Prysmian Cavi E Sistemi S.R.L vs Vijay Karia And 76 Ors

Prysmian Cavi E Sistemi S.r.I. (formerly known as Prysmian Cavi e Sistemi Energia S.r.I.), a company incorporated under the laws of Italy with its registered office at Via Chiese 6, 20126 Milan Italy. .. Petitioner V/s. 1. Vijay Karia 2. Jagdish Karia 3. Jaswanti Jagdish Karia 4. Chandrakant M. Karia 5. Shilpa V. Karia 6 Master Pratham V. Karia 7. Vijay P. Karia - HUF 8. Pramod Mohanlal Karia - HUF 9. Hetvi Vijay Karia 10. Vasumati C. Karia 11. Piyush J. Karia 12. Piyush J. Karia - HUF 13. Tejal P. Karia 14. Yash P. Karia 15. Kunj P. Karia 16. Paresh J. Karia 17. Chandrakant M. Karia-HUF 18. Jagdish M. Karia - HUF 19. Vivek Hanmantrao Kulkarni 20. Pravinchandra C. Modi

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21. Anil Kumar K. 22. Suryakant Khushal Das Sheth 23. Megha K. Murthy 24. Ritesh Kedia 25. Reema Nilesh Vaghani 26. Rajesh H. Dube 27. Anil Harihar Borkar 28. Shah Pragna Indravadan 29. Vivek Kohli 30. Pamela Miranda 31. Dipti Bharat Kotak 32. M/s. Comet Cables Pvt. Limited 33. Rai Bala 34. Mahesh Chand 35. Hemant Krishnarao Talapadatur 36. Ajitchandra Jeram Thakker 37. Bharat Jeram Thakker 38. Hema Jayesh Kotak 39. Jitendrakumar Zatakia 40. Shital Thakkar 41. Ameeta Bharat Thakkar 42. Neha Garg 43. Narandas Kotak 44. V. Hariharan 45. Bina Sayani 46. Mittal N. Mehta 47. Raksha J. Mehta 48. Jaswantilal M. Mehta 49. Latha K. Murthy 50. Jayshree Dilip Shah 51. Dilip Chinubhai Shah 52. Rushikesh Jitendra Zatakia

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53. Ramniklal J. Sayani 54. Aruna R. Sayani 55. Trupti S. Sayani 56. Rajeshkumar R. Sayani 57. Surajkumar R. Sayani 58. Kantilal Tapandas Someiya 59. Mrudula Kantilal Someiya 60. Saroj Narendra Kotak 61. Sunil Gopal Kulkarni 62. Nikhil N. Banwat 63. Vishwas Dhall 64. Jayesh Kotak 65. Anil K. Someiya 66. Bina Anil Somaiya 67. Manasvi A. Someiya 68. Bakul Natvarlal Kotak 69. Nisha Bakul Kotak 70. Dineshchandra N. Shah 71. Sharif Habib Al Awadhi 72. Ibrahim Saad M. A. Yaaqib 73. Sanjay Goenka 74. The Hon'ble Sheikh Mohammad Bin 75. Mohammad Siddique Wadiwala 76. Estate of Promod Mohanlal Karia (since deceased) represented by Vijay Karia 77. Estate of Asha Paresh Karia (since deceased) represented by Vijay Karia All represented by Mr. Vijay Karia residing at - A-1202, Surya Apartments, Bhulabai Desai Road, Mumbai-400 026. ... Respondents

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............ Mr. Fredun E. De Vitre, Senior Advocate, a/w Ms. Naira Jejeebhoy, Mr. M. P. Bharucha and Ms. Shreya Gupta I/b. Bharucha and Partners for the petitioner.

Mr. Navroz Seervai, Senior Advocate, a/w Ms. Arti Raghavan, Mr. Vyapak Desai, Ms. Ranjana Adhikari and Manish Doshi I/b. Vimadalal & Co. for respondent nos.1, 5 to 7, 9, 20, 22, 23, 25, 27, 28, 31 to 34, 36 to 42, 44, 45, 50 to 58, 60, 61, 64 to 66, 73.

Mr. Aspi Chinoy, Senior Advocate a/w Hussain Somji I/b. Unadkat & Co. for respondent nos.3, 4, 10 to 18, 46 to 48 and 77. ...........

CORAM : A. K. MENON, J. RESERVED ON : 10 th SEPTEMBER, 2018 PRONOUNCED ON : 7 th JANUARY, 2019.

JUDGMENT:

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1. By this petition, the petitioner corporation registered under the laws of

Italy seeks enforcement of a foreign award.

The brief facts leading to the filing of the present petition are as follows:

2. The petitioner is engaged in manufacture of cables and systems for

energy and telecommunications. The petitioner entered into Joint Venture

Agreement (JVA) dated 19 th January, 2010 whereby it became entitled to and

holds 51% of shareholding of Indian Company Ravin Cables Limited ("Ravin").

One Vijay Karia ("Karia")respondent no.1 alone represents the existing

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shareholders of Ravin. It is stated that all existing shareholders were

represented by Mr.Karia who was empowered by powers of attorney stated to

be coupled with interest and which were at all times valid and subsisting. One

of the two erstwhile shareholders P. M. Karia and Asha P. Karia expired and

their estate is said to be represented by the First respondent to the extent it

concerns shareholding in Ravin. The shares said to have been held by late P. M.

Karia are said to be presently under the control of respondent no.1 and the

shares held by late Asha Karia were transferred to Paresh J. Karia-respondent

no.16 who has constituted respondent no.1 as his attorney. Thus, the

respondents hold 49% of the shareholding of Ravin. Negotiations in respect of

the JV Agreement are believed to have commenced in 2008.

3. In essence the petitioner was to hold 51% shares by way of

subscription and transfer of shares of an existing shareholders for achieving

51% shareholding. The petitioner is believed to have paid Euro 5 million to the

promoters as 'Control Premium' as a result of which the petitioner would be

entitled to manage and control Ravin by appointing three Directors on board

and also appoint a Chief Executive Officer in due course. Mr. Vijay Karia was

to continue as the Chairman and Managing Director. All the other

shareholders were to be treated as one party, represented by the said Karia. On

completion of integration period, Vijay Karia would cease to be involved in day

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to day management of the company and his involvement was to be restricted to

internal audit, strategy and business development. Thus, during the

integration period, Vijay Karia was to be available for ensuring a smooth

transition. Clause 8 of the JVA set out the purpose and the objects. The

intention being to conduct the business of the company in the best interests of

the company and in accordance with sound professional and commercial

principles. The shareholders were to cooperate with the other parties and with

the company and shall use its respective best efforts to ensure the success of the

company with special focus in the industrial special energy cables and high

voltage energy cables markets.

4. Under clause 8.2.3, if any Director or committee member nominated by a

shareholder failed to vote in accordance with the terms of the agreement or it

becomes disqualified by virtue of provisions of the Companies Act then in such

event the shareholder was required to take all action within its power including

to vote at general meeting to remove or replace such Director. The Articles of

Association of Ravin are believed to have been amended pursuant to the JVA.

Under clause 10 existing shareholders and other shareholders of Ravin were

not to transfer or create any interest or encumbrance favour of competitors and

the petitioners in their shares or part with them without the prior written

consent of the petitioner. The parties were not to assign or sell or transfer

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partially shares to a third party without written consent of the other party. The

JVA provided for a "Right Of First Refusal(ROFR) and "Tag Along Rights",

permitted transfers and further issue of shares. The JVA further provided that

in the event of material breach it would constitute a default. Defaults included

sale of 51% or 49% of shares by the non-defaulting shareholder at discounted

price of 10% or 10% premium. The JVA provided for determination notice(s)

and cessation of all rights of the defaulting party if the breach was not rectified

after the cure period.

5. It provided for rights of shareholders who were to act in good faith and

equity between them and for the manner in which the cables business would be

carried on by the petitioner/ 4 th respondent. The shares were to be valued by

one of four valuers who were named KPMG, Ernst & Young, Price Waterhouse

Coopers and Deloitte. Disputes, if any, were to be referred to an arbitration

under the Rules of the LCIA although the seat and place was to be London the

Indian Contract Act would apply but the law of arbitration was to be English

Law. It is also in dispute that on 19 th January, 2010, the parties signed a

Control Premium Agreement under which control premium was paid to the

promoters mainly the Karia Group. Pursuant to JVA, the Articles of Association

of the company were also amended and in June 2010 Mr. Luigi Sarogni was

appointed as CEO of the company. The integration period under JVA came to

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an end on appointment of the CEO and it was agreed as long as integration

period continued, the company would be managed jointly. In or around

November 2010, the petitioner announced that its parent company was

proposing to acquire the Draka Group of Companies engaged in manufacture

of cable which acquisition would entail that the petitioners parent company

would also required majority stake in the Indian subsidiary of the Draka Group

known as Associated Cables Private Limited (ACPL). In September 2011, the

Board of Directors conferred exclusive powers of day to day management of the

company on the CEO appointed by the petitioner. Apparently this was the end

of integration period contemplated under clause 12 of the JVA.

6. In November 2011 the company by resolution of its Board appointed Ms.

Cinzia Farise, as CEO and empowered her to operate the company's bank

accounts. The CEO was also appointed as a non-executive Director of ACPL by

the parent company. In November 2011 the CEO Ms. Farise was also

empowered to employ and lay off permanent staff. She required prior approval

in the event the company intended to hire a new staff. Around this stage,

friction between the parties commenced. A lady employee was hired in the

Sales team. Apparently her records were not disclosed to the Human Resources

Director and it is the petitioners case that her employment was not authorised.

In the meanwhile, one Mr. Brunetti was appointed as Chief Financial

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Officer(CFO) and in December 2011 CEO proposed a board meeting to

formalize the appointment of Brunetti as CFO. However, this was not approved

by the Karia Group. Later in January 2012 the employees resorted to a strike

allegedly supported by Vijay Karia and who did not take steps to prevent it.

Karia is believed to have made several serious allegations against the CEO. The

management meetings called by the CEO were not attended by the employees

and eventually the petitioner issued a Request for Arbitration (RFA) as

contemplated in clause 27 of the JVA on the basis that the respondents were

trying to oust the petitioners from the affairs of the company and causing

employees of the company to support such conduct. Karia apparently also filed

a complaint with the Foreigner's Regional Registration Office (FRRO) against

the CEO and the Human Resources Director in February 2012. In March 2012,

the respondents filed a claim inter alia seeking an order requiring the petitioner

to buy the respondents shareholding at a 10% premium. This led to a fresh

controversy when the respondents contended that the option of selling their

stake was a typographical error. The other shareholders were at all time

represented by said Karia and the respondents had by then filed a counter claim

and participated in the proceedings. On 26 th March, 2012, the respondents are

believed to have served a Determination Notice alleging breach by the

petitioners and upon expiry of 60 days from the date of the Request for

Arbitration breaches remained irremediable as a result the sole arbitrator

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came to be appointed by the LCIA.

7. The respondents initially contended that the arbitrator would have a

conflict of interest since according to them he had been engaged as a counsel

by the petitioners' Advocates in some other unconnected matter. The petitioners

Advocates and the arbitrator denied the allegations of conflict. Later this plea

was given up and the parties continued with the Arbitrator appointed. It is

material to note that at that time the registry of the LCIA had informed the

respondents that the rules of the LCIA included a challenge procedure to the

appointment of the sole arbitrator. This option was, however, not availed of

and on 4th July, 2012 the petitioners filed a statement of claim and extended

period for rectification of breaches ended on 6 th July, 2012. On 20th July, 2012

the CEO Ms. Farise filed a witness statement in which she disclosed that she was

a non-executive director of ACPL. She was not involved in day to day activities

and had not disclosed any confidential information in relation to Ravin to ACPL.

In or around August 2012, the arbitral tribunal passed an interim order by

which Karia was to be continued as Chairman and Managing Director and had

powers limited to internal audit, strategy and business development. Thereafter

between 4th and 20th September, 2012 both parties served a notice of default

since time to rectify had expired. The pleadings were meanwhile completed

and procedural orders came to be passed from time to time including

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Procedural Order no.4 by which the petitioners were directed to produce

documents. The order came to be passed on 14 th November, 2012 but as far as

the compliance was concerned, it was met with resistance and the petitioners

apparently took a shelter under a letter of ACPL to the effect that the documents

could not be submitted on the grounds of confidentiality. The parties were

heard on jurisdictional issues including construction of the JVA and issues

pertaining to a trademark licence agreement and a technical assistance

agreement. A further Procedural Order no.9 came to be passed granting

permission to the petitioner to rely on further documents in relation to existing

pleaded allegations which the petitioner's claim to have found and to which

documents they had no prior access.

8. Hearing on liability thereafter took place in London during May 2013.

On 21st August, 2013, the tribunal dealt with the petitioners applications for

interim measures. Mr. Vijay and Piyush Karia were directed to (a) ensure that

the Board of Directors was reconstituted, (b) give effect to the petitioners'

nomination and (c) provide the petitioners with management accounts of the

company. Allegations of breach of confidentiality once again surfaced as a

result of public advertisement issued by one Gilbert Tweed Associates,

suggesting recruitment of personnel which allegedly was indicative of a

favourable award being passed. This publication was attributed to the

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petitioner. The petitioner, however, denied that it had caused such a statement

to be made on its behalf and Gilbert Tweed Associates is said to have apologized

for having made such a statement. The petitioner also undertook to terminate

its arrangement with Gilbert Tweed Associates. While this may have been a

mischievous ploy about needs to be considered is whether the award would be

rendered unenforceable by reason of such unwarranted publication. The

tribunal has dealt with this contention and accepted the petitioners undertaking

to terminate the arrangement of Gilbert Tweed Associates as aforesaid.

