TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1374
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement (JVA) dated 19th January, 2010 whereby it became entitled to and holds 51% of shareholding of Indian Company Ravin Cables Limited ("Ravin"). One Vijay Karia ("Karia")respondent no.1 alone represents the existing shareholders of Ravin. It is stated that all existing shareholders were represented by Mr.Karia who was empowered by powers of attorney stated to be coupled with interest and which were at all times valid and subsisting. One of the two erstwhile shareholders P. M. Karia and Asha P. Karia expired and their estate is said to be represented by the First respondent to the extent it concerns shareholding in Ravin. The shares said to have been held by late P. M. Karia are said to be presently under the control of respondent no.1 and the shares held by late Asha Karia were transferred to Paresh J. Karia-respondent no.16 who has constituted respondent no.1 as his attorney. Thus, the respondents hold 49% of the shareholding of Ravin. Negotiations in respect of the JV Agreement are believed to have commenced in 2008. 3. In essence the petitioner was to hold 51% shares by way of subscription and transfer of shares of an existing shareholders for achieving 51% shareholding. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... price of 10% or 10% premium. The JVA provided for determination notice(s) and cessation of all rights of the defaulting party if the breach was not rectified after the cure period. 5. It provided for rights of shareholders who were to act in good faith andequity between them and for the manner in which the cables business would be carried on by the petitioner/ 4th respondent. The shares were to be valued by one of four valuers who were named KPMG, Ernst & Young, Price Waterhouse Coopers and Deloitte. Disputes, if any, were to be referred to an arbitration under the Rules of the LCIA although the seat and place was to be London the Indian Contract Act would apply but the law of arbitration was to be English Law. It is also in dispute that on 19th January, 2010, the parties signed a Control Premium Agreement under which control premium was paid to the promoters mainly the Karia Group. Pursuant to JVA, the Articles of Association of the company were also amended and in June 2010 Mr. Luigi Sarogni was appointed as CEO of the company. The integration period under JVA came to an end on appointment of the CEO and it was agreed as long as integration period continued, the company would b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....This led to a fresh controversy when the respondents contended that the option of selling their stake was a typographical error. The other shareholders were at all time represented by said Karia and the respondents had by then filed a counter claim and participated in the proceedings. On 26th March, 2012, the respondents are believed to have served a Determination Notice alleging breach by the petitioners and upon expiry of 60 days from the date of the Request for Arbitration breaches remained irremediable as a result the sole arbitrator came to be appointed by the LCIA. 7. The respondents initially contended that the arbitrator would have a conflict of interest since according to them he had been engaged as a counsel by the petitioners' Advocates in some other unconnected matter. The petitioners Advocates and the arbitrator denied the allegations of conflict. Later this plea was given up and the parties continued with the Arbitrator appointed. It is material to note that at that time the registry of the LCIA had informed the respondents that the rules of the LCIA included a challenge procedure to the appointment of the sole arbitrator. This option was, however, not availed of and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made on its behalf and Gilbert Tweed Associates is said to have apologized for having made such a statement. The petitioner also undertook to terminate its arrangement with Gilbert Tweed Associates. While this may have been a mischievous ploy about needs to be considered is whether the award would be rendered unenforceable by reason of such unwarranted publication. The tribunal has dealt with this contention and accepted the petitioners undertaking to terminate the arrangement of Gilbert Tweed Associates as aforesaid. 9. On 19th December, 2013 the tribunal passed the Second Partial Final Award (PFA) in relation to the hearings held in May 2013. It held that the respondents were in material breach and that they were obliged to sell all shares of Ravin at the discounted price and as valued by KPMG. KPMG had been appointed in accordance with the JVA by consent of the parties on or about 28th October, 2012 and had conducted the valuation as provided for in the JVA. The respondents challenged the Second PFA to the limited extent of seeking a remand to the tribunal to reconsider the date of valuation. It is the application to be heard by Commercial Court which passed an order on 14th J....