Bombay High Court
Reliance Capital Ltd vs Indusind Bank Limited on 11 December, 2019
Equivalent citations: AIRONLINE 2019 BOM 2738
Author: G.S. Patel
Bench: G.S. Patel
904-CARBPL-1414-19.DOC
Ashwini
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISON
COMM ARBITRATION PETITION (L) NO. 1414 OF 2019
Reliance Capital Ltd ...Petitioner
Versus
IndusInd Bank Ltd & Anr ...Respondents
Mr Navroz Seervai, Senior Advocate, with Priyanka Devgan and
Sushma Nagraj, i/b Verus, for the Intervenors.
Mr Dinyar Madon, Senior Advocate, with Cyrus Ardeshir, Rishika
Harish, Suraj Iyer, Rickin Dang & Osama Butt, i/b Ganesh &
Co., for the Petitioner.
Mr Janak Dwarkadas, Senior Advocate, with Sharan Jagtiani,
Ameya Gokhale, Vaibhav Singh, Ms Radhika Indapurkar, i/b
Shardul Amarchand Mangaldas & Co., for Respondent No.1.
Mr Ravitej Chilumuri, i/b Khaitan & Co., for Respondent No. 2.
CORAM: G.S. PATEL, J.
DATED: 11th December 2019 PC:-
1. The matter was argued at some length on the previous occasion. Parties took time to take instructions. They agree now that the disputes and the diferences between the Petitioner, Reliance Capital Limited, and the 1st Respondent, Indusind Bank Limited arising from the Framework Agreement dated 5th July 2019 read with the Deed of Adherence dated 20th July 2019 will be referred to the sole arbitration of Mr Fredun E DeVitre, learned Senior Counsel of this Court.
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2. The Framework Agreement contains clauses for arbitration, governing law and jurisdiction. The relevant clauses are:
"11.2 Dispute Resolution 11.2.1 If any dispute arises between the Parties hereto during the subsistence of this Agreement or thereafter, in connection with the validity, interpretation, implementation or performance or non-performance or alleged breach of any provision of this Agreement, the dispute shall be fnally resolved by binding arbitration in accordance with the provisions of the Arbitration rules of the Mumbai Centre of International Arbitration ( or any modifcations thereto or any re-enactments thereof as may be in force at that time).
11.2.2 If the dispute arises between any of the Parties, then Mumbai Centre of International Arbitration shall appoint 3 (Three) arbitrators.
11.2.3 The arbitration proceedings shall be in the English language and the seat of arbitration shall be Mumbai.
11.2.4 This Agreement and the rights and obligations of the Parties contained in this Agreement shall remain in full force and efect pending issuance of the award in such arbitration proceedings, which award, if appropriate, shall determine whether and when any termination shall become efective.n
3. The present petition under Section 9 is to be disposed of as an application under Section 17 by the learned sole arbitrator appointed by this order by consent.
4. However, a limited order is necessary and this is in regard to Rs 2,04,97,423/- shares held by Reliance Capital Limited in another Page 2 of 9 11th December 2019 ::: Uploaded on - 12/12/2019 ::: Downloaded on - 14/12/2019 03:38:22 ::: 904-CARBPL-1414-19.DOC company called Reliance Nippon Asset Management Limited. These were the subject matter of a pledge made by Reliance Capital to the IndusInd Bank under the Framework Agreement dated 5th July 2019 to secure the repayment of a debt due to IndusInd Bank by a Reliance Capital group company. IndusInd Bank has purportedly invoked that pledge and has transferred the subject Reliance Nippon shares to its own demat account.
5. Mr Dwarkadas, learned Senior Counsel for IndusInd Bank states on instructions received that the entirety of this holding of 2,04,97,423 shares will be transferred to a separate, dedicated demat account to be opened by Indusind Bank, and which will not be operated in any manner without specifc directions of the learned sole arbitrator made in the Section 17 Application.
6. IndusInd Bank also claims to have appropriated in full satisfaction of its claim for repayment of the loan to the Reliance Capital group entity an amount of Rs. 6,45,66,30,598.51. There is, IndusInd Bank says, an available surplus of Rs. 95,42,12,687.14. These are not actual sale proceeds but are adjustment entries of the value of the pledged shares, reckoned at Rs. 361.55 per shares as on 20th November 2019. Whether IndusInd Bank is entitled to invoke the pledge and make this appropriation or adjustment in this or any other amount is also to be the subject matter of the section 17 application before the learned sole arbitrator. At present, therefore, IndusInd Bank's claim to having made this appropriation in this amount and leaving such a surplus is neither accepted nor rejected Page 3 of 9 11th December 2019 ::: Uploaded on - 12/12/2019 ::: Downloaded on - 14/12/2019 03:38:22 ::: 904-CARBPL-1414-19.DOC but is merely noted. It is subject to a decision in the Interim Application to be decided by the learned sole arbitrator.
7. The statement Mr Dwarkadas makes is accepted and it is, of course, without prejudice to all rights and contentions. All contentions are kept open.
(a) Appointment of Arbitrator: By consent, Mr Fredun E DeVitre, learned Senior Advocate of this Court, is hereby nominated to act as a Sole Arbitrator to decide the disputes and diferences between the parties arising from the Framework Agreement dated 5th July 2019 read with the Deed of Adherence dated 20th July 2019.
(b) Communication to Arbitrator of this order:
(i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates for the Applicant within one week from today of the order being uploaded.
(ii) In addition, within one week of this order being uploaded, the Registry will forward an ordinary copy of this order to the learned Sole Arbitrator at the following postal and email addresses:
Arbitrator Mr Fredun E DeVitre, Senior
Advocate.