9. On 19th December, 2013 the tribunal passed the Second Partial Final

Award (PFA) in relation to the hearings held in May 2013. It held that the

respondents were in material breach and that they were obliged to sell all

shares of Ravin at the discounted price and as valued by KPMG. KPMG had

been appointed in accordance with the JVA by consent of the parties on or

about 28th October, 2012 and had conducted the valuation as provided for in

the JVA. The respondents challenged the Second PFA to the limited extent of

seeking a remand to the tribunal to reconsider the date of valuation. It is the

application to be heard by Commercial Court which passed an order on 14 th

January, 2015. In the meantime, the petitioners had decided that it would not

contest the application filed by the respondents seeking remand as aforesaid.

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10. Vide Procedural Order no.11, further interim measures came to be

passed holding that the respondents had no surviving rights under the JVA and

they were directed to cease interfering with the operations and management of

the company. In an unexpected development, on or about 23 rd June, 2014, the

respondents informed the tribunal that they would not be represented by their

erstwhile Advocates and requested that communications to be made directly to

the respondents at a nominated address and further accused the tribunal of

bias.

11. According to the claimants and as canvassed by Mr. DeVitre, the

allegations of bias were based on findings of the tribunal which they contended

were wrong. On 1st July, 2014 the allegations of bias were rejected by the

tribunal. On 29th July, 2014 Vijay Karia addressed an email agreeing to the

engagement of Deloitte as valuers and for fixing a valuation date, being a date

as close as possible and in any event not later than 30 th September, 2014. Since

the hearings were fixed on 1st and 2nd October, 2014, the tribunal is believed to

have sent email to the respondents enquiring whether the respondents wished

to submit any material in respect of the impending hearing but there was no

response. On 28th September, 2014 the respondents informed the tribunal that

they had applied to the LCIA seeking revocation of the authority of the sole

arbitrator under Article 10.2 of the LCIA rules and that they would not appear

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on the dates fixed for hearing. This challenge was repelled by the LCIA on the

basis that it was beyond time.

12. Procedural Order no.12 came to be passed on 10 th October, 2014

directing the appointment of the valuer, date of the valuation and the

methodology to be adopted. It also provided for the material which the valuer

was to be provided with. It also specified some method and material to be

provided to the valuer. Mr. De Vitre submitted that the tribunal had observed

that even 10 months after the Second PFA no valuer came to be appointed. It

was submitted on behalf of the petitioner that on 14 th October, 2014 the

petitioners called upon the respondents to finalize the appointment of Deloitte

but Karia objected to Deloitte's appointment claiming a conflict of interest since

according to Karia the respondents had earlier approached Deloitte to conduct

an independent valuation which had been declined. Deloitte had undertaken a

forensic exercise on behalf of the respondents regarding certain data

downloaded from Ravin's server and further Deloitte was also acting as auditor

for Power Plus Cable Company LLC in which 49% shares were held by Ravin.

Mr. DeVitre submitted that all the allegations made by the respondents and

their Advocates have been dealt with in a rejoinder dated 18 th October, 2014.

Meanwhile a letter was addressed by Karia to the Institute of Chartered

Accountants of India protesting against the appointment of Deloitte and relying

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upon the correspondence between the parties in that respect. It is behaved that

the said complaint was not sustained and was dismissed.

13. On 14 th January, 2015 the Third PFA was made. It granted final relief

holding that all rights of the respondents under the joint venture agreement

ceased to be effective and that all aspects requiring respondents consent stands

excluded. The respondents were restrained from exercising rights under the

JVA and held that the date of the valuation would be 30 th September, 2014. On

11th May, 2015 the said Karia addressed an email to the tribunal that the

respondents have called upon Deloitte to refrain from proceeding with the

valuation and threatening civil and criminal proceedings if Deloitte failed to

comply. On 23rd November, 2015 Deloitte published its valuation report

determining fair market value of the respondents equity shares at Rs.71/- after

discounting the value by 10%. The Chartered Accountants engaged by the

petitioners, however, also carried out the valuation of the shares after taking

into Foreign Exchange Management Act (FEMA) requirements. That valuation

surprisingly found that the each share was valued at Rs.16.88.

14. On 30th May, 2016 the petitioner called upon the respondents to sell to

them their 49% of the shareholding of the company as per the Third PFA at

Rs.63.90 being higher than the valuation computed by Deloitte. On 6 th June,

2016 said Karia declined to transfer of shares. On 8 th July, 2016 the petitioners

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sought a final award from the tribunal as also termination of proceedings.

Karia objected to the petitioners application while questioning Deloitte's

valuation report. The petitioner refuted the respondents allegations and

contending that this was only an attempt to delay the sale of shares and retain

control of the company.

15. By Procedural Order no.13, the tribunal rejected the request of the

respondents to dismiss the petitioners application and granted time to file a

reply. The respondents sought time of 10-12 weeks. Vide Procedural Order

no.13, time was granted till 17 th October, 2016. Meanwhile on 15 th October,

2016 the respondents filed an report by BDO and sought extension till 2 nd

December, 2016 to provide a separate stand-alone valuation. The respondents

also sought time to file a written response to the petitioners application for

award. The tribunal granted extension of time to file a complete response as

also reply to the valuation report. The respondents thereafter filed the BDO

valuation report and response to the petitioners application. A rejoinder came

to be filed by the petitioners and on 3 rd February, 2017, the tribunal informed

the parties that the tribunal will proceed to issue a final award which came to

be passed on 11th April, 2017. On 21st April, 2017, the petitioners Advocates

called upon the respondents to comply with the order but to no avail and that is

how this petition came to be filed in this Court.

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Submissions of counsel:-

16. On behalf of the petitioners, it is submitted by Mr. De Vitre vide the

First Partial Final Award (PFA) the tribunal considered the arguments on

construction of the JVA and whether certain aspects if proved would

constitute a breach. The tribunal held that the contracts for sale of cables within

the Cable Business which had been concluded directly by the petitioner or its

affiliate otherwise than through Ravin do not constitute investment, acquisition

or participation in the Cable Business in India. It held that the acquisition of

Draka which in turn held the majority stake in ACPL, did not amount to

participation of the Cable Business in India. The tribunal further inter alia held

that clause 23.1 and 23.2 requires issuance of Determination Notice of an

event of default even if the non-defaulting party contends that the material

breach is irremediable and if the breach is not rectified at the expiry of the

rectification period, that could be relied upon by the non-defaulting party

which would result in deprivation and or alteration of rights of the defaulting

party under clause 23.7 and that the definition of "Event of Default" was not

conditional upon giving a Determination Notice. The tribunal also held that it

did not have jurisdiction to decide the questions raised by the respondents as to

who held the rights to register trademarks as also the alleged breaches of the

Trademark Licence Agreement and the Technical Assistance Agreement.

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17. Mr. DeVitre then drew my attention to the Second PFA, the tribunal

held that in order to constitute the material breach the focus must be on the

breach rather than the obligation that had been allegedly breached. Further it

must be serious enough to have an adverse effect on an innocent party's

interest. The tribunal rejected the case that a material breach would necessarily

be a repudiatory breach. It analyzed the various breaches alleged by the

petitioner and held that the respondents have committed material breaches of

several of the JVA terms. It found that the witnesses examined by the petitioners

were honest and that the respondents key witness's evidence as of Vijay Karia

did not commend itself to the tribunal as being truthful. The counter claim

was rejected and on the basis that none of the alleged breaches were material

breaches. Apropos the breach concerning ACPL, the tribunal considered the

fact that Karia had in his first reaction to the news of the acquisition was

positive and his email was congratulatory in nature. Secondly, it found that the

acquisition of ACPL was not a serious actual loss or having an adverse impact

and considered expert evidence as to the potential impact that the acquisition

could have on the business of Ravin. The tribunal also held that the

Determination Notice need not be distinguished from the request for arbitration

and that it was not a condition precedent to a request for arbitration. Further it

was held that the petitioner issued a valid notice for determination under clause

23.2 as also a valid Event of Default notice under clause 23.4 of the agreement

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and thus, the respondents were held liable to sell their shares at a discount of

10% and as determined in accordance with the JVA.

18. In the Third PFA dated 14th January, 2015, the tribunal dealt with the

events after the Second PFA, observing that the respondents had challenged the

Second PFA in the English Courts under Section 68 of the English Arbitration

Act seeking remand which was not contested, alleging bias and seeking recusal

by the arbitrator. This application was rejected . The tribunal observed that

procedural orders were issued for interim measures, viz for appointment of

valuer and for change of date of valuation. The tribunal held that the defaulting

party viz. the respondents had ceased to have any effective right in relation to

JVA including the requirement of consent from the respondents and Mr. Karia.

It restrained the respondents in exercising any rights under the JVA. The date of

assessment for the purpose of valuation of shares was fixed as 30 th September,

2014.

19. By the final award, the tribunal rejected the respondents approach

apropos appointment of Deloitte as valuer and the fixation of date for valuation.

The tribunal accepted the valuation report made by Deloitte fixing the value of

each share at Rs.71/-. At the same time it rejected the opposition to acceptance

of the Deloitte valuation. The respondents were directed to transfer the shares

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held by them to the claimant at the total cost of Rs.65.20 crores computed at

the rate of Rs.63.90 per share and directed Mr. Karia as the constituent attorney

for the existing shareholders to execute the transfer forms on behalf of heirs. It

also directed the Board of Directors of Ravin to register transfer of shares and

required Mr. Vijay Karia and Mr. Piyush Karia to resign as Directors on the

transfers being registered and issued a permanent injunction in terms of the

provisions of the JVA effectively restrained the Karia's from acting contrary to

the JVA. Several other issues have been canvassed by the petitioners including

the fact that on conclusion of the oral hearing on 24 th May, 2013, the counsel

for the respondents had specifically agreed and acknowledged that the

respondents had been given a fair opportunity of a full hearing and it was

impermissible for the respondent to resist the enforcement of the parties on the

ground that non production of documents impaired the respondents ability to

present its case. According to the Mr. De Vitre the award was enforceable and

there was no occasion to question the enforceability of the award on any

legitimate ground.

20. On behalf of respondent nos.1, 5 to 7, 9, 20, 22-23, 25, 27-28, 31 to 34,

36 to 42, 44, 45, 50 to 58, 60, 61, 64 to 66, 73, arguments were led by Mr.

Seervai, and on behalf of respondent nos.3, 4, 10 to 18, 46 to 48 and 77 by Mr.

Chinoy. Mr. Seervai assailed the award, submitting that although the petition

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sought enforcement the opposition would involve review of merits, extensive

re-appreciation of evidence and would result in the Court having to examine

the matter as if in an appellate jurisdiction albeit not being one. Mr. Seervai

submitted that this was an objection that would run through the entire set of

grounds on which the enforcement was being opposed. He first submitted that

acquisition of ACPL was a material breach because clause 21.1 of the

agreement it prohibited the parties from investing, acquiring or participating in

the Cable Business of India directly or indirectly, save and except through

Ravin. He submitted that in the First PFA the tribunal held that the restraint

under clause 21 was not limited to behaviour that would constitute competition

to the company. In the Second PFA, the tribunal rejected the contention that

breach of clause 21 as a result of acquisition of ACPL was material by reason

that Ravin and ACPL operated in different spaces and were not competitors.

The tribunal concluded in the Second PFA that the petitioner was not in

material breach of terms of the JVA and thus was inconsistent with the

tribunal's ruling in the First PFA and that such contradiction should shock the

conscience of the Court. This was indicative of non application of mind and

therefore contrary to the fundamental policy of Indian Law rendering the

awards unenforceable in terms of Section 48(2)(b)(ii) and (iii) of the Arbitration

and Conciliation Act. He highlighted the inconsistency as between the First PFA

and Second PFA as to the scope of clause 21 whether it amount to competition

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with Ravin or not. Mr. Seervai submitted that the inconsistencies between the

First and Second PFA are such that it would shock the conscience of the Court

and expose non application of mind and it was contrary to the fundamental

policy of Indian Law.

21. According to Mr.Seervai the Court must examine whether the tribunal

acted arbitrarily by shifting the goal-post between the First and Second PFA.

This does not amount to a review on merits but on the procedure adopted in

determination. The petitioners failure to produce the relevant documents was

held against the respondents. ACPL's documents not having been produced by

the petitioners, the tribunal observed that the respondents did not adduce

evidence of serious actual loss or harm. Thus, the tribunal failed to secure

relevant evidence to enable respondents to rely on it and enable the party to

rely on it and drew an adverse inference against the party who sought

production of evidence. This objection relates to unequal treatment of parties

but not a review under merits of the ACPL factor. The objections to

enforcement on the ground that critical evidence being entirely overlooked and

not been dealt with at all and non-consideration of material evidence is a

breach of natural justice and thus contrary to the fundamental policy of Indian

law. For the aforesaid reasons, it thus reiterated that the award is not

enforceable.