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest since according to Karia the respondents had earlier approached Deloitte to conduct an independent valuation which had been declined. Deloitte had undertaken a forensic exercise on behalf of the respondents regarding certain data downloaded from Ravin's server and further Deloitte was also acting as auditor for Power Plus Cable Company LLC in which 49% shares were held by Ravin. Mr. DeVitre submitted that all the allegations made by the respondents and their Advocates have been dealt with in a rejoinder dated 18th October, 2014. Meanwhile a letter was addressed by Karia to the Institute of Chartered Accountants of India protesting against the appointment of Deloitte and relying upon the correspondence between the parties in that respect. It is behaved that the said complaint was not sustained and was dismissed. 13. On 14th January, 2015 the Third PFA was made. It granted final relief holding that all rights of the respondents under the joint venture agreement ceased to be effective and that all aspects requiring respondents consent stands excluded. The respondents were restrained from exercising rights under the JVA and held that the date of the valuation would be 30th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that is how this petition came to be filed in this Court. Submissions of counsel:- 16. On behalf of the petitioners, it is submitted by Mr. De Vitre vide theFirst Partial Final Award (PFA) the tribunal considered the arguments on construction of the JVA and whether certain aspects if proved would constitute a breach. The tribunal held that the contracts for sale of cables within the Cable Business which had been concluded directly by the petitioner or its affiliate otherwise than through Ravin do not constitute investment, acquisition or participation in the Cable Business in India. It held that the acquisition of Draka which in turn held the majority stake in ACPL, did not amount to participation of the Cable Business in India. The tribunal further inter alia held that clause 23.1 and 23.2 requires issuance of Determination Notice of an event of default even if the non-defaulting party contends that the material breach is irremediable and if the breach is not rectified at the expiry of the rectification period, that could be relied upon by the non-defaulting party which would result in deprivation and or alteration of rights of the defaulting party under clause 23.7 and that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bias and seeking recusal by the arbitrator. This application was rejected . The tribunal observed that procedural orders were issued for interim measures, viz for appointment of valuer and for change of date of valuation. The tribunal held that the defaulting party viz. the respondents had ceased to have any effective right in relation to JVA including the requirement of consent from the respondents and Mr. Karia. It restrained the respondents in exercising any rights under the JVA. The date of assessment for the purpose of valuation of shares was fixed as 30th September, 2014. 19. By the final award, the tribunal rejected the respondents approach apropos appointment of Deloitte as valuer and the fixation of date for valuation. The tribunal accepted the valuation report made by Deloitte fixing the value of each share at Rs. 71/-. At the same time it rejected the opposition to acceptance of the Deloitte valuation. The respondents were directed to transfer the shares held by them to the claimant at the total cost of Rs. 65.20 crores computed at the rate of Rs. 63.90 per share and directed Mr. Karia as the constituent attorney for the existing shareholders to execute the transfer fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d thus was inconsistent with the tribunal's ruling in the First PFA and that such contradiction should shock the conscience of the Court. This was indicative of non application of mind and therefore contrary to the fundamental policy of Indian Law rendering the awards unenforceable in terms of Section 48(2)(b)(ii) and (iii) of the Arbitration and Conciliation Act. He highlighted the inconsistency as between the First PFA and Second PFA as to the scope of clause 21 whether it amount to competition with Ravin or not. Mr. Seervai submitted that the inconsistencies between the First and Second PFA are such that it would shock the conscience of the Court and expose non application of mind and it was contrary to the fundamental policy of Indian Law. 21. According to Mr.Seervai the Court must examine whether the tribunal acted arbitrarily by shifting the goal-post between the First and Second PFA. This does not amount to a review on merits but on the procedure adopted in determination. The petitioners failure to produce the relevant documents was held against the respondents. ACPL's documents not having been produced by the petitioners, the tribunal observed that the respondents ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sition was rejected on the basis that the respondents had failed to adduce "credible evidence of serious actual loss or harm". This evidence he submitted was in the possession of the petitioners and was not brought on record. Thus, on account of failure to produce the ACPL documents, Mr. Seervai contended that the respondents were unable to present their case despite which the tribunal had rendered a finding in favour of the petitioners and without drawing any adverse inference as to the petitioners failure to produce documents. On this basis, Mr. Seervai submitted that the impugned award is unenforceable in terms of Section 48(2) (b) of the Act. 24. Mr. Seervai invited my attention to the disclosure sought and submitted that the respondents had produced before the tribunal the entire list of customers of ACPL and other documents as obtained from the ACPL's website and the tribunal had considered the evidence and had concluded that material on record did not establish material breach. 