TaxTMI 
TaxTMI 
2020 (9) TMI 1322
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....who have been heard over several days, this judgement disposes of the appeal of the appellant. Facts Undisputed Facts 3. Anand Gupta, Rajesh Gupta and Dinesh Gupta are brothers, Anand Gupta being elder to Rajesh Gupta, who is elder to Dinesh Gupta. Dinesh Gupta is Appellant No. 1, and Anand Gupta is Respondent No. 1, in these proceedings. Rajesh Gupta has not been impleaded as a party. 4. Dinesh Gupta, Anand Gupta and Rajesh Gupta headed three groups of a joint family, referred to, in the impugned order, by the acronyms 'DGG', 'AGG' and 'RGG', respectively. A fourth group, namely the Bechu Singh Group ('BSG') was also a party before the learned Sole Arbitrator. For ease of reference, this judgement uses the same acronyms. 5. The appellants, in this appeal, are Dinesh Gupta, his wife Shivani Gupta and his son Shreyansh Gupta, as Appellants No. 1, 3 and 2, and the various Companies constituting part of DGG, as Appellants No. 4 to 19. Respondents No. 2, 3 and 4 are the son, wife and daughter of Respondent No. 1 Anand Gupta, Respondent No. 5 is the HUF of the respondents and Respondents Nos. 6 to 12 are Companies which, together with Respondents Nos. 1 to 5, constitute AGG. 6. ....
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..... The above said settlement is binding on the parties, on companies/entities vested in the parties as well as family members and associates of the parties. None of the parties shall challenge the terms of the settlement in any court, authority etc. 9. The cross holdings shall be mutually transferred between the parties on the basis of vesting of companies as detailed above and in a manner and at valuations which will lead to the entire capital distributed 50:50 between both groups detailed as above A and B. 10. The parties agreed that the tax will be borne respectively by the respective parties as per Annexure- A & B. However, taxes pertaining to claims as per Annexure E & F as list as per Annexure H shall be borne by the respective beneficiary. 11. The parties shall cooperate with each other to implement the terms of this settlement. 12. That more than 100 Crores worth of actionable claims were held in excess by Dinesh Group which is to be reimbursed to Rajesh Group if received. Specific irrevocable resolutions of companies will be given to recover the actionable claims by Dinesh Group. (Sd/-) Rajesh Gupta (for self & on behalf of his associates and entities vested i....
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....at Dinesh Gupta was liable to reimburse, to Rajesh Gupta, an amount of Rs. 22,44,85,000/-. Dinesh Gupta was also called upon to furnish resolutions for pursuing actionable claims of companies, which vested in RGG. The communication also requested that a reputed accounting/auditing firm (the names of KPMG and PricewaterhouseCoopers (PwC) were suggested), be appointed to resolve the disputes between RGG and DGG. 13.2 DGG responded, on 12th January, 2018, asserting that the Mutual Funds in issue were in the personal name of Dinesh Gupta, and that Rajesh Gupta was merely the second holder therein. It was further asserted that the investments, in the said Mutual Funds, had been made by Dinesh Gupta from his personal savings. DGG, therefore, denied any monetary liability towards RGG, but assented to the appointment of KPMG, to settle the disputes between RGG and DGG. 13.3 On 19th January, 2018, RGG sent requisitions, under Section 100 of the Companies Act, 2013 (hereinafter referred to as "the Companies Act") to the Board of Directors (hereinafter referred to as "BOD") of BDR, for removal of Dinesh Gupta and Shreyansh Gupta from the Board of Directors of BDR, alleging that, by their ac....
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....upta and Shreyansh Gupta, requiring them to repay, to Anand Gupta, a loan of Rs. 77,48,870/-, advanced by Anand Gupta, for investment in real estate projects and repayable on demand. The notice was predicated on the allegation that Dinesh Gupta and Shreyansh Gupta had committed various frauds, with which the present petition is not really concerned. 14.3 On 16 February, 2018, Sanchit Gupta issued a requisition, under Section 100 (2) of the Companies Act, in respect of Renu Promoters. Sanchit Gupta asserted his authority to issue the said requisition, as he held 50% of the total paid-up equity share capital in Renu Promoters. Alleging that Dinesh Gupta had mismanaged the affairs of Renu Promoters and had, thereby, rendered himself incapable of continuing as Director of the said Company and liable to be removed under Section 169 of the Companies Act, the requisition sought convening of an EGM for the said purpose. 14.4 On 23rd February, 2018, AGG wrote to Dinesh Gupta and Shreyansh Gupta, with respect to the shareholding of AGG in BDR. It was asserted, in the said communication, that AGG had never transferred, of its own volition, its shares in BDR to DGG. Rather, the notice assert....
