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2014 Supreme(Bom) 1281
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. GUPTE, J.
Rakesh S. Kathotia & Anr. - Petitioners
Versus
Milton Global Ltd. & Ors. - Respondents
ARBITRATION PETITON NO. 66 OF 2014
Decided on : 02 JULY 2014
Mr. Vikram Nankani, Mr. Naresh Thacker, Mr.Vipin Jain, Mr.Amit Vyas, Ms.Neeti Sachdeva, Ms.Aanchal Waswani i/b. M/s.Economic Law Practice for Petitioners.
Mr. Diniyar Madon i/b. M/s.Law Charter for Respondent Nos.2, 10 to 15.
Mr.Nitin Thakkar i/b. Mr.Hiren Mehta with Ms.Ritu Pathak for Respondent Nos.1, 3, 4, 5, 8 and 9.
The central legal point established in the judgment is the requirement of consent to the arbitral forum and the limitations of invoking Section 9 against a third party.
Headnote:
Arbitration - Joint Venture Agreement - Arbitration and Conciliation Act, 1996, Section 9 - 5, 7, 17 - The court discussed the interpretation of the arbitration agreement contained in the Joint Venture Agreement (JVA) and the parties bound by it. The court considered the capacity of the signatories to the JVA and the principle of representation. It also examined the concept of a party to the arbitration agreement and the requirement of consent to the arbitral forum. The judgment emphasized the need for a written contract and the limitations of invoking Section 9 against a third party.
Fact of the Case:
The petition sought to restrain the Respondents from breaching a Joint Venture Agreement (JVA) and enforce the arbitration agreement under the JVA. The main defense of the Respondents was the lack of identity of the parties to the arbitration agreement and the parties against whom relief was sought.
Finding of the Court:
The court found that the parties against whom relief was sought were not parties to the JVA or the arbitration agreement. It held that the capacity of the signatories to the JVA and the representation of other individuals or entities must be proven for them to be bound by the agreement.
Issues: The main issue was the identity of the parties to the arbitration agreement and the scope of relief under Section 9 of the Act.
Ratio Decidendi: The court emphasized the requirement of consent to the arbitral forum and the need for a written contract. It clarified the concept of a party to the arbitration agreement and the limitations of invoking Section 9 against a third party.
Final Decision: The court dismissed the petition, stating that the reliefs claimed could not be granted.
This Arbitration Petition, filed under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”), seeks to restrain the Respondents from committing breach of a Joint Venture Agreement (“JVA”) between the Petitioners and the Respondents.
2. The Petitioners' case may be briefly stated thus : Respondent No.1 is a Joint Venture Company, formed by the Petitioners, representing the 'Subhkam Group' and Respondent Nos.2 to 15 representing the 'Vaghani Group'. Respondent Nos.5 to 9, who are claimed to be relations of the Respondents representing the Vaghani Group, are signatories to the JVA. The Vaghani Group owned the company – Respondent No.4, which manufactured and marketed consumer durables and kitchen appliances under the brand name 'Milton'. The JVA was entered into by the parties to carry on this manufacturing and marketing business under the brand name of 'Milton'. According to the Petitioners, they entered into the JVA under the bona fide belief that the entire distribution and marketing network of Respondent No.4 would be transferred to Respondent No.1. Under the JVA, the management of Respondent No.1 was to be overseen by a Board of Directors to be appointed by the Subhkam Group and the Vaghani Group in terms of the relevant clauses of the JVA. Subhkam Group held 49.99% of the total issued and paid up capital of Respondent No.1, whilst Vaghani Group held the balance 50.01%. It is the case of the Petitioners that the Vaghani Group, in breach of the JVA, developed a competitive business through Respondent No.2 and have transferred the business of Respondent No.1 to Respondent No.2. The Petitioners seek to enforce the arbitration agreement under the JVA and in the meantime, restrain Respondent No.2 from manufacturing and marketing consumer durables, kitchen appliances and other goods and products falling under the definition of “Goods” in the JVA.
3. The main defence of the Respondents is that there is no identity of the parties to the arbitration agreement contained in the JVA and the parties hereto against whom relief is sought in the petition. If the parties against whom relief is sought in the petition are not parties to the arbitration agreement, then under the principle of the Supreme court ruling in the case of Sukanya Holdings (P) Ltd. vs. Jayesh H. Pandya (2003) 5 SCC 531 the subject matter of the Petition is not covered by the arbitration agreement. It would then be impermissible to grant relief to the Petitioners in a petition under Section 9 of the Act.
4. The parties to the JVA are (i) Petitioner No.1, (ii) Respondent No.4, (iii) Respondent Nos.5 to 9 (described as “the Vaghani Group”), (iv) Respondent No.1 (referred to as “the JVC” or “the Company”). Petitioner No.2, Respondent Nos.2 and 3 and Respondent Nos.10 to 15 are not parties to the JVA. The main allegations in the petition are against Respondent No.3 and the main relief is sought against Respondent No.2. Prima facie, therefore, as the apparent state of affairs indicates, the parties against whom reliefs are sought in the petition, are not parties to the JVA and consequently to the arbitration agreement contained therein.
5. Mr.Nankani, the learned Senior Counsel appearing for the Petitioners, however, submits that the capacity of the signatories to the JVA, namely, Respondent Nos.5 to 9, was as representatives of the Vaghani Group and the entire Vaghani Group is bound by the JVA and the stipulations therein, including the arbitration agreement contained therein. It is submitted that the other Respondents (Respondent Nos.2, 3 and 10 to 15) are part of the Vaghani Group. Mr.Nankani submits that Respondent No.3 was the Chairman (and earlier Managing Director) of Respondent No.1 and named in the JVA as 'Vaghani Representative' and signed the JVA in his capacity as the authorised signatory of Respondent No.1. Mr.Nankani relies on the judgments in the cases of Smita Conductors Ltd. vs. Euro Alloys Ltd. (2001) 7 SCC 728, Tata Industries Ltd. vs.
