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2023 Supreme(Bom) 1396
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BHARATI DANGRE, J.
Kotak Mahindra Bank Ltd. - Applicant
Versus
Williamson Magor and Co. Ltd. and Anr. - Respondents
Commercial Arbitration Application No. 107 of 2021
Decided On : 17-07-2023
For the Applicant :Mr. Sharan Jagtiani, Senior Advocate a/w Mr. Dharam Jumani a/w. Mr. Mihir Nerulkar, Ms. Sneha Patil i/b. Maniar Srivastava Associates.
For the Respondent:Mr. Ashish Kamat, Senior Advocate a/w. Mr. Prathamesh Kamat a/w. Mr. Vishal S. Shriyan and Mr. Arsalan Thaver i/b. Mr. Vishal Shriyan.
Headnote:
Arbitration and Conciliation Act, 1996 - Section 11(6), (8), 12(1) - Recovery of Debts and Bankruptcy Act, 1993 - Section 2(g) - Appoint a Sole Arbitrator - Adjudicate disputes - Pass an order nominating an arbitrator on behalf of Respondent in terms of Transaction Documents and in alternative, this Hon’ble Court be pleased to appoint a Sole Arbitrator to adjudicate disputes – Held, Stamp duty will have to be determined on basis of transaction and its value indicated in instrument and not on prospective value as Section 21 of Maharashtra Stamp Act, clearly prescribe that when an instrument is chargeable with ad-valorem duty in respect of any stock, or of any marketable or other security, such duty shall be calculated on value of such stock or security according to average price or value thereof, on day of execution of instrument – Court hold that instrument/ document in question which is basis for invoking arbitration is affixed with adequate stamp duty and suffers from no legal infirmity - On exercising power available in me under Sub-section (6) of Section 11, Court nominate arbitrator for respondent – Ordered accordingly.
JUDGMENT :
1. Kotak Mahindra Bank Ltd, a Public Company incorporated under the Companies Act, 1956 and a banking company within the meaning of Banking Regulation Act, 1959, engaged in the business of banking, investments and other activities throughout India, has filed the present application seeking the following relief :
“(a) That this Hon’ble Court be pleased to pass an order nominating an arbitrator on behalf of the Respondent in terms of the Transaction Documents i.e. Agreement dated 18th April, 2018 and Deed of Guarantee dated 18th April, 2018 and in the alternative, this Hon’ble Court be pleased to appoint a Sole Arbitrator to adjudicate the disputes and differences that have arisen between the Applicant and the Respondents arising out of and / or relating to the Transaction Documents i.e. the Agreement dated 18th April, 2018 read with Deed of Guarantee dated 18th April, 2018;”
2. The above relief is prayed, in the wake of the dispute that arises, out of the agreement entered with respondent no.1 on 12/04/2018, through which the applicant, referred to as the “Investor”, invested monies in the respondent no. 1 company, by acquisition of shares. The respondent no.2, is a Chairman and one of the promoters of respondent no.1, who is alleged to control it’s affairs and business decisions. Respondent no.1 is a promoter of the company known as ‘McNally Bharat Engineering company Ltd’.
The agreement was executed, between the Applicant and the respondent no.1 as the respondents approached the applicant, to invest the monies into it’s company, the applicant being one of the leading bank in India, and since it was expected that the said investment would be a major confidence booster for other investors and they would derive substantial benefits from such investments. The applicant invested a sum of Rs.14,88,00,000/- in the Company and under the agreement dated 12/04/2018, the respondent no.1 allowed a ‘Put Option’ to the applicant, exercisable at it’s option between 15 to 30 months from the date of the Agreement.
Consequential to this Agreement, on the same day the respondent no.2 executed a ‘Deed of Guarantee’ to support the main Agreement of Investment and both the agreements together were referred to as ‘Transaction Documents’.
3. It is the case of the applicant, that the respondent no.1 failed and neglected to buy the applicant’s share and/or cause a third party to buy the same in accordance with the Transaction Documents and this resulted in the applicant issuing the demand notice upon the respondent no.2 to comply with respondent no.1’s obligations.
The applicant even approached this Court by filing Commercial Arbitration Petition (L) No. 87 of 2020, seeking interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, which resulted in an order being passed on 22/01/2020, where certain disclosures were directed at the end of respondent nos.1 and 2.
It is the specific case of the applicant, that despite the assurance to repay the amounts, there was a failure to abide by the said assurance and this constrained the applicant to invoke arbitration on 17/11/2020, both under the Agreement dated 12/04/2018 and under the ‘Deed of Guarantee’ of the same date.
4. The invocation notice clearly set out the claim and name of the nominee arbitrator on behalf of the applicant was suggested and the respondents were called upon to appoint their nominee arbitrator within a period of 30 days from the date of receipt of the said notice.
A response dated 16/12/2020 followed the said notice, addressed by the respondent no.2, specifically taking a stand that he is not a signatory or privy to any Arbitration Agreement with the respondent no.1 Company, and hence he cannot be a party to the arbitration proceedings. There was a failure on part of the respondents to nominate the nominee arbitrator, and on failure to comply with the notice invoking arbitration, the applicant Bank seek a relief under subsection (6) of Section 11 of the Arbitrati
