlier decision of the Jagdish Chander v. Ramesh Chander [(2007) 5 SCC 719] was relied, in which it was held that it is not permissible to appoint an arbitrator to adjudicate the disputes between the parties, in absence of an Arbitration Agreement or mutual consent. In the above case, the Apex Court noticed that no notice for demand and making any claim against the appellant was issued by the first respondent and there was absence of any notice to the appellant seeking reference of any dispute to arbitration and, therefore, it could not be said that any dispute existed between the first respondent and the appellant, when the petition under Section 11 of the Act was filed and, therefore, the petition under Section 11 of the Act against the appellant was considered as misconceived as the appellant was not a party to the Construction Agreement dated 21.2.2008.
7 That learned Single Judge in paragraphs 18 and 19 finally concluded as under: "18. Though elaborate arguments were made on behalf of the petitioner on merits by taking the stand that the petitioner being non signatory to the JOA cannot be joined in arbitration proceedings and such arguments were sought to be supported by above two Page 24 of 40 HC-NIC Page 24 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT decisions and other judgments, however, the Court is of the view that once the arbitration proceedings commence, it is for the Arbitral Tribunal to decide all questions arise in connection with arbitration proceedings. If the impact of any order made while deciding any question in the arbitration proceedings, is either on the jurisdiction of the Arbitral Tribunal or concerning the issue on which application under Section 34 of the Act for setting aside the arbitral award could be made, the aggrieved party will have his remedy under the Act i.e. under Section 34 or Section 37 of the Act, and the High Court would not interdict the arbitration proceedings by permitting such party to invoke powers under Article 226 and 227 of the Constitution of India. Simply because such party will be required to face and suffer the arbitration proceedings till the award is made would not be the guiding factor to permit the party to invoke the jurisdiction of this Court under Article 226 and 227 of the Constitution of India. By impleadment of petitioner in arbitration proceedings, the Arbitral Tribunal could be said to have assumed jurisdiction over the petitioner in arbitration proceedings. Having assumed such jurisdiction, the Arbitral Tribunal shall continue to exercise jurisdiction subjecting the petitioner to arbitration proceedings till the final award is made. Therefore all questions including the question that no arbitration agreement exists against the petitioner, that in absence of any claim / dispute raised against the petitioner or in absence of notice under Section 21 of the Act issued to the petitioner, no arbitration could take place against the petitioner etc., could well be raised by taking appropriate remedy by the petitioner under Page 25 of 40 HC-NIC Page 25 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT the Act.
19. For the reasons stated above, the Court finds that no interference is called for in the impugned order dated 18.02.2017 passed by the Arbitral Tribunal, on impleadment applications preferred by the respondent no.1 to join the petitioner as respondent No.2 in arbitration proceedings. The petitions are therefore rejected. Notice discharged."
7.1 Thus, Shri Mihir Thakore, learned Senior Counsel and Shri Apurva Vakil, learned advocate for the appellant at the outset contended that the impugned judgment is devoid of reasonings, findings and discussion on merit of the contentions raised by learned counsel appearing for the writ petitioners and the conclusions drawn rendered the judgment vulnerable and in spite of elaborate arguments canvassed and exhaustive submissions made for five days by learned counsel for the parties on law, facts and relevant judgments relied on, no mention is made much less discussed in the judgment. According to learned counsel appearing for the parties, various documentary evidence, particularly JOA and articles 17 and 18 thereof, email dated 15.8.2013 of respondent no.2 and letter dated 19.8.2013 of the appellant and other such communication including notices and further communications so as to demonstrate that no such Page 26 of 40 HC-NIC Page 26 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT notice viz. under Section 21 of the Arbitration Act was issued to the appellant and even an unreported judgment on the very issue of Delhi High Court dated 28.2.2017 in the matter of Alupro Building System Pvt Ltd. was cited and relied on but again no reflection in the judgment and accordingly both these appeals deserve to be considered and be allowed by quashing and setting aside the impugned judgment.
8 Accordingly, learned counsel for the appellant in both these appeals contended that the judgment rendered by learned Single Judge impugned in these appeals lacks reasonings, in addition to above nondealing with specific submissions made in law as well as on facts deserve to be quashed and set aside.