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....acts within six weeks from today: - (i) He will pay to Mr. Rajesh Gupta a sum of Rs. 11.28 crores plus Rs.5.28 crores which he is seeking to withhold on his own interpretation of the family settlement. This amount would be in lieu of the redemption of mutual funds held by BDR Developers and Builders Private Limited. This would also be subject to further orders that may be passed by the court. (ii) The plaintiff will ensure resolution of the Board of Directors of the companies vested in Dinesh Gupta Group be given in favour of Mr. Rajesh Gupta to contest/pursue the case of actionable claims pertaining to the said companies/actionable claims have been given to the Rajesh Gupta Group. This is subject to further orders the court may pass. (iii) Plaintiff will also pass a resolution of the Board of Directors in favour of Rajesh Gupta of Companies which have fallen to his share for the purpose of pursuing litigation with respect to immovable properties which are vested in the Rajesh Gupta Group. This is subject to further orders that the court may pass. (iv) Mr. Rajesh Gupta will place on record accounts of any amounts which are recovered by him in the course of adjudication of p....
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....019 passed by the Division Bench. The impugned order dated 16.11.2018 passed by the learned Single Judge and the order dated 14.1.2019 shall merge in the orders that may be passed by the Ld. Arbitrator." Proceedings before the learned Sole Arbitrator, and the passing of the impugned Order dated 18th February, 2020 18. Before the learned Sole Arbitrator, Anand Gupta/AGG filed two counter-claims. 19. Counter-claim by Anand Gupta/AGG related to Mutual Funds, claiming a total of Rs. 19,55,00,000/-: 19.1 This counter claim (hereinafter referred to as "the Mutual Funds counter-claim", for the sake of convenience) was preferred by Anand Gupta (HUF) and Sanchit Gupta, representing, in essence, the interests of AGG. It was contended, in the counter-claim, that, on 30th November, 2017 and 4th December, 2017, the counter-claimants liquidated part of their investments in their Mutual Funds, and credited the amounts in their respective bank accounts. Thereafter, signed blank cheques were stated to have been handed over, to Shreyansh Gupta, for investing the amounts in appropriate equity Mutual Funds, which, purportedly, was a practice that had been adopted on earlier occasions as well. It....
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..... 19,02,74,000/- to Anand Gupta, Rs. 21,07,24,000/- to Sanchit Gupta, Rs. 4,81,20,000/- to Meena Gupta and Rs. 8,81,20,000/- to Aashna Gupta, along with interest @ 18% p.a. Fresh applications, under Section 17, preferred before the learned Sole Arbitrator 21. Four fresh applications, under Section 17 of the 1996 Act, were preferred, before the learned Sole Arbitrator. Of these, one was preferred by DGG and three were preferred by AGG. 22. Fresh application, under Section 17, preferred before the learned Sole Arbitrator by DGG, seeking implementation of the Family Settlements: 22.1 Alleging that, while it had itself implemented the covenants of the Family Settlements "to an extent of more than eighty percent", RGG had implemented the said covenants only to the extent of thirty percent, and that the acts of AGG, prejudicial to the interests of DGG, were provoked by RGG, an application, under Section 17 of the 1996 Act, was moved, before the learned Sole Arbitrator, by DGG. Reference was invited to the orders, passed by the learned Single Judge, as well as by the Division Bench, cited supra. DGG expressed discomfiture at the fact that the shares, transferred by DGG to RGG, were ....
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.... that Dinesh Gupta and Shreyansh Gupta were "not handling the issue efficiently with the tenant of the property" of Renu Promoters, located at W-12, Greater Kailash Part II, New Delhi. Even while judgement was reserved, by the learned Single Judge in CS (OS) 100/2018, it was alleged that Dinesh Gupta and Shreyansh Gupta had sold the said property, vide Sale Deed dated 18th May, 2018, for Rs. 10,50,00,000/-. 23.3 Pointing out that AGG was not a party to the Family Settlements between DGG and RGG, and that the said Family Settlements had also been disputed by RGG on various grounds, the application asserted that, in issuing notices under Section 100 of the Companies Act, for convening of the EGM, Sanchit Gupta was merely exercising his statutory rights, in view of the fact that Dinesh Gupta was acting against the interests of Renu Promoters. In the circumstances, the application prayed that (i) Dinesh Gupta, Shreyansh Gupta and Renu Promoters be directed to maintain status quo, in relation to the immovable assets of Renu Promoters, as well as in relation to its shareholdings, and that (ii) Dinesh Gupta and Shreyansh Gupta be restrained from taking any decision in their capacity ....
