TaxTMI 
TaxTMI 
2021 (11) TMI 458
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....ort 'SCB') as their agent to identify the purchaser for the appellant's shares in Atlas. The dispute apparently commenced on account of the stand of the respondent that his signatures on the placement instructions had been forged. Accordingly, he lodged a complaint with the Economic Offences Wing, Mumbai Police (for short 'EOW') on 19.04.2010 against both the appellant and the SCB. 2. Better sense appears to have prevailed at that stage amongst the parties, or if one would say commercial sense; and they endeavoured to resolve their disputes by entering into a Deed of Settlement dated 03.01.2011. Since the present proceedings need to be adjudicated on aspects which emerge from the Deed of Settlement, it would be appropriate at this stage to set out the gist of its relevant clauses. a. Clause 2 provided that the respondent would withdraw all complaints and proceedings filed against the appellant. b. Clause 3 forbade the respondent from writing letters, communications, or complaints to any person about the subject matter of the Deed of Settlement. The latter part of the said clause reads as under: "3..........It is farther agreed that in future Jackie shall not write any letter....
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....ppellant not to give updates to the respondent. This e-mail was also circulated to their associates. On the respondent asking the appellant on 30.06.2011 to complete the sale of shares for release of the second escrow cheque of US$ 2 million, the appellant replied the same day stating that the respondent could not push him to sell. The appellant also alleged the breach of the Deed of Settlement by the false and defamatory e-mail on 15.06.2011. This triggered recourse to the arbitration clause. Arbitral proceedings and Court proceedings in relation to arbitral proceedings: 4. In July 2012, a share purchase agreement was executed for MSM's shares and the transfer was pending approval by the Foreign Investment Promotion Board. The appellant filed a petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'said Act') seeking interim relief against the respondent, his wife, and the escrow agent. The appellant claimed that the amount should not be released to the respondent on account of the breach of the Deed of Settlement through the e-mail sent by the respondent's wife on 15.06.2011. In the said proceedings, being Petition No.853/2012, a ....
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.... by himself his officers, servants, and agents be restrained by an order and permanent injunction of this Hon'ble Tribunal from making any false, baseless and defamatory statements against the Claimant in breach of the express terms of the Deed of Settlement. (g) For the costs of this Claim; and (h) For such further and other reliefs as the nature and circumstances of the case may require and the Hon'ble Tribunal deems fit." 6. The respondent sought recourse to Section 16 of the said Act seeking to raise a jurisdictional challenge against the reference, however the arbitrator opined on 17.01.2013 that there could not be a threshold rejection of the appellant's claim. Thereafter the proceedings were contested by the respondent. 7. It may be noticed that MSM's shares were sold in March, 2013, and on 06.04.2013, Atlas declared and paid dividend to its shareholders from the proceeds. The appellant immediately thereafter filed an application under Section 17 of the said Act seeking to attach an amount of US$ 1.5 million which the respondent was to receive as his share of the said proceeds. That application was rejected and further proceedings in respect of the same also met the....
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....mmercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is- (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country;" The admitted position is that the appellant is a party based in Singapore and thus, in terms of the aforesaid definition the arbitration although carried out a within the country, would be an "international commercial arbitration". We may notice at this stage that it is nobody's case that the award in question is a foreign award within the meaning of Part II Section 44 of the said Act. For domestic awards, Chapter 7 of the said Act provides recourse against the arbitral award. Section 34 of the said Chapter provides for application for setting aside an arbitral award and specifies the ground avail....
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....on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re appreciation of evidence." 17. The crux of the aforesaid is that while the plea of the award being vitiated by patent illegality is available for an arbitral award, such an award has to be a purely domestic award, i.e. the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment. 18. We are noticing the aforesaid distinction as it appears that the judgments of the learned Single Judge and the Division Bench decide the challenge to the award on the plea of patent illegality without noticing this distinction. No doubt both judgments proceed on the basis that in either situation, i.e., within the test available for a purely domestic award or a domestic award arising from an international commercial arbitration; the award cannot be sustained. Thus far as to the nature of the award. Whether the amendment would apply in the facts of the present case: 19. It is the say of the appellant that the award has to be scrutinised in the post amendment scenario and, thus, both t....
