TaxTMI 
TaxTMI 
TaxTMI 
2020 (12) TMI 1319
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....Mr.Mukul Rohtagi and Mr.Vikram Nankani, Sr.Advocates with Mr.Mahesh Agarwal, Mr.Rishi Agarwala, Mr.Karan Luthra, Mr.Pranjit Bhattacharya and Mr.Ankit Banati, Advocates, Dr.Abhishek Manu Singhvi, Sr.Advocate with Mr.Avishkar Singhvi, Ms.Madhavi Khanna, Mr.K.R.Sasiprabhu and Mr.Aditya Swarup, Advocates ORDER I.A.10376/2020 (under Order XXXIX Rule 1 and 2 CPC) Brief Facts 1.1 The plaintiff-Future Retail Ltd. (in short 'FRL') has filed the present suit impleading Amazon.com NV Investment Holdings LLC (in short 'Amazon') as defendant No.1; Future Coupons Pvt. Ltd. ( in short 'FCPL') as defendant Nos.2; the promoters of the plaintiff (in short 'Biyanis') as defendant Nos.3 to 11, Future Corporate Resources Private Limited (in short 'FCRPL'), Akar Estate and Finance Private Limited (in short 'AEFPL') as defendants No.12 and 13 respectively, and Reliance Retail Ventures Limited (in short 'RRVL') and Reliance Retail and Fashion Lifestyle Limited (in short 'RRFLL' as defendant Nos.14 and 15 respectively (together referred as Reliance) with the following prayers: (a) Restrain by an order of permanent injunction the Defendant No. ....
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....e. 1.2 Prayers in the interim application, that is, I.A.10376/2020 (under Order XXXIX Rule 1 and 2 CPC) are identical to prayers (a), (b) and (c) in the plaint. 1.3 At the outset on a query raised by this Court as to whether the parties agree that this application can be finally decided based on the arguments on behalf of the parties without formal counter affidavits, learned counsels for the parties stated that the application be finally decided without formal affidavits based on oral arguments on behalf of the parties. Mr.Harish Salve, learned Senior Counsel appearing for the plaintiff further stated that in the interim application, he is not seeking any anti arbitration injunction or any anti suit injunction but only an interim restraint on Amazon to not interfere before the authorities such as SEBI etc. in relation to the lawful 'transaction' between FRL and Amazon pending consideration before the Regulators and statutory authorities. 1.4 Though not challenging the Emergency Award order (in short 'EA order') dated 25th August, 2020 on merits before this Court which challenge is also not maintainable in the present suit, grievance of FRL in the present suit i....
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....eholders, livelihood of the employees etc. The transaction will infact preserve the value of the Amazon's investment in FCPL whose primary asset is its shares in FRL. In case FRL becomes insolvent, the same will destroy the substratum of Amazon's investment in FCPL. It is, therefore, also claimed that de hors the invalidity of EA order, the conduct of Amazon in the interfering before the statutory authorities/Regulators amounts to tortious interference. 1.6 Since the assets of FRL are suffering deterioration at a rapid pace, it is imperative that the transaction between FRL and reliance is expeditiously concluded to stave off the prospects of the company going into liquidation. The transaction is presently at the stage of seeking various regulatory approvals from inter alia the Stock Exchanges and the Securities and Exchange Board of India (in short SEBI) Despite the fact that Amazon was in loop in respect of the transaction as is evident from the various correspondences, Amazon for the first time on 3rd October, 2020 wrote to NSE/BSE/SEBI, raising the plea that the transaction between Amazon and Reliance violated its contractual rights, that is, FCPL SHA and the authorities shoul....
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....between Amazon, FCPL and persons listed in Schedule-I being Biyanis, FCRPL and AEFPL (in short FCPL SSA); (v) Letter dated 22nd August, 2019 by FRL to the Stock Exchanges in relation to execution of FCPL SHA and FCPL SSA;. (vi) An application dated 23rd September, 2019 filed before the Competition Commission of India (in short 'CCI') by Amazon (investor) for obtaining the approval of CCI for proposed acquisition of 34,02,713 Class-A voting equity shares and 63,71,678 Class-B non-voting equity shares aggregating to 49% of the total voting and non-voting equity share capital in FCPL, (a wholly owned subsidiary of FCRPL; FCPL and FCRPL being owned and controlled by the promoter group, that is, Biyanis); (vii) Letter dated 19th December 2019 by FCPL to FRL in relation to the FRL SHA dated 12th August, 2019 notifying the "effective date" for the purposes of the FRL SHA to be the date of the said letter and that the list of restricted persons was as set out in the Annexure - I of the letter; (viii) E-mails dated 12th March, 2020; 15th March, 2020; 19th March, 2020 and 25th March, 2020 received from FCRPL intimating Amazon about the various notices received from the banks ....
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.... for the purposes of Proposed Transaction Ill) are below the thresholds provided in the Target Exemption. (iii) Accordingly, it is submitted that each of the constituent transactions of the Proposed Combination, on a standalone basis, are not notifiable to the Hon'ble Commission. (iv) Without prejudice to the foregoing, should the Hon'ble Commission consider the Proposed Combination to be a notifiable combination, the Amazon is notifying the Proposed Combination in terms of Section 6(2) of the Competition Act read with Sub-regulation (4) of Regulation 9 of the Combination Regulations. 5.1.3. Right(s) acquired or arising out of or in connection with the transaction(s) referred to at 5.1.1 and 5.1.2 above. (v) It is clarified that the Amazon is not acquiring control over FCPL in any manner pursuant to the Proposed Transaction III. The Amazon submits that the rights to be acquired by the Amazon pursuant to the consummation of the Proposed Transaction III are mere investor protection rights, which are typically granted to minority investors with a view to protect the investment made by such investor and do not confer control. (vi) The rights that will be acquired by t....
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....d not to transfer, encumber, divest or dispose of these Retail Assets (as defined in the SHA), directly or indirectly, in favour of a mutually agreed list of Restricted Persons (as defined in the SHA). (D) In Para 29 Amazon notified that the rationale of FCPL was that the Promoters have invited Amazon to invest in FCPL with a view to strengthen and augment the business of FCPL. FCPL believes that the Proposed Combination will provide an opportunity to FCPL to learn global trends in digital payments solutions and launch new products and usage of in-built payment mechanisms can lead to acquisition of customers' base and increased loyalty. (E) In Para 30 Amazon notified the rationale for Amazon as it believes that FCPL holds a potential for long term value creation and providing returns on its investment. Amazon has decided to invest in FCPL with a view to strengthen and augment the business of FCPL (including the marketing and distribution of loyalty cards, corporate gift cards and reward cards to corporate customers) and unlock the value in the company. 1.10 Thus, the proposed combination contained of Proposed Transactions I, II and III as notified by Amazon to CCI was that A....
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....L, if such Transfer or Encumbrance is in accordance with the provisions of the FCL SHA. Contentions on behalf of FRL 2.1 According to Mr.Harish Salve, learned Senior Counsel appearing for FRL states that FRL is a listed company having more than three lakhs shareholders, over 25,000 employees and several other stakeholders (including banks and financial institutions). The Covid-19 pandemic has had significant impact on Indian businesses, particularly the retail sector, in which FRL carries on its business and thus the transaction between FRL and Reliance is to protect the interest of all the stakeholders of FRL through a large infusion of funds and acquisition of liabilities of FRL's business by Reliance. 2.2 According to the learned Senior Counsel, the present plaint seeks injunction against Amazon from unlawfully interfering with the performance of the transaction between FRL and Reliance (defendant Nos.14 and 15) to restructure and transfer a part of FRL's business to Reliance to raise funds immediately required by FRL inter-alia to meet its debt repayments. Since Amazon is resorting to measures that constitute tortiuous interference with lawful contracts being entered into b....