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....f. 24. As a result, the learned Sole Arbitrator had, before him, seven applications, under Section 17 of the 1996 Act - the three Civil Suits filed before the learned Single Judge, i.e. CS (OS) 51/2018, CS (OS) 100/2018 and CS (OS) 101/2018, one fresh application filed by Dinesh Gupta and three fresh applications filed by AGG/its members. Besides these, applications had also been preferred, under Section 17, by RGG and by Bechu Singh, with which we need not concern ourselves. The impugned Order 25. Though the grievance of the petitioner is with respect to a limited direction in the impugned Order, it is necessary to examine how the learned Sole Arbitrator has proceeded, while deciding the aforesaid applications, under Section 17, preferred by DGG and AGG/their respective members. 26. The learned Sole Arbitrator has observed, at the outset, that the execution of the Family Settlement dated 2nd December, 2017 and 9th December, 2017, was undisputed, and that it was also an admitted position that, even prior to the recording of the said Family Settlements, DGG, RGG and even AGG were taking actions to detangle their rights in various Companies, in terms thereof. Disputes, however, ....
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....settlements were enforceable even against non- signatories thereto. As BDR and Nishit fell, under the Family Settlements, to the share of DGG, the learned Sole Arbitrator held that it was not appropriate to restrain DGG from dealing with the said Companies, especially as they were in the business of real estate, and any direction, to them, to maintain status quo in respect of the immovable assets of BDR and Nishit would stifle their business. It was noticed that the said assets were the stock-in-trade of BDR and Nishit. Even so, DGG was directed to maintain status quo in respect of those immovable assets which constituted part of its capital assets, and were not part of its stock-in-trade. 31. Adverting to the second and third applications, under Section 17 of the 1996 Act, preferred by AGG/its members, the learned Sole Arbitrator held thus (in para 3.28 of the impugned Order, the concluding sentence of which constitutes the subject matter of challenge herein): "In the other two applications filed by members of AGG, they are seeking restitution of the amounts which they have remitted. For the reasons given above, such a relief cannot be granted at this stage as it needs determin....
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....ich was not permissible. Apropos the clarifications sought by AGG, the learned Sole Arbitrator only addressed the submission that, qua the impugned direction to DGG to furnish security, no time period had been stipulated. The learned Sole Arbitrator clarified that security was required to be furnished, by DGG, as directed in the impugned para 3.28 of the order dated 18th February, 2020, within four weeks, to the satisfaction of the learned Sole Arbitrator. 34. The findings of the learned Sole Arbitrator, qua the clarifications sought by RGG, are not relevant for the purposes of the present petition, and are not, therefore, being adverted to. Rival Contentions 35. Mr. Rajiv Nayar, on behalf of the appellant, advances the following submissions, to assail the impugned direction, in para 3.28 of the order dated 18th February, 2020, of the learned Sole Arbitrator: (i) No prayer, for directing furnishing of security, by DGG, had been made by AGG, in any of its applications, under Section 17. The prayer was only for restraint, against DGG, from dealing with the shares held by DGG in C.R. Farms and with the shares of BDR. No prayer, for restitution of any amount, was contained in th....
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....out the circumstances in which relief could be moulded, none of which were satisfied in the present case) and Seshambal v. Chelur Corporation Chelur Building [(2010) 3 SCC 470]. (v) No finding of the existence of a prima facie case, in favour of AGG, had been returned by the learned Sole Arbitrator. Nor has the learned Sole Arbitrator addressed the concerns of balance of convenience and irreparable loss, which, in conjunction with the existence of a prima facie case, constituted the troika for grant of interim relief. Mr. Nayar relied, in this context, on the judgement of this Court in Intertoll ICS Cecons O & M Co. Pvt Ltd v. N.H.A.I. [ILR (2013) II Del 1018]. (vi) AGG was acting with clear dishonesty, as it was challenging the actions, taken by it in favour of DGG, without challenging similar actions, taken by it in favour of RGG. (vii) The liability for security had entirely been fastened on DGG, whereas the liability of AGG, if any, would fall on the entire estate shared between DGG and RGG. 36. Responding to the submissions of Mr. Nayar, it was contended, by Mr. Sudhir Nandrajog, learned Senior Counsel for AGG, thus: (i) AGG was neither a party, nor a signatory, to th....