8.1 Learned counsel for the appellant contended that Special Civil Applications were heard for about 5 days in which elaborate and extensive submissions were made by the appellant as well as respondent - GSPC. By referring to the record of Special Civil Application No.4211 of 2017 in the context of JOA, Articles 17 and 18 contained therein, and other communications including email dated 15.08.2013 of respondent No.2, letters dated 19.08.2013 and 11.10.2013 of the appellant and notice dated 26.03.2014 of Page 27 of 40 HC-NIC Page 27 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT respondent GSPC invoking arbitration clause under Article 18 of the JOA and correspondence, as above, was emphasized in the context of main submission about requirement of issuance of notice under Section 21 of the Arbitration Act. Likewise, execution of concession agreement on 09.03.2008 followed by JOA dated 18.07.2011, no action was taken to arbitrate against the appellant, a nonsignatory party. So, belated action after 7 years without issuance of notice under Section 21 was though argued by placing reliance on case law inter alia judgment dated 28.02.2017 by learned Single Judge of High Court of Delhi on the requirement of issuance of notice under Section 21, same were not at all considered by the learned Single Judge.
8.2 Reliance placed on various judgments in the context of submissions made by learned counsel appearing for the writ petitioner are as under:
[a] (2003)5 SCC 531 - Sukanya Holdings Pvt. Ltd.
[b] (2011)1 SCC 320 - S.N.Prasad, Hitek Industries (Bihar) Ltd.
[c] (2011)11 SCC 375 - Deutsche Post Bank Page 28 of 40 HC-NIC Page 28 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Home Finance Ltd.
[d] (2015)10 SCC 642 - Essar Oil Limited.
[e] (2009)1 SCC 372 - Yogi Agarwal.
[f] (2010)5 SCC 306 - Indowind Energy Ltd.
[g] (2007)5 SCC 719 - Jagdish Chander [h] Unreported judgment dated 28.02.2017 of the Delhi High Court in the matter of Alupro Building Systems Pvt. Ltd.
[i] 281 F.Supp.1004 [E.D.Va.1968] - Brown (of the United States District Court, E.D.Virginia Norfok Division) Even law laid down in the judgments including Chloro Control India Pvt. Ltd. [supra] and Vodafone International Holdings BV [supra] were also distinguished, but surprisingly reasons do not appear on record for taking a view that Chloro Control India Pvt. Ltd. [supra] will be applicable in the facts of the present case. Likewise, nondealing with other judgments cited by the writ petitioners before the learned Single Judge would render the judgment under challenge vulnerable though maintainability of Special Page 29 of 40 HC-NIC Page 29 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Civil Application under Articles 226 and 227 of the Constitution of India was upheld. Learned counsel appearing for the appellant would contend that paragraphs 3, 4 and 5 of the impugned judgment record submissions of the appellant; para 7 records the submissions of respondent - GSPC; paras 8, 9 and 10 are with regard to maintainability of writ petition; and para 10 upholds that such petition is maintainable under Articles 226 and 227 of the Constitution of India. Again, in paras 12, 13 and 14 of the judgment, learned Single Judge has recorded submissions of respondent - GSPC on the aspect of lifting corporate veil and referred to the judgment of the Supreme Court in the cases of Renusagar Power Co. [supra], Vodafone International Holdings BV [supra] and Chloro Controls India Pvt. Ltd. [supra], but submissions made by learned counsel for the writ petitioner distinguish the law laid down in the above cases in the backdrop of peculiar facts find no reference in the impugned judgment. Though in paras 16 and 17 learned Single Judge recorded further submissions of the writ petitioner exclusively reproduced extracts of the judgment of the Apex Court in the cases of S.N.Prasad, Hitek Industries (Bihar) Ltd. [supra] and Deutsche Post Bank Home Finance Limited [supra] the conclusions are drawn about remedy available Page 30 of 40 HC-NIC Page 30 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT to the writ petitioner under Sections 34 and 37 of the Act and also contention about absence of notice under Section 21 of the act and, therefore, no arbitration could take place also could well be raised by taking appropriate remedy are no consequence in the eye of law and, therefore, the order impugned deserves to be quashed and set aside.