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22. The tribunal had stressed upon the fact that the acquisition of ACPL was

wholly incidental to and not in material competition with Ravin and therefore,

the First PFA holds that the lack of material competition between ACPL and

Ravin would be a relevant and important factor. He submitted that the record

demonstrates that the respondents had clearly contended that competition with

Ravin was their focal point in support of their allegation with regard to the

ACPL breach, that there was an overlap between the business of ACPL and

Ravin. Both Ravin and ACPL manufacture and sell instrumentation cables and

both are competing the market of control cables segment and medium voltage

segment and both Ravin and ACPL have common customers in India. He

further submitted that it is not possible for the respondents to contend that the

competition between the Ravin and ACPL was not relevant and could not form

the basis of the tribunal's ruling.

23. Apropos the petitioners' failure to produce relevant documents, Mr.

Seervai submitted that tribunal's ruling is in violation of principles of natural

justice and the arbitral proceedings were conducted in a manner that rendered

the respondents unable to present their case. Mr. Seervai submitted that the

petitioners had been directed on 14 th November, 2012 to produce evidence in

respect of the value of ACPL's business with customers of Ravin and the value of

the top 10 contracts in the relevant years. However, the petitioners had

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contended that ACPL had declined to furnish the information on grounds of

confidentiality. It was further contended that the respondents claim as to

material breach, resulting from the ACPL acquisition was rejected on the basis

that the respondents had failed to adduce "credible evidence of serious actual

loss or harm". This evidence he submitted was in the possession of the

petitioners and was not brought on record. Thus, on account of failure to

produce the ACPL documents, Mr. Seervai contended that the respondents were

unable to present their case despite which the tribunal had rendered a finding

in favour of the petitioners and without drawing any adverse inference as to

the petitioners failure to produce documents. On this basis, Mr. Seervai

submitted that the impugned award is unenforceable in terms of Section 48(2)

(b) of the Act.

24. Mr. Seervai invited my attention to the disclosure sought and submitted

that the respondents had produced before the tribunal the entire list of

customers of ACPL and other documents as obtained from the ACPL's website

and the tribunal had considered the evidence and had concluded that material

on record did not establish material breach.

25. The petitioners had failed to produce relevant documents being value of

the top 10 contracts on the ground of confidentiality. Not having done so the

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respondents were unable to present their case. This entails that the respondents

were seeking to collect evidence in support of their case from the petitioners

and not having been successful expected the tribunal to draw an adverse

inference. This is being urged as a ground in support of the contention that the

award is unenforceable. That evidence in the form of invoices, customer lists

shows that ACPL was indeed under the control of the Petitioner but this was

ignored and the tribunal failed to consider the submission of the respondents

that key management personnel of the petitioners had been appointed in senior

positions at ACPL. He invited my attention to the fact that ACPL vide letter of

16th November, 2012 declined to provide copies of documents. Procedural

Order no.5 had specifically recorded that if the respondents wished to pursue

their request for disclosure they must do so at the hearing on merits and the

tribunal had limited power over third party's as against the power of the Court.

26. Mr. Seervai submitted that the tribunal's decision was perverse since

critical evidence was ignored and being contrary to the evidence of expert

witnesses who opined that Ravin and ACPL were competing in the market. He

submitted that the petitioners expert witness had admitted that ACPL

manufactures and sells low voltage power cables, the same product is that of

Ravin's. That evidence in the form of invoices, tenders, purchase orders and

customer lists that shows ACPL was in competition. He assailed the conclusion

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of the tribunal that ACPL was not a competitor and that acquisition of ACPL

would not adversely affect Ravin.

27. The next objection canvassed by Mr. Seervai is the allegation of the

petitioner that the engagement of back office staff member Ms. Mathure at a

salary of Rs.20,000/- per month was a material breach of the JVA but the

tribunal found in favour of the petitioner holding inter alia, that the

engagement of Ms. Mathure had led to considerable strife and that it would go

to the root of the matter as to whether the respondents will allow the

petitioners' nominee to run Ravin. Mr. Seervai submitted that the tribunal's

award is rendered perverse and contrary to principles of natural justice.

28. The next ground canvassed by Mr. Seervai is that the tribunal's analysis

of contemporaneous conduct was selective and perverse. He submitted that the

respondents had given up their interest in competing business Vijay Industrial

Electricals in order to comply with clause 21.1. However, when it came to

considering the petitioners acquisition of ACPL, the tribunal failed to consider

the respondents submissions. It also failed to consider email of July 2009 from

respondent no.1's advisors to the petitioners representative which sets out that

ACPL should be merged with Ravin cables post acquisition of Draka by the

petitioners, yet the tribunal placed reliance on Mr. Karia's response to the

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acquisition of ACPL as being highly instructive in determining whether

acquisition of ACPL is to be analyzed as in the material breach or whether it

had been the breaches or an excuse. He submitted that the tribunal had taken

into consideration evidence which was irrelevant e.g. the congratulatory email

sent by Mr. Karia upon acquisition of Draka but ignored the conduct of parties

such as divestment in other competing concerns to ensure compliance with

clause 21.1. He contended that parties were not treated equally and that the

tribunal had rendered an award contrary to the basic notions of justice since it

had adopted the different approach to the respondents.

29. The respondents also resist enforcement on the basis of incorporation of

Jaguar Communication Consultancy Services Pvt. Ltd. (Jaguar) which had one

of its main objects as manufacture, sale, distribution of telecom cables and

which is said to be material breach of clauses 21.1, 8.2.1 and 20.1.2 of the JVA.

The tribunal, according to Mr.Seervai, failed to consider the merits of the

counter claim in respect of Jaguar. Although the petitioner contended that the

respondents counter claims were not pleaded since it did not form part of the

determination notice of March 2012 and were only raised to respondents

closing submissions of August 2013, Mr.Seervai submitted that the tribunal's

observation in the Second PFA that the respondents should be restricted to the

four corners of the determination notice and the pleaded case and further that

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the determination notice is clearly limited to a case of ACPL and on direct sales

into India, was perverse. Mr. Seervai submitted that incorporation of Jaguar

was a concealed breach and critical evidence in respect of the breach came to

light only during cross examination of the petitioners witnesses which is why

the submissions in respect of the counter claim were only made in the

respondents closing submissions. He submitted that failure to consider

respondents counter claims relating to Jaguar indicated the tribunal's arbitrary

approach and is inconsistent with the First PFA where it rules that the non-

defaulting party may rely on a concealed breach and treat the same as an un-

rectified event of the default. Therefore, the tribunal's findings are violation of

principles of natural justice since the proceedings were conducted in a manner

so as to render the respondents unable to present its case.

30. The next ground urged by Mr. Seervai was pertaining to the petitioners'

attempt to oust the respondents from Ravin. In this respect, Mr. Seervai

submitted that the tribunal had clearly failed to consider the evidence of the

counter claim and in particular the admissions in evidence and cross

examination of petitioners witnesses, with the result that the tribunal failed to

determine the effect of the petitioners taking away power from the first

respondent during the integration period itself which is stated to be in violation

of the JVA. That the JVA that required that the company should be jointly run

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by petitioners CEO and the respondent no.1 during that period. This he

submitted was unacceptable and therefore was a good ground of challenge

since the tribunal had failed to rule on the respondents counter claim and

therefore it would constitute a failure on the part of the tribunal resulting in a

finding contrary to the fundamental policy of Indian Law. He therefore

submitted that the award was violative being against the basic notions of

justice.

31. The next ground for objection was as to direct sales of cables in India by

the petitioner through distributors, sales agents, agency and distribution

agreements allegedly in contravention of clauses 8, 20 and 21.1 of the JVA. It

was contended that the tribunal adopted a perverse interpretation contrary to

the plain language of the JVA. He submitted that the respondents claims

arising from direct sales of cables in India was rejected on the ground that the

impugned agreements and arrangements were permissible. The tribunal held

that under clause 21.1 only long term arrangements involving injection of

capital or exchange of capital know-how would be covered. Although clause

21.1 prohibits participation in the cable business which included

manufacturing, sale, distribution, import, export, research, development of

energy cables and /or telecom cables. The tribunal's decision he submitted was

unsupported by evidence and the award was unenforceable being contrary to

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the fundamental policy of Indian Law and basic notions of justice.

32. Mr. Seervai submitted that the tribunal also failed to consider the

respondents allegation of breach of clause 8 and 20 of the JVA contemplated in

the First PFA. The tribunal held that the direct sales could potentially amount to

a breach of clauses 8 and 20 but the Second PFA failed to deal with these

submissions. Mr. Seervai submitted that the tribunal's decision is perverse since

it ignored particular evidence and arrived at a conclusion that there was no

material breach of the JVA because the maximum loss through direct sales was

Euro 1,30,000 which did not get near to satisfying the threshold to establish a

material breach. The tribunal however did not record or deal with the evidence

in respect of the subsidiaries and that sales through petitioners subsidiaries

amounted to Euro 44 million.

33. The next point urged by Mr. Seervai was that all direct sales of cables in

India by the petitioner were in contravention of clause 8, 20 and 21.1 of the

JVA. Accordingly to Mr. Seervai the tribunal adopted a perverse interpretation

and ruled that clause 21.1 of the JVA prohibited only long term engagements

that involved injection or exchange of capital and know-how. The sales of

cables through impugned arrangements were said to be permissible. This he

submitted was contrary to the meaning and intent of clause 21.1. The reference

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to cable business in clause 21.1 would entail "...participation in the Cable

Business in India.." which expression was inclusive of "...manufacturing, sale,

distribution, import, export, research, development of energy cables and/or

telecom cables..." The tribunals decision was unsupported by evidence and

contrary to the purpose and object of the JVA.

34. Mr. Seervai then submitted that failure to consider and rule on breach of

clause 8 and 20, was in breach of the principles of natural justice and the

fundamental policy in law and the basic notions of justice. As far as the aspect

of valuation is concerned Mr. Seervai submitted that the tribunal disregarded

the factual submissions in arriving at a valuation date. According to him both

the petitioner and the respondents were ad idem on the issue of the valuation

date being the date closest to the date of the actual sale of shares and it was on

this basis that the respondents agreed to 30 th September, 2014 being adopted

as valuation date subject to sale of shares being concluded by 31 st December,

2014. The tribunal proceeds on an incorrect basis that respondents agreement

of 30th September, 2014 being valuation date was unconditional. According to

him sale of shares was to be concluded by 31 st December, 2014 and the

tribunal while passing the final award on 11 th April, 2017 adopted the

valuation in the report made by Deloitte on 25 th November, 2015. It ignored

the fact that the respondents had agreed to valuation date as 30 th September,

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2014 only on the basis that transaction would be complete by 31 st December,

2014 of the same year and the Tribunals approach in attributing delay to the

respondents were canvassed by Mr.Seervai as evidence of bias and

arbitrariness.

35. According to Mr.Seervai the respondents actions did not delay the

submission of the valuation report since the respondents had even earlier

objected to and complained against Deloitte being appointed as valuer and

thus had not participated in the valuation process. Mr. Seervai further

submitted that the complaint against Deloitte carrying out the valuation

exercise could not prevent them from undertaking the valuation and the

tribunal was wrong in accepting the petitioners contention that Deloitte took

10 months to produce the report on account of filing of the complaint and

consequent delay. It is submitted that the petitioner on the other hand had

contributed to the delay in culminating of the sale since it received the

Deloitte Report in November, 2015 yet did not apply for a final award till July,

2016. The valuation by Deloitte allegedly resulted in a severe under

valuation of the respondents shares by applying valuation as of 30 th September,

2014. The tribunal conducted the valuation contrary to one proposed by both

parties. The date should have been closest to the date of sale and the tribunal

acted in contravention to the principles of natural justice. Therefore according

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to Mr. Seervai the award was bad.

36. Mr. Seervai then submitted that the tribunal had adopted an approach

that was different from the stand of both parties. It failed to consider the fact

that respondents had challenged the Deloitte Report for not considering the

value of the Ravin's 49% shareholding in Power Plus Company LLC.

Furthermore, it was the petitioners case that share holding in Power Plus did

not significantly affect the valuation of the company and Ravin had no details

of Power Plus which would enable it to assess the value. Incidentally Power

Plus had not distributed dividends to Ravin. However the tribunal calculated

the fair value of Power Plus separately and in its assessment of Fair Market

Value of the Company the method used was inconsistent with what was

provided in clause 17 of the JVA. The tribunal had adopted a different

procedure thereby displaying a non judicious and arbitrary approach.

According to Mr. Seervai not having been provided any opportunity to make

submissions on the tribunal's approach while taking a view not covered by

either party, the award was unenforceable being contrary to the principles of

natural justice and in contravention to the fundamental policy of Indian Law

in terms of section 48(2)(b)(ii).

37. Mr. Seervai's next ground of opposition pertains to the trade mark and

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license agreement. According to Mr. Seervai the petitioner surreptitiously

attempted to register the Ravin trade mark in breach of clause 20.1.2 of the JVA

that required parties to co-operate and act in good faith. The tribunal

according to Mr. Seervai had incorrectly concluded that registration of the

Ravin trade mark fell outside the scope of the arbitration clause. That the

respondents were in breach of good faith obligation under clause 20.1.2 and it

was not a dispute concerning the right to register the trade mark. The

awards were thus unenforceable.