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....drajog, were in excess of mere furnishing of security. (vii) The reliefs claimed by AGG, in its counter claims, was also relevant. The amounts claimed by AGG were in excess of Rs. 70 crores. (viii) Para 3.27 of the impugned Order clearly noted the contentions of the parties, and gave reasons for not granting the larger relief claimed by AGG. The status quo, as directed to be maintained by DGG, was also restricted to its capital assets, and did not extend to its stock-in-trade. This direction was not assailed by DGG. AGG had, in fact, sought restitution. The learned Sole Arbitrator held that, while it was not possible to grant restitution as claimed, it was equitable to direct furnishing of security by DGG. In so directing, the learned Sole Arbitrator clearly acted within the confines of the jurisdiction, vested in him by clauses (b) and (e) of Section 17 (2) of the 1996 Act. (ix) The direction for furnishing of securities effectively balanced the equities between the parties. No occasion, for interference therewith, therefore, existed. In this context, my attention was invited to the fact that the learned Sole Arbitrator had stayed all the recovery notices, issued by AGG. (....
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....Arbitrator was to reach the opinion that the Family Settlements were binding, AGG would be left high and dry. (xvi) The reliance, by the appellant, on Sections 91 and 92 of the Evidence Act, was misplaced, as these provisions applied only where a person sought to lead evidence contrary to the document to which he was a signatory. No such occasion arose in the present case. (xvii) The impugned Order had been passed at a preliminary stage, and could not be said to suffer from any such perversity, as would justify interference, by this Court. 37. Arguing in rejoinder, Mr. Nayar re-emphasised the fact that, having held, in para 3.28 of the impugned Order dated 18th February, 2020, that no relief, for restitution of the amounts, as claimed by AGG, could be granted, the learned Sole Arbitrator signally erred in directing furnishing of security by the appellant. Mr. Nayar emphasised, further, that the contentions, advanced by Mr. Nandrajog, did not constitute the basis for the impugned direction, of the learned Sole Arbitrator. He submitted that the direction to furnish security, if issued under Section 17 of the 1996 Act, had necessarily to conform to the discipline of Order XXXVIII....
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....igh Court, under Section 37, is subject to the same circumscriptions as formed by its jurisdiction under Section 34. Mr. Nayar had submitted, before me, that it would be folly to restrict the jurisdiction of the High Court, under Section 37, by the principles which apply to Section 34. He had sought to emphasise that the jurisdiction vested in the Court by Section 37 was appellate, unlike Section 34. Appellate jurisdiction, by its very nature, Mr. Nayar had sought to submit, is wider than the jurisdiction which applies to consideration of objections against an arbitral award. Appellate jurisdiction encompasses, within its fold, the power to review findings of fact and, in fact, the appellate court is, jurisprudentially, an extension of the original court, the appeal being a continuation of the original proceedings. As such, Mr. Nayar had sought to submit, the High Court, exercising appellate jurisdiction under Section 37, should not feel restricted by the constraints which govern its jurisdiction under Section 34. 41. Empirically viewed, Mr. Nayar's submissions appear attractive. There is, undoubtedly, qualitatively, a distinction between appellate jurisdiction and "judicial revie....
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....grant of stay of a decree under the provisions of the Code of Civil Procedure, 1908". By reference, therefore, Order 41 Rule 5 of the CPC, which deals with stay, by the appellate court, of original decrees, stands incorporated into Section 36(3) of the 1996 Act. Though, therefore, the final arbitral award is not made amenable to appeal, by the 1996 Act, any prayer for stay of the arbitral award, that accompanies objections under Section 34, is required to be examined in the light of the provisions, in the CPC, governing stay of original decrees, in exercise of appellate jurisdiction. Though, for the purposes of this judgement, it is not necessary to psychoanalyse the legislative intent in providing for such a peculiar dispensation, the fact that applications for stay of final arbitral awards, are required to be considered on the basis of the principles governing stay, by appellate courts, under Order 41 Rule 5 of the CPC, indicate, to an extent, that the principles of Order 41 are also required to be borne in mind, while exercising appellate jurisdiction, under Section 37. 45. The 1996 Act is, preambularly, a fallout of the United Nation's Commission on International Trade Law (UN....
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....gs to encourage settlement of disputes; g. to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; h. to provide a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and i. to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign awards. 5. The Bill seeks to achieve the above objects." 46. The Supreme Court has, in Chloro Controls (I) Ltd v. Severn Trent Water Purification Inc. [(2013) 1 SCC 641], held that the legislative intent and essence of the 1996 Act "is to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and Geneva Convention". The afore-extracted passages, from the Statements of Object and Reasons of the 1996 Act has, necessarily, to guide the Court, while interpreti....