9 As against above, Shri Kapadia, learned counsel appearing for GSPC, respondent no.1 would contend that learned Single Judge has considered all relevant submissions and judgments in the context of issue to be considered and decided and was of the view that ultimately no harm would cause to the petitioner even if an award is against the petitioner for which an application under Section 34 of the Act for setting aside the arbitral award could be made and no case was made out to grant relief in exercise of extraordinary powers under Articles 226 and 227 of the Constitution of India. By impleadment of the petitioner in arbitration proceedings, the Arbitral Tribunal could be said to have assumed jurisdiction over the petitioner and once the Arbitral Tribunal has assumed the jurisdiction it shall continue to exercise such jurisdiction till the final award is made and all the questions including no arbitration agreement or absence of Page 31 of 40 HC-NIC Page 31 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT any claim against present appellant, no notice under Section 21 of the Act could be finally challenged at the end of arbitration and, therefore, both these appeals lack merit and deserve to be rejected.
10 Having heard learned counsels for the parties and on perusal of the record, including the impugned judgment, we have been persuaded by the submissions made by learned counsel for the appellant that the judgment under challenge in this appeal do not deal with relevant case law and factual scenario in the context of submissions made therein. Further, extracts of judgments relied on by the learned counsel for the appellant are produced, but reasons for non applicability of the decision are absent. Those case laws particularly Renusagar Power Co. [supra], Vodafone International Holdings BV [supra] and Chloro Controls India Pvt. Ltd. [supra] were distinguished by making elaborate submissions again find no reference, more particularly for not accepting clarification, explanation and distinguishing features of the case on hand.
10.1 That the learned counsel has again relied on various decisions before this Court on the question of an arbitration agreement between Page 32 of 40 HC-NIC Page 32 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT the parties and impleading such nonsignatory to arbitration proceedings and that whether corporate veil is to be lifted or not.
10.2 The learned Senior Counsel appearing for the appellant relied on following decisions in support of his submissions:
"1.Sukanya Holdings Pvt. Ltd. v/s Jayesh H. Pandya and Another, reported in (2003) 5 SCC 531.
In the above decision, in the context of Section 8 of the Arbitration and Conciliation Act, 1996, it was held that where a suit is commenced in respect of a matter which falls partly within the arbitration agreement and partly outside and which involves parties some of whom are parties to the arbitration agreement while some are not so, and in such circumstances Section 8 of the Act not attracted.
2.SBP & Company v/s Patel Engineering Ltd. and Another, reported in (2005) 8 SCC 618, is about interpretation of Section 11 (6) and (8) of the Arbitration and Conciliation Act, 1996, in which law laid down in the case of Konkan Railway case Page 33 of 40 HC-NIC Page 33 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT (2202) 2 SCC 388, came to be overruled by holding that powers conferred under Section 11(6) is a judicial power and not administrative power.
3. In the case of Yogi Agarwal v/s Inspiration Clothes & U and Others, reported in (2009) 1 SCC 372, the Apex Court considered Sections 7 and 8 of the Arbitration and Conciliation Act, 1996 and held that twin conditions are to be fulfilled for an arbitration agreement to enable a defendant to invoke Section 8 are
(i) it should be between the parties to the dispute, and (ii) it should relate to for the applicable to the dispute.
4.S.N. Prasad Hitek Industries (Bihar) Limited v/s Monnet Finance Limited and others, reported in (2011) 1 SCC 320.
In the above case by referring to Sections 7, 11 and 34 of the Arbitration and Conciliation Act, 1996 and arbitration agreement in which guarantor of loan was not a party to loan agreements containing arbitration clause, it was held that guarantor cannot be made party to a Page 34 of 40 HC-NIC Page 34 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT reference to arbitration and subjected to arbitration award in dispute for repayment of such loan.
5. Deutsche Post Bank Home Finance Limited v/s Taduri Sridhar and another, reported in (2011) 11 SCC 375.
In the above case, the Apex Court considered Sections 11 (6), 7 and 2 (b) of the Arbitration and Conciliation Act, 1996 in the context of parties that may be impleaded as respondents in a tripartite contract, namely Housing development agreement based on a loan with developer as guarantor and with inter se disputes between borrower and guarantor developer arising out of construction agreement in which Arbitration Clause was available but not in loan agreement and when lender was impleaded, it was held improper in absence of Arbitration Clause in loan agreement.