38. The last ground of challenge was based on allegation of bias. It is

submitted that the outcome of the Second PFA was announced prior to the

award being communicated. Reference was made to the communication put out

by Gilbert Tweed in relation to the likelihood of personnel being recruited. The

petitioners had also thought it fit to terminate the arrangements with Gilbert

Tweed. This conduct it is submitted was clearly indicative of the fact that the

petitioners had caused Gilbert Tweed to publish the report. It was contended

that the tribunal surprisingly did not seek any further investigation but only

accepted an apology from the petitioners counsel. Mr. Seervai submitted that

the petitioner clearly had prior knowledge of the outcome of the proceeding

and therefore it reflected on the sanctity of the proceeding and clearly

demonstrated lack of impartiality. On this basis Mr. Seervai submitted that the

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petitioner had not provided any explanation as to how one party had come to

know of the outcome of the proceeding and the arbitrators rejection of the issue

without considering the petitioners case was clearly unwarranted inasmuch as

Gilbert Tweed would not have in the normal course come to know of the same

unless they were informed of the likely outcome. There was no inquiry made

into how the information pertaining to the Second PFA was made available to

Gilbert Tweed and merely accepting the apology was not sufficient and it

pointed out to the tribunals complicity in the matter. It was then submitted that

the consequences of this episode strikes at the very root of the independence

of the tribunal which was doubtful.

39. Continuing to support of the allegation of bias Mr. Seervai submitted that

the respondents had made an application for recusal which application was

not accepted. On 23 rd June, 2014 the respondents alleged bias and unfairness

in the conduct of proceedings which request was rejected. A further

application was filed under the rules of the London Exchange in their LCIA

Rules for the revocation of the appointment of the arbitrator on the ground of

lack of impartiality and alleged justifiable doubts of its independence. That the

LCIA Court summarily dismissed the application without addressing the merits

and since impartiality and independence of the tribunal was fundamental the

existence of bias renders the proceedings bad and rendered the award

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unenforceable.

40. Mr. Seervai concluded by submitting that the tribunal was biased and

had conducted proceeding in violation of principles of natural justice, rendered

perverse finding on the aspects of non production of relevant documents by the

petitioner ignoring all critical evidence and concluded that ACPL is not a

competing entity. Perversity was more evident from the fact that the

respondents had given up their interest in Vijay Industrial Electricals in order to

comply with clause 21.1 yet the acquisition of ACPL was ignored. Mr. Seervai

laid much stress on the interpretation of clause 21.1. For ease of reference

clause 21.1 as contained in the JVA is reproduced below

"The Parties agree that neither Prysmian nor Mr. Karia, whether directly

or through their Affiliates, shall invest, acquire or participate in the Cables

Business in India, save and except through the Company in accordance with

this agreement"

Mr.Seervai relied upon the effect of the definition cable business as provided in

schedule XXVI of the JVA and submitted that the tribunal had omitted the

words "or participate", "sale", "distribution" and "import" while considering the

definition of cable business. At the same time it read into clause 21.1 the words

"or enter into such other long term engagement, arrangement or commitment

involving either an injection or exchange of capital or know how on the part of

the investor" even when these words were not part of clause 21.1 but were

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used in order to reach the conclusion that the tribunal did in the First partial

award. By deleting the word "Participate", "Sale", "import" and "distribution"

from the definition of cable business, the scope of the expression cable business

was altered favourably to the petitioners and by doing so the intention behind

clause 21.1 was misinterpreted. He submitted that the tribunal could not have

done so.

Mr. Seervai relied upon the following judgements

1. PT First Media TBK vs. Astro Nausantara International B V. 1

2. Dallah Real Estate and Tourism Holding Company vs. The Ministry of Religious Affairs, Govt. of Pakistan.2.

3. Westlaw India Gbangbola vs. Smit and Sherrif 3

4. Malicorp Ltd. vs. Government of Arab Republic of Egypt. 4

5. Annie Fox and Ors. & Philip Fisher and Anr. vs. Wellfair Limited. 5

6. Front Row Investment Holdings (Singapore) vs. Daimler South East Asia Pre.6

7. Vikram Greentech India Limited vs. New India Assurance Company Ltd. 7

8. National Highways Authority of India vs. Som Datt Builders 8NCC-NEC (JV)

9. Oil and Natural Gas Corporation Ltd. vs. Western Geco International Limited.9

10. Associate Builders vs. Delhi Development Authority 10

1 (2014) 1 SLR 372 2 (2010) 2 WLR 805 3 (1999) 1 T.C.L.R. 136 4 [2015]EWHC 361 (Comm) 5 1981 WL 186914 6 [2010] SGHC 80 7 (2009) 5 SCC 599 8 FAO(OS) no.427 of 2007 Del HC 9 (2014) 9 SCC 263 10 (2015) 3 SCC 49

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MR. CHINOY's SUBMISSIONS

41. On behalf of the respondent nos.3, 4, 10 to 18, 46 to 48 and 77, Mr.

Chinoy submitted that award in so far as it grants to the petitioners specific

performance under the JVA and directs the respondents to sell and transfer

shares in violation of basic fundamental principles of Indian Law governing

specific performance of contracts. It is ex-facie arbitrary, perverse and

discloses a non-judicious approach. The claimants had at no time averred that

they were and at all times they were ready and willing to perform their

obligation under the Contract, an express requirement of section 16(c) of the

Specific Relief Act which was applicable. Such an averment was a mandatory

condition for seeking specific performance. It is thus submitted that claimants

could not claim specific performance since the tribunal found that they had

committed breach of clause 21 of the JVA by acquiring a majority stake in

ACPL through their holding company acquiring DRAKA which held a majority

stake in ACPL. This rendered the award contrary to the fundamental policy of

Indian Law. Accordingly a party which committed breach of the contract

could not claim a decree or award for specific performance. This aspect of

Indian Law was raised by the parties. The Second PFA however fails to

consider these submissions and directs specific performance.

42. According to Mr. Chinoy the award was contrary to the fundamental

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policy of Indian law as dealt with in ONGC Ltd. vs. Saw Pipes Ltd [(2003) 5

SCC 705.] He submitted that the award is ex-facie arbitrary and perverse. It

was then submitted that the claimants had sought an order pursuant to clause

23 of the JVA requiring the respondents to sell their shares and the petitioners

had specifically stated that a remedy will be in the nature of an order of specific

performance. However in actual terms the respondents in their closing

submissions dated 19th July, 2013 pointed out that the claimants were not

entitled to get specific performance inasmuch as they failed to aver that they

were ready and willing to perform their obligation an express requirement

under section 16(c). In view there of claimants were debarred and dis-entitled

in getting award in terms of clause 23 of the JVA having committed breach of

material provision contained in clause 21 having acquired majority stake in

ASCPL through DRAKA.

43. Mr. Chinoy made further reference to the fact that the arbitrator had

held that the claimants had committed a breach of the JVA by having acquired

a majority stake in ACPL but found that breach was not a material breach

sufficient to constitute to event of default. That under the First PFA the

arbitrator had held that on proper construction of clause 21 the acquisition by

the petitioners principals of DRAKA which in turn held 60% of ACPL indicated

that it was "capable of amounting to an acquisition of cable business in India".

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In the Second PFA dated 19 th December, 2013 the arbitrator held that the

breach of clause 21 is not material breach. Although respondents had urged

that the breach of clause 21 would go to the root of the JVA and was also in

breach of clause 8.2.2(i) of the JVA and Article 318 of the Articles of

Association, the tribunal held that it would focus on the materiality of the

breach rather than materiality of the obligation, although there might be some

overlap. Tribunal held that although in the First PFA it had held in favour of

the respondents that acquisition of majority interest in ACPL was contemplated

under clause 23, the question whether breach was material one was left open

and thereafter the tribunal found that the respondents had fallen short in

establishing material breach sufficient to amount to an event of default.

44. Mr. Chinoy submitted that the petitioner's contention that the tribunal

had not come to a finding that the petitioner was in breach of clause 21 and

that the respondents were relying in loose language in the PFA is incorrect was

not a valid argument because if there was no finding of breach arrived at,

there would have been no reason for the arbitrator to decide whether or not

there was a material breach and proceed to a detailed consideration of facts. In

the Second PFA Mr. Chinoy submitted, without adverting to issues of non

compliance of the requirement of section 16(c) of the Specific Relief Act, the

award grants specific performance requiring the respondents to sell their

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shares at a discount.

45. Mr. Chinoy submitted that the contract was subject to Indian law and

the petitioner had obviously claimed specific performance of clause 23. The

respondents relied upon non compliance under section 16(c) resulting in

petitioners being dis-entitled to claim specific performance. This submission

was not dealt with. Not having dealt with this aspect the award is perverse.

The arbitrators failure to deal with these issues are contrary to the fundamental

policy of Indian law as contemplated in ONGC vs. Western Geco [(2014) 9

SCC 263] . It was submitted that the award is invalid since it directs

respondents to transfer their shares @ 10% discount of fair market value. Fair

Market Value was to be determined by one of 4 firms. The determination of the

fair market value was jointly referred to Deloitte to issue their valuation report

but directed respondents to sell at discounted price at 10% discount of the Fair

Market Value. That under the Foreign Exchange Management Act and Foreign

Exchange Management (Transfer of Securities) regulation and pricing

guidelines issued there under share can be transferred to non residents at price

not less than Fair Market Value determined by internationally accepted pricing

methodology for valuation of shares. That the provision in the JVA for

discounted price would be unenforceable as matter of Indian law and this

was highlighted by the petitioners before the tribunal. Mr. Chinoy submitted

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that is the fundamental policy of law that the shares may not be transferred to

a non resident at less than Fair Market Value but tribunal did not consider the

issue by contending that the respondents had not raised it at the stage of First

and Second PFAs. He submitted that the tribunal could not justify transfer of

shares contrary to FEMA regulations.

46. In conclusion Mr. Chinoy submitted that the scope of review of grounds

of public policy under Section 48 of the Arbitration Act has been dealt with in

ONGC (supra) and Associate Builders [(2015) 3 SCC 49]. The term

fundamental policy of Indian law has been interpreted as "(1) one requiring a

judicial approach (2) compliance with principles of natural justice and (3)

application of mind to the facts and wednesbury principles of reasonableness.

By virtue of the Amendment Act of 3 of 2016 the expression public policy in

section 34 of section 48 was statutorily defined to include fundamental policy

of Indian law. He submitted that this Court in Integrated Sales Service vs.

Arun Dev [(2017) 1 Mh LJ 681] has held that interpretation of the

expression "Fundamental policy of Indian Law" is part of the statutory

provisions itself and the tests laid down in Western Geco and Associate

Builders is applied to foreign Awards as well.

47. Mr. Chinoy further canvassed the point that the observations in the

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ruling in HRD Corporation v/s. GAIL (2018) 12 SCC 471 relied upon by Mr. De

Vitre were casual observations and does not result in any overruling. In the

HRD Corporation case the scope of section 34 and 48 were not considered. The

judgment dealt only with section 12. Counsel for the petitioner in that case

contended that section 12(1) and (5) have to be read in context of the grounds

for challenge to awards being narrower that they were under section 34 of the

Act. The Supreme Court rejected this contention. It is further submitted that no

arguments were advanced or considered by the Supreme Court under section

34 and 48 after 2016 amendment and the observation do not constitute ratio

decidendi or obiter dicta. They are casual observations and do not overrule the

judgment in Western Geco (supra) of this Court or Supreme Court in Western

Geco. Thus according to Mr. Chinoy the expression fundamental policy of

Indian Law in section 34 and 48 will have to be given a meaning to it by

referring to judgment in ONGC (supra) and Associate Builders(supra). He

therefore submitted that the award does not justify the order of enforcement.

Judgments referred by Mr. Chinoy

1. Balraj Taneja & Anr. vs. Sunil Madan & Anr.11

2. Integrated Sales Services Ltd., Hong Kong vs. Arun Dev s/o.

Govindvishnu Uppadhyaya.12

3. B. Vijaya Bharathi vs. P. Savitri & Ors.13

4. Man Kaur (Dead) by Lrs. vs. Hartar Singh Sangha 14

11 (1999) 8 SCC 396 12 2016(6) Mh.L.J. 195 13 (2018) 11 SCC 761 14 (2010) 10 SCC 512

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5. H. P. Pyarejan vs. Dasappa through his heirs.15

6. Raj Kishore vs. Prem Singh & Ors.16

7. National Highways Authority of India vs. Gwalior Jhansi Expressway Ltd.17

8. Durga Prasad Pradhan vs. Palden Lama & Anr.18

9. R. N. Philips vs. A. N. Sattnathan.19

10. Kaikhosroo Phirozshaw Doctor vs. State 20

Mr. De Vitre's submissions in rejoinder

48. In rejoinder Mr. Devitre submitted that by the second PFA the

respondents were directed to sell their share holding in Ravin at a discount of

10% of the Fair Market Value to be determined by one of the valuers named in

clause 17 of the JVA. That the respondents agreed that either of KPMG or

Deloitte be selected by drawing of lots. KPMG was selected on 8 th May, 2013

and the terms of engagement of the KPMG was also agreed between the

parties but the respondents delayed agreeing to KPMG terms and in January

2014 respondents informed the petitioner that they had challenged the

tribunal's finding as to valuation date in the second PFA under section 68 of

15 (2006) 2 SCC 496 16 (2011) 1 SCC 657 17 2018 SCC Online SC 688 18 AIR 1981 Sikk 41 19 1955 ILR 318 20 1955 ILR 69

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the English Arbitration Act. The challenge was not opposed by the petitioner as

a result of which it was remanded to the tribunal.