25. The petitioners had failed to produce relevant documents being value of the top 10 contracts on the ground of confidentiality. Not having done so the respondents were unable to present their....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heir interest in competing business Vijay Industrial Electricals in order to comply with clause 21.1. However, when it came to considering the petitioners acquisition of ACPL, the tribunal failed to consider the respondents submissions. It also failed to consider email of July 2009 from respondent no.1's advisors to the petitioners representative which sets out that ACPL should be merged with Ravin cables post acquisition of Draka by the petitioners, yet the tribunal placed reliance on Mr. Karia's response to the acquisition of ACPL as being highly instructive in determining whether acquisition of ACPL is to be analyzed as in the material breach or whether it had been the breaches or an excuse. He submitted that the tribunal had taken into consideration evidence which was irrelevant e.g. the congratulatory email sent by Mr. Karia upon acquisition of Draka but ignored the conduct of parties such as divestment in other competing concerns to ensure compliance with clause 21.1. He contended that parties were not treated equally and that the tribunal had rendered an award contrary to the basic notions of justice since it had adopted the different approach to the respondents. 29....
X X X X Extracts X X X X
X X X X Extracts X X X X
....EO and the respondent no.1 during that period. This he submitted was unacceptable and therefore was a good ground of challenge since the tribunal had failed to rule on the respondents counter claim and therefore it would constitute a failure on the part of the tribunal resulting in a finding contrary to the fundamental policy of Indian Law. He therefore submitted that the award was violative being against the basic notions of justice. 31. The next ground for objection was as to direct sales of cables in India by the petitioner through distributors, sales agents, agency and distribution agreements allegedly in contravention of clauses 8, 20 and 21.1 of the JVA. It was contended that the tribunal adopted a perverse interpretation contrary to the plain language of the JVA. He submitted that the respondents claims arising from direct sales of cables in India was rejected on the ground that the impugned agreements and arrangements were permissible. The tribunal held that under clause 21.1 only long term arrangements involving injection of capital or exchange of capital know-how would be covered. Although clause 21.1 prohibits participation in the cable business which included manufactu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titioner and the respondents were ad idem on the issue of the valuation date being the date closest to the date of the actual sale of shares and it was on this basis that the respondents agreed to 30th September, 2014 being adopted as valuation date subject to sale of shares being concluded by 31st December, 2014. The tribunal proceeds on an incorrect basis that respondents agreement of 30th September, 2014 being valuation date was unconditional. According to him sale of shares was to be concluded by 31st December, 2014 and the tribunal while passing the final award on 11th April, 2017 adopted the valuation in the report made by Deloitte on 25th November, 2015. It ignored the fact that the respondents had agreed to valuation date as 30 th September, 2014 only on the basis that transaction would be complete by 31st December, 2014 of the same year and the Tribunals approach in attributing delay to the respondents were canvassed by Mr.Seervai as evidence of bias and arbitrariness. 35. According to Mr.Seervai the respondents actions did not delay the submission of the valuation report since the respondents had even earlier objected to and complained against Deloitte being appointed as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r surreptitiously attempted to register the Ravin trade mark in breach of clause 20.1.2 of the JVA that required parties to co-operate and act in good faith. The tribunal according to Mr. Seervai had incorrectly concluded that registration of the Ravin trade mark fell outside the scope of the arbitration clause. That the respondents were in breach of good faith obligation under clause 20.1.2 and it was not a dispute concerning the right to register the trade mark. The awards were thus unenforceable. 