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.... of the business. The balance of convenience, therefore, also lies in restraining Amazon from in any manner interfering with the transaction. 2.6 Claim of Amazon that the FRL SHA, FCPL SHA and FCPL SSA are a Single Integrated Transaction is not only contrary to the provisions of FRL SHA, FCPL SHA and FCPL SSA but also the representation of Amazon before the Competition Commission of India (CCI). 2.7 Contention of Amazon based on the letter dated 19th December, 2019 issued by FCPL to FRL under the FRL SHA notifying the effective date of FRL SHA as 19th December, 2019 and listing the Restricted Persons for the purposes of FRL SHA is fallacious and misleading. Based on this letter Amazon contends that FCPL SHA and FRL SHA are interlinked since the list of Restricted Persons notified under this letter was the same as the list of Restricted Persons set out in the FCPL SHA. 2.8 According to FRL the said letter was issued by FCPL in accordance with the provisions of FRL SHA which stipulates that the effective date of FRL SHA would mean the date designated in writing by FCPL after receipt of any approval from any government authority including the CCI, if applicable, that may be require....
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....on knew, being a foreign investor, its limit of investment in view of Regulatory Regime in India and thus it was content with an investment made with the shareholder of FRL. Reliance is placed on the decisions reported as (2012) 6 SCC 613 Vodafone International Holdings BV vs. Union of India; RNRL vs. RIL (supra); 2000 (3) Mh LJ 700 Rolta India Ltd vs. Venire Industries Ltd.; 1959 AC 324 Scottish Co-operative Wholesale Society Ltd vs. Mayer and [2009] EWCA Civ 291 Hawkes vs. Cuddy to contend that the Directors of a listed entity have to act in fiduciary duty and not merely follow the direction of Promoters which tantamount to destroy the value of public shareholders and other stakeholders. 2.13 The WhatsApp chats between the parties clearly reveal that Amazon was aware of the fact that FRL was engaged in the talks to transfer its business to Reliance since June/July, 2020 and the representation of Amazon to the Authorities that it only came to know of the transaction on 16th September, 2020 is false. As a matter of fact, informal discussions were also held between Amazon and Reliance wherein Reliance informed Amazon that it was acquiring the assets of FRL when Amazon did not raise....
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....is not challenging the legality of the findings in the EA order on merits nor seeking a declaration as to the invalidity of the EA order but since the Emergency Arbitrator has no legal status, thus the EA order is not binding, FRL seeks its relief on the basis that the EA order is a nullity. Since Amazon claims that the EA order is valid, same is an issue to be decided by this Court. 2.18 Appearance of the FRL before the Emergency Arbitrator was subject to its objections as to the jurisdiction and the said objection cannot be waived. According to learned Senior Counsel, FRL appeared before the Emergency Arbitrator without prejudice to the objection that an Emergency Arbitrator is not recognized under Part-1 of the A&C Act as is evident from the letters of FRL dated 6th October, 2010 and 7th October, 2020 to SIAC and the response dated 12th October, 2020. Thus Amazon's contention that FRL waived the objection to the jurisdiction of the Emergency Arbitrator is false and misconceived. 2.19 Further since the Emergency Arbitrator lacks legal status under Part-I of the A&C Act, the parties by consent could not confer jurisdiction on the Emergency Arbitrator. Despite the fact that the o....
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....er International commercial arbitration seated at Delhi, in India. Further in both the domestic and international commercial arbitration under Part-I, Emergency Arbitrator is barred, as the remedy for seeking an interim relief before the Arbitral Tribunal is constituted, is under Section 9 of the A&C Act from a Court. That being the only remedy available, Amazon cannot bypass the said remedy and seek appointment of an Emergency Arbitrator. 2.23 Under Section 11(1) of the A&C Act, an Arbitrator has a degree of permanence. The A&C Act also does not contemplate that for the first six months there would be one arbitrator and than other one. Further Sections 12 and 13 of the A&C Act which permit a party to challenge the jurisdiction of an Arbitrator, provide for the grounds and procedure on which appointment of the Arbitrator can be challenged. Section 15 of the A&C Act provides for the manner in which the mandate of an Arbitrator can be terminated and another Arbitrator can be substituted. It is contended that the SIAC Rules cannot override the mandatory provisions of Part-I of the A&C Act. Referring to Section 2(6) of the A&C Act, it is submitted that the parties have freedom to auth....
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....urt held that the appointment of two Arbitrators would not frustrate Section 10 of the A&C Act as in the event the two Arbitrators arrive at conflicting views, they could very well appoint a third Arbitrator to act as a presiding Arbitrator. Reliance of Amazon on the Rules of Delhi International Arbitration Centre ("DIAC Rules"), Mumbai Centre of International Arbitration ("|MCIA Rules") and Madras High Court Arbitration Centre ("MHCAC Rules") which provide for emergency arbitration procedures to contend that emergency arbitration is recognized under the A&C Act is also misconceived as DIAC, MCIA and MHCAC Rules cannot override the mandatory provisions of the A&C Act. Further these Rules have been made flexible so as to apply to foreign seated arbitrations as well and the Rules were framed in anticipation of the amendment proposed by 246th Law Commission Report which sought amendment to Section 2(1)(d) of the A&C Act to include emergency arbitration which was not accepted by the Parliament. 2.26 Reliance of Amazon on the decisions in Raffles (supra) and 2020 SCC Online Del 631 Goodwill Non-Woven P. Ltd vs. Xcoal Energy & Resources LLC is also misconceived as the said decisions per....
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....zed as coram judice for granting any reliefs under the A&C Act. Despite challenging the jurisdiction of the Emergency Arbitrator to grant interim relief as the said jurisdiction under the A&C Act is either vested in the Court in terms of Section 9(1) of the A&C Act or before the Arbitral Tribunal once it is constituted under Section 9(3) of the A&C Act, the Emergency Arbitrator passed the EA Order. 3.2 It is well settled that an Arbitral Tribunal is constituted either on the basis of agreement between the parties or under Section 11 of the A&C Act and in the present case there was neither an agreement between the parties nor a direction under Section 11 of the A&C Act for appointment of the Emergency Arbitrator Under Section 2 (6) read with Section 19 (2) of the A&C Act, derogation of the A&C Act is only possible where the A&C Act itself permits the parties to derogate therefrom. Further Section 9 of the A&C Act does not contain the phrases like "subject to any agreement to the contrary" or "unless otherwise agreed by the parties", thus, the parties cannot derogate from Section 9 of the A&C Act. The parties cannot by consent confer jurisdiction upon a body not recognized under the....
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....ly prescribe the procedure for the arbitration proceedings. In case of conflict with Indian substantive law, the provisions of the A&C Act will prevail and apply mutatis mutandis. The seat of arbitration being New Delhi, the arbitration proceedings are governed by Part-I of the A&C Act. Under Part-I of the A&C Act, interim order can only be passed under Section 9 or 17 of the A&C Act. The Emergency Arbitrator being a temporary creature under the SIAC Rules is not the Arbitral Tribunal and has no jurisdiction to pass orders under Section 17 of the A&C Act. 4.2 Reiterating the provisions under the SIAC Rules and Section 11 of the A&C Act relating to the appointment of Arbitral Tribunal, Sections 13 to 15 and 32 of the A&C Act relating to the manner in which the mandate of Arbitral Tribunal can be terminated and Sections 14 or 15 for appointment of a substitute arbitrator, it is contended that under Part-I of the A&C Act there is no scope of appointment of different Arbitral Tribunals for various stages of arbitral proceedings viz. Emergency Arbitrator at the initial stage whose mandate automatically ends when the Tribunal is constituted. 4.3 Under Section 17 (2) of the A&C Act, an ....
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....urumukh Das Saluja & Ors. 4.7 Chapter XV of the Companies Act, 2013 read with the Companies (Compromise, Arrangement and Amalgamations) Rules, 2016, the National Company Law Tribunal Rules, 2016 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('SEBI LODR') form a complete code governing all aspects of the scheme of arrangement between the company, its members and its creditors. 4.8 The Board of Directors of FRL vide Resolution dated 29th August, 2020 have approved the transaction in a properly constituted meeting at which the majority of the Directors voted in favour of the proposed transaction. 4.9 It is thus prayed that Amazon be injuncted from interfering in the transaction between FRL and Reliance. Contentions on behalf of Amazon 5.1 According to Mr. Gopal Subramanium, learned Senior counsel appearing on behalf of Amazon the suit as filed by the plaintiff seeking an anti-arbitration injunction, anti-suit injunction and injunction with respect to communication to statutory authorities is not maintainable. The arbitration proceedings having commenced on 5th October, 2020 under Part 1 of the A&C Act in respect....