49. Mr. De Vitre submitted the fact that Deloitte had been engaged by

Prysmian was in the public domain since 2013 and as admitted by the

respondents in their email of 25 th July, 2016 which forms part of the rejoinder

to the reply filed by Vijay Karia. The respondents even threatened to take action

against KPMG if they .corresponded with the petitioner without the respondents

participation. It is in these circumstances that the petitioner had requested the

tribunal to appoint Deloitte as the valuers. The petitioner also specifically

highlighted to the tribunal that valuation date cannot be an unascertained

future date and must be a known date prior to valuation exercise. The

respondents therefore did not seriously object to the appointment of Deliotte

nor did they make any submissions in relation to the valuation date. Deloitte

was appointed by Procedural Order no. 12 dated 10 th October, 2014 and the

respondents had opportunity to participate in the preceding hearing. It is on

14th October, 2014 that the respondents informed the petitioner for the First

time claiming that Deloitte was conflicted. This communication was not

marked to the tribunal. Vide another email of 17 th October, 2014 the objection

was reiterated, but yet again, it was not marked to the tribunal. The petitioner's

Advocate vide email dated 18 th October, 2014 pointed out that respondents

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had omitted to mention that it was First respondent who proposed Deloitte after

they knew that the allegation of conflict was made. Despite all this the

respondents ensured that Ravin executed the engagement letter with Deloitte.

The respondents repeated the allegation of conflict and filed a complaint

against Deloitte. Deloitte sought information to carry out valuation exercise,

but the respondents did not provide such information. On 11 th May, 2015 the

respondents informed the tribunal that they had complained to the Institute of

Chartered Accountants of India against Deloitte. On 23 rd November, 2015

Deloitte made its valuation report and provided a copy in which it made a

reference to the fact that respondents did not provide information.

50. In the meantime the petitioner asked M/s. Kalyaniwalla & Mistry,

Chartered Accountants ( "K & M") to carry out a valuation. The said firm issued

a report dated 4th March, 2016. The K & M Report was attached to the

petitioner's application for final award and by email dated 25 th July, 2016

respondents accepted the fact that Deloitte's engagement with Prysmian was a

matter of public knowledge as far back as 2013 and that the respondents were

therefore well aware of this fact.

51. According to Mr. De Vitre, Mr. Karia was not ousted since he continued

in management and he relied on submissions on behalf of the respondents

counsel that Mr. Karia was a person who wanted to take life a little easier.

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According to the petitioners the allegation of attempts to oust the respondents

was the result of analysing an inter action between Mr. Sarogni and one Mr.

Simms about the possibility of realigning of personnel in the management

especially considering the fact that Mr. Karia could no longer be involved in

day-to-day management.

52. In relation to the respondents case on specific performance he submitted

that the respondents had contended that both parties could have been in

material breach of the JVA. In the closing submissions the respondents had

contested the claimants argument that the party which served a Determination

Notice First should be treated as the non defaulting party and that the date of

the first breach should be the relevant consideration. The respondents

contended that the party who committed the breach first should be considered

the defaulting party. The tribunal found that the respondents were in breach

and that the claimants were not. As a result it was not necessary to consider the

position resulting from both parties being in material breach. The contention

that the petitioner cannot be granted specific performance under section 16(c)

of the Specific Relief Act since in the absence of a pleading that they were ready

and willing to perform was not argued before tribunal. This Mr. DeVitre

submitted was evident from the closing submissions exchanged . The

Respondents had in fact contended that if the tribunal concludes that both

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parties had committed breach, specific performance should be granted to the

party which committed the later breach.

53. In the circumstances the grant of relief on transfer of shares does not

result in breach of section 16(c). Moreover clause 23.4 of the JVA provided for

consequences if the material breach as specified in the Determination Notice if

it is not cured within the specified period and the tribunal had only enforced

the term of the JVA. Mr. De Vitre further submitted that there was no specific

form in which such averment as to readiness and willingness had to be made

and in the present case the test was satisfied considering the Determination

Notice and the findings in the Award. It is further contended that the

petitioner's Determination Notice and Statement of Claims sets out its right to

take over management of the affairs of the company under the JVA. The

petitioner had denied the respondents allegations of breaches and all the

averments and materials on record established the petitioners performance and

its readiness and willingness to perform the JVA. In any event he submitted that

there is no breach of any policy of law and that the allegation that a foreign

award is in breach of statutory provision may be based on equitable principles

and not good ground to oppose enforcement.

54. In view of Mr. Chinoy's submission on violation of FEMA and the RBI

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pricing guidelines, it was pointed out that the respondents had raised the issue

in their reply dated 30th December, 2016. By contending that in RBI

guidelines sale of shares can only be at fair market value and cannot be

discounted as otherwise it would be in contravention of Indian law but they did

not produce either FEMA regulations or personal guidelines or any other

circular and accordingly the contention was rejected. He submitted that under

pricing guidelines the price of transfer of shares from resident to non resident

was to be not less than fair market value. There is no bar against the price

being higher than valuation as determined under FEMA. That the Deloitte

valuation was Rs. 71 per share and applying 10% discount Rs. 61.93 ps. per

share and the valuation is contractually binding. Valuation by Deloitte is not

certified for the purposes of FEMA and that the petitioner had produced a

valuation from M/s. Kalyaniwalla & Mistry which certified the fair market

value for the purposes of FEMA that valuation was 16.38. The K & M report was

part of the petitioner applications for final award and respondents did not deal

with it at all. They ignored the K & M report of the petitioners and highlighted

the fact that respondents had not dealt with K & M report. They ignored the

fact that although the FEMA valuation is much lower then the Deloitte

valuation the claimant is committed to purchase shares as contractually

agreed. The discounted price of 63.93 was worked out in accordance with the

contract and is not less than FEMA fair valuation of 16.38. The objections on

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this ground are therefore misconceived.

55. Mr. De Vitre further submitted that the FEMA presents a shift from the

provision of earlier FERA and established a more lenient environment and does

not render transactions void for violation. In the light of the respondents

contention that the tribunal took into consideration the K & M Report which

was not contractually provided for. Mr. Devitre submitted that no such case

was urged before the tribunal and the final award mentioned that the K & M

Report was not dealt with by the respondents in their submissions. He

submitted that Shri Lal Mahal (supra) has laid down the principles underlying

section 48 which entail that an inquiry under section 48 does not permit

review of the foreign award on merits.

56. Although the defendants contend that tribunal ought not to have relied

upon K & M Report there is no substance in this contention as the K & M

Report and the BDO Report stand on a different footing. The K & M Report was

for the purpose of establishing regulatory compliance and not to impugn the

Deloitte valuation. The K & M Report was based on the very information

forming the basis of the Deloitte report, whereas the BDO Report considers a

different date of valuation and different methodology of valuation and not in

compliance with Procedural Order No. 12. The tribunal however dealt with

the BDO report and in any event Shri Lal Mahal (supra) holds that award

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would not be rendered unenforceable if the tribunal considered a non-

contractual report while rejecting a contractual one. Apropos the various legal

pronouncements it was submitted that the 2015 amendment to the Arbitration

and Conciliation Act grants for opposing enforcement of foreign award only

include public policy restricted to fundamental policy of Indian Law is

contemplated in Renusagar (supra) and Shri Lal Mahal (supra). Justice and

morality as contemplated in Associate Builders (supra) and if the award is

affected by fraud or corruption or violation of section 75 and 85 of the law as

laid down in Renusagar and Shri Lal Mahal apply and the scope for resisting

enforcement is extremely limited. It was further submitted that the wider

grounds of challenge in ONGC (supra) and Associate Builders save and except

paragraph 36 thereof have been done away with and are not applicable to

enforcement proceedings contemplated under section 48. That the 2015

amendment act has brought section 48 in line with Shri Lal Mahal and this was

as a result of the 246th Law Commission Report.

57. Mr. De Vitre submitted that reference to these judgments were felt

necessary since section 12 and the schedule ought not to be construed widely

using a more narrow approach in respect of grounds under section 34 and 48.

Specific reference was made by Mr. Devitre to the observation of the Supreme

Court in Kaikhosroo Phirozshaw Doctor vs. State [(1955) ILR Bom 69] to

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state that the opinion of the Supreme Court even on a point which does not

strictly arise must be accepted by the High Court as laying down a statement of

law. More recently Supreme Court reaffirmed in HRD Corporation in the

matter of Board of Control for Cricket in India vs. Kochi Cricket Pvt. Ltd

[AIR 2018 SC 1549] observing that it was in consonance with the objects of

the Act to avoid increased interference by Courts. A contrary view would mean

that 2015 amendment is not to be given effect to. Integrated Sales Services

(supra) also follows Shri Lal Mahal (supra). Moreover it notes that the 2015

amendment Explanation 2 prohibits the review on merits of the dispute while

considering a challenge to the enforcement on the ground that it is in

contravention with the fundamental policy of Indian law. Renusagar (supra)

lays down the following tests; (a) A Foreign award cannot be resisted on the

basis of a challenge on merit. New York Convention tilts towards pre

enforcement grounds. (b) Article V of the New York Convention does not

include mistake of fact or law by the arbitrator is ground for refusing

enforcement. (c) The New York Convention does not permit a review on merits.

The award cannot be impeached on merits. (d) Objections to enforcement are

limited in its scope and lastly (e) Contravention to some local law will not

attract the public policy concept. In other words something more than

violation of the Indian law is required.

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58. Mr. De Vitre submitted that the principles in Renusagar (supra) have

been followed in Shri Lal Mahal (supra) and applied to enforcement of foreign

Awards. There is a very limited scope to resist enforcement. He then submitted

that Shri Lal Mahal (supra) examined the effect of the meaning of the

expression "merits of the award" to hold that section 48 does not facilitate a

Second look at the foreign award at the stage on enforcement or its review on

merits. Nor does it permit considering of acceptance or rejection of evidence by

the tribunal. In view thereof he submitted that reliance on a report which was

not provided for in contract or rejection of a report of a contractual agency

cannot come in the way of enforcement of an award and the Court in any event

does not exercise Appellate jurisdiction over foreign award nor it will enquire

whether an error has been committed in rendering the award.

59. In M/s. Louis Dreyfus Commodities Suisse S. A. vs. Sakuma Exports

Ltd [(2015) SCC Online Bom 5006] the Court held that even in case where

the tribunal considered the documents along with written arguments without

giving an opportunity to the respondents to deal with it could not be a ground

to refuse enforcement. . A submission that the tribunal did not consider an

Expert's report was one that touched the merits of the claim and could not be

used for resisting a foreign award. The Court enforcing an award cannot

review the award on merits even for considering an objection on the ground of

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violation of fundamental policy and conflict with basic notions of justice. Challenge to awards under section 34 on the ground of 'patent illegality' as

contemplated in Saw Pipes, Western Geco and Associated Builders(supra) now

stand negated and can only be a ground of challenge under section 34 for

domestic awards and not while considering section 48 for enforcement. The

ground of patent illegality contemplated a domestic award and cannot apply to

foreign awards. That the observation of the Delhi High Court in NHAI (supra)

relied upon by respondents was based on Saw Pipes (supra) and dealt with

domestic awards. In conclusion it is submitted that the reading of the 2015

amendment as clarified by the 246 th Law Commission Report and the

Supplementary Law Commission Report there can be no review on the merits of

public policy and also on the ground of justice or morality since otherwise it

would result in avoiding the effect of 2015 amendment. No finding of fact can

be reversed on the basis that an arbitral tribunal did not consider certain

evidence and/or if it had considered such evidence or argument the conclusion

may be different.

Mr. De Vitre relied upon the following judgments

1. Shri Lal Mahal Limited vs. Progetto Grano SPA 21

2. M/s. Louis Dreyfus Commodities Suisse S. A. vs. Sakuma Exports Ltd. 22

3. Sideralba S.P.A. vs. Shree Precoated Steels Ltd.23

4. Richmond Mercantile Limited FZC vs. Vinergy International Pvt.Ltd. 24

21 (2014) 2 SCC 433 22 (2015) SCC Online Bom 5006 23 (2015) SCC Online Bom 5056 24 (2016) SCC Online Bom 4559

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5. HRD Corporation (Marcus Oil and Chemical) vs. Gail (I) Ltd. 25

6. Board of Control for Cricket in India (BCCI) vs. Kochi Cricket Pvt. Ltd.

and others26

7. Renusagar Power Co. Ltd. vs. General Electric Co. 27

8. ARK Shipping Co. Ltd. vs. CRT Ship Management Pvt. Ltd. 28

9. POL India Project Ltd. vs. Aurelia Reederei Eugen Friederich GmbH. 29

60. I have heard the submissions of all learned Senior Counsel at length

who have taken me through the relevant provisions of the JVA, the Awards and

case law cited. The case of the respondents in a nutshell is that the awards are

not enforceable under the Act because the respondents were deprived of an

opportunity to present their case and because the awards are contrary to public

policy. The respondents have contended that the scope for resisting

enforcement pursuant to 2015 Amendment Arbitration Act are similar to the

ground available under Section 34 for challenging an award, that except for

the ground of patent illegality under Section 34(2)(a) which is available for

challenging awards other than awards passed in international Commercial

Arbitrations under Part I. The grounds for challenge under Section 34 and for

the Court to decline enforcement under Section 48 are identical and that the

expression public policy of India has now been defined with the intention of

restricting the scope of public policy under Section 34 and 48 and in a sense

25 (2018) 12 SCC 471 26 (2018) 6 SCC 287 27 (1994) Supp 10 SCC 644 28 (2007) SCC Online Bom 663 29 ARBP/76/2012 WITH ARBP/12/2012 (BHC)

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bring the definition in line with the Supreme Court's decision in Renusagar

(supra). The respondents have contended that the amendment has erased the

distinction created by Shri Lal Mahal which had narrowed down the scope of

public policy than under Section 34. According to the respondents, the scope of

public policy under Section 34 (2b)(ii) and 48 (2b)(ii) are the same. The

respondents have contended that the decisions in Shri Lal Mahal, M/s. Louis

Dreyfus, Richmond Mercantile and Sideralba S.P.A. (supra) are not relevant

since they would operate in circumstances prevailing prior to the amendment

of the Arbitration Act. The respondents contend that the award is violative of

the fundamental policy of Indian law because the petitioner were granted

specific performance despite failure to make averments of readiness and

willingness which was mandatory. Besides the enforcement of the Award to the

extent it contemplated sale of shares is in violation of the Foreign Exchange

Management Act. The respondents have also contended that merely because

they have not challenged the awards in the seat of the Arbitration does not

restrict their rights to resist enforcement that they had the option of either

challenging the awards at the seat or to resistant enforcement.

