TaxTMI 
TaxTMI 
2025 (7) TMI 1071
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....ve") is a one- person company formed by Mr. Saravana Prasad ("Prasad"). Innovative is the Petitioner in Commercial Arbitration Petition (L) No. 22746 of 2024 while Prasad is the Petitioner in Commercial Arbitration Petition (L) No. 22714 of 2024. Innovative entered into a "Production Agreement" dated March 10, 2021 ("Agreement") whereby Endemol would create, produce, edit post-production and deliver episodes of the well-known cookery television show franchise "Masterchef" in Tamil, Telugu, Kannada and Malayalam. Payments were due on the basis of milestones across the span of work to be carried out. 3. It is common ground that Endemol delivered the episodes in Tamil and Telugu and was contractually entitled to payment on the four invoices it raised on Innovative from time to time, aggregating to Rs. 15.93 crores. It is also common ground that a sum of Rs. 4.45 crores has been paid by Innovative to Endemol. A sum of Rs. 1.08 crores was adjusted against dues in another contract between the parties. The outstanding dues on the invoices were stated to be Rs. 10.40 crores. Disputes and differences relating to the claim to these dues are the trigger for the arbitral proceedings w....
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....in the Impugned Order, what the Learned Arbitral Tribunal, in its wisdom, believed would meet the ends of justice as an interlocutory measure. There has been extensive reliance on merits by both sides in the course of the hearing before me, seeking to draw inferences from such detailed submissions on merits, although the Learned Arbitral Tribunal has itself stated that it has not gone into the merits in any material depth. 8. Having examined the contentions and the material on record, what stands out is that the Learned Arbitral Tribunal has taken note of the Confirmation Letter as being the linchpin of Endemol's arguments, and indeed also noted that Innovative has not denied having issued the Confirmation Letter. In my opinion, whether the Confirmation Letter was something consciously issued or routinely issued in the course of audit confirmations sought by auditors of Endemol, the reasons for which there is no Confirmation Letter after 2022, and the implications of accounts reconciliation exercises that the parties had engaged in, are all matters that would be dealt with by the Learned Arbitral Tribunal in the course of the conduct of the arbitration. 9. The real issue that....
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.... Union, the United States of America, United Kingdom and even in Asian economies such as China and Singapore. 12. The hallowed case of Saloman (Saloman vs. Saloman - (1897) AC 22) that laid the foundation of limited liability for companies was the case of a leather boot manufacturer who converted his sole proprietorship business into a company (of course with his family owning nominal shares). The issue that arose was whether the shareholder would be liable for the obligations of the company. The House of Lords overturned the view of the Court of Appeal, which had held that the company was a sham and a device, propagated to escape the liability of the shareholder. Today, as a matter of Indian company law, the concept of the OPC is now a matter of special corporate law policy of India introduced into the Companies Act to enable individual entrepreneurs to ring-fence their assets from exposure to liability arising out of the conduct of business by the OPC formed by them. 13. Essentially, while the Impugned Order is generally incapable of being interfered with since it but an interim arrangement, and the Learned Arbitral Tribunal has taken a reasonable approach of ensuring that ....
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....d in the narrower scope of review under Section 34 of the Arbitration Act, the Impugned Order does not pass muster in its over-reach to Prasad. 17. Mr. Jagtiani would attempt to extrapolate from Cox & Kings (Cox and Kings Ltd. vs. SAP India Private Limited and Another - (2024) 4 SCC 1) to propound the theory that Prasad was the signatory to contracts executed by Innovative in his capacity as the sole director of the OPC; the correspondence by Innovative was by Prasad; and thereby an implied consent to bind Prasad was discernible. This submission is totally untenable and has to be stated to be rejected. To begin with, it is nobody's case that Prasad is a party to the Agreement, which admittedly a contract between Innovative and Endemol. Innovative was inherently an OPC, which, by law may have just one director and by law must have only one shareholder. The OPC is meant to be the business and social alter ego of the OPC, and that is by legal design. The legal framework explicitly protects such sole shareholder by limiting the liability as for any other company. If the director signing on behalf of the OPC is reason enough to wish away the statutory scheme of limited liability, it ....
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.... and therefore unworthy of interference. 22. Mr. Bhole would contend that the Learned Arbitral Tribunal has placed excessive reliance on the Confirmation Letter and that Learned Arbitral Tribunal has cast a negative burden on Innovative to prove that the Confirmation Letter is incorrect. I am unable to accept this proposition. The Confirmation Letter was issued by Innovative. When balances are confirmed to auditors of counterparties, it is essentially an assurance that the amounts shown in the books of the counterparty as being due, is prima facie a true and fair record in the books of accounts. 23. It is true that such confirmations need not be conclusive evidence and if there are disputes that arise subsequently, such disputes cannot be wished away when dealing with balances in the books of accounts. However, whether there are other circumstances and facts that would undermine such a confirmation is a matter of evidence. That can be gone into in the course of the arbitration. At the stage of considering the Section 17 proceedings, the Learned Arbitral Tribunal has rightly adopted a prima facie view. Unless such view is blatantly perverse by being in ex facie conflict with t....
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....uld be appropriate to summarise my conclusions as under: a) Since Prasad's liability is limited by the Companies Act, no direction against Prasad to make a deposit or make any disclosure is legally sustainable or tenable - such a direction is in direct conflict with the fundamental policy of Indian law governing OPCs, as enshrined in the Companies Act; b) Even a final relief against Prasad looks, prima facie, unlikely - it is left open to the course of arbitration to see if there is any other basis at all for any claim to be made against Prasad, but at this stage there is not even a prima facie case for issuing any directions involving personal liability on Prasad. Therefore, directing him to make a deposit or to make disclosures of his personal assets and liabilities (which can only be in aid of a potential future personal liability) is untenable and liable to be set aside; c) Therefore, the Impugned Order, insofar as it directs imposition of any personal obligations on Prasad, is hereby set aside; d) The Impugned Order, insofar as it imposes obligations on Innovative - whether in the nature of maintaining a fixed deposit in a bank, or disclosin....