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IN THE HIGH COURT OF BOMBAY AT GOA
Manish Pitale, J.
Auduth Timblo, son of Late Shri Modu Timblo and Others – Appellants
Versus
Ravi Kant Jaipuria and Others – Respondents
Appeal Under Arbitration No. 15 of 2019
Decided On : 03-03-2022
Arbitration - Share Purchase Agreement - Arbitration and Conciliation Act, 1996 - [ARBITRATION] - [SHARE PURCHASE AGREEMENT] - [Section 34 of the Arbitration and Conciliation Act, 1996] - The court discussed the interpretation of the terms of the Share Purchase Agreement and the applicability of Section 34 of the Arbitration and Conciliation Act, 1996. The court found that the Arbitral Tribunal misconstrued the terms of the contract/agreements between the parties, leading to perverse findings on claim no.1 raised by the Appellants. The District Court failed to appreciate these aspects of the matter, primarily for the reason that the District Court proceeded on the misquoted clause 4(vi) of the Second Supplemental SPA, on the basis of which the Arbitral Tribunal had proceeded to render perverse findings against the terms of the Agreement between the parties. As a result, the District Court erroneously failed to exercise jurisdiction under Section 34 of the Act to interfere with the Arbitral Award, insofar as claim no.1 was concerned. The Appeal was partly allowed in terms of prayer clause (A), setting aside the Arbitral Award dated 03.03.2015, rejecting claim no.1 of the Appellants, leaving the parties free to begin arbitration on claim no.1 afresh, if so advised.
Fact of the Case:
The Appellants challenged the Judgment and Order passed by the District Court, whereby an application filed by the Appellants under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside of arbitral award was only partly allowed and rejection of claim no.1 in the arbitral award was confirmed. The Share Purchase Agreement (SPA) and the subsequent Supplemental SPAs were executed between the Appellants, Respondent no.5, and Respondent nos. 1 to 4, pertaining to share holdings of Goa Bottling Company Limited. Disputes arose between the parties regarding the payment of interest on the balance consideration, leading to the present Appeal.
Finding of the Court:
The court found that the Arbitral Tribunal misconstrued the terms of the contract/agreements between the parties, leading to perverse findings on claim no.1 raised by the Appellants. The District Court failed to appreciate these aspects of the matter, primarily for the reason that the District Court proceeded on the misquoted clause 4(vi) of the Second Supplemental SPA, on the basis of which the Arbitral Tribunal had proceeded to render perverse findings against the terms of the Agreement between the parties. As a result, the District Court erroneously failed to exercise jurisdiction under Section 34 of the Act to interfere with the Arbitral Award, insofar as claim no.1 was concerned. The Appeal was partly allowed in terms of prayer clause (A), setting aside the Arbitral Award dated 03.03.2015, rejecting claim no.1 of the Appellants, leaving the parties free to begin arbitration on claim no.1 afresh, if so advised.
Issues: The issues before the court included whether the Arbitral Tribunal construed the terms of the SPA, read with the First Supplemental SPA and the Second Supplemental SPA, in such a manner that it amounts to interpretation against the very terms of the said Agreements, thereby justifying interference with the Arbitral Award under Section 34 of the Act, which the District Court failed to appreciate; whether the interpretation of the terms of the aforesaid Agreements adopted by the Arbitral Tribunal and accepted by the District Court, could be said to be a reasonable construction of the said terms; and whether the terms of the said Agreements provided for payment of amount towards interest to the Appellants on the balance purchase price even when the same was paid before the due date i.e. 28.09.2000.
Ratio Decidendi: The court found that the Arbitral Tribunal misconstrued the terms of the contract/agreements between the parties, leading to perverse findings on claim no.1 raised by the Appellants. The District Court failed to appreciate these aspects of the matter, primarily for the reason that the District Court proceeded on the misquoted clause 4(vi) of the Second Supplemental SPA, on the basis of which the Arbitral Tribunal had proceeded to render perverse findings against the terms of the Agreement between the parties. As a result, the District Court erroneously failed to exercise jurisdiction under Section 34 of the Act to interfere with the Arbitral Award, insofar as claim no.1 was concerned.