61. Mr. Seervai reiterated that the definitions of public policy and

fundamental policy of Indian Law would apply with equal force to objections

against enforcement of a foreign award. He relied upon paragraph 35, 38 and

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39 of the decision of the Supreme Court in Western Geco (supra) which

emphasizes that there must be fidelity of judicial approach and one which

cannot be arbitrary, capricious or whimsical manner. A judicial approach

ensures that the authorities act bonafide and deals with the subject in a fair,

reasonable and objective manner and that the decision is not actuated by any

extraneous considerations. A judicial approach would act as a check against

flaws and faults that can render the decisions of a Court vulnerable. The

fundamental policy of Indian law is a principle that Courts and quasi judicial

authorities must decide in accordance with principles of natural justice and

apart from ensuring compliance with the audi alteram partem rule one of the

facets of the principles of natural justice is that the Court or authority deciding

matters must apply its mind to the attendant facts and circumstances while

taking a view one way or the other. Non-application of mind is a defect that is

fatal to any adjudication. A decision can be said to be perverse if no reasonable

person would have arrived at the same. According to the respondents, in

Associate Builders (supra) the Supreme Court dealt with what is judicial

approach meant viz. a decision in order to be fair must be reasonable and

objective. The principles of audi alteram partem must be observed and if a

finding is based on no evidence or if irrelevant considerations are taken into

account or if the decision ignores vital elements, such a decision would be

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62. When queried whether or not the challenge in this matter requires me

to consider the merits of the rival claims, Mr. Seervai submitted that the

respondents were assailing the process which demonstrates that the tribunal

did not act judicially, that the decisions were not fair or reasonable, the

principle of audi alteram partem was not observed and that the decision was

perverse and irrational such that no reasonable person could have arrived at

the same. The findings were not based on evidence but on irrelevant

considerations ignoring vital evidence and therefore should shock the

conscience of the Court. Mr. Seervai fairly conceded that he was conscious of

the fact that an award cannot be reviewed on merits, however, in the instant

case the respondents by identifying conclusions arrived at by over looking the

material evidence or arriving at a conclusion inconsistent with material

evidence and identifying claims that were not decided on entirely or

misconstruing claims or identifying claims that were entirely misconstrued by

the tribunal, the respondents are not engaging in a review on merits. The

awards in the opinion of Mr. Seervai do not comply with the requirements of

natural justice.

63. On the aspect of valuation and inclusion of Power Plus for both the

parties had agreed in principle that the value of power plus may be included or

accounted for in the valuation but the tribunal disregarded the submissions of

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the parties in its final award and took a different view. Mr.Seervai submitted

that if an arbitrator does not express his disagreement with the party's witness

or expert, it results in violation of principles of natural justice. He relied upon

Annie Fox & Ors. (supra) and in this respect he submitted that in the instant

case the tribunal did not record any disagreement with experts of parties. The

testimony of the parties' experts in this regard constituted critical evidence and

that the arbitrator's failure to express disagreement with the parties' experts

deprived the parties of an opportunity to present their case and renders the

awards unenforceable as being contrary to the fundamental policy of Indian

Law and basic notions of justice.

64. Mr. Seervai submitted that the arbitrator's failure to consider material

evidence is also violative of principles of natural justice and that this principle

was enunciated in the case of Front Row Investment Holdings (Singapore)

Pte. Ltd. (supra) wherein the challenge was on the basis that the arbitrator had

while adjudicating the counter claim, incorrectly found that a party was

asserting inducement on the basis of a single misrepresentation and while

setting aside the award dealing with the counter claim. The Court held that

failure to allow a party to address the tribunal on a key issue is a corollary to

allowing the submission and ignoring it altogether whether deliberately or

otherwise and in both these cases, the mischief results from a party denied an

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opportunity to present its case to a judicial mind.

65. Furthermore, relying upon the Australian case of Timwin

Construction v/s. Facade Innovations (2205) NSWSC 548, Mr. Seervai had

submitted that there will be a breach of natural justice when the arbitrator

disregards the submissions made by a party during the hearing and does not try

to understand them or fails to deal with the matter in dispute. In the present

case the arbitrator failed to consider the respondents submissions on Jaguar, the

attempts to oust Mr. Vijay Karia, submissions in relation to breach of clauses 8

and 20 of the JVA as a result of the petitioner conducting direct sales in India

and in the light of overwhelming evidence.

66. As regards clause 21 the respondents had submitted that the contract

ought not to be rewritten under the guise of interpretation as laid down by the

Supreme Court in Vikram India Greentech & Anr. V/s. New India

Assurance Company Limited (2009) 5 SCC 559 in which the Supreme

Court observed that the endeavour must be interpret the words in a contract

which is expressed by the parties and while construing the terms of a policy

one is not expected to venture into extra liberalism that may result in rewriting

a contract or substituting the terms. So also in the case of National Highways

Authority of India v/s. Som Datt Builders, FAO (OS) no.427 of 2007 , the

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Delhi High Court observed that it was incumbent on the tribunal to interpret

the contractual terms and such interpretation should be a plausible one. The

Court would not interfere with the award merely because another

interpretation is preferable. However, if the interpretation adopted by the

tribunal is so unreasonable that no reasonable person would adopt it or so

unfair so as to shock the conscience of the Court, it is an illegality which goes to

the root of the matter and not a trivial one.

67. Having considered the approach of the tribunal, I do not see any sign

of unreasonableness in the interpretation of the provisions by the tribunal. It is

also not possible to ascertain whether the tribunal has ignored evidence. In my

view the process adopted by the tribunal is transparent and across the three

PFAs and the final award. Different views may have been possible, but merely

because the tribunal adopted an unfavourable one, the award cannot be

rendered unenforceable. Dealing with the respondents contention that merely

because the respondents had not challenged the award at the seat of the

arbitration did not prevent challenge resistance to enforcement, I have no

hesitation in agreeing with that line of reasoning. Chapter I of Part II which

deals with New York Convention Awards does not differentiate between

enforcement of awards that have been unsuccessfully challenged at the seat or

those which being not except for Section 48(1)(e) and Section 48(3).

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68. In ARK Shipping Co. (supra) the award was made in Singapore and

enforcement was objected to on the basis that there was no valid contract

between the parties and that there was no arbitration agreement. The seat of

arbitration was Singapore and the proper law of contract was English Law.

Further this Court in ARK Shipping (supra) held that there is nothing in the

Arbitration Act which gives the power to the Indian Courts to set aside the

foreign arbitral award and/or sit over the decision concluded by the tribunal

based on the provisions of the Arbitration Act about the existence of the

agreement. The Court also observed that where grounds in relation to the

existence of the agreement have been decided by the tribunal and against

which no appeal has been preferred, it would not be appropriate to permit

challenge to the foreign award under Section 34. He submitted that the

emphasis is on the nature of the objection raised since it was a jurisdictional

issue over which the Court at the seat in arbitration had jurisdiction. The High

Court's observation on the failure to challenge the award at the seat was limited

to a challenge as to the existence of a contract or existence of an agreement to

arbitration.

69. In POL India Projects Limited (supra), the composition of the tribunal

not being in accordance with agreement was raised at the time of enforcement

of the award. Once again these issues are jurisdictional in nature and law at

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the seat of the arbitration was applicable. The Court observed that the findings

and conclusions of the tribunal as to the existence of an arbitration agreement

and that the composition was in accordance with the agreement. The

petitioners could not be permitted to move such a challenge after having

omitted to challenge the same under section 73 of the English Arbitration Act.

Section 48(1) of the Arbitration and Conciliation Act states that the parties are

required to furnish proof to the Court that the parties to the agreement referred

to Section 44 were, under the law applicable to them, under some incapacity or

that the agreement was not valid under the applicable law and failing such an

indication under the law of the country where the award was made. Secondly,

proof that the composition of the arbitral tribunal or procedure adopted was

not in accordance with the agreement between the parties, failing such

agreement, in accordance with law of country where the arbitration took place.

70. Mr.Seervai had relied upon the Singapore Court of Appeals'

observation that preventing the party from resisting enforcement without

challenging the award at the seat of the arbitration unduly restricted the

freedom of a party to decide on how it should object with the award and the

party should be free to avail alternate systems of defence which was recognised

in the New York Convention as part of model law that PT First Media (supra)

follows the decision of the Supreme Court of United Kingdom in Dallah Real

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Estate (supra) in which case the appellant sought enforcement of a final

award made by the tribunal in Paris against the Government of Pakistan. It was

held that neither the New York Convention nor the English Arbitration Act

suggests that a person resisting recognition or enforcement in one country had

any obligation to seek to set aside the award in the other country where it was

made.

71. I have no doubt that failure to challenge the award in the seat of

Arbitration would in any manner impact the right of a party to resist

enforcement in this country and in this respect I am in agreement with the

views expressed in Dallah Real Estate (supra) and PT First Media . The

Arbitration & Conciliation Act, 1996 in its current avatar also does not support

the view that resisting enforcement would be subject to a prior challenge at the

seat of arbitration. It does not support the view that absent a challenge in the

seat of the Arbitration, a party could not resist enforcement of the award in a

different jurisdiction. If that were to be so the legislature would have provided

for appropriate pre-conditions to resist enforcement of foreign award and

justifiably so because if an award were to be set aside in the seat, there may be

no occasion to resist enforcement. On the other hand if a challenge at the seat is

repelled, a losing party could still resist enforcement on available grounds.

Assuming for the sake of argument that a foreign award was not challenged in

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the seat of arbitration, nothing prevents the respondents from resisting

enforcement. It is akin to judgment debtor resisting execution on just and valid

grounds. Merely because the decree has not being challenged does not render

resistance to its execution under legitimate legal grounds invalid. This excluded

cases where a challenge in the seat was necessary such as in Ark Shipping and

Pol India (Supra) but otherwise a party cannot be prevented from attempting to

resist enforcement of a foreign award.

72. The 2015 amendments to Section 34 and 48 of the Act were on the

basis of the Supplementary Report no.246 of the Law Commission of India and

sought to prevent review on merits as done in the case of Western Geco (supra).

The Court revisited the findings in the arbitration and reviewed those findings

to ascertain whether they were sustainable in the light of the evidence on

record. In Western Geco (supra) the challenge was not as much as of the

procedure adopted by the tribunal but that on the basis of the record, the

tribunal ought to have arrived at a different conclusion. This approach in

Western Geco (supra) amounted to a review on merits. The Supplementary

Report refers to the wider interpretation of the term "public policy" by

including the Wednesbury principle of reasonableness within the expression

"fundamental policy of Indian Law" alluding to the possibility of a review on

merits. It is such a review on merits that the legislature sought to do away with

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by introducing Explanation 2 to Section 34(2) and 48(2). As far as the

petitioners arguments that the respondents case seeks review on merits is

concerned, I agree with Mr. Seervai that it does not mean that no reference can

be made to facts or documents as forming part of the record. Limited references

may be justified in a given case but not a sub-cutaneous examination of the

merits. Indeed I must observe that all counsel have exercised restraint in

making reference to the consideration of the merits of the case by the tribunal

but in my view consideration of the grounds raised by the respondents will

involve detailed appreciation of evidence and its treatment by the tribunal

which in my view is not permissible.

73. The other ground of challenge is that the award should shock the

conscious of the Court is sought to be invoked is on the basis of the arbitrator's

ruling in respect of direct sales. The tribunal in its First and Second award had

rejected the respondents counter claim allegedly on a incorrect reading of

clause 21.1. Although reliance was placed on Vikram India (supra) of the

Supreme Court and the decision in Som Datt Builders(supra ), I am not able to

accept the respondents contention that the interpretation of Rule 21(1) was

perverse and unreasonable. Perusal of the award reveals that the arbitrator has

dealt with the interpretation of clause 21.1 extensively and threadbare with

reasons including those given from paragraph 72 to 115 in the Partial Final

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Award which dealing with the tribunal's view on the construction of clause 21.

74. In my view, in order to succeed on the ground of being deprived of an

opportunity of being heard, one has to establish that the tribunal did not offer

an aggrieved party an opportunity of presenting their case. In the facts of the

case at hand, it is obvious that ACPL declined to submit the documents on the

ground of confidentiality. It is another matter that the petitioners apparently

had control over ACPL and could have had a say in the response of ACPL

especially since it was open for the petitioners to collect the information from

ACPL which it had declined to do. Had it been the petitioners case it had no

control over ACPL, there was no question of obtaining the response. In my

view, the tribunal was not wrong in concluding that it had no power to direct

ACPL to provide documents. It was always open for the respondents to

approach the Courts in the appropriate jurisdiction to seek an order of

disclosure or could have applied for summoning ACPL to elicit information.