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.... has not seriously questioned the Emergency Arbitrator's findings about the applicability of the 'group of companies' doctrine and/or the theory of implied consent in these proceedings, however FRL continues to argue that it was not a signatory to the arbitration agreement in FCPL SHA. The issues agitated before the Emergency Arbitrator cannot be re-agitated in the present proceedings. During the course of arguments neither FRL nor defendant Nos.2 to 13 have addressed arguments on the breaches committed of the FCPL SHA and FRL SHA. Thus, no case is made out for the present action to safeguard the transaction, which is post the EA order, premised on a breach and an afterthought with the sole motive of a collateral challenge. Therefore, no case of tortious interference is made out. 5.5 Learned Senior counsel for Amazon takes serious objection to the filing of the documents dated 29th August, 2020 filed by FRL and FCPL on 12th November, 2020 before this Court without being accompanied by a statement of truth. This document was not produced before the Emergency Arbitrator and in this regard a finding has been returned by the Emergency Arbitrator. Further this document dated 29th Augus....
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....n 2(8), Section2(1)(d) of the A&C Act and the SIAC Rules in accordance with the principle of party autonomy; Thirdly, under the SIAC Rules, the Emergency Arbitrator occupies the position of and functions as an arbitrator till the Arbitral Tribunal is fully constituted. Rule 1.3 of the SIAC Rules defines an 'Emergency Arbitrator' as 'an arbitrator appointed in accordance with Para 3 of Schedule I'. Besides several other provisions of SIAC Rules such as Rule 38, 39 and Schedule I, reinforce that an Emergency Arbitrator occupies the position of an arbitrator and functions as an arbitrator. Further there is nothing in the A&C Act which prohibits, disempower or nullify proceedings before an Emergency Arbitrator. Reliance is placed on the decision in (1998) 3 SCC 573 K.K. Modi v. K.N. Modi. Submission of FRL that since an Emergency Arbitrator is not expressly provided under the A&C Act, it must follow that the A&C Act prohibits emergency arbitration is fallacious. In Centrotrade Minerals (supra) Supreme Court held that merely because the A&C Act does not expressly recognize the procedure agreed to by the parties, in exercise of the 'grund norm' of 'party autonomy' the A&C Act does not pr....
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....orceable as an order of the Court under Section 17(2) of the A&C Act. 5.10 Referring to the decisions in (2016) 9 SCC 44 Anita International v. Tungabadra Sugar Works; (2011) 3 SCC 363 Krishnadevi Malchand v. Bombay Environmental Action Group; (2002) 7 SCC 46 Prakash Narain v. Burmah Shell learned counsel for Amazon contends that unless an order is set aside, the same is valid and cannot be indirectly challenged in collateral proceedings. Thus the challenge of FRL to the EA order in the present suit is not maintainable. Since the EA order is an interim measure under Section 17(1) of the A&C Act, it is deemed to be an order of the Court under Section 17(2) of the A&C Act and can be challenged only in the manner prescribed by law and not otherwise. Contention of FRL that since the EA order is without jurisdiction and a coram non judice, hence, not required to be challenged as per the requirement of law and order in this respect thereto can be passed by this Court in the present proceedings is misconceived. Reliance is placed on the decision in (1997) 3 SCC 443 Tayabbhai M. Bagasarwalla v. Hind Rubber. 5.11 It is further contended that the EA order has been passed in exercise of jur....
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.... SC 995 MTNL v. Canara Bank and (2017) SCC Online Del 11625 GMR Energy v. Doosan Power to contend that non-signatories can also be bound as parties to the arbitration agreement. 5.14 Learned Senior counsel for Amazon contends that the agreements i.e. FRL SHA, FCPL SHA and FCPL SSA were negotiated at the same time amongst Amazon, FRL, FCPL and the Biyanis. The future group, including FRL was represented by a common team of legal counsel. Further, FRL SHA though executed on 12th August, 2019 became effective only on 19th December, 2019 vide letter dated 19th December, 2019 issued by FCPL to FRL, once FCPL communicated the list of restricted persons under the FRL SHA. These facts were duly considered by the Emergency Arbitrator, who held that besides these facts, the terms of the agreement established 'cogent commonality, intimate inter-connectivity and undeniable indivisibility of the contractual agreements'. In the present proceedings FRL has not seriously questioned the application of theory of implied consent and the doctrine of 'group of companies' as applied by the Emergency Arbitrator. 5.15 Contention on behalf of FRL that reading of the FRL SHA and FCPL SHA as one single tra....
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....ding amongst Amazon, FCPL, the Biyanis and the FRL was thus set out clearly in the representation to the CCI. 5.18 It is further contended that the FRL SHA, FCPL SHA and FCPL SSA constituting a single, integrated transaction do not make the agreement illegal being in violation of the Foreign Exchange laws. Amazon does not control FRL. FRL forms a part of the future group of companies. Defendant No.3 and 8 herein are the directors on the Board of FRL; defendant No.3 being the Executive Chairman and defendant No.8 being the Managing Director of FRL. Thus, they are the person who are entrusted with substantial power of management of the affairs of the company, as defined under Section 2(54) of the Companies Act, 2013. At the time of entering into FRL SHA and FCPL SHA, defendant No.3 to 13 (excluding FCPL) held 47.2% shares of FRL (which translate into 43.58% of FRL shares on a fully diluted basis). Thus defendant No.3 to 13 collectively (excluding FCPL) are the single largest shareholders of FRL with fragmented public shareholding and are in de-facto control of FRL. 5.19 Further Amazon's investment in FCPL does not violate the Foreign Exchange laws. As per the FEMA (FDI) Rules, fore....
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....PL SHA, no case for grant of interim injunction as prayed for is made out. Consequently, the application be dismissed. ISSUES 6.1 On the arguments addressed by the parties, following issues arise for consideration before this Court: I. Whether the present suit is prima facie maintainable? II. Whether the Emergency Arbitrator lacks legal status under Part I of the A&C Act and thus coram non judice? III. Whether the Resolution dated 29th August, 2020 of FRL is void or contrary to any statutory provision? IV. Whether by conflation of the FRL SHA, FCPL SHA and FCPL SSA, Amazon seeks to exercise 'Control' on FRL which is forbidden under the FEMA FDI Rules? V. Whether prima facie a case for tortious interference is made out by FRL? VI. Whether FRL is entitled to an interim injunction? Whether the present suit is prima facie maintainable 7.1 Objections of Amazon to the maintainability of the present suit confined to the issues raised in the present application are; firstly, that the arbitration proceedings having already commenced on 5th October, 2020, the present suit is an abuse of the process of the Court and secondly, there can be no collateral challenge to th....
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....terference by Amazon are; Firstly, that the EA order on the strength of which Amazon seeks to obstruct the approval of the transaction before the Statutory Authorities/Regulators is invalid as the Emergency Arbitrator is a coram non judice; Secondly, Amazon is illegally claiming the Resolution dated 29th August, 2020 of FRL as void and contrary to the statutory provisions; and Thirdly, by conflation of the FRL SHA, FCPL SHA and FCPL SSA, Amazon seeks to exercise 'control' over FRL which is forbidden under the FEMA FDI Rules. 7.6 Section 9 of the CPC provides as under:- "9. Courts to try all civil suits unless barred- The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is neither expressly or impliedly barred." 7.7 Supreme Court in 1995 Supp (4) SCC 286 Most Rev. P.M.A. Metropolitan v. Moran Mar Marthoma, noting the basic principle of law that every right has a remedy and every civil suit is cognizable unless it is barred, held: "28. One of the basic principles of law is that every right has a remedy. Ubi jus ibi remediem is the well-know maxim. Every civil suit is....