38. The last ground of challenge was based on allegation of bias. It is submitted that the outcome of the Second PFA was announced prior to the award being communicated. Reference was made to the communication put out by Gilbert Tweed in relation to the likelihood of personnel being recruited. The petitioners had also thought it fit to terminate the arrangements with Gilbert Tweed. This conduct it is submitted was clearly indicative of the fact that the petitioners had caused Gilbert Tweed to publish the report. It was contended that the tribunal surprisingly did not seek any further investigation but only accepted an apology from the petitioners counsel. Mr. Seervai submitted that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The Parties agree that neither Prysmian nor Mr. Karia, whether directly or through their Affiliates, shall invest, acquire or participate in the Cables Business in India, save and except through the Company in accordance with this agreement" Mr.Seervai relied upon the effect of the definition cable business as provided in schedule XXVI of the JVA and submitted that the tribunal had omitted the words "or participate", "sale", "distribution" and "import" while considering the definition of cable business. At the same time it read into clause 21.1 the words "or enter into such other long term engagement, arrangement or commitment involving either an injection or exchange of capital or know how on the part of the investor" even when these words were not part of clause 21.1 but were used in order to reach the conclusion that the tribunal did in the First partial award. By deleting the word "Participate", "Sale", "import" and "distribution" from the definition of cable business, the scope of the expression cable business was altered favourably to the petitioners and by doing so the intention behind clause 21.1 was misinterpreted. He submitted that the tribunal could not have done so. M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Indian law as dealt with in ONGC Ltd. vs. Saw Pipes Ltd [(2003) 5 SCC 705.] He submitted that the award is ex-facie arbitrary and perverse. It was then submitted that the claimants had sought an order pursuant to clause 23 of the JVA requiring the respondents to sell their shares and the petitioners had specifically stated that a remedy will be in the nature of an order of specific performance. However in actual terms the respondents in their closing submissions dated 19th July, 2013 pointed out that the claimants were not entitled to get specific performance inasmuch as they failed to aver that they were ready and willing to perform their obligation an express requirement under section 16(c). In view there of claimants were debarred and dis-entitled in getting award in terms of clause 23 of the JVA having committed breach of material provision contained in clause 21 having acquired majority stake in ASCPL through DRAKA. 43. Mr. Chinoy made further reference to the fact that the arbitrator had held that the claimants had committed a breach of the JVA by having acquired a majority stake in ACPL but found that breach was not a material breach sufficient to constitute to event of d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... invalid since it directs respondents to transfer their shares @ 10% discount of fair market value. Fair Market Value was to be determined by one of 4 firms. The determination of the fair market value was jointly referred to Deloitte to issue their valuation report but directed respondents to sell at discounted price at 10% discount of the Fair Market Value. That under the Foreign Exchange Management Act and Foreign Exchange Management (Transfer of Securities) regulation and pricing guidelines issued there under share can be transferred to non residents at price not less than Fair Market Value determined by internationally accepted pricing methodology for valuation of shares. That the provision in the JVA for discounted price would be unenforceable as matter of Indian law and this was highlighted by the petitioners before the tribunal. Mr. Chinoy submitted that is the fundamental policy of law that the shares may not be transferred to a non resident at less than Fair Market Value but tribunal did not consider the issue by contending that the respondents had not raised it at the stage of First and Second PFAs. He submitted that the tribunal could not justify transfer of shares contr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Bharathi vs. P. Savitri & Ors. (2018) 11 SCC 761 4. Man Kaur (Dead) by Lrs. vs. Hartar Singh Sangha (2010) 10 SCC 512 5. H. P. Pyarejan vs. Dasappa through his heirs. (2006) 2 SCC 496 6. Raj Kishore vs. Prem Singh & Ors. (2011) 1 SCC 657 7. National Highways Authority of India vs. Gwalior Jhansi Expressway Ltd. 2018 SCC Online SC 688 8. Durga Prasad Pradhan vs. Palden Lama & Anr. AIR 1981 Sikk 41 9. R. N. Philips vs. A. N. Sattnathan. 1955 ILR 318 10. Kaikhosroo Phirozshaw Doctor vs. State 1955 ILR 69 Mr. De Vitre's submissions in rejoinder 48. In rejoinder Mr. Devitre submitted that by the second PFA the respondents were directed to sell their share holding in Ravin at a discount of 10% of the Fair Market Value to be determined by one of the valuers named in clause 17 of the JVA. That the respondents agreed that either of KPMG or Deloitte be selected by drawing of lots. KPMG was selected on 8th May, 2013 and the terms of engagement of the KPMG was also agreed between the parties but the respondents delayed agreeing to KPMG terms and in January 2014 respondents informed the petitioner that they had challenged the tribunal's finding as to valuation date in the second ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut a valuation. The said firm issued a report dated 4th March, 2016. The K & M Report was attached to the petitioner's application for final award and by email dated 25th July, 2016 respondents accepted the fact that Deloitte's engagement with Prysmian was a matter of public knowledge as far back as 2013 and that the respondents were therefore well aware of this fact. 51. According to Mr. De Vitre, Mr. Karia was not ousted since he continued in management and he relied on submissions on behalf of the respondents counsel that Mr. Karia was a person who wanted to take life a little easier. According to the petitioners the allegation of attempts to oust the respondents was the result of analysing an inter action between Mr. Sarogni and one Mr. Simms about the possibility of realigning of personnel in the management especially considering the fact that Mr. Karia could no longer be involved in day-to-day management. 