6.By relying in the cases of Vodafone International Holdings BV v/s Union of India and another, reported in (2012) 6 SCC 613 and Chloro Controls India Private Limited v/s Severn Trent Water Purification Page 35 of 40 HC-NIC Page 35 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT Inc. and others, reported in (2013) 1 SCC 641, the learned counsel submitted that both the above decisions in which facts were different and Vodafone (supra) was arising out of nonresidence/offshore transactions and general AntiAvoidance Rules (GAAR) then judicial AntiAvoidance Rules (JAAR) and difference between tax planning and tax avoidance or tax evasion visavis in the context of certainty and stability which form basic foundation of any fiscal system, Corporate Laws, particularly Company Law and existence of multinational companies / transnational companies and subsidiaries have to conform to local laws and therefore, must and usually do have autonomy and exist as such an independent legal entity. Besides, in the context of GAAR and JAAR like substance over form, nature and character of transaction, piercing corporate veil, true beneficial ownership or alter ego, participative investment, preordained transaction and fiscal nullity if still warranted after application of look at principle. Chloro (supra) was passed on doctrines of composite performance and group of companies in which various Page 36 of 40 HC-NIC Page 36 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT agreements were constituting a composite transactions and in such a case, Court can refer disputes to arbitration existing between signatory or nonsignatory parties if all ancillary agreement between them are relatable to principal agreement i.e. mother agreement and to performance of one agreement is so intrinsically interlinked with other agreement that they are incapable of being beneficially performed without performance of others or severed from the rest then it is possible to invoke principle of "composite performance".
7.Alupuro Building Systems v/s Ozone Overseas pvt. Ltd. passed by the Delhi High Court (Coram: S. Muralidhar,J), in Original Miscellaneous Petition No.3 of 2015 on 28.02.2017, the above decision relied on for mandatory nature of issuing notice under Section 21 of the Arbitration and Conciliation Act, 1996, invoking the Arbitration Clause."
Though other foreign decisions are relied on, but we are not inclined to deal with the same at this stage as we are satisfied that the appeals on hand deserve to be remanded to the learned Single Judge for taking a decision afresh in Page 37 of 40 HC-NIC Page 37 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT accordance with law.
10.3 It is trite that while quashing any order passed by the court, quasi judicial forum or even executing authority deciding the lis is bound to deal with submissions made by the parties on law in the backdrop of facts and reason is the soul of the order and absence of reason deprives the appellate forum a ground for dealing with the impugned decision. In the case of Union of India v. Mohan Lal Capoor & Ors. [(1973)2 SCC 836], the Apex Court while dealing with the duty cast upon selection committee to assign reasons noticed `rubber stamp' reason given mechanically for the supersession of officer, at the most that could be said for the stock reason is that it is the general description of the process adopted in arriving at a conclusion and further it was reiterated that reasons are links between material on which certain questions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision. That reasons should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable.
Page 38 of 40HC-NIC Page 38 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT 10.4 As we are convinced that judgment under challenge passed by the learned Single Judge is not in conformity with the concept of assigning reasons as held by the Apex Court and in view of the above discussion, order dated 14.03.2017 passed by the learned Single Judge in Special Civil Application No.4210 of 2017 with Special Civil Application No.4211 of 2017 is hereby quashed and set aside and the matters are remanded to the learned Judge for taking decision afresh in accordance with law. Order dated 07.04.2017 passed in Civil Application No.4853 and 4854 of 2017 to continue for a further period of 3 weeks from today so as to enable the learned Single Judge to hear the cases. If both the above writ petitions are not heard within 3 weeks from today, it will be open for the parties to request the learned Single Judge for expeditious hearing or any other relief, as deemed proper.
11 Both these appeals are allowed to the aforesaid extent only.
12 In view of the above, Civil Application Nos. 4125 and 4126 of 2017 also stand disposed of.
(ANANT S.DAVE, J.) (A.Y. KOGJE, J.) At this stage, learned counsel for the respondent No.1 prays to stay this order, to which learned Page 39 of 40 HC-NIC Page 39 of 40 Created On Tue Aug 22 08:03:57 IST 2017 C/LPA/462/2017 CAV JUDGMENT counsel for the appellant raised objection. Considering the facts of the case, request to stay this order is rejected.
(ANANT S.DAVE, J.) (A.Y. KOGJE, J.) pvv Page 40 of 40 HC-NIC Page 40 of 40 Created On Tue Aug 22 08:03:57 IST 2017