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....Arbitrator, to direct furnishing of security, is not under question; indeed, in view of sub- clause (b) of Section 17 (1) (ii) of the 1996 Act, it cannot. The arbitrator is, under the said sub-clause, entirely within his jurisdiction in securing the amount in dispute in the arbitration. Whether, in exercising such jurisdiction, the arbitrator has acted in accordance with law, or not, can, of course, always be questioned. While examining such a challenge, however, the Court has to be mindful of its limitations, in interfering with the decision of the arbitrator, especially a decision taken at the discretionary level, and at an interlocutory stage. 50. One may also refer, in this context, to Section 5 of the 1996 Act, which reads as under: "5. Extent of judicial intervention. - Notwithstanding anything contained in any other law for the time being in force, in matters covered by this Part, no judicial authority shall intervene except where so provided in this Part." It is, no doubt, possible to argue that the intent, of Section 5, is to restrict judicial intervention, with arbitral proceedings, and orders passed therein, to the avenues for such interference, as provided by Part I....
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.... Section 34, the principles enunciated therein embody the general philosophy underlying the 1996 Act. The italicised words, towards the conclusion of the paragraph, especially, would apply, with equal force, to challenges to interlocutory orders of arbitral tribunals, under Section 37, as they would, to challenges to the final award, under Section 34. 52. Section 37 is, in a sense, a somewhat peculiar provision as, against the decision of the arbitrator, it provides for a first appeal, as well as a second appeal, to the High Court. Sub-section (1) provides for an appeal, to the High Court, from the decision of the Section 34 Court, before which the final award has, in the first instance, been tested. Sub-section (2), on the other hand, provides for a first appeal, against interlocutory orders of the arbitral tribunal under Section 16 or Section 17. There is, necessarily, a qualitative difference between these two challenges, though both would lie to the High Court. The challenge under Section 37(1), which is directed against a final award of the arbitrator/arbitral tribunal, is akin to a second appeal, as was observed by this Court in M.T.N.L. v. Fujitshu India Pvt Ltd [2015 (2) A....
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.... observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the arbitral tribunal 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." 55. The concluding caveat, in Section 17 (1), makes it abundantly clear that the power of an arbitrator, to grant interim measures, under Section 17(1), is analogous and equivalent to the power of a Court, to pass such orders. Section 9 of the 1996 Act grants co-equal jurisdiction, worded in identical terms, on the Court, to pass interim orders, concluding with a parallel caveat, to the effect that "the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it". 56. The scope and ambit of Section 9, especially in the light of this concluding caveat, was examined by the Supreme Court in Arvind Constructions Co. (P) Ltd v. Kalinga Mining Corporation....
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.... well known principles governing the grant of interim injunction that generally governed the courts in this connection". 57. The principles governing Order XXXIX of the CPC have, therefore, also to guide the Court, while granting interim protection under Section 9(1), or the arbitrator, while granting such protection under Section 17(1), of the 1996 Act. 58. Applicability of Order XXXVIII Rule 5, CPC, to Section 9(1)(ii)(b), and Section 17(1)(ii)(b) of the 1996 Act 58.1 On the applicability, to Section 9(1)(ii)(b), or Section 17(1)(ii)(b), of Order XXXVIII Rule 5, CPC, reliance was placed, by Mr. Nandrajog, on the judgement of a learned Single Judge of this Court in Steel Authority of India Ltd v. AMCI PTY Ltd31, to contend that Order XXXVIII Rule 5 of the CPC has no applicability to proceedings under the 1996 Act, specifically to the exercise of jurisdiction under Section 17. 58.2 Undoubtedly, Steel Authority of India Ltd [(2011) 3 Arb LR 502] says so. That position has, however, altered, subsequently, with the judgement, of a Division Bench of this Court in Ajay Singh v. Kal Airways Pvt Ltd [(2018) 209 Comp Cas 154], paras 25 to 28 of which read thus: "25. The first questi....
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....interim protection or the appointment of a receiver." 26. Interestingly, in a previous decision, Firm Ashok Traders v. Gurumukh Das Saluja (2004) 3 SCC 155, the Supreme Court observed that: "13. ..The Relief sought for in an application under Section 9 of the A&C Act is neither in a suit nor a right arising from a contract. The right arising from the partnership deed or conferred by the Partnership Act is being enforced in the Arbitral Tribunal; the court under Section 9 is only formulating interim measures so as to protect the right under adjudication before the Arbitral Tribunal from being frustrated....." 27. Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the weight to be given to the materials on record, a fact dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be principled, premised on some known guidelines - therefore, the analogy of Orders 38 and 39. Equally, the court should....
