Bombay High Court asserts jurisdiction in arbitration dispute, enforces Share Purchase Agreement, imposes interim measures.

The Bombay High Court asserted jurisdiction to entertain a petition under Section 9 of the Arbitration and Conciliation Act, 1996, despite a prior application in the Gujarat High Court. The respondents were found liable for breaching the Share Purchase Agreement and Share Subscription Agreement by not disclosing liabilities and hindering valuation. The court enforced indemnification obligations and imposed interim measures to prevent asset transfers aimed at evading arbitration awards, securing the petitioner's claims. The respondents were directed to comply with contractual obligations to prevent circumvention of potential arbitration outcomes.

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Issues Involved:
1. Jurisdiction of the Bombay High Court to entertain the petition under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Alleged breaches of the Share Purchase Agreement (SPA) and Share Subscription Agreement (SSA) by the respondents.
3. Indemnification obligations of the respondents under the SPA.
4. Transfer of assets by the respondents and the creation of trusts.
5. Interim measures sought by the petitioner, including the appointment of a Court receiver and injunctions.

Detailed Analysis:

1. Jurisdiction of the Bombay High Court:
The petitioner filed an application under Section 11 for the appointment of an arbitrator before the Gujarat High Court prior to filing this Section 9 petition in the Bombay High Court. The respondents argued that only the Gujarat High Court had jurisdiction. However, the court noted that the application under Section 11 was not before a "court" as defined under Section 2(e) of the Arbitration Act. Additionally, both parties had previously proceeded on the premise that both Gujarat and Bombay courts had jurisdiction. Thus, the Bombay High Court held that it had jurisdiction to entertain the petition.

2. Alleged Breaches of SPA and SSA:
The petitioner alleged that the respondents made false representations and did not disclose all liabilities of the company, thereby breaching the SPA and SSA. The petitioner claimed that the respondents refused to allow an independent valuer to determine the actual value of the company, resulting in a significant financial discrepancy. The petitioner sought indemnification for various liabilities that emerged post-agreement, including tax liabilities and statutory dues.

3. Indemnification Obligations:
Under Clause 9.3(c) of the SPA, the respondents' obligation to indemnify the petitioner arises immediately upon incurring any liability, irrespective of any defense or right to appeal. Clause 5.6 of the SPA extends this obligation for three years from the execution date. The court found that the indemnity clauses were enforceable and that the respondents were liable to indemnify the petitioner for the claims and demands received from various authorities.

4. Transfer of Assets and Creation of Trusts:
The petitioner alleged that the respondents started disposing of their assets to various companies and created trusts to defeat any potential arbitration award. The court noted that the respondents had transferred almost every property to their own companies and created trusts where family members were beneficiaries. These transfers were seen as attempts to alienate or dispose of assets with the intention to defeat any potential arbitration award, thus warranting interim measures.

5. Interim Measures:
The petitioner sought interim measures including the appointment of a Court receiver and injunctions to secure the claim. The court, referencing previous judgments, held that it had the power to grant interim measures even if the property or things were not the subject matter of the dispute in arbitration. The court granted several interim measures, including:
- Transfer of escrow amount II into an interest-bearing fixed deposit.
- Direction to respondents to furnish documents for valuation.
- Disclosure of properties.
- Securing the petitioner's claim by restraining respondents from disposing of their assets.

Conclusion:
The Bombay High Court held that it had jurisdiction to entertain the petition and granted interim measures to secure the petitioner's claims. The court directed the respondents to comply with the SPA and SSA obligations, including indemnification and disclosure of assets, to prevent any attempt to defeat potential arbitration awards.

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