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....oes not imply that FRL is barred from taking any civil action against Amazon except through invoking Arbitration for the reason there is no arbitration agreement between FRL and Amazon as such. 7.11 In the present suit, seeking the relief against tortious interference by Amazon, one of the grounds urged by FRL is the invalidity of the Emergency Arbitrator amounting to use of 'unlawful means' in its representations to the authorities. Therefore, also FRL in these proceedings is entitled to challenge the legal status of Emergency Arbitrator, to the extent required for making out the ingredients of 'unlawful means'. 7.12 The issue in the present suit is not the violation of the EA order or whether the EA order is binding on FRL or not, but whether this Court can consider the legal status of the Emergency Arbitrator or that the same can be decided only in proceedings as envisaged under Part-I of the A&C Act. 7.13 Supreme Court in the decision reported as AIR 1962 SC 199 Hira Lal Patni vs. Sri Kali Nath held that the validity of a decree can be challenged in execution proceedings on the ground that the Court which passed the decree was lacking in inherent jurisdiction....
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....assed the order, in a collateral proceedings. Thus the said decision has no application to the facts of the present case. 7.17 Challenge of FRL to the EA order is not on merits and no declaration for the EA order being invalid or illegal on merits is sought from this Court. Case of the FRL is that since Amazon is trying to enforce and act upon the EA order before the Statutory Authority/Regulators and as the Emergency Arbitrator is a coram non-judice, this Court can go into the validity of the same to the extent asserted in the present suit. In the present suit, the cause of action pleaded by FRL is the tortuous interference by Amazon in its lawful transaction and to determine the ingredients of the said cause of action, i.e. whether use of 'unlawful means' is being resorted by Amazon, this Court is required to return a finding. 7.18 In view of the discussion aforesaid, this Court is of the considered opinion that prima facie the present suit cannot be held to be not maintainable on the two grounds urged by Amazon, that is, that the EA order cannot be challenged in the present proceedings and secondly, that the grounds urged by FRL before this Court have already been urge....
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....IAC"), and such rules (the "Rules") as may be modified by the provisions of this Section 25 (Governing Law and Dispute Resolution). This Agreement and the rights and obligations of the parties shall remain in full force and effect pending the award in such arbitration proceeding, which award, if appropriate, shall determine whether and when any termination shall become effective. 25.2.2.Seat and Venue of Arbitration. The seat and venue of the arbitration shall be at New Delhi unless otherwise agreed between the Parties to the Dispute and the arbitration shall be conducted under and in accordance with this Section 25 (Governing Law and Dispute Resolution). This choice of jurisdiction and venue shall not prevent either Party from seeking injunctive reliefs in any appropriate jurisdiction." (Emphasis supplied) 8.4 As noted above, FCPL and Amazon agreed that the agreement shall be governed by and construed in accordance with the laws of India and subject to provisions of Clause 25.2, the Courts at New Delhi, India shall have exclusive jurisdiction over any matters or disputes relating to or arising out of the agreement. Further, any dispute, controversy or claim between the par....
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....rbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.] xxx xxx xxx (6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue. xxx xxx xxx (8) Where this Part- (a) refers to the fact that the parties have agreed or that they may agree, or (b) in any other way refers to an agreement of the parties, that agreement shall include any arbitration rules referred to in that agreement." (9) Interim measures, etc., by Court.-[(1)]A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court- (i) xxx xxx xxx (ii) for an interim measure of protection in respect of any of the following matters, namely:- (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspectio....
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....l to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it. (2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure,1908 (5 of 1908), in the same manner as if it were an order of the Court. 8.7 Relevant provisions of SIAC Rules and the Schedule thereunder, including providing for Emergency Arbitration are as under: 1. Scope of Application and Interpretation 1.1 Where the parties have agreed to refer their disputes to SIAC for arbitration or to arbitration in accordance with the SIAC Rules, the parties shall be deemed to have agreed that the arbitration shall be conducted pursuant to and administered by SIAC in accordance with these Rules. 1.2. xxx xxx xxx 1.3 In these Rules: "Award" includes a partial, interim or final award and an award of an Emergency Arbitrator; "Emergency Arbitrator" means an arbitrator appointed in accordance with paragraph 3 of Sc....
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.... or vacate the preliminary order, the interim order or Award for good cause. xxx xxx xxx 11. Any interim order or Award by the Emergency Arbitrator maybe conditioned on provision by the party seeking such relief of appropriate security. 12. The parties agree that an order or Award by an Emergency Arbitrator pursuant to this Schedule 1 shall be binding on the parties from the date it is made, and undertake to carry out the interim order or Award immediately and without delay. The parties also irrevocably waive their rights to any form of appeal, review or recourse to any State court or other judicial authority with respect to such Award insofar as such waiver may be validly made. 8.8 The Courts of India have for long recognized the legal position that in an International Commercial Arbitration, there are three sets of law that may apply, i.e. proper law of the contract; proper law of the arbitration agreement/lex arbitri; and proper law of the conduct of arbitration/lex fori/curial law. 8.9 Supreme Court in the decision reported as 1992 (3) SCC 551 National Thermal Power Corporation vs. Singer Company &Ors. dealt with the consequences of parties having chosen a different....
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....tion agreement fall within the exclusive competence of the courts of the country whose laws govern the arbitration agreement. [See Mustil& Boyd, Commercial Arbitration, 2nd edn.; Allen Redfern and Martin Hunter, Law & Practice of International Commercial Arbitration, 1986; Russel on Arbitration, 20th edn. (1982); Cheshire & North's Private International Law, 11th edn. (1987).] 27. The proper law of the contract in the present case being expressly stipulated to be the laws in force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been specifically accepted, and the parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement is indeed the law in force in India, and the competent courts of this country must necessarily have jurisdiction over all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the procedure followed in the courts of the country ....
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....by a different system of law. If the parties had agreed that the proper law of the contract should be the law in force in India, but had also provided for arbitration in a foreign country, the laws of India would undoubtedly govern the validity, interpretation and effect of all clauses including the arbitration clause in the contract as well as the scope of the arbitrators' jurisdiction. It is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control. (See the principle stated by Lord Denning, M.R. in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC [(1975) 1 All ER 242 (CA)].) 51. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and th....
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....xtract of the report is set out hereunder:- 10. In the Law and Practice of Commercial Arbitration in England, 2nd Edn. by Mustill and Boyd, there is a chapter on "The Applicable Law and the Jurisdiction of the Court". Under the sub-title "Laws Governing the Arbitration", it is said, "An agreed reference to arbitration involves two groups of obligations. The first concerns the mutual obligations of the parties to submit future disputes, or an existing dispute to arbitration, and to abide by the award of a tribunal constituted in accordance with the agreement. It is now firmly established that the arbitration agreement which creates these obligations is a separate contract, distinct from the substantive agreement in which it is usually embedded, capable of surviving the termination of the substantive agreement and susceptible of premature termination by express or implied consent, or by repudiation or frustration, in much the same manner as in more ordinary forms of contract. Since this agreement has a distinct life of its own, it may in principle be governed by a proper law of its own, which need not be the same as the law governing the substantive contract. The second group....
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....ract. 3. The proper law of the reference governs the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute. *** In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the 'seat' of the arbitration, i.e., the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement to arbitrate." 15. We think that our conclusion that the curial law does not apply to the filing of an award in court must, accordingly, hold good. We find support for the conclusion in the extracts from Mustill and Boyd which we have quoted earlier. Where the law governing the conduct of the reference is different from the law governing the underlying arbitration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference sh....
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.... in that direction and which has been consistently followed in all the subsequent decisions including the recent Reliance Industries Ltd. v. Union of India [Reliance Industries Ltd. v. Union of India, (2014) 7 SCC 603 : (2014) 3 SCC (Civ) 737] ." (Emphasis supplied) 8.14 In Centrotrade (supra), a three judge bench of the Supreme Court was called upon to test the legality of a double-tier arbitration agreement. The parties had agreed that if either of them is dissatisfied with the domestic award rendered in India, they would have the right to appeal in a second arbitration seated in London. The Supreme Court upheld the validity of the double-tier arbitration agreement between the parties. Dealing with the issue of public policy of India, Supreme Court held that there is nothing in the A&C Act that prohibits the contracting parties from agreeing upon a second instance or the appellate arbitration-either explicitly or implicitly. No such prohibition or mandate can be read into the A&C Act except by an unreasonable and awkward misconstruction and by straining its language to a vanishing point. The Court further noted that despite granting finality to the domestic award as per the A&....