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....at the result of the BCCI judgment was that salutary amendments made by the 2015 Amendment Act would apply to all court proceedings initiated after 23.10.2015. 25. The contention of the appellant, faced with the aforesaid judicial pronouncements, solely rests on the wording of clause 9 of the Deed of Settlement, which provides that "the Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or any amendment thereto."(Emphasis supplied). The submission thus was that this phraseology of clause 9 included the possibility of any future amendments to the said Act being made applicable to the arbitration in question. 26. We have to thus examine the effect of such phraseology used in the arbitration clause. 27. In the context of the Arbitration Act, 1940 (hereinafter referred to as the 'Old Act') and the said Act, there are some observations in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited (1999) 9 SCC 334, which are relevant for the purposes of this discussion. While opining that the provisions of the Old Act would apply in relation to arbitral proceedings which had commenced before the coming into force of the said Act, this Cou....
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.... Act unless the parties otherwise agree. Whether the application was pending for appointment of an arbitrator or in the case of rejection because of no claim as in that case for appointment of an arbitrator including change/substitution of the arbitrator was held not to be of any legal effect for invoking the provision of the 2015 amendment. While S.P. Singla supra and Parmar Construction Company supra opined on the topic of arbitral proceedings, we may note here that the matter concerns Section 34 proceedings for setting aside the award. In this case, the Section 34 proceedings had already commenced when the 2015 Amendment Act came into effect. The court proceedings were already subject to the pre- 2015 legal position. In a conspectus of the aforesaid, a generally worded clause such as Clause 9 of the Deed of Settlement cannot be said to constitute an agreement to change the course of law that the Section 34 proceedings were subject to. We may also note that a learned single Judge of the Delhi High Court in ABB India Ltd. v. Bharat Heavy Electricals Ltd. OMP (T) (Comm) No.48/2020, while referring to the judgment in Parmar Construction Company supra case, has proceeded in accordanc....
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....ed of to expand the scope of scrutiny as it would appear to run contrary to the legislative intent of Section 26 of the Amendment Act. In this regard it may be appropriate to refer to the Supreme Court's observations in Ssyangong Engineering and Construction Company Ltd. (supra) relating to the scope of 'public policy' as a ground to set aside arbitral awards before the 2015 Amendment Act: 24. Yet another expansion of the phrase "public policy of India" contained in Section 34 of the 1996 Act was by another judgment of this Court in Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , which was explained in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] as follows : (SCC pp. 73-77, paras 28-34) "28. In a recent judgment, ONGC v. Western Geco International Ltd. [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the fundamental policy of Indian law. The Court held : (SCC pp. 278-80, paras 35 & 38-40) [...] 29. It is clear that the ....
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....avail the financial benefit under the Deed of Settlement. 34. The first such step was to withdraw all complaints and proceedings against appellant and all other named and unnamed persons before the EOW. The respondent complied with the same and all such proceedings were brought to an end. US $ 1.5 million was kept in escrow to ensure that those proceedings came to an end, and on achieving the said objective the escrow amount had to be released to the respondent. 35. The second stage was of the sale of shares and the escrow amount of US$ 2 million was to be paid to the respondent when the shares were sold. It appears that there was some delay in the sale of shares which is what was objected to by the wife of the respondent and the appellant claimed that he could not be pushed into an early sale. Be that as it may, the sale did take place. Thus, the necessary conditions of the Deed of Settlement stood satisfied. It is in this context that we have to consider whether clause 6 would come into play, so as to deprive the respondent of the benefits which were two fold, i.e., monetary benefit to cease and desist on complaints and litigations, and the proceeds from the sale of shares that....
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....ment of USD 3,500,000 to the latter. He got the EOW complaint withdrawn; he got the Petitioner to ratify the original Placement Instruction to SCB for sale of Atlas shares and for making over of the consideration to Grandway; he got an irrevocable power of attorney in his name for sale of shares of Atlas from the Petitioner; he got all the Petitioner's claims against him, his wife and Atlas and Grandway and their shareholders released; he got the Petitioner's resignation from the Board of Atlas; he got an agreement and irrevocable consent from the Petitioner for sale and transfer of Atlas shares; he got an agreement or consent from the Petitioner for dividend distribution and winding up of Atlas in a manner as the Board and the other shareholders might deem fit; and he got a confirmation of no claim against him or his family member or Atlas or Grandway of their shareholders by the Petitioner. And after all that is done, he even gets back his entire money of USD 3,500,000. And that because the Petitioner's wife calls him a 'forger' in a private communication made to a couple of acquaintances or associates. Can such award be ever sustained as something a fair and judiciously minded p....