52. In relation to the respondents case on specific performance he submitted that the respondents had contended that both parties could have been in material breach of the JVA. In the closing submissions the respondents had contested the claimants argument that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contending that in RBI guidelines sale of shares can only be at fair market value and cannot be discounted as otherwise it would be in contravention of Indian law but they did not produce either FEMA regulations or personal guidelines or any other circular and accordingly the contention was rejected. He submitted that under pricing guidelines the price of transfer of shares from resident to non resident was to be not less than fair market value. There is no bar against the price being higher than valuation as determined under FEMA. That the Deloitte valuation was Rs. 71 per share and applying 10% discount Rs. 61.93 ps. per share and the valuation is contractually binding. Valuation by Deloitte is not certified for the purposes of FEMA and that the petitioner had produced a valuation from M/s. Kalyaniwalla & Mistry which certified the fair market value for the purposes of FEMA that valuation was 16.38. The K & M report was part of the petitioner applications for final award and respondents did not deal with it at all. They ignored the K & M report of the petitioners and highlighted the fact that respondents had not dealt with K & M report. They ignored the fact that although the FE....
X X X X Extracts X X X X
X X X X Extracts X X X X
....limited. It was further submitted that the wider grounds of challenge in ONGC (supra) and Associate Builders save and except paragraph 36 thereof have been done away with and are not applicable to enforcement proceedings contemplated under section 48. That the 2015 amendment act has brought section 48 in line with Shri Lal Mahal and this was as a result of the 246th Law Commission Report. 57. Mr. De Vitre submitted that reference to these judgments were felt necessary since section 12 and the schedule ought not to be construed widely using a more narrow approach in respect of grounds under section 34 and 48. Specific reference was made by Mr. Devitre to the observation of the Supreme Court in Kaikhosroo Phirozshaw Doctor vs. State [(1955) ILR Bom 69] to state that the opinion of the Supreme Court even on a point which does not strictly arise must be accepted by the High Court as laying down a statement of law. More recently Supreme Court reaffirmed in HRD Corporation in the matter of Board of Control for Cricket in India vs. Kochi Cricket Pvt. Ltd [AIR 2018 SC 1549] observing that it was in consonance with the objects of the Act to avoid increased interference by Courts. A contrar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esisting a foreign award. The Court enforcing an award cannot review the award on merits even for considering an objection on the ground of violation of fundamental policy and conflict with basic notions of justice. Challenge to awards under section 34 on the ground of 'patent illegality' as contemplated in Saw Pipes, Western Geco and Associated Builders(supra) now stand negated and can only be a ground of challenge under section 34 for domestic awards and not while considering section 48 for enforcement. The ground of patent illegality contemplated a domestic award and cannot apply to foreign awards. That the observation of the Delhi High Court in NHAI (supra) relied upon by respondents was based on Saw Pipes (supra) and dealt with domestic awards. In conclusion it is submitted that the reading of the 2015 amendment as clarified by the 246th Law Commission Report and the Supplementary Law Commission Report there can be no review on the merits of public policy and also on the ground of justice or morality since otherwise it would result in avoiding the effect of 2015 amendment. No finding of fact can be reversed on the basis that an arbitral tribunal did not consider certai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dents have contended that the decisions in Shri Lal Mahal, M/s. Louis Dreyfus, Richmond Mercantile and Sideralba S.P.A. (supra) are not relevant since they would operate in circumstances prevailing prior to the amendment of the Arbitration Act. The respondents contend that the award is violative of the fundamental policy of Indian law because the petitioner were granted specific performance despite failure to make averments of readiness and willingness which was mandatory. Besides the enforcement of the Award to the extent it contemplated sale of shares is in violation of the Foreign Exchange Management Act. The respondents have also contended that merely because they have not challenged the awards in the seat of the Arbitration does not restrict their rights to resist enforcement that they had the option of either challenging the awards at the seat or to resistant enforcement. 