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....thority of India Ltd31 and Ajay Singh32 were, however, both decisions which arose under Section 17 of the 1996 Act, as it stood prior to its amendment, with effect from 23rd October, 2015. Lanco Infratech12, rendered by a learned Single Judge of this Court, however, seriously doubts the applicability of Order XXXVIII Rule 5 of the CPC, to cases arising under Section 17 of the 1996 Act, after its amendment with effect from 23rd October, 2015. The controversy, in that case, arose under the pre-amended Section 17, and paras 12, 14 and 35 of the report are of stellar significance, in the context of the issue of applicability of Order XXXVIII Rule 5 of the CPC. They read thus: "12. The above submissions have been considered. The submissions revolve around the scope of the powers under Section 17 of the Act as it stood prior to the amendment by the Arbitration and Conciliation (Amendment) Act, 2015 with effect from 23rd October 2015. The unamended Section 17 reads thus: "17. Interim measures ordered by arbitral tribunal. - (1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the....
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....iously questionable, even under the pre- amended Section 17, the provisions of Order XXXVIII Rule 5 of the CPC cannot, bodily, be incorporated into the provision, though the principles governing the exercise of jurisdiction under Order XXXVIII Rule 5 are required to inform such exercise of jurisdiction. Either which way, therefore, while exercising jurisdiction under Section 17(1)(ii)(b), the arbitrator is not strictly bound by the confines of Order XXXVIII Rule 5 of the CPC, but is also proscribed from acting in a manner completely opposed thereto. A middling approach is, therefore, required, without treating Order XXXVIII Rule 5 as entirely inapplicable to Section 17(1)(ii)(b) (as Mr. Nandrajog would contend), or as applicable with all its vigour and vitality (as Mr. Nayar would contend). 59. Having said that, it is indisputable that the exercise of jurisdiction, by the arbitrator, under Section 17, is fundamentally discretionary in nature - as contrasted with Section 16(2) and (3). Judicial interference, with the exercise of discretionary power, is, classically, limited, and is even more circumscribed, where the authority exercising discretion is itself a judicial authority - a....
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....ave been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph, (1960) 3 SCR 713 : AIR 1960 SC 1156: "... These principles are well established, but as has been observed by Viscount Simon in Charles Osenton & Co. v. Jha....
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....eal: - a. Set aside the Impugned order dated November 16, 2018 passed in IA No 3238 of 2018th in CS (OS) No. 100 of 2018 to the extent that the Appellants were restrained from giving effect to the notices/communications dated February 16, 2018, February 12, 2018, February 22, 2018 and February 23, 2018; b. Fix a date of meeting of shareholders of Renu Promoters Pvt. Ltd. (Respondent No. 12) in pursuance of and as contemplated in the notice/communication dated February 16, 2018 in accordance with the provisions of the Companies Act, 2013." The First Section 17 application "It is, therefore, most respectfully prayed that Ld. Arbitrator may kindly be pleased to allow the present Application and: - i. Direct Claimant Nos. 1, 2 and 12 to maintain status quo in relation to its immovable assets and not to create any charge, encumbrance and/or third-party rights in relation to the said immovable assets. ii. Direct Claimant No 1, 2 and 12 to maintain status quo in relation to the shareholding of Claimant No. 12. iii. Restrained the Claimant Nos. 1 and 2 from taking any decision in the capacity of being the Director during the pendency of the present proceedings and further, r....
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....and fraudulently transferred by the Claimant Nos. 1 and 2, in their favor, until the consideration of Rs. 53,72,38,000/- (Rupees Fifty-Three Crores Seventy Two Lakhs Thirty Eight Thousand only) is paid by the Claimant Nos. 1 and 2 to the Counter- Claimants/Respondent Nos. 1 to 4, for such transfer of shares, as explained above; b. Restrain the Claimants from creating any charge, encumbrance or any other third-party rights over the above mentioned 26,86,190 (Twenty-Six Lakh Eighty-Six Thousand One Hundred And Ninety) equity shares of BDR, until the consideration of Rs. 53,72,38,000/- (Rupees Fifty-Three Crores Seventy Two Lakhs Thirty Eight Thousand only), for transfer of the said shares has been paid by the Claimant Nos. 1 and 2 to the Counter-Claimants/Respondents Nos. 1 to 4." 62.4 On these three applications, the learned Sole Arbitrator has ruled, thus (in para 3.27 and 3.28 of the impugned Order): "3.27 Having regard to the aforesaid, and when the companies have gone to DGG, it may not be appropriate to restrain Claimants 1, 2 and 12 from dealing with the properties of BDR and Nishit. The two companies are in the business of real estate and directing the companies to maint....