Address Yashwant Chambers, 1st foor,
18, Burjorji Bharucha Marg, Fort,
Mumbai 400 001
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904-CARBPL-1414-19.DOC
Mobile 98200 51378
022- 2265 7555
Email [email protected]
(c) Disclosure: The learned Sole Arbitrator is requested to
forward his statement of disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the Prothonotary & Senior Master of this Court, referencing this arbitration application, as soon as possible, and in any case sufciently in advance of his entering upon the reference to his arbitration. That statement will be retained by the Prothonotary & Senior Master on the fle of this application. Copies will be given to both sides.
(d) Appearance before the Arbitrator: Parties will appear before the learned Sole Arbitrator on such date and at such place as he nominates to obtain appropriate directions in regard to fiing a schedule for completing pleadings, etc.
(e) Contact/communication information of the parties:
Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator within one week of this order being uploaded. The information is to include a valid and functional email address.
(f ) Section 16 application: The respondent is at liberty to raise all questions of jurisdiction within the meaning of Page 5 of 9 11th December 2019 ::: Uploaded on - 12/12/2019 ::: Downloaded on - 14/12/2019 03:38:22 ::: 904-CARBPL-1414-19.DOC section 16 of the Arbitration Act. All contentions are left open.
(g) Interim Application/s:
(i) The present Petition under Section 9 of the
Arbitration Act will be treated, heard, and disposed of as an application under Section 17 of the Act. All afdavits fled in the Section 9 petition will be treated as afdavits fled in the Section 17 application. Liberty to apply to the learned Sole Arbitrator for leave to fle further afdavits.
(ii) Liberty to both sides parties to make an interim application or interim applications including (but not limited to) interim applications under Section 17 of the Arbitration & Conciliation Act, 1996 before the learned Sole Arbitrator.
(iii) The learned Sole Arbitrator is requested to dispose of all interim applications at the earliest and, if possible, within four weeks.
(h) Fees: The arbitral tribunal's fees shall be governed by the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.
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(i) Sharing of costs and fees: Parties agree that all arbitral costs and the fees of the arbitrator will be borne by the two sides in equal shares in the frst instance.
(j) Consent to an extension if thought necessary. Parties immediately consent to a further eitension of up to sii months to complete the arbitration should the learned Sole Arbitrator fnd it necessary.
(k) Venue and seat of arbitration: Parties agree that the venue and seat of the arbitration will be in Mumbai.
8. This leaves Mr Seervai, who appears on behalf of two applicants Purab Associates Private Limited and Chowdry Assurance in Interim Application No. 1 of 2019. His case, shortly stated, is this. These two entities claim to hold these debentures under a debenture trust deed. The debenture trustee is one Vistra ITCL Limited. That debenture trustee has not being joined to this Interim Application or to any other proceeding. The debenture trust benefciaries claim is that IndusInd Bank could never have invoked the pledge or made any alleged appropriation because these shares was always subject to a prior charge of the debenture trust benefciaries. This charge was registered. IndusInd Bank had notice or is deemed to have had notice of that charge.
9. There is a question of letter of consent said to have been given by the debenture trustee Vistra ITCL to Reliance Capital to create the pledge in favour of IndusInd Bank and a subsequent alleged retraction of that consent. I only note this.
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10. Admittedly, there is no privity of contract between the debenture trustee or the debenture trust benefciaries and Indusind Bank. They are not parties to the Framework Agreement. They are not signatories or parties to the Deed of Adherence. Whether they can or cannot, in these facts, participate in the arbitration between Reliance Capital and IndusInd Bank is a matter that I believe can and should be decided by the learned sole arbitrator. The reason is this: all three entities are at issue over the same subject matter i.e 2,04,97,423 equity shares of Reliance Nippon held by Reliance Capital. IndusInd Bank has invoked a pledge of these shares. Puran Associates & Chowdry Associates that it could not have efected any such pledge invocation or consequent appropriation. I do not see what purpose will be achieved by hearing the interim application here. The very same question will undoubtedly arise in the facts and circumstances of the case in the arbitration itself. Whether or not Reliance Capital itself wants to take this defence (that the pledge could not have been invoked because of the eiistence of the prior charge to the debenture trustees) is another matter but it is always open to Mr Seervai's clients to contend before the learned sole arbitrator that while they may not be concerned with the fnal monetary claims as between the Reliance Capital and IndusInd Bank, they certainly has an interest in any interim order in regard to the shares in question.
11. There is of course Mr Dwarkadas's submission that Mr Seervai's clients have evidently been put up by Reliance Capital. This is only noted, and noted only for completeness of record.
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12. I will therefore leave it to the learned sole arbitrator to decide this question as well on an appropriate application made to him either by the two applicants in the interim application or by the debenture trustee Vistra ITCL or both. All contentions are eipressly kept open.
13. As regards Respondent No. 2, Nippon Life, its Advocate has no instructions either to oppose or to consent to the appointment of a sole arbitrator rather than a three-member tribunal. In fact, it is stated that Nippon Life, though a party to the Framework Agreement, may not have any role to play in arbitration at all. This statement is noted.
14. That said, Nippon Life has no objection to Reliance Capital and IndusInd Bank taking their inter se disputes to arbitration by a sole arbitrator appointed by this Court rather than following the procedure stipulated in the contract. The 2nd Respondent agrees that it will not raise any objection to the efect that the contractually mandated procedure was not followed by Reliance Capital, IndusInd Bank. This is noted and accepted including for the purposes of Section 4 of the Arbitration Act.
15. The Arbitration Petition is disposed of in these terms. Costs to be claimed in arbitration.
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