However, that not having been done, it is not open to the respondents to now

contend that they were denied an opportunity of presenting their case and that

failure of the petitioners in procuring the information that they sought from

ACPL would amount to violation of principles of natural justice.

75. The tribunal was the sole judge of the quantity and quality of evidence

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and there can be no re-appreciation of evidence by this court. The petitioner

had also contended that the question as to whether there was a material breach

was considered by assessing whether there was any evidence of serious actual

loss or actual adverse impact on Ravin due to acquisition of ACPL and that the

tribunal had noted that ACPL could be in competition with Ravin but there was

no evidence that Ravin actually lost business to ACPL and that even the

commonality of clients lists was not evidence of there having been any

diversion or business or targeting of Ravin's business.

76. In relation to the contention that the petitioner has been attempting to

oust the respondents from Ravin and the respondent had made a similar

counter claim in this respect. However, the tribunal did not consider the

evidence in support of the counter claim including admission in evidence and

cross examination by the petitioners witness. The respondents had attempted to

demonstrate how the petitioner was conniving to wrest power from the

respondent no. 1 during the integration period and in breach of the JVA. Mr

Seervai submitted that the tribunal's failure to rule on the counter claim is

opposed public policy and is a fundamental flaw and against the notions of

justice. As against this, it is the petitioners case that such alleged breach was

never pleaded. The Determination Notice of 26 th March 2012 and the counter

claim dated 9th September, 2012 did not allege ouster of the respondents, since

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Mr. Vijay Karia continued to be in management throughout the period of

integration. Considering the nature of the business of the petitioners and its

parent company it is but obvious that scale of operations were considerably

large and it is one of the fundamental reasons why they proposed the expansion

by acquiring to the JVA with the intention of gaining control over Ravin. This

is evident from the fact that the petitioner had admittedly paid a "control

premium" to Ravin.

77. As regards the allegation that the counter claims were not considered,

the tribunal was the final arbiter of the merits. Allegations of concealed breach

and the allegations that the tribunal did not mean any determination in relation

to the respondents counter claim alleging attempts at ousting the respondent

no.1 also have been dealt with by the tribunal. As already stated, there is

nothing in my view that obliged the tribunal to place before the parties of the

view that it intended to take and I am unable to find any support from the

submissions canvassed at the bar alluding to appointment of a conflicted party

as a valuer to the extent the challenge concerned alleged inconsistencies in the

first and second PFA's. There is no merit in the contention that the tribunal

shifted the goal post between the first and second PFA. The alleged

inconsistencies only indicate that the Arbitral tribunal was actively considering

all contentions on both sides. As far as the documents are concerned, I have

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already opined that the respondents could not rely upon third party disclosures

or lack of it to prove their case. I also do not find substance in the contention

that critical evidence has been ignored. That aspect was entirely in the domain

of the tribunal and if this Court is to enter upon a scrutiny of the awards to

ascertain whether any evidence, critical or otherwise was ignored, it would

entail a substantial review of the merits of the case. There can be no doubting

the fact that appreciation of evidence was exclusively within the jurisdiction of

the tribunal and is not open to scrutiny in these proceedings. I am therefore

unable to find merit in the contention that the tribunal did not consider the

counter claim or rule on it.

78. Mr. De Vitre had contended that the respondents had therefore not

considered the Jaguar effect to be critical in any manner. The respondents did

not argue the Jaguar issue which was not even pleaded and only their post

hearing closing submissions filed in August 2013 that the respondents dealt

with the "Jaguar effect". The petitioners have also refuted the contention that

the "Jaguar effect" came to light only during cross examination of the

petitioners' witnesses. Besides Jaguar had no business and was set up solely for

purchasing office space in Mumbai. Although Mr. Seervai placed on the objects

clause in the Memorandum and Articles of Association of Jaguar, in my view

the objects clauses are usually varied and numerous and that by itself would

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not be indicative of the nature of the business that the company would carry on

and in that light of the matter I am of the view that the arbitral tribunal was

the best judge in this context. I am unable to find that the manner in which the

tribunal has dealt with incorporation of Jaguar will not justify my arriving at a

conclusion that the award is unenforceable.

79. The petitioner contended that allegations of bias are made by way of an

after thought and Second PFA was not revealed prior to its publication. It was

submitted that there was no suggestion at any time that the recruitment notice

issued by Gilbert Tweed was merely in the regular course to identify potential

candidates who could be recruited for Ravin and not otherwise. It was further

contended that the reaction of the respondent to the recruitment notice

published by Gilbert Tweed was material inasmuch as the respondents merely

alleged breach of confidentiality and nothing more and it was not suggested at

the material time, that the result of the arbitration was known in advance to

other parties including Gilbert Tweed and Associates. The allegation of bias was

made for the first time only after the Second PFA and not before. In October

2013 when the respondents did raise the issue about statement made by Gilbert

Tweed, it was only on the basis of breach and confidentiality and not of bias.

The respondents after alleging bias and filing of application for revocation,

changed their Advocates but continued to participate in the arbitration. They

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sought time from the tribunal on account of change of Advocates, but refused

to co-operate with Deloitte and did not furnish them the information sought.

It is pertinent to mention here that the law of arbitration in the instant case was

English law but the respondents made no effort to take its allegations of bias to

its logical end under the English Arbitration Act on the other hand after

alleging bias they continued to appear in the arbitral proceedings. On 8 th July,

2016 the petitioner had filed an application seeking a final award. On 25 th

July, 2016 they filed application for summary rejection of the application for

final award. They also filed reply to an application and the BDO observation

report with full knowledge and in the face of the allegation against the

tribunal. What is material to note is that even after alleging bias, the

respondents continued to participate in the arbitral proceedings and took no

objection whatsoever in the conduct of proceedings. Even after the allegation

of bias was rejected they continued to participate in the proceeding without

reservation, clearly establishing that there was no substance in the allegation of

bias. The respondents also filed written submissions and participated in a six

hour telephone hearing in June, 2014.

80. One of the challenges is based on the assertion that the tribunal's

decision could not be one that was not contemplated by either party since an

aggrieved party would be denied of an opportunity of hearing and show cause

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why the tribunal ought not to take such view. In the facts at hand, it is

contended that on the aspect of valuation the tribunal could not have left out the

valuation of Power Plus despite both parties agreeing in principle that the value

of Power Plus can be counted for in the valuation of the company. The tribunal

disagreed and adopted an inconsistent method of valuation when neither party

had advanced such a contention. According to the respondents if an Arbitrator

does not express disagreement with the parties witness or expert, it would

constitute violation of principles of natural justice. In the case at hand the

tribunal had not recorded any disagreement with experts who had opined that

ACPL and the company were competing, that such evidence of the experts was

critical yet an Arbitrator did not express disagreement with the experts and

grant an opportunity to deal with the Arbitrator's concerns as to why he would

not accept the expert witnesses opinion. The Arbitrator should not surprise a

party with his own ideas and if the tribunal tenders an award which has no

basis in pleadings or arguments it renders a party unable to canvass its case and

therefore is entitled to resist enforcement of an award. According to the

respondents had the Arbitrator expressed his views they could have responded

and failure to grant an opportunity to deal with the arbitrators views results in

the awards being unenforceable and contrary to the public policy of India.

81. I am unable to appreciate the respondents contention that the arbitrator

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was bound to express his views on expert evidence. It is open for the a tribunal

to consider expert evidence without being obliged to express his views on the

veracity of such evidence. The arbitrator in the instant case was under no

obligation of respond to expert evidence led by the parties. No doubt it was

open to the arbitrator to seek clarifications if he felt necessary. The Arbitrator

was not bound to do so. More often than not consideration of witness

statements, their relevancy, veracity and the impact would be considered not

only when the evidence is recorded but that is at a later date prior to making of

an award. An arbitrator would garner his thoughts not necessarily on being

presented with the evidence but later, having considered the entire gamut of the

proceedings.

82. In Gbangbola v/s. Smith and Sherrif, the Technology and

Construction Court observed that a tribunal does not act fairly or impartially if

does not give a party an opportunity of dealing with arguments which are not

been advanced by either party and unless an opportunity is given there is a

danger that the final result need not be determined fairly against the party

would be ordered to pay the costs. Relying upon this observation, Mr. Seervai

had submitted that it was incumbent upon the arbitration tribunal to alert the

parties of the view that the tribunal was inclined to take steps especially in

relation to the expert evidence given and I do not see how this judgment is of

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any assistance to the respondents because this is an order of the Technology

and Construction Court, a sub-division of the Queen Bench Division of the

High Court and largely concerned with complex and technical claims. The

relevance of observations in Gbangbola (supra) in the present context cannot be

appreciated.

83. In Malicorp Limited (supra), a dispute was subject matter of

arbitration between the company and the Government of the Arab Republic of

Egypt and two others. The tribunal had awarded damages and this is came as

surprise to Egypt. It has challenged to the award. The Queen's Bench Division

of the High Court observed that the failure of the tribunal to ensure that Egypt

was warned of these matters could constitute a serious breach of natural justice.

The High Court found that the breach was too serious and the consequences for

Egypt are too grave and therefore declined to permit enforcement of the award.

The award was then set aside on Egypt's application. In the facts at hand, I do

not find that the tribunal had acted in a manner so as to deprive either party of

an opportunity to present their case. The only factor that has been relied upon

to allege that the respondents were unable to present their case that the

arbitrator had adopted an approach which was not anticipated by either party.

The fact that an arbitrator has taken a view unanticipated by parties would not,

in my view, constitute a breach of the principles of natural justice.

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84. In Front Row Investment (supra), an award came to be challenged

before the High Court in Singapore on the ground that the arbitrator had

breached rules of natural justice by concluding that only one of three grounds

of alleged misrepresentations had been relied upon and there was no basis on

which it could be concluded that the appellant had given up the rest of the

grounds. In that case the arbitrator had dismissed the appellants counter claim

without considering the grounds of its counter claim in full because the

arbitrator was under a misapprehension that the appellant had abandoned

reliance on certain representations. This is once again the decision on facts

which does not share anything in common with the instant case. This decision

is therefore of no assistance to the respondents. I am therefore unable to accept

the contention that omission by the tribunal in the instant case to express his

views, on evidence of experts would in any manner qualify as failure to grant

an opportunity to present the party's case.

85. In Richmond Mercantile (supra), a Single Judge of this Court while

observing the objections to enforcement of the award were on merits also

observed that a Court cannot refuse enforcement of an award on the basis of

sufficiency of evidence. The Court found that the allegation that the tribunal

had not recorded reasons for awarding damages had not been established. The

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tribunal had considered the relevant provisions of contract and the tribunal

was not expected to give reasons as are required to be given in the Court of Law

in a judgment. In the facts of the case, the reasons recorded were to be clear

and sufficient to indicate the mind of the tribunal in arriving at the conclusions.

While reiterating that the powers of the Court hearing objections to

enforceability are limited, this Court reiterated that it cannot go into correctness

of the findings recorded by the tribunal on merits in proceedings filed under

Section 46 to 48 of the Act.

86. In Associate Builders and ONGC/Western Geco the Supreme Court was

dealing with the powers of the Court under Section 34 of the Arbitration Act in

the case of domestic awards. The nature of jurisdiction under Section 48 was

totally different and the power under Section 47 and 48 are very narrow. For

those reasons, Mr. De Vitre submitted that the scope of challenge was extremely

limited. In Sideralba, the attention of the Court was invited to the judgment of

the Supreme Court in Shri Lal Mahal Ltd. (supra) which held that Section 48 of

the Arbitration Act does not give an opportunity to have a "second look" on the

foreign award at the stage of enforcement. In paragraph 45 and 46 of Shri Lal

Mahal (supra) Supreme Court observed as follows :

"45. Moreover, Sections 48 of the 1996 Act does not give an opportunity to have a "Second look" at the foreign award in the award enforcement stage. The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or

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ignoring / rejecting the evidence which may be of binding nature) in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy.

46. In what we have discussed above, even if it be assumed that the Board of Appeal erred in relying upon the report obtained by the buyers from Crepin which was inconsistent with the terms on which the parties had contracted in the contract dated 12-5-1994 and wrongly rejected the report of the contractual agency, in our view, such errors would not bar the enforceability of the appeal awards passed by the Board of Appeal".

87. The scope of enquiry under Section 48 did not permit a review on

merits and that under Section 48(2)(b) enforcement of a foreign award could

be refused only if it is found to be contrary to (i)the fundamental policy of

Indian Law; (ii) to the interest of India and (iii) justice of morality. Thus, there

being no opportunity for this Court to review a foreign award on merits, in

Sideralba (supra) the Court pointed out that there was no substance in the

submission that a foreign award cannot be enforced on the ground that the

petitioner had not proved actual loss. The Court found on perusal of the award

that the tribunal had rendered pure findings of fact and enforcement of the

award could not be refused by reviewing the process of adjudication upon the

findings of fact recorded by the tribunal. The Court also rejected the contention

that the award was contrary to the terms of contract or based on no evidence.