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....such arbitral proceedings except in cases which shock the judicial conscience. 8.16 Rule 30 of the SIAC Rules deals with Interim and Emergency Relief. Rule 30.3 in clear terms provides that the parties to the arbitration are also entitled to apply to a judicial authority for grant of interim relief, and that such request made to a judicial authority for grant of interim relief shall not be incompatible with the SIAC Rules. Therefore, the SIAC rules themselves recognize and uphold the right of a party to avail interim relief under Section 9 of the A&C Act. The SIAC rules however provide an option to the aggrieved party to either approach the emergency arbitrator for interim relief, or to approach a judicial authority for the same, prior to the constitution of the Tribunal. In such circumstances, this Court finds that the SIAC Rules do not take away the substantive right of the parties to approach the Courts in India for interim relief. 8.17 Where the parties exercising autonomy expressly choose different procedural rules for conduct of arbitration, they are assumed to be aware of the provisions of such rules, including the procedure for obtaining interim relief, and the fact that ....
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.... Avitel Post Studioz Ltd. & ors. vs. HSBC PI Holdings (Mauritius) Ltd., Supreme Court dealing with the contention that an amendment to Section 16 proposed by the 246th Law Commission Report in the light of the Supreme Court decision i.e. 2010 (1) SCC 72 N. Radhakrishnan vs. Maestro Engineers which appears to denude an Arbitral Tribunal of the power to decide on issues of fraud etc. claimed that the decision in N. Radhakrishnan (supra) having not been legislatively overruled, cannot now be said to be in any way deprived of its precedential value, as the Parliament has taken note of the proposed Section 16 (7) in the 246th Law Commission Report, and has expressly chosen not to enact it. Supreme Court held that the development of law by the Supreme Court cannot be thwarted merely because a certain provision recommended in a Law Commission Report is not enacted by the Parliament. It noted that the Parliament may have felt, that it was unable to make up its mind and instead, leave it to the Courts to continue, case by case, deciding upon what should constitute the fraud exception. Parliament may also have thought that Section 16(7), proposed by the Law Commission, is clumsily worded as ....
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.... position, Supreme Court in (2012) 9 SCC 522 Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc. (BALCO) held that if the parties to an arbitration seated outside India choose the A&C Act to govern the arbitration proceedings, it would still not make Part 1 of the A&C Act applicable. Instead, only the provisions in the A&C Act relating to the internal conduct of the arbitration proceedings will be applicable, to the extent they are not inconsistent with the mandatory provisions of the curial law of the seat of arbitration. Thus, the fact that applicability of Section 9 can be excluded in an International Commercial Arbitration, conducted as per the provisions of A&C Act indicates that Section 9 of the A&C Act is not a mandatory provision. 8.25 Thus, this Court finds no merit in the contention of FRL with respect to Section 2(6) and 2(8) of the A&C Act, in view of the finding that the SIAC Rules relating to emergency arbitration are not contrary to the mandatory provisions of the A&C Act. As discussed above, the parties have chosen SIAC Rules that grant them freedom to approach the Court also under Section 9 of the A&C Act to obtain interim relief, thus, to that exten....
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....AIR 1965 SC 1535 Shanti Prasad Jain Vs. Kalinga Tubes Limited, Supreme Court in Vodaaphone (supra) further held that the agreement between non-members and members of a company will not bind the company, but there is nothing unlawful in entering into agreement for transferring of shares. Of course, the manner in which such agreement is to be enforced in the case of breach is given in the general law between the company and the shareholders. A breach of SHA which does not breach the articles of association is a valid corporate action and the parties aggrieved can get remedies under the general law of the land. 9.3 Therefore, a shareholders' agreement is a private contract between the shareholders, an agreement enforceable under the Contract Act and for the breach thereof, any party aggrieved can seek remedy under the law or in case provided under the agreement through arbitration, however, as held by the Supreme Court in case of conflict between the shareholders agreement and the Articles of Association of the company, the later will prevail. 9.4 The rationale behind the Articles of Association of a company prevailing over a shareholder's agreement stems from the basic principl....
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....and 56 are set out herein: "32. Enforcement of contracts contingent on an event happening.-Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void. xx xx xx 56. Agreement to do impossible act.-An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful.-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the Act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful.-Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise." 35. Prior to the decision in Taylor v. Caldwell [Taylor v. Caldwell, (1863) 3 B & S 826 ....
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.... to claim payment of consideration, for performance of the contract at rates different from the stipulated rates, on a vague plea of equity. Parties to an executable contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, for example, a wholly abnormal rise or fall in prices which is an unexpected obstacle to execution. This does not in itself get rid of the bargain they have made. It is only when a consideration of the terms of the contract, in the light of the circumstances existing when it was made, showed that they never agreed to be bound in a fundamentally different situation which had unexpectedly emerged, that the contract ceases to bind. It was further held that the performance of a contract is never discharged merely because it may become onerous to one of the parties. 38. Similarly, in Naihati Jute Mills Ltd. v. Khyaliram Jagannath [Naihati Jute Mills Ltd. v. Khyaliram Jagannath, (1968) 1 SCR 821 : AIR 1968 SC 522] , this Court went into the English law on frustration in some detail, and then cited the celebrated judgment of Satyabrata Ghose v. Mugneeram Bangur & Co. [Satyabrata Ghose v. Mugneeram Bangur ....
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....(The Sea Angel), 2007 EWCA Civ 547 : (2007) 2 Lloyd's Rep 517 (CA)] , the modern approach to frustration is well put, and the same reads as under: "111. In my judgment, the application of the doctrine of frustration requires a multi-factorial approach. Among the factors which have to be considered are the terms of the contract itself, its matrix or context, the parties' knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of the contract, at any rate so far as these can be ascribed mutually and objectively, and then the nature of the supervening event, and the parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Since the subject-matter of the doctrine of frustration is contract, and contracts are about the allocation of risk, and since the allocation and assumption of risk is not simply a matter of express or implied provision but may also depend on less easily defined matters such as "the contemplation of the parties", the application of the doctrine can often be a difficult one. In such circumstances, the test of "radically different" is i....
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....rcise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment." 9.9 Supreme Court in AIR 1950 SC 172 Nanalal Zaver & Anr. Vs. Bombay Life Assurance Co. Ltd. & Ors. reiterating the well settled principle that in exercising their powers, whether general or special, the directors, must always bear in mind that they hold a fiduciary position and must exercise their powers for the benefit of the company and for that alone. It was held that the Court can intervene to prevent the abuse of a power, whenever such abuse is held proved, and also cautioned that where directors have a discretion and are bona-fidely acting in the interest of the company, it is not the habit of Court to interfere with the same. It was further held that when a company is in no need of further capital, directors are not entitled to use their power of issuing shares merely for the purpose of maintaining themselves and their friends in management over the affairs of a company, or merely for the purpose of defeating the wishes of the existing majority of the shareholders. It was held: "41. It is well established that directors of a company are in a fiduciary position vi....
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....It is just because the society could not only use the ordinary and legitimate weapons of commercial warfare but could also control from within the operations of the company that it is illegitimate to regard the conduct of the company's affairs as a matter for which they had no responsibility. After much consideration of this question, I do not think that my own views could be stated better than in the late Lord President Cooper's words on the first hearing of this case. "In my view," he said, "the section warrants the court in looking at the business "realities of a situation and does not confine them to a narrow "legalistic view. The truth is that, whenever a subsidiary is "formed as in this case with an independent minority of share-"holders, the parent company must, if it is engaged in the same "class of business, accept as a result of having formed such a "subsidiary an obligation so to conduct what are in a sense its "own affairs as to deal fairly with its subsidiary." At the opposite pole to this standard may be put the conduct of a parent company which says: "Our subsidiary company has served its "purpose, which is our purpose. Therefore let it die," and, having thus....