61. Mr. Seervai reiterated that the definitions of public policy and fundamental policy of Indian Law would apply with equal force to objections against enforcement of a foreign award. He relied upon paragraph 35, 38 and 39 of the decision of the Supreme Court in Western Geco (supra) which emphasizes that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence and identifying claims that were not decided on entirely or misconstruing claims or identifying claims that were entirely misconstrued by the tribunal, the respondents are not engaging in a review on merits. The awards in the opinion of Mr. Seervai do not comply with the requirements of natural justice. 63. On the aspect of valuation and inclusion of Power Plus for both the parties had agreed in principle that the value of power plus may be included or accounted for in the valuation but the tribunal disregarded the submissions of the parties in its final award and took a different view. Mr.Seervai submitted that if an arbitrator does not express his disagreement with the party's witness or expert, it results in violation of principles of natural justice. He relied upon Annie Fox & Ors. (supra) and in this respect he submitted that in the instant case the tribunal did not record any disagreement with experts of parties. The testimony of the parties' experts in this regard constituted critical evidence and that the arbitrator's failure to express disagreement with the parties' experts deprived the parties of an opportunity to present their case and renders t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usible one. The Court would not interfere with the award merely because another interpretation is preferable. However, if the interpretation adopted by the tribunal is so unreasonable that no reasonable person would adopt it or so unfair so as to shock the conscience of the Court, it is an illegality which goes to the root of the matter and not a trivial one. 67. Having considered the approach of the tribunal, I do not see any sign of unreasonableness in the interpretation of the provisions by the tribunal. It is also not possible to ascertain whether the tribunal has ignored evidence. In my view the process adopted by the tribunal is transparent and across the three PFAs and the final award. Different views may have been possible, but merely because the tribunal adopted an unfavourable one, the award cannot be rendered unenforceable. Dealing with the respondents contention that merely because the respondents had not challenged the award at the seat of the arbitration did not prevent challenge resistance to enforcement, I have no hesitation in agreeing with that line of reasoning. Chapter I of Part II which deals with New York Convention Awards does not differentiate between enfor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....osition of the arbitral tribunal or procedure adopted was not in accordance with the agreement between the parties, failing such agreement, in accordance with law of country where the arbitration took place. 70. Mr.Seervai had relied upon the Singapore Court of Appeals' observation that preventing the party from resisting enforcement without challenging the award at the seat of the arbitration unduly restricted the freedom of a party to decide on how it should object with the award and the party should be free to avail alternate systems of defence which was recognised in the New York Convention as part of model law that PT First Media (supra) follows the decision of the Supreme Court of United Kingdom in Dallah Real Estate (supra) in which case the appellant sought enforcement of a final award made by the tribunal in Paris against the Government of Pakistan. It was held that neither the New York Convention nor the English Arbitration Act suggests that a person resisting recognition or enforcement in one country had any obligation to seek to set aside the award in the other country where it was made. 71. I have no doubt that failure to challenge the award in the seat of Arbitr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of a review on merits. It is such a review on merits that the legislature sought to do away with by introducing Explanation 2 to Section 34(2) and 48(2). As far as the petitioners arguments that the respondents case seeks review on merits is concerned, I agree with Mr. Seervai that it does not mean that no reference can be made to facts or documents as forming part of the record. Limited references may be justified in a given case but not a sub-cutaneous examination of the merits. Indeed I must observe that all counsel have exercised restraint in making reference to the consideration of the merits of the case by the tribunal but in my view consideration of the grounds raised by the respondents will involve detailed appreciation of evidence and its treatment by the tribunal which in my view is not permissible. 73. The other ground of challenge is that the award should shock the conscious of the Court is sought to be invoked is on the basis of the arbitrator's ruling in respect of direct sales. The tribunal in its First and Second award had rejected the respondents counter claim allegedly on a incorrect reading of clause 21.1. Although reliance was placed on Vikram India (supra) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting of Ravin's business. 