2016 Supreme(Bom) 390

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
Wind World (India) Limited – Petitioner
Vs.
Enercon GmbH Company – Respondent
Arbitration Petition (L) No. 374 of 2016
Decided On : 29-03-2016

1. The order of disclosure directed by the majority arbitrators is contrary to Article 3(9) of the IBA Rules and section 27 of the said Arbitration Act. 2. The majority arbitrators could not have issued such directions which would affect the rights of the third parties i.e. the other partners of those four limited liability partnership firms and a private limited company, who are admittedly not party to the arbitral proceedings or arbitration agreement. 3. The order passed by the majority arbitrators granting the interim measures directly or indirectly against such limited liability partnerships or a private limited company on the premise that those limited liability partnerships and the said company were under the control of the petitioner Nos. 2 and 3 is totally contrary to the provisions of the said Limited Liability Partnerships Act, 2008 and the Indian Companies Act, 1956. 4. The arbitral tribunal has no power to lift the corporate veil but only a court can lift a corporate will of the company if the strongest case is made out. 5. The interim measures under section 17 must be related to the protection of the subject matter of the dispute and the order may be addressed only to a party to the arbitration. 6. The arbitral tribunal could not have converted an unsecured debt into a secured debt.

Headnote:

ARBITRATION - SECTION 37 - MAINTAINABILITY OF PETITION - ORDER OF DISCLOSURE AND FURNISHING COPIES OF DOCUMENTS - WHETHER APPEALABLE - COMPOSITE ORDER - WHETHER SEVERABLE - INTERIM MEASURES - JURISDICTION OF ARBITRAL TRIBUNAL - WHETHER ARBITRAL TRIBUNAL CAN PASS INTERIM MEASURES AGAINST THIRD PARTIES - WHETHER ARBITRAL TRIBUNAL CAN LIFT CORPORATE VEIL - WHETHER ARBITRAL TRIBUNAL CAN CONVERT UNSECURED DEBT INTO SECURED DEBT - WHETHER ARBITRAL TRIBUNAL CAN GRANT INTERIM MEASURES IN THE NATURE OF ATTACHMENT BEFORE JUDGMENT AGAINST THIRD PARTY.

Fact of the Case:

Petitioners impugned the order dated 8th March 2016 passed by the arbitral tribunal (as decided by the majority) directing the petitioners herein to produce various documents to the respondents and also granting various interim measures. The petitioners also prayed for stay of the operation and implementation of the time-table contained in the order No. 7 dated 3rd February 2016 passed by the arbitral tribunal and also stay of all further proceedings before the arbitral tribunal.

Finding of the Court:

1. The order of disclosure directed by the majority arbitrators is contrary to Article 3(9) of the IBA Rules and section 27 of the said Arbitration Act. 2. The majority arbitrators could not have issued such directions which would affect the rights of the third parties i.e. the other partners of those four limited liability partnership firms and a private limited company, who are admittedly not party to the arbitral proceedings or arbitration agreement. 3. The order passed by the majority arbitrators granting the interim measures directly or indirectly against such limited liability partnerships or a private limited company on the premise that those limited liability partnerships and the said company were under the control of the petitioner Nos. 2 and 3 is totally contrary to the provisions of the said Limited Liability Partnerships Act, 2008 and the Indian Companies Act, 1956. 4. The arbitral tribunal has no power to lift the corporate veil but only a court can lift a corporate will of the company if the strongest case is made out. 5. The interim measures under section 17 must be related to the protection of the subject matter of the dispute and the order may be addressed only to a party to the arbitration. 6. The arbitral tribunal could not have converted an unsecured debt into a secured debt.

Issues: 1. Whether the composite petition filed by the petitioners under section 37 of the said Arbitration and Conciliation Act, 1996 inter alia impugning the order of disclosure passed under section 19 of the Act and interim measures granted under section 17 of the Act is maintainable? 2. Whether the arbitral tribunal could have directed the petitioner Nos. 2 and 3 to produce and furnish copies of various documents of third parties? 3. Whether the arbitral tribunal could have passed any interim measures against the petitioner Nos. 2 and 3 who had certain shares in those four limited liability partnerships in view of the fact that those four limited liability partnerships were separate legal entities? 4. Whether the arbitral tribunal could have subjected the other partners of the limited liability partnership or shareholders of a private limited company to obtain prior permission to deal with or dispose off the assets of those limited liability partnerships which is not permissible in law?

Ratio Decidendi: 1. A composite order, which comprises of part of the order which is not appealable and comprises of another part of the order which is appealable, in that situation, such composite order will be amenable to appeal. 2. The arbitral tribunal could not have directly or indirectly directed the petitioners herein to disclose and produce various documents relating to third parties which were objected to by the petitioners. 3. The majority arbitrators could not have issued such directions which would affect the rights of the third parties i.e. the other partners of those four limited liability partnership firms and a private limited company, who are admittedly not party to the arbitral proceedings or arbitration agreement. 4. The arbitral tribunal has no power to lift the corporate veil but only a court can lift a corporate will of the company if the strongest case is made out. 5. The interim measures under section 17 must be related to the protection of the subject matter of the dispute and the order may be addressed only to a party to the arbitration. 6. The arbitral tribunal could not have converted an unsecured debt into a secured debt.

Final Decision: The impugned order dated 8th March, 2016 passed by the arbitral tribunal is set aside.