A sole shareholder of a one-person company cannot be held liable for the company's debts under the Companies Act, upholding the principle of limited liability.

JUDGEMENT :

SOMASEKHAR SUNDARESAN, J.

Context and Factual Background:

1. These Petitions are filed under Section 37 (2)(b) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) challenging an order dated July 10, 2024, passed by a Learned Arbitral Tribunal under Section 17 of the Arbitration Act, directing a deposit of Rs. ~10.40 crores in a fixed deposit in a nationalised bank and requiring expansive disclosures in the course of conduct of the arbitral proceedings.

2. Innovative Film Academy Private Limited (“Innovative”) is a one- person company formed by Mr. Saravana Prasad (“Prasad”). Innovative is the Petitioner in Commercial Arbitration Petition (L) No. 22746 of 2024 while Prasad is the Petitioner in Commercial Arbitration Petition (L) No. 22714 of 2024. Innovative entered into a “Production Agreement” dated March 10, 2021 (“Agreement”) whereby Endemol would create, produce, edit post-production and deliver episodes of the well-known cookery television show franchise “Masterchef” in Tamil, Telugu, Kannada and Malayalam. Payments were due on the basis of milestones across the span of work to be carried out.

3. It is common ground that Endemol delivered the episodes in Tamil and Telugu and was contractually entitled to payment on the four invoices it raised on Innovative from time to time, aggregating to Rs. ~15.93 crores. It is also common ground that a sum of Rs. ~4.45 crores has been paid by Innovative to Endemol. A sum of Rs. ~1.08 crores was adjusted against dues in another contract between the parties. The outstanding dues on the invoices were stated to be Rs. ~10.40 crores. Disputes and differences relating to the claim to these dues are the trigger for the arbitral proceedings which led to the Impugned Order being passed as an interlocutory measure under Section 17 of the Arbitration Act.

4. The Learned Arbitral Tribunal has ordered the “Respondents” (in the arbitral proceedings i.e. Innovative and Prasad) to do the following:-

a) deposit the claimed sum of Rs. ~10.40 crores in a fixed deposit in a nationalised bank, to be maintained without disturbance pending the hearing and final disposal of the arbitration;

b) disclose all assets (movable and immovable) and all encumbrances, charges and attachments on such assets since March 2019;

c) disclose details of all companies and firms in which they are shareholders, directors or partners and the extent of their interest in such enterprises;

d) disclose all income-tax returns since March 2019 along with the profit and loss account and all ledger statements along with narrations; and

e) disclose details of all bank accounts held by them since March 2019.

5. In arriving at the aforesaid directions, the Learned Arbitral Tribunal has also denied multiple reliefs as formulated by Endemol but that need not detain my attention since Endemol has not challenged the Impugned Order. Suffice it to say, disclosures had been sought by Endemol about the assets of all family members of Prasad, which has been denied, but the Learned Arbitral Tribunal has been persuaded to direct Prasad to make disclosures. The Learned Arbitral Tribunal has essentially taken a prima facie view of the facts and material on record; held that it cannot lean on principles of equity and that it must stick to the contractual terms; noted that Endemol’s case hinges primarily on a letter dated July 11, 2022, co