76. In relation to the contention that the petitioner has been attempting to oust the respondents from Ravin and the respondent had made a similar counter claim in this respect. However, the tribunal did not consider the evidence in support of the counter claim including admission in evidence and cross examination by the petitioners witness. The respondents had attempted to demonstrate how the petitioner was conniving to wrest power from the respondent no. 1 during the integration period and in breach of the JVA. Mr. Seervai submitted that the tribunal's failure to rule on the counter claim is opposed public policy and is a fundamental flaw and against the notions of justice. As against this, it is the petitioners case that such alleged breach was never pleaded. The Determination Notice of 26th March 2012 and the counter claim dated 9th September, 2012 did not allege ouster of the respondents, since Mr. Vijay Karia continued to be in management throughout the period of integration. Considering the nature of the business of the petitioners and its parent company it is but obvious that scale of operations were considerably large and it is one of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y during cross examination of the petitioners' witnesses. Besides Jaguar had no business and was set up solely for purchasing office space in Mumbai. Although Mr. Seervai placed on the objects clause in the Memorandum and Articles of Association of Jaguar, in my view the objects clauses are usually varied and numerous and that by itself would not be indicative of the nature of the business that the company would carry on and in that light of the matter I am of the view that the arbitral tribunal was the best judge in this context. I am unable to find that the manner in which the tribunal has dealt with incorporation of Jaguar will not justify my arriving at a conclusion that the award is unenforceable. 79. The petitioner contended that allegations of bias are made by way of an after thought and Second PFA was not revealed prior to its publication. It was submitted that there was no suggestion at any time that the recruitment notice issued by Gilbert Tweed was merely in the regular course to identify potential candidates who could be recruited for Ravin and not otherwise. It was further contended that the reaction of the respondent to the recruitment notice published by Gilbert Twe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in principle that the value of Power Plus can be counted for in the valuation of the company. The tribunal disagreed and adopted an inconsistent method of valuation when neither party had advanced such a contention. According to the respondents if an Arbitrator does not express disagreement with the parties witness or expert, it would constitute violation of principles of natural justice. In the case at hand the tribunal had not recorded any disagreement with experts who had opined that ACPL and the company were competing, that such evidence of the experts was critical yet an Arbitrator did not express disagreement with the experts and grant an opportunity to deal with the Arbitrator's concerns as to why he would not accept the expert witnesses opinion. The Arbitrator should not surprise a party with his own ideas and if the tribunal tenders an award which has no basis in pleadings or arguments it renders a party unable to canvass its case and therefore is entitled to resist enforcement of an award. According to the respondents had the Arbitrator expressed his views they could have responded and failure to grant an opportunity to deal with the arbitrators views results in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The High Court found that the breach was too serious and the consequences for Egypt are too grave and therefore declined to permit enforcement of the award. The award was then set aside on Egypt's application. In the facts at hand, I do not find that the tribunal had acted in a manner so as to deprive either party of an opportunity to present their case. The only factor that has been relied upon to allege that the respondents were unable to present their case that the arbitrator had adopted an approach which was not anticipated by either party. The fact that an arbitrator has taken a view unanticipated by parties would not, in my view, constitute a breach of the principles of natural justice. 84. In Front Row Investment (supra), an award came to be challenged before the High Court in Singapore on the ground that the arbitrator had breached rules of natural justice by concluding that only one of three grounds of alleged misrepresentations had been relied upon and there was no basis on which it could be concluded that the appellant had given up the rest of the grounds. In that case the arbitrator had dismissed the appellants counter claim without considering the grounds of its coun....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or ignoring / rejecting the evidence which may be of binding nature) in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy. 46. In what we have discussed above, even if it be assumed that the Board of Appeal erred in relying upon the report obtained by the buyers from Crepin which was inconsistent with the terms on which the parties had contracted in the contract dated 12-5-1994 and wrongly rejected the report of the contractual agency, in our view, such errors would not bar the enforceability of the appeal awards passed by the Board of Appeal". 