The Court also observed that Associate Builders was a decision rendered prior

to the amendment of 2015. This Court found that in Shri Lal Mahal (supra) the

Supreme Court had considered the expression "public policy of India" in

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Section 48(2)(b) and whether it should be given a meaning narrower than that

in Section 34. In Shri Lal Mahal, the Supreme Court adverted to its decision in

Renusagar (supra) in which it had been held that the term "public policy" used

in Section 7(1)(b)(ii) of the Foreign Awards Act meant public policy of India

and the Supreme Court negated the argument that recognition and

enforcement of an award of GAFTA could be questioned on the ground that that

contrary to the public policy of the State of New York. The Supreme Court

drew a distinction while applying the rule of public policy between a matter

governed by domestic laws and a matter involving conflict of laws. It also held

that application of the doctrine of public policy in the field of contract laws is

more limited than in the case of domestic law and the courts are slower to

invoke public policy in cases involving a foreign element.

88. Mr. De Vitre had highlighted the fact that decision in Shri Lal Mahal

(supra) was rendered prior to the 246 th law commission report and after

interpreting the judgments on the case of ONGC v/s. Saw Pipes Ltd. It was held

that in case of enforcement of foreign awards, there is a departure from the

meaning of "public policy" for the purposes of jurisdiction of the Court for

setting aside an award under Section 34. Thus, under Section 48, there was a

narrower scope for interference. In Shri Lal Mahal (supra), the Supreme Court

has already held that while considering the enforceability of a foreign award

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the Court does not exercise appellate jurisdiction. It does not enquire whether

any error has been committed in rendering the award. In Sideralba (supra),

objections raised by the respondents did not fall under the category of the

award being contrary to the fundamental policy of Indian Law or the interest of

India or justice or morality. This Court was of the view that scope of the

expression "public policy" in the case of enforcement of a foreign award is very

narrow and limited and is not wider than when dealing with a domestic award. The Court found that by virtue of the principles laid down in Shri Lal Mahal

(supra), the challenge to domestic award is very narrow and limited and in any

event not wider than those applicable by challenging a domestic award. The

Court rejected the submission of counsel for the respondent that the expression

"fundamental policy of Indian law" as interpreted by the Supreme Court in

Associate Builders (supra) and ONGC v/s. Western Geco (supra) were

applicable to a foreign award. It is further held that the Supreme Court in

Associate Builders (supra) and Western Geco (supra) had affirmed the view in

ONGC which dealt with a domestic award under Section 34 of the Act and

observed that those principles cannot be extended to a foreign award under

Section 48(2(b). Besides the principle laid down in Phulchand Exports Ltd.

v/s. O.O.O. Patriot 2011(10) SCC 300 applying the expression public policy

as interpreted by the Supreme Court in the case of Saw Pipes (supra) to a

foreign award has been overruled in Shri Lal Mahal.

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89. The learned Single Judge while deciding the challenge in Sideralba also

had occasion to consider the decision of this Court in Pol India Projects Limited

which have dealt with various judgments of the Supreme Court including Shri

Lal Mahal and quoting from the decision of the Delhi High Court in Penn

Racquet Sports v/s. Mayor International Limited ILR 2011 Delhi 181 and

observed that in Shri Lal Mahal the Supreme Court had after referring to

principles laid down in Renusagar (supra) held that those principles must apply

for the purposes of Section 48(2)(b) of the Act and although the expression

"public policy of India" has been used in Section 34 (2)(b)(ii) and Section 48(2)

(b)(ii), the concept although referred to in these two sections differs in degree.

The scope of the public policy doctrine for the purpose of Section 48(2)(b) is

more limited than in the case of domestic arbitral award.

90. Mr. Chinoy had contended that in view of provisions of section 16(b)

and (c)the petitioners are not entitled to specific performance and that the

mandatory nature of compliance was well settled law and as observed by the

Supreme Court in Balraj Taneja & Anr. vs. Sunil Madan & Anr.(1999) 8

SCC 396 and Raj Kishore(dead) by LRs.vs. Prem Singh & Ors. (2011)1

SCC 657 as also in B. Vijaya Bharathi vs. P Savitri (2018) 11 SCC 761.

Mr. Chinoy contended that the legal pre-conditions urged are not technical in

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nature. They embody basic principles of justice and equity and constitute

fundamental principles of law. In this respect he relied upon Durga Prasad

vs. Palden Lama & Anr.(1981 SCC Online Sikk 1) and NHAI vs. Gwalior

Jhansi Expressway Ltd [(2018) SCC Online 688 [paras 24 and 25]

91. Mr. Chinoy had relied upon the decision of Supreme Court in H.P.

Pyarejan (supra) which dealt with the requirement on the part of the plaintiff

to make an averment in the specific performance to the effect that he was

always ready and willing to perform the part of the contract and this was the

basic principle that the plaintiff must satisfy and that such averment was

necessary. The Court held that Section 16(c) of the Specific Relief Act, the

plaintiff must aver in the plaint and establish the fact by evidence aliunde that

he has always been ready and willing to perform his part of the contract and a

party seeking specific performance must manifest that his conduct is

blemishless throughout entitling him to specific relief. The provisions imposes

a personal bar to grant relief and that pleadings manifest that the conduct of

the plaintiff entitles him to get relief. Mr. Chinoy submitted that the petitioner

not having made such averments, this is one of the crucial grounds available to

resist enforcement.

92. Mr. Chinoy's contention that failure to make and averment as to

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readiness and willingness to perform the contract is fatal since grant of relief in

the absence of such mandatory averments would be against the fundamental

policy of Indian law is in my view misconceived since the effect of absence of

such averments would depend on the facts of a case In the case at hand, the

respondents had not raised this contention before the tribunal. The respondents

case on the other hand was that the respondents, as opposed to the petitioner,

were entitled to specific performance as contemplated in clause 23.4 of the JVA.

This was canvassed on the basis that if both parties were found to be in breach,

the party which committed the later breach would be entitled to specific

performance. The respondents contended that if at all the respondents had

breached the agreement, its breach was later in point of time and therefore the

respondents as against the petitioner was entitled to specific performance.

93. This in my view indicates that the absence of an averment on readiness

and willingness was not urged and not a matter in issue before the tribunal but

the tribunal was seized of rivals claims on specific performance under clause

23.4. The essence of the relief claimed was therefore pleaded and as

contemplated in the observations of the Supreme Court in Syed Dastagir

(supra) which held that a mechanical reproduction of the exact words of a

statute is not necessary. No specific phraseology or language is required to be

established in ascertaining whether such plea was taken or not. Absence of

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form cannot dissolve the essence if already pleaded.

94. In Sideralba (supra) this court has already taken a view rejecting the

defence of a foreign award cannot be enforced if it is in contravention of the

fundamental policy of Indian law as contemplated in Associate Builders

(supra) and Western Geco (supra). I am in agreement with that view. Even

otherwise the contention that section 16(c) embodied the fundamental 'policy'

of Indian law does not commend itself to me because the fundamental policy of

a country's law would be something more basic than provisions of section

16(c), for example the presumption of innocence till proven guilty is generally

speaking is part of the fundamental policy of Indian law. The expression

"fundamental" entails something that is the very basis, the foundation of law.

Policy as a concept encompasses the manner in which the law of the country

would deal with a case viz aspects which are of basic concern to the country

such as the rules of natural justice, right to privacy and the like. I am therefore

unable to accept the submission that absence of a specific averment would, in

the facts of this case, be fatal to the claim for specific performance as being

contrary to the fundamental policy of Indian law.

95. One other issue that requires to be dealt with is Mr. Chinoy's contention

that HRD Corporation (supra) does not laid on the law and that it only dealt

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with the effect of Section 12 of the Arbitration Act. In R.N. Phillips (supra), Mr.

Chinoy invited my attention to the fact that the Division Bench had then

observed that it could be incorrect to say that every opinion of the Supreme

Court would be binding on the High Court in India. The only opinion which

would be binding would be an opinion expressed on a question that arose for

determination of the Supreme Court and even though ultimately, it may be

found that the particular question was not necessary for decision of a case and

yet opinion was expressed by the Supreme Court on such a question then the

opinion would be binding upon the High Court. He therefore submitted that

merely because HRD Corporation had made certain observation and as

highlighted by Mr.DeVitre need not ipso facto operate as a precedent. Mr.

Chinoy relied upon a decision of the Full bench of Kaikhosroo Phirozshaw

Doctor v/s. State in which the Court considered opinion by the Supreme Court

even on a point which does not strictly arises for decision must be accepted by

the High Court as laying down statement of law which is followed but the full

bench observed that it did not read that particular observation as laying down

views of the Supreme Court expressed with emphasis and after due deliberation

a casual observation it was submitted did not so operated. In this manner, Mr.

Chinoy had sought to contend that the decision in HRD would not qualify as a

precedent, with the result that the scope of resistance to enforcement was

rendered wider. The fact is that HRD had made reference to the decisions in

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ONGC v/s. Saw Pipes and ONGC v/s. Western Geco and the observation that

both Sections 34 and 48 have been brought back to the position law contained

in Renusagar(supra) where public policy will include only two of three things

that is fundamental policy of Indian law and justice and morality would

prevail.

96. Although Mr. Chinoy may be correct in submission that the matter

substantially in issue in HRD Corporation (supra) was Section 12 of the

Arbitration Act, the fact is that the Supreme Court has expressed its views on

the scope of challenge which is obviously far narrower than the scope of

challenge under Section 34 although the scope of Section 48 was not directly in

issue. I find no reason to disagree or take a different view notwithstanding, the

contention that the decision in HRD Corporation (supra) is not a precedent

which can be cited in support of the petitions seeking enforcement of a foreign

award. The Law Commission report also observed that in Shri Lal Mahal

(supra) the wider definition of public policy contemplated as in Saw Pipes

(supra) did not apply to public policy under section 48(2). A supplementary

report came to be issued by the Law Commission in February 2015 to negate

the effect of Western Geco and Associated Builders which interpreted

fundamental policy of Indian law. In HRD Corporation (supra) the Supreme

Court had occasion to consider the 246 th Law Commission report and held that

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the definition of public policy held that Saw Pipes and Western Geco versions of

public policy was not relevant any more. The fact that the scope of challenge as

contemplated in ONGC v/s. Saw Pipes (supra) is no longer available cannot be

disputed. HRD Corporation has since been reaffirmed in the BCCI case (supra).

97. With reference to Mr. Chinoy's other ground to resist enforcement viz,

the enforcement of the Award being in contravention of the Foreign Exchange

Management Act, in Penn Racquet (supra), the Delhi High Court had held that

recognition and enforcement of a foreign award cannot be denied merely

because it was in contravention with the laws of India. An award should be

contrary to the fundamental policy of Indian law and only then enforcement

could be denied. This Court had in Pol India Projects (supra) approved of the

decision in Penn Racquet Sports (supra) as squarely applicable to the facts of

the cases. The Court in Pol India Projects (supra) further observed that the

Supreme Court had held since the expression "public policy' covers the field not

covered by the words "and the law of India" which follow that expression

contravention of law alone will not attract the bar of public policy and

something more than the contravention of law is required and adverting to the

facts of the case even if a law of guarantee could not have been issued in favour

of the respondents under provisions of the Foreign Exchange Management

(Guarantees) Regulation, 2000 which was acted upon by the parties simplicitor

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violation of the provisions would not be contrary to the fundamental policy of

Indian law. POL India Projects Ltd (supra) followed the Delhi High Court

decision in SRM Exploration P.Ltd vs. N & S & N Consultants [(2012) 4

Company Law Journal 178 Delhi] holding that legislative intent while

enacting FEMA is not to void a transaction even if it is in violation. As also of

the decision of the Bombay High Court in Vitol SA vs Bhatia International

Ltd and Noy Vallencia Engineering Spa Vs Jindal Drugs Ltd (2006) 5

Bom C.R. 155 all of which allowed enforcement of foreign awards held and

held that even if guarantees are not issued under FEMA Regulations, violation

of the provisions would not be contravention of the fundamental policy of

Indian law. In the facts of the case I do not find the objection on the ground of

violation of FEMA as canvassed by Mr. Chinoy of substance since on facts, the

fair value for the purposes of FEMA was determined at a far lower rate.

98. In conclusion I must mention that although in the affidavit in reply one

of the contentions taken up was that no oral hearing was granted, this has not

been canvassed as an instance of lack of a proper opportunity to present the

respondents case probably because written submissions were on the record of

the tribunal. No other ground has been canvassed before me. In conclusion I am

of the view that the objections sought to be raised are in the nature of seeking a

review on merits of the lis and calls for appreciation of evidence which cannot

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be done. I am unable to accept the respondents contentions that the tribunals

findings are contrary to the fundamental policy of Indian law or reveal lack of

opportunity to present the respondents' case nor is it lacking in judicial

approach or against basic notions of justice. The respondents have not made

out a case for resisting enforcement of the awards. The awards at hand are

capable of being enforced in India and the petitioners are entitled to proceed in

execution. The petition must therefore be allowed. Accordingly, I pass the

following order.

(I) The Awards are enforceable against the respondents. The petitioner may

proceed in execution of the Awards.

(II) Till the Awards are enforced, there will be an order in terms of prayer

clause (b) (vii)(a).

(III) Petition disposed in the above terms.

(IV) In view of disposal of the petition, Notice of Motion no.555 of 2017 and

Chamber Summons(L)no.286 of 2017 do not survive and the same are

also disposed.

(V) No costs.

(A. K. MENON, J.)

wadhwa

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