An arbitration clause requires clear intention to refer disputes to arbitration; the decisions of escrow holders being final and binding negates the reference to arbitration.

JUDGMENT :

Sugato Majumdar, J.

The Court: G.A.3 of 2022 is filed by the Defendant No.3 being M/s Asian Tea & Exports Ltd., a company registered under the Companies Act, 1956, praying for referring the instant dispute to arbitration.

The sum and substance of the application may be summarized as follow :

i. A Share Transfer Agreement was executed on 12/09/2014 between Late Devrat Gupta (the original Plaintiff No.1, who left for heavenly abode during pendency of the suit), Smt. Kashmira Gupta (Plaintiff No.4), Sri Devansh Gupta (Plaintiff No.3), Smt. Priyanka Gupta (Plaintiff No.2) and Smt. Mridula Gupta (Plaintiff No.5), who were the Sellers, on the one hand and M/s Asian Tea & Exports Ltd. (Defendant No.3) and Sri Hariram Garg (Defendant No.4), on the other hand, who were the Buyers. This agreement was executed for transfer by the Sellers in favor of the Buyers 9,50,000 number of fully paid up equity shares of Rs.10/- each in the Defendant.5, namely, M/s Indong Tea Comp. Pvt. Ltd.

ii. In course of transfer of shares, an escrow account was required to be created appointing Escrow Holders. The Defendant Nos.1 & 2 were appointed as the Escrow Holders in terms of the Escrow Agreement dated 12/09/2014. In terms of the Escrow Agreement dated 12/09/2014, a sum of Rs.30,00,000/- was deposited with the Escrow Holders to meet up any unclaimed gratuity liability and further statutory liabilities. The Escrow Holders were to hold on the said sum of Rs. 30,00,000/- in an account to be maintained in ICICI Bank, Ballygunge Branch.

iii. The Escrow Agreement indicated that out of Rs.30,00,000/-, a sum of Rs.15,00,000/- would be earmarked for meeting liabilities of the unclaimed amount of gratuity dues, if any, while the remaining amount will be utilized for meeting up statutory liabilities.

iv. The entire share transfer took effect and the Defendant Nos.3 & 4 took control and management of the Defendant No.5.

v. The Share Transfer Agreement contained an arbitration clause to refer any present or future dispute to arbitration. There is specific reference of the arbitration clause in the Escrow Agreement.

vi. In terms of the Share Transfer Agreement, the escrow amount or any remaining balance was to be released by the Escrow Holders upon utilization for payment towards statutory liabilities and outstanding gratuity dues of the Defendant No.5.

vii. The parties raised disputes regarding quantum of amount to be released by the Escrow Holders, namely, the Defendant Nos.1 & 2 and the parties are entitled to payment by the Escrow Holders. The Plaintiffs claimed refund of the escrow amount but the same was refuted by the Defendant Nos.3 & 4 on the premises that the escrow amount was paid by the Asian Group and it is entitled to refund of the said amount. Existence of the Share Transfer Agreement as well as the Escrow Agreement are not disputed. In view of the arbitration clause, the instant dispute should be referred to arbitration. Hence, the instant application is filed.

Affidavit was filed by the Defendant Nos.1 & 2 in support of the instant application.

The Plaintiffs filed affidavit-in-opposition against the instant application. The sum and substance of the affidavit-in-opposition, filed by the Plaintiffs may be summarized as follow:

a. The Plaintiffs have filed the instant suit praying for recovery of money wrongly withheld in an escrow account by the Defendant Nos.1 & 2. The reliefs claimed in the suit are also directed against the Defendant Nos.1 & 2 who are advocates.

b. The Defendant Nos.1 & 2 are entitled to hold the said amount in the escrow account to meet alleged claims which had to be made within 30/09/2016. Neither any claim nor any dispute had been raised till that date.

c. There is no arbitration agreement between the Plaintiff and the Defendant Nos.1 & 2. Reference of purported arbitration agreement contained in the Share Transfer Agreement does not imply existence of any arbitrable dispute between the Plaintiff and the Defendant Nos.1 & 2. Therefore