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....ion of the Mutual Funds held by AGG, had, voluntarily and without consideration, being transferred, and gifted, by AGG to DGG, as sequelae to the Family Settlements dated 2nd December, 2017 and 9th December, 2017. Mr. Nandrajog, representing AGG, emphatically contended that it was preposterous to imagine that AGG would, willy- nilly and without any consideration whatsoever, relinquish such huge amounts on investments, in favor of DGG. He also pointed out that AGG was, in fact, not even a party to the Family Settlements. 62.6 The learned Single Judge had, vide his order dated 16th November, 2018, stayed the operation of the aforesaid notices, dated 12th February, 2018, 16th February, 2018, 22nd February, 2018 and 23rd February, 2018, issued by AGG. AGG had, in FAO (OS) 18/2019, challenged the said order of stay. FAO (OS) 18/2019 was converted into an application under Section 17 of the 1996 Act, to be decided by the learned Sole Arbitrator. The learned Sole Arbitrator was, therefore, seized the of the issue of whether to continue the interim order, dated 16th November, 2018, of the learned Single Judge, thereby continuing the injunction against operation of the notices dated 12th F....
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....dent microscopic analysis. As is correctly pointed out, the learned Sole Arbitrator did not decide, by the said Order, a single application, or even a group of applications filed by AGG under Section 17, alone, but disposed of all the applications, under Section 17, pending before him, whether filed by AGG, DGG or RGG. The rationale and raison d'etre, for the decision of the learned Sole Arbitrator has, therefore, to be discerned by a holistic appreciation of the impugned Order, and not by an isolated, or insulated, reading of the last sentence in para 3.28, with which DGG claims to be aggrieved. It is clear that the learned Sole Arbitrator has not directed furnishing of security, equivalent to the disputed amount, as his mere ipse dixit, but has arrived at the said decision by a careful process of ratiocination, keeping the competing interests of the claims of the claimants and the respondents, as well as their legitimate business concerns and considerations, in mind. 62.10 The discussion, hereinabove, has already made it apparent that the principles behind Orders XXXVIII and XXXIX of the CPC are required to guide the exercise of jurisdiction under Section 9, or Section 17 of the....
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....le Arbitrator has granted relief in excess of that sought by AGG is also, in the facts, clearly misguided, as the impugned direction has been issued after balancing the rival claims of both parties. 62.12 The judgements, on which Mr. Nayar sought to place reliance, to support his submission that the learned Sole Arbitrator had erred in awarding relief in excess of that sought by AGG, do not really advance his case. Tata Advanced Systems Ltd [MANU/DE/1061/2020] did not notice the judgement of the Division Bench of this Court in Ajay Singh [(2018) 209 Comp Cas 154]; besides, there was no application, under Section 17, before the arbitrator in that case, and there is a specific finding, by the learned Single Judge, to the effect that the direction, for furnishing of Bank Guarantee, was not preceded by any reasoning. Captain Guman Singh [2016 SCC Online Del 983], too, does not help Mr. Nayar, as it merely reiterates the principle that a Court cannot grant relief, not sought by the parties before it. In the present case, as I have observed, the learned Sole Arbitrator was well within his jurisdiction in directing DGG to furnish security, of the amount in dispute. Besides, the direction....
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....arly encompass the entire recital prior to the said decision, in the course of which the learned Sole Arbitrator has examined, in detail, the facts of the case, and has comprehensively analysed the competing equities, and the claims of the parties before him. The dispute was still at large before the learned Sole Arbitrator, and it would have been entirely inappropriate, for the learned Sole Arbitrator, at that stage, to opine, one way or the other, thereon, with any modicum of finality. The learned Sole Arbitrator, therefore, correctly observes that it needed determination "as to whether the payments were made by AGG (to) DGG voluntarily pursuant to the Family Settlements or they are fraudulently secured by DGG as contended by AGG in these applications". Even so, while rejecting the relief sought by AGG, the learned Sole Arbitrator has, acting within the confines of the jurisdiction vested in him by Section 17(1)(ii)(b), deemed it appropriate to secure the amount in dispute. 63.2 Even on facts, the learned Sole Arbitrator was justified in so directing. The impugned Order does contain factual justification for the direction. The allegation, of AGG, was that their shares, are held ....
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....rder, of the Supreme Court, which dealt with the challenge to the direction, of the Arbitral Tribunal, restraining the claimant's from alienating, encumbering or transferring its assets without permission of the Arbitral Tribunal. As such, the order in question was injunctive in nature, unlike the present case, where injunction has specifically been refused. This, even by itself, renders the said decision entirely inapplicable to the facts of this case. It is further observed, in the said order, that the Arbitral Tribunal merely cited balance of convenience and irreparable injury, as a ground for the injunction. Further, the Supreme Court observes that "the Arbitral Tribunal has no jurisdiction to affect the rights and remedies of the third party secured creditors in the course of determining disputes pending before it", as the claim of the appellants, before the Supreme Court, was that they were not even parties before the arbitrator. The order does not disclose that any direction, furnishing security, had been passed by the Arbitral Tribunal in that case. As such, the reliance, by Mr. Nayar, on the observation, in the concluding para 5 of the order, that the decision of the Arbit....