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....quences following on one or other of these forms of combination one result, in my opinion, followed in the present case from the method adopted, which is common to partnership, that there should be the utmost good faith between the constituent members. In partnership the position is clear. As stated in Lindley on Partnership, 11th ed., p. 401: "A partner cannot, without the consent of his co-"partners lawfully carry on for his own benefit, either openly or "secretly, any business in rivalry with the firm to which he "belongs." It may not be possible for the legal remedies that would follow in the case of a partnership to follow here, but the principle has, I think, valuable application to the circumstances of this case." 9.12 In the decision reported as [2009] EWCA Civ 291; [2010] B.C.C. 597 Hawkes vs. Cuddy the Court of Appeals held, the fact that a Director of a company was nominated to that office by a shareholder did not, of itself, impose any duty on the director, owed to his nominator. The director may owe duties to his nominator if he was an employee or officer of the nominator, or by reason of a formal or informal agreement with his nominator. Such duties did not arise out....
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.... clear that the grim situation of FRL was duly notified to Amazon and though Amazon through its various options including from SAMARA was trying to negotiate however, nothing concrete resulted. It is in this peculiar circumstance and the fact, as the shares of FRL fell down with investors recalling their securities, it was essential for FRL to act, to survive. This is thus a case of supervening circumstance and as noted by the Supreme Court in Energy Watchdog's decision (supra) a multi-factorial approach should be adopted and the acts of both FRL and Amazon have to be tested on the said anvil. 9.17 Though the claim of Amazon in the representation to statutory authorities regarding the transaction is that the same is in breach of FCPL SHA and FRL SHA and the resolution dated 29th August, 2020 passed by the Board of Directors of FRL is void, however, no material has been placed on record by the FRL to show that the resolution dated 29th August, 2020 passed by the Board of Directors of FRL is void or contrary to any statutory provision. Case of FRL is that its Board Resolution dated 29th August, 2020 does not violate any provision of the FRL's Article of Association or any provis....
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....2) SCC 1 Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta & Ors., learned Senior Counsel for Amazon contends that Amazon does not have right to appoint the majority Directors of FCPL and the rights granted to Amazon under FCPL SHA are merely protective rights that do not relate in any manner to the day-to-day management and operation of FCPL or FRL. This is exactly the dichotomy of which FRL is aggrieved of. According to FRL, though Amazon claims that in terms of FCPL SHA the rights, if any, with Amazon are protective rights for its investments with no interference in day-to-day management and operations of FCPL or FRL, however, on conflation of the FCPL SHA and FRL SHA, Amazon has complete control over the functioning of FRL. 10.2 According to Amazon, the FRL SHA, FCPL SHA and the FCPL SSA being a single integrated transaction do not violate the foreign exchange laws of India. It is stated that FRL is a part of Future Group of Companies, defendant No.3 is the Executive Chairman of FRL and defendant No.8 is the Managing Director of FRL and they continue to hold the powers of management of the affairs of FRL. Further the Biyanis excluding FCPL are collectively the single larges....
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.... resident outside India through equity instruments where such investment is less than ten per cent of the post issue paid-up share capital on a fully diluted basis of a listed Indian company or less than ten per cent of the paid-up value of each series of equity instrument of a listed Indian company; 2(u) "FPI" or "Foreign Portfolio Investor" means a person registered in accordance with the provisions of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 3. Restriction on investment in India by a person resident outside India.- Save as otherwise provided in the Act or rules or regulations made thereunder, no person resident outside India shall make any investment in India : Provided that an investment made in accordance with the Act or the rules or the regulations made thereunder and held on the date of commencement of these rules shall be deemed to have been made under these rules and shall accordingly be governed by these rules: Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons and in consultation with the Central Government, permit a person resident outside India to make any inve....
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....e Securities and Exchange Board of India and the conditions prescribed in Schedule II. (2) A FPI may purchase, hold, or sell Indian Depository Receipts (IDRs) of companies resident outside India and issued in the Indian capital market, in the manner and subject to the terms and conditions as prescribed in Schedule X. xxx xxx xxx 23. Downstream investment - (1) Indian entity which has received indirect foreign investment shall comply with the entry route, sectoral caps, pricing guidelines and other attendant conditions as applicable for foreign investment. Explanation: Downstream investment by an LLP not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India is allowed in an Indian company operating in sectors where foreign investment up to one hundred percent is permitted under automatic route and there are no FDI linked performance conditions. xx xx xx Explanation.- For the purposes of this rule,- (a) "ownership of an Indian company" shall mean beneficial holding of more than fifty percent of the equity instruments of such company and "ownership of an LLP" shall mean contribution of more than fifty percent....
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....rect foreign investment and the same will be reckoned on a fully diluted basis" 10.4 Additional condition under the FDI Policy Circular of 2017: b. In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst shareholders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such interse agreements for determining ownership and control when considering the case for approval of foreign investment." 10.5 Para-3 of Schedule-I of FEMA FDI Rules, reads as under: "(3) Permitted sectors, entry routes and sectoral caps for total foreign investment Unless otherwise specified in these Rules or the Schedules, the entry routes and sectoral caps for the total foreign investment in an Indian entity shall be as follows, namely:- (i) "automatic route" means the entry route through which investment by a person resident outside India does not require ....
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....mber, 2019, only 16.18% FRL securities were free from encumbrances and as per Clause-17.2(i) of the FCPL SHA, the promoters were under an obligation to reserve the said minimum shareholding. 10.9 'Control' is defined in the Companies Act, 2013 under Section 2(27) as: "2 In this Act, unless the context otherwise requires,- "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner" 10.10 Similar definition of 'control' is provided under the Insolvency and Bankruptcy Code 2016, SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, Insurance Laws (Amendment) Act, 2015 and Explanation to Rule 23 FEMA FDI Rules. 10.11 In Arcelormittal (supra), Supreme Court dealing with the meaning of expression 'management and control' under the Insolvency and Bankruptcy Code held that the expression 'management' would refer to the de-jure 'management' of a corporate debtor and ....
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....e SAT para 6) "6. ... The term control has been defined in Regulation 2(1)(c) of the Takeover Code to "include the right to appoint majority of the Directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner". This definition is an inclusive one and not exhaustive and it has two distinct and separate features: (i) the right to appoint majority of Directors or, (ii) the ability to control the management or policy decisions by various means referred to in the definition. This control of management or policy decisions could be by virtue of shareholding or management rights or shareholders agreement or voting agreements or in any other manner. This definition appears to be similar to the one as given in Black's Law Dictionary (Eighth Edn.) at p. 353 where this term has been defined as under: 'Control-The direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or o....
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....ht given to the Board of Directors to manage the company, the underlying reason being the shareholders cannot achieve by pooling agreement that what is prohibited to them if they are voting individually. It was held: "22. A pooling agreement may be utilised in connection with the election of Directors and shareholders' Resolutions where shareholders have a right to vote. However, a pooling agreement cannot be used to supersede the statutory rights given to the Board of Directors to manage the company, the underlying reason being that the shareholders cannot achieve by pooling agreement that which is prohibited to them, if they are voting individually. Therefore, the power of shareholders to unite is not extended to contracts, whereby restrictions are placed on the powers of Directors to manage the business of the Corporation. It is for this reason that a pooling agreement cannot be between Directors regarding their powers as Directors. There is vast difference in principle between the case of a shareholder binding himself by such a contract and the Director of the Company undertaking such an obligation by compromising his fiduciary status. The shareholder is dealing with his ....
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.... will exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Shareholders of the Company so as to enable the approval of any and every resolution of the Company necessary or desirable to give full effect to this Agreement and the FRL SHA and likewise so as to ensure that no resolution of the Company is passed which is not in accordance with this Agreement and, or, the FRL SHA; (iii) that they will cause any Person appointed by them as their nominee Director on the Board to exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Board of the Company (or any committee thereof) so as to enable the approval of any and every resolution necessary or desirable to give full effect to this Agreement and the FRL SHA, and likewise so as to ensure that no resolution is passed which is not in accordance with this Agreement and, or, the FRL SHA; (iv) that they will exercise any power to vote or cause the power to vote, on behalf of themselves and the Company, to be exercised, at any meeting of the shareholders of the Material Entities so as to enable the approval of any and every resolution necessary or desirable to ....
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....rson and his Immediate Relative shall hold (directly and or indirectly) at least 76% (seventy six percent) of the legal and beneficial ownership and voting interests, on a fully diluted basis of such Promoter and, or, Promoter Affiliate; (ii) (if it is a body corporate), undertake and ensure that no Restricted Person shall hold any ownership interest, voting interests or share capital or Control in, or over such Promoter, or such Promoter Affiliates, and (iii) qualify as a 'resident Indian citizen' as defined under the FEMA Regulations, and where such Promoter or such Promoter Affiliate is a Person other than a natural Person, it shall be ultimately owned and Controlled by Persons who are resident Indian citizens under the FEMA Regulations. 10.1.2.It is hereby agreed that the provisions of Section 10.1.1(ii) shall apply mutatis mutandis to any Person (not being a natural Person) which holds securities, ownership or voting interests, whether directly, and, or indirectly in the Promoters which hold Company Securities, or Promoter Affiliates which hold Company Securities. The Promoters shall cause and ensure compliance by such Person as referred to in this Section 10.1.2 with Secti....
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....nication to FRL under FRL SHA shall be undertaken only after a prior written consent of the Investor has been obtained. 13.1.3.The Company and the Promoters agree, covenant and undertake that any assignment of the rights and obligations of the Company or the Promoters under the FRL SHA shall be undertaken only after a prior written consent of the Investor has been obtained. 13.2. FRL SHA 13.2.1.The Promoters and the Company agree, covenant and undertake to comply with the provisions of the FRL SHA at all times. If any provision of the FRL SHA is breached or likely to be breached ("FRL SHA Breach"), the Promoters and the Company shall be obligated to undertake all actions necessary to ensure that such a breach is duly addressed and, or rectified and the rights and, or, interests of the Company under the FRL SHA are not violated and shall promptly, notify the Investor in writing in relation to such FRL SHA Breach. 13.2.2.Upon the occurrence of a FRL SHA Breach, the Company, and, or, the Promoters shall promptly issue a notice to the Investor, specifying in such notice, details with respect to the FRL SHA Breach, and the remedial actions proposed to be undertaken by the par....
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....ehalf of the Company), initiate any legal proceedings against FRL and, or, the Promoters, for the purposes of ensuring that the FRL SHA is strictly complied with and the Company's rights under the FRL SHA are adequately safeguarded. 13.2.5.The company and the Promoters hereby agree that any action or decision that may be undertaken pursuant to Section 13.2 (FRL SHA) above is being undertaken in the best interest of the Company and to safeguard rights and entitlements of the Company. 10.15 Relevant Clauses of FRL SHA read as under:- 4.1. The Existing Shareholders hereby agree, covenant, and undertake: (i) To perform and observe all of the provisions of this Agreement, the Memorandum of Association, and the Articles of Association. (ii) To ensure and procure that every Person for the time being representing it in its capacity as a Shareholder will exercise any power to vote or cause the power to vote to be exercised, at any meeting of the Shareholders so as to enable the approval of any and every resolution necessary or desirable to give full effect to this Agreement, and likewise so as to ensure that no resolution is passed which is not in accordance with this Agreement....
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.... Shareholders. All Transfer of Securities permitted by this Agreement may only be made in compliance with requirements of Law. 6.2.2. Encumbrances over Existing Shareholder Securities: In the event there is a breach, or event of default, or any other event or occurrence, under any agreement, or arrangement relating to any loan, and, or debt taken or raised by the Company with a Lender whereby the Lender makes or is entitled to make a claim of any interests over the Existing Shareholders Securities (such event, the "Existing Shareholders Event of Default" ), including any right of alienation, disposal etc., the Existing Shareholders shall immediately, and no later than 1(one) day from the occurrence of such event, notify FCL, in writing, of such event and in such case, the Company shall, if requested by the Existing Shareholders, and the FCL, undertake all such actions as may be required to replace the Lenders of the Company with such other Persons as may be nominated by the Existing Shareholders, and FCL. 6.2.3. The Company shall not assume any share transfer restrictions (including without limitation any lock-in, right of first refusal, right of first offer, tag-along rights)....
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....ed. xx xx xx 9. RESERVED MATTERS AND OTHER MATTERS. 9.1. Notwithstanding anything to the contrary, the Existing Shareholders, and the Company hereby agree and undertake that the matters set forth below shall not be taken-up, decided, acted upon or implemented by the Company ("Reserved Matters"); nor the Reserved Matters be placed for a vote thereon at a Shareholders' meeting of the Company; nor any decision be taken by the Shareholders or Board or any committee of the Board; nor the Company be bound/ committed to any resolutions/ transactions pertaining to the Reserved Matters, unless the Reserved Matter has been, first approved in the affirmative, in writing, by FCL. Without limiting the generality of the foregoing, in the event that the Company proposes to take up, or decide any Reserved Matters, in (a) any meeting of the Board, or any committee thereof, such matter shall be taken up only if the written consent of FCL has been obtained prior to such meeting, or (b) any meeting of the Shareholders of the Company, such matter shall be taken-up only if the written consent of FCL has been obtained prior to such meeting. (i) except as otherwise provided in Section 9.2 (....
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.... a non-obstante clause that obligates the existing shareholders (as set out in Schedule 1) and FRL to undertake that FRL would not take up, decide, act upon or implement certain 'Reserved Matters', and further that such Reserved Matters shall not be voted upon at a shareholders meeting of FRL, nor any decision would be taken on such reserved matters by the shareholders or the directors or any committee of the board of FRL, nor would FRL be bound to any such resolutions relating to such reserved matters, unless such Reserved Matter has been first approved in the affirmative by FCPL. 10.19 The reserved matters are set out in Clause 9.1(i) to (iv) and comprise of:- i) Any transfer or license of all or substantially all of the Assets of FRL (including all, or substantially all Intellectual Property), including without limitation a Restricted Transfer; ii) Any Restricted Transfer to an Affiliate or a 'related party' of FRL or the Existing Shareholders. iii) Any amendment to the Articles of FRL which is in conflict with the rights of FCPL under the FRL SHA; and iv) Any issuance of securities to a Proposed Investor not in accordance with Section 7 of the FRL SHA (relating to furt....
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....nnot be acted upon by FCPL or the Promoters unless approved in writing by Amazon. 10.24 Cumulatively, it is clear that Amazon's consent is required by FRL to act upon 'Reserved Matters' and that without the consent of Amazon, FRL is only entitled to deal with and carry out 'Permitted Transactions' which are set out in Clause 9.2 of the FRL SHA. 10.25 Clause 9.2 (i) and (ii) set out the Permitted Transactions. It is severely limited in its operation and includes the sale or transfer of 'Non-Core Assets' (other than Retail Assets) which constitute less than 2% of the turnover or Assets of FRL at the time of such sale, provided that such sale is undertaken at fair market value, and that in any one financial year, the FRL does not undertake more than one of such transaction. Another Permitted Transaction under 9.2(ii) is the sale or transfer of securities of any Person held by FRL where such Person operates the convenience stores under the brand name '7-Eleven' which is an exempted entity. 10.26 Accordingly, for any sale or transfer to be undertaken by FRL which is not a Permitted Transaction (covered under Clause 9.2 of the FRL SHA), FRL would require the express consent of FCPL, a....
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....he sole discretion of FRL are very limited. This seems to be for the reason that Amazon was not only safeguarding its investments by creating protective rights, but also creating preemptive rights in contemplation of any change in Indian law that would permit Amazon to hold substantial shareholding of FRL. 10.30 The rights granted to Amazon by conflation of the two Shareholders Agreements are prima facie disproportionate to the actual shareholding of Amazon and by camouflaging of words, the extensive rights held by Amazon by the provisions of the inter se agreements set out above, cannot be masked as mere protective rights so as to fall beyond the test of 'control' as elaborated in Arcelor Mittal (supra). 10.31 Therefore, this Court is prima facie of the opinion that the conflation of the three agreements i.e. FRL SHA, FCPL SHA and FCPL SSA besides creating protective rights in favour of Amazon for its investments also transgress to 'control' over FRL requiring government approvals and in the absence thereof are contrary to FEMA FDI Rules. Tortious interference 11.1 Case of FRL is that Amazon is unlawfully interfering in FRL's endeavour to survive by amalgamation of....