87. The scope of enquiry under Section 48 did not permit a review on merits and that under Section 48(2)(b) enforcement of a foreign award could be refused only if it is found to be contrary to (i)the fundamental policy of Indian Law; (ii) to the interest of India and (iii) justice of morality. Thus, there being no opportunity for this Court to review a foreign award on merits, in Sideralba (supra) th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sideralba (supra), objections raised by the respondents did not fall under the category of the award being contrary to the fundamental policy of Indian Law or the interest of India or justice or morality. This Court was of the view that scope of the expression "public policy" in the case of enforcement of a foreign award is very narrow and limited and is not wider than when dealing with a domestic award. The Court found that by virtue of the principles laid down in Shri Lal Mahal (supra), the challenge to domestic award is very narrow and limited and in any event not wider than those applicable by challenging a domestic award. The Court rejected the submission of counsel for the respondent that the expression "fundamental policy of Indian law" as interpreted by the Supreme Court in Associate Builders (supra) and ONGC v/s. Western Geco (supra) were applicable to a foreign award. It is further held that the Supreme Court in Associate Builders (supra) and Western Geco (supra) had affirmed the view in ONGC which dealt with a domestic award under Section 34 of the Act and observed that those principles cannot be extended to a foreign award under Section 48(2(b). Besides the principle l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ust aver in the plaint and establish the fact by evidence aliunde that he has always been ready and willing to perform his part of the contract and a party seeking specific performance must manifest that his conduct is blemish less throughout entitling him to specific relief. The provisions imposes a personal bar to grant relief and that pleadings manifest that the conduct of the plaintiff entitles him to get relief. Mr. Chinoy submitted that the petitioner not having made such averments, this is one of the crucial grounds available to resist enforcement. 92. Mr. Chinoy's contention that failure to make and averment as to readiness and willingness to perform the contract is fatal since grant of relief in the absence of such mandatory averments would be against the fundamental policy of Indian law is in my view misconceived since the effect of absence of such averments would depend on the facts of a case In the case at hand, the respondents had not raised this contention before the tribunal. The respondents case on the other hand was that the respondents, as opposed to the petitioner, were entitled to specific performance as contemplated in clause 23.4 of the JVA. This was canv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith the effect of Section 12 of the Arbitration Act. In R.N. Phillips (supra), Mr. Chinoy invited my attention to the fact that the Division Bench had then observed that it could be incorrect to say that every opinion of the Supreme Court would be binding on the High Court in India. The only opinion which would be binding would be an opinion expressed on a question that arose for determination of the Supreme Court and even though ultimately, it may be found that the particular question was not necessary for decision of a case and yet opinion was expressed by the Supreme Court on such a question then the opinion would be binding upon the High Court. He therefore submitted that merely because HRD Corporation had made certain observation and as highlighted by Mr.DeVitre need not ipso facto operate as a precedent. Mr. Chinoy relied upon a decision of the Full bench of Kaikhosroo Phirozshaw Doctor v/s. State in which the Court considered opinion by the Supreme Court even on a point which does not strictly arises for decision must be accepted by the High Court as laying down statement of law which is followed but the full bench observed that it did not read that particular observation as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcement of a foreign award cannot be denied merely because it was in contravention with the laws of India. An award should be contrary to the fundamental policy of Indian law and only then enforcement could be denied. This Court had in Pol India Projects (supra) approved of the decision in Penn Racquet Sports (supra) as squarely applicable to the facts of the cases. The Court in Pol India Projects (supra) further observed that the Supreme Court had held since the expression "public policy' covers the field not covered by the words "and the law of India" which follow that expression contravention of law alone will not attract the bar of public policy and something more than the contravention of law is required and adverting to the facts of the case even if a law of guarantee could not have been issued in favour of the respondents under provisions of the Foreign Exchange Management (Guarantees) Regulation, 2000 which was acted upon by the parties simplicitor violation of the provisions would not be contrary to the fundamental policy of Indian law. POL India Projects Ltd (supra) followed the Delhi High Court decision in SRM Exploration P.Ltd vs. N & S & N Consultants [(2012) 4 Company....