Final Decision: The Appeal was partly allowed in terms of prayer clause (A), setting aside the Arbitral Award dated 03.03.2015, rejecting claim no.1 of the Appellants, leaving the parties free to begin arbitration on claim no.1 afresh, if so advised.
JUDGMENT :
1. Heard finally with the consent of the learned Counsel appearing for the parties.
2. Admit. Mr. Santimano, learned Counsel, waives notice on behalf of Respondent nos. 1 to 4.
3. By this Appeal, the Appellants have challenged Judgment and Order dated 19.11.2018, passed by the Court of District Judge-I South Goa, (herein after referred to as the District Court), whereby an application filed by the Appellants under Section 34 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as 'the said Act') for setting aside of arbitral award was only partly allowed and rejection of claim of no.1 in the arbitral award was confirmed. Although the Appeal and the documents filed therewith, as also the reply filed on behalf of the Respondents are voluminous, only one point really arises for consideration in the present Appeal.
4. The facts in brief leading up to filing of the present Appeal are that, the Appellants and Respondent no.5 entered into a Share Purchase Agreement (herein after referred to as the 'SPA') with Respondent nos. 1 to 4, pertaining to share holdings of Goa Bottling Company Limited. The Appellants alongwith Respondent no.5 were the sellers while Respondent nos. 1 to 4 were the purchasers under the said SPA. The said SPA was executed on 14.06.2000, wherein the agreed consideration was Rs.42,71,00,000/-, of which as per the said agreement Rs.10,00,000/- as part payment was to be made on the date of the SPA.
5. The SPA specifically defined terms used in the Agreement and such terms or expressions were to be the basis for construing various clauses of the SPA. The said SPA provided for arbitration in case of disputes between the parties.
6. On the very same day i.e. 14.06.2000, the parties also executed a Supplemental Share Purchase Agreement (herein after referred to as the 'First Supplemental SPA'). By the First Supplemental SPA, some modifications were made in the SPA to add definition of the expression “additional consideration” and to amend the definition of the expression “Balance Purchase Price”. A new clause was also added, stating that Respondent no.1 shall issue a promissory note for a specific sum, being the amount corresponding to the additional consideration.
7. Thereafter, on 24.09.2000, the parties executed a Second Supplemental Agreement (herein after referred to as the 'Second Supplemental SPA'). By the aforesaid document, amendment was made to the First Supplemental SPA, on the basis of which the parties agreed to close the transaction envisaged under the SPA. Clause 2.2 of the First Supplemental SPA stood deleted and the expression “Balance Purchase Price” was stated to remain the same as set out in the SPA. It was specified that “additional consideration” was always deemed to have meant and shall mean interest payable by the Respondent-Purchasers on the balance purchase price. It was also recorded that the promissory note given by the Respondent no.1 to the Appellants, would be handed over to the Escrow Agent and it was recorded that interest to be paid under the First Supplemental SPA was still to be paid. Cheques aggregating to a particular amount, less than the amount specified in the promissory note, were handed over to the Escrow Agent till resolution of outstanding issues by the Mediators.
8. It is significant that by the time the Second Supplemental SPA was executed on 24.09.2000, disputes had already arisen between the parties and they were in the process of mediation. It is also an admitted position that although the SPA recorded that part payment of Rs. 10,00,000/- was to be made by the Appellants on the date of execution of the SPA and the First Supplemental SPA, in addition to the amount of Rs. 10,00,000/-, the Respondent-Purchasers had also paid an amount of Rs. 12 Crores to the Appellants. Consequently, the balance amount was reduced from Rs. 42.61 Crores to Rs. 30.61 Crores. As per the SPA, the balance consideration was to be paid by 28.09.2000 and it is also an admitted
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