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.... simply observed that "[t]he economic torts [of which the unlawful means tort is one] are in a mess": H. Carty, "Intentional Violation of Economic Interests: The Limits of Common Law Liability" (1988), 104 Law Q. Rev. 250, at p. 278. Careful review of the development of the unlawful means tort reveals confusion, overlap and inconsistency: see, e.g., Carty, An Analysis of the Economic Torts (2nd ed.), at pp. 73-78; P. Burns, "Tort Injury to Economic Interests: Some Facets of Legal Response" (1980), 58 Can. Bar Rev. 103, at pp. 145-48; T. Weir, Economic Torts (1997), at pp. 36-43; L.L. Stevens, "Interference With Economic Relations - Some Aspects of the Turmoil in the Intentional Torts" (1974), 12 Osgoode Hall L.J. 595, at pp. 617-19. At its core, however, the tort has two key ingredients: intention and unlawfulness. The gist of the tort is the intentional infliction of economic harm by unlawful means. (Emphasis Supplied) 11.4 One of the leading decisions on this subject and relied upon by FRL is the decision of the House of Lords in OBG Ltd. v. Allan (Supra), where the House of Lords was deciding 3 appeals that involved the same issues of law, though the facts therein were diffe....
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....der:- 46. The rationale of the tort was described by Lord Lindley in Quinn v Leathem [1901] AC 495, 534-535: "a person's liberty or right to deal with others is nugatory, unless they are at liberty to deal with him if they choose to do so. Any interference with their liberty to deal with him affects him. If such interference is justifiable in point of law, he has no redress. Again, if such interference is wrongful, the only person who can sue in respect of it is, as a rule, the person immediately affected by it; another who suffers by it has usually no redress; the damage to him is too remote, and it would be obviously practically impossible and highly inconvenient to give legal redress to all who suffer from such wrongs. But if the interference is wrongful and is intended to damage a third person, and he is damaged in fact - in other words, if he is wrongfully and intentionally struck at through others, and is thereby damnified - the whole aspect of the case is changed: the wrong done to others reaches him, his rights are infringed although indirectly, and damage to him is not remote or unforeseen, but is the direct consequence of what has been done." (Emphasis Supplied) 11.....
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....ious unlawful interference as under: "73. The indeterminate ambit of "unlawful means" thus remains one of the principal causes of uncertainty as to the potential scope of liability under this tort. The issue has been the subject of some judicial deliberation in other common law jurisdictions. In Scotland, in McLeod v. Rooney, Lord Glennie concluded from an extensive review of the speeches in OBG Ltd. v. Allan that "the essential aspect [of the tort] is that the loss is caused to the claimant through a third party on whom the defender has unlawfully acted. That is the control mechanism. The inquiry focuses on the nature of the disruption caused as between the third party and the claimant rather than on the directness of the causative link between the defender's wrong and the claimant's loss." ([2009] CSOH 158; 2010 S.L.T. 499 at 18) 74. A party must be shown to have known that they were inducing a breach of contract. It is not enough that a defendant knows that he is procuring an act which, as a matter of law or construction of the contract, is a breach, nor that he ought reasonably to have known that it is a breach. (See OBG v. Allan per Lord Hoffman at Paragraph 39; Br....
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....) 3 All ER 449, five conditions have laid down that are required to be fulfilled by the plaintiff in a suit for interference with a subsisting contract. First, there must be either (a) 'direct' interference with performance of the contract or (b) indirect interference with performance coupled with the use of unlawful means. Secondly, the defendant must be shown to have knowledge of the relevant contract; but it is not necessary that he should have known its precise terms. (Emerald Construction Co. Ltd. v. Lawthien, (1966) 1 WLR 691). Thirdly, he must be shown to have had the intent to interfere with it. Fourthly, the plaintiff must show that he has suffered special damage, that is, more than nominal damage. Fifthly, so far as is necessary, the plaintiff must successfully rebut any defence based on justification which the defendant may put forward. 82. At this stage, however, the Court is only required to find out if the necessary ingredients of such "economic tort" constituting the cause of action are present in the plaint and not to assess the evidentiary value of such averments." 11.12 In 1999 (50) DRJ 656 Pepsi Foods Ltd. Vs. Bharat Coca Cola Holdings Pvt. Ltd., referred by ....
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....FRL and FCPL showing that FCPL has consented to the transaction. According to Amazon since the said document has not been filed accompanied by statement of truth under Order VI Rule 15(a) of CPC the said document cannot be looked into. As noted above in the initial paragraphs of this judgment, parties at the ad-interim stage have advanced arguments at length without filing written statements/counter affidavits and to this procedure both parties agreed. Amazon has also filed number of documents including various emails, transcripts of the proceedings recorded before the Emergency Arbitrator beseeching this Court to consider the same without even filing written statements or counter affidavits much less statement of truth. Hence, this court is not declining to take on record the document dated 29th August, 2020. Of course, it will be for the parties to comply with the provisions of the Code of Civil Procedure, 1908 while completing the pleadings in the suit and file necessary affidavits. 11.16 The Resolution dated 29th August, 2020 of FRL approving the proposed transaction between FRL and Reliance satisfies the requirement of a valid contract. Further the plea of Amazon that the Res....
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....s, statutory torts, crimes, breaches of contract, breaches of trust and equitable obligations, breaches of confidence, and so on. 151. Another view is that in this context 'unlawful means' comprise only civil wrongs. Thus in Allen v Flood itself Lord Watson described illegal means as 'means which in themselves are in the nature of civil wrongs': [1898] AC 1, 97-98. A variant on this view is even more restricted in its scope: 'unlawful means' are limited to torts and breaches of contract. (Emphasis Supplied) 11.20 Eventually, the House of Lords by majority agreed to the view taken by Lord Hoffman, who opined that the scope of 'unlawful means' should be narrow as laid down in [1898] AC 1 Allen v Flood. It was in this background that he defined 'unlawful means' in Paragraph 51 of his opinion as noted above. 11.21 Various examples of what was found 'unlawful means' in this context can be ascertained from the judicial decisions referred to in OBG (Supra). Lord Hoffman illustrated the cases of [1908] 1 Ch 335 National Phonograph Co Ltd v Edison-Bell Consolidated Phonograph Co Ltd, where the defendant had fraudulently induced a third party to act to the plaintiff's detriment. The ....
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....719 Dalpat Kumar &Anr. vs. Prahlad Singh &Ors. laying down the principles for grant of injunction noted that the grant of injunction is a discretionary relief and exercise thereof is subject to the Court satisfying that (1) there is a serious disputed question to be tried in the suit and that on the facts before the court, there is probability of his being entitled to the relief asked for by the plaintiff/defendant; (2) the court's interference is necessary to protect the party from the species of injury. In other words, irreparable injury or damage would ensue before the legal right would be established at trial; and (3) that the comparative hardship or mischief or inconvenience which is likely to occur from withholding the injunction will be greater than that would be likely to arise from granting it. It was held that therefore, the burden is on the plaintiff by evidence aliunde by affidavit or otherwise that there is "a prima facie case" in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction. However, satisfaction that there i....
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....t to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the "balance of convenience" lies. [See: Wander Ltd. v. Antox India (P) Ltd. [1990 Supp SCC 727]. In order to protect the defendant while granting an interlocutory injunction in his favour the court can require the plaintiff to furnish an undertaking so that the defendant can be adequately compensated if the uncertainty were resolved in his favour at the trial. 12.3 Thus the trinity of the principles for grant of interim injunction i.e. prima facie case, irreparable loss and balance of convenience are required to be tested in terms of principles as noted above. Since this Court has held that prima facie the representation of Amazon based on the plea that the resolution dated 29th August, 2020 of FRL is void and that on conflation of the FCPL SHA and FRL SHA, the 'control' that is sought to be asserted by Amazon on FRL is not permitted under the FEMA FDI Rules, without the governmental approvals, this Court finds that FRL has made out a prima facie ca....