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....l Majeed [(2019) 14 SCC 1]. As the present dispute does not involve any order of prohibitory injunction, I do not deem it necessary to burden this judgement with the law on the point; suffice it to state that judgements, involving challenges to orders of interim prohibitory injunction, whether under Section 17, or under Section 9, of the 1996 Act, may not be of much relevance, while examining a challenge to an order directing furnishing of security by way of Bank Guarantee. 65. Lanco Infratech [234 (2016) DLT 175] is completely inapplicable, as it did with the pre-amended Section 17. In fact, the learned Single Judge of this Court, while deciding the petition, has clarified, or more than one point, that he was adjudicating the matter in the context of the pre- amended Section 17, and that "the underlying principle" behind Order XXXVIII Rule 5 of the CPC "apply to Section 17 of the Act as it stood prior to the amendment with effect from 23rd October, 2015". It has also been observed, in the said decision, that "while under the unamended Section 17 of the Act, there was no specific power for the AT to order interim measures to secure the amount in dispute, that power has been expres....
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....rems of Euclid, but have to be understood in the backdrop of the fact-situation which presented itself before the Court, and the precise controversy, with which the Court was seized [U.O.I v. Major Bahadur Singh (2006) 1 SCC 368 ; BGS SGS Soma JV v. NHPC Ltd. (2020) 4 SCC 234]. In the present case, no parallel, whatsoever, can be drawn with the facts which presented themselves before this Court in Goodwill Non-Woven (P) Ltd [2020 SCC Online Del 631]. Here, the precise case of AGG was that DGG had, in a fraudulent manner, misappropriated, to its own unjust advantage, Rs. 19.55 crores, resulting from liquidation of the Mutual Funds of AGG, as well as 26,86,190 with the shares of BDR, valued at Rs. 53,72,38,000/-. As such, the allegation of AGG was that DGG had not only failed to abide by the oral agreement between AGG and DVD, on the basis whereof blank Delivery Instruction Slips, qua the 26,86,190 shares of BDR, and blank cheques, qua the amount of Rs. 19.55 crores, realised by liquidation of the Mutual Funds, had been provided by AGG to DGG, but that it had used the said blank Delivery Instruction Slips and blank cheques to misappropriate, to its own advantage, the shares of BDR, a....
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....te that the sole argument, on the basis of which the prayer for security, in the said case, was premised, was that the respondent was in financial distress. The learned Single Judge observed that the question of whether, in fact, such "financial distress" existed, or not, was a disputed question of fact, which could not be adjudicated under Section 9. This sole ground, therefore, held the learned Single Judge, was insufficient to sustain a prayer for directing furnishing of security, by the opposite party. In the present case, the learned Sole Arbitrator was exercising jurisdiction, not under Section 9, but under Section 17. That apart, as the discussion hereinabove amply reveals, the learned Sole Arbitrator as set out, in detail, the facts of the case, which disclosed that the amount of Rs. 19.55 crores, realised by liquidation of the Mutual Funds of the AGG, as well as the 26,86,190 shares of BDR, held by AGG, had been appropriated, by DGG, to its bank account, and to its DEMAT Account, respectively, without any consideration having been paid to AGG therefor. Further, AGG had alleged that part of the said amount had also been invested in certain other corporate enterprises. This,....
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....o furnish security for the amount in dispute in the arbitration - which, clearly, is within the province of the jurisdiction of the learned Sole Arbitrator, conferred by Section 17(1)(ii)(b) - it would do violence to the entire ethos of the 1996 Act, and would militate against the avowed objective of the legislation itself. 73. In my view, any interlocutory order, by the arbitrator, under Section 17, to furnish security, if preceded by adequate examination and appreciation of the facts, and the rival stands of the parties, should remain impervious to judicial interference. The Court is required to adopt a holistic, and comprehensive, view in such cases. Any attempt, by the Court, to vivisect, microscopically, the order of the arbitrator, to find flaws, would be entirely inappropriate. So long as the decision is informed by adequate application of mind, it should be allowed to prevail, especially as it is in the nature of an interlocutory direction, and is always subject to the final award, to be passed in the arbitral proceedings. 74. For all these reasons, I am of the opinion that no occasion arises, for this Court to interfere with the impugned direction